Palomar Holdings, Inc.

Good morning and welcome to Palomar Holdings, Inc. fourth quarter and full year 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, a telephonic replay of this call will be available on the Investor Relations section of our website through 1159 p.m. Eastern Time on February 19, 2026. Before we begin, Let me remind everyone that 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 for 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, everyone. I'm excited to review our strong fourth quarter and full-year results. In 2025, we delivered record levels of gross written premium and adjusted net income as well as strong, broad-based profitable growth. For the full year, Palomar grew gross written premium 32%, increased adjusted net income by 62%, and achieved an adjusted return on equity of 26%. We also meaningfully exceeded our initial full-year adjusted net income guidance of $180 to $192 million, finishing the year at $216 million. We meet earnings every quarter of the year, resulting in four upward revisions to our outlook as performance continued to strengthen and exceed expectations. At the start of 2025, we outlined four strategic imperatives, integrate and operate, build new market leaders deliberately, remember what we like and don't like, and generate consistent earnings. And I'm proud to report that we executed across all four efforts in all four quarters. We scaled our newer verticals in casualty and crop while maintaining underwriting discipline. We purposefully built a balanced book of both admitted and ENS in residential and commercial property and casualty products, to ensure consistent results in any market cycle. We added outstanding talent across all our departments, including underwriting, investment, claims, data, and actuarial, growing our team to over 500 exceptional professionals. Finally, we successfully integrated two specialty franchises, First Indemnity of America and Advanced Ag Protection, and at the end of January, announced the closing of our third acquisition, Gray Casualty and Surety, now Palomar Casualty and Surety. The myriad achievements of 2025 enabled us to reach our Palomar 2X target of doubling the Just a Net income for both the 2022 and 2023 cohorts, a significant and impressive milestone that underscores the strength of our execution. We exit 2025 with a national footprint with offices and team members located across the country. We are attracting the best talent in the industry. Our people in 2025's accomplishments give us strong confidence in our ability to sustain Palomar 2X. Turning to the fourth quarter specifically, our strong performance marked a fitting close to an exceptional 2025. The quarter was highlighted by record adjusted net income and a robust top and bottom line growth, with gross written premium increasing 32% and adjusted net income growing 48% across our differentiated and diversified portfolio. As I said, our specialty product suite is designed to perform consistently through market cycles and generate attractive returns. a strength demonstrated by an adjusted combined ratio of 73% and a 27% adjusted return on equity. Collectively, these results highlight the growth, durability, balance, and quality of our franchise. Turning to our business segments, our earthquake franchise declined 2% year over year, a level slightly lower than our previously stated expectation for low single-digit growth in the fourth quarter. Our year-over-year results were muted by a one-time headwind from a large under-premium transfer in the fourth quarter of 2024. Adjusting for this one-time benefit in 24, we would have delivered growth in the quarter. As we've discussed, our earthquake book consists of residential commercial policies written on an admitted and ENS basis. This balance allows us to successfully optimize our earthquake risk-adjusted returns and navigate any market condition. In the fourth quarter, the commercial earthquake book continued to face pressure with rates off 15%. Competition remained elevated, and we believe this environment could persist through much of 2026. We remain disciplined in our underwriting, but also note that the commercial book is still generating attractive returns. Conversely, our residential earthquake book, which ended the year at 58% of the total earthquake premium, continued to perform in line with expectations. During the quarter, we saw year-over-year growth in new business written and a premium retention rate of a healthy 97% for our admitted flagship product. As we've said before, The 10% inflation guard on our residential earthquake policies affords our book compelling operating leverage in a softening property catastrophe reinsurance market. In addition, we are encouraged by our pipeline of high-quality residential earthquake partnerships, which could bolster growth in 26 and in 2027. The softening reinsurance market combined with the growth of the residential earthquake book should allow us to absorb the primary rate pressure in the commercial market. Overall, we expect our earthquake book to deliver modest premium growth and margin expansion in 2026, even with commercial pressure persisting. Our inland marine and other property group grew 30% year-over-year in the fourth quarter. Driven by strong performance from our admitted and ENS builders risk book and Hawaiian hurricane products, as well as record production in our flood book stemming from the early success of our Neptune flood partnerships. Like our earthquake business, the mix of residential and admitted offerings provided balance to the group, allowing us to offset pressure in certain E&S commercial lines. For instance, we have pending rate increases of more than 10% for our Hawaii hurricane and motor truck cargo book in California, whereas our large E&S builders risk accounts are seeing rate decreases in the low single digits. Like commercial earthquake, the underwriting performance and profitability in commercial property was very strong in the quarter. All risk, excess national property, and ENS builders risk each had a loss ratio below 25%. The strong underwriting results in commercial property are driving further investment in talent and geographic expansion. During the quarter, we added professionals in Texas and the Northeast to support profitable growth of the commercial side of the group. Additionally, we recruited Matt Deans to launch and lead our new construction engineering practice. Matt is a long-tenured expert in this dynamic space, which we believe represents a significant market opportunity. With our strong track record in builder's risk, the growth in our balance sheet, our A rating from AM Best, and expanded reinsurance capacity, we believe now is the right time to enter this market and supplement our property franchise with a book of large, complex infrastructure projects such as bridges, roads, and data centers. Consistent with our disciplined approach to new lines, we will begin with modest net line sizes supported by robust reinsurance. Our casualty business delivered 120% year-over-year gross rate and premium growth in the fourth quarter. The casualty book