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What changed in Palomar Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Palomar Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+282 added−277 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-23)

Top changes in Palomar Holdings, Inc.'s 2024 10-K

282 paragraphs added · 277 removed · 226 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

132 edited+40 added−37 removed411 unchanged
Biggest changeYear Ended December 31, 2023 2022 2021 ($ in thousands) % of % of % of Amount GWP Amount GWP Amount GWP State California $ 600,791 52.6 % $ 418,809 47.5 % $ 244,416 45.7 % Texas 95,517 8.4 % 90,459 10.3 % 62,893 11.8 % Washington 49,494 4.3 % 41,827 4.7 % 23,608 4.4 % Hawaii 47,388 4.2 % 40,157 4.5 % 34,993 6.5 % Florida 47,595 4.2 % 38,715 4.4 % 27,386 5.1 % Oregon 23,220 2.0 % 24,108 2.7 % 13,677 2.6 % Illinois 22,340 2.0 % 17,368 2.0 % 12,133 2.3 % New York 18,424 1.6 % 12,510 1.5 % 3,077 0.6 % Other 236,789 20.7 % 197,915 22.4 % 112,992 21.1 % Total Gross Written Premiums $ 1,141,558 100.0 % $ 881,868 100.0 % $ 535,175 100.0 % 9 Table of Contents We believe that maintaining a balanced book of personal and commercial lines business is beneficial.
Biggest changeYear Ended December 31, 2024 2023 2022 ($ in thousands) % of % of % of Amount GWP Amount GWP Amount GWP State California $ 668,635 43.4 % $ 600,791 52.6 % $ 418,809 47.5 % Texas 124,416 8.1 % 95,517 8.4 % 90,459 10.3 % Hawaii 72,558 4.7 % 47,388 4.2 % 40,157 4.5 % Florida 67,008 4.3 % 47,595 4.2 % 38,715 4.4 % Washington 57,900 3.8 % 49,494 4.3 % 41,827 4.7 % New York 38,919 2.5 % 18,424 1.6 % 12,510 1.5 % Oregon 29,550 1.9 % 23,220 2.0 % 24,108 2.7 % Illinois 20,901 1.4 % 22,340 2.0 % 17,368 2.0 % Other 462,075 30.0 % 236,789 20.7 % 197,915 22.4 % Total Gross Written Premiums $ 1,541,962 100.0 % $ 1,141,558 100.0 % $ 881,868 100.0 % 9 Table of Contents Year Ended December 31, 2024 2023 2022 ($ in thousands) % of % of % of Amount GWP Amount GWP Amount GWP Product (1) Earthquake $ 522,864 33.9 % $ 436,897 38.3 % $ 345,480 39.2 % Inland Marine and Other Property 334,079 21.7 % 250,022 21.9 % 232,918 26.4 % Fronting 333,188 21.6 % 352,141 30.8 % 223,249 25.3 % Casualty 235,592 15.3 % 90,388 7.9 % 80,221 9.1 % Crop 116,239 7.5 % 12,110 1.1 % — — % Total Gross Written Premiums $ 1,541,962 100.0 % $ 1,141,558 100.0 % $ 881,868 100.0 % (1) - Beginning in 2024, the Company has updated the categorization of its products to align with management's current strategy and view of the business.
Investment policy is set by our Board of Directors, subject to the limits of applicable regulations. Our investment policy imposes strict requirements for credit quality, with a minimum average credit quality of the portfolio being rated “A” or higher by Standard & Poor’s or the equivalent rating from another nationally recognized rating agency.
Our investment policy is set by our Board of Directors, subject to the limits of applicable regulations. Our investment policy imposes strict requirements for credit quality, with a minimum average credit quality of the portfolio being rated “A” or higher by Standard & Poor’s or the equivalent rating from another nationally recognized rating agency.
These ongoing enhancements include the creation of an ERM Committee of the Board of Directors which is comprised select board members and select members of executive management, creation and maintenance of a risk register, and regular reporting on risk management. 20 Table of Contents An additional important part of our ERM is business continuity, including in the circumstances of a catastrophe event.
These ongoing enhancements include the creation of an ERM Committee of the Board of Directors which is comprised of select board members and select members of executive management, creation and maintenance of a risk register, and regular reporting on risk management. 20 Table of Contents An additional important part of our ERM is business continuity, including in the circumstances of a catastrophe event.
Many factors affect our ability to pay claims accurately and timely, including the training and experience of our claims representatives, including our third-party claims administrators (“TPAs”), the effectiveness of our management, and our ability to develop or select and implement appropriate procedures and systems to support our claims functions and other factors.
Many factors affect our ability to pay claims accurately and timely, including the training and experience of our claims representatives, including our third-party claims administrators (“TPAs”), the effectiveness of our management, our ability to develop or select and implement appropriate procedures and systems to support our claims functions and other factors.
We expect our quarterly results to continue to fluctuate in the future due to a number of factors, including the general economic conditions in the markets where we operate, the frequency of occurrence and severity of catastrophe or other insured events, fluctuating interest rates, claims exceeding our loss reserves, competition in our industry, deviations from expected premium retention rates of our existing policies, volatility in investment performance and gains and losses on our equity securities, and the cost of reinsurance coverage.
We expect our quarterly results to continue to fluctuate in the future due to a number of factors, including the general economic conditions in the markets where we operate, the frequency of occurrence and severity of catastrophe or other insured events, fluctuating interest rates, claims exceeding our loss reserves, competition in our industry, deviations from expected premium retention rates of our existing policies, volatility in investment performance, including gains and losses on our equity securities, and the cost of reinsurance coverage.
Among the factors that could affect our stock price are: • market conditions in the broader stock market; • actual or anticipated fluctuations in our quarterly financial and operating results; • introduction of new products or services by us or our competitors; 46 Table of Contents • issuance of new or changed securities analysts’ reports or recommendations; • results of operations that vary from expectations of securities analysis and investors; • short sales, hedging and other derivative transactions in our common stock; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • strategic actions by us or our competitors; • announcement by us, our competitors or our acquisition targets; • sales, or anticipated sales, of large blocks of our stock, including by our directors, executive officers and principal stockholders; • additions or departures in our Board or Directors, senior management or other key personnel; • regulatory, legal or political developments; • public response to press releases or other public announcements by us or third parties, including our filings with the SEC; • litigation and governmental investigations; • changing economic conditions; • changes in accounting principles; • any indebtedness we may incur or securities we may issue in the future; • default under agreements governing our indebtedness; • exposure to capital and credit market risks that adversely affect our investment portfolio or our capital resources; • changes in our credit ratings; • changes in corporate tax rates; • exchange rate fluctuations; and • other events or factors, including those from natural disasters, war, pandemics, acts of terrorism, cyber-attacks or responses to these events.
Among the factors that could affect our stock price are: • market conditions in the broader stock market; • actual or anticipated fluctuations in our quarterly financial and operating results; • introduction of new products or services by us or our competitors; 46 Table of Contents • issuance of new or changed securities analysts’ reports or recommendations; • results of operations that vary from expectations of securities analysis and investors; • short sales, hedging and other derivative transactions in our common stock; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • strategic actions by us or our competitors; • announcement by us, our competitors or our acquisition targets; • sales, or anticipated sales, of large blocks of our stock, including by our directors, executive officers and principal stockholders; • additions or departures in our Board or Directors, senior management or other key personnel; • regulatory, legal or political developments; • public response to press releases or other public announcements by us or third parties, including our filings with the SEC; • litigation and governmental investigations; • changing economic conditions; • changes in accounting principles; • any indebtedness we may incur or securities we may issue in the future; • default under agreements governing our indebtedness; • exposure to capital and credit market risks that adversely affect our investment portfolio or our capital resources; • changes in our credit ratings; • changes in corporate tax rates; • interest or exchange rate fluctuations; and • other events or factors, including those from natural disasters, war, pandemics, acts of terrorism, cyber-attacks or responses to these events.
Our actual results may differ materially from those expressed in, or implied by, the forward-looking statements included in this Annual Report on Form 10-K as a result of various factors, including, among others: ● claims arising from unpredictable and severe catastrophe events could reduce our earnings and stockholders’ equity and limit our ability to underwrite new insurance policies; ● the inability to purchase third-party reinsurance or otherwise expand our catastrophe coverage in amounts that are commercially acceptable to us or on terms that adequately protect us; ● the inherent uncertainty of models resulting in actual losses that are materially different than our estimates; ● we and our customers could be negatively and adversely impacted by pandemics, disease outbreaks, and other public health crises such as the COVID-19 Pandemic; ● a decline in our financial strength rating adversely affecting the amount of business we write; 49 Table of Contents ● reinsurance counterparty credit risk; ● the concentration of our business in California and Texas; ● the potential loss of one or more key executives or an inability to attract and retain qualified personnel adversely affecting our results of operations; ● our reliance on a select group of brokers; ● the failure of any of the loss limitations or exclusions we employ, or changes in other claims or coverage issues, having a material adverse effect on our financial condition or results of operations; ● unexpected changes in the interpretation of our coverage or provisions; ● adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity resulting in the sale of fewer policies than expected or an increase in frequency or severity of claims and premium defaults or both, affecting our growth and profitability; ● the performance of our investment portfolio adversely affecting our financial results; ● being forced to sell investments to meet our liquidity requirements; ● extensive regulation adversely affecting our ability to achieve our business objectives or the failure to comply with these regulations adversely affecting our financial condition and results of operations; ● we may become subject to additional government or market regulation; ● the possibility that states could increase the assessments that Palomar Specialty Insurance Company is required to pay; ● the ability to pay dividends being dependent on our ability to obtain cash dividends or other permitted payments from our insurance subsidiary; ● fluctuation and variance in our operating results; ● the possibility that we act based on inaccurate or incomplete information regarding the accounts we underwrite; ● our employees, underwriters and other associates taking excessive risks; ● our inability to obtain future additional capital or obtaining additional capital on unfavorable terms; ● the failure of our information technology and telecommunications systems; ● our inability to protect our trademarks or other intellectual property rights; ● our inability to maintain, or errors in, our third-party and open source licensed software; ● the inability to manage our growth effectively; ● the intense competition for business in our industry; 50 Table of Contents ● the failure of renewals of our existing contracts to meet expectations could affect our written premiums in the future; ● our inability to underwrite risks accurately and charge competitive yet profitable rates to our policyholders; ● the effects of litigation having an adverse effect on our business; ● changes in accounting practices; ● our failure to accurately and timely pay claims; ● legal or regulatory requirements that restrict our ability to access credit score information for purposes of pricing and underwriting our insurance policies; ● increased costs as a result of being a public company; and ● the failure to maintain effective internal controls in accordance with Sarbanes-Oxley. ​ We have based the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy and financial needs.
Our actual results may differ materially from those expressed in, or implied by, the forward-looking statements included in this Annual Report on Form 10-K as a result of various factors, including, among others: ● claims arising from unpredictable and severe catastrophe events could reduce our earnings and stockholders’ equity and limit our ability to underwrite new insurance policies; ● the inability to purchase third-party reinsurance or otherwise expand our catastrophe coverage in amounts that are commercially acceptable to us or on terms that adequately protect us; ● the inherent uncertainty of models resulting in actual losses that are materially different than our estimates; ● we and our customers could be negatively and adversely impacted by pandemics, disease outbreaks, and other public health crises; ● a decline in our financial strength rating adversely affecting the amount of business we write; 49 Table of Contents ● reinsurance counterparty credit risk; ● the concentration of our business in California and Texas; ● the potential loss of one or more key executives or an inability to attract and retain qualified personnel adversely affecting our results of operations; ● our reliance on a select group of brokers; ● the failure of any of the loss limitations or exclusions we employ, or changes in other claims or coverage issues, having a material adverse effect on our financial condition or results of operations; ● unexpected changes in the interpretation of our coverage or provisions; ● adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity resulting in the sale of fewer policies than expected or an increase in frequency or severity of claims and premium defaults or both, affecting our growth and profitability; ● the performance of our investment portfolio adversely affecting our financial results; ● being forced to sell investments to meet our liquidity requirements; ● extensive regulation adversely affecting our ability to achieve our business objectives or the failure to comply with these regulations adversely affecting our financial condition and results of operations; ● we may become subject to additional government or market regulation; ● the possibility that states could increase the assessments that Palomar Specialty Insurance Company is required to pay; ● the ability to pay dividends being dependent on our ability to obtain cash dividends or other permitted payments from our insurance subsidiary; ● fluctuation and variance in our operating results; ● the possibility that we act based on inaccurate or incomplete information regarding the accounts we underwrite; ● our employees, underwriters and other associates taking excessive risks; ● our inability to obtain future additional capital or obtaining additional capital on unfavorable terms; ● the failure of our information technology and telecommunications systems; ● our inability to protect our trademarks or other intellectual property rights; ● our inability to maintain, or errors in, our third-party and open source licensed software; ● the inability to manage our growth effectively; ● the intense competition for business in our industry; 50 Table of Contents ● the failure of renewals of our existing contracts to meet expectations could affect our written premiums in the future; ● our inability to underwrite risks accurately and charge competitive yet profitable rates to our policyholders; ● the effects of litigation having an adverse effect on our business; ● changes in accounting practices; ● our failure to accurately and timely pay claims; ● legal or regulatory requirements that restrict our ability to access credit score information for purposes of pricing and underwriting our insurance policies; ● increased costs as a result of being a public company; and ● the failure to maintain effective internal controls in accordance with Sarbanes-Oxley. ​ We have based the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy and financial needs.
Premium grace periods could significantly increase our expenses while decreasing our short-term revenues which would adversely impact our liquidity. Additionally, in response to the growing threat of cyber-attacks in the insurance industry, new cybersecurity regulations have been adopted, which, among other things, require insurance companies to establish and maintain a cybersecurity program and implement and maintain cybersecurity policies and procedures.
Premium grace periods could significantly increase our expenses while decreasing our short-term revenues which would adversely impact our liquidity. Additionally, in response to the growing threat of cyber-attacks in the insurance industry, cybersecurity regulations have been adopted, which, among other things, require insurance companies to establish and maintain a cybersecurity program and implement and maintain cybersecurity policies and procedures.
Entrepreneurial and highly experienced management team and board. Our management team is highly qualified, with an average of more than twenty years of relevant experience in insurance, reinsurance and capital markets. We are led by our Chairman and Chief Executive Officer, Mac Armstrong, who prior to founding Palomar was President of Arrowhead General Insurance Agency (“Arrowhead”).
Highly experienced management team and board. Our management team is highly qualified, with an average of more than twenty years of relevant experience in insurance, reinsurance and capital markets. We are led by our Chairman and Chief Executive Officer, Mac Armstrong, who prior to founding Palomar was President of Arrowhead General Insurance Agency (“Arrowhead”).
Our insurance operations expose us to claims arising from unpredictable catastrophe events, such as earthquakes, hurricanes, windstorms, floods and other severe events. We have incurred significant losses from catastrophe events multiple times in our history and we may incur significant losses from future catastrophe events. The actual occurrence, frequency and magnitude of such events are uncertain.
Our insurance operations expose us to claims arising from unpredictable catastrophe events, such as earthquakes, hurricanes, windstorms, floods, wildfires, and other severe events. We have incurred significant losses from catastrophe events multiple times in our history and we may incur significant losses from future catastrophe events. The actual occurrence, frequency and magnitude of such events are uncertain.
Evidence of the Company’s commitment to the environment and combating climate change can be found in the Sustainability and Citizenship report available on our corporate website. The company considers ESG factors as part of its investment strategy and reviews individual investments to ensure congruence with company goals in this area.
Evidence of the Company’s commitment to the environment and combating climate change can be found in the Sustainability and Citizenship report available on our corporate website. The company considers sustainability factors as part of its investment strategy and reviews individual investments to ensure congruence with company goals in this area.
