Palomar Holdings, Inc.

1. Summary of Operations and Basis of Presentation

Summary of Operations

Palomar Holdings, Inc. (the “Company”) is a Delaware-incorporated insurance holding company that was founded in 2014. The Company has several wholly owned subsidiaries including an Oregon-domiciled insurance company, Palomar Specialty Insurance Company (“PSIC”), a Bermuda-domiciled reinsurance company, Palomar Specialty Reinsurance Company Bermuda Ltd. (“PSRE”), an Arizona-domiciled surplus lines insurance company, Palomar Excess and Surplus Insurance Company (“PESIC”), a California-domiciled property and casualty insurance agency, Palomar Insurance Agency, Inc., DBA Palomar General Insurance Agency (“PGIA”), a Delaware-incorporated management company, Palomar Underwriters Exchange Organization, Inc. (“PUEO”), that provides services to a Hawaii-domiciled reciprocal exchange, Laulima Exchange (“Laulima”), as its attorney-in-fact, a New Jersey-domiciled insurance carrier specializing in surety bonds, First Indemnity of America Insurance Co. (“FIA”), a Delaware-incorporated insurance management company, Palomar Crop Insurance Services, Inc. (“PCIS”), and a Louisiana-domiciled and Treasury-listed surety carrier specializing in contract bonds, Palomar Casualty & Surety Company (“PCSC”).

Segment Reporting

The Company has asingle operating segment, the property and casualty insurance business. The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM reviews the Company’s consolidated net income as reported under GAAP, which is the primary measure of segment profit or loss. The CODM also reviews the individual measures and significant segment expenses that contribute to net income including gross written premiums, net earned premiums, losses and loss adjustment expenses, acquisition and underwriting expenses, and net investment income. The CODM reviews these measures, comparing them to prior periods and forecasted expectations, and makes resource allocation decisions based on the analysis. The significant segment expenses provided to the CODM are consistent with the categories shown in the Company’s Consolidated Statements of Income and Comprehensive Income and there are no other segment items used by the CODM. While the Company’s CODM also reviews the revenue streams attributable to individual products, operations are managed, resources are allocated, and financial performance is evaluated on a consolidated basis.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and include the accounts of the Company and its wholly‑owned subsidiaries.

The condensed consolidated financial statements also include the accounts of Laulima, a variable interest entity (“VIE”) for which the Company is the primary beneficiary. The Company determined it is the primary beneficiary because it has the power to direct the activities that most significantly impact Laulima’s economic performance and the obligation to absorb losses that could be significant to Laulima, primarily through capital previously provided. The assets of Laulima may only be used to settle its obligations, and its creditors do not have recourse to the general credit of the Company.

These condensed consolidated financial statements do not contain all information and footnotes required by GAAP for complete consolidated financial statements. For a more complete description of the Company’s business and accounting policies, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 24, 2026 (the “2025 Annual Report on Form 10-K”). In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. All intercompany balances and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results of operations for the full year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. All revisions to accounting estimates are recognized in the period in which the estimates are revised. Significant estimates reflected in the Company’s condensed consolidated financial statements include, but are not limited to, reserves for losses and loss adjustment expenses, reinsurance recoverables on unpaid losses, and the fair values of investments.

Recent Accounting Pronouncements

Recently adopted accounting pronouncements

The Company has not adopted any new accounting guidance during the three months ended March 31, 2026.