ended 2025 at 20% of the total gross rate and premium for the company. Fourth quarter results were driven by strong momentum in ENS casualty, primary and excess contractors general liability, and environmental liability. The E&S general liability segment of the Cassidy book, both excess and primary, continued to see a healthy rate environment. In Q4, rates on excess policies increased on average in the low teens, while primary rates were up mid to high single digits. Our professional lines remained in a stable pricing environment, with certain areas showing selected improvement, such as miscellaneous professional liability, private company D&O, and real estate agents E&O. We are also encouraged by the early traction in healthcare liability, which is probably the most dislocated market we currently underwrite, with technical rates increasing, approaching 35%. In the fourth quarter, we added to our already strong team of casualty underwriters, which should open new geographies and distribution sources, and ultimately drive growth. We remain conservative in managing our casualty exposure and reserves. Our discipline focused on low and short attachment points combined with the use of both facultative and quota share reinsurance should limit volatility in the casualty book and allow the portfolio to season in a controlled manner. Through the fourth quarter, the average net line size across casualty remained below one million. With E&S Casualty, our largest line of casualty business averaging approximately $700,000. Our reserving approach in casualty remains conservative and unchanged. It is grounded in continuous evaluation of loss development, attachment structures, and portfolio mix. As previously discussed, approximately 80% of our casualty reserves are held as IV&R, well above industry norms. This conservatism underpins balance sheet strength and reinforces confidence in the stability and predictability of future results. Our crop franchise generated $248 million of gross rate and premium in 2025. exceeding our original $200 million expectation and our most recent revised guidance of $230 million. Our performance was driven by strong execution and the successful recruitment of top-tier talent as we expanded into attractive states and products. The broader footprint also drove higher-than-expected fourth quarter production with $40 million of premium written. Importantly, this incremental business is diversifying from spring season MPCI, providing a nice complement to the portfolio. From an underwriting standpoint, 2025 was a good year for our crop book as we generated a loss ratio under 80% and still hold a conservative reserve base as we sit here today. Given the experience of our team, the short-tailed nature of the risk, and the growth of our balance sheet, effective 1-1-2026, we increased our retention to 50% net of the SRA. We will support and protect our retention with stop-loss reinsurance consistent with last year. On a prospective basis, we expect crop premium to grow more than 30% in 2026 and remain on track to achieve our intermediate term target of $500 million in premium and our long-term target of $1 billion in premium. As previously discussed, fronting is no longer a strategic focus of the business. While we still continue to support our existing relationships, we are not devoting resources and capital towards an earnest pursuit of new fronting partnerships. We simply believe we can achieve better risk-adjusted returns in all other product groups. As a result, we are reconstituting our product groups, and fronting will no longer be a standalone category. Our existing and any future fronting partnerships will be categorized in alignment with the underlying class of business starting the first quarter of 2026. For instance, our cyber-fronted program will be in the casualty product group, and our Texas homeowners-fronted program will be in the inland marine and other property product group. Following the closing of the Gray surety acquisition, surety and credit will become the fifth product category we report on going forward. As a frame of reference, pro forma for the acquisition of Gray, surety and credit would have constituted 6.5% of Palomar's total premium base in 2025. Gray surety significantly strengthens our surety franchise, adding management expertise, system scale and geographic reach, complementing our existing operations and accelerating our path toward building a market leader in an attractive sector. We believe surety and credit will serve as a stable long-term growth driver for Palomar while providing meaningful diversification to our book and earnings base. Turning to reinsurance, the fourth quarter was both eventful and productive. We renewed four quota share treaties on 1-1, all at approved economics, and completed two new placements. Key highlights of the quota share activity included a commercial earthquake quota share that renewed approximately 15% down on a risk-adjusted basis, and our primary and excess casualty quota share that saw a nice improvement in the expiring seating commission. As it pertains to excess of loss reinsurance, we placed a surety XOL and renewed two earthquake excess of loss treaties. The earthquake places renewed more than 15% lower on a risk-adjusted basis. Looking ahead to the 6-1 renewal, market conditions remain favorable for reinsurance buyers, and we are confident in further pricing improvement across our property cap program. Our diversified portfolio delivered strong top and bottom line results in the quarter and the full year. While I'm very proud of our results in the execution over the past year, I'm even more excited with the many opportunities that lie ahead. The success of 2025, the momentum in the business, and our team's collective enthusiasm for the year ahead are reflected in our 2026 earnings guidance. Adjusted net income of $260 million to $275 million. The guidance midpoint implies approximately 24% adjusted net income growth and an adjusted return on equity greater than 20%. The midpoint of our guidance assumes a $10 million catastrophe load and a decrease of 10% on our excess of lost property catastrophe reinsurance renewal on June 1st. To help us deliver on these opportunities, we are implementing four strategic imperatives for 2026. One, leverage our scale to enhance profitable growth. curate a one-of-one distinct portfolio, three, deepen our position in existing markets and unlock new opportunities, and four, integrate, optimize, and execute. To support these imperatives, we are strategically deploying AI across our organization. Current initiatives underway are focused on enhancing our underwriting workflow, portfolio optimization, process automation, and operational efficiency. These efforts involve the use of both third-party tools and internally developed agentic solutions that should allow us to increase productivity and scale our organization. If we execute our plan and these imperatives, we will achieve our Palomar 2S objectives in 2026 and beyond. With that, I'll turn the call over to Chris to discuss our financial results and guidance assumptions in more detail.