What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-25 compared with 2024-02-23 · 195 added, 138 removed, 1309 unchanged (20% of the section changed)

103 unchanged sentences

Equity method investment

Other investments

Total investments

17 unchanged sentences

Deferred tax assets, net

10,119 10,622

Property and equipment, net

1 unchanged sentence

13,242 12,315

$ 2,262,220 $ 1,708,022

Liabilities and stockholders' equity

11 unchanged sentences

Borrowings from credit agreements

52,600 36,400

Total liabilities

49 unchanged sentences

Stockholders'

Balance at January 1, 2021

Balance at December 31, 2021

Other comprehensive loss, net of tax

4 unchanged sentences

Balance at December 31, 2022

Other comprehensive loss, net of tax

Other comprehensive income, net of tax

Stock-based compensation

1 unchanged sentence

Issuance of common stock via equity incentive plan

Policy holder contribution to surplus

Repurchases of common stock

Balance at December 31, 2023

Other comprehensive income, net of tax

Other comprehensive loss, net of tax

Stock-based compensation

Issuance of common stock in stock offering, net of offering costs

Issuance of common stock via employee stock purchase plan

Issuance of common stock via equity incentive plan

Policyholder contribution to surplus

Repurchases of common stock

Policy holder contribution to surplus

Balance at December 31, 2024

36 unchanged sentences

Change in securities receivable or payable, net

Investments in limited partnerships

Acquisitions, net of cash acquired

Purchase of policy renewal rights

Net cash used in investing activities

Financing activities

Proceeds from line of credit, net of repayments

Net (payments on) proceeds from line of credit

Proceeds from common stock issued via employee stock purchase plan

2 unchanged sentences

Repurchase of common stock

Net cash (used in) provided by financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash

Proceeds from stock offering, net of offering costs

Net cash provided by (used in) financing activities

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

20 unchanged sentences

PSIC is a property and casualty insurance company domiciled in the state of Oregon.

The Company’s core focus is on the residential and commercial earthquake markets in earthquake-exposed states such as California, Oregon, Washington, and states with exposure to the New Madrid Seismic Zone.

The Company also offers products tailored to broader geographic regions and perils, including Fronting, Inland Marine, Hawaii Hurricane, Casualty, and Flood products.

PSIC is licensed to underwrite insurance on an admitted basis in 44 states in the United States, as of December 31, 2024 , mainly through managing general insurance agencies, wholesale brokers, and independent agents.

11 unchanged sentences

These statutes require that each insurance company in the system register with the insurance department of its state of domicile and furnish information concerning the operations of companies within the holding company system that may materially affect the operations, management or financial condition of the insurers within the system and domiciled in that state.

Segment Reporting

The Company has a single operating segment, the property and casualty insurance business.

The Company's chief operating decision maker ("CODM") is the Chief Executive Officer.

While the Company’s CODM reviews the revenue streams attributable to individual products, operations are managed, resources are allocated, and financial performance is evaluated on a consolidated basis.

The significant segment expenses provided to the CODM are consistent with the categories shown in the Company's Consolidated Statements of Income and Comprehensive Income and there are no other segment items used by the CODM.

The CODM reviews the Company's revenue, expenses and net income as reported under GAAP, which is the primary measure of segment profit or loss.

The CODM reviews these measures, comparing them to prior periods and expectations, and makes resource allocation decisions based on the analysis.

While the Company’s CODM also reviews the revenue streams attributable to individual products, operations are managed, resources are allocated, and financial performance is evaluated on a consolidated basis.

Basis of Presentation

27 unchanged sentences

Gains or losses from this equity method investment are recognized as a component of realized and unrealized gains or losses on investments in the Company's Statement of Income and Comprehensive Income.

The Company also invests a small portion of its portfolio in limited partnerships, which are classified as other investments on the consolidated balance sheet.

These investments are measured at estimated fair value utilizing a net asset value per share (or its equivalent) as a practical expedient.

Gains or losses from other investments are recognized as a component of realized and unrealized gains or losses on investments in the Company's Statement of Income and Comprehensive Income.

The Company reviews all securities with unrealized losses on a quarterly basis to assess whether the decline in the securities fair value necessitates the recognition of an allowance for credit losses.

9 unchanged sentences

The Company does not measure an allowance for credit losses on accrued interest receivable and instead would write off accrued interest receivable at the time an issuer defaults or is expected to default on payments.

The Company’s allowance for credit losses related to its available-for-sale securities was immaterial as of December 31, 2023 and December 31, 2022 .

Fair value is defined as the price that the Company would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment.

31 unchanged sentences

The company considers the current economic environment, specific regulatory developments, and historic payment and cancelation trends by line of business and location when determining whether to record an allowance for uncollectible premiums.

The Company recorded an immaterial allowance for uncollectible premiums as of December 31, 2023 and $ 0.1 million as of December 31, 2022 , respectively, and believes that all other amounts are collectable.

