Palomar Holdings, Inc. 2026 Investor Update: Robust Growth, Strategic Acquisitions, and Strong Guidance

Key Financial Highlights

• Gross Written Premiums (GWP): \$492.6 million in Q4 2025, representing 31.8% year-over-year growth. Full-year 2025 GWP reached \$2.03 billion, up 31.5%.
• Adjusted Net Income: \$61.1 million for Q4 2025, a 48.0% YoY increase; full-year 2025 adjusted net income was \$216.1 million, up 61.9%.
• Adjusted Return on Equity (ROE): 26.9% in Q4 2025, with a full-year adjusted ROE of 25.9%.
• Adjusted Combined Ratio: 73.4% for Q4 2025 and 72.7% for the full year, demonstrating strong underwriting discipline and profitability.
• EPS Growth: Diluted adjusted earnings per share of \$2.24 for Q4 2025, \$7.86 for the full year.
• Investment Portfolio: \$1.4 billion total, average credit quality “A1/A+”, book yield 4.8%, leverage 1.4x, with a weighted average duration of 3.8 years.

Strategic and Operational Highlights

• Acquisition of Gray Surety: Closed on January 31, 2026. The acquisition is expected to be modestly EPS accretive in 2026 and generate further scale in 2027 and beyond. With the pro-forma inclusion, Surety & Credit would have represented about 7% of total GWP for FY2025.
• Diversified Portfolio: Palomar’s specialty insurance portfolio now comprises five key product categories: Earthquake, Casualty, Inland Marine & Property, Crop, and Surety & Credit. The company has seen a shift toward a more diversified mix, with non-Earthquake (Non-EQ) premiums now representing 72% of the specialty premium base, enhancing resilience across market cycles.
• Cautious but Ambitious Casualty Strategy: The company continues its “walk before we run” approach to Casualty, targeting niche segments with limited auto exposure and careful use of reinsurance to manage volatility. Over 85% of Casualty reserves are held as IBNR (incurred but not reported), supporting earnings stability.
• Reinsurance Program: Palomar utilizes a broad suite of risk transfer products, including excess of loss (XOL), quota share, and catastrophe bonds. The earthquake reinsurance program increased total ground-up coverage to \$3.5 billion while maintaining a \$20 million retention. All perils excluding earthquake are covered by a separate tower with U.S. hurricane coverage up to \$100 million and per occurrence retention reduced to \$11 million. Recent reinsurance renewals were completed at improved terms, with risk-adjusted pricing down ~15% for commercial earthquake quota share and XOL renewals.
• Technology and Data Leadership: Palomar is deploying AI-driven automation to enhance underwriting productivity, leveraging third-party data for portfolio optimization, and utilizing advanced analytics for pricing, retention, and risk concentration management. The company continues to invest in best-in-class core systems and playbooks for new product launches.
• Management Team: Palomar boasts a highly experienced leadership team with deep industry experience across underwriting, risk, finance, technology, and legal disciplines.

Guidance and Outlook

• 2026 Full-Year Guidance:
  • Adjusted net income projected at \$260M–\$275M, implying 24% YoY growth at the midpoint.
  • Adjusted ROE is expected to exceed 20%, consistent with the company’s “Palomar 2X” goal to double adjusted net income every 3–5 years while sustaining strong ROE.
  • The company expects to surpass its 2024 Palomar 2X goal by 2026, reflecting continued momentum and profitable growth.
• Strong Track Record: Palomar has outperformed consensus estimates for 14 consecutive quarters, underscoring the reliability of its diversified, cycle-resilient business model.

Potential Price-Sensitive and Shareholder-Relevant Information

• Accretive Acquisition: The Gray Surety acquisition is expected to be EPS accretive in 2026 and to provide significant scale benefits from 2027 onwards. This transaction could be a catalyst for future share price appreciation due to expanded market presence and earnings power.
• Exceptional Growth Metrics: The combination of strong premium growth (+31.8% YoY), robust adjusted net income growth (+61.9% for 2025), and a best-in-class combined ratio positions Palomar as a high-performing specialty insurer likely to attract increased investor interest.
• Favorable Reinsurance Market: The current softening in the property catastrophe reinsurance market is contributing to margin expansion, enhancing profitability outlook for 2026 and beyond.
• Technology Investments: Advanced use of AI and data analytics for underwriting and risk management could result in further operational efficiencies, supporting higher margins and sustainable growth.
• Guidance Exceeding Targets: Management’s guidance to exceed the 2024 Palomar 2X goal in just two years (by 2026) signals confidence in the ongoing earnings growth trajectory, which is likely to be favorably received by the market.

Detailed Financial Metrics (FY 2025 vs. FY 2024)

• Gross Written Premiums: \$2,028.3M (2025) vs. \$1,541.96M (2024) [+31.5%]
• Net Written Premiums: \$964.0M (2025) vs. \$644.9M (2024) [+49.5%]
• Net Earned Premiums: \$802.6M (2025) vs. \$510.7M (2024) [+57.2%]
• Underwriting Income: \$185.9M (2025) vs. \$111.9M (2024) [+66.1%]
• Net Income: \$197.1M (2025) vs. \$117.6M (2024) [+67.6%]
• Adjusted Net Income: \$216.1M (2025) vs. \$133.5M (2024) [+61.9%]
• Adjusted Combined Ratio: 72.7% (2025) vs. 73.7% (2024)
• Adjusted ROE: 25.9% (2025) vs. 22.2% (2024)
• Diluted Adjusted EPS: \$7.86 (2025) vs. \$5.09 (2024)

Conclusion

Palomar Holdings, Inc. has delivered another year of exceptional growth and profitability, underpinned by its diversified specialty portfolio, disciplined risk management, and strategic acquisition of Gray Surety. With robust guidance for 2026, continued market outperformance, and ongoing technology-driven operational enhancements, Palomar is well-positioned for sustained shareholder value creation. The combination of strong financial results, accretive M&A, and favorable reinsurance conditions are all factors that could positively impact the company’s share price in the near to medium term.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Forward-looking statements are subject to risks and uncertainties. Please refer to Palomar Holdings, Inc.’s filings with the SEC for additional information and risk factors.

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