Q - Palomar Holdings,

Previous wording

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2025, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report, and in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K as filed with the SEC on February 25, 2025.

Current wording

The results of operations for the six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2025, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report, and in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K as filed with the SEC on February 25, 2025.

Previous wording

Our gross written premiums are also impacted when we assume unearned in-force premiums due to new partnerships or other business reasons. In periods where we assume a large volume of unearned premiums, our gross written premiums may increase significantly compared to prior periods and the increase may not be indicative of future trends. The majority of our Crop written premiums are recognized in the third quarter, as we receive the requisite reporting from insureds at that time.

Current wording

Our gross written premiums are also impacted when we assume unearned in-force premiums due to new partnerships or other business reasons. In periods where we assume a large volume of unearned premiums, our gross written premiums may increase significantly compared to prior periods and the increase may not be indicative of future trends. The majority of our Crop written premiums are recognized in the third quarter, as we receive the requisite reporting from insureds at that time. This pattern reflects the seasonal nature of the Crop business, which typically results in a disproportionate amount of Crop premiums being recognized in the third quarter. As such, our interim results may not be indicative of full-year performance.

Previous wording

Losses and loss adjustment expenses represent the costs incurred for losses, net of any losses ceded to reinsurers. These expenses are a function of the size and term of the insurance policies we write and the loss experience associated with the underlying coverage. Certain policies we write subject us to attritional losses such as building fires or casualty claims. In addition, many of the policies we write subject us to catastrophe losses. Catastrophe losses are certain losses resulting from events involving multiple claims and policyholders, including earthquakes, hurricanes, floods, convective storms, terrorist acts or other aggregating events. Our losses and loss adjustment expenses are generally affected by:

Current wording

Losses and loss adjustment expenses represent the costs incurred for losses, net of any losses ceded to reinsurers. These expenses are a function of the size and term of the insurance policies we write and the loss experience associated with the underlying coverage. Certain policies we write subject us to attritional losses such as building fires or casualty claims. In addition, many of the policies we write subject us to catastrophe losses. Catastrophe losses are certain losses resulting from events involving multiple claims and policyholders, including earthquakes, hurricanes, floods, droughts, convective storms, terrorist acts or other aggregating events. Our losses and loss adjustment expenses are generally affected by:

Previous wording

Gross written premiums increased $74.1 million, or 20.1%, to $442.2 million for the three months ended March 31, 2025 compared to $368.1 million for the three months ended March 31, 2024. Premium growth was primarily due to an increased volume of policies in the majority of our lines of business which was driven by new business generated with existing partners, strong premium retention rates for existing business, expansion of our distribution footprint, and new partnerships. The following table summarizes our gross written premiums by line of business and shows each line’s percentage of total gross written premiums for each period:

Current wording

Gross written premiums increased $111.1 million, or 28.8%, to $496.3 million for the three months ended June 30, 2025 compared to $385.2 million for the three months ended June 30, 2024. Premium growth was primarily due to an increased volume of policies in the majority of our lines of business which was driven by new business generated with existing partners, strong premium retention rates for existing business, expansion of our distribution footprint, and new partnerships, partially offset by a decrease in our Fronting line. The following table summarizes our gross written premiums by line of business and shows each line’s percentage of total gross written premiums for each period:

Previous wording

Although our volume of ceded written premiums increased, ceded written premiums as a percentage of gross written premiums decreased to 52.2% for the three months ended March 31, 2025 from 62.0% for the three months ended March 31, 2024. This percentage decrease was driven by changes in our composition of business whereby premiums written in the current period were subject to lower quota share or XOL cession percentages compared to premiums written in the prior period.

Current wording

Although our volume of ceded written premiums increased, ceded written premiums as a percentage of gross written premiums decreased to 53.7% for the three months ended June 30, 2025 from 54.3% for the three months ended June 30, 2024. This percentage decrease was driven by changes in our composition of business whereby premiums written in the current period were subject to lower quota share or XOL cession percentages compared to premiums written in the prior period.

Previous wording

Net written premiums increased $71.5 million, or 51.1%, to $211.4 million for the three months ended March 31, 2025 from $139.9 million for the three months ended March 31, 2024. The increase was primarily due to an increase in gross written premiums, primarily in our Casualty and Earthquake lines, partially offset by increased ceded written premiums.

Current wording

Net written premiums increased $53.8 million, or 30.6%, to $229.8 million for the three months ended June 30, 2025 from $176.0 million for the three months ended June 30, 2024. The increase was primarily due to an increase in gross written premiums, primarily in our Casualty and Crop lines, partially offset by increased ceded written premiums.

