Palomar (PLMR 1.47%), a specialty property insurance provider known for its focus on niche markets such as earthquake and specialty lines, announced its Q2 2025 results on August 4, 2025. The most important headline: Palomar delivered better-than-expected non-GAAP earnings per share and raised its outlook for adjusted net income for 2025. Non-GAAP earnings per share came in at $1.76, ahead of the $1.67 non-GAAP analyst estimate, while GAAP revenue was reported as $203.3 million. Net earned premiums, a core insurance metric, climbed 47.2% year-over-year (GAAP). Overall, the period was marked by solid organic growth across key business lines, increases in profitability, and tangible progress on Palomar’s diversification initiatives.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $1.76 | $1.67 | $1.25 | 40.8 % |
| Revenue (GAAP) | $203.3 million | N/A | $131.1 million | 55.1 % |
| Net Earned Premiums | $180.0 million | $122.3 million | 47.2 % | |
| Adjusted Combined Ratio | 73.1 % | 73.1 % | 0.0 % | |
| Annualized Adjusted Return on Equity | 23.7 % | 24.7 % | (1.0) pp |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Palomar's Business and Growth Focus
Palomar’s core business centers on specialty property and casualty insurance for underserved risk categories. It holds a prominent position in earthquake insurance in California, is growing rapidly in casualty, with gross written premium for casualty increasing 113% year-over-year, and also serves markets like inland marine, fronting, and crop insurance. Its competitive edge comes from using advanced technology platforms and proprietary analytics for underwriting and pricing, allowing for speed and flexibility.
In recent years, Palomar has prioritized diversification. It is broadening its insurance offerings outside earthquake coverage, focusing on product expansion, geographic reach, and customer mix. These moves aim to reduce its reliance on any single risk type or region. Key success factors include disciplined risk management, strong reinsurance programs, and investments in operational technology.
Quarter in Detail: Revenue Growth, Segment Trends, and Profitability Drivers
Palomar saw a notable increase in business activity. Net earned premiums (GAAP) increased from $122.3 million in Q2 2024 to $180.0 million, reflecting expansion across product lines. Growth in premiums written was strongest in the casualty segment, which surged 118.8% to $128.2 million and The casualty segment now composes over a quarter of total gross written premium. Inland marine and property lines gross written premiums grew 28.4%. Crop insurance posted impressive gains, with gross written premium rising from $2.2 million to $39.5 million year over year. Conversely, the fronting segment, previously a larger contributor, declined 36.5% as expected due to the wind-down of a major partnership.
The diversification strategy was evident in the quarterly mix: earthquake made up 29.8% of gross written premiums (down from 35.1% in Q2 2024), while no single line exceeded that share. Geographically, California exposure was 33.0% of gross written premium, further highlighting Palomar's broader portfolio. This balance limits concentration risk and reflects a shift toward markets with higher growth potential.
Key profitability metrics also improved. The adjusted combined ratio (non-GAAP), which measures claims and expenses as a percentage of premiums earned, remained stable at 73.1%. The combined ratio excluding catastrophe losses ticked up, and upfront expense recognition related to crop business expansion. Loss ratios, which show claims costs compared to premiums, rose modestly from 24.9% in Q2 2024 to 25.7%, while the catastrophe loss ratio (non-GAAP) dropped to zero, signaling an absence of major insured events this period. The expense ratio (GAAP) improved, falling to 53.1% from 54.2% compared to Q2 2024.
Earthquake insurance, Palomar's original specialty, recorded slower but steady growth, with management expecting mid- to high-teens gross written premium growth for FY2025. Thanks to investments in new talent and acquisitions like Advanced AgProtection. Notably, the fronting business is in runoff and becoming less significant for the company’s outlook. On the finance side, net investment income rose 68.0% year over year, benefiting from higher yields and a bigger asset base, while annualized adjusted return on equity (non-GAAP) was 23.7%.
Strategic Initiatives and Risk Management Execution
During the period, Palomar made progress on several strategic initiatives. Specialty insurance markets like earthquake remain core to its identity, but expansion in casualty, crop, and inland marine has reshaped its revenue balance. The acquisition of Advanced AgProtection expanded the crop business’s geographic reach and distribution footprint. Meanwhile, the planned runoff of the fronting segment, particularly following the termination of larger partnerships, continued as forecast and should have less impact after the next quarter.
The company also executed a successful renewal of its reinsurance program at an adjusted rate decrease of approximately 10% year-over-year. Reinsurance is a form of insurance for insurers, letting Palomar limit its exposure to large, unpredictable events like natural disasters. The structure of its catastrophe bond placements and reinsurance treaties has further reduced volatility, as evidenced by the minimal catastrophe losses this quarter.
Investment in technology and analytics was again highlighted, supporting automation and operational scale. These efforts allow for more targeted underwriting in specialty lines and maintain Palomar’s competitive position, though the company is incurring additional costs as it builds out new lines, especially crop.
The company does not currently pay a dividend.
Looking Ahead: Outlook and Watch Points
Management raised its full-year adjusted net income guidance to a range of $198–208 million (non-GAAP) for 2025, up from the prior estimate of $186–200 million (adjusted net income). This new outlook factors in a likely $8–12 million in catastrophe-related losses for the remainder of the year, as well as the expected seasonal effects from crop insurance operations. Overall, the company expects the combined ratio to be in the mid-to-upper 70% range.
Investors should monitor several evolving trends and risks. These include sustained growth in casualty and crop gross written premiums, ongoing reduction in the fronting segment, expense levels tied to scaling new lines, the attritional loss ratio as business mix changes, and potential shifts in reinsurance market conditions. Analysts will look to see—especially as the company adapts to changing competitive pressures.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
