Palomar's Q4 2024 Earnings Call: Contradictory Insights on Reinsurance Pricing, Growth Strategies, and Crop Business Dynamics

These are the key contradictions discussed in Palomar's latest 2024Q4 earnings call, specifically including: Reinsurance Pricing Expectations and Market Opportunities, Growth Strategy, Crop Business Strategy, and Reinsurance Pricing Assumptions:



Exceptional Financial Performance:
- Palomar Holdings reported adjusted net income of $41.3 million for Q4 2024, representing 47.5% growth year-over-year.
- Growth was driven by a 39% increase in gross written premiums, with the company achieving 23% adjusted return on equity.
- This strong performance was supported by consistent execution of strategic objectives and conservative underwriting practices.

Earthquake Insurance and Strategic Growth:
- The earthquake franchise grew gross written premiums by 20% in Q4, with the company's balanced approach to residential and commercial earthquake insurance allowing for sustained margin preservation.
- This growth strategy was supported by a 10% inflation guard on residential products and a focus on retaining and adding high-value accounts.
- The company's strong theoretical loss and aggregation metrics reflect this balanced approach to risk management.

Casualty Segment Expansion:
- The casualty segment experienced 112% year-over-year premium growth in Q4, driven by hardening markets and increased exposure in segments like primary and excess construction liability insurance.
- Expansion was supported by the addition of experienced talent and focused underwriting strategies, such as shorter-tail liability focus and modest line sizes.
- The casualty segment now represents 15% of the total portfolio, and reserve growth continues to support profitable growth.

Reinsurance and Market Dynamics:
- Palomar engaged in reinsurance renewals with a 15% reduction in risk-adjusted treaty costs at January 1.
- Despite the impact of wildfires, the company anticipates strong investor appetite for single peril exposures like earthquake, reflected in recent cat bond issuances and secondary market pricing.
- The company remains cautiously optimistic about its 6/1 renewal prospects, with leading indicators suggesting strong investor appetite.