Our custom application platform seamlessly integrates policy administration, billing, and maintenance. We emphasize the use of technology in our analytics and enterprise risk management (“ERM”) operations. Our analytics team, which reports to our Chief Risk Officer, uses multiple catastrophe modeling software applications to evaluate our ongoing risk exposure.
Our custom application platform seamlessly integrates policy administration, billing, and maintenance. We emphasize the use of technology in our analytics and enterprise risk management (“ERM”) operations. Our data and analytics team, which reports to our Chief Technology Officer, uses multiple catastrophe modeling software applications to evaluate our ongoing risk exposure.
We depend on our ability to attract and retain experienced personnel and seasoned key executives who are knowledgeable about our business. The pool of talent from which we actively recruit is limited and may fluctuate based on market dynamics specific to our industry and independent of overall economic conditions.
We depend on our ability to attract and retain experienced personnel and seasoned key executives who are knowledgeable about our business. The pool of talent from which we recruit is limited and may fluctuate based on market dynamics specific to our industry and independent of overall economic conditions.
We currently write a book of specialty insurance that is diversified by underlying loss exposure, customer type and geography. Our major product lines and exposures are uncorrelated, such that events contributing to a loss in one line of business are unlikely to generate material losses in our other lines of business.
We currently write a book of specialty insurance that is diversified by underlying loss exposure, customer type and geography. Our major product lines and exposures are uncorrelated, such that events contributing to a loss in one product line are unlikely to generate material losses in our other product lines.
We purchase program specific reinsurance, consisting primarily of quota share coverage, for certain lines of business with an attritional loss component such as Inland Marine and Casualty. We also utilize a combination of XOL and quota share reinsurance to provide coverage for our Flood products.
We purchase program specific reinsurance, consisting primarily of quota share coverage, for certain lines of business with an attritional loss component such as Inland Marine and Casualty. We also utilize a combination of XOL and quota share reinsurance to provide coverage for our Flood, Inland Marine, and Crop products.
We will therefore increasingly rely on third-party software providers to maintain appropriate controls and safeguards to protect the integrity of our data and any information we transmit, including personal, personally identifiable, sensitive, confidential or proprietary information.
We will increasingly rely on third-party software providers to maintain appropriate controls and safeguards to protect the integrity of our data and any information we transmit, including personal, personally identifiable, sensitive, confidential or proprietary information.
Summary Risk Factors ​ Our business is subject to numerous risks and uncertainties, these risks include, but are not limited to, the following: ​ Risks Related to Our Business and Industry: ● Claims arising from unpredictable and severe catastrophe events, including those caused by global climate change, could reduce or eliminate our earnings and stockholders' equity, and limit our ability to underwrite new insurance policies; ● Our reinsurers may not pay claims on a timely basis, or at all, which may materially adversely affect our business, financial condition, and results of operations; ● Our loss reserves are established based on estimates and may be inadequate to cover actual incurred losses which could have a material adverse impact on our results of operations and financial condition; ● We may be unable to purchase third-party reinsurance or otherwise expand our catastrophe coverage in amounts we desire on commercially acceptable terms or on terms that adequately protect us, and this inability may materially adversely affect our business, financial condition and results of operations. ● Our risk management and loss limitation methods, including estimates and models, may fail to adequately manage our exposure to losses from catastrophe events and our losses could be materially higher than our expectations; ● Our business is concentrated in California and Texas and we are exposed more significantly to California and Texas loss activity and regulatory environments; ● We rely on a select group of brokers and program administrators, and such relationships may not continue; ● There is intense competition for business in our industry; Risks Related to the Economic Environment: ● Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity could affect our growth and profitability; ​ 26 Table of Contents Risks Related to Technology: ​ ● The failure of our information technology and telecommunications systems could adversely affect our business; ● Security breaches or cyber-attacks could expose us to liability and damage our reputation and business; Risks Related to Laws and Regulations: ​ ● We are subject to extensive regulation, which may adversely affect our ability to achieve our business objectives; ● Unexpected changes in the interpretation of our coverage or provisions, including loss limitations and exclusions, in our policies could have a material adverse effect on our financial condition or results of operations; ● We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to complying with public company regulations; and Risks Related to Ownership of our Common Stock: ​ ● Our operating results and stock price may be volatile, or may decline regardless of our operating performance, and holders of our common stock could lose all or part of their investment.
Summary Risk Factors ​ Our business is subject to numerous risks and uncertainties, these risks include, but are not limited to, the following: ​ Risks Related to Our Business and Industry: ● Claims arising from unpredictable and severe catastrophe events, including those caused by global climate change, could reduce or eliminate our earnings and stockholders' equity, and limit our ability to underwrite new insurance policies; ● Our reinsurers may not pay claims on a timely basis, or at all, which may materially adversely affect our business, financial condition, and results of operations; ● Our loss reserves are established based on estimates and may be inadequate to cover actual incurred losses which could have a material adverse impact on our results of operations and financial condition; ● We may be unable to purchase third-party reinsurance or otherwise expand our catastrophe coverage in amounts we desire on commercially acceptable terms or on terms that adequately protect us, and this inability may materially adversely affect our business, financial condition and results of operations. ● Our risk management and loss limitation methods, including estimates and models, may fail to adequately manage our exposure to losses from catastrophe events and our losses could be materially higher than our expectations; ● Our business is concentrated in California and we are exposed more significantly to California loss activity and regulatory environments; ● We rely on a select group of brokers and program administrators, and such relationships may not continue; ● There is intense competition for business in our industry; ● Volatility in crop prices, as a result of weather conditions or other events, could adversely impact our results of operations; Risks Related to the Economic Environment: ● Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity could affect our growth and profitability; ​ 26 Table of Contents Risks Related to Technology: ​ ● The failure of our information technology and telecommunications systems could adversely affect our business; ● Security breaches or cyber-attacks could expose us to liability and damage our reputation and business; Risks Related to Laws and Regulations: ​ ● We are subject to extensive regulation, which may adversely affect our ability to achieve our business objectives; ● Unexpected changes in the interpretation of our coverage or provisions, including loss limitations and exclusions, in our policies could have a material adverse effect on our financial condition or results of operations; ● We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to complying with public company regulations; and Risks Related to Ownership of our Common Stock: ​ ● Our operating results and stock price may be volatile, or may decline regardless of our operating performance, and holders of our common stock could lose all or part of their investment.
As of December 31, 2023, we had partnerships with over 25 insurance companies. Several carriers invite us to provide a companion offer for residential earthquake insurance alongside their homeowners’ insurance policy offerings. Other carriers will direct their captive agents to our online system so that they may quote, bind and issue policies directly.
As of December 31, 2024, we had partnerships with over 25 insurance companies. Several carriers invite us to provide a companion offer for residential earthquake insurance alongside their homeowners’ insurance policy offerings. Other carriers will direct their captive agents to our online system so that they may quote, bind and issue policies directly.
This catastrophe bond was also completed through Torrey Pines Re Ltd and provides indemnity-based reinsurance covering earthquake events through June 1, 2026. We may seek similar catastrophe bond offerings in the future. However, there can be no assurance that we will be able to complete such offerings on acceptable terms, if at all.
This catastrophe bond was also completed through Torrey Pines Re Ltd and provides indemnity-based reinsurance covering earthquake events through June 1, 2027. We may seek similar catastrophe bond offerings in the future. However, there can be no assurance that we will be able to complete such offerings on acceptable terms, if at all.
In addition, if we do not manage our TPAs effectively, or if our TPAs are unable to effectively handle our volume of claims, our ability to handle our claims workload could be adversely affected.
In addition, if we do not manage our TPAs effectively, or if our TPAs are unable to effectively manage our volume of claims, our ability to manage our claims workload could be adversely affected.
In addition, the insurance and reinsurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity (soft market cycle) as well as periods when shortages of capacity increase premium levels (hard market cycle). We expect our business and results of operations to be continuously impacted by these market cycles.
In addition, the insurance and reinsurance business historically has been a cyclical industry characterized by periods of intense price competition due to excess underwriting capacity (soft market cycle) as well as periods when shortages of capacity increase premium levels (hard market cycle). We expect our business and results of operations to be continuously impacted by these market cycles.
If these controls do not operate effectively, we may not be able to rely on their software and cyber attackers may be able to exploit vulnerabilities, resulting in operational disruption, data loss, defects or a security event. Migrating our software to the cloud increases the risk of operational disruption should internet service be interrupted.
If these controls do not operate effectively, we may not be able to rely on their software and cyber attackers may be able to exploit vulnerabilities, resulting in operational disruption, data loss, defects or a cybersecurity event. Migrating our software to the cloud increases the risk of operational disruption should internet service be interrupted.
States may also assess admitted companies to fund their respective department of insurance operations. Some states permit member insurers to recover assessments paid through full or partial premium tax offset or in limited circumstances by surcharging policyholders. PSIC is licensed to conduct insurance operations on an admitted basis in 42 states.
States may also assess admitted companies to fund their respective department of insurance operations. Some states permit member insurers to recover assessments paid through full or partial premium tax offset or in limited circumstances by surcharging policyholders. PSIC is licensed to conduct insurance operations on an admitted basis in 44 states.
Best performs quantitative and qualitative analysis of a company’s balance sheet strength, operating performance and business profile. A.M. Best financial strength ratings range from “A++” (Superior) to “F” for insurance companies that have been publicly placed in liquidation. As of December 31, 2023, A.M.
Best performs quantitative and qualitative analysis of a company’s balance sheet strength, operating performance and business profile. A.M. Best financial strength ratings range from “A++” (Superior) to “F” for insurance companies that have been publicly placed in liquidation. As of December 31, 2024, A.M.
Admitted products are backed by state guarantee funds and, as a result, are subject to more regulation, as admitted insurance companies must receive approval for rates and policy forms from individual state regulators. Our admitted insurance company subsidiary, PSIC, is licensed to write business in 42 states.
Admitted products are backed by state guarantee funds and, as a result, are subject to more regulation, as admitted insurance companies must receive approval for rates and policy forms from individual state regulators. Our admitted insurance company subsidiary, PSIC, is licensed to write business in 44 states.
For certain products where limited models are available, we have worked directly with the vendors to develop proprietary models. We update all of our pricing models as new versions are released, which mitigates our exposure to changes in our business following industry-wide model changes.
For certain products where limited models are available, we have worked directly with the vendors to develop proprietary models. We update our pricing models as new versions are released, which mitigates our exposure to changes in our business following industry-wide model changes.
We have invested significantly in customizing, building on top of and extending these applications to increase automation and enhance efficiency. We have dedicated in-house software developers as well as external resources. Our internally developed PASS provides producers direct access to our retail and wholesale distributed products including Residential Earthquake, Commercial Earthquake, Hawaii Hurricane, Inland Marine and Residential Flood.
We have invested significantly in customizing, building on top of and extending these applications to increase automation and enhance efficiency. We have dedicated in-house software developers as well as external resources. Our internally developed PASS provides producers direct access to our retail and wholesale distributed products including Residential Earthquake, Hawaii Hurricane, and Residential Flood.
Ratings Each of our insurance company subsidiaries, PSIC and PESIC has a rating of “A−” (Excellent) (Outlook Positive) from A.M. Best, which rates insurance companies based on factors of concern to policyholders. A.M. Best currently assigns 16 ratings to insurance companies, which currently range from “A++” (Superior) to “F” for insurance companies that have been publicly placed in liquidation.
Ratings Our insurance company subsidiaries, PSIC and PESIC each has a rating of “A” (Excellent) (Outlook Stable) from A.M. Best, which rates insurance companies based on factors of concern to policyholders. A.M. Best currently assigns 16 ratings to insurance companies, which currently range from “A++” (Superior) to “F” for insurance companies that have been publicly placed in liquidation.
A significant portion of our employees work remotely and outside of our primary offices on a regular basis.
A portion of our employees work remotely and outside of our primary offices on a regular basis.
These outcomes would reduce our underwriting profit to the extent these factors are not reflected in the rates we charge. We underwrite a significant portion of our insurance in California and Texas. An economic downturn which particularly impacts either state could have an adverse effect on our financial condition and results of operations.
These outcomes would reduce our underwriting profit to the extent these factors are not reflected in the rates we charge. We underwrite a significant portion of our insurance in California. An economic downturn which particularly impacts California could have an adverse effect on our financial condition and results of operations.
We encourage our teammates to share ideas and collaborate to remove organizational boundaries, solve problems, and drive company growth. ​ Compensation, Health and Well Being We offer fair, competitive compensation and benefits to support our team members overall well-being. Our compensation programs include base pay, annual incentive compensation and, in many cases, long-term equity-based compensation.
We encourage our teammates to share ideas and collaborate to remove organizational boundaries, solve problems, and drive company growth. ​ Compensation, Health and Well Being We offer fair, competitive compensation and benefits to support our team members overall well-being. Our compensation programs include base pay, annual incentive compensation and long-term equity-based compensation.
Our data analytics enable us to provide real-time reporting of our in-force portfolio to our reinsurers, TPAs and distribution partners on a regular basis and during severe weather events. This reporting combines content from the catastrophe models that we license with internally developed content.
Our data analytics enable us to provide timely reporting of our in-force portfolio to our reinsurers, TPAs and distribution partners on a regular basis and during severe weather events. This reporting combines content from the catastrophe models that we license with internally developed content.
The ESG committee oversees and provides guidance on the company’s strategies related to several factors, including environmental, health and safety, corporate social responsibility, governance, sustainability and public policy matters relevant to our business. ​ Specific duties of the ESG committee include: • Assisting the management team in setting general strategy relating to ESG matters; • Developing, implementing and monitoring initiatives and policies based on that strategy; and • Overseeing communications with employees, investors and shareholders with respect to ESG matters. ​ The ESG committee meets on a regular basis to assess progress on ESG matters and will continue to look for opportunities to integrate ESG concerns in our strategy. ​ Environmental and Climate Change ​ Our economic model is closely tied to our coverages for natural disasters and catastrophes.
The Sustainability Committee oversees and provides guidance on the company’s strategies related to several factors, including community resiliency, health and safety, corporate social responsibility, governance, partner diversity, and public policy matters relevant to our business. ​ Specific duties of the Sustainability Committee include: • Assisting the management team in setting general strategy relating to sustainability matters; • Developing, implementing and monitoring initiatives and policies based on that strategy; and • Overseeing communications with employees, investors and shareholders with respect to sustainability matters. ​ The Sustainability Committee meets on a quarterly basis to assess progress on sustainability matters and will continue to look for opportunities to integrate sustainability concerns in our strategy. ​ Environmental and Climate Change ​ Our economic model is closely tied to our coverages for natural disasters and catastrophes.
Short-term investments are reported at cost and include investments that are both readily convertible to known amounts of cash and have maturities of 12 months or less upon acquisition by us. 19 Table of Contents Our investment securities available totaled $689.6 million and $553.6 million at December 31, 2023 and 2022 respectively, and are summarized as follows: ​ Fair % of Total December 31, 2023 Value Fair Value Fixed maturities: ​ ​ U.S.
Short-term investments are reported at cost and include investments that are both readily convertible to known amounts of cash and have maturities of 12 months or less upon acquisition by us. 19 Table of Contents Our investment securities available totaled $987.7 million and $689.6 million at December 31, 2024 and 2023 respectively, and are summarized as follows: ​ Fair % of Total December 31, 2024 Value Fair Value Fixed maturities: ​ ​ U.S.
These markets have primarily been served by either large generalist insurance companies and state-managed entities applying “one-size-fits-all” pricing and policy forms across broad geographies. We sell both admitted and surplus lines products. Our admitted products feature rates and policy forms approved by state insurance departments and are backed by state guaranty funds, providing a further level of security to policyholders.
These markets have primarily been served by either large generalist insurance companies and state-managed entities applying “one-size-fits-all” pricing and policy forms across broad geographies. Our admitted products feature rates and policy forms approved by state insurance departments and are backed by state guaranty funds, providing a further level of security to policyholders.
