PLMR 10-K & 10-Q changes, risk factors and insider trading

Claims arising from unpredictable and severe catastrophe events, including those caused by global climate change, could reduce or eliminate our earnings and stockholders’ equityequity, particularly if such events occur with greater frequency or severity than historical experience, and could limit our ability to underwrite new insurance policies.

Our insurance operations expose us to claims arising from unpredictable catastrophe events, such as earthquakes, hurricanes, droughts, 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. While there can be no certainty surrounding the timing and magnitude of earthquakes, some observers believe that significant shifts in the tectonic plates, including the San Andreas Fault, may occur in the future. Over the past several years, changing weather patterns and climatic conditions, such as global warming, have added to the unpredictability and frequency of natural disasters in certain parts of the world, including the markets in which we operate. Climate change may increasecontribute theto frequencyincreased andfrequency, severity or geographic concentration of extreme weather events. This effect has led to conditions in the ocean and atmosphere, including warmer-than-average sea-surface temperatures and low wind shear that increase hurricane activity. Hurricane activity typically increases between June and November of each year, though the actual occurrence and magnitude of such events is uncertain. The occurrence of a natural disaster or other catastrophe loss could materially adversely affect our business, financial condition, and results of operations. These events could impact our business even where we do not have insured exposure, such as the 2025 California wildfires, as homes and businesses lost due to such events may cancel or not renew their policies with us which could adversely affect our business, financial condition, and results of operations.us. Additionally, any increased frequency and severity of such weather events, including hurricanes, could havematerially a material adverse effect onimpair our ability to accurately predict, quantify, reinsure and manage catastrophe risk and may materially increase our losses resulting from such catastrophe events.losses.

The extent of losses from catastrophes is a function of both the frequency and severity of the insured events and the total amount of insured exposure in the areas affected. The frequency and severity of catastrophes are inherently unpredictable and the occurrence of one catastrophe does not make the occurrence of another catastrophe more or less likely. Increases in the replacement cost of insured property due to higher material and labor costs, increases in concentrations of insured property, the effects of inflation, and changes in cyclical weather patterns may increase the severity of claims from catastrophe events in the future. Claims from catastrophe events could reduce our earnings and cause substantial volatility in our results of operations for any fiscal quarter or year, which could materially adversely affect our financial condition, possibly to the extent of eliminating our total stockholders’ equity. Our ability to underwrite new insurance policies could also be materially adversely impacted as a result of corresponding reductions in our capital. In addition, a natural disaster could materially impact the financial condition of our policyholders, resulting in loss of premiums.

Our reinsurance coverage currently exhausts at $3.08$3.1 billion for earthquake events, $735 million for Hawaii hurricane events,events and $117.5$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. Best threshold. Laulima maintains Hawaii hurricane reinsurance coverage through a standalone XOL treaty, which provides per-occurrence coverage up to $735 million with a retention of $1.5 million. Our catastrophe event retention is currently $20 million for earthquake events and $15.5$11 million for hurricane events and all other perils. In addition to our event retention, we may also incur additional reinsurance expenses upon a catastrophe event. While we only select reinsurers whom we believe to have acceptable credit, if our reinsurers are unable to pay the claims for which they are responsible, we retain primary liability. 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 periodsperiods, increase retentions or reduce available limits, or make it more difficult to obtain reinsurance on commercially acceptable terms. While we believe our risk transfer program reduces exposure to catastrophe losses and earnings volatility, one or more severe catastrophe events could result in claims that exceed the limits of our reinsurance coverage.

Our ability to grow our business is dependent in part inon our ability to secure reinsurance for a substantial portion of the risk associated with our policies. Although reinsurance makes the reinsurer liable to us to the extent the risk is transferred or ceded to the reinsurer, it does not relieve us (the ceding insurer) of our primary liability to our policyholders. While our current reinsurance program is designed to limit our risk retention, in the event of a major catastrophe, our reinsurers may not pay claims made by us on a timely basis, or they may not pay some or all thesesuch claims.

In addition, reinsurers may default in their financial obligations to us as the result of insolvency, lack of liquidity, operational failure, fraud, asserted defenses based on agreement wordings or the principle of utmost good faith, asserted deficiencies in the documentation of agreements, or other reasons. Any disputes with reinsurers regarding coverage under reinsurance contracts could be time consuming, costly, and subject to uncertain of success.outcomes. If a catastrophe event were to occur and our reinsurers were unable to satisfy their commitments to us, we may be unable to satisfy our policyholder liabilities which would adversely impact our results of operations and financial condition. 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, 2024,2025, we had $395.2$468.7 million of aggregate reinsurance recoverables.

Our loss reserves are established based on estimates and assumptions, which may be inadequate to cover actual incurred losseslosses, including as a result of changes in claims severity, litigation trends, or other loss development, and could have a material adverse impact on our results of operations and financial condition.

The process of estimating the reserves for losses and loss adjustment expenses requires a high degree of judgment and is subject to several variables. Multiple actuarial methods are used to estimate the reserve for losses and loss adjustment expenses. These methods utilize, to varying degrees, the initial expected loss ratio, detailed statistical analysis of past claims reporting and payment patterns, claims frequency and severity, paid loss experience,and industry loss experience, and changes in market conditions, policy forms, exclusions, and exposures.