Previous wording

Net earned premiums increased $56.2 million, or 52.1%, to $164.1 million for the three months ended March 31, 2025 from $107.9 million for the three months ended March 31, 2024 due primarily to the earning of increased gross written premiums offset by the earning of ceded written premiums under reinsurance agreements. The table below shows the amount of premiums we earned on a gross and net basis and net earned premiums as a percentage of gross earned premiums in each period presented:

Current wording

Net earned premiums increased $57.7 million, or 47.2%, to $180.0 million for the three months ended June 30, 2025 from $122.3 million for the three months ended June 30, 2024 due primarily to the earning of increased gross written premiums partially offset by the earning of ceded written premiums under reinsurance agreements. The table below shows the amount of premiums we earned on a gross and net basis and net earned premiums as a percentage of gross earned premiums in each period presented:

Previous wording

Commission and other income increased $0.3 million to $0.8 million for the three months ended March 31, 2025 from $0.5 million for the three months ended March 31, 2024. The balance increased due to an increase in commissions and policy related fees driven by increased premiums written.

Current wording

Commission and other income increased $0.9 million to $1.7 million for the three months ended June 30, 2025 from $0.8 million for the three months ended June 30, 2024. The balance increased due to an increase in commissions and policy related fees driven by increased premiums written.

Previous wording

Losses and loss adjustment expenses increased $11.9 million, or 44.4% to $38.7 million for the three months ended March 31, 2025 from $26.8 million for the three months ended March 31, 2024. Losses and loss adjustment expenses consisted of the following elements during the respective periods:

Current wording

Losses and loss adjustment expenses increased $15.8 million, or 51.8% to $46.2 million for the three months ended June 30, 2025 from $30.4 million for the three months ended June 30, 2024. Losses and loss adjustment expenses consisted of the following elements during the respective periods:

Previous wording

Catastrophe loss activity for the quarter ended March 31, 2025 was related to favorable development on prior period catastrophe events.

Current wording

Catastrophe loss activity for the quarter ended June 30, 2025 was minimal and related to favorable development on prior period catastrophe events.

Previous wording

Catastrophe loss activity for the quarter ended March 31, 2024 was primarily related to flood losses.

Current wording

Catastrophe loss activity for the quarter ended June 30, 2024 was primarily related to severe convective storms.

Previous wording

Non-catastrophe losses increased for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 due mainly to higher attritional losses driven by premium growth on lines of business subject to attritional losses such as Casualty and Inland Marine and Other Property.

Current wording

Non-catastrophe losses increased for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 due mainly to higher attritional losses driven by premium growth on lines of business subject to attritional losses such as Casualty, Crop, and Inland Marine and Other Property.

Previous wording

Acquisition expenses increased $14.6 million, or 45.8%, to $46.4 million for the three months ended March 31, 2025 from $31.8 million for the three months ended March 31, 2024. The increase was primarily due to higher commissions and premium-related taxes resulting from higher gross earned premiums. Acquisition expenses as a percentage of gross earned premiums were 12.3% for the three months ended March 31, 2025 compared to 10.5% for the three months ended March 31, 2024. Acquisition expenses as a percentage of gross earned premiums increased due to higher commissions and premium-related taxes as a percentage of gross earned premiums and lower ceded commissions and fronting fees as a percentage of gross earned premiums due to changes in the composition of our business.

Current wording

Acquisition expenses increased $15.8 million, or 44.2%, to $51.6 million for the three months ended June 30, 2025 from $35.8 million for the three months ended June 30, 2024. The increase was primarily due to higher commissions and premium-related taxes resulting from higher gross earned premiums. Acquisition expenses as a percentage of gross earned premiums were 12.6% for the three months ended June 30, 2025 compared to 11.0% for the three months ended June 30, 2024. Acquisition expenses as a percentage of gross earned premiums increased due to higher commissions and premium-related taxes as a percentage of gross earned premiums and lower ceded commissions and fronting fees as a percentage of gross earned premiums due to changes in the composition of our business.

Previous wording

Other underwriting expenses increased $10.9 million, or 44.1%, to $35.7 million for the three months ended March 31, 2025 from $24.8 million for the three months ended March 31, 2024. The increase was primarily due to the Company incurring higher payroll, technology, and stock-based compensation expenses associated with growth of the Company.

