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Palomar Holdings, Inc. (PLMR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong growth: total revenues rose to $155.8M (+47.8% YoY), net income reached $35.0M ($1.29 diluted EPS), and adjusted net income was $41.3M ($1.52 adjusted EPS), despite $8.1M catastrophe losses from Hurricane Milton .
  • Combined ratio was 75.9% and adjusted combined ratio 71.7%; net earned premium ratio increased to 39.0% (from 33.9% in Q4 2023) on improved excess-of-loss reinsurance and mix shift to lines that cede less premium .
  • 2025 guidance: adjusted net income $180–$192M, catastrophe load $8–$12M; management expects net earned premium ratio to rise vs 2024 (low point in Q3), loss ratio to finish in low-30s, and adjusted combined ratio in mid–upper 70s; guidance assumes 6/1 XOL pricing flat to down ~5% .
  • Strategic catalysts: scaling Crop (participation rising to 30% with potential ~$200M 2025 premium), continued earthquake leadership with residential inflation guard offsetting commercial rate softening, and entry into Surety via FIA acquisition .
  • Management emphasized this is the ninth straight quarter exceeding expectations, supported by portfolio diversification, conservative reserving, and favorable reinsurance market indicators (cat bonds) .

What Went Well and What Went Wrong

What Went Well

  • Strong top-line growth: Q4 gross written premiums (GWP) up 23.3% YoY to $373.7M; net earned premiums up 54.6% YoY; total revenues up 47.8% YoY to $155.8M .
  • Profitability maintained: adjusted net income up 47.5% YoY to $41.3M; adjusted combined ratio 71.7% (ex-cat 66.1%), with adjusted ROE at 23.1% .
  • Management quote: “Q4 2024 is the ninth straight quarter that we have beaten expectations… record gross written premium and adjusted net income… adjusted ROE of 22% for the year” .

What Went Wrong

  • Higher loss ratio: total loss ratio increased to 25.7% (attritional 20.1%, catastrophe 5.6%), from 19.1% in Q4 2023; catastrophe losses were $8.1M (Hurricane Milton) .
  • Commercial earthquake rate softening (~5% decrease) pressured margins; offset by residential earthquake inflation guard (+10%) and portfolio balance, but a headwind persists .
  • Fronting business declined 33% YoY in Q4 following the separation from Omaha National; management expects it to be a laggard near term .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total Revenues ($USD Millions)$105.4 $131.1 $148.5 $155.8
Net Earned Premiums ($USD Millions)$93.7 $122.3 $135.6 $144.9
Gross Written Premiums ($USD Millions)$303.2 $385.2 $415.0 $373.7
Diluted EPS ($USD)$1.02 $1.00 $1.15 $1.29
Diluted Adjusted EPS ($USD)$1.11 $1.25 $1.23 $1.52
Loss Ratio (%)19.1% 24.9% 29.7% 25.7%
Combined Ratio (%)74.2% 79.1% 80.5% 75.9%
Adjusted Combined Ratio (%)68.8% 73.1% 77.1% 71.7%

Segment GWP ($USD Millions):

ProductQ4 2023Q2 2024Q3 2024Q4 2024
Earthquake$122.1 $135.0 $135.3 $146.8
Inland Marine & Other Property$63.0 $93.5 $78.7 $85.4
Casualty$32.3 $58.6 $56.3 $68.5
Fronting$85.7 $95.9 $84.9 $57.4
Crop$(0.0) $2.2 $59.7 $15.7

Key KPIs:

KPIQ4 2023Q2 2024Q3 2024Q4 2024
Net Earned Premium Ratio (%)33.9% 37.4% 34.3% 39.0%
Annualized ROE (%)23.2% 19.9% 19.7% 19.5%
Annualized Adjusted ROE (%)25.1% 24.7% 21.0% 23.1%
Adjusted Underwriting Income ($M)$29.3 $32.9 $31.0 $41.0
Catastrophe Loss Ratio (%)0.0% 2.8% 9.5% 5.6%
Adjusted Combined Ratio ex-Cat (%)68.8% 70.3% 67.6% 66.1%
Net Investment Income ($M)$7.0 $8.0 $9.4 $11.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Net Income ($M)FY 2024$124–$130 $124–$128 Narrowed/updated (reflecting additional Q4 cat loss)
Catastrophe Losses (assumption)FY 2024+$5–$7M in Q3 (Beryl/Debby) +~$8M in Q4 (Milton) Raised incremental cat assumption
Adjusted Net Income ($M)FY 2025N/A$180–$192 New issuance
Catastrophe Losses ($M)FY 2025N/A$8–$12 New issuance
Net Earned Premium RatioFY 2025N/AIncrease vs 36.5% in 2024; low point in Q3 Directional update
Loss RatioFY 2025N/ALow-30s (incl. cats) Directional update
Adjusted Combined RatioFY 2025N/AMid–upper 70s Directional update
6/1 XOL Reinsurance PricingFY 2025N/AFlat to down ~5% from 2024 treaty Assumption underpinning guidance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4)Trend
Reinsurance pricing & spendQ2: Core XOL placed better than anticipated (June 1) ; Q3: Noted cat activity and higher spend, but no explicit pricing update Assumes 6/1 pricing flat to down ~5%; $262M 6/1/24 XOL spend; Jan 1 treaties at ~15% risk-adjusted decreases; cat bond market supportive Cautious optimism; potential expense tailwind if pricing improves
Earthquake portfolioQ2: EQ GWP +25.1% ; Q3: +19.4% Q4: +20.2%; residential inflation guard (+10%) offsets ~5% commercial rate softening; expects mid–high teens growth in 2025 Balanced mix maintains margins despite softening; steady growth
Casualty expansionQ2: +258% GWP ; Q3: +90.7% Q4: +111.9%; strong rates (+7–12% E&S/excess; ~20% contractors GL with auto); conservative limits/reserves (80%+ IBNR) Scaling with prudent underwriting and reinsurance
Crop businessQ2: nascent ($2.2M) ; Q3: $59.7M; seasonal earnings pattern Q4: $15.7M; $116M FY; 2025 participation rising to 30% with quota share + stop-loss; target $200M+ 2025, top-10 writer by YE25 Rapid growth; adds seasonality to ratios; durable reinsurance structure
Fronting programsQ2: +20.3% GWP ; Q3: –10.5% YoY Q4: –33% YoY on Omaha National separation; likely laggard short term Near-term headwind; pipeline maintained
California wildfiresQ3: Multiple hurricanes drove cats Q4: Minimal wildfire impact; <1% residential EQ book in burn zones; no homeowners exposure; awareness may lift EQ demand Limited direct impact; potential demand tailwind
Investments/capitalQ2: NII +43.7%, duration 3.73 yrs ; Q3: NII +56.0%; cash & invested assets $1,017.5M Q4: NII +61.3%; cash & invested assets ~$1.1B; duration 4.04 yrs Higher yields and balances post-August equity offering