We are subject to uncertainties which impact the adequacy of our reserves. For example, when we write “occurrence” policies, we are obligated to pay covered claims, up to the contractually agreed amount, for any covered loss that occurs while the policy is in force. Accordingly, claims may arise in years after a policy has lapsed. In addition, there may be significant reporting lags between the occurrence of an insured event and the time it is actually reported to us and additional lags between the time of reporting and final settlement of any claims. Consequently, estimates of loss associated with specified claims can increase as new information emerges, which could cause the reserves for thesuch claimclaims to become inadequate.

Our reserves are driven by several important factors, including litigation and regulatory trends, legislative activity, climate change, social and economic patterns, and claims inflation assumptions. Our reserve estimates reflect current inflation in legal claims’ settlements and assume we will not be subject to losses from significant new legal liability theories. Our reserve estimates are based on current regulatory and legislative environments and assume that there will not be significant changes in the regulatory and legislative environment. The impact of potential changes in the regulatory or legislative environment is difficult to quantify in the absence of specific, significant new regulation or legislation. 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.

For further information on our loss reserving methodology, see “Management’s Discussion and Analysis-Critical Accounting Policies and Estimates- Reserve for Losses and Loss Adjustment Expenses”. in this Annual Report on Form 10-K.

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 are commercially acceptable and adequately protect us, including due to volatility in reinsurance market conditions, and this inability may materially adversely affect our business, financial condition and results of operations.

We buy multiple types of reinsurance including treaty excess of loss (“XOL”) coverage and program specific reinsurance coverage on a quota share, property per risk or a facultative basis. Treaty coverage refers to a reinsurance contract that is applied to a group or class of business where all the risks written meet the criteria for that class. Facultative coverage refers to a reinsurance contract on individual risks as opposed to a group or class of business. Our catastrophe XOL treaties are divided into multiple layers.

If we are unable to renew our expiring reinsurance contracts on acceptable terms or expand our reinsurance coverage through traditional reinsurers, catastrophe bonds, or otherwise,alternative risk transfer arrangements, our loss exposure may increase, which would increase our potential losses related to catastrophe or non-catastrophe events. If we are unwilling to bear an increase in loss exposure, we may have to reduce our written premiums. These outcomes could adversely affect our business, financial condition, and results of operations.

In addition, as we grow our written premiums and enter new lines of business we will seek new types of reinsurance and will need to purchase reinsurance on commercially acceptable terms in order to reducemanage the riskrisks associated with entering new lines of business. The inability to purchase appropriate reinsurance for new lines of business could negatively impact our ability to grow our written premiums and maintain our desired level of profitability.

Many reinsurance companies have begunincreasingly to excludeexcluded certain coverages from, or alteraltered terms in, our reinsurance contracts with them. As a result, we, like other insurance companies, write insurance policies which to some extent do not have the benefit of reinsurance protection. These gaps in reinsurance protection expose us to greater risk and greater potential losses.

We utilize several risk management and loss limitation methods, including relyingreliance on estimates and models. If these methods fail to adequately manage our exposure to losses from catastrophe events,events and other underwriting risks, our losses could be materially higher than our expectations, and our business, financial condition, and results of operations could be materially adversely affected.

Our approach to risk management relies on subjective variables that entail significant uncertainties. We manage our exposure to catastrophe losses by analyzing the probability of the occurrence of catastrophe events and their severity and impact on our underwriting and investment portfolio. We monitor and mitigate our exposure through a number of methods designed to minimize risk, including underwriting specialization, modeling and data systems, data quality control, strategic use of policy deductibles, regular review of aggregate exposure and probable maximum loss reports, which report the maximum amount of expected losses based on computer or actuarial modeling techniques. These methods rely on estimates, models, data, and scenarios that may not produceaccurately accuratepredict predictions;actual consequently,outcomes. Consequently, we could incur losses both in the risks we underwrite and to the value of our investment portfolio due to the overall impact on financial markets from the occurrence of catastrophe events.

In addition, output from our risk modeling software is based on third-party data that we believe to be accurate and reliable. The estimates and assumptions we use are dependent on many variables, such as loss adjustment expenses, insurance to value, storm or earthquake intensity, building code compliance and demand surge, which is the temporary inflation of costs for building materials such as lumber and labor resulting from increased demand for rebuilding services in the aftermath of a catastrophe. Accordingly, if the estimates and assumptions used in our risk models are incorrect or if our risk models prove to be an inaccurate forecasting tool, the losses we incur from an actual catastrophe could be materially higher than our expectation of losses generated from modeled catastrophe scenarios, and our business, financial condition, and results of operations could be materially adversely affected.scenarios. In addition, our third-party data providers may change the estimates or assumptions that we use in our risk models and/or their data may be inaccurate. Changes in these estimates or assumptions or the use of inaccurate third-party data could cause our actual losses to be materially higher than our current expectation of losses generated by modeled catastrophe scenarios, which in turn could materially adversely affect our business, financial condition, and results of operations.

We run many model simulations to understandevaluate the impact of these assumptions on a catastrophe’s loss potential. Furthermore, there are risks associated with catastrophe events, which are either poorly represented or not represented at all by catastrophe models. Climate change, evolving catastrophe patterns, and the emergence of secondary perils such as severe inland flooding, wildfires, and convective storms may further increase both the frequency and severity of catastrophe events. Limited historical data for certain perils, along with changes in climate and loss patterns, may reduce the reliability of catastrophe models and stress the assumptions on which we rely to price risk, manage exposures, and purchase reinsurance. Each modeling assumption or un-modeled risk introduces uncertainty into probable maximum loss estimates that management must consider. These uncertainties can include, but are not limited to, the following:

As a result of these factors and contingencies,result, our reliance on assumptionsassumptions, data, and data usedmodels to evaluate our entire risk portfolio and specifically to estimate a probable maximum loss is subject to a high degree of uncertainty that could result in actual losses that are materially different from our probable maximum loss estimates and could adversely impact our financial results.

