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Palomar Holdings (PLMR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Aug 5, 2026

Source: earnings call transcript

Executive summary

Palomar Holdings Q2 FY26 — Record Adjusted Net Income & Increased Full-Year Guidance

Palomar Holdings delivered a strong second quarter, marked by record adjusted net income and significant premium growth, driven by its diversified specialty portfolio. The company raised its full-year adjusted net income and crop premium guidance, reflecting confidence in its execution despite competitive pressures in certain commercial lines. Management emphasized disciplined underwriting and strategic capital allocation, including opportunistic share repurchases and the initiation of a quarterly dividend, while continuing to invest in its Palomar 2X growth strategy.

Highlights

5

  • Adjusted net income reached a record $63.8 million, growing 31% year-over-year.

  • Adjusted earnings per share increased 34% to $2.36.

  • Gross written premium rose 27% year-over-year to $630.5 million.

  • The adjusted combined ratio was 77% and adjusted return on equity was 26%.

  • Full-year adjusted net income guidance was raised to $270 million to $280 million, implying 27% growth at the midpoint.

Concerns

4

  • Commercial Earthquake market conditions remain highly competitive, with average rate decreases of more than 20% in large commercial layered and shared business.

  • Large commercial new business pricing in Commercial Earthquake is below technical pricing levels.

  • Intense competition in layered and shared large account business within Inland Marine and Property led to rates being down 16%.

  • Exposure to transactional liability and cyber was reduced as pricing no longer met return hurdles.

Guidance & targets

CategoryTargetConfidence
Full-year adjusted net income
$270 million to $280 million
high materiality
High
Full-year crop premium
more than $400 million
medium materiality
High
Long-term crop franchise size
$1 billion
medium materiality
High
Long-term surety franchise ranking
Top 20
low materiality
Medium
Full-year 2026 net earned premium ratio
upper 40s
medium materiality
High
Full-year 2026 acquisition expense ratio
slight improvements
low materiality
Medium
Full-year 2026 adjusted other underwriting expense ratio
slight improvements
low materiality
Medium
Full-year 2026 loss ratio (including catastrophes and prior year development)
mid-to-upper 30s
medium materiality
High
Full-year 2026 adjusted combined ratio
mid-70s
high materiality
High
Expected catastrophe losses
$8 million to $12 million
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Earthquake
Residential Earthquake continues to be a stable and predictable foundation, offsetting pressure in Commercial Earthquake. New business production was strong in Residential. Commercial Earthquake faces highly competitive market conditions with significant rate pressure, especially in large commercial layered and shared business. Small Commercial Earthquake is less impacted but still competitive. The AAL to premium ratio for Residential Earthquake has remained stable over the last 3 years.
Year-to-date GWP growth: 1% YoYResidential Earthquake share: 64% of bookResidential Earthquake premium retention: >96%Residential Earthquake inflation guard: 10%Commercial Earthquake share: 36% of bookCommercial Earthquake average rate decrease (large commercial): >20%Commercial Earthquake pricing decline (small commercial): low double digitsAAL to premium ratio: stable vs Q2 FY23 (overall portfolio)
—down <1 percentage point (QoQ GWP)——
Inland Marine and Property
Strong performance driven by admitted Builder's Risk, construction engineering, residential property, and motor truck cargo. Residential property, particularly Hawaiian hurricane, benefits from limited competition and rate adequacy. The company is investing in its Builder's Risk franchise and homebuilders practice. Competitive pressure persists in the large commercial property market, but Palomar maintains underwriting discipline.
Large account rates: down 16%Residential property share: 36% of franchiseHawaiian hurricane rate increase: 12% (approved, earning in)Laulima event retention: $1.5 millionMotor truck cargo growth: 22%Motor truck cargo rate increase (California): 13% (approved)
—11%——
Casualty
Growth is a function of investments in new products, systems, talent, and distribution. The business is managed as distinct specialty lines with individual objectives. Modest line sizes and conservative attachment points contribute to shorter tail development. Exposure to transactional liability and cyber was reduced due to pricing. Reinsurance treaty renewals priced favorably, validating underwriting performance. Growth benefits from rollover of established casualty books from program administrators.
Excess casualty average rate increase: 5.8% (this quarter), >10% (last 4 quarters)Real estate E&O average rate decline: 3.9% (this quarter), 1.6% (last 4 quarters)Primary GL policies with auto coverage: 9%ISO GL loss cost change (top 5 states): 4.4%Blended GL portfolio rate increase: 7.5%Casualty reserves held with IBNR: 84%
—37%——
Crop
Significantly exceeded initial expectations, rapidly becoming a key contributor to earnings and diversification. The launch of PLMR.Farm, an AI-developed policy administration platform, is a key differentiator. Current crop conditions indicate profit expectations within historical norms. Higher crop premium naturally results in a higher current quarter loss ratio due to the margin profile.
Full-year 2026 premium outlook: >$400 million (up from ~$320 million)2026 crop year combined ratio (net basis): booked closer to 100% (initially)2025 crop year combined ratio: ~80%
—96%——
Surety and Credit
Incorporates full quarter results from Gray Surety, with integration substantially complete. Focus is on franchise building through new underwriting talent, geographic expansion, and product capabilities. Hired new commercial surety underwriters and honed the FAST Act credit platform. Successfully completed surety excess of loss reinsurance program on July 1.
Gross written premium: ~$39 millionT listing limit bond authorization: $70 millionNet retention: $3.5 million
—236%——

Product announcements

ProductTypeDetails
PLMR.Farmlaunch

Deals & partnerships

Gray Surety Acquisition of a surety business to expand the Surety and Credit franchise.