In March 2019, we (i) implemented a domestication pursuant to Section 388 of the Delaware General Corporation Law and became a Delaware corporation. 8 Table of Contents Our primary operating subsidiary, PSIC, is an insurance company domiciled in the state of Oregon and is an admitted insurer licensed to write business in 42 states as of December 31, 2023.
In March 2019, we implemented a domestication pursuant to Section 388 of the Delaware General Corporation Law and became a Delaware corporation. 8 Table of Contents Our primary operating subsidiary, PSIC, is an insurance company domiciled in the state of Oregon and is an admitted insurer licensed to write business in 44 states as of December 31, 2024.
It is possible that such reviews of us may result in adverse ratings consequences, which could have a material adverse effect on our financial condition and results of operations. We and our customers could be negatively and adversely impacted by pandemics, disease outbreaks and other public health crises, such as the COVID-19 pandemic.
It is possible that such reviews of us may result in adverse ratings consequences, which could have a material adverse effect on our financial condition and results of operations. We and our customers could be negatively and adversely impacted by pandemics, disease outbreaks and other public health crises.
The following charts illustrate our business mix by product, residential versus commercial markets, state, and entity for the year ended December 31, 2023: We employ a highly granular and analytical underwriting process to assess each insurance policy that we write, and we ensure that the risk characteristics of business assumed through our channel partnerships or written by program administrator partners are consistent with our underwriting of direct business.
The following charts illustrate our business mix by product, state, and entity for the year ended December 31, 2024: We employ a highly granular and analytical underwriting process to assess each insurance policy that we write, and we ensure that the risk characteristics of business assumed through our channel partnerships or written by program administrator partners are consistent with our underwriting of direct business.
In addition, we maintain reinsurance coverage equivalent to or better than the 1 in 250 year PML for our other lines. As of December 31, 2023, our first event retention represented approximately 3.7% of our stockholders’ equity.
In addition, we maintain reinsurance coverage equivalent to or better than the 1 in 250 year PML for our other lines. As of December 31, 2024, our first event retention represented approximately 2.7% of our stockholders’ equity.
We continue to develop product offerings for lines of business that harness our core competencies and where we believe we can generate attractive risk-adjusted returns. Notable recent examples of our commitment to developing new products include the expansion of our Casualty and Fronting operations and the launch of our Crop insurance program.
We continue to develop new product offerings for lines of business that harness our core competencies and where we believe we can generate attractive risk-adjusted returns. Recent examples of our commitment to developing new products include the expansion of our Casualty and Crop insurance offerings.
Department of Agriculture's Risk Management Agency and designed to cover revenue shortfalls or production losses due to natural causes such as drought, hail, and wind. We currently write Crop insurance through a strategic partnership with the goal of minimizing exposure to a single region.
Department of Agriculture's Risk Management Agency and designed to cover revenue shortfalls or production losses due to natural causes such as drought, hail, and wind. We currently write Crop insurance with the goal of minimizing exposure to any single region.
We may become subject to additional government or market regulation, including additional regulation around cyber-attacks, which may have a material adverse impact on our business.
We may become subject to additional government or market regulation, including additional regulation around cybersecurity, which may have a material adverse impact on our business.
We evaluate each reinsurance claim based on the facts of the case, historical experience with the reinsurer on similar claims and existing case law and consider including any amounts deemed uncollectible from the reinsurer in a reserve for uncollectible reinsurance. As of December 31, 2023, we had $276.8 million of aggregate reinsurance recoverables.
We evaluate each reinsurance claim based on the facts of the case, historical experience with the reinsurer on similar claims and existing case law and consider including any amounts deemed uncollectible from the reinsurer in a reserve for uncollectible reinsurance. As of December 31, 2024, we had $395.2 million of aggregate reinsurance recoverables.
We also invest in marketable equity securities. These securities are carried on the balance sheet at fair market value and are subject to potential losses and declines in market value based on the performance of equity markets. Our equity invested assets totaled $43.2 million as of December 31, 2023.
We also invest in marketable equity securities. These securities are carried on the balance sheet at fair market value and are subject to potential losses and declines in market value based on the performance of equity markets. Our equity invested assets totaled $40.5 million as of December 31, 2024.
Our underwriters actively collaborate with our actuarial team to determine pricing and risk exposure. This analytical and underwriting expertise framework enables us to offer rate relief in low risk areas and to accurately price risks that are at higher risk.
Our underwriters actively collaborate with our actuarial team to determine pricing and risk exposure. This analytical and underwriting expertise framework enables us to offer rate relief in low risk areas and to accurately price risks that are at higher risk. Personal lines policies are issued via automated underwriting.
In 2023, 31% of our workforce was promoted or moved into new positions. ​ During the third quarter of 2023, our team members completed an engagement survey, and we received a 80% response rate, and a 77% overall engagement score. Consistent with historical practice, we use the responses and learnings from this survey to inform our future talent management strategies.
In 2024, 28% of our workforce was promoted or moved into new positions. ​ During the third quarter of 2024, our team members completed an engagement survey, and we received an 85% response rate, and a 87% overall engagement score. Consistent with historical practice, we use the responses and learnings from this survey to inform our future talent management strategies.
We undertake no obligation to update any forward-looking statements after the date of this Annual Report on Form 10-K or to conform such statements to actual results or revised expectations, except as required by law. ​ Item 1B: Unresolved Staff Comments ​ None.
We undertake no obligation to update any forward-looking statements after the date of this Annual Report on Form 10-K or to conform such statements to actual results or revised expectations, except as required by law. ​
In addition, a natural disaster could materially impact the financial condition of our policyholders, resulting in loss of premiums. 27 Table of Contents Our reinsurance coverage currently exhausts at $2.71 billion for earthquake events, $900 million for Hawaii hurricane events, and $100 million for continental U.S. hurricane events, with coverage in excess of our estimated peak zone 1 in 250 year PML event and in excess of our A.M.
In addition, a natural disaster could materially impact the financial condition of our policyholders, resulting in loss of premiums. 27 Table of Contents Our reinsurance coverage currently exhausts at $3.08 billion for earthquake events, $735 million for Hawaii hurricane events, and $117.5 million for continental U.S. hurricane events, with coverage in excess of our estimated peak zone 1 in 250 year PML event and in excess of our A.M.
California represents our largest current exposure with 53% of our gross written premiums for the year ended December 31, 2023. Our business strategy involves continuing to grow our core earthquake insurance business, diversifying our book of business into uncorrelated products such as Casualty and Fronting, and extending the reach of lines of business such as Inland Marine.
California represents our largest current exposure with 43% of our gross written premiums for the year ended December 31, 2024. Our business strategy involves continuing to grow our core earthquake insurance business, extending the reach of Inland Marine and Other Property Products, and diversifying our book of business into uncorrelated products such as Casualty, Fronting and Crop.
Our Fronting and Crop businesses offers an additional source of fee income that we earn from program administrators and reinsurers seeking to access our licensed insurance companies. Our multi-channel distribution model produces attractive business that we aim to translate into a balanced mix of underwriting and fee income.
Our Fronting and Crop products offer additional sources of fee income that we earn from program administrators and reinsurers seeking to access our licensed insurance companies. Our multi-channel distribution model produces attractive business that we aim to translate into a balanced mix of underwriting and fee income.
On October 24, 2017, the NAIC adopted its Insurance Data Security Model Law, intended to serve as model legislation for states to enact in order to govern cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws. We are required to file compliance certifications pertaining to this legislation.
On October 24, 2017, the NAIC adopted its Insurance Data Security Model Law, intended to serve as model legislation for states to enact in order to govern cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws.
As a result, we are able to generate an attractive underwriting profit by expanding the addressable market and winning market share with our distinctive products. For the years ended December 31, 2023 and 2022, our return on equity (“ROE”) was 18.5% and 13.4%, and our adjusted ROE was 21.9% and 18.3%, respectively.
As a result, we are able to generate an attractive underwriting profit by expanding the addressable market and winning market share with our distinctive products. For the years ended December 31, 2024 and 2023, our return on equity (“ROE”) was 19.6% and 18.5%, and our adjusted ROE was 22.2% and 21.9%, respectively.
Best has assigned a financial strength rating of “A−” (Excellent) (Outlook Positive) to our insurance company subsidiaries, Palomar Specialty Insurance Company (“PSIC”) and Palomar Excess and Surplus Insurance Company (“PESIC”). A.M.
Best has assigned a financial strength rating of “A” (Excellent) (Outlook Stable) to our insurance company subsidiaries, Palomar Specialty Insurance Company (“PSIC”) and Palomar Excess and Surplus Insurance Company (“PESIC”). A.M.
For the year ended December 31, 2023, 38% of our gross written premiums were related to earthquake insurance and non-earthquake related premiums grew 31% while earthquake related premiums grew 27% versus the prior year. ​ 4 Table of Contents Our admitted insurance subsidiary, PSIC, is licensed in 42 states and we have the flexibility to write nationally through our surplus lines subsidiary, PESIC.
For the year ended December 31, 2024, 34% of our gross written premiums were related to earthquake insurance and non-earthquake related premiums grew 45% while earthquake related premiums grew 20% versus the prior year. ​ 4 Table of Contents Our admitted insurance subsidiary, PSIC, is licensed in 44 states and we have the flexibility to write nationally through our surplus lines subsidiary, PESIC.
These challenges may continue for the foreseeable future. In particular, our future success is substantially dependent on the continued service of our Founder, Chief Executive Officer and Chairman, Mac Armstrong, and our Chief Financial Officer, Christopher Uchida.
In particular, our future success is substantially dependent on the continued service of our Founder, Chief Executive Officer and Chairman, Mac Armstrong, and our Chief Financial Officer, Christopher Uchida.
Our primary insurance products include Residential and Commercial Earthquake, Fronting, Inland Marine, and Casualty. We aim to develop a diversified portfolio with exposure spread across geographic regions with limited correlation. Although our largest exposure is in the state of California, we write business across the United States.
Our lines of business include: Earthquake, Inland Marine and Other Property, Casualty, Fronting, and Crop. We aim to develop a diversified portfolio with exposure spread across geographic regions with limited correlation. Although our largest exposure is in the state of California, we write business across the United States.
Our current reinsurance program is designed to limit our net loss before tax from a single event to $17.5 million, equivalent to approximately 3.7% of our total stockholders’ equity as of December 31, 2023.
Our current reinsurance program is designed to limit our net loss before tax from a single event to $20 million, equivalent to approximately 2.7% of our total stockholders’ equity as of December 31, 2024.
Human Capital Overview We believe our greatest asset is our talent. As of December 31, 2023, we employed 213 team members. During 2023, our workforce increased by approximately 12% compared to the prior year, and our turnover rate was approximately 18%. ​ Our business relies on our ability to attract and retain talented team members.
Human Capital We believe our greatest asset is our talent. As of December 31, 2024, we employed 253 team members. During 2024, our workforce increased by approximately 19% compared to the prior year, and our turnover rate was approximately 8.5%. ​ Our business relies on our ability to attract and retain talented team members.
We also compete with the E&S market, including Lloyd’s of London in some of our lines. In addition, we compete against state or other publicly managed enterprises including the California Earthquake Authority and the National Flood Insurance Program. We may also compete with new market entrants in the future.
In addition, we compete against state or other publicly managed enterprises including the California Earthquake Authority and the National Flood Insurance Program. We may also compete with new market entrants in the future.
We tailor our risk participation to optimize our returns depending on the conditions of specific markets. In total, we are licensed as an admitted insurer in 42 total states. The following table shows gross written premium (“GWP”) by state for the years ended December 31, 2023, 2022 and 2021.
We tailor our risk participation to optimize our returns depending on the conditions of specific markets. In total, we are licensed as an admitted insurer in 44 total states. The following tables show gross written premiums (“GWP”) by state and product for the years ended December 31, 2024, 2023 and 2022.
Our reinsurance coverage exhausts at $2.71 billion for earthquake events, $900 million for Hawaii hurricane events, and $100 million for continental U.S. hurricane events, providing coverage in excess of our 1:250 year peak zone PML and in excess of our A.M. Best threshold.
Our reinsurance coverage exhausts at $3.08 billion for earthquake events, $735 million for Hawaii hurricane events, and $117.5 million for continental U.S. hurricane events, providing coverage in excess of our 1:250 year peak zone PML and in excess of our A.M. Best threshold.
We also continue to experience growth and profitability across our other lines of business. 3 Table of Contents Our primary lines of business include: Residential and Commercial Earthquake, Fronting, Inland Marine, and Casualty.
We also continue to experience growth and profitability across our other lines of business. 3 Table of Contents Our five product lines include: Earthquake, Inland Marine and Other Property, Casualty, Fronting, and Crop.
We have built a proprietary operating platform that employs best practices derived from our management team’s extensive prior experience. Our technology platform is not burdened by outdated technology and processes which may be utilized by older insurance companies. In building our platform, we have emphasized automated processes that use granular data and analytics consistently across all aspects of our business.
Emphasis on the use of technology and analytics across our business. We have built a proprietary operating platform that employs best practices derived from our management team’s extensive prior experience. Our technology platform is not burdened by outdated technology and processes which may be utilized by older insurance companies.
Additionally, we voluntarily disclose our base pay ranges to all our internal employees for the roles they hold in alignment with our philosophy of pay transparency. ​ 24 Table of Contents Talent Development We provide numerous training opportunities for our team members, with a focus on personal and professional development.
Additionally, we voluntarily disclose our base pay ranges to all our internal employees for the roles they hold. ​ 24 Table of Contents Talent Development We provide numerous training opportunities for our team members, with a focus on personal and professional development. We utilize “Coaching for Performance” methodologies to manage performance, provide feedback and develop talent.
Our policyholders and insurance risks are currently concentrated in California and Texas, which generated 47% and 10% of our gross written premiums for the year ended December 31, 2022 and 53% and 8% or the year ended December 31, 2023.
Our policyholders and insurance risks are currently concentrated in California, which generated 53% of our gross written premiums for the year ended December 31, 2023 and 43% for the year ended December 31, 2024.
Leverage our underwriting, analytics, and risk transfer acumen to generate fee income. We generate fee income through the use of quota share reinsurance treaties whereby third-party reinsurers pay us a ceding commission in order to access attractive pools of risk.
As we grow, we intend to maintain a diversified book of business and continually capitalize on these advantages. Leverage our underwriting, analytics, and risk transfer acumen to generate fee income. We generate fee income through the use of quota share reinsurance treaties whereby third-party reinsurers pay us a ceding commission in order to access attractive pools of risk.
We must retain accounting and financial staff with appropriate public company reporting experience and technical accounting knowledge. Other expenses associated with being a public company include increased auditing, accounting and legal fees and expenses, investor relations expenses, increased directors’ fees and director and officer liability insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses.
Other expenses associated with being a public company include increased auditing, accounting and legal fees and expenses, investor relations expenses, increased directors’ fees and director and officer liability insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses.
As such, higher demand for employees having the desired skills and expertise could lead to increased compensation expectations for existing and prospective personnel, making it difficult for us to retain and recruit key personnel and maintain labor costs at desired levels. Recently, companies have had issues with employee turnover and finding, hiring, and retaining qualified employees.
As such, higher demand for employees having the desired skills and expertise could lead to increased compensation expectations for existing and prospective personnel, making it difficult for us to retain and recruit key personnel and maintain labor costs at desired levels.
Should an event equivalent to one of these historical events recur, our hypothetical net loss before any tax effect would be capped at our current net retention of $17.5 million. ​ 12/31/2023 Historical Event modeled PML ​ ($ millions) CA 1906 San Francisco M7.8 $ 1,912 CA 1994 Northridge M6.7 1,352 CA 1971 San Fernando M6.7 694 CA 1868 Hayward M7.0 672 NM 1811‑12 sequence M7.8 591 HI 1992 Hurricane Iniki 455 NW 1949 Puget Sound M7.1 461 CA 1857 Fort Tejon M7.9 382 CA 1933 Long Beach M6.4 336 While we only select reinsurers whom we believe to have acceptable credit or a minimum A.M.