Participants in the insurance industry use ratings from independent ratings agencies, such as A.M. Best, as an important means of assessing the financial strength and qualitycreditworthiness of insurers. In setting its ratings, 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, 2024,2025, 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.and BestFirst assigns ratings that are intended to provide an independent opinionIndemnity of anAmerica insuranceInsurance company’s ability to meet its obligations to policyholders and such ratings are not evaluations directed to investors and are not a recommendation to buy, sell or hold our common stock or any other securities we may issue. A.M. Best’s analysis includes comparisons to peers and industry standards as well as assessments of operating plans, philosophy and management. A.M. Best periodically reviews our financial strength rating and may revise it downward or revoke it at A.M. Best’s discretion based primarily on its analyses of our balance sheet strengthCo. (including“FIA”) capital adequacy and loss adjustment expense reserve adequacy), operating performance and business profile. Factors that could affect such analyses include, but are not limited to:.

Our business is concentrated in California and, as a result,and we are exposed more significantly to California loss activity and regulatory environments.environments, including regulatory constraints on pricing, underwriting actions, and the timing or approval of rate changes.

We are a specialty insurance company that provides property and casualty insurance products to individuals and businesses. 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 ourcoverage customers flexible products with customized and granular pricing forin both the admitted and excess and surplus lines (“E&S”) markets.markets, utilizing proprietary data analytics and a technology-enabled platform to support customized underwriting and pricing. Our insurance company subsidiaries, Palomar Specialty Insurance Company (“PSIC”) and, Palomar Excess and Surplus Insurance Company (“PESIC”), and First Indemnity of America Insurance Co. (“FIA”) carry an “A” financial strength 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 strategic partnerships with other insurance companies. Our business strategy is supported by a comprehensive risk transfer program with reinsurance coverage thatwhich we believe reduces earnings volatility and provides appropriate levels of protection from catastrophic events. Our management team combines decades of insurance industry experience across specialty underwriting, reinsurance, program administration, distribution, claims, and analytics.

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$2.0 billion for the year ended December 31, 2024,2025, which reflects a compound annual growth rate of approximately 57%.55%. We have also been profitable since 20162016, and our net income growthhas sinceincreased 2016over reflectsthat period at a compound annual growth rate of 43%.46%.

We seek to continuously grow our income by developing productsproduct inofferings for lines of business that harness our core competencies and where we believe we can generate attractive risk adjusted returns. In recent years, we have introduced several new products including Crop, Environmental Liability, and E&S Casualty.Casualty, InSurety Januaryand 2025,Environmental we completed the acquisition of First Indemnity of America ("FIA"), a New Jersey domiciled insurance carrier specializing in surety bonds for small to medium sized contractors primarily in the Northeast United States.Liability. 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.

Our gross written premiums are also impacted when we assume unearned in-force premiums due to new partnerships or other business reasons. In periods where we assume a large volume of unearned premiums, our gross written premiums may increase significantly compared to prior periods and the increase may not be indicative of future trends. The majority of our Crop written premiums are recognized in the third quarter, as we receive the requisite reporting from insureds at that time. This pattern reflects the seasonal nature of the Crop business, which typically results in a disproportionate amount of Crop premiums being recognized in the third quarter. As such, our interim results may not be indicative of full-year performance.

Our ceded written premiums can be impacted significantly in certain periods due to changes in quota share agreements. In periods where we modify a quota share agreement, ceded written premiums may increase or decrease significantly compared to prior periods and these fluctuations may not be indicative of future trends. Our XOL costs as a percentage of gross earned premiums also may vary each period due to changes in cost of XOL between contract periods, changes of premium in-force during the XOL contract periodperiod, or due to acceleration of XOL charges or the need to purchase additional XOL reinsurance due to losses. In addition, the volume of premiums ceded in fronting agreements each period may vary due to the timing of entering new fronting partnerships and terminations of fronting partnerships.

Commission and other income consists primarilyconsist of feescommissions earned on policies written on behalf of third-party insurance companies where we have no exposure to the insured risk and commissionscertain fees earned in conjunction with underwriting policies. Commission and other income are earned on the effective date of the underlying policy.

Losses and loss adjustment expenses represent the costs incurred for losses, net of any losses ceded to reinsurers. These expenses are a function of the size and term of the insurance policies we write and the loss experience associated with the underlying coverage. 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, droughts, convective storms, terrorist acts or other aggregating events. Our losses and loss adjustment expenses are generally affected by:

Acquisition expenses are principally comprised of the commissions we pay retail agents, program administrators and wholesale brokers, net of ceding commissions and fronting fees we receive on business ceded under quota share and fronting reinsurance agreements. In addition, acquisition expenses include premium-relatedpremium‑related taxes and other fees. Acquisition expenses related to each policy we write are deferred and expensed pro rata over the term of the policy. We earn fronting fees in a manner consistent with thehow recognitionwe of the earnedearn premiums on the underlying insurance policies, on a pro ratapro-rata basis over the terms of the policies.

