Palomar Holdings, Inc.

Good morning and welcome to the Palomar Holdings Incorporated Third Quarter 2025 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference line will be open for questions with instructions to follow. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Chris Uchida, Chief Financial Officer. Please go ahead, sir.

Thank you, operator, and good morning, everyone. We appreciate your participation in our earnings call. With me here today is Mac Armstrong, our chairman and chief executive officer. Additionally, John Christensen, our president, is here to answer questions during the Q&A portion of the call. As a reminder, the telephonic replay of this call will be available on the investor relations section of our website through 1159 p.m. Eastern Time on November 14, 2025. Before we begin, let me remind everyone This call may contain certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about management's future expectations, beliefs, estimates, plans, and prospects. Such statements are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in our quarterly report on Form 10Q, filed with the Securities and Exchange Commission. We do not undertake any duty to update such forward-looking statements. Additionally, during today's call, we will discuss certain non-GAAP measures which we believe are useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute to results prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to their most comparable GAAP measure can be found in our earnings release. At this point, I'll turn the call over to Mac.

Thank you, Chris, and good morning. Today, I'm pleased to walk through our exceptional third quarter results. It was another outstanding quarter for Palomar, highlighted by a record gross written premium, record adjusted net income, the 12th consecutive earnings beat, and our fourth adjusted net income guidance increase in calendar 2025. These results underscore the strength of our distinct franchise and the effectiveness of our disciplined underwriting, diversified portfolio, and consistent execution. We've intentionally constructed a portfolio of specialty products designed to perform through all parts of the insurance market cycle. Our portfolio consists of a unique mix of admitted and ENS residential and commercial property and casualty risk that provide balance and earnings consistency. Additionally, our newer businesses like Crop and Surety are scaling nicely and enhance the diversification of the book given their lack of correlation to the broader P&C market. Even with the increasing balance of our book, we are not standing still. The Palomar team remains not only entrepreneurial, but also steadfastly committed to profitable growth. We continue to strengthen our franchise, entering select specialty markets that offer compelling, risk-adjusted returns. As part of this effort, last week we announced the acquisition of the Gray Casualty and Surety Company, a leading surety carrier with a strong national presence and an exceptional management team. This transaction meaningfully enhances Palomar's surety platform, bolstering our market position and complementing our existing operations. The acquisition immediately adds scale and provides access to attractive markets such as Texas, Florida, and California. Gray only enhances the sustained execution of our Palomar 2X initiative of doubling adjusted net income over a three- to five-year time frame. We're thrilled to welcome the great team to Palomar. Returning to the third quarter, we delivered another quarter of strong financial results, highlighted by 44% gross written premium growth and 70% adjusted net income growth. Our operating metrics were equally as strong with an adjusted combined ratio of 75% and an adjusted return on equity of 26%, demonstrating the strength of our underwriting discipline and the earnings power of our model. Our strong top line growth was not driven by a single line of business as all our product groups, save for Fronting, experienced double-digit growth in the third quarter. The balance in our mix of business, commercial and personal lines products written on an admitted and excess and surplus basis, allows us to navigate property and casualty market cyclicality deftly. The balance book combined with the numerous growth vectors across all our lines of business allowed us to outperform industry growth and profitability benchmarks in the third quarter and emboldens us to do so for the indefinite future. Turning to our business segments, our earthquake franchise is a great example of the balanced approach we take to constructing our portfolio. Our book of admitted and ENS residential commercial earthquake products grew 11% year-over-year in the third quarter, a sequential improvement from the second quarter. Growth was driven by the sound performance in the residential earthquake market as we continue to see healthy new business production and strong policy retention, a robust 88% for our flagship residential earthquake business. We continue to benefit from our 10% inflation guard, which affords our residential earthquake book meaningful operating leverage in a softening property catastrophe reinsurance market. Additionally, we have a robust pipeline of high-quality residential earthquake partnerships that we believe will provide incremental growth as we move into 2026. In our commercial earthquake business, the rate pressure experienced in the first half of the year persisted into the third quarter. During the quarter, the average commercial risk price decreased approximately 18% on a risk-adjusted basis, with large commercial accounts seeing more pressure than small commercial risks. Despite the rate pressure in the market, our commercial earthquake book grew during the third quarter, which reflects the strength and breadth of our franchise. We do not believe the rate pressure and commercial earthquake will ease over the near term, but we still expect to see growth the remainder of the year and in 2026. We expect that the earthquake book will experience single-digit growth in the fourth quarter, although that is somewhat exacerbated by a one-time unearned premium transfer received in the fourth quarter of 2024. Overall, we remain convicted in our long-term ability to profitably grow our earthquake business. The underlying profitability remains at a very high level with our earthquake average annual loss at a level considerably below that of 2023 and 2022. The stature of our residential earthquake book, which was 61% of the total earthquake book in the third quarter, Combined with the expected further softening of the property cap reinsurance market will enable us to grow net-earned premium even if primary commercial rates decline in 2026. As we have said time and time again, we have purposely built