Should an event equivalent to one of these historical events recur, our hypothetical net loss before any tax effect would be capped at our current net retention of $20.0 million for earthquake events or $15.5 million for hurricane events and all other perils. ​ 12/31/2024 Historical Event modeled PML ​ ($ millions) CA 1906 San Francisco M7.8 $2,177 CA 1994 Northridge M6.7 1,624 CA 1971 San Fernando M6.7 817 CA 1868 Hayward M7.0 773 NM 1811‑12 sequence M7.8 680 HI 1992 Hurricane Iniki 673 NW 1949 Puget Sound M7.1 518 CA 1857 Fort Tejon M7.9 465 CA 1933 Long Beach M6.4 437 NW 1965 Puget Sound M6.5 225 While we only select reinsurers whom we believe to have acceptable credit or a minimum A.M.
We regularly audit data gathered during our underwriting process to determine the accuracy of rating information and risk pricing. For example, we often inspect properties as part of our underwriting process to discover any unrepaired damage and identify any other conditions that affect the insurability of the property.
For example, we often inspect properties as part of our underwriting process to discover any unrepaired damage and identify any other conditions that affect the insurability of the property.
Our earthquake policies do not provide coverage for fire damage arising from an earthquake. Catastrophe events which cause our reinsurers to incur losses may increase the cost of reinsurance in future periods or make it more difficult to obtain reinsurance on commercially acceptable terms.
Catastrophe events which cause our reinsurers to incur losses may increase the cost of reinsurance in future periods or make it more difficult to obtain reinsurance on commercially acceptable terms.
We believe that diversity leads to greater creativity and productivity, helps us serve our customers and partners more effectively, and ultimately benefits our shareholders and the communities in which we do business. We set diversity goals in our annual Sustainability & Citizenship report.
We are committed to following best-in-class sustainability practices, and we believe that our focus on sustainability fosters greater creativity and productivity, helps us serve our customers and partners more effectively, and ultimately benefits our shareholders and the communities in which we do business. As part of our sustainability efforts, we set diversity goals in our annual Sustainability & Citizenship report.
In 2023, 100% of our workforce received equity awards. We offer team members a comprehensive and leading benefits program that includes a holistic approach to health and wellness.
In 2024, 100% of our workforce received equity awards and participated in our annual cash bonus plan, including all hourly personnel. We offer team members a comprehensive and leading benefits program that includes a holistic approach to health and wellness.
We use proprietary data analytics and a modern technology platform to offer our customers flexible products with customized and granular pricing for both the admitted and excess and surplus lines (“E&S”) markets. ​ We provide admitted insurance products through our Oregon domiciled insurance company, Palomar Specialty Insurance Company (“PSIC”), and E&S insurance products through our Arizona domiciled surplus lines insurance company, Palomar Excess and Surplus Insurance Company (“PESIC”).
We use proprietary data analytics and a modern technology platform to offer our customers flexible products with customized and granular pricing for both the admitted and excess and surplus lines (“E&S”) markets. Our insurance company subsidiaries, Palomar Specialty Insurance Company (“PSIC”) and Palomar Excess and Surplus Insurance Company (“PESIC”) carry an “A” rating from A.M. Best Company (“A.M.
We may, in certain circumstances, invest immaterial amounts in private companies we believe provide strategic opportunities. These types of investments are typically illiquid, and we have limited ability to take actions that protect or increase the value of this type of investment. Net losses from these investments or impairment of these investments may negatively impact our operating results.
We may, in certain circumstances, invest a small percentage of our investment portfolio in private companies or limited partnerships which we believe provide strategic opportunities. These types of investments are typically illiquid, and we have limited ability to take actions that protect or increase the value of this type of investment.
The macroeconomic effects of a global health crisis may persist for an indefinite period, even after it has subsided. We cannot anticipate all the ways in which global health crises could adversely impact our business in the future.
The macroeconomic effects of a global health crisis may persist for an indefinite period, even after it has subsided. We cannot anticipate all the ways in which global health crises could adversely impact our business in the future. Our business is concentrated in California and, as a result, we are exposed more significantly to California loss activity and regulatory environments.
We could be forced to sell investments to meet our liquidity requirements. We invest the premiums we receive from our insureds until they are needed to pay policyholder claims.
Net losses from these investments or impairment of these investments may negatively impact our operating results. We could be forced to sell investments to meet our liquidity requirements. We invest the premiums we receive from our insureds until they are needed to pay policyholder claims.
“A−” (Excellent) (Outlook Positive) is the fourth highest rating. In evaluating a company’s financial and operating performance, A.M.
“A” (Excellent) (Outlook Stable) is the third highest rating. In evaluating a company’s financial and operating performance, A.M.
Changes in California or Texas political climates could result in new or changed legislation affecting the property and casualty insurance industry in general which could have a negative impact on our business. 32 Table of Contents We could be adversely affected by the loss of one or more key executives or by an inability to attract and retain qualified personnel.
Changes to insurance-related laws or regulations in California could also have a negative impact on our business. 32 Table of Contents We could be adversely affected by the loss of one or more key executives or by an inability to attract and retain qualified personnel.
To support this belief, we provide a $3,000 tuition and/or certification reimbursement for ongoing development. Lastly, we have a methodical approach to talent development, offering organizational advancement and mentoring services to all team members regardless of position or title.
Lastly, we have a methodical approach to talent development, offering organizational advancement and mentoring services to all team members regardless of position or title.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties ​ Our primary executive offices and insurance operations are located in La Jolla, California, which occupy approximately 14,700 square feet of office space for annual rent and rent-related operating payments of approximately $0.7 million. We recently signed a lease extension through July 2034 for this space.
Biggest changeItem 2. Properties ​ Our primary executive offices and insurance operations are located in La Jolla, California, which occupy approximately 22,000 square feet of office space for annual rent and rent-related operating payments of approximately $1.0 million with the lease expiring in 2034.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSuch returns are based on historical results and are not indicative of future performance. ​ April 17, 2019 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Palomar Holdings, Inc $ 100.00 $ 265.88 $ 467.83 $ 341.07 $ 237.81 $ 292.26 Nasdaq Composite Index $ 100.00 $ 112.21 $ 161.18 $ 195.66 $ 145.59 $ 187.73 Nasdaq Insurance Index $ 100.00 $ 110.88 $ 111.93 $ 126.69 $ 116.15 $ 139.85 Item 6. [Reserved]
Biggest changeSuch returns are based on historical results and are not indicative of future performance. ​ December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 Palomar Holdings, Inc $ 100.00 $ 175.96 $ 128.28 $ 89.44 $ 109.92 $ 209.13 Nasdaq Composite Index $ 100.00 $ 143.64 $ 174.36 $ 129.75 $ 167.30 $ 215.22 Nasdaq Insurance Index $ 100.00 $ 100.95 $ 114.26 $ 104.75 $ 126.13 $ 156.55 Item 6. [Reserved]
Performance Graph ​ The following performance graph compares the cumulative total shareholder return of an investment in (1) our common stock, (2) the cumulative total returns to the Nasdaq Composite Index and (3) the cumulative total returns to the Nasdaq Insurance Index, for the period from April 17, 2019 (the date our common stock began trading on Nasdaq) through December 31, 2023. ​ 53 Table of Contents The graph assumes an initial investment of $100.
Performance Graph ​ The following performance graph compares the cumulative total shareholder return of an investment in (1) our common stock, (2) the cumulative total returns to the Nasdaq Composite Index and (3) the cumulative total returns to the Nasdaq Insurance Index, for the period from December 31, 2019 through December 31, 2024. ​ 53 Table of Contents The graph assumes an initial investment of $100.
As of February 22, 2024, there were approximately seven holders of record of our common stock.
As of February 22, 2025, there were approximately six holders of record of our common stock.
Issuer Purchases of Equity Securities In January 2022, Company's the Board of Directors approved a share repurchase program which replaced the existing program and authorized the repurchase of up to $100 million of outstanding shares of common stock over the period ending on March 31, 2024.
Issuer Purchases of Equity Securities In January 2022, Company's the Board of Directors approved a share repurchase program which replaced the existing program and authorized the repurchase of up to $100 million of outstanding shares of common stock. This program ended on March 31, 2024 and there were no share repurchases during the year ended December 31, 2024.
Removed
The Company purchased 418,901 shares for $22.3 million at an average price of $54.4 under this program during the year ended December 31, 2023. Approximately $43.5 million remains available for future repurchases. There were no share repurchases during the quarter ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

82 edited+13 added−12 removed148 unchanged
Biggest changeSee “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of stockholders’ equity calculated in accordance with GAAP to tangible stockholders’ equity. 59 Table of Contents Results of Operations Year ended December 31, 2023 compared to year ended December 31, 2022 ​ The following table summarizes our results for the years ended December 31, 2023 and 2022: Year Ended December 31, Percent 2023 2022 Change Change ($ in thousands, except per share data) Gross written premiums $ 1,141,558 $ 881,868 $ 259,690 29.4 % Ceded written premiums (731,531 ) (524,575 ) (206,956 ) 39.5 % Net written premiums 410,027 357,293 52,734 14.8 % Net earned premiums 345,913 316,466 29,447 9.3 % Commission and other income 3,367 4,272 (905 ) (21.2 )% Total underwriting revenue (1) 349,280 320,738 28,542 8.9 % Losses and loss adjustment expenses 72,592 78,672 (6,080 ) (7.7 )% Acquisition expenses 107,745 110,771 (3,026 ) (2.7 )% Other underwriting expenses 88,172 69,219 18,953 27.4 % Underwriting income (1) 80,771 62,076 18,695 30.1 % Interest expense (3,775 ) (873 ) (2,902 ) 332.4 % Net investment income 23,705 13,877 9,828 70.8 % Net realized and unrealized gains (losses) on investments 2,941 (7,529 ) 10,470 (139.1 )% Income before income taxes 103,642 67,551 36,091 53.4 % Income tax expense 24,441 15,381 9,060 58.9 % Net income 79,201 52,170 27,031 51.8 % Adjustments: Net realized and unrealized (gains) losses on investments (2,941 ) 7,529 (10,470 ) (139.1 )% Expenses associated with transactions 706 130 576 443.1 % Stock-based compensation expense 14,913 11,624 3,289 28.3 % Amortization of intangibles 1,481 1,255 226 18.0 % Expenses associated with catastrophe bond, net of rebate 1,640 1,992 (352 ) (17.7 )% Tax impact (1,480 ) (3,366 ) 1,886 (56.0 )% Adjusted net income (1) $ 93,520 $ 71,334 $ 22,186 31.1 % Key Financial and Operating Metrics Annualized return on equity 18.5 % 13.4 % Annualized adjusted return on equity (1) 21.9 % 18.3 % Loss ratio 21.0 % 24.9 % Expense ratio 55.7 % 55.5 % Combined ratio 76.6 % 80.4 % Adjusted combined ratio (1) 71.2 % 75.6 % Diluted earnings per share $ 3.13 $ 2.02 Diluted adjusted earnings per share (1) $ 3.69 $ 2.77 Catastrophe losses $ 3,442 $ 15,394 Catastrophe loss ratio (1) 1.0 % 4.9 % Adjusted combined ratio excluding catastrophe losses (1) 70.2 % 70.8 % Adjusted underwriting income (1) $ 99,511 $ 77,077 $ 22,434 29.1 % ​ (1) Indicates non-GAAP financial measure; see “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures prepared in accordance with GAAP. 60 Table of Contents Gross Written Premiums Gross written premiums were $1.1 billion for the year ended December 31, 2023 compared to $881.9 million for the year ended December 31, 2022, an increase of $259.7 million, or 29.4%.
Biggest changeSee “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of stockholders’ equity calculated in accordance with GAAP to tangible stockholders’ equity. 59 Table of Contents Results of Operations ​ The following table summarizes our results for the years ended December 31, 2024 and 2023: Year Ended December 31, Percent 2024 2023 Change Change ($ in thousands, except per share data) Gross written premiums $ 1,541,962 $ 1,141,558 $ 400,404 35.1 % Ceded written premiums (897,111 ) (731,531 ) (165,580 ) 22.6 % Net written premiums 644,851 410,027 234,824 57.3 % Net earned premiums 510,687 345,913 164,774 47.6 % Commission and other income 2,784 3,367 (583 ) (17.3 )% Total underwriting revenue (1) 513,471 349,280 164,191 47.0 % Losses and loss adjustment expenses 134,759 72,592 62,167 85.6 % Acquisition expenses 149,657 107,745 41,912 38.9 % Other underwriting expenses 117,113 88,172 28,941 32.8 % Underwriting income (1) 111,942 80,771 31,171 38.6 % Interest expense (1,138 ) (3,775 ) 2,637 (69.9 )% Net investment income 35,824 23,705 12,119 51.1 % Net realized and unrealized gains on investments 4,568 2,941 1,627 55.3 % Income before income taxes 151,196 103,642 47,554 45.9 % Income tax expense 33,623 24,441 9,182 37.6 % Net income 117,573 79,201 38,372 48.4 % Adjustments: Net realized and unrealized gains on investments (4,568 ) (2,941 ) (1,627 ) 55.3 % Expenses associated with transactions 1,479 706 773 109.5 % Stock-based compensation expense 16,685 14,913 1,772 11.9 % Amortization of intangibles 1,558 1,481 77 5.2 % Expenses associated with catastrophe bond 2,483 1,640 843 51.4 % Tax impact (1,699 ) (1,480 ) (219 ) 14.8 % Adjusted net income (1) $ 133,511 $ 93,520 $ 39,991 42.8 % Key Financial and Operating Metrics Annualized return on equity 19.6 % 18.5 % Annualized adjusted return on equity (1) 22.2 % 21.9 % Loss ratio 26.4 % 21.0 % Expense ratio 51.7 % 55.7 % Combined ratio 78.1 % 76.6 % Adjusted combined ratio (1) 73.7 % 71.2 % Diluted earnings per share $ 4.48 $ 3.13 Diluted adjusted earnings per share (1) $ 5.09 $ 3.69 Catastrophe losses $ 27,846 $ 3,442 Catastrophe loss ratio (1) 5.5 % 1.0 % Adjusted combined ratio excluding catastrophe losses (1) 68.3 % 70.2 % Adjusted underwriting income (1) $ 134,147 $ 99,511 $ 34,636 34.8 % ​ (1) Indicates non-GAAP financial measure; see “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures prepared in accordance with GAAP. 60 Table of Contents Gross Written Premiums Gross written premiums were $1.5 billion for the year ended December 31, 2024 compared to $1.1 billion for the year ended December 31, 2023, an increase of $400.4 million, or 35.1%.
Although we are inherently subject to catastrophe losses, the frequency and severity of catastrophe losses is unpredictable and their impact on our operating results may vary significantly between periods and obscure other trends in our business.
Although we are inherently subject to catastrophe losses, the frequency and severity of catastrophe losses is unpredictable and their impact on our operating results may vary significantly between periods and obscure other trends in our business.
Therefore, we are providing this metric because we believe it gives our management and other financial statement users useful insight into our results of operations and trends in our financial performance without the volatility caused by catastrophe losses.
Therefore, we are providing this metric because we believe it gives our management and other financial statement users useful insight into our results of operations and trends in our financial performance without the volatility caused by catastrophe losses.
Certain policies we write subject us to attritional losses such as building fires. In addition, many of the policies we write subject us to catastrophe losses. Catastrophe losses are certain losses resulting from events involving multiple claims and policyholders, including earthquakes, hurricanes, floods, convective storms, terrorist acts or other aggregating events.
Certain policies we write subject us to attritional losses such as building fires or casualty claims. In addition, many of the policies we write subject us to catastrophe losses. Catastrophe losses are certain losses resulting from events involving multiple claims and policyholders, including earthquakes, hurricanes, floods, convective storms, terrorist acts or other aggregating events.