We earn investment income on our portfolio of invested assets. 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. The principal factors that influence net investment income are the size of our investment portfolio, the yield on that portfolio, and investment management expenses. As measured by amortized cost, which excludes fair value fluctuations from changes in interest rates or other factors, the size of our investment portfolio is mainly a function of our invested capital along with premiumspremium we receive from our insureds, less payments on policyholder claims and other operating expenses. Our balance of invested capital may be impacted in the future by repurchases of shares of our common stock or borrowings under our credit agreements.

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 unrealizedother gainschanges andin lossesthe onfair equityvalue method and otherof investments. Unrealized gains and losses on fixed maturity securities are recognized as a component of other comprehensive income and do not impact our net income.

Underwriting revenue is a non-GAAPnon‑GAAP financial measure defined as total revenue, excluding net investment income and net realized and unrealized gains and losses on investments. See “Reconciliation of Non-GAAPNon‑GAAP Financial Measures” for a reconciliation of total revenue calculated in accordance with GAAP to underwriting revenue.

Underwriting income is a non-GAAPnon‑GAAP financial measure defined as income before income taxes excluding net investment income, net realized and unrealized gains and losses on investmentsinvestments, and interest expense. See “Reconciliation of Non-GAAPNon‑GAAP Financial Measures” for a reconciliation of income before income taxes calculated in accordance with GAAP to underwriting income.

Adjusted net income is a non-GAAPnon‑GAAP financial measure defined 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. We calculate the tax impact only on adjustments which would be included in calculating our income tax expense using the estimated tax rate at which the company received a deduction for these adjustments. See “Reconciliation of Non-GAAPNon‑GAAP Financial Measures” for a reconciliation of net income calculated in accordance with GAAP to adjusted net income.

Annualized adjusted return on equity is a non-GAAPnon‑GAAP financial measure defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. See “Reconciliation of Non-GAAPNon‑GAAP Financial Measures” for a reconciliation of return on equity calculated using unadjusted GAAP numbers to adjusted return on equity.

Adjusted combined ratio is a non-GAAPnon‑GAAP financial measure defined 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. See “Reconciliation of Non-GAAPNon‑GAAP Financial Measures” for a reconciliation of combined ratio calculated using unadjusted GAAP numbers to adjusted combined ratio.

Diluted adjusted earnings per share is a non-GAAPnon‑GAAP financial measure defined 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. See “Reconciliation of Non-GAAPNon‑GAAP Financial Measures” for a reconciliation of diluted earnings per share calculated in accordance with GAAP to diluted adjusted earnings per share.

Catastrophe loss ratio is a non-GAAPnon‑GAAP financial measure defined as the ratio of catastrophe losses to net earned premiums. See “Reconciliation of Non-GAAPNon‑GAAP Financial Measures” for a reconciliation of loss ratio calculated using unadjusted GAAP numbers to catastrophe loss ratio.

Adjusted combined ratio excluding catastrophe losses is a non-GAAPnon‑GAAP financial measure defined as adjusted combined ratio excluding the impact of catastrophe losses. See “Reconciliation of Non-GAAPNon‑GAAP Financial Measures” for a reconciliation of combined ratio calculated using unadjusted GAAP numbers to adjusted combined ratio excluding catastrophe losses.

Tangible stockholders’ equity is a non-GAAPnon‑GAAP financial measure defined as stockholders’ equity less intangible assets. See “Reconciliation of Non-GAAPNon‑GAAP Financial Measures” for a reconciliation of stockholders’ equity calculated in accordance with GAAP to tangible stockholders’ equity.

Gross written premiums wereincreased $486.3 million, or 31.5%, to $2.0 billion for the year ended December 31, 2025 compared to $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%.2024. Premium growth was primarily due to an increased volume of policies writtenin acrossthe majority of our lines of businessbusiness, particularly in our Casualty and Crop lines, which was driven by new business generated with existing partners, strong premium retention rates for existing business, expansion of our distribution footprint, and new partnerships.partnerships, partially offset by a decrease in our Fronting line. The following table summarizes our gross written premiums by line of business and shows each line’s percentage of total gross written premiums for each period:

Although our volume of ceded written premiums increased, ceded written premiums as a percentage of gross written premiums decreased to 52.5% for the year ended December 31, 2025 from 58.2% for the year ended December 31, 2024 from 64.1% for the year ended December 31, 2023.2024. This percentage decrease was driven by changes in our composition of business whereby premiums written in the current yearperiod were subject to lower quota share or XOL cession percentages compared to premiums written in the prior year.period.

Net written premiums increased $234.8$319.2 million, or 57.3%,49.5%, to $964.0 million for the year ended December 31, 2025 from $644.9 million for the year ended December 31, 2024 from $410.0 million for the year ended December 31, 2023.2024. The increase was primarily due to an increase in gross written premiums, primarily in our Casualty and EarthquakeCrop products,lines, partially offset by increased ceded written premiums.

Net earned premiums increased $164.8$291.9 million, or 47.6%,57.2%, to $802.6 million for the year ended December 31, 2025 from $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. The table below shows the amount of premiums we earned on a gross and net basis forand net earned premiums as a percentage of gross earned premiums in each period presented:

Our net earned premium ratio increased due to changes in our composition of business whereby premiums earned in the current period were subject to lower quota share or XOL cession percentages compared to premiums earned in the prior period.period, which was partially driven by the aforementioned decrease in fronting premiums.