Recently issued accounting pronouncements not yet adopted

Income Statement Expenses

In November 2024, the FASB issued ASU No.2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”), which will require disclosure of additional information about specific expense categories in the notes to financial statements for all public business entities. ASU 2024-03 is effective for annual reporting beginning with the fiscal year ending December 31, 2027, and for interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

Internal-Use Software

In September 2025, the FASB issued ASU No. 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40) (“ASU 2025-06”), which clarifies and modernizes the accounting for costs related to internal-use software by removing references to project stages and clarifying the probable-to-complete threshold for capitalization of internal-use software costs when significant development uncertainty exists. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

2. Investments

The Company’s available‑for‑sale investments are summarized as follows:

Security holdings in an unrealized loss position

As of March 31, 2026, the Company held 754 fixed maturity securities in an unrealized loss position with a total estimated fair value of$857.6 million and total gross unrealized losses of$29.6 million. As of December 31, 2025, the Company held 391 fixed maturity securities in an unrealized loss position with a total estimated fair value of$375.4 million and total gross unrealized losses of$19.5 million.

The aggregate fair value and gross unrealized losses of the Company’s investments aggregated by investment category and the length of time these individual securities have been in a continuous unrealized loss position as of March 31, 2026 and December 31, 2025, are as follows:

The Company reviews all securities with unrealized losses on a quarterly basis to assess whether the decline in the securities fair value necessitates the recognition of an allowance for credit losses. The Company considers numerous factors in its review as described in Note 2 of the Notes to the Consolidated Financial Statements in the 2025 Annual Report on Form 10-K.

Based on the Company’s review as of March 31, 2026, the Company determined that the fixed maturity securities’ unrealized losses were primarily the result of the interest rate environment and not the credit quality of the issuers. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before the recovery of their amortized cost basis.

Contractual maturities of available‑for‑sale fixed maturity securities

The amortized cost and fair value of fixed maturity securities at March 31, 2026, by contractual maturity, are shown below.

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations.

Net investment income summary

Net investment income is summarized as follows:

Net realized and unrealized investment gains and losses

The following table presents net realized and unrealized investment gains and losses:

Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date.

Proceeds from the sale of fixed maturity securities were$15.4 million and$2.0 million for the three months ended March 31, 2026 and 2025, respectively. Proceeds from the sale of equity securities were an insignificant amount and$1.8 million for the three months ended March 31, 2026 and 2025.

The Company places securities on statutory deposit with certain state agencies to retain the right to do business in those states. These securities are included in available‑for‑sale investments on the unaudited condensed consolidated balance sheets. As of March 31, 2026 and December 31, 2025, the carrying value of securities on deposit with state regulatory authorities was$18.6 million and$13.5 million, respectively.

The Company has investments in limited partnerships, recorded in the Other investments line of the unaudited condensed consolidated balance sheets. These investments represent capital contributions to private equity funds structured as limited partnerships, which primarily hold illiquid securities. The funds have a ten-year term with no redemption rights. Capital is contributed as called by the general partners, and distributions are received as proceeds are generated from the underlying investments. These investments are measured at estimated fair value utilizing a net asset value per share (or its equivalent) as a practical expedient. As of March 31, 2026, the Company had unfunded commitments to invest an additional$136.1 million in these limited partnerships.

3. Derivative Instruments

The Company uses commodity-based derivative instruments, specifically put options on livestock, as part of its financial risk management program to mitigate price risk associated with certain insurance contracts exposed to livestock commodity price fluctuations. As part of this program, the Company employs an economic hedging strategy using derivatives to reduce exposure to adverse livestock price movements. The notional amount of derivative contracts held and the degree of hedged exposure are actively managed and vary based on volume of the business written. The Company does not use derivatives for speculative or trading purposes. All derivative positions are intended to support the overall risk management objectives of the business. The Company has not elected hedge accounting for these derivatives.

These derivative instruments are recorded at fair value on the unaudited condensed consolidated balance sheets within “Other investments,” with changes in fair value recognized in earnings in “Losses and loss adjustment expenses.”

As of March 31, 2026, the notional amount and fair value of the Company’s derivative assets were $13.2 million and $4.4 million, respectively. As of December 31, 2025, the notional amount and fair value of the Company’s derivative assets were $16.4 million and $9.9 million, respectively. For thethree months ended March 31, 2026 and 2025, the Company recognized $12.3 million and an insignificant amount, respectively, of pre-tax net gains related to these derivatives, which were included in earnings within “Losses and loss adjustment expenses.”