The Company recorded an immaterial allowance for uncollectible premiums as of December 31, 2024 and December 31, 2023 , and believes that all other amounts are collectable.

Earned Premiums

10 unchanged sentences

Commission and Other Income

Commission and other income is comprised of commissions earned on policies where the Company has no exposure to underlying risk and fees earned in conjunction with underwriting policies.

Commission and other income is comprised of commissions and fees earned in conjunction with underwriting policies.

Commission and fee income is earned at the time the policy is written.

12 unchanged sentences

Intangible assets consist of both finite and indefinite lived assets.

Finite lived intangible assets consist of customer relationships acquired from another insurer during 2020 which the Company is amortizing over a period of 8 years.

Finite lived intangible assets consist of customer relationships which are amortized over a period of 8 years.

Indefinite lived intangible assets consist primarily of state licenses acquired upon formation of the Company.

37 unchanged sentences

Best, or whose surplus drops by more than 20%.

Historically, the Company has not experienced any credit losses from reinsurance recoverables and did not have an allowance for uncollectible reinsurance recoverables as of December 31, 2023 or December 31, 2022 .

Historically, the Company has experienced minimal credit losses from reinsurance recoverables and did not have an allowance for uncollectible reinsurance recoverables as of December 31, 2024 or December 31, 2023 .

Stock Based Compensation Expense

19 unchanged sentences

Recently adopted accounting pronouncements

The Company has not adopted any new accounting guidance during the year ended December 31, 2023 .

Recently issued accounting pronouncements not yet adopted

Segment Reporting

In November 2023, the FASB issued ASU No.

3 unchanged sentences

ASU 2023 - 07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company adopted this guidance beginning with this Annual Report on Form 10 -K and the adoption did not have a significant impact to the Company's required disclosures.

Recently issued accounting pronouncements not yet adopted

Income Statement Expenses

In November 2024, the FASB issued ASU 2024 - 03, Disaggregation of Income Statement Expenses , which will require disclosure of additional information about specific expense categories in the notes to financial statements for all public business entities.

ASU 2024 - 03 is effective for annual reporting beginning with the fiscal year ending December 31, 2027, and for interim periods thereafter.

Early adoption is permitted.

113 unchanged sentences

Dividend income

1,075 871 739

Investment expense

19 unchanged sentences

Change in allowance for credit losses

659 ( 667 ) —

Net unrealized gains (losses) on equity securities

1 unchanged sentence

Net unrealized losses on equity method investment

( 340 ) ( 382 ) —

Net unrealized gains on other investments

Net realized and unrealized gains (losses) on investments

4 unchanged sentences

At December 31, 2024 and 2023 , the carrying value of securities on deposit with state regulatory authorities was $ 9.9 million and $ 8.6 million, respectively.

The Company has investments in limited partnerships, recorded in the other investments line of the consolidated balance sheet.

These investments are measured at estimated fair value utilizing a net asset value per share (or its equivalent) as a practical expedient.

As of December 31, 2024 the Company had unfunded commitments to invest an additional $ 79.5 million in these limited partnerships.

Fair value measurements

3 unchanged sentences

Fixed maturity securities

$ — $ 32,806 $ — $ 32,806

States, Territories, and Political Subdivisions

— 9,778 — 9,778

Special revenue excluding mortgage/asset-backed securities

— 26,634 — 26,634

Corporate and other

— 475,491 — 475,491

Mortgage/asset-backed securities

— 394,337 — 394,337

Equity securities

40,529 — — 40,529

Cash, cash equivalents, and restricted cash

80,539 — — 80,539

$ 121,068 $ 939,046 $ — $ 1,060,114

December 31, 2023

1 unchanged sentence

Fixed maturity securities

$ — $ 39,420 $ — $ 39,420

States, Territories, and Political Subdivisions

— 9,902 — 9,902

Special revenue excluding mortgage/asset-backed securities

— 29,511 — 29,511

Corporate and other

— 300,239 — 300,239

Mortgage/asset-backed securities

— 264,727 — 264,727

Equity securities

43,160 — — 43,160

Cash, cash equivalents, and restricted cash

The carrying amounts of financial assets and liabilities reported in the accompanying condensed consolidated balance sheet including cash and cash equivalents, restricted cash, receivables, reinsurance recoverable, and accounts payable and other accrued liabilities approximate fair value due to their short term-maturity.

The carrying amount of the Company’s borrowings under the Federal Home Loan Bank (“FHLB”) line of credit approximates fair value as the Company is currently borrowing at the overnight rate, which is adjusted daily.

51,852 — — 51,852

$ 95,012 $ 643,799 $ — $ 738,811

The carrying amounts of financial assets and liabilities reported in the accompanying consolidated balance sheet including cash and cash equivalents, restricted cash, receivables, reinsurance recoverable, and accounts payable and other accrued liabilities approximate fair value due to their short term-maturity.