Commission and other income decreasedincreased $0.6$2.7 million, or 17.3%,million to $5.5 million for the year ended December 31, 2025 from $2.8 million for the year ended December 31, 2024 from $3.4 million for the year ended December 31, 2023.2024. The decreasebalance wasincreased drivendue byto aan decreaseincrease in commissions and policy related fees driven by changesincreased inpremiums the mix of business produced.written.

Losses and loss adjustment expenses increased $62.2$93.8 million, or 85.6%,69.6%, to $228.6 million for the year ended December 31, 2025 from $134.8 million for the year ended December 31, 20242024. fromLosses $72.6and millionloss foradjustment expenses consisted of the yearfollowing endedelements Decemberduring 31,the 2023.respective periods:

Catastrophe lossesloss increasedactivity duringfor the year ended December 31, 2024 duewas to higher frequency and severity of catastrophe events compared to the prior year. Catastrophe losses during the year ended December 31, 2024 wereprimarily related to floodsflood occurringlosses duringin the first quarter, severe convective storms occurring duringin the second quarter, and Hurricanes Beryl, Debby, Helene and Milton which occurredHelene during the third and fourth quarters. 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 losses increased for the year ended December 31, 2025 compared to the year ended December 31, 2024 due mainly to higher attritional losses increaseddriven dueby topremium agrowth higheron volumelines of premiums beingbusiness subject to attritional losses,losses primarilysuch drivenas byCasualty, the growth in CasualtyCrop, and Inland Marine and otherOther Property premiums.Property.

OurA significant portion of our business is concentratedgenerated in CaliforniaCalifornia, and as a result, we are exposed more significantly exposed to California loss activity and regulatory environments, including regulatory constraints on pricing, underwriting actions, and the timing or approval of rate changes;

Litigation, judicial and regulatory trends, such as increased litigation andlitigation, higher jury awardsawards, class action lawsuits, multi-district litigation, and evolving legal theories that may increase claim duration, defense costs and settlement values;

In addition to reinsurance purchased from traditional reinsurers, we utilize collateralized protection from the insurance-linked securities market through catastrophe bonds issued via Torrey Pines Re Ltd., a Bermuda-domiciled special purpose insurer. We closed a $360 million catastrophe bond in the second quarter of 2026, effective June 1, 2026 through June 1, 2029; a $525 million catastrophe bond in the second quarter of 2025, effective June 1, 2025 through June 1, 2028; a $420 million catastrophe bond in the second quarter of 2024, effective June 1, 2024 through June 1, 2027; and a $200 million catastrophe bond in the second quarter of 2023, effective June 1, 2023 through June 1, 2026; and a $275 million 144A catastrophe bond in the second quarter of 2022, effective June 1, 2022 through June 1, 2025.2026. These catastrophe bonds provide indemnity-based reinsurance coverage for earthquakecatastrophe events.

Our approach to risk management relies on subjective variables that entail significant uncertainties. We manage our exposure to catastrophe losses by analyzing the probability of the occurrence of catastrophe events and their severity and impact on our underwriting and investment portfolio. We monitor and mitigate our exposure through several of methods designed to minimize risk, including underwriting specialization, modeling and data systems, data quality control, strategic use of policy deductibles, regular review of aggregate exposure and probable maximum loss reports, which report the maximum amount of expected losses based on computer or actuarial modeling techniques. These methods rely on estimates, models, data, and scenarios that may not accurately predict actual outcomes. Consequently, we could incur losses both in the risks we underwrite and to the value of our investment portfolio due to the overall impact on financial markets from the occurrence of catastrophe events.

We run many model simulations to evaluate the impact of these assumptions on a catastrophe’s loss potential. Furthermore, there are risks associated with catastrophe events, which are either poorly represented or not represented at all by catastrophe models. Climate change, evolving catastrophe patterns, and the emergence of secondary perils such as severe inland flooding, wildfires, and convective storms may further increase both the frequency and severity of catastrophe events. Limited historical data for certain perils, along with changes in climate and loss patterns, may reduce the reliability of catastrophe models and stress the assumptions on which we rely to price risk, manage exposures, and purchase reinsurance. Changing catastrophe patterns may also reduce the predictive value of historical loss experience used to develop catastrophe models, which could impair our ability to price business, estimate probable maximum losses, and structure our reinsurance program. Each modeling assumption or un-modeled risk introduces uncertainty into probable maximum loss estimates that management must consider. These uncertainties can include, but are not limited to, the following:

Participants in the insurance industry use ratings from independent ratings agencies, such as A.M. Best, as an important means of assessing the financial strength and creditworthiness of insurers. In setting its ratings, 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 MarchJune 31,30, 2026, A.M. Best has assigned a financial strength rating of “A” (Excellent) (Outlook Stable) to our insurance company subsidiaries, Palomar Specialty Insurance Company (“PSIC”), Palomar Excess and Surplus Insurance Company (“PESIC”) and First Indemnity of America Insurance Co. (“FIA”), and “A-” (Excellent) (Outlook Positive) to Palomar Casualty and Surety Company (“PCSC”).

OurA significant portion of our business is concentratedgenerated in CaliforniaCalifornia, and as a result, we are exposed more significantly exposed to California loss activity and regulatory environments, including regulatory constraints on pricing, underwriting actions, and the timing or approval of rate changes.