See Note 2 to the Notes to the Consolidated Financial Statements in our 2025 Annual Report on Form 10-K for additional discussion of the Company’s derivative instrument policy.

4. Fair Value Measurements

Fair value is defined as the price that the Company would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment.

The three‑tier hierarchy of inputs is summarized in the three broad levels listed below:

Level 1—Unadjusted quoted prices are available in active markets for identical investments as of the reporting date.

Level 2—Pricing inputs are quoted prices for similar investments in active markets; quoted prices for identical or similar investments in inactive markets; or valuations based on models where the significant inputs are observable or can be corroborated by observable market data.

Level 3—Pricing inputs into models are unobservable for the investment. The unobservable inputs require significant management judgment or estimation.

To measure fair value, the Company obtains quoted market prices for its investment securities from its outside investment managers. If a quoted market price is not available, the Company uses prices of similar securities. The fair values obtained from the outside investment managers are reviewed for reasonableness and any discrepancies are investigated for final valuation.

The fair value of the Company’s investments in fixed maturity securities is estimated using relevant inputs, including available market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. An option adjusted spread model is also used to develop prepayment and interest rate scenarios. Industry standard models are used to analyze and value securities with embedded options or prepayment sensitivities. These fair value measurements are estimated based on observable, objectively verifiable market information rather than market quotes. Therefore, these investments are classified and disclosed in Level 2 of the hierarchy.

The following tables present the hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025.

The carrying amounts of financial assets and liabilities reported in the accompanying condensed consolidated balance sheet including cash and cash equivalents, restricted cash, receivables, reinsurance recoverable, and accounts payable and other accrued liabilities approximate fair value due to their short-term maturity.

The Company’s derivative assets are measured at fair value in accordance with ASC 815, and are included on the unaudited condensed consolidated balance sheets within “Other investments” with any changes in fair value recorded in earnings in “Losses and loss adjustment expenses.” See Note 3 for further information regarding the Company’s derivative assets.

The carrying amount of any borrowings under the Federal Home Loan Bank (“FHLB”) line of credit and U.S. Bank revolving facility (the “Revolving Facility”) approximate fair value as the credit agreements have variable rates which frequently reprice at market rates.

Transfers between Level 3 and Level 2 securities result from changes in the availability of observable market inputs and are recorded at the beginning of the reporting period. As of March 31, 2026 and December 31, 2025, the Company had an insignificant amount of securities classified as Level 3.

5. Reserve for Losses and Loss Adjustment Expenses

The following table represents a reconciliation of changes in the ending reserve balances for losses and loss adjustment expenses (“LAE”):

(1)

Represents amounts recognized in Reserve for losses and LAE net of reinsurance recoverables upon acquisition of The Gray Casualty and Surety Company(“Gray Surety”) and FIA on 1/31/2026 and 1/1/2025, respectively, in accordance with ASC 805, Business Combinations. See Note 23 of the Notes to the Consolidated Financial Statements in our 2025 Annual Report on Form 10-K and Note 13 of this Quarterly Report on Form 10-Q for additional information regarding the acquisitions.

(2)

Losses for the three months ended March 31, 2026 and 2025 include $12.3 million and an insignificant amount, respectively, of gains on derivative instruments.

Considerable variability is inherent in the estimate of the reserve for losses and LAE. Although management believes the liability recorded for losses and LAE is adequate, the variability inherent in this estimate could result in changes to the ultimate liability, which may be material to stockholders’ equity.

The Company experienced favorable prior year development of$10.3 million and favorable prior year development of$4.3 million during the three months ended March 31, 2026 and 2025, respectively.

Favorable prior year development during the three months ended March 31, 2026 and 2025 was primarily due to lower than anticipated severity of attritional losses in the Company’s Inland Marine and Property line of business.