the Earthquake Book of Business to navigate any market cycle. Our Inland Marine and other property category grew 50% year-over-year, which is a strong acceleration from the 28% growth in the second quarter. The quarter's performance was driven primarily by our admitted and residential property products. including but not limited to Hawaii hurricane, ENS flood, and admitted builders risk. The Hawaii book grew close to 20% and Laulima has emerged as the second largest writer of standalone hurricane coverage in Hawaii. Our residential flood product, while still a modest contributor to premium today, has experienced strong, steady growth. We also believe our partnership with Neptune Flood will serve as a key catalyst accelerating the product's growth over the next three years. The Neptune Partnership commenced writing new business on October 1st, and we are encouraged with the initial production, which has been amplified by the temporary closure of the National Flood Insurance Program. Our Builders Risk franchise continues to stand out, growing 53% in the quarter. Like our earthquake business, our suite of Builders Risk products includes commercial and residential products written on both an admitted and ENS basis. Builders Risk is a national product with no geographical boundaries, and we are investing in talent where building activity remains robust. During the quarter, we had experienced underwriters in the high-growth markets of Boston and Dallas sustain our growth and extend our reach. Importantly, we are achieving this growth in our Inland Marine and other property group, despite the challenging commercial property market that has impacted our excess national property and commercial all-risk lines. Again, underscoring the value of our differentiated and balanced mix across residential and commercial, admitted and ENS products. Our casualty business delivered 170% year-over-year growth rate and premium growth, representing a nice sequential improvement from the 119% growth in the second quarter. We remain focused on segments of the casualty market where there is sustained rate adequacy. We are maintaining a disciplined approach to attachment points and net limits, leveraging quarter share reinsurance to manage volatility, and allow the portfolio to season appropriately. Through the third quarter, our average net line across casualty remained below $1 million, with our largest line of business, E&S General Casualty, averaging roughly 750,000. In the quarter, we saw strong performance from the excess and primary general casualty, which grew more than 110% year-over-year. In our environmental liability business, that was up 119%. Real estate E&L, which is our longest tenured casualty line, grew 65%. This quarter, we also rode our first healthcare liability premiums, providing capacity to a segment amidst a hard market, with technical rate increases exceeding 20%. Our casualty reserving philosophy also remains conservative and consistent. It is informed by ongoing analysis of loss emergence trends, attachment points, and portfolio composition. As we've discussed in prior quarters, we continue to carry more than 80% of our casualty reserves as IV&R, well above industry standards. Maintaining this conservative position reinforces the strength of our balance sheet and provides confidence in the durability and predictability of our future results. Front team premium declined 32% year over year, a function of the last quarter of impact from the termination of the Omaha National Partnership. Fourth quarter results will better reflect the underlying performance in the front team business. We remain selective in choosing our counterparties, and while we expect to add new partners in the coming quarters, fronting is not our highest strategic priority. Our crop franchise delivered 120 million of gross written premium in the third quarter, doubling the 60 million produced in the same period last year. This strong year over year growth puts us well ahead of the pace to exceed our full year guidance of $200 million. Beyond the production during the quarter, we added talent focusing on the Kansas and Oklahoma markets that will help drive seasonal production in the first and fourth quarters of each year. These additions inform our revised premium expectation of $230 million for 2025. We remain confident in building the business to $500 million over the intermediate term. Additionally, the crop market conditions have been favorable so far this season. with strong planting activity and growing conditions that appear to be better than historical averages. Based on what we are seeing today, we expect results to outperform the 15-year average industry loss ratio. These dynamics are an encouraging indicator for the remainder of the year. The third quarter is generally not considered a major reinsurance renewal period. However, it was active for Palomar as we placed seven treaties. Importantly, all treaties renewed on terms equal to or better than expiring. We also had successful first-time placements for our new flood and healthcare liability programs. Market conditions remain conducive to reinsurance buyers, and at this point, we are confident that we will see further decreases in property cap treaty pricing. Before I hand it over to Chris, I want to provide a little more color on gray surety. A $300 million acquisition is expected to close in the first quarter of 2026, and it should be accretive to earnings in its first year of incorporation into our organization. We intend to finance the transaction with the new term loan and excess cash on hand. Gray's terrific leadership team, Colin Piskey and Michael Petrie, will continue to lead Gray Surety, which will reband as Palomar Surety. They will join forces with our team in New Jersey to build a top 30 national surety carrier. Adding Gray to our portfolio further diversifies our book, and when combined with crop, results in approximately 15% of our premium base being not subject to property and casualty market cyclicality. To conclude, I'm very proud of our third quarter results and moreover the team that delivered them. We generated strong top and bottom line growth, a top tier return on equity, and our 12th consecutive earnings feed. We are raising our 2025 adjusted net income guidance to $210 million to $215 million from $198 million to $208 million, the midpoint implying an adjusted ROE of 24%. The revised guidance applies the achievement of the Palomar 2X tenant of doubling adjusted net income in an intermediate timeframe In the case of our 2022 cohort, a three-year time frame, and our 2023 cohort, two years. We continue to believe this is an attainable target for the foreseeable future. With that, I'll turn the call over to Chris to discuss our financial results and guidance assumptions in more detail.