The potential for a large claim under an insurance or reinsurance contract means that our insurance subsidiaries may need to make substantial payments within relatively short periods of time, which would have a negative impact on our operating cash flows. We generated positive cash flows from operations for the years ended December 31, 2023 and 2022.
The potential for a large claim under an insurance or reinsurance contract means that our insurance subsidiaries may need to make substantial payments within relatively short periods of time, which would have a negative impact on our operating cash flows. We generated positive cash flows from operations for the years ended December 31, 2024 and 2023.
However, this dividend amount is subject to annual enhanced solvency requirement calculations. There were no dividends declared or paid during the years ended December 31, 2023 and December 31, 2022 70 Table of Contents One of our insurance company subsidiaries, PSIC, is a member of the Federal Home Loan Bank of San Francisco (FHLB).
However, this dividend amount is subject to annual enhanced solvency requirement calculations. There were no dividends declared or paid during the years ended December 31, 2024 and December 31, 2023 70 Table of Contents One of our insurance company subsidiaries, PSIC, is a member of the Federal Home Loan Bank of San Francisco (FHLB).
As of December 31, 2023 and December 31, 2022, the total adjusted capital of PSIC and PESIC were in excess of their respective prescribed risk-based capital requirements. Under the Insurance Act and related regulations, our Bermuda reinsurance subsidiary, PSRE, is required to maintain certain solvency and liquidity levels, which it maintained as of December 31, 2023 and December 31, 2022.
As of December 31, 2024 and December 31, 2023, the total adjusted capital of PSIC and PESIC were in excess of their respective prescribed risk-based capital requirements. Under the Insurance Act and related regulations, our Bermuda reinsurance subsidiary, PSRE, is required to maintain certain solvency and liquidity levels, which it maintained as of December 31, 2024 and December 31, 2023.
In the event of significant new regulation or legislation, we will attempt to quantify its impact on our business, but no assurance can be given that our attempt to quantify such inputs will be accurate or successful. The table below quantifies the impact of potential reserve deviations from our carried reserve at December 31, 2023.
In the event of significant new regulation or legislation, we will attempt to quantify its impact on our business, but no assurance can be given that our attempt to quantify such inputs will be accurate or successful. The table below quantifies the impact of potential reserve deviations from our carried reserve at December 31, 2024.
The relevant liabilities include total general business insurance reserves and total other liabilities, less sundry liabilities. As of December 31, 2023 and December 31, 2022, we met the minimum liquidity ratio requirement. Bermuda regulations limit the amount of dividends and return of capital paid by a regulated entity.
The relevant liabilities include total general business insurance reserves and total other liabilities, less sundry liabilities. As of December 31, 2024 and December 31, 2023, we met the minimum liquidity ratio requirement. Bermuda regulations limit the amount of dividends and return of capital paid by a regulated entity.
We invest primarily in investment grade fixed maturity securities, including U.S. government issues, state government issues, mortgage and asset-backed obligations, and corporate bonds with a small portion of our portfolio in equity securities, equity method investments, and cash and cash equivalents.
We invest primarily in investment grade fixed maturity securities, including U.S. government issues, state government issues, mortgage and asset-backed obligations, and corporate bonds with a small portion of our portfolio in equity securities, equity method investments, limited partnerships, and cash and cash equivalents.
Net Realized and Unrealized Gains and Losses on Investments Net realized and unrealized gains and losses on investments are a function of the difference between the amount received by us on the sale of a security and the security’s cost-basis, mark-to-market adjustments, credit losses recognized in earnings, and unrealized gains and losses on equity securities.
Net Realized and Unrealized Gains and Losses on Investments Net realized and unrealized gains and losses on investments are a function of the difference between the amount received by us on the sale of a security and the security’s cost-basis, mark-to-market adjustments, credit losses recognized in earnings, unrealized gains and losses on equity securities, and unrealized gains and losses on equity method and other investments.
The amounts in the above table represent our gross estimates of known liabilities as of December 31, 2023 and do not include any allowance for claims for future events within the time period specified.
The amounts in the above table represent our gross estimates of known liabilities as of December 31, 2024 and do not include any allowance for claims for future events within the time period specified.
Excluding the impact of expenses relating to transactions, stock-based compensation, amortization of intangibles, and catastrophe bonds, other underwriting expenses as a percentage of gross earned premiums were 6.8% for the year ended December 31, 2023 compared to 7.8% for the year ended December 31, 2022.
Excluding the impact of expenses relating to transactions, stock-based compensation, amortization of intangibles, and catastrophe bonds, other underwriting expenses as a percentage of gross earned premiums were 6.8% for the year ended December 31, 2024 compared to 6.8% for the year ended December 31, 2023.
The increase was primarily due to a higher average balance of investments during the year ended December 31, 2023 and higher yields on invested assets.
The increase was primarily due to a higher average balance of investments during the year ended December 31, 2024 and higher yields on invested assets.
In both periods, the balance was primarily driven by unrealized gains and losses on our equity securities due to the general performance of equity security markets.
In both periods, the balance was primarily driven by unrealized gains on our equity securities due to the general performance of equity security markets.
We are currently utilizing tax planning strategies in our assessment of the realizability of a portion of our net capital deferred tax asset at December 31, 2023.
We are currently utilizing tax planning strategies in our assessment of the realizability of a portion of our net capital deferred tax asset at December 31, 2024.
These tax planning strategies include the holding of fixed maturity securities that are currently in a net unrealized loss position for tax purposes until recovery or maturity, if needed, to avoid future expiring capital loss carryforwards. ​ As of December 31, 2023, we had a valuation allowance of $3.5 million relating to our state net operating loss carryforwards and federal net operating losses related to Laulima, and the remainder of our deferred tax assets did not require a valuation allowance. ​ Recent Accounting Pronouncements See “Note 2—Recent Accounting Pronouncements” in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our financial statements.
These tax planning strategies include the holding of fixed maturity securities that are currently in a net unrealized loss position for tax purposes until recovery or maturity, if needed, to avoid future expiring capital loss carryforwards. ​ As of December 31, 2024, we had a valuation allowance of $3.4 million relating to our state net operating loss carryforwards and the remainder of our deferred tax assets did not require a valuation allowance. ​ Recent Accounting Pronouncements See “Note 2—Recent Accounting Pronouncements” in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our financial statements.
Currently, $15 million of the borrowing capacity of the Credit Agreement is pledged as collateral and not able to be utilized. ​ 72 Table of Contents As of December 31, 2023 we do not have any outstanding borrowings under the Credit Agreement, but we may seek to borrow under the Credit Agreement in the future. ​ Our PSIC subsidiary is a member of the Federal Home Loan Bank of San Francisco (“FHLB”).
Currently, $5.6 million of the borrowing capacity of the Credit Agreement is pledged as collateral and not able to be utilized. ​ 72 Table of Contents As of December 31, 2024 we do not have any outstanding borrowings under the Credit Agreement, but we may seek to borrow under the Credit Agreement in the future. ​ Our PSIC subsidiary is a member of the Federal Home Loan Bank of San Francisco (“FHLB”).
For the year ended December 31, 2022, our effective tax rate was 22.8% and the difference between our tax rate and the statutory rate of 21% relates primarily to non-deductible executive compensation expense and state taxes, offset by the permanent component of employee stock options. 64 Table of Contents Reconciliation of Non-GAAP Financial Measures Underwriting Revenue We define underwriting revenue as total revenue excluding net investment income and net realized and unrealized gains and losses on investments.
For the year ended December 31, 2023, our effective tax rate was 23.6% and the difference between our tax rate and the statutory rate of 21% relates primarily to non-deductible executive compensation expense and state taxes, offset by the permanent component of employee stock options. 64 Table of Contents Reconciliation of Non-GAAP Financial Measures Underwriting Revenue We define underwriting revenue as total revenue excluding net investment income and net realized and unrealized gains and losses on investments.
Founded in 2014, we have significantly grown our business and have generated attractive returns. We have organically increased gross written premiums from $16.6 million in our first year of operations to $1.1 billion for the year ended December 31, 2023, which reflects a compound annual growth rate of approximately 60%.
Founded in 2014, we have significantly grown our business and have generated attractive returns. We have organically increased gross written premiums from $16.6 million in our first year of operations to $1.5 billion for the year ended December 31, 2024, which reflects a compound annual growth rate of approximately 57%.
Our fixed income investment portfolio had a book yield of 4.07% as of December 31, 2023, compared to 3.30% as of December 31, 2022. 73 Table of Contents At December 31, 2023 and December 31, 2022 the amortized cost and fair value on available-for-sale securities were as follows: December 31, 2023 Amortized Cost or Cost Fair Value % of Total Fair Value ​ ($ in thousands) Fixed maturities: ​ U.S.
Our fixed income investment portfolio had a book yield of 4.59% as of December 31, 2024, compared to 4.07% as of December 31, 2023. 73 Table of Contents At December 31, 2024 and December 31, 2023 the amortized cost and fair value on available-for-sale securities were as follows: December 31, 2024 Amortized Cost or Cost Fair Value % of Total Fair Value ​ ($ in thousands) Fixed maturities: ​ U.S.
Recent events, including changes in market interest rates and significant financial market volatility have caused us to incur unrealized losses on investments which contributes to us having a net capital deferred tax asset in the amount of $5.9 million at December 31, 2023, as compared to a net capital deferred tax asset of $11.0 million at December 31, 2022.
Recent events, including changes in market interest rates and significant financial market volatility have caused us to incur unrealized losses on investments which contributes to us having a net capital deferred tax asset in the amount of $5.3 million at December 31, 2024, as compared to a net capital deferred tax asset of $5.9 million at December 31, 2023.
The increase was primarily due to the Company incurring higher payroll, technology, and stock-based compensation expenses associated with growth of the Company. Other underwriting expenses as a percentage of gross earned premiums were 8.7% for the year ended December 31, 2023 compared to 10.0% for the year ended December 31, 2022.
The increase was primarily due to the Company incurring higher payroll, technology, and stock-based compensation expenses associated with growth of the Company. Other underwriting expenses as a percentage of gross earned premiums were 8.4% for the year ended December 31, 2024 compared to 8.7% for the year ended December 31, 2023.
Pursuant to Bermuda regulations, the maximum amount of dividends and return of capital available to be paid by a reinsurer is determined pursuant to a formula. Under this formula, the maximum amount of dividends and return of capital available from PSRE during 2023 is calculated to be approximately $4.1 million.
Pursuant to Bermuda regulations, the maximum amount of dividends and return of capital available to be paid by a reinsurer is determined pursuant to a formula. Under this formula, the maximum amount of dividends and return of capital available from PSRE during 2025 is calculated to be approximately $4.2 million.
As of December 31, 2023, the majority of our investment portfolio, or $643.8 million, was comprised of fixed maturity securities that are classified as available-for-sale and carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income.
As of December 31, 2024, the majority of our investment portfolio, or $939.0 million, was comprised of fixed maturity securities that are classified as available-for-sale and carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income.
IBNR reserves are estimated based on generally accepted actuarial reserving techniques that consider quantitative loss experience data and, where appropriate, qualitative factors. With the assistance of an independent actuarial firm, we use statistical analysis to estimate the cost of losses and loss adjustment expenses related to IBNR.
IBNR reserves are estimated based on generally accepted actuarial reserving techniques that consider quantitative loss experience data and, where appropriate, qualitative factors. We use statistical analysis to estimate the cost of losses and loss adjustment expenses related to IBNR.
Based on the above restrictions, PESIC may pay a dividend or distribution of no greater than $1.5 million in 2024 without approval of the Arizona Insurance Commissioner. In addition to the above limitations, any dividend or distribution declared is also subject to state regulatory approval prior to payment.
Based on the above restrictions, PESIC may pay a dividend or distribution of no greater than $4.2 million in 2025 without approval of the Arizona Insurance Commissioner. In addition to the above limitations, any dividend or distribution declared is also subject to state regulatory approval prior to payment.
Adjusted return on equity should not be viewed as a substitute for return on equity calculated using unadjusted GAAP numbers, and other companies may define adjusted return on equity differently. 66 Table of Contents Adjusted return on equity is calculated as follows: ​ Year Ended December 31, ​ 2023 2022 ​ ($ in thousands) Numerator: Adjusted net income $ 93,520 $ 71,334 Denominator: Average stockholders' equity 428,002 389,461 Adjusted return on equity 21.9 % 18.3 % Adjusted Combined Ratio We define adjusted combined ratio as the sum of the loss ratio and the expense ratio calculated excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook.
Adjusted return on equity should not be viewed as a substitute for return on equity calculated using unadjusted GAAP numbers, and other companies may define adjusted return on equity differently. 66 Table of Contents Adjusted return on equity is calculated as follows: ​ Year Ended December 31, ​ 2024 2023 ​ ($ in thousands) Numerator: Adjusted net income $ 133,511 $ 93,520 Denominator: Average stockholders' equity 600,140 428,002 Adjusted return on equity 22.2 % 21.9 % Adjusted Combined Ratio We define adjusted combined ratio as the sum of the loss ratio and the expense ratio calculated excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook.
The majority of our insurance policies have a term of one year and premiums are earned pro rata over the terms of the policies.
The majority of our insurance policies have a term of one year and premiums are earned pro rata over the terms of the policies. Crop premiums are earned ratably over the risk period.
Cash provided by financing activities for the year ended December 31, 2022 related to $36.4 million in proceeds from our FHLB line of credit, $2.3 million in proceeds from common stock issued via stock option exercises and $0.8 million in proceeds from our employee stock purchase plan, offset by the repurchase of $34.4 million of our common stock. 71 Table of Contents We do not have any current plans for material capital expenditures other than current operating requirements.
Cash used in financing activities for the year ended December 31, 2023 related to the repurchase of $22.3 million of our common stock, offset by $16.2 million in proceeds from our FHLB line of credit, $1.2 million in proceeds from stock option exercises and $0.8 million in proceeds from our employee stock purchase plan. 71 Table of Contents We do not have any current plans for material capital expenditures other than current operating requirements.
Diluted adjusted earnings per share should not be viewed as a substitute for diluted earnings per share calculated in accordance with GAAP, and other companies may define diluted adjusted earnings per share differently. 67 Table of Contents Diluted adjusted earnings per share is calculated as follows: ​ Year Ended December 31, ​ 2023 2022 ​ (in thousands except shares and per share data) Adjusted net income $ 93,520 $ 71,334 Weighted-average common shares outstanding, diluted 25,327,091 25,796,008 Diluted adjusted earnings per share $ 3.69 $ 2.77 ​ Catastrophe Loss Ratio ​ Catastrophe loss ratio is defined as the ratio of catastrophe losses to net earned premiums.
Diluted adjusted earnings per share should not be viewed as a substitute for diluted earnings per share calculated in accordance with GAAP, and other companies may define diluted adjusted earnings per share differently. 67 Table of Contents Diluted adjusted earnings per share is calculated as follows: ​ Year Ended December 31, ​ 2024 2023 ​ (in thousands except shares and per share data) Adjusted net income $ 133,511 $ 93,520 Weighted-average common shares outstanding, diluted 26,223,842 25,327,091 Diluted adjusted earnings per share $ 5.09 $ 3.69 ​ Catastrophe Loss Ratio ​ Catastrophe loss ratio is defined as the ratio of catastrophe losses to net earned premiums.
For the year ended December 31, 2023 our effective tax rate was 23.6% and the difference between our tax effective tax rate and the statutory rate of 21% relates primarily to non-deductible executive compensation expense, offset by the permanent component of employee stock options.
For the year ended December 31, 2024 our effective tax rate was 22.2% and the difference between our tax effective tax rate and the statutory rate of 21% relates primarily to non-deductible executive compensation expense and state taxes, offset by the permanent component of employee stock options.