Integration of the acquired business is substantially complete. Focus is now on franchise building through talent addition, geographic expansion, and new product capabilities.

Risks & headwinds

Commercial Earthquake market competition Remainder of 2026

Average rate decrease of more than 20% in large commercial layered and shared business; new business pricing below technical levels.

Mitigation:Disciplined underwriting; willingness to walk away from business that does not meet return thresholds; optimism that pace of rate declines could moderate.

Large commercial property market competition

Rates down 16% in layered and shared large account business.

Mitigation:Disciplined underwriting; not chasing growth; leveraging balanced property portfolio (Admitted/E&S, Residential/Commercial) to prioritize profitability over premium growth.

Unattractive pricing in transactional liability and cyber Q2 FY26

Pricing no longer met return hurdles.

Mitigation:Reduced exposure to these lines.

El Niño-driven wind season impact on Hawaiian hurricane business 2026

Potential impact from El Niño conditions.

Mitigation:Laulima (reciprocal) purchased its own reinsurance and maintains a $1.5 million event retention, limiting direct balance sheet and earnings exposure.

Crop losses showing up earlier than premiums H1 FY26

Higher losses and loss ratio in the first half of the year, amplified by higher premium expectations.

Mitigation:Use of standard reinsurance agreement and third-party reinsurance to mitigate impact; current crop conditions within Midwestern footprint indicate profit expectations within historical norms.

What to watch in Q3 FY26

Commercial Earthquake rate declines

Remainder of 2026
Current >20% average rate decrease in large commercial
Target Moderation in pace of rate declines

Why it matters

Indicates potential bottoming of competitive pressure in a key segment, impacting profitability and growth.

We are optimistic that the pace of rate declines could moderate but not dissipate in the large account space over the remainder of 2026.

Find out whether PLMR delivers this. Inve re-checks your case every morning.

Q&A highlights

Asked for details on specific lines and accident years contributing to favorable casualty reserve development.

Management confirmed favorable development was primarily from an older fronted workers' comp program (Omaha National, 2021-2022 risk participation). Emphasized conservative reserving philosophy with high IBNR (84% for casualty).

“we did release some reserves from really an older fronted program where we had a risk participation in the workers' comp space.”

asked by David Motemaden · answered by D. Armstrong

2 min read 5 chapters

Detailed narrative

Diversification Strategy & Market Conditions

Palomar's diversified portfolio, with no single product group exceeding one-third of gross written premium, proved resilient in Q2 FY26. Approximately half of the portfolio is property business, with nearly 20% generated from lines not correlated to traditional P&C market cycles, and 52% written on an admitted basis. This deliberate strategy allows the company to deploy capacity into attractive areas while maintaining underwriting discipline, especially as portions of the commercial property market continue to soften.

Earthquake & Inland Marine Performance

Residential Earthquake, representing 64% of the book, served as a stable foundation with strong new business production and premium retention exceeding 96%, including a 10% inflation guard. In contrast, Commercial Earthquake (36% of the book) faced intense competition, with average rate decreases over 20% in large commercial layered and shared business. The Inland Marine and Property Group saw 11% year-over-year GWP growth, driven by strong performance in admitted Builder's Risk, construction engineering, residential property (led by Hawaiian hurricane with a 12% rate increase earn-in), and motor truck cargo (22% growth, 13% rate increase in California), despite large account rates being down 16%.

Casualty & Crop Growth

The casualty portfolio, comprising seven niche lines, grew gross written premium by 37% year-over-year, benefiting from strategic investments in new products, talent, and program partnerships. Excess casualty saw average rate increases of 5.8% this quarter, while real estate E&O experienced declines. The crop business significantly exceeded expectations, with GWP up 96% year-over-year, driven by strong production and the launch of PLMR.Farm, an innovative AI-developed policy administration platform. The company now targets over $400 million in crop premium for calendar year 2026.

Surety & Reinsurance

The integration of Gray Surety is substantially complete, contributing to a 236% year-over-year GWP increase in Surety and Credit to approximately $39 million. New hires and platform enhancements are aimed at building a top 20 surety franchise. Palomar successfully completed its June 1 reinsurance placement, adding $421 million of incremental limit, bringing total coverage to $3.92 billion for earthquake events and $135 million for Continental U.S. hurricane events, while maintaining modest retentions. Fourteen treaties were renewed at favorable economics, securing additional capacity for various lines.

AI & Capital Allocation

Palomar is actively deploying AI across the enterprise, led by a new Head of AI, focusing on four high-impact initiatives: an underwriting workbench, enhanced claims capabilities, efficient operations, and the continuing rollout of PLMR.Farm. The company demonstrated a disciplined capital allocation strategy, repurchasing 368,719 shares for $41 million at an average price of $111 per share, and initiating a quarterly dividend of $0.45 per share, payable September 2. These actions are aligned with its Palomar 2X growth strategy and commitment to shareholder returns.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.