Our policyholders and insurance risks are currently concentrated in California, which generated 30.9% of our gross written premiums for the year ended December 31, 2025 and 25.0%25.6% for the threesix months ended MarchJune 31,30, 2026. We are exposed to business, economic, political, judicial and regulatory risks due to this concentration that are greater than the risks faced by insurance companies with a lower concentration of their premiums in California. Any single, major catastrophe event, series of events or other condition causing significant losses in California could materially adversely affect our business, financial condition and results of operations. This may include catastrophes even where we do not insure against the loss, such as the 2025 California wildfires, as homes and businesses lost or damaged due to catastrophe events may cancel or not renew their policies with us following such events. Additionally, unfavorable business, economic or regulatory conditions in California may result in a significant reduction of our premiums or increase our loss exposure. Changes to insurance-related laws or regulations in California could also adversely affect our business. In addition, the California Department of Insurance has continued to implement regulatory reforms, including changes to catastrophe modeling and rate regulation. We cannot predict how these or other regulatory changes may affect our California business. Delays in obtaining adequate rate approvals or restrictions on underwriting actions could reduce our ability to respond to changing loss trends and effectively manage catastrophe exposure.

For the threesix months ended MarchJune 31,30, 2026, our largest program administrator distributed $101.4$207.6 million, or 16.1%16.5% of our gross written premiums and our second largest program administrator distributed $87.8$164.5 million, or 13.9%13.0% of our gross written premiums. There were no other program administrators that distributed greater than 10% of our gross written premiums for the threesix months ended MarchJune 31,30, 2026.

We face competition from other specialty insurance companies, standard insurance companies and underwriting agencies that are larger than we are and that have greater financial, marketing, technological, and other resources than we do. Some of these competitors also have longer operating histories and more market recognition than we do in certain lines of business. In addition, we compete against state or other publicly managed enterprises including the California Earthquake Authority (“CEA”), the National Flood Insurance Program, and the Texas Wind Insurance Association. If the CEA were to provide coverage to non-CEA member carriers or lessenedlessen the capital requirements for membership, we would face additional competition in our markets, and our operating results could be adversely affected. Furthermore, it may be difficult or prohibitively expensive for us to implement or maintain technology systems and processes that are competitive with those of larger insurers.

In addition, the insurance and reinsurance industries have historically been cyclical, characterized by periods of intense price competition due to excess underwriting capacity (soft market cycle) which decrease premium levels as well as periods when shortages of capacity increase premium levels (hard market cycle). We expect our business and results of operations to continue to be impacted by these market cycles.

Requiring the dedication of a portion of our expected cash flows from operations to service our debt, thereby reducing the amount of expected cash flows available for other purposes, including investing, and paying claims and operating expenses; and Exposing us to interest rate risk since the interest rate in the Credit Agreement is a variable rate In addition, the Credit Agreement contains financial covenants, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. The financial covenants in the Credit Agreement require that we do not exceed a maximum leverage ratio and maintain a minimum net worth at the end of each quarter. Our insurance subsidiaries are also required to maintain a minimum risk-based capital ratio at the end of each year and must always maintain a minimum AMA.M. Best Financial Strength rating. All of these covenants and restrictions impact how we operate our business and may limit our flexibility in planning for, or reacting to, changes in our business and industry. Our ability to comply with these covenants may be affected by events beyond our control. If we breach any of the covenants and do not obtain a waiver from the noteholders or lenders, then, subject to applicable cure periods, any outstanding debt may be declared immediately due and payable.

Instability in the surety market, resulting from construction defaults, contractual disputes, or evolving regulatory requirements, could negatively impact the performance of our surety products;products.

Ongoing global economic uncertainty, including the effects of inflation, interest rate volatility, and changes in international trade policies such as the imposition of tariffs, could have wide-ranging impacts on the markets in which we operate. These conditions may lead to shifts in consumer behavior, changes in exposure levels across personal and commercial lines, and increased costs associated with claims, operations, and policy administration. In addition, market volatility may negatively impact the performance of our investment portfolio and influence policyholder behavior. Together,These thesedevelopments, developmentsincluding inflation, tariffs and supply-chain disruptions, may increase the cost of construction materials, auto parts, labor and other inputs used to settle claims, increasing claim severity, reserve requirements and pressure on underwriting margins, which could adversely affect our financial results, capital position,position and ability to execute our long-term business strategy.

We are incorporating AI and AI adjacentAI-adjacent technology and tools in certain business processes and workflows and expect AI to have a more meaningful impact on our Company in the future. While we are attempting to implement AI deliberately to enhance automation, efficiency, and risk management, we believe it introduces several additional risks. The increased investment in and reliance on AI for business processes creates risks should AI not provide the anticipated benefits or operate as anticipated. There are numerous AI adjacentAI-adjacent tools which may improve the efficiency or effectiveness of our processes, and there is a risk that we do not implement the correct tools or do not implement the tools effectively. While we issue guidelines to employees on the use of AI, employees may use it in unanticipated ways that introduce additional risk to us. Generative AI tools may provide inaccurate, incomplete or false informationinformation, introduce biases or introduceotherwise biases.adversely affect our operations, financial results or regulatory compliance. We also use AI to support risk selection, underwriting, pricing, and claims handling; if the analyses or recommendations these tools produce are, or are alleged to be, inaccurate, biased, or unfairly discriminatory, whether due to flawed algorithms, insufficient or biased data, or deficient training methodologies, our business, results of operations, reputation, and regulatory standing could be adversely affected.