The carrying amount of the Company’s borrowings under the Federal Home Loan Bank (“FHLB”) line of credit approximates fair value as the Company borrows at a rate which is adjusted daily.

Policy Acquisition Costs

17 unchanged sentences

(in thousands)

$ 3,755 $ 3,755

Indefinite-lived intangibles:

8 unchanged sentences

State insurance licenses consist of licenses acquired at the inception of PSIC.

Customer relationships represents the fair value of acquired policy renewal rights.

The Company began amortizing this intangible asset on a straight line basis in 2021 and is amortizing it over a period of 8 years.

Amortization expense was $ 1.5 million for the years ended December 31, 2023 and $ 1.3 million for the year ended December 31, 2022 .

Customer relationships represents the fair value of acquired policy renewal rights which are amortized on a straight line over a period of 8 years.

Amortization expense was $ 1.6 million for the year ended December 31, 2024 and $ 1.5 million for the year ended December 31, 2023 .

Capitalized Assets

29 unchanged sentences

$ 2,021 $ ( 1,648 ) $ 373

Depreciation expense for the years ended December 31, 2023 , 2022 and 2021 was $ 0.2 million, $ 0.2 million, and $ 0.2 million respectively.

Depreciation expense for the years ended December 31, 2024 , 2023 and 2022 was immaterial.

The Company has operating leases for office space used to conduct its insurance operations and administration activities.

33 unchanged sentences

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, the Company uses statistical analysis to estimate the cost of losses and loss adjustment expenses related to IBNR.

The Company uses statistical analysis to estimate the cost of losses and loss adjustment expenses related to IBNR.

Those estimates are based on historical information, industry information and practices, and estimates of trends that may affect the ultimate frequency of incurred but not reported claims and changes in ultimate claims severity.

29 unchanged sentences

$ 503,382 $ 342,275 $ 231,415

The foregoing reconciliation shows a loss and loss adjustment expense deficiency of $ 2.2 million and $ 2.4 million developed in 2023 and 2022 respectively, and a loss and loss adjustment expense reserve redundancy of $ 3.6 million developed in 2021 .

The foregoing reconciliation shows favorable net development of $ 3.0 million in 2024 and unfavorable net development of $ 2.2 million and $ 2.4 million in 2023 and 2022, respectively.

During 2024, the net favorable reserve development was primarily due to lower than anticipated severity of attritional losses in our Inland Marine and other property line of business.

During 2023, the net unfavorable reserve development was primarily due to the effect of ceding gross favorable development under our catastrophe XOL reinsurance program and due to unfavorable development on lines of business subject to lower amounts of ceding.

During 2022, the net unfavorable reserve development was primarily attributable to prior year catastrophe events including certain 2020 Hurricanes, offset by favorable development related to 2021 attritional and catastrophe losses.

During 2021, the net favorable reserve development was primarily due to the effect of ceding gross unfavorable development under our reinsurance program and lower than anticipated severity of catastrophe losses associated with certain hurricanes that occurred during the second half of 2020.

The Company compiles and aggregates its claims data by grouping the claims according to the year in which the claim occurred (“Accident Year”) when analyzing claim payment and emergence patterns and trends over time.

20 unchanged sentences

77,421 32,641 8,069

$ 273,479 $ 42,826 $ 35,681

Cumulative Paid Losses and Allocated Loss Adjustment Expenses,

22 unchanged sentences

As of December 31, 2024

Incurred but Not Reported Cumulative Number of

Incurred but Not Reported

Cumulative Number of

Accident Year

Liabilities Claims

$ 109 $ 35 $ 46 $ 47 $ — 7

3 unchanged sentences

21,811 20,011 267

$ 42,046 $ 28,176 486

Cumulative Paid Losses and Allocated Loss Adjustment Expenses,

2 unchanged sentences

$ 109 $ 35 $ 46 $ 47

141 347 653 906

746 1,603 3,445

Reserve for losses and loss adjustment expense, net of reinsurance

7 unchanged sentences

As of December 31, 2024

Incurred but Not Reported Cumulative Number of

Incurred but Not Reported

Cumulative Number of

Accident Year

2020 2021 2022 2023 Liabilities

$ 48 $ 26 $ 7 $ — $ 286 $ 285 7

3 unchanged sentences

18,503 10,785 1,324

$ 40,825 $ 23,602 2,826

Cumulative Paid Losses and Allocated Loss Adjustment Expenses,

Net of Reinsurance Other Liability Occurrence (in thousands) ( 1 )

Net of Reinsurance Other Liability Claims Made (in thousands) ( 1 )

Accident Year

1 unchanged sentence

62 221 449 1,009

481 1,584 2,776

Reserve for losses and loss adjustment expense, net of reinsurance

18 unchanged sentences

This amount reflects gross and net reserves related to this treaty and the ultimate incurred amount reflects IBNR only.