Government $ 40,836 $ 39,420 6.1 % U.S.
Governments $ 40,836 $ 39,420 6.1 % U.S.
To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $741.4 million in cash and investment securities available at December 31, 2023.
To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $1,068.3 million in cash and investment securities available at December 31, 2024.
Our fixed maturity securities, including cash equivalents, had a weighted average effective duration of 3.48 and 3.81 years and an average rating of “Aa3/A+” and “A1/A+” at December 31, 2023 and December 31, 2022, respectively.
Our fixed maturity securities, including cash equivalents, had a weighted average effective duration of 4.04 and 3.48 years and an average rating of A1/A+ and “Aa3/A+” at December 31, 2024 and December 31, 2023, respectively.
Ceded written premiums are earned pro-rata over the period of risk covered. The volume of our ceded written premiums is impacted by the amount of our gross written premiums and our decisions to increase or decrease limits or retention levels in our XOL agreements and co-participation levels in our quota share agreements.
The volume of our ceded written premiums is impacted by the amount of our gross written premiums and our decisions to increase or decrease limits or retention levels in our XOL agreements and co-participation levels in our quota share agreements.
Adjusted combined ratio is calculated as follows: ​ Year Ended December 31, ​ 2023 2022 ​ ($ in thousands) Numerator: Sum of losses, loss adjustment expenses, underwriting, acquisition and other underwriting expenses, net of commission and other income $ 265,142 $ 254,390 Denominator: Net earned premiums $ 345,913 $ 316,466 Combined ratio 76.6 % 80.4 % Adjustments to numerator: Expenses associated with transactions (706 ) (130 ) Stock-based compensation expense (14,913 ) (11,624 ) Amortization of intangibles (1,481 ) (1,255 ) Expenses associated with catastrophe bond, net of rebate (1,640 ) (1,992 ) Adjusted combined ratio 71.2 % 75.6 % Diluted adjusted earnings per share We define diluted adjusted earnings per share as adjusted net income divided by the weighted-average common shares outstanding for the period, reflecting the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method.
Adjusted combined ratio is calculated as follows: ​ Year Ended December 31, ​ 2024 2023 ​ ($ in thousands) Numerator: Sum of losses, loss adjustment expenses, underwriting, acquisition and other underwriting expenses, net of commission and other income $ 398,745 $ 265,142 Denominator: Net earned premiums $ 510,687 $ 345,913 Combined ratio 78.1 % 76.6 % Adjustments to numerator: Expenses associated with transactions (1,479 ) (706 ) Stock-based compensation expense (16,685 ) (14,913 ) Amortization of intangibles (1,558 ) (1,481 ) Expenses associated with catastrophe bond (2,483 ) (1,640 ) Adjusted combined ratio 73.7 % 71.2 % Diluted adjusted earnings per share We define diluted adjusted earnings per share as adjusted net income divided by the weighted-average common shares outstanding for the period, reflecting the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method.
Stockholders’ equity increased primarily due to net income we earned for the period and activity related to stock-based compensation, and was partially offset by repurchases of shares of our common stock. Stock-based compensation expense is treated as an additional paid-in-capital and increases stockholders’ equity. Tangible stockholders’ equity is a non-GAAP financial measure.
Stockholders’ equity increased primarily due to net income we earned for the period, stock offering proceeds, and activity related to stock-based compensation. Stock-based compensation expense is treated as an additional paid-in-capital and increases stockholders’ equity. Tangible stockholders’ equity is a non-GAAP financial measure.
The Company incurred $2.9 million of net realized and unrealized gains on investments for the year ended December 31, 2023 compared to $7.5 million of net realized and unrealized losses for the year ended December 31, 2022.
The Company incurred $4.6 million of net realized and unrealized gains on investments for the year ended December 31, 2024 compared to $2.9 million of net realized and unrealized gains for the year ended December 31, 2023.
Catastrophe loss ratio should not be viewed as a substitute for loss ratio calculated using unadjusted GAAP numbers, and other companies may define catastrophe loss ratio differently. ​ Catastrophe loss ratio is calculated as follows: Year Ended December 31, 2023 2022 ($ in thousands) Numerator: Losses and loss adjustment expenses $ 72,592 $ 78,672 Denominator: Net earned premiums $ 345,913 $ 316,466 Loss ratio 21.0 % 24.9 % Numerator: Catastrophe losses $ 3,442 $ 15,394 Denominator: Net earned premiums $ 345,913 $ 316,466 Catastrophe loss ratio 1.0 % 4.9 % Adjusted Combined Ratio Excluding Catastrophe Losses ​ Adjusted combined ratio excluding catastrophe losses is defined as adjusted combined ratio excluding the impact of catastrophe losses.
Catastrophe loss ratio should not be viewed as a substitute for loss ratio calculated using unadjusted GAAP numbers, and other companies may define catastrophe loss ratio differently. ​ Catastrophe loss ratio is calculated as follows: Year Ended December 31, 2024 2023 ($ in thousands) Numerator: Losses and loss adjustment expenses $ 134,759 $ 72,592 Denominator: Net earned premiums $ 510,687 $ 345,913 Loss ratio 26.4 % 21.0 % Numerator: Catastrophe losses $ 27,846 $ 3,442 Denominator: Net earned premiums $ 510,687 $ 345,913 Catastrophe loss ratio 5.5 % 1.0 % Adjusted Combined Ratio Excluding Catastrophe Losses ​ Adjusted combined ratio excluding catastrophe losses is defined as adjusted combined ratio excluding the impact of catastrophe losses.
All advances have predetermined term and the interest rate varies based on the term of the advance. ​ As of December 31, 2023, the Company had $52.6 million of borrowings outstanding through the FHLB line of credit. ​ Financial Condition Stockholders ’ Equity At December 31, 2023 total stockholders’ equity was $471.3 million and tangible stockholders’ equity was $458.9 million, compared to total stockholders’ equity of $384.8 million and tangible stockholders’ equity of $376.5 million as of December 31, 2022.
All advances have predetermined term and the interest rate varies based on the term of the advance. ​ As of December 31, 2024, the Company did not have any borrowings outstanding through the FHLB line of credit. ​ Financial Condition Stockholders ’ Equity At December 31, 2024 total stockholders’ equity was $729.0 million and tangible stockholders’ equity was $715.8 million, compared to total stockholders’ equity of $471.3 million and tangible stockholders’ equity of $458.9 million as of December 31, 2023.
Adjusted combined ratio excluding catastrophe losses should not be viewed as a substitute for combined ratio calculated using unadjusted GAAP numbers, and other companies may define adjusted combined ratio excluding catastrophe losses differently. ​ 68 Table of Contents Adjusted combined ratio excluding catastrophe losses is calculated as follows: Year Ended December 31, 2023 2022 ($ in thousands) Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $ 265,142 $ 254,390 Denominator: Net earned premiums $ 345,913 $ 316,466 Combined ratio 76.6 % 80.4 % Adjustments to numerator: Expenses associated with transactions $ (706 ) $ (130 ) Stock-based compensation expense (14,913 ) (11,624 ) Amortization of intangibles (1,481 ) (1,255 ) Expenses associated with catastrophe bond, net of rebate (1,640 ) (1,992 ) Catastrophe losses (3,442 ) (15,394 ) Adjusted combined ratio excluding catastrophe losses 70.2 % 70.8 % Tangible Stockholders ’ Equity We define tangible stockholders’ equity as stockholders’ equity less intangible assets.
Adjusted combined ratio excluding catastrophe losses should not be viewed as a substitute for combined ratio calculated using unadjusted GAAP numbers, and other companies may define adjusted combined ratio excluding catastrophe losses differently. ​ 68 Table of Contents Adjusted combined ratio excluding catastrophe losses is calculated as follows: Year Ended December 31, 2024 2023 ($ in thousands) Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $ 398,745 $ 265,142 Denominator: Net earned premiums $ 510,687 $ 345,913 Combined ratio 78.1 % 76.6 % Adjustments to numerator: Expenses associated with transactions $ (1,479 ) $ (706 ) Stock-based compensation expense (16,685 ) (14,913 ) Amortization of intangibles (1,558 ) (1,481 ) Expenses associated with catastrophe bond (2,483 ) (1,640 ) Catastrophe losses (27,846 ) (3,442 ) Adjusted combined ratio excluding catastrophe losses 68.3 % 70.2 % Tangible Stockholders ’ Equity We define tangible stockholders’ equity as stockholders’ equity less intangible assets.
Stockholders’ equity calculated in accordance with GAAP reconciles to tangible stockholders’ equity as follows: ​ December 31, ​ 2023 2022 ​ (in thousands) Stockholders’ equity $ 471,252 $ 384,754 Intangible assets (12,315 ) (8,261 ) Tangible stockholders’ equity $ 458,937 $ 376,493 ​ Liquidity and Capital Resources Sources and Uses of Funds We operate as a holding company with no business operations of our own.
Stockholders’ equity calculated in accordance with GAAP reconciles to tangible stockholders’ equity as follows: ​ December 31, ​ 2024 2023 ​ (in thousands) Stockholders’ equity $ 729,030 $ 471,252 Intangible assets (13,242 ) (12,315 ) Tangible stockholders’ equity $ 715,788 $ 458,937 ​ Liquidity and Capital Resources Sources and Uses of Funds We operate as a holding company with no business operations of our own.
Net Investment Income and Net Realized and Unrealized Gains (Losses) on Investments Net investment income increased $9.8 million, or 70.8%, to $23.7 million for the year ended December 31, 2023 from $13.9 million for the year ended December 31, 2022.
Net Investment Income and Net Realized and Unrealized Gains (Losses) on Investments Net investment income increased $12.1 million, or 51.1%, to $35.8 million for the year ended December 31, 2024 from $23.7 million for the year ended December 31, 2023.
Also included in our investment portfolio were $43.2 million of equity securities. In addition, we maintained a non-restricted cash and cash equivalent balance of $51.9 million at December 31, 2023.
Also included in our investment portfolio were $40.5 million of equity securities. In addition, we maintained a non-restricted cash and cash equivalent balance of $80.5 million at December 31, 2024.
Net income calculated in accordance with GAAP reconciles to adjusted net income as follows: ​ Year Ended December 31, ​ 2023 2022 ​ (in thousands) Net income $ 79,201 $ 52,170 Adjustments: Net realized and unrealized (gains) losses on investments (2,941 ) 7,529 Expenses associated with transactions 706 130 Stock-based compensation expense 14,913 11,624 Amortization of intangibles 1,481 1,255 Expenses associated with catastrophe bond, net of rebate 1,640 1,992 Tax impact (1,480 ) (3,366 ) Adjusted net income $ 93,520 $ 71,334 Adjusted Return on Equity We define adjusted return on equity as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.
Net income calculated in accordance with GAAP reconciles to adjusted net income as follows: ​ Year Ended December 31, ​ 2024 2023 ​ (in thousands) Net income $ 117,573 $ 79,201 Adjustments: Net realized and unrealized (gains) losses on investments (4,568 ) (2,941 ) Expenses associated with transactions 1,479 706 Stock-based compensation expense 16,685 14,913 Amortization of intangibles 1,558 1,481 Expenses associated with catastrophe bond 2,483 1,640 Tax impact (1,699 ) (1,480 ) Adjusted net income $ 133,511 $ 93,520 Adjusted Return on Equity We define adjusted return on equity as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.
Other companies may define adjusted underwriting income differently. 65 Table of Contents Income before income taxes calculated in accordance with GAAP reconciles to underwriting income and adjusted underwriting income as follows: ​ Year Ended ​ December 31, ​ 2023 2022 ​ (in thousands) Income before income taxes $ 103,642 $ 67,551 Net investment income (23,705 ) (13,877 ) Net realized and unrealized (gains) losses on investments (2,941 ) 7,529 Interest expense 3,775 873 Underwriting income $ 80,771 $ 62,076 Expenses associated with transactions 706 130 Stock-based compensation expense 14,913 11,624 Amortization of intangibles 1,481 1,255 Expenses associated with catastrophe bond, net of rebate 1,640 1,992 Adjusted underwriting income $ 99,511 $ 77,077 Adjusted Net Income We define adjusted net income as net income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact.
Other companies may define adjusted underwriting income differently. 65 Table of Contents Income before income taxes calculated in accordance with GAAP reconciles to underwriting income and adjusted underwriting income as follows: ​ Year Ended ​ December 31, ​ 2024 2023 ​ (in thousands) Income before income taxes $ 151,196 $ 103,642 Net investment income (35,824 ) (23,705 ) Net realized and unrealized (gains) losses on investments (4,568 ) (2,941 ) Interest expense 1,138 3,775 Underwriting income $ 111,942 $ 80,771 Expenses associated with transactions 1,479 706 Stock-based compensation expense 16,685 14,913 Amortization of intangibles 1,558 1,481 Expenses associated with catastrophe bond 2,483 1,640 Adjusted underwriting income $ 134,147 $ 99,511 Adjusted Net Income We define adjusted net income as net income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact.
Total revenue calculated in accordance with GAAP reconciles to underwriting revenue as follows: ​ Year Ended ​ December 31, ​ 2023 2022 ​ (in thousands) Total revenue $ 375,926 $ 327,086 Net investment income (23,705 ) (13,877 ) Net realized and unrealized (gains) losses on investments (2,941 ) 7,529 Underwriting revenue $ 349,280 $ 320,738 ​ ​ Underwriting Income and adjusted underwriting income We define underwriting income as income before income taxes excluding net investment income, net realized and unrealized gains and losses on investments, and interest expense.
Total revenue calculated in accordance with GAAP reconciles to underwriting revenue as follows: ​ Year Ended ​ December 31, ​ 2024 2023 ​ (in thousands) Total revenue $ 553,863 $ 375,926 Net investment income (35,824 ) (23,705 ) Net realized and unrealized (gains) losses on investments (4,568 ) (2,941 ) Underwriting revenue $ 513,471 $ 349,280 ​ ​ Underwriting Income and adjusted underwriting income We define underwriting income as income before income taxes excluding net investment income, net realized and unrealized gains and losses on investments, and interest expense.
The following table summarizes our cash flows for the years ended December 31, 2023 and 2022: ​ Year ended ​ December 31, ​ 2023 2022 ​ ($ in thousands) Cash provided by (used in): ​ ​ Operating activities $ 116,106 $ 169,583 Investing activities (128,478 ) (156,807 ) Financing activities (3,940 ) 5,017 Change in cash, cash equivalents, and restricted cash $ (16,312 ) $ 17,793 ​ Our cash flow from operating activities has been positive in each of the last two years.
The following table summarizes our cash flows for the years ended December 31, 2024 and 2023: ​ Year ended ​ December 31, ​ 2024 2023 ​ ($ in thousands) Cash provided by (used in): ​ ​ Operating activities $ 261,157 $ 116,106 Investing activities (306,244 ) (128,478 ) Financing activities 73,774 (3,940 ) Change in cash, cash equivalents, and restricted cash $ 28,687 $ (16,312 ) ​ Our cash flow from operating activities has been positive in each of the last two years.
The increase was primarily due to an increase in gross written premiums, primarily in our Commercial Earthquake, Casualty, and Residential Earthquake lines, partially offset by increased ceded written premiums. 62 Table of Contents Net Earned Premiums Net earned premiums increased $29.4 million, or 9.3%, to $345.9 million for the year ended December 31, 2023 from $316.5 million for the year ended December 31, 2022 due primarily to the earning of increased gross written premiums offset by the earning of ceded written premiums under reinsurance agreements.
The increase was primarily due to an increase in gross written premiums, primarily in our Casualty and Earthquake products, partially offset by increased ceded written premiums. 62 Table of Contents Net Earned Premiums Net earned premiums increased $164.8 million, or 47.6%, to $510.7 million for the year ended December 31, 2024 from $345.9 million for the year ended December 31, 2023 due primarily to the earning of increased gross written premiums offset by the earning of ceded written premiums under reinsurance agreements.