Current wording

Other underwriting expenses increased $14.3 million, or 45.8%, to $45.5 million for the three months ended June 30, 2025 from $31.2 million for the three months ended June 30, 2024. The increase was primarily due to the Company incurring higher payroll, technology, and stock-based compensation expenses associated with growth of the Company.

Previous wording

Other underwriting expenses as a percentage of gross earned premiums were 9.5% for the three months ended March 31, 2025 compared to 8.2% for the three months ended March 31, 2024. Excluding the impact of expenses relating to transactions, stock-based compensation, and amortization of intangibles, other underwriting expenses as a percentage of gross earned premiums were 7.5% for the three months ended March 31, 2025 compared to 6.8% for the three months ended March 31, 2024. Other underwriting expenses as a percentage of gross earned premiums may fluctuate period over period based on timing of certain expenses relative to premium growth.

Current wording

Other underwriting expenses as a percentage of gross earned premiums were 11.1% for the three months ended June 30, 2025 compared to 9.6% for the three months ended June 30, 2024. Excluding the impact of expenses relating to transactions, stock-based compensation, and amortization of intangibles, other underwriting expenses as a percentage of gross earned premiums were 8.7% for the three months ended June 30, 2025 compared to 7.3% for the three months ended June 30, 2024. Other underwriting expenses as a percentage of gross earned premiums fluctuates period over period based on timing of certain expenses relative to premium growth.

Previous wording

Income tax expense increased $2.8 million to $10.8 million for the three months ended March 31, 2025 from $8.0 million for the three months ended March 31, 2024 due to higher pre-tax income for the period ended March 31, 2025. During the three months ended March 31, 2025, our income tax rate of 20.1% was lower than the statutory rate of 21% due primarily to permanent component of employee stock option exercises offset by non-deductible executive compensation expense. During the three months ended March 31, 2024, our income tax rate of 23.2% was higher than the statutory rate of 21% due primarily to non-deductible executive compensation expense.

Current wording

Income tax expense increased $5.7 million to $13.4 million for the three months ended June 30, 2025 from $7.6 million for the three months ended June 30, 2024 due to higher pre-tax income for the period ended June 30, 2025. During the three months ended June 30, 2025 and 2024, the Company’s income tax rates of 22.3% and 22.9%, respectively, were higher than the statutory rate of 21% due primarily to non-deductible executive compensation expense.

Previous wording

Net investment income increased $4.9 million, or 69.1%, to $12.1 million for the three months ended March 31, 2025 from $7.1 million for the three months ended March 31, 2024. The increase was primarily due to a higher average balance of investments during the three months ended March 31, 2025 due primarily to the use of proceeds from our August 2024 secondary offering and also due to higher yields on invested assets versus the prior year.

Current wording

Net investment income increased $10.3 million, or 68.5%, to $25.4 million for the six months ended June 30, 2025 from $15.1 million for the six months ended June 30, 2024. The increase was primarily due to a higher average balance of investments during the six months ended June 30, 2025 due primarily to the investing of proceeds from our August 2024 secondary offering and also due to higher yields on invested assets versus the prior year.

Previous wording

The Company incurred $2.3 million of net realized and unrealized losses on investments for the three months ended March 31, 2025 compared to $3.0 million of net realized and unrealized gains for the three months ended March 31, 2024 In both periods, the balance was primarily driven by unrealized gains and losses on our equity securities. Unrealized gains and losses on fixed maturity securities are recognized as a component of other comprehensive income*** ***and do not impact our net income. The following table summarizes the components of our investment income for each period presented:

Current wording

The Company incurred $6.0 million of net realized and unrealized gains on investments for the six months ended June 30, 2025 compared to $3.0 million of net realized and unrealized gains for the six months ended June 30, 2024 In both periods, the balance was primarily driven by unrealized gains on our equity securities. Unrealized gains and losses on fixed maturity securities are recognized as a component of other comprehensive income and do not impact our net income. The following table summarizes the components of our investment income for each period presented:

Previous wording

The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024:

Current wording

The following table summarizes our cash flows for the six months ended June 30, 2025 and 2024:

Previous wording

Our cash flow from operating activities was positive during the three months ended March 31, 2025 and 2024 due to net income and a decrease in net operating assets in each period.

Current wording

Our cash flow from operating activities was positive during the six months ended June 30, 2025 and 2024 due to net income and a decrease in net operating assets in each period.

Previous wording

Cash used in investing activities for the three months ended March 31, 2025 and 2024 related primarily to purchases of fixed maturity securities in excess of sales and maturities in each period.

Current wording

Cash used in investing activities for the six months ended June 30, 2025 and 2024 related primarily to purchases of fixed maturity securities in excess of sales and maturities and acquisitions occurring in each period.