The Company does not have direct access to individual claim information underlying the assumed quota arrangement.

The Company does not have direct access to individual claim information underlying the assumed quota share arrangement.

The Company does not use claim frequency information in the determination of loss reserves or for other internal purposes.

4 unchanged sentences

In an XOL treaty, the Company retains losses for any occurrence up to a specified amount (its “retention”) and reinsurers assume any losses above that amount.

As of December 31, 2023 , the Company’s catastrophe event retention is $ 17.5 million for all perils.

As of December 31, 2024 , the Company’s catastrophe event retention is $ 20 million for earthquake events and $ 15.5 million for hurricane events and all other perils.

As of December 31, 2024 , the Company’s reinsurance structure provides protection up to $ 3.08 billion for earthquake events, $ 735 million for Hawaii hurricane events, and $ 117.5 million for continental U.S.

6 unchanged sentences

$ 312,173 $ 339,376 $ 237,285

Inland Marine

109,975 12,110 —

36,677 23,398 5,138

Commercial Earthquake

29,708 20,467 14,447

Commercial All Risk

Inland Marine and Other Property

103,863 108,409 84,045

Specialty Homeowners

86,120 36,677 23,398

4 unchanged sentences

The increase was driven primarily by premium growth in lines subject to fronting agreements or quota shares.

In addition to reinsurance purchased from traditional reinsurers, we have historically incorporated collateralized protection from the insurance linked securities market via catastrophe bonds.

During the first quarter of 2021, we closed a $ 400 million 144A catastrophe bond that became effective June 1, 2021.

In addition to reinsurance purchased from traditional reinsurers, the Company has historically incorporated collateralized protection from the insurance linked securities market via catastrophe bonds.

During the first quarter of 2021, the Company closed a $ 400 million 144A catastrophe bond that became effective June 1, 2021.

The catastrophe bond was completed through Torrey Pines Re Pte.

2 unchanged sentences

is a special purpose reinsurance vehicle incorporated in Singapore that provides Palomar with indemnity-based reinsurance covering earthquake events through June 1, 2024.

During the second quarter of 2022, we closed a $ 275 million 144A catastrophe bond that became effective June 1, 2022.

During the second quarter of 2022, the Company closed a $ 275 million 144A catastrophe bond that became effective June 1, 2022.

This catastrophe bond was completed through Torrey Pines Re Ltd., a Bermuda-domiciled special purpose insurer that provides indemnity-based reinsurance covering earthquake events through June 1, 2025.

During the second quarter of 2023, we also closed a $ 200 million 144A catastrophe bond that became effective June 1, 2023.

During the second quarter of 2023, the Company also closed a $ 200 million 144A catastrophe bond that became effective June 1, 2023.

This catastrophe bond was also completed through Torrey Pines Re Ltd and provides indemnity-based reinsurance covering earthquake events through June 1, 2026.

During the second quarter of 2024, the Company also closed a $ 420 million 144A catastrophe bond which became effective June 1, 2024.

This catastrophe bond was also completed through Torrey Pines Re Ltd and provides indemnity-based reinsurance covering earthquake events through June 1, 2027.

Written premiums ceded under these catastrophe bond agreements were $ 55.3 million, $ 42.7 million and $ 28.3 million for the years ended December 31, 2024 , 2023 and 2022 , respectively.

61 unchanged sentences

All advances have a 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 at the overnight rate of 5.62 %.

As of December 31, 2024 , there were no borrowings outstanding through the FHLB.

Interest expense on the FHLB Line of Credit was $ 0.8 million for the year ended December 31, 2024 .

46 unchanged sentences

The total intrinsic value of stock options exercised during the years ended December 31, 2024 and December 31, 2023 was $ 18.7 million and $ 3.5 million, respectively.

As of December 31, 2023 , the Company had approximately $ 1.3 million of total unrecognized stock-based compensation expense related to stock options expected to be recognized over a weighted-average period of 1.0 years.

The fair value of each option granted was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions in each year presented:

Year ended December 31,

(in thousands)

Risk free rate of return (2)

— % 1.69 % - 4.23 % 0.57 % - 1.35 %

Expected share price volatility (3)

0.00 % 39.73 % - 43.03 % 26.06 % - 39.41 %

Expected life in years (4)

Dividend yield (5)

( 1 ) There were no stock options granted during the year ended December 31, 2023.

Determined based on the U.S.

Treasury yield in effect at the time of the grant for zero -coupon U.S.

Treasury notes with remaining terms similar to the expected term of the options.

Determined based on a blend of the Company’s historic stock price volatility and the historic volatility of a peer group of publicly traded companies.

Determined using the “simplified method” for estimating the expected option life, which is the average of the weighted-average vesting period and contractual term of the option as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its common stock has been publicly traded.

Determined to be zero as the Company does not currently plan to issue dividends.