Management Commentary

  • “Palomar’s stellar 2024 was capped off by an exceptional fourth quarter… adjusted net income growth of 48%… adjusted return on equity of 23%… record gross written premium and adjusted net income” — Mac Armstrong .
  • “Q4 2024 is the ninth straight quarter that we have beaten expectations… our stockholders’ equity increased 55% YoY” — Mac Armstrong .
  • “We do not write homeowners insurance in California… losses from the Eaton and Palisades fires are very modest and within the scope of our 2025 guidance” — Mac Armstrong .
  • “Assumes our core 6/1 excess of loss reinsurance treaty renews at a price of flat to down 5%… midpoint implies adjusted ROE of 23%” — Mac Armstrong .
  • “Ratio of net earned premiums to gross earned premiums was 39% vs 33.9% last year… reflective of improved XOL and higher growth of non-fronting lines (including earthquake) that cede less” — T. Chris Uchida .

Q&A Highlights

  • Reinsurance pricing sensitivity: Guidance levered to 6/1 XOL pricing; below –5% would materially benefit results; 6/1/24 spend was ~$262M; strong cat bond appetite observed .
  • Earthquake demand: Underpenetrated residential EQ market; wildfire disruption may reduce CEA participation and lift Palomar demand; residential inflation guard supports retention and rate .
  • Crop exposure/structure: Focused in core Midwest corn/soy states; lowering private quota share, adding stop-loss; participation rising from 5% to 30% in 2025 .
  • Casualty growth durability: Continued rate increases (7–12% E&S/excess; ~20% contractors GL with auto), conservative limits/reserving (80%+ IBNR) underpin profitable growth .
  • Fronting outlook: Disproportionate near-term impact from Omaha National exit; flattish to slightly up same-store thereafter; capital prioritized to crop, quake, other property, surety, casualty .

Estimates Context

  • S&P Global consensus estimates (EPS and revenue) were unavailable due to request limitations at the time of retrieval; therefore, explicit beat/miss vs Wall Street cannot be provided in this recap. Management noted Q4 marked the ninth straight quarter exceeding expectations, suggesting continued estimate-positive execution .
  • Estimate implications: 2025 adjusted net income guidance of $180–$192M (midpoint +39% YoY) and assumption of flat to down ~5% XOL pricing could necessitate upward revisions, with seasonality from crop participation (low point in Q3 net earned premium ratio and combined ratio) .

Key Takeaways for Investors

  • Earnings quality: Strong adjusted profitability with ex-cat adjusted combined ratio at 66.1% and adjusted ROE at 23.1%; portfolio diversification continues to dampen volatility .
  • Reinsurance tailwind potential: If 6/1 XOL pricing lands below flat to –5%, underwriting income could benefit beyond guidance; cat bond market indicators are favorable .
  • Growth vectors: Earthquake mid–high teens growth expected for 2025; casualty scaling with favorable rates and conservative limits/reserving; crop participation rising to 30% under quota share + stop-loss structure .
  • Fronting rationalization: Expect near-term pressure (–33% YoY Q4) as capital is reallocated to higher-return lines; monitor stabilization into 2H25 .
  • Capital and investment income: Higher yields and larger invested asset base post-August offering drive NII growth (+61.3% YoY in Q4), supporting earnings leverage .
  • Cat load transparency: 2025 cat guidance of $8–$12M (~1–2 loss ratio points) plus ongoing mini-cats (additional ~2–3 points) provides clearer risk budgeting .
  • Stock catalysts: New 2025 guidance, crop scaling, earthquake demand tailwinds in California, and potential reinsurance savings are likely to be focal points for the stock’s narrative .

All financial and management commentary sourced from Palomar’s Q4 2024 8-K press release and earnings call materials – – – –, and prior quarter press releases for trend analysis – –.