6. Stockholders’ Equity

As of March 31, 2026 and December 31, 2025, the Company had 5,000,000 preferred shares authorized with a par value of $0.0001 andno preferred shares issued and outstanding. As of March 31, 2026 and December 31, 2025, the Company had 500,000,000 common shares authorized and 26,514,295 and 26,520,417 common shares issued and outstanding, respectively, with a par value of $0.0001. Additional paid-in capital was$533.6 million as of March 31, 2026 and$523.2 million as of December 31, 2025.

Common stock reserved for future issuance

Common stock reserved for future issuance consists of the following as of March 31, 2026:

Stock based compensation

The following table summarizes the Company’s stock-based compensation expense for each period presented:

Stock-based compensation expense is recognized on a straight-line basis over the vesting period of equity-based awards. For performance stock units (“PSUs”), any changes to expense resulting from differences in actual performance versus target are recognized over the remaining vesting period of the awards. The Company does not apply a forfeiture rate to unvested awards and accounts for forfeitures as they occur. All stock-based compensation is included in other underwriting expenses in the Company’s unaudited condensed consolidated statement of income and comprehensive income.

2019 Equity Incentive Plan

On April 16, 2019, the Company’s 2019 Equity Incentive Plan (the “2019 Plan”) became effective. The 2019 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares and units, and other cash-based or share-based awards. In addition, the 2019 Plan contains a mechanism through which the Company may adopt a deferred compensation arrangement in the future.

A total of 2,400,000 shares of common stock were initially authorized and reserved for issuance under the 2019 Plan. This reserve increases on January 1 of each year through 2029 by an amount equal to the smaller of:3% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or an amount determined by the board of directors.

Stock Options

Recipients of stock options can purchase shares of the Company’s common stock at a price equal to the common stock’s fair market value on the grant date, determined by the closing price of the Company’s common stock on the grant date. Stock options vest over a period betweentwo andfour years with between 25% and 50% vesting on the first anniversary of the grant date and the remainder vesting monthly over the remaining period, subject to continued service to the Company. Stock options expire ten years after the grant date.

The following table summarizes stock option transactions for thethree months ended March 31, 2026:

As of March 31, 2026, the Company hadno unrecognized stock-based compensation expense related to stock options.

Restricted Stock Units

RSUs are valued using the closing price of the Company’s common stock on their grant date. The Company has issued RSUs with vesting periods ofone tofive years. Vesting is generally subject to continued service with the Company; however, certain employees who meet the requirements of the Company’s Equity Award Retirement Policy may continue to vest their RSUs following a qualified retirement.

The following table summarizes RSU transactions for thethree months ended March 31, 2026:

As of March 31, 2026, the Company had approximately$32.2 million of total unrecognized stock-based compensation expense related to RSUs expected to be recognized over a weighted-average period of 2.1 years.

Performance Stock Units

The Company issues PSUs with a combination of service, performance, and market conditions.

The majority of PSUs were issued via grants made to certain executives during 2021 and are earned based on the achievement of stock price milestones. If the Company’s stock price reaches and remains at certain milestones for 30 days, the PSUs shall become earned units and will vest upon completion of a requisite service period of approximately five years from the date of grant. As of March 31, 2026, four stock price milestones have been achieved solely with respect to the PSU award granted to the Chief Executive Officer. Additionally, two stock price milestones have been achieved with respect to each of the PSU awards granted to four other executives. These PSUs have been earned, but will not vest until thefifth anniversary of the grant date, subject to continued service.

For other PSUs outstanding, vesting of PSUs requires a period of future service and the number of shares that vest depends on performance relative to predetermined targets of the Company’s gross written premiums and adjusted return on equity as set by the Compensation Committee. The PSU’s performance period is primarily a three-year period beginning with the grant date. At the end of the performance period, the actual results are measured against the predetermined targets to determine the number of PSUs to be earned as compensation. The earned PSUs are also subject to a required service period of approximately three years from the grant date before vesting and being issued as common stock.