Previous wording

Cash provided by financing activities for the three months ended March 31, 2025 was related to the receipt of $2.4 million in proceeds from stock option exercises, the receipt of $0.5 million in proceeds from our employee stock purchase plan and the receipt of $0.8 million in proceeds from policy holder contributions of surplus, offset by $0.1 million in offering costs from the August 2024 Secondary Offering. Cash used in financing activities for three months ended March 31, 2024 was related to $9.6 million in payments on our FHLB line of credit, offset by the receipt of $1.9 million in proceeds from stock option exercises and the receipt of $0.4 million in proceeds from our employee stock purchase plan.

Current wording

Cash provided by financing activities for the six months ended June 30, 2025 was related to the receipt of $3.3 million in proceeds from stock option exercises, the receipt of $0.5 million in proceeds from our employee stock purchase plan and the receipt of $1.8 million in proceeds from policy holder contributions of surplus, offset by $0.1 million in offering costs from the August 2024 Secondary Offering. Cash used in financing activities for six months ended June 30, 2024 was related to $52.6 million in payments on our FHLB line of credit, offset by the receipt of $4.0 million in proceeds from stock option exercises, the receipt of $0.4 million in proceeds from our employee stock purchase plan and the receipt of $1.1 million in proceeds from policy holder contributions of surplus.

Previous wording

We do not have any current plans for material capital expenditures other than current operating requirements. We believe that we will generate sufficient cash flows from operations to satisfy our liquidity requirements for at least the next 12 months and beyond. The key factor that will affect our future operating cash flows is the frequency and severity of catastrophe losses. To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $1,168.7 million in cash and investment securities available at March 31, 2025. We also have the ability to access additional capital through pursuing third‑party borrowings, sales of our equity or debt securities or entrance into a reinsurance arrangement.

Current wording

We do not have any current plans for material capital expenditures other than current operating requirements. We believe that we will generate sufficient cash flows from operations to satisfy our liquidity requirements for at least the next 12 months and beyond. The key factor that will affect our future operating cash flows is the frequency and severity of catastrophe losses. To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $1.3 billion in cash and investment securities available at June 30, 2025. We also have the ability to access additional capital through pursuing third‑party borrowings, sales of our equity or debt securities or entrance into a reinsurance arrangement.

Previous wording

Our share repurchase program expired on March 31, 2024 and we did not make any share repurchases during the three months ended March 31, 2025.

Current wording

Our prior share repurchase program expired on March 31, 2024 and we did not make any share repurchases during the six months ended June 30, 2025.

Previous wording

In December 2021, we entered into a Credit Agreement (the “Credit Agreement”) with U.S. Bank National Association which provides a revolving credit facility of up to $100 million through December 8, 2026. Interest on the credit facility accrues on each SOFR rate loan at the applicable SOFR (as defined in the Credit Agreement) plus 1.75% and on each base rate loan at the applicable Alternate Base Rate (as defined in the Credit Agreement) plus 0.75%. A loan may be either a SOFR rate loan or a base rate loan, at our discretion. Outstanding amounts under the Credit Agreement may be prepaid in full or in part at any time with no prepayment premium and may be reduced in full or in part at any time upon prior notice. Currently, $5.6 million of the borrowing capacity of the Credit Agreement is pledged as collateral and not able to be utilized.

Current wording

In December 2021, we entered into a Credit Agreement (the “Credit Agreement”) with U.S. Bank National Association which provides a revolving credit facility of up to $100 million through December 8, 2026. Interest on the credit facility accrues on each Secured Overnight Financing Rate (“SOFR”) rate loan at the applicable SOFR (as defined in the Credit Agreement) plus 1.75% and on each base rate loan at the applicable Alternate Base Rate (as defined in the Credit Agreement) plus 0.75%. A loan may be either a SOFR rate loan or a base rate loan, at our discretion. Outstanding amounts under the Credit Agreement may be prepaid in full or in part at any time with no prepayment premium and may be reduced in full or in part at any time upon prior notice. Currently, $5.6 million of the borrowing capacity of the Credit Agreement is pledged as collateral and not able to be utilized.

Previous wording

At March 31, 2025 total stockholders’ equity was $790.4 million and tangible stockholders’ equity was $765.5 million, compared to total stockholders’ equity of $729.0 million and tangible stockholders’ equity of $715.8 million as of December 31, 2024. Stockholders' equity increased due to net income earned for the period, activity related to stock-based compensation, and unrealized gains on fixed maturity securities.