Each of our insurance company subsidiaries as carries an “A-“ rating from A.M. Best Company (“A.M. Best”), a leading rating agency for the insurance industry. We distribute our products through multiple channels, including retail agents, program administrators, wholesale brokers, and partnerships with other insurance companies.
Our insurance company subsidiaries, Palomar Specialty Insurance Company (“PSIC”) and Palomar Excess and Surplus Insurance Company (“PESIC”) carry an “A” rating from A.M. Best Company (“A.M. Best”), a leading rating agency for the insurance industry. 54 Table of Contents We distribute our products through multiple channels, including retail agents, program administrators, wholesale brokers, and partnerships with other insurance companies.
We believe that our market opportunity, distinctive products, and differentiated business model position us to grow our business profitably.
These new products diversify our book of business and broaden our product portfolio. We believe that our market opportunity, distinctive products, and differentiated business model position us to grow our business profitably.
Based on the above restrictions, PSIC may pay a dividend or distribution of no greater than $96.0 million in 2024 without approval by the California and Oregon Insurance Commissioners. 69 Table of Contents Under Arizona statute which governs PESIC, dividends paid in a consecutive twelve month period cannot exceed the lesser of (i) 10% of an insurance company’s statutory policyholders’ surplus as of December 31 of the preceding year or (ii) 100% of its statutory net income for the preceding calendar year.
During October 2024, PSIC elected to pay a dividend of $95.0 million to its parent company. 69 Table of Contents Under Arizona statute which governs PESIC, dividends paid in a consecutive twelve month period cannot exceed the lesser of (i) 10% of an insurance company’s statutory policyholders’ surplus as of December 31 of the preceding year or (ii) 100% of its statutory net income for the preceding calendar year.
Net Ultimate LLAE December 31, 2023 Potential Impact on 2023 Sensitivity Accident Year Sensitivity Factor Net Ultimate Incurred LLAE Net LLAE Reserve Pre‑tax income Stockholders’ Equity* (in thousands) Sample increases 2023 5.0 % $ 70,346 $ 50,746 $ 3,517 $ 2,779 2022 2.5 % $ 83,026 $ 33,538 $ 2,076 $ 1,640 Prior 1.0 % $ 137,410 $ 13,369 $ 1,374 $ 1,086 Sample decreases 2023 (5.0 )% $ 70,346 $ 50,746 $ (3,517 ) $ (2,779 ) 2022 (2.5 )% $ 83,026 $ 33,538 $ (2,076 ) $ (1,640 ) Prior (1.0 )% $ 137,410 $ 13,369 $ (1,374 ) $ (1,086 ) * Effective tax rate estimated to be 21% 77 Table of Contents The amount by which estimated losses differ from those originally reported for a period is known as “development.” Development is unfavorable when the losses ultimately settle for more than the amount reserved or subsequent estimates indicate a basis for reserve increases on unresolved claims.
Net Ultimate LLAE December 31, 2024 Potential Impact on 2024 Sensitivity Accident Year Sensitivity Factor Net Ultimate Incurred LLAE Net LLAE Reserve Pre‑tax income Stockholders’ Equity* (in thousands) Sample increases 2024 5.0 % $ 137,788 $ 94,215 $ 6,889 $ 5,443 2023 2.5 % $ 68,066 $ 31,171 $ 1,702 $ 1,344 Prior 1.0 % $ 219,724 $ 29,913 $ 2,197 $ 1,736 Sample decreases 2024 (5.0 )% $ 137,788 $ 94,215 $ (6,889 ) $ (5,443 ) 2023 (2.5 )% $ 68,066 $ 31,171 $ (1,702 ) $ (1,344 ) Prior (1.0 )% $ 219,724 $ 29,913 $ (2,197 ) $ (1,736 ) * Effective tax rate estimated to be 21% 77 Table of Contents The amount by which estimated losses differ from those originally reported for a period is known as “development.” Development is unfavorable when the losses ultimately settle for more than the amount reserved or subsequent estimates indicate a basis for reserve increases on unresolved claims.
Net Written Premiums Net written premiums increased $52.7 million, or 14.8%, to $410.0 million for the year ended December 31, 2023 from $357.3 million for the year ended December 31, 2022.
Net Written Premiums Net written premiums increased $234.8 million, or 57.3%, to $644.9 million for the year ended December 31, 2024 from $410.0 million for the year ended December 31, 2023.
The following tables summarize our gross and net reserves for unpaid losses and loss adjustment expenses at December 31, 2023 and 2022. ​ December 31, 2023 ​ Gross % of Total Net % of Total Loss and Loss Adjustment Reserves ($ in thousands) Case reserves $ 124,170 36.3 % $ 38,428 39.4 % IBNR 218,105 63.7 % 59,225 60.6 % Total reserves $ 342,275 100.0 % $ 97,653 100.0 % ​ ​ December 31, 2022 ​ Gross % of Total Net % of Total Loss and Loss Adjustment Reserves ​ ​ ​ Case reserves $ 72,598 31.4 % $ 34,084 44.0 % IBNR 158,817 68.6 % 43,436 56.0 % Total reserves $ 231,415 100.0 % $ 77,520 100.0 % ​ ​ The process of estimating the reserves for losses and loss adjustment expenses requires a high degree of judgment and is subject to several variables.
The following tables summarize our gross and net reserves for unpaid losses and loss adjustment expenses at December 31, 2024 and 2023. ​ December 31, 2024 ​ Gross % of Total Net % of Total Loss and Loss Adjustment Reserves ($ in thousands) Case reserves $ 164,665 32.7 % $ 40,731 26.2 % IBNR 338,717 67.3 % 114,568 73.8 % Total reserves $ 503,382 100.0 % $ 155,299 100.0 % ​ ​ December 31, 2023 ​ Gross % of Total Net % of Total Loss and Loss Adjustment Reserves ​ ​ ​ Case reserves $ 124,170 36.3 % $ 38,428 39.4 % IBNR 218,105 63.7 % 59,225 60.6 % Total reserves $ 342,275 100.0 % $ 97,653 100.0 % ​ ​ The process of estimating the reserves for losses and loss adjustment expenses requires a high degree of judgment and is subject to several variables.
Acquisition expenses as a percentage of gross earned premiums decreased due to the recognition of higher ceding commission and fronting fee income as a percentage of gross earned premiums due to changes in mix of business produced and growth in fronting premiums. 63 Table of Contents Other Underwriting Expenses Other underwriting expenses increased $19.0 million, or 27.4%, to $88.2 million for the year ended December 31, 2023 from $69.2 million for the year ended December 31, 2022.
Acquisition expenses as a percentage of gross earned premiums slightly increased due to the higher commission expenses as a percentage of gross earned premiums due to changes in mix of business produced. 63 Table of Contents Other Underwriting Expenses Other underwriting expenses increased $28.9 million, or 32.8%, to $117.1 million for the year ended December 31, 2024 from $88.2 million for the year ended December 31, 2023.
Contractual Obligations and Commitments The following table illustrates our contractual obligations and commercial commitments by due date as of December 31, 2023: ​ Total ​Less Than One Year ​One Year to Less Than Three Years ​Three Years to Less Than Five Years More Than Five Years ($ in thousands) Reserves for losses and loss adjustment expenses $ 342,275 $ 247,275 $ 49,003 $ 40,992 $ 5,005 Operating lease obligations 1,127 643 348 136 — Total $ 233,602 $ 178,843 $ 30,321 $ 24,155 $ 283 ​ ​ The reserve for losses and loss adjustment expenses represents management’s estimate of the ultimate cost of settling losses.
Contractual Obligations and Commitments The following table illustrates our contractual obligations and commercial commitments by due date as of December 31, 2024: ​ Total ​Less Than One Year ​One Year to Less Than Three Years ​Three Years to Less Than Five Years More Than Five Years (in thousand) Reserves for losses and loss adjustment expenses $ 503,382 $ 383,684 $ 67,713 $ 48,367 $ 3,618 Operating lease obligations 9,906 1,050 2,790 1,015 5,051 Total $ 233,602 $ 178,843 $ 30,321 $ 24,155 $ 283 ​ ​ The reserve for losses and loss adjustment expenses represents management’s estimate of the ultimate cost of settling losses.
Unrealized gains and losses on fixed maturity securities are recognized as a component of other comprehensive income and do not impact our net income. ​ The following table summarizes the components of our investment income for each period presented: Year Ended December 31, ​ 2023 2022 Change % Change ​ ($ in thousands) Interest income $ 23,349 $ 13,631 $ 9,718 71.3 % Dividend income 871 739 132 17.9 % Investment management fees and expenses (515 ) (493 ) (22 ) 4.5 % Net investment income 23,705 13,877 9,828 70.8 % Net realized and unrealized gains (losses) on investments 2,941 (7,529 ) 10,470 (139.1 )% Total $ 26,646 $ 6,348 $ 20,298 319.8 % ​ Income Tax Expense Income tax expense increased $9.1 million, or 58.9%, to $24.4 million for the year ended December 31, 2023 compared to $15.4 million during the year ended December 31, 2022.
Unrealized gains and losses on fixed maturity securities are recognized as a component of other comprehensive income and do not impact our net income. ​ The following table summarizes the components of our investment income for each period presented: Year Ended December 31, ​ 2024 2023 Change % Change ​ ($ in thousands) Interest income $ 35,433 $ 23,349 $ 12,084 51.8 % Dividend income 1,075 871 204 23.4 % Investment management fees and expenses (684 ) (515 ) (169 ) 32.8 % Net investment income 35,824 23,705 12,119 51.1 % Net realized and unrealized gains on investments 4,568 2,941 1,627 55.3 % Total $ 40,392 $ 26,646 $ 13,746 51.6 % ​ Income Tax Expense Income tax expense increased $9.2 million, or 37.6%, to $33.6 million for the year ended December 31, 2024 compared to $24.4 million during the year ended December 31, 2023.
Forward-looking statements in this Annual Report on Form 10-K are based on information available to us as of the date hereof, and we assume no obligation to update any such forward-looking statements. The following section generally discusses 2023 results compared to 2022 results.
Forward-looking statements in this Annual Report on Form 10-K are based on information available to us as of the date hereof, and we assume no obligation to update any such forward-looking statements. Overview We are a specialty insurance company that provides property and casualty insurance products to individuals and businesses.
Losses and Loss Adjustment Expenses Losses and loss adjustment expenses decreased $6.1 million, or 7.7%, to $72.6 million for the year ended December 31, 2023 from $78.7 million for the year ended December 31, 2022.
Losses and Loss Adjustment Expenses Losses and loss adjustment expenses increased $62.2 million, or 85.6%, to $134.8 million for the year ended December 31, 2024 from $72.6 million for the year ended December 31, 2023.
Bank National Association which provides a revolving credit facility of up to $100 million through December 8, 2026.
Credit Agreement In December 2021, we entered into a Credit Agreement (the “Credit Agreement”) with U.S. Bank National Association which provides a revolving credit facility of up to $100 million through December 8, 2026.
The catastrophe events which experienced unfavorable development were primarily subject to ceding under our XOL treaties while the catastrophe events which experienced favorable development were subject to a lower amount of ceding. 78 Table of Contents Although we believe that our reserve estimates are reasonable, it is possible that our actual loss experience may not conform to our assumptions.
The favorable 2021 development was subject to a higher amount of ceding versus the unfavorable 2020 development resulting in the net unfavorable development being higher than the gross amount. 78 Table of Contents Although we believe that our reserve estimates are reasonable, it is possible that our actual loss experience may not conform to our assumptions.
This percentage decreased due to an increase in earned premiums without a corresponding increase in operating expenses. Other underwriting expenses as a percentage of gross earned premiums may fluctuate period over period based on timing of certain expenses relative to premium growth.
This percentage was relatively consistent as adjusted operating expenses grew at approximately the same rate as gross earned premiums. Other underwriting expenses as a percentage of gross earned premiums may fluctuate period over period based on timing of certain expenses relative to premium growth.
States, Territories, and Political Subdivisions 10,776 9,652 1.1 % Special revenue excluding mortgage/asset-backed securities 37,260 32,799 6.4 % Corporate and other 278,164 254,095 49.3 % Mortgage/asset-backed securities 184,578 169,967 33.0 % Total available-for-sale investments $ 561,580 $ 515,064 100.0 % ​​ The following tables provide the credit quality of investment securities as of December 31, 2023 and December 31, 2022: December 31, 2023 Estimated Fair Value % of Total ($ in thousands) Rating ​ ​ AAA $ 98,823 15.4 % AA 211,354 32.8 % A 205,162 31.9 % BBB 119,016 18.5 % BB 5,869 0.9 % B 735 0.1 % CCC&Below 2,840 0.4 % ​ $ 643,799 100.0 % ​ ​ 74 Table of Contents December 31, 2022 Estimated Fair Value % of Total ($ in thousands) Rating ​ ​ AAA $ 182,620 35.4 % AA 55,438 10.8 % A 171,292 33.3 % BBB 95,402 18.5 % BB 10,047 1.9 % B 236 0.1 % CCC&Below 29 — % ​ $ 515,064 100.0 % The amortized cost and fair value of our available-for-sale investments in fixed maturity securities summarized by contractual maturity as of December 31, 2023 were as follows: December 31, 2023 Amortized Cost Fair Value % of Total Fair Value ​ ($ in thousands) Due within one year $ 46,366 $ 45,221 7.0 % Due after one year through five years 188,698 180,645 28.1 % Due after five years through ten years 127,925 118,748 18.4 % Due after ten years 37,591 34,458 5.4 % Mortgage and asset-backed securities 274,550 264,727 41.1 % ​ $ 675,130 $ 643,799 100.0 % ​ Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations.
States, Territories, and Political Subdivisions 10,641 9,902 1.5 % Special revenue excluding mortgage/asset-backed securities 32,513 29,511 4.6 % Corporate and other 316,590 300,239 46.6 % Mortgage/asset-backed securities 274,550 264,727 41.1 % Total available-for-sale investments $ 675,130 $ 643,799 100.0 % ​​ The following tables provide the credit quality of investment securities as of December 31, 2024 and December 31, 2023: December 31, 2024 Estimated Fair Value % of Total ($ in thousands) Rating ​ ​ AAA $ 130,161 13.9 % AA 305,267 32.5 % A 254,890 27.1 % BBB 236,855 25.2 % BB 10,614 1.1 % B 1,258 0.1 % CCC&Below 1 0.0 % ​ $ 939,046 100.0 % ​ ​ 74 Table of Contents December 31, 2023 Estimated Fair Value % of Total ($ in thousands) Rating ​ ​ AAA $ 98,823 15.4 % AA 211,354 32.8 % A 205,162 31.9 % BBB 119,016 18.5 % BB 5,869 0.9 % B 735 0.1 % CCC&Below 2,840 0.4 % ​ $ 643,799 100.0 % The amortized cost and fair value of our available-for-sale investments in fixed maturity securities summarized by contractual maturity as of December 31, 2024 were as follows: December 31, 2024 Amortized Cost Fair Value % of Total Fair Value ​ ($ in thousands) Due within one year $ 76,696 $ 76,089 8.1 % Due after one year through five years 195,931 190,627 20.3 % Due after five years through ten years 192,924 183,560 19.5 % Due after ten years 101,182 94,433 10.1 % Mortgage and asset-backed securities 406,597 394,337 42.0 % ​ $ 973,330 $ 939,046 100.0 % ​ Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations.
Cash used in financing activities for the year ended December 31, 2023 related to the repurchase of $22.3 million of our common stock, offset by $16.2 million in proceeds from our FHLB line of credit, $1.2 million in proceeds from common stock issued via stock option exercises and the receipt of $0.8 million in proceeds from our employee stock purchase plan.
Cash provided by financing activities for the year ended December 31, 2024 related to the receipt of $115.7 million in proceeds from a stock offering, $7.0 million in proceeds from stock option exercises, $2.8 million in proceeds from policy holder contributions of surplus and $0.9 million in proceeds from our employee stock purchase plan, offset by $52.6 million in payments on our FHLB line of credit.