Effective starting with 2025 grants, PSUs issued to executives include a relative total shareholder return (“RTSR”) modifier. The RTSR modifier adjusts PSU payouts up or down based on the Company’s shareholder return relative to the S&P 1500 Property & Casualty Insurance Index (the “Index”) over athree-year measurement period. These PSUs were valued using a Monte Carlo simulation with key valuation assumptions as follows:

(1)

The risk-free interest rate was based on the zero-coupon U.S. Treasury yield curve on the valuation date, with a maturity matched to the performance period.

(2)

Volatility is derived from historical stock prices as well as implied volatility when appropriate and available.

(3)

The weighted average of fair values used to record compensation expense as determined by the Monte Carlo simulation.

The following table summarizes PSU transactions for thethree months ended March 31, 2026:

The PSU grants above represent the number of shares that would vest based on achievement of all stock price milestones in the 2021 executive stock grants and the 100%achievement of the predetermined performance conditions for the other PSU grants. The actual number of PSUs which will vest is subject to adjustment based on the Company’s actual stock price performance and financial performance relative to the predetermined targets. As of March 31, 2026, the Company had approximately$24.5 million of total unrecognized stock-based compensation expense related to PSUs expected to be recognized over a weighted-average period of 1.0 years.

2019 Employee Stock Purchase Plan

On April 16, 2019, the Company’s 2019 Employee Stock Purchase Plan (the “2019 ESPP”) became effective. A total of 240,000 shares of common stock were initially authorized and reserved for issuance under the 2019 ESPP. In addition, the 2019 ESPP provides for annual increases in the number of shares available for issuance on January 1 of each year through 2029, equal to the smaller of 240,000 shares of the Company’s common stock or such other amount as may be determined by the board of directors.

Under the 2019 ESPP, employees can purchase Company stock at a discount via payroll withholdings. The 2019 ESPP is administered through employee participation in discrete offering periods. During each discrete offering period employee funds are withheld, and the stock purchase occurs upon the conclusion of the offering period. The Company issued 7,148 shares pursuant to the ESPP during the three months ended March 31, 2026.

Share repurchases

In July 2025, the Company’s Board of Directors approved a share repurchase program authorizing the repurchase of up to $150 million of outstanding shares of common stock through July 31, 2027.

The Company repurchased 190,255 shares for$23.1 million at an average price of$121.33 per share under this program during thethree months ended March 31, 2026. Approximately$89.6 million remains available for future repurchases under this program. The Company accounts for share repurchases by charging the excess of repurchase price over the common stock’s par value entirely to retained earnings. All repurchased shares are retired and become authorized but unissued shares.

7. Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income (loss) (“AOCI”) are as follows:

8. Underwriting Information

The Company has a single reportable segment and offers specialty insurance products. Gross written premiums (“GWP”) by product are presented below:

(1)

Beginning in 2026, the Company has updated the categorization of its products to align with management’s current strategy and view of the business. Prior year amounts have been reclassified for comparability purposes. The recategorization is for presentation purposes only and does not impact overall gross written premiums.

Gross written premiums by state are as follows:

Gross written premiums by insurance subsidiary are as follows:

9. Income Taxes

The Company calculates its tax provision in interim periods using its best estimate of the effective tax rate expected for the full year. For the three months ended March 31, 2026 and 2025, the Company’s income tax rates of 19.7% and 20.1%, respectively, were lower than the statutory rate of 21% due primarily to the tax impact of the permanent component of employee stock option exercises offset by non-deductible executive compensation expense.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA extends or makes permanent various tax provisions that were originally enacted in the 2017 Tax Cuts and Jobs Act and were set to expire at the end of 2025. The Company does not expect the enactment of OBBBA to materially impact the Company’s overall income tax expense.