Restricted Stock Units

16 unchanged sentences

If the Company’s stock price reaches and remains at certain milestones for 30 days, the PSUs shall become earned units and will vest upon completion of a requisite service period of approximately five years from the date of grant.

As of December 31, 2023 , none of the stock price milestones have been achieved.

For other PSUs outstanding, vesting of PSUs requires a period of future service and the number of shares that vest depends on performance relative to predetermined targets of the Company’s Gross Written Premiums and Adjusted Return on Equity as set by the Compensation Committee.

For PSU grants issued in years prior to 2023, the PSU’s performance period was the fiscal year of the grant.

For PSU grants issued in 2023, the PSU’s performance period is primarily a three -year period beginning with the grant date.

For PSU grants issued in 2023 and after, the PSU’s performance period is primarily a three -year period beginning with the grant date.

At the end of the performance period, the actual results are measured against the predetermined targets to determine the number of PSUs to be earned as compensation.

5 unchanged sentences

( 12,645 ) 96.74

( 7,538 ) 51.92

Non vested outstanding at December 31, 2024

5 unchanged sentences

During the year ended December 31, 2021, the Company granted 192,307 RSUs and 350,000 PSUs to various executives, including the Company’s CEO.

The RSUs vest over a period of five years with one fifth vesting upon the first, second and third anniversary of the grants and the remainder vesting monthly thereafter.

The RSUs vest over a period of five years with one fifth vesting upon the first, second and third anniversary of the grants and the remainder vesting quarterly thereafter.

The PSUs are earned based on the achievement of stock price milestones.

2 unchanged sentences

Other executives must remain as employees through December 31, 2026 for the PSUs to vest.

As of December 31, 2023 , none of the stock price milestones have been achieved.

The RSUs were valued based on the closing price of the Company’s stock on the grant date.

The PSUs were valued using a Monte Carlo simulation to account for the market condition within the award.

The Company expects to recognize $ 14.6 million of expense relating to the RSUs and $ 12.4 million relating to the PSUs.

The expense shall be recognized straight-line over the requisite service period of approximately five years.

Should these executives leave prior to the requisite service period, any recognized compensation expense related to unvested RSUs and PSUs will be reversed.

As of December 31, 2024 , 28,125 PSU shares have become earned units and will vest upon completion of the requisite service period.

2019 Employee Stock Purchase Plan

7 unchanged sentences

Share repurchases

In January 2022, the Company's 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.

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.

The Company accounts for share repurchases by charging the excess of repurchase price over the common stock’s par value entirely to retained earnings.

All repurchased shares are retired and become authorized but unissued shares.

The Company's share repurchase program expired on March 31, 2024.

There were no share repurchases made during the year ended December 31, 2024.

Accumulated Other Comprehensive Income

3 unchanged sentences

Balance as of January 1

Other comprehensive income (loss) before reclassification

Federal income tax (expense) benefit

Other comprehensive income (loss) before reclassification, net of tax

$ ( 23,991 ) $ ( 36,515 ) $ 5,312

Other comprehensive (loss) income before reclassification

( 5,924 ) 15,913 ( 55,270 )

Federal income tax benefit (expense)

1,244 ( 3,342 ) 11,607

Other comprehensive (loss) income before reclassification, net of tax

( 4,680 ) 12,571 ( 43,663 )

Amounts reclassified from AOCI

Federal income tax expense (benefit)

2,311 ( 60 ) 2,325

Federal income tax (benefit) expense

( 485 ) 13 ( 489 )

Amounts reclassified from AOCI, net of tax

Other comprehensive income (loss)

1,826 ( 47 ) 1,836

Other comprehensive (loss) income

( 2,854 ) 12,524 ( 41,827 )

Balance at end of period

$ ( 26,845 ) $ ( 23,991 ) $ ( 36,515 )

Underwriting Information

The Company has a single reportable segment and offers primarily earthquake, fronting, inland marine, wind, casualty, and flood insurance products.

The Company has a single reportable segment and offers specialty insurance products.

Gross written premiums (“GWP”) by product are presented below:

2 unchanged sentences

$ 522,864 33.9 % $ 436,897 38.3 % $ 345,480 39.2 %

Residential Earthquake

253,530 22.2 % 213,803 24.2 % 171,048 32.0 %

Commercial Earthquake

183,368 16.1 % 131,677 14.9 % 90,552 16.9 %

Inland Marine

140,067 12.3 % 105,068 11.9 % 57,124 10.7 %

76,864 6.7 % 35,791 4.1 % 9,584 1.9 %

Hawaii Hurricane

38,188 3.3 % 32,967 3.7 % 30,298 5.6 %

Commercial All Risk

Inland Marine and Other Property

334,079 21.7 % 250,022 21.9 % 232,918 26.4 %

Residential Flood

333,188 21.6 % 352,141 30.8 % 223,249 25.3 %

Specialty Homeowners

235,592 15.3 % 90,388 7.9 % 80,221 9.1 %

2 unchanged sentences

$ 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.

