Palomar's Strategic Growth: A 2025 Performance Review
Palomar registered record-breaking performance in 2025, demonstrating significant growth in both premiums and net income. This notable achievement came through the strategic acquisition of Gray Surety, which expanded its product offerings and enhanced its surety market position. With a new premium category set for 2026, Palomar refocuses its business strategy towards increased crop retention and less dependency on stand-alone fronting arrangements. This strategic realignment aims to bolster loss ratios through enhanced efficiency, while reinsurance renewals led to significant reductions in risk-adjusted rates, with further price improvements anticipated midyear.
At the heart of Palomar's strategy is their ongoing technological investment in artificial intelligence, designed to optimize operational efficiency across the organization. This positions the company to achieve its ambitious Palomar 2x initiative, targeting the doubling of adjusted net income.
Reflecting on its 2025 performance, Palomar reported a 32% increase in gross written premiums alongside a 62% rise in adjusted net income, achieving a 26% adjusted return on equity. Management credits these outcomes to strategic imperatives focused on integration, market leadership, and sustainable earnings. Throughout the year, the company expanded its casualty and crop sectors, maintaining a disciplined underwriting approach. Additionally, Palomar's workforce grew to over 500 professionals, following acquisitions like First Indemnity of America and Advanced Ag Protection, and the closure of Gray Casualty and Surety.
Palomar's Q4 2025 results reflect its robust portfolio, with a 32% uptick in gross written premiums and a 48% increase in adjusted net income, achieving an adjusted combined ratio of 73% and a 27% return on equity. This showcases Palomar's strength and diversification, capable of yielding consistent returns despite market volatility.
Sector-specific Performance and Strategic Focus
The earthquake segment experienced a slight year-over-year decline due to a prior period’s unearned premium. However, Palomar's disciplined reinsurance and retention strategy is expected to support modest segment growth and margin expansion. The inland marine and property sector demonstrated impressive growth driven by robust performance in builders risk, Hawaiian hurricane, and flood insurance products.
Palomar's casualty segment achieved substantial growth, fueled by favorable market conditions and strategic recruitment. The crop insurance sector also exceeded expectations with a $248 million written premium, enhanced by increased retention rates. While winding down fronting operations, the company remains committed to nurturing existing relationships within this framework.
In reinsurance, Palomar successfully renewed multiple treaties with improved terms, spotlighting favorable market conditions for buyers. The company is hopeful for further pricing enhancements for its property catastrophe program by mid-year.
Overall, Palomar is optimistic about continued growth in 2026, with projected adjusted net income between $260 million and $275 million. The company's strategic focus is on enhancing growth, expanding market presence, and leveraging technological advancements, such as AI, to accomplish its ongoing objectives.