10. Earnings Per Share

The following table sets out earnings per share of common stock:

Common share equivalents relate primarily to outstanding stock options, RSUs and PSUs under the 2019 Plan and unpurchased shares under the 2019 ESPP and are calculated using the treasury stock method.

11. Reinsurance

The Company utilizes reinsurance in order to limit its exposure to losses and enable it to underwrite policies with sufficient limits to meet policyholder needs. The Company utilizes both excess of loss (XOL) and quota share reinsurance.

As of March 31, 2026, the Company’s catastrophe event retention is$20.0 million for earthquake events and$11.0 million for continental hurricane events and all other perils. Laulima maintains Hawaii hurricane reinsurance coverage through a standalone XOL treaty, which provides per-occurrence coverage up to$735.0 million with a retention of$1.5 million. As of March 31, 2026, the Company’s XOL reinsurance structure provides protection up to$3.5 billion for earthquake events and$100.0 million for continental U.S. hurricane events.

In addition to reinsurance purchased from traditional reinsurers, the Company utilizes collateralized protection from the insurance-linked securities market through catastrophe bonds issued via Torrey Pines Re Ltd., a Bermuda-domiciled special purpose insurer. The Company closed a $525 million catastrophe bond in the second quarter of 2025, effective June 1, 2025 through June 1, 2028; a $420 million catastrophe bond in the second quarter of 2024, effective June 1, 2024 through June 1, 2027; a $200 million catastrophe bond in the second quarter of 2023, effective June 1, 2023 through June 1, 2026; and a $275 million 144A catastrophe bond in the second quarter of 2022, effective June 1, 2022 through June 1, 2025. These catastrophe bonds provide indemnity-based reinsurance coverage for earthquake events.

12. Credit Agreements

U.S. Bank Credit Agreement

In December 2021, the Company entered into a credit agreement with U.S. Bank National Association (the “2021 Credit Agreement”), which provided a revolving credit facility of up to $100 million through December 8, 2026. In January 2026, the Company entered into a new credit agreement (the “2026 Credit Agreement”) that replaced the 2021 Credit Agreement. The 2026 Credit Agreement provides for unsecured credit facilities totaling $450 million, comprised of a $150 million revolving facility (the “Revolving Facility”) and a $300 million term loan (the “Term Loan”), each maturing on January 27, 2031. Borrowings under the 2026 Credit Agreement bear interest at variable rates based on Term Secured Overnight Financing Rate (“SOFR”) or an alternate base rate, plus an applicable margin determined by the Company’s debt-to-capital ratio (as defined in the 2026 Credit Agreement). In additionto interest on funds borrowed, the Company must pay an unused line fee of up to 0.25%, determined by the Company’s debt-to-capital ratio, on any amounts not borrowed. The Term Loan amortizes quarterly, and borrowings may be prepaid in full or in part with no penalty or premium. Obligations under the 2026 Credit Agreement are guaranteed by certain of the Company’s domestic subsidiaries and are unsecured, subject to a negative pledge. Proceeds from the 2026 Credit Agreement may be used for general corporate purposes, including permitted acquisitions and the refinancing of existing indebtedness.

The 2026 Credit Agreement contains customary representations, warranties, and affirmative and negative covenants, including, among other things, financial covenants, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, dividends, and other distributions. The financial covenants include requirements to maintain a permissible debt to capital ratio, a minimum consolidated net worth, a minimum risk-based capital ratio and minimum A.M. Best financial strength rating. The 2026 Credit Agreement also contains customary events of default, such as non-compliance with financial covenants. If an event of default occurs, any debt may be declared immediately due and payable. As of March 31, 2026, the Company was in compliance with all debt covenants.

As of March 31, 2026, the Company had $297.4 million outstanding on its Term Loan. Interest expense on the Term Loan was $2.9 million for thethree months ended March 31, 2026.

As of March 31, 2026 and December 31, 2025, the Company hadno borrowings outstanding on the 2021 Credit Agreement. Interest expense on the 2021 Credit Agreement was insignificant and $0.1 million for thethree months ended March 31, 2026 and 2025, respectively.

