Palomar NASDAQ: PLMR reported record second-quarter adjusted net income and raised its full-year outlook for the third time in 2026, citing growth across its diversified specialty insurance portfolio, higher net earned premiums, underwriting discipline and stronger investment income.
Adjusted net income rose 31% year over year to $63.8 million, or $2.36 per diluted share, compared with $48.5 million, or $1.76 per share, in the second quarter of 2025. Adjusted earnings per share increased 34%, aided by share repurchases over the past year. Gross written premium increased 27% from a year earlier, while gross earned premiums rose 27% to $630.5 million.
Chairman and Chief Executive Officer Mac Armstrong said the company recorded its 15th consecutive earnings beat. Palomar posted an adjusted combined ratio of 76.7%, compared with 73.1% in the prior-year quarter, and an annualized adjusted return on equity of 26.3%, up from 23.7% a year earlier.
Guidance Raised as Crop Outlook Improves
Palomar raised its full-year adjusted net income guidance to $270 million to $280 million. At the midpoint, the outlook represents about 27% year-over-year growth and an adjusted return on equity of approximately 26%, according to management. The guidance includes an expected $8 million to $12 million of catastrophe losses, in addition to historically contemplated “mini catastrophe” losses.
The company also increased its full-year crop premium outlook to more than $400 million, from a previous estimate of about $320 million. Crop gross written premium increased 96% year over year in the quarter.
Armstrong said crop has become an earnings contributor alongside its role in diversifying Palomar’s premium base. The company introduced PLMR.Farm, an AI-developed policy administration platform covering crop underwriting, customer service and claims administration. Management said current crop conditions in its Midwestern footprint indicate profit expectations within historical norms, while the company’s use of the Standard Reinsurance Agreement and third-party reinsurance should mitigate a meaningful portion of early-season winter wheat challenges in parts of Oklahoma and Kansas.
Chief Financial Officer Chris Uchida said the expanding crop business contributes to a higher loss ratio because of its margin profile and because crop losses emerge earlier than premiums. Palomar expects its full-year loss ratio, including catastrophes and prior-year development, to be in the mid- to upper 30% range, with the high point in both the loss ratio and combined ratio expected in the third quarter.
Portfolio Diversification Offsets Competitive Property Markets
Management emphasized that no single product group accounted for more than one-third of gross written premium during the quarter. About half of the portfolio consists of property business, nearly 20% comes from lines not correlated to traditional property-and-casualty market cycles, and 52% is written on an admitted basis.
Earthquake premium was effectively flat in the second quarter, with year-to-date written premium up 1%. Residential earthquake continued to offset pressure in commercial earthquake. Residential business represented approximately 64% of the earthquake book, posted strong new business production and maintained premium retention above 96%, according to Armstrong.
Commercial earthquake pricing remained competitive, with average rates declining more than 20% in the book. Palomar said certain large commercial new-business accounts were priced below what it considers technical pricing levels, and management said it would not pursue business that does not meet return thresholds. Small commercial earthquake pricing declined by low double digits during the quarter.
Inland marine and property gross written premium increased 11%, supported by admitted builders risk, construction engineering, residential property and motor truck cargo. Residential property, which represented 36% of the group, benefited from Hawaiian hurricane business and an approved 12% rate increase that has yet to fully earn into results. Motor truck cargo grew 22% and recently received approval for a 13% rate increase on California policies.
Palomar added underwriting talent in Texas and New York for builders risk and said it expanded support for technically complex construction projects, including data centers. The company also hired a leader to build a national home builders practice from its current Texas-only presence.
Casualty, Surety and Reinsurance Developments
Casualty gross written premium grew 37% year over year across seven niche lines and selected third-party administered programs. Armstrong said the company reduced exposure to transactional liability and cyber because pricing no longer met its return hurdles. Excess casualty pricing increased 5.8% during the quarter, while real estate errors-and-omissions pricing declined 3.9%.
Palomar reported $14.3 million of favorable prior-year reserve development, primarily from inland marine and property and crop, with additional favorability in casualty. Armstrong said the majority of favorable casualty development came from an older workers’ compensation fronting program involving Omaha National. The company said 79% of total reserves and 84% of casualty reserves were held as incurred-but-not-reported reserves.
Surety and credit gross written premium rose 236% to about $39 million, including a full quarter of results from Gray Surety. The integration of Gray Surety is substantially complete, management said. Palomar also completed a surety excess-of-loss treaty that allows it to write its full $70 million T-List bond authorization while retaining $3.5 million net per bond.
On reinsurance, Palomar added approximately $421 million of earthquake limit, bringing total coverage to $3.92 billion, and maintained its $20 million earthquake event retention. Continental U.S. hurricane coverage totaled $135 million with an $11 million event retention. The company also expanded Laulima’s Hawaii hurricane coverage to $865 million while maintaining a $1.5 million event retention.
Capital Returns and Balance Sheet
Palomar repurchased 368,719 shares during the quarter for approximately $41 million, or an average price of $111 per share. Stockholders’ equity increased to $980.9 million, while cash and invested assets totaled approximately $1.7 billion at quarter-end.
The board also authorized a quarterly dividend of $0.45 per share, payable Sept. 2 to shareholders of record as of Aug. 19. Armstrong said the dividend would not alter the company’s growth strategy or limit its ability to fund the Palomar 2X strategy, which targets long-term growth while maintaining returns above 20%.
“We will always sacrifice premium for profitability, but we will not sacrifice profitability for premium,” Armstrong said.
About Palomar (NASDAQ:PLMR)
Palomar Holdings, Inc NASDAQ: PLMR is a specialty insurance holding company focused on providing medical stop-loss coverage and related administrative services to self-funded employer health plans in the United States. The firm operates through two primary business segments—Medical Stop-Loss and Specialty Program Management—to deliver tailored risk protection and comprehensive program administration.
In its Medical Stop-Loss segment, Palomar underwrites excess and aggregate stop-loss policies designed to shield self-insured employers from catastrophic medical claims that exceed pre-determined retention levels.
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