Acquisition expenses as a percentage of gross earned premiums were 10.6% for the year ended December 31, 2023 compared to 15.9% for the year ended December 31, 2022.
This was partially offset by higher ceding commissions due to a higher volume of premiums subject to quota share arrangements. Acquisition expenses as a percentage of gross earned premiums were 10.7% for the year ended December 31, 2024 compared to 10.6% for the year ended December 31, 2023.
Ceded Written Premiums Ceded written premiums are the amount of gross written premiums ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential losses and to provide additional capacity for growth. We cede premiums through excess of loss (“XOL”) agreements, quota share agreements, and fronting agreements.
The majority of our Crop written premiums are recognized in the third quarter, as we receive the requisite reporting from insureds at that time. Ceded Written Premiums Ceded written premiums are the amount of gross written premiums ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential losses and to provide additional capacity for growth.
We use proprietary data analytics and a modern technology platform to offer our customers flexible products with customized and granular pricing for both the admitted and excess and surplus lines (“E&S”) markets. 54 Table of Contents We provide admitted insurance products through our Oregon domiciled insurance company, Palomar Specialty Insurance Company (“PSIC”), and E&S insurance products through our Arizona domiciled surplus lines insurance company, Palomar Excess and Surplus Insurance Company (“PESIC”).
We use our underwriting and analytical expertise to provide innovative insurance products serving five categories: Earthquake, Inland Marine and Other Property, Casualty, Fronting, and Crop. We use proprietary data analytics and a modern technology platform to offer our customers flexible products with customized and granular pricing for both the admitted and excess and surplus lines (“E&S”) markets.
We reflect favorable or unfavorable development of loss reserves in the results of operations in the period the estimates are changed. ​ The following tables present the development of our loss reserves by accident year on a gross basis and net of reinsurance recoveries during each of the below calendar years: Gross Ultimate Loss and LAE Development- (Favorable) Unfavorable Calendar Year 2020 to 2021 to 2022 to Accident Year 2020 2021 2022 2023 2021 2022 2023 (in thousands) Prior $ 249,973 $ 278,648 $ 294,470 $ 276,821 $ 28,675 $ 15,822 $ (17,649 ) 2021 — 171,922 156,434 140,413 — (15,488 ) (16,021 ) 2022 — — 200,765 198,635 — — (2,130 ) 2023 — — — 334,520 — — — $ 28,675 $ 334 $ (35,800 ) Net Ultimate Loss and LAE Development- (Favorable) Unfavorable ​ Calendar Year 2020 to 2021 to 2022 to Accident Year 2020 2021 2022 2023 2021 2022 2023 (in thousands) Prior $ 98,073 $ 94,488 $ 98,041 $ 94,002 $ (3,585 ) $ 3,553 $ (4,039 ) 2021 — 45,042 43,872 43,403 — (1,170 ) (469 ) 2022 — — 76,289 83,026 — — 6,737 2023 — — — 70,346 — — — $ (3,585 ) $ 2,383 $ 2,229 ​ ​ During the year ended December 31, 2023, our total gross incurred losses for accident years 2022 and prior developed favorably by $35.8 million.
We reflect favorable or unfavorable development of loss reserves in the results of operations in the period the estimates are changed. ​ The following tables present the development of our loss reserves by accident year on a gross basis and net of reinsurance recoveries during each of the below calendar years: Gross Ultimate Loss and LAE Development- (Favorable) Unfavorable Calendar Year 2021 to 2022 to 2023 to Accident Year 2021 2022 2023 2024 2022 2023 2024 (in thousands) Prior $ 450,570 $ 450,904 $ 417,234 $ 416,443 $ 334 $ (33,670 ) $ (791 ) 2022 200,765 198,635 182,660 — (2,130 ) (15,975 ) 2023 334,520 308,049 — — (26,471 ) 2024 537,646 — — — $ 334 $ (35,800 ) $ (43,237 ) Net Ultimate Loss and LAE Development- (Favorable) Unfavorable ​ Calendar Year 2021 to 2022 to 2023 to Accident Year 2021 2022 2023 2024 2022 2023 2024 (in thousands) Prior $ 139,530 $ 141,913 $ 137,405 $ 139,173 $ 2,383 $ (4,508 ) $ 1,768 2022 76,289 83,026 80,551 — 6,737 (2,475 ) 2023 70,346 68,015 — — (2,331 ) 2024 137,788 — — — $ 2,383 $ 2,229 $ (3,038 ) ​ ​ During the year ended December 31, 2024, our total gross incurred losses for accident years 2023 and prior developed favorably by $43.2 million.
The increase was primarily due to increased premiums ceded under fronting agreements due to growth in fronting premiums written and growth in the volume of written premiums subject to quota shares. In addition, our XOL reinsurance expense increased due to growth in exposure and higher rates on XOL reinsurance.
The increase was primarily due to increased premiums ceded related to our Crop products as these products saw significant growth and we currently cede the majority of Crop premiums and risk to reinsurers. In addition, our XOL reinsurance expense increased due to growth in exposure and higher rates on XOL reinsurance.
Non-catastrophe attritional losses increased due to a higher volume of premiums being subject to attritional losses, primarily driven by the growth in Inland Marine and Casualty Premiums. Acquisition Expenses Acquisition expenses decreased $3.0 million, or 2.7%, to $107.7 million for the year ended December 31, 2023 from $110.8 million for the year ended December 31, 2022.
Catastrophe losses during the year ended December 31, 2023 were primarily related to floods occurring during the first quarter and severe convective storms occurring during the second quarter. Non-catastrophe attritional losses increased due to a higher volume of premiums being subject to attritional losses, primarily driven by the growth in Casualty and Inland Marine and other Property premiums.
Accordingly, it is highly likely that the total amounts of obligations paid by us in the time periods shown will be greater than those indicated in the table. Share repurchases We also have implemented a share repurchase plan and have used and may use our cash in the future to purchase outstanding shares of our common stock.
Accordingly, it is highly likely that the total amounts of obligations paid by us in the time periods shown will be greater than those indicated in the table. Share repurchases Our share repurchase program expired on March 31, 2024 and we did not make any share repurchases during the year ended December 31, 2024.
Commission and Other Income Commission and other income decreased $0.9 million, or 21.2%, to $3.4 million for the year ended December 31, 2023 from $4.3 million for the year ended December 31, 2022. The decrease was driven by a lower volume of policies written through our internal managing general agency, Palomar Insurance Agency.
Commission and Other Income Commission and other income decreased $0.6 million, or 17.3%, to $2.8 million for the year ended December 31, 2024 from $3.4 million for the year ended December 31, 2023. The decrease was driven by a decrease in policy related fees driven by changes in the mix of business produced.
The gross favorable development was due primarily to lower than anticipated severity of catastrophe losses, offset by higher than anticipated severity of attritional losses.
During the year ended December 31, 2023, our total gross incurred losses for accident years 2022 and prior developed favorably by $35.8 million. The gross favorable development was due primarily to lower than anticipated severity of catastrophe losses, offset by higher than anticipated severity of attritional losses.
Ceded written premiums as a percentage of gross written premiums increased to 64.1% for the year ended December 31, 2023 from 59.5% for the year ended December 31, 2022. This increase was primarily due to increased quota share and fronting cessions as previously described.
Although our volume of ceded written premiums increased, ceded written premiums as a percentage of gross written premiums decreased to 58.2% for the year ended December 31, 2024 from 64.1% for the year ended December 31, 2023.
Losses and loss adjustment expenses consisted of the following elements during the respective periods: Year Ended December 31, 2023 2022 Change % Change ($ in thousands) Catastrophe losses $ 3,442 $ 15,394 $ (11,952 ) (77.6 )% Non-catastrophe losses 69,150 63,278 5,872 9.3 % Total losses and loss adjustment expenses $ 72,592 $ 78,672 $ (6,080 ) (7.7 )% Catastrophe loss ratio 1.0 % 4.9 % Non-catastrophe loss ratio 20.0 % 20.0 % Total loss ratio 21.0 % 24.9 % Catastrophe losses during the year ended December 31, 2023 were primarily related to floods occurring during the first quarter and severe convective storms occurring during the second quarter.
Losses and loss adjustment expenses consisted of the following elements during the respective periods: Year Ended December 31, 2024 2023 Change % Change ($ in thousands) Catastrophe losses $ 27,846 $ 3,442 $ 24,404 709.0 % Non-catastrophe losses 106,913 69,150 37,763 54.6 % Total losses and loss adjustment expenses $ 134,759 $ 72,592 $ 62,167 85.6 % Catastrophe loss ratio 5.5 % 1.0 % Non-catastrophe loss ratio 20.9 % 20.0 % Total loss ratio 26.4 % 21.0 % Catastrophe losses increased during the year ended December 31, 2024 due to higher frequency and severity of catastrophe events compared to the prior year.
The gross unfavorable development was due primarily to losses on certain 2020 Hurricanes emerging at a higher severity than expected, primarily in our special property lines of business. On a net basis, the development was favorable by $3.6 million due to the effect of ceding gross unfavorable development under our reinsurance program.
The gross favorable development was due primarily to lower than anticipated severity of attritional losses in our Inland Marine and other property line of business. On a net basis, the development was favorable by $3.0 million due to the same reason.
States, Territories, and Political Subdivisions 10,641 9,902 1.5 % Special revenue excluding mortgage/asset-backed securities 32,513 29,511 4.6 % Corporate and other 316,590 300,239 46.6 % Mortgage/asset-backed securities 274,550 264,727 41.1 % Total available-for-sale investments $ 675,130 $ 643,799 100.0 % December 31, 2022 Amortized Cost or Cost Fair Value % of Total Fair Value ​ ($ in thousands) Fixed maturities: ​ ​ ​ U.S.
States, Territories, and Political Subdivisions 10,606 9,778 1.0 % Special revenue excluding mortgage/asset-backed securities 30,283 26,634 2.8 % Corporate and other 492,395 475,491 50.6 % Mortgage/asset-backed securities 406,597 394,337 42.0 % Total available-for-sale investments $ 973,330 $ 939,046 100.0 % December 31, 2023 Amortized Cost or Cost Fair Value % of Total Fair Value ​ ($ in thousands) Fixed maturities: ​ ​ ​ U.S.
These underwriting changes contributed to the decline in Commercial All Risk and Specialty Homeowners premiums shown above. 61 Table of Contents The following table summarizes our gross written premiums by insurance subsidiary: Year Ended December 31, 2023 2022 ($ in thousands) % of % of Amount GWP Amount GWP Change % Change Subsidiary PSIC $ 653,809 57.3 % $ 489,720 55.5 % $ 164,089 33.5 % PESIC 487,749 42.7 % 392,148 44.5 % 95,601 24.4 % Total Gross Written Premiums $ 1,141,558 100.0 % $ 881,868 100.0 % $ 259,690 29.4 % Ceded Written Premiums Ceded written premiums increased $207.0 million, or 39.5%, to $731.5 million for the year ended December 31, 2023 from $524.6 million for the year ended December 31, 2022.
Crop premiums are primarily written and earned during the third quarter of each year. 61 Table of Contents The following table summarizes our gross written premiums by insurance subsidiary: Year Ended December 31, 2024 2023 ($ in thousands) % of % of Amount GWP Amount GWP Change % Change Subsidiary PSIC $ 823,263 53.4 % $ 653,809 57.3 % $ 169,454 25.9 % PESIC 661,404 42.9 % 487,749 42.7 % 173,655 35.6 % Laulima 57,295 3.7 % — — % 57,295 NM Total Gross Written Premiums $ 1,541,962 100.0 % $ 1,141,558 100.0 % $ 400,404 35.1 % NM- Not meaningful Ceded Written Premiums Ceded written premiums increased $165.6 million, or 22.6%, to $897.1 million for the year ended December 31, 2024 from $731.5 million for the year ended December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe attempt to anticipate the potential impact of inflation in our pricing and our establishing of reserves for losses and loss adjustment expenses. Inflation in excess of the levels we have assumed could cause losses and loss adjustment expenses to be higher than we anticipated.
Biggest changeInflation We establish our insurance premiums prior to knowing the amount of losses and loss adjustment expenses or the extent to which inflation may affect such amounts. We attempt to anticipate the potential impact of inflation in our pricing and our establishing of reserves for losses and loss adjustment expenses.
We estimate that a 100-basis point increase in interest rates would cause a 3.4% decline in the estimated fair value of our fixed maturities portfolio, while a 100-basis point decrease in interest rates would cause a 3.6% increase in the estimated fair value of that portfolio.
We estimate that a 100-basis point increase in interest rates would cause a 3.7% decline in the estimated fair value of our fixed maturities portfolio, while a 100-basis point decrease in interest rates would cause a 4.0% increase in the estimated fair value of that portfolio.
We also invest in higher yielding fixed maturities and equity securities. Our fixed maturity portfolio has an average rating by at least one nationally recognized rating organization of “AA−,” with approximately 80.0% rated “A−” or better. At December 31, 2023, 1.5% of our fixed maturity portfolio was unrated or rated below investment grade.
We also invest in higher yielding fixed maturities and equity securities. Our fixed maturity portfolio has an average rating by at least one nationally recognized rating organization of “AA−,” with approximately 73.5% rated “A−” or better. At December 31, 2024, 1.3% of our fixed maturity portfolio was unrated or rated below investment grade.
In the management of this risk, the characteristics of duration, credit and variability of cash flows are critical elements. We regularly assess these risks and balance them within the context of our liability and capital position. As of December 31, 2023, the estimated fair value of our fixed maturities was $643.8 million.
In the management of this risk, the characteristics of duration, credit and variability of cash flows are critical elements. We regularly assess these risks and balance them within the context of our liability and capital position. As of December 31, 2024, the estimated fair value of our fixed maturities was $939.0 million.
Inflation assumptions also impact our reinsurance costs and the amount of reinsurance we must purchase to meet certain thresholds and higher inflation assumptions cause our reinsurance costs to increase.
Inflation in excess of the levels we have assumed could cause losses and loss adjustment expenses to be higher than we anticipated. Inflation assumptions also impact our reinsurance costs and the amount of reinsurance we must purchase to meet certain thresholds and higher inflation assumptions cause our reinsurance costs to increase.
Seasonality Our Commercial All Risk and Hawaii Hurricane businesses expose us to claims from seasonal weather events such as hurricanes and windstorms. The occurrence of such events typically increases between June and November of each year.
Seasonality Our Inland Marine and Other Property line of business exposes us to claims from seasonal weather events such as hurricanes and windstorms. The occurrence of such events typically increases between June and November of each year. As a result, we may experience increased losses in our Inland Marine and Other Property line of business during this period.
The selected scenarios are not predictions of future events, but rather illustrate the effect that such events may have on the fair value of our fixed maturities portfolio. Inflation We establish our insurance premiums prior to knowing the amount of losses and loss adjustment expenses or the extent to which inflation may affect such amounts.
The selected scenarios are not predictions of future events, but rather illustrate the effect that such events may have on the fair value of our fixed maturities portfolio. Equity Price Risk Equity risk represents the potential economic losses due to adverse changes in equity security prices.
Removed
As a result, we may experience increased losses in our Commercial All Risk and Hawaii Hurricane lines of business during this period. ​ 82 Table of Contents
Added
As of December 31, 2024, the estimated fair value of our equity securities was $40.5 million. Our equity securities consist primarily of exchange traded funds which seek to track the performance of the broader U.S. stock market.
Added
Therefore, the fair value of our equity securities will fluctuate with the value of the overall U.S. stock market and a large decline in the value of the U.S. stock market would cause a corresponding decline in the value of our equity securities.
Added
We also write and earn the majority of our Crop premiums during the third quarter of each year. ​ 82 Table of Contents

Other PLMR 10-K year-over-year comparisons