As of March 31, 2026, the Company hadno borrowings outstanding on the Revolving Facility. Interest expense on the Revolving Facility was $0.1 million for thethree months ended March 31, 2026.

FHLB Line of Credit

The Company’s PSIC subsidiary is a member of the Federal Home Loan Bank of San Francisco (“FHLB”). Membership in the FHLB provides PSIC access to collateralized advances, which can be drawn for general corporate purposes and used to enhance liquidity management. All borrowings are fully secured by a pledge of specific investment securities of PSIC and the borrowing capacity is equal to 10% of PSIC’s statutory admitted assets. All advances have a predetermined term and the interest rate varies based on the term of the advance.

As of March 31, 2026 and December 31, 2025 the Company hadno borrowings outstanding through the FHLB. Interest expense on the FHLB line of credit was $0.1 million and insignificant for the three months ended March 31, 2026 and 2025, respectively.

13. Business Acquisitions

On January 31, 2026, the Company completed the acquisition of 100% of the issued and outstanding equity interests of Gray Surety for aggregate consideration of approximately $314.8 million. The acquisition was funded with proceeds from the Term Loan (as defined in Note 12) and cash on hand and was completed to expand the Company’s surety platform. The Company subsequently renamed Gray Surety to Palomar Casualty & Surety Company (“PCSC”).

The acquisition has been accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations and ASC 944 Financial Services - Insurance. The allocation of the purchase price to the assets acquired and liabilities assumed is preliminary and subject to adjustment during the measurement period, which will not exceed one year from the acquisition date. The results of operations of Gray Surety have been included in the Company’s condensed consolidated financial statements since the acquisition date of January 31, 2026. For the three months ended March 31, 2026, Gray Surety contributed revenue of $12.0 million and net loss of $1.2 million.

The Company recognized $7.4 million of acquisition-related expenses for Gray Surety during the three months ended March 31, 2026, within Other underwriting expenses on the Consolidated Statement of Income and Comprehensive Income. These expenses include advisory, legal, accounting, valuation, and other due diligence costs.

The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and liabilities assumed at the date of acquisition:

Intangible assets were comprised of the following:

The table above excludes value of business acquired (“VOBA”), which is presented separately in the purchase price allocation due to its insurance-specific nature and amortization pattern. In connection with the acquisition, the Company recognized VOBA in accordance with ASC 944-805-30-1. Upon acquisition, the Company acquired the contractual insurance and reinsurance assets of Gray Surety, including existing deferred acquisition costs. These deferred acquisition costs were derecognized, as they represent historical costs of the acquiree, and the Company recognized the fair value of the in-force insurance contracts, including a VOBA component representing the present value of future underwriting profits. This component was determined using an income approach based on expected future cash flows discounted at a weighted-average cost of capital.

The Company recognized total VOBA of approximately $23.1 million recorded within intangible assets, representing the present value of future underwriting profits associated with the acquired in-force policies.

VOBA is amortized over the expected remaining life of the underlying policies in proportion to the earning pattern of the related unearned premium as of the acquisition date. VOBA balances are subject to recoverability testing. No impairment was identified as of March 31, 2026.

Goodwill of $121.2 million represents the excess of consideration transferred over the fair value of the net identifiable assets acquired. Goodwill reflects the expected synergies from combining Gray Surety’s surety and bond platform with the Company’s specialty insurance operations, including expanded distribution relationships, cross-selling opportunities, and operational efficiencies. Goodwill is not deductible for income tax purposes.

The following unaudited pro forma financial information presents the combined results of operations of the Company and Gray Surety as if the acquisition had occurred on January 1, 2025. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results that would have occurred had the acquisition been completed on January 1, 2025, nor does it purport to project the future results of operations of the combined company. Significant pro forma adjustments include amortization of VOBA, financing costs, transactions costs, and related tax effects.