Prior year amounts have been reclassified for comparability purposes.

The recategorization is for presentation purposes only and does not impact overall gross written premiums.

Gross written premiums by state are as follows:

17 unchanged sentences

661,404 42.9 % 487,749 42.7 % 392,148 44.5 %

57,295 3.7 % — — % — — %

Total Gross Written Premiums

$ 1,541,962 100.0 % $ 1,141,558 100.0 % $ 881,868 100.0 %

The Company distributes a significant portion of its Fronting, Residential Earthquake, Commercial Earthquake, and Hawaii Hurricane products through select program administrators.

The Company distributes a significant portion of its products through select program administrators.

Each of the products managed by the program administrators operates as a separate program that is governed by an independent, separately negotiated agreement with unique terms and conditions, including geographic scope, key men provisions, economics and exclusivity.

These programs also feature separate managerial oversight and leadership, policy administration systems and retail agents originating policies.

For the year ended December 31, 2023 , our largest program administrator distributed $ 394.1 million or 34.5% of our gross written premiums and our second largest program administrator distributed $ 152.4 million, or 13.3 % of our gross written premiums.

For the year ended December 31, 2024 , our largest program administrator distributed $ 403.4 million or 26.2 % of our gross written premiums.

There were no other program administrators which distributed greater than 10 % of our gross written premiums for the year ended December 31, 2024 .

1 unchanged sentence

There were no other program administrators which distributed greater than 10 % of our gross written premiums for the year ended December 31, 2023.

For the year ended December 31, 2021, our largest program administrator distributed $ 215.3 million or 40.2 % of our gross written premiums.

For the year ended December 31, 2022, our largest program administrator distributed $ 322.4 million or 36.6 % of our gross written premiums and our second largest program administrator distributed $ 95.1 million, or 10.8 % of our gross written premiums.

There were no other program administrators which distributed greater than 10 % of our gross written premiums for the year ended December 31, 2022.

13 unchanged sentences

Losses and LAE reserve discount

Net operating losses

$ 1,711 $ 942

State tax net operating losses

Deferred Intercompany

4 unchanged sentences

Deferred compensation

Lease Liability

Total deferred tax assets

5 unchanged sentences

( 1,118 ) ( 1,276 )

State deferred liability

State deferred tax liability

( 1,216 ) ( 1,150 )

Right-of-use Asset

( 1,604 ) ( 478 )

( 837 ) ( 451 )

Total deferred tax liabilities

6 unchanged sentences

$ 8,814 $ 10,119

The above valuation allowance relates to state net operating losses ("NOL") carryforwards and federal net operating losses related to Laulima, which was formed in 2023.

The above valuation allowance relates to state net operating losses ("NOL") carryforwards.

Due to the limited carryforward period these do not meet the “more likely than not” criteria and it is necessary to maintain a valuation allowance on these items.

The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period change or if objective negative evidence in the form of cumulative losses is no longer present.

As of December 31, 2023 , there are $ 0.1 million of federal NOLs set to expire starting 2043 and $ 2.8 million of state NOLs set to expire beginning in 2023 over various periods.

As of December 31, 2024 , there is no federal net operating loss or tax credit carryforwards for tax purposes.

The Company has $ 3.4 million of state NOLs (tax-effected, net of federal benefit) set to expire beginning in 2025 over various periods.

There is $ 2.9 million of tax capital loss carryforwards which will begin to expire in 2030.

The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the tax years ended December 31, 2024 , 2023 and 2022 :

3 unchanged sentences

$ 31,750 21.00 % $ 21,765 21.00 % $ 14,186 21.00 %

Stock-based compensation and Section 162(m)

Stock-based compensation

429 0.28 % 1,523 1.47 % 153 0.23 %

3 unchanged sentences

291 0.19 % 261 0.25 % 180 0.27 %

State tax expense (benefit)

State tax expense

601 0.40 % 303 0.29 % 773 1.14 %

4 unchanged sentences

$ 33,623 22.23 % $ 24,441 23.58 % $ 15,381 22.77 %

For the year ended December 31, 2023 , the difference relates primarily to Section 162 (m) limitations on executive compensation deductions, offset by the permanent component of employees stock option exercises.

For the year ended December 31, 2024 , the difference relates primarily to Section 162 (m) limitations on executive compensation deductions and state taxes, offset by the permanent component of employee stock option exercises.

For the year ended December 31, 2023, the difference relates primarily to Section 162 (m) limitations on executive compensation deductions and state taxes.

For the year ended December 31, 2022, the difference relates primarily to the permanent component of employee stock option exercises and state taxes.

For the years ended December 31, 2022 and December 31, 2021 , the Company increased its valuation allowance relating to deferred tax assets associated with state net operating losses.