There is also risk around third-party use of AI as our customers, software vendors and other service providers are increasingly incorporating AI into their processes, which may expose us to additional risks should they not be able to incorporate the technology effectively. Our competitors may incorporate AI more effectively than uswe do, causing us to lose market share. We also believe AI increases the information technology and cybersecurity risks described above and could enhance cyberattack capabilities. AI-related issues, deficiencies and/or failures could adversely impact our operations, damage our reputation, and give rise to legal or regulatory action.

In addition, regulatory standards relating to the use of artificial intelligence are evolving in the states where certain states have issued regulatory guidance to insurance companies on the use of AI. Certain states have adopted the NAIC Model Bulletin on the Use of Artificial Intelligence, while the New York Department of Financial Services issued its circular letter. Such state guidance on the use of AI sets forth expectations that companies have governance and risk management practices in place to ensure the use of AI complies with various state laws governing the business of insurance

Future tax legislation or changes to tax laws such as changing the corporate or personal tax rate or changes to allowed tax deductions could have a negative impact on our results of operations and profitability by causing us to incur additional tax expense or by having a financial impact on our policyholders. In particular, because PSRE is domiciled in Bermuda, changes in U.S. tax laws affecting reinsurance arrangements between U.S. insurers and their non-U.S. affiliates - including legislative proposals to limit or eliminate the deductibility of premiums ceded to affiliated offshore reinsurers - could increase our effective tax rate or otherwise adversely affect our results of operations, and any such changes could apply retroactively.

The continued operation and growth of our business will require substantial capital. WeAlthough dowe did not intend to declare and pay cash dividends on sharesour common stock prior to 2026, our Board of Directors has declared a cash dividend of $0.45 per share of our common stockstock, payable on September 2, 2026 to stockholders of record as of August 19, 2026, representing the first cash dividend declared on our common stock. Any future declaration and payment of dividends, including whether we continue to pay dividends at all, in the foreseeablecurrent future.amount, or on a quarterly schedule, will be at the discretion of our Board of Directors and will depend on, among other things, our results of operations, financial condition, capital requirements, regulatory restrictions, and other factors. Because we are a holding company with no business operations of our own, our ability to payreturn capital to stockholders, including through dividends toand stockholdersother distributions from our insurance subsidiaries largely depends on dividends and other distributions from our insurance subsidiaries, PSIC, PESIC, PSRE, FIA, and PCSC.

The Sarbanes‑Oxley Act and the Dodd‑Frank Act, as well as new rules subsequently implemented by the SEC and Nasdaq, have increased regulation of, and imposed enhanced disclosure and corporate governance requirements on, public companies. We expect disclosure requirements to increase in the future and expand to areas such as climate change and greenhouse gas emissions. Our efforts to comply with these evolving laws, regulations and standards increasesincrease our operating costs and divert management’s time and attention from revenue‑generating activities.

provide, through 2027, that our Board of Directors areis classified into three classes with staggered, three year terms and that directors may only be removed for cause;

The results of operations for the threesix months ended MarchJune 31,30, 2026 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2026, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report, and in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K as filed with the SEC on February 24, 2026.

Three months ended MarchJune 31,30, 2026 compared to three months ended MarchJune 31,30, 2025

The following table summarizes our results for the three months ended MarchJune 31,30, 2026 and 2025:

Indicates non-GAAP financial measure; see “Reconciliation of Non‑GAAPNon-GAAP Financial Measures” for a reconciliation of the non‑GAAPnon-GAAP financial measures to their most directly comparable financial measures prepared in accordance with GAAP.

Gross written premiums increased $187.7$134.2 million, or 42.4%,27.0%, to $629.8$630.5 million for the three months ended MarchJune 31,30, 2026 compared to $442.2$496.3 million for the three months ended MarchJune 31,30, 2025. Premium growth was primarily due to an increased volume of policies in the majority of our lines of business, particularly in our Casualty and Inland Marine and PropertyCrop lines, which was driven by new business generated with existing partners, strong premium retention rates for existing business, expansion of our distribution footprint, and new partnerships. The following table summarizes our gross written premiums by line of business and shows each line’s percentage of total gross written premiums for each period:

Ceded written premiums increased $61.2$38.8 million, or 26.5%,14.5%, to $291.9$305.3 million for the three months ended MarchJune 31,30, 2026 from $230.7$266.5 million for the three months ended MarchJune 31,30, 2025. The increase in ceded written premium was primarily driven by growth in written premiums subject to quota share arrangements, such as those in Casualty and Inland Marine and PropertyCrop lines.

Although our volume of ceded written premiums increased, ceded written premiums as a percentage of gross written premiums decreased to 46.3%48.4% for the three months ended MarchJune 31,30, 2026 from 52.2%53.7% for the three months ended MarchJune 31,30, 2025. This percentage decrease was driven by changes in our composition of business whereby premiums written in the current period were subject to lower quota share or XOL cession percentages compared to premiums written in the prior period.

Net written premiums increased $126.5$95.4 million, or 59.8%,41.5%, to $337.9$325.2 million for the three months ended MarchJune 31,30, 2026 from $211.4$229.8 million for the three months ended MarchJune 31,30, 2025. The increase was primarily due to an increase in gross written premiums, primarily in our Casualty and Inland Marine and PropertyCrop lines, partially offset by increased ceded written premiums.