Current wording

At June 30, 2025 total stockholders’ equity was $847.2 million and tangible stockholders’ equity was $784.4 million, compared to total stockholders’ equity of $729.0 million and tangible stockholders’ equity of $715.8 million as of December 31, 2024. Stockholders’ equity increased due to net income earned for the period, activity related to stock-based compensation, and unrealized gains on fixed maturity securities.

Previous wording

Our primary investment objectives are to maintain liquidity, preserve capital and generate a stable level of investment income. We purchase securities that we believe are attractive on a relative value basis and seek to generate returns in excess of predetermined benchmarks. Our Board of Directors approves our investment guidelines in compliance with applicable regulatory restrictions on asset type, quality and concentration. Our current investment guidelines allow us to invest in taxable and tax‑exempt fixed maturities, as well as publicly traded mutual funds and common stock of individual companies. Our cash and invested assets consist of cash and cash equivalents, fixed maturity securities, and equity securities. As of March 31, 2025, the majority of our investment portfolio, or $991.8 million, was comprised of fixed maturity securities that are classified as available‑for‑sale and carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income. Also included in our investment portfolio were $44.4 million of equity securities, $2.3 million of equity method investments and $11.0 million of investments in limited partnerships. In addition, we maintained a non‑restricted cash and cash equivalent balance of $119.3 million at March 31, 2025. Our fixed maturity securities, including cash equivalents, had a weighted average effective duration of 4.09 and 4.04 years and an average rating of “A1/A+” and “A1/A+” at March 31, 2025 and December 31, 2024, respectively. Our fixed income investment portfolio had a book yield of 4.65% as of March 31, 2025, compared to 4.59% as of December 31, 2024.

Current wording

Our primary investment objectives are to maintain liquidity, preserve capital and generate a stable level of investment income. We purchase securities that we believe are attractive on a relative value basis and seek to generate returns in excess of predetermined benchmarks. Our Investment Committee reviews and recommends investment guidelines, which are subject to approval by our Board of Directors in accordance with applicable regulatory restrictions on asset type, quality and concentration. Our current investment guidelines allow us to invest in taxable and tax‑exempt fixed maturities, as well as publicly traded mutual funds and common stock of individual companies. Our cash and invested assets consist of cash and cash equivalents, fixed maturity securities, and equity securities. As of June 30, 2025, the majority of our investment portfolio, or $1.1 billion, was comprised of fixed maturity securities that are classified as available‑for‑sale and carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income. Also included in our investment portfolio were $49.2 million of equity securities, and $12.4 million of investments in limited partnerships. In addition, we maintained a non‑restricted cash and cash equivalent balance of $81.3 million at June 30, 2025. Our fixed maturity securities, including cash equivalents, had a weighted average effective duration of 4.13 and 4.04 years and an average rating of “A1/A” and “A1/A+” at June

Previous wording

In addition to reinsurance from traditional reinsurers, we utilize collateralized protection via catastrophe bonds. We currently have $895 million of multi-year indemnity-based reinsurance coverage for earthquake events, all issued through Torrey Pines Re Ltd, a Bermuda-domiciled special purpose insurer.

Current wording

In addition to reinsurance from traditional reinsurers, we utilize collateralized protection via catastrophe bonds. We currently have $1.2 billion of multi-year indemnity-based reinsurance coverage for earthquake events, all issued through Torrey Pines Re Ltd, a Bermuda-domiciled special purpose insurer.

Previous wording

Our catastrophe event retention is $20 million for earthquake events and $15.5 million for hurricane events and all other perils. Our reinsurance coverage exhausts at $3.2 billion for earthquake events, $735 million for Hawaii hurricane events, and $117.5 million for continental U.S. hurricane events, providing coverage in excess of our 1 in 250-year peak zone PML and in excess of our A.M. Best requirement. In addition, we maintain reinsurance coverage equivalent to or better than the 1 in 250-year PML for our other lines.

Current wording

Our catastrophe event retention is $20 million for earthquake events and $11 million for hurricane events and all other perils. Laulima maintains Hawaii hurricane reinsurance coverage through a standalone XOL treaty, which provides per-occurrence coverage up to $735 million with a retention of $1.5 million. Our reinsurance coverage exhausts at $3.53 billion for earthquake events and $100 million for continental U.S. hurricane events, providing coverage in excess of our 1 in 250-year peak zone PML and in excess of our A.M. Best requirement. In addition, we maintain reinsurance coverage equivalent to or better than the 1 in 250-year PML for our other lines.