As of December 31, 2024 and 2023 , the Company had no uncertain tax positions that required either recognition or disclosure in the consolidated financial statements.

3 unchanged sentences

The 2024 income tax return is expected to be filed in 2025 and is subject to examination when filed.

The Company's PSRE entity may be subject to taxation in Bermuda in future years under the Bermuda Corporate Income Tax Act of 2023.

Under Pillar Two/GloBE rules, certain countries have agreed to enact a jurisdictional-level minimum tax system with a minimum effective tax rate (ETR) of 15%.

The Bermuda Corporate Income Tax Act of 2023 also established a 15% income tax regime.

Companies with annual revenue above 750 million Euros will be within the scope of Pillar Two and the Bermuda CIT.

As of December 31, 2024, Palomar is not within this revenue threshold and hence not an in-scope entity.

Subsequent financial years will be assessed for these rules.

Earnings Per Share

2 unchanged sentences

(in thousands, except shares and per share data)

$ 117,573 $ 79,201 $ 52,170

Weighted average common shares outstanding:

25,520,343 24,822,004 25,243,397

Common Share equivalents

703,499 505,087 552,611

26,223,842 25,327,091 25,796,008

Earnings per share:

$ 4.61 $ 3.19 $ 2.07

$ 4.48 $ 3.13 $ 2.02

Common share equivalents relate to outstanding stock options, RSUs, and PSUs under the 2019 Plan and unpurchased shares under the 2019 ESPP and are calculated using the treasury stock method.

18 unchanged sentences

PSRE had stockholders’ equity of $ 16.9 million and $ 16.3 million on a GAAP basis at December 31, 2024 and 2023 , respectively.

The principal difference between statutory capital and surplus and stockholders’ equity presented in accordance with GAAP are prepaid expenses, which are non-admitted assets for Bermuda statutory purposes.

The principal difference between statutory capital and surplus and stockholders’ equity presented in accordance with GAAP is related to the valuation of investments.

No dividends were paid in 2024 and 2023 .

11 unchanged sentences

Based on the above restrictions, PSIC may pay a dividend or distribution of no greater than $99.6 million in 2025 without approval by the California and Oregon Insurance Commissioners.

During October 2024, PSIC elected to pay a dividend of $ 95.0 million to its parent company.

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.

11 unchanged sentences

Letters of Credit and Trusts

As of December 31, 2023 , the Company has four irrevocable standby letters of credit for the benefit of ceding insurance companies to secure the unearned premium assumed by PSIC.

As of December 31, 2024 , the Company has three irrevocable standby letters of credit for the benefit of ceding insurance companies to secure the unearned premium assumed by PSIC.

The bank letters of credit amount to a total of $ 5.6 million and may renew if the Company continues to assume premium from these insurance companies.

The letters of credit are collateralized by either the Company’s available-for-sale investments or the Credit Agreement.

In addition, the Company established two Regulation 114 Trust accounts for the benefit of ceding insurance companies to secure the unearned premium assumed by PSIC.

The letters of credit are collateralized by the Company’s Credit Agreement.

As of December 31, 2024 , the Company has a Letter of Credit for the benefit of the State of California to secured unearned premium and loss reserves incurred in the Worker’s Compensation program.

The letter of credit amounts to $75 million and are collateralized by the Company’s available-for-sale investments.

In addition, the Company has established six Regulation 114 Trust accounts for the benefit of ceding insurance companies to secure the unearned premium assumed by PSIC.

As of December 31, 2024 the trust had a market value of $ 7.9 million.

11 unchanged sentences

The assets of Laulima can be used only to settle the obligations of Laulima and general creditors have no recourse to the Company.

The results of operations of Laulima are included in the Company’s consolidated income statement and generated $ 0.1 million of earned premiums in 2023.

There were no claims or claims expenses in 2023.

The results of operations of Laulima are included in the Company’s consolidated statement of income and comprehensive income and Laulima generated $ 0.1 million of net loss in 2024 and $ 0.6 million of net loss in 2023.

As of December 31, 2024, Laulima's assets totaled $ 51.0 million, primarily comprised of $ 18.5 million of cash and investments and $ 30.5 million of prepaid reinsurance premiums and are included in the Company's consolidated balance sheets.

For the same year, Laulima's liabilities totaled $ 48.9 million and primarily include $ 30.5 million of unearned premiums and $ 15.0 million of surplus notes.

As of December 31, 2023, Laulima's assets totaled $16.4 million, primarily comprised of $ 15.1 million of cash and investments, and are included in the Company's consolidated balance sheets.

Laulima's liabilities totaled $ 16.9 million and primarily include $ 15.0 million of surplus notes.

The surplus notes are payable to PSIC and eliminate in consolidation.

Laulima's remaining liabilities are included in the Company's consolidated balance sheets.

For the same year, Laulima's liabilities totaled $ 16.9 million and primarily include $ 15.0 million of surplus notes.