Net earned premiums increased $97.4$107.0 million, or 59.3%,59.5%, to $261.4$287.0 million for the three months ended MarchJune 31,30, 2026 from $164.1$180.0 million for the three months ended MarchJune 31,30, 2025 due primarily to the earning of increased gross written premiums partially offset by the earning of ceded written premiums under reinsurance agreements. The following table shows the amount of premiums we earned on a gross and net basis and net earned premiums as a percentage of gross earned premiums in each period presented:

Our net earned premium ratio increased due to changes in our composition of business wherebyas premiums earned in the current period were subject to lower quota share or XOL cession percentages compared to premiums earned in the prior period. This was primarily driven by our decision to retain a higher percentage of premiums on our Crop business in 2026 and lower XOL pricing.

Commission and other income increaseddecreased $0.6$0.9 million to $1.4 million for the three months ended March 31, 2026 from $0.8 million for the three months ended MarchJune 31,30, 2026 from $1.7 million for the three months ended June 30, 2025. The balance increaseddecreased due to anthe increasenon-recurrence of a reimbursement arrangement that benefited us in commissionsthe andprior policy related fees driven by increased premiums written.quarter.

Losses and loss adjustment expenses increased $48.4$52.8 million, or 124.8%,114.3%, to $87.1$99.0 million for the three months ended MarchJune 31,30, 2026 from $38.7$46.2 million for the three months ended MarchJune 31,30, 2025. Losses and loss adjustment expenses consisted of the following elements during the respective periods:

Catastrophe loss activity for the quarter ended MarchJune 31,30, 20252026 was primarily related to favorable development on prior period catastrophe events.

Non-catastrophe losses increased for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 due mainly to higher attritional losses driven by premium growth on lines of business subject to attritional losses such as Casualty, Crop, and Inland Marine and Property and due to our decision to retain a higher percentage of premiums and losses on our Crop business in 2026.

Acquisition expenses increased $24.0$19.6 million, or 51.7%,38.0%, to $70.3$71.3 million for the three months ended MarchJune 31,30, 2026 from $46.4$51.6 million for the three months ended MarchJune 31,30, 2025. The increase was primarily due to higher commissions and premium-related taxes resulting from higher gross earned premiums. Acquisition expenses as a percentage of gross earned premiums were 14.0%12.9% for the three months ended MarchJune 31,30, 2026 compared to 12.3%12.6% for the three months ended MarchJune 31,30, 2025. Acquisition expenses as a percentage of gross earned premiums increased due to higher commissions as a percentage of gross earned premiums due to changes in the composition of our business.

Other underwriting expenses increased $29.2$23.9 million, or 81.6%,52.5%, to $64.9$69.4 million for the three months ended MarchJune 31,30, 2026 from $35.7$45.5 million for the three months ended MarchJune 31,30, 2025. The increase was primarily due to us incurring higher payroll, technology, and stock-based compensation expenses associated with general growth.

Other underwriting expenses as a percentage of gross earned premiums were 12.9%12.6% for the three months ended MarchJune 31,30, 2026 compared to 9.5%11.1% for the three months ended MarchJune 31,30, 2025. Excluding the impact of expenses relating to transactions, stock-based compensation, and amortization of intangibles, other underwriting expenses as a percentage of gross earned premiums were 8.5%9.1% for the three months ended MarchJune 31,30, 2026 compared to 7.5%8.7% for the three months ended MarchJune 31,30, 2025. Other underwriting expenses as a percentage of gross earned premiums fluctuates period over period based on timing of certain expenses relative to premium growth.

Net investment income increased $5.9$6.6 million, or 49.0%,49.2%, to $18.0$20.0 million for the three months ended MarchJune 31,30, 2026 from $12.1$13.4 million for the three months ended MarchJune 31,30, 2025. The increase was primarily due to a higher average balance of investments during the three months ended MarchJune 31,30, 2026 due to the investing of cash generated from operations and higher yields on invested assets versus the prior year.

We incurred $1.9$6.8 million of net realized and unrealized losses on investments for the three months ended MarchJune 31,30, 2026 compared to $2.3$8.3 million of net realized and unrealized losses for the three months ended MarchJune 31,30, 2025. In both periods, the balance was primarily driven by unrealized losses on our equity securities. 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:

Income tax expense decreasedincreased $0.3$3.9 million to $10.5$17.2 million for the three months ended MarchJune 31,30, 2026 from $10.8$13.4 million for the three months ended MarchJune 31,30, 2025 due to lowerhigher pre-tax income for the period ended MarchJune 31,30, 2026. For the three months ended MarchJune 31,30, 2026 and 2025 our income tax rates of 19.7%24.7% and 20.1%,22.3%, respectively, were lowerhigher than the statutory rate of 21% due primarily to the tax impact of the permanent component of employee stock option exercises, offset by non-deductible executive compensation expense.

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. We calculate the tax impact only on adjustments which would be included in calculating our income tax expense using the estimated tax rate at which we received a deduction for these adjustments. We use adjusted net income as an internal performance measure in the management of our operations because we believe it gives our management and financial statement users useful insight into our results of operations and our underlying business performance. Adjusted net income does not reflect the overall profitablyprofitability of our business and should not be viewed as a substitute for net income calculated in accordance with GAAP. Other companies may define adjusted net income differently.

Under Louisiana law which governs PCSC, the maximum amount of stockholder dividends that the Company may pay without prior approval of the Louisiana Insurance Commissioner is limited to the lessorlesser of (i) statutory net income for the preceding three calendar years excluding realized capital gains and dividend paid during the preceding two calendar years, or (II) 10% of statutory surplus. Based on the above restrictions, PCSC may pay a dividend or distribution of no greater than $13.2 million in 2026 without approval of the Louisiana Insurance Commissioner.