The surplus notes are payable to PSIC and eliminate in consolidation for all years presented.

Subsequent Events

On February 9, 2024, the Company entered into a lease amendment to extend the lease term and expand the rentable square feet for its principal office in La Jolla, California.

The lease amendment is effective August 1, 2024 and expires on July 31, 2034, with monthly payments (in thousands) as follows:

Months 13-24:

Months 25-36:

Months 37-48:

Months 49-60:

Months 61-72:

Months 73-84:

Months 85-96:

Months 97-108:

Months 109-120:

On January 1, 2025, the Company acquired 100 % of the outstanding voting stock of First Indemnity of America Insurance Company (“FIA”) for a purchase price of $ 29.3 million.

FIA is a New Jersey domiciled insurance carrier that specializes in the underwriting of surety bonds for small to medium sized contractors primarily in the Northeast United States.

FIA is licensed in 16 states and is rated "A-" by A.M.

To date, the initial accounting for the acquisition is incomplete due to the limited time since the closing date.

The Company is still gathering the necessary information to provide such disclosures in future filings.

The Company has evaluated all other subsequent events from the balance sheet date through the date the financial statements were issued and has determined there are no additional events required to be disclosed.

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Receivables from subsidiaries

78,961 51,967

Note receivable from subsidiary

15,000 15,000

Investment in subsidiaries

7 unchanged sentences

Federal income tax payable

16,398 10,282

Total liabilities

1 unchanged sentence

Stockholders' equity:

Preferred stock, $ 0.0001 par value, 5,000,000 shares authorized as of December 31, 2024 and December 31, 2023, 0 shares issued and outstanding as of December 31, 2024 and December 31, 2023

Common stock, $ 0.0001 par value, 500,000,000 shares authorized, 26,529,402 and 24,772,987 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively

16 unchanged sentences

Net investment income

$ 4,877 $ 1,699 $ 1,048

Net realized and unrealized gains (losses) on investments

23 ( 209 ) ( 320 )

Total revenues

4,900 1,490 728

Other operating expenses

48,251 39,347 33,292

Loss before income taxes

Income tax (benefit) expense

( 43,351 ) ( 37,857 ) ( 32,564 )

Income tax benefit

( 10,199 ) ( 7,953 ) ( 8,464 )

Loss before equity in net income of subsidiaries

( 33,152 ) ( 29,904 ) ( 24,100 )

Equity in net income of subsidiaries

150,725 109,105 76,270

117,573 79,201 52,170

Other comprehensive income:

Net unrealized (losses) gains on securities available for sale

Net unrealized losses on securities available for sale

( 5,114 ) ( 2,505 ) ( 3,997 )

Equity in other comprehensive income (loss) of subsidiaries, net of taxes

2,261 15,029 ( 37,830 )

Total comprehensive income

$ 114,720 $ 91,725 $ 10,343

See accompanying notes.

5 unchanged sentences

Operating activities

$ 117,573 $ 79,201 $ 52,170

Adjustments to reconcile net income to net cash provided by operating activities:

Equity in undistributed earnings of subsidiaries

( 150,725 ) ( 109,105 ) ( 76,270 )

Stock-based compensation expense

Net realized and unrealized (losses) gains on investments

10,513 10,426 8,820

Net realized and unrealized losses on investments

( 23 ) 209 320

Amortization of premium on fixed maturity securities

Deferred income tax expense

( 15,640 ) 2,787 7,210

Dividend received from subsidiary

Changes in operating assets and liabilities:

( 80,154 ) 37,777 36,449

Net cash provided by (used in) operating activities

( 23,284 ) 21,484 29,046

Investing activities

Purchases of fixed maturity securities

( 114,611 ) ( 11,045 ) ( 9,807 )

Sales and maturities of fixed maturity securities

Cash paid to subsidiaries

Cash received from subsidiaries

Net cash (used in) provided by investing activities

13,004 9,232 8,488

Net cash provided by (used in) investing activities

( 101,607 ) ( 1,813 ) ( 1,319 )

Financing activities

Proceeds from stock offering, net of offering costs

Proceeds from common stock issued via equity incentive plans

7,892 2,038 3,032

Policyholder contribution to surplus

Repurchase of common stock

Net cash used in financing activities

Net decrease in cash and cash equivalents

— ( 22,266 ) ( 34,415 )

Net cash provided by (used in) financing activities

126,374 ( 20,138 ) ( 31,383 )

Net (decrease) increase in cash and cash equivalents

1,483 ( 467 ) ( 3,656 )

Cash and cash equivalents at beginning of period

314 781 4,437

Cash and cash equivalents at end of period

$ 1,797 $ 314 $ 781

Supplementary cash flow information:

Cash paid for income taxes

$ 38,454 $ 21,124 $ 18,890

Cash paid for interest

$ 1,048 $ 3,682 $ 704

See accompanying notes.

22 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data