Palomar Holdings, Inc. 10-K

Item 8: Financial Statements Palomar Holdings, Inc. and Subsidiaries INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Index to Audited Consolidated Financial Statements of Palomar Holdings, Inc. and Subsidiaries as of December 31, 2024 and 2023 and for each of the Three Years Ended December 31, 2024, 2023 and 2022 ​ Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) 84 Consolidated Financial Statements ​ Consolidated Balance Sheets as of December 31, 2024 and 2023 87 Consolidated Statements of Income and Comprehensive Income for the three years ended December 31, 2024, 2023 and 2022 88 Consolidated Statements of Stockholders’ Equity for the three years ended December 31, 2024, 2023 and 2022 89 Consolidated Statements of Cash Flows for the three years ended December 31, 2024, 2023 and 2022 90 Notes to Consolidated Financial Statements 92 Schedule II—Condensed Financial Information of Registrant—Parent Company only 125 Schedule V—Valuation and Qualifying Accounts 129 ​ Schedules other than those listed are omitted for the reason that they are not required, are not applicable or that equivalent information has been included in the financial statements or notes thereto or elsewhere herein. 83 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ To the Stockholders and the Board of Directors of Palomar Holdings, Inc. Opinion on Internal Control Over Financial Reporting ​ We have audited Palomar Holdings, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Palomar Holdings, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedules listed in the Index at Item 15(a) and our report dated February 25, 2025 expressed an unqualified opinion thereon. ​ Basis for Opinion ​ The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. ​ Definition and Limitations of Internal Control Over Financial Reporting ​ A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP San Francisco, California February 25, 2025 ​ 84 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ To the Stockholders and the Board of Directors of Palomar Holdings, Inc. ​ ​ Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of Palomar Holdings, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income and comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2025 expressed an unqualified opinion thereon. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter ​ The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. ​ 85 Table of Contents ​ Valuation of Reserve for Losses and Loss Adjustment Expenses Description of the Matter At December 31, 2024, the reserve for losses and loss adjustment expenses (LAE) is $503,382 (in thousands). As explained in Notes 2 and 9 to the consolidated financial statements, the reserve for losses and LAE represents management's best estimate for unpaid claims and claim adjustment expenses on reported losses and estimates of losses incurred but not reported (IBNR), net of salvage and subrogation recoveries. The liability is based on individual claims, case reserves and other estimates reported by policyholders, as well as management estimates of ultimate losses and loss adjustment expenses. Inherent in the estimates of ultimate losses and loss adjustment expenses are expected trends in claims severity and frequency and other factors that could vary significantly as claims are settled. IBNR reserves include an estimate for future loss payments on incurred claims not yet reported and for expected development on reported claims. There is significant uncertainty inherent in determining management’s best estimate of IBNR, which is sensitive to significant assumptions including the selection of actuarial methods and reported and paid loss emergence patterns. Auditing management’s best estimate of IBNR reserves was complex due to the highly judgmental nature of the assumptions, including selection of actuarial methods and reported and paid loss emergence patterns, used in the valuation process. These assumptions have a significant effect on the valuation of reserves for IBNR claims. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over the process for estimating IBNR reserves. This included, among other procedures, testing management review controls in place over the review and approval of methods and assumptions used in estimating IBNR reserves. To test IBNR reserves, our audit procedures included, among others, testing the completeness and accuracy of the data used in the calculation by testing reconciliations of the underlying claims and policyholder data recorded in the source systems to the actuarial reserving calculations and comparing a sample of incurred and paid claims to source documentation. With the assistance of our actuarial specialists, we evaluated the Company’s selection and weighting of actuarial methods compared to methods used in prior periods and in the industry for the specific types of insurance. To evaluate the significant assumptions used by management, we compared the assumptions to current and historical claims trends and to current industry benchmarks. We compared the Company’s recorded reserves to a range of reasonable reserve estimates developed by our actuarial specialists based on independently selected methods and assumptions. We also compared the results of the reserve study prepared by the Company’s actuarial specialists to management’s recorded reserve. Additionally, we performed a hindsight analysis of the prior period estimates using subsequent claims development. ​ /s/ Ernst & Young LLP We have served as the Company’s auditor since 2016 San Francisco, California February 25, 2025 ​ 86 Table of Contents Palomar Holdings, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except shares and par value data) ​ December 31, 2024 December 31, 2023 Assets ​ ​ Investments: ​ ​ Fixed maturity securities available for sale, at fair value (amortized cost: $ 973,330 in 2024; $ 675,130 in 2023) $ 939,046 $ 643,799 Equity securities, at fair value (cost: $ 32,987 in 2024; $ 43,003 in 2023) 40,529 43,160 Equity method investment 2,277 2,617 Other investments 5,863 — Total investments 987,715 689,576 Cash and cash equivalents 80,438 51,546 Restricted cash 101 306 Accrued investment income 8,440 5,282 Premium receivable 305,724 261,972 Deferred policy acquisition costs, net of ceding commissions and fronting fees 94,881 60,990 Reinsurance recoverable on paid losses and loss adjustment expenses 47,076 32,172 Reinsurance recoverable on unpaid losses and loss adjustment expenses 348,083 244,622 Ceded unearned premiums 276,237 265,808 Prepaid expenses and other assets 91,086 72,941 Deferred tax assets, net 8,768 10,119 Property and equipment, net 429 373 Goodwill and intangible assets, net 13,242 12,315 Total assets $ 2,262,220 $ 1,708,022 Liabilities and stockholders' equity Liabilities: Accounts payable and other accrued liabilities $ 70,079 $ 42,376 Reserve for losses and loss adjustment expenses 503,382 342,275 Unearned premiums 741,692 597,103 Ceded premium payable 190,168 181,742 Funds held under reinsurance treaty 27,869 13,419 Income taxes payable — 7,255 Borrowings from credit agreements — 52,600 Total liabilities 1,533,190 1,236,770 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 3 3 Additional paid-in capital 493,656 350,597 Accumulated other comprehensive loss ( 26,845 ) ( 23,991 ) Retained earnings 262,216 144,643 Total stockholders' equity 729,030 471,252 Total liabilities and stockholders' equity $ 2,262,220 $ 1,708,022 ​ See accompanying notes. 87 Table of Contents Palomar Holdings, Inc. and Subsidiaries Consolidated Statements of Income and Comprehensive Income (in thousands, except shares and per share data) Year Ended December 31, 2024 2023 2022 Revenues: Gross written premiums $ 1,541,962 $ 1,141,558 $ 881,868 Ceded written premiums ( 897,111 ) ( 731,531 ) ( 524,575 ) Net written premiums 644,851 410,027 357,293 Change in unearned premiums ( 134,164 ) ( 64,114 ) ( 40,827 ) Net earned premiums 510,687 345,913 316,466 Net investment income 35,824 23,705 13,877 Net realized and unrealized gains (losses) on investments 4,568 2,941 ( 7,529 ) Commission and other income 2,784 3,367 4,272 Total revenues 553,863 375,926 327,086 Expenses: Losses and loss adjustment expenses 134,759 72,592 78,672 Acquisition expenses, net of ceding commissions and fronting fees 149,657 107,745 110,771 Other underwriting expenses 117,113 88,172 69,219 Interest expense 1,138 3,775 873 Total expenses 402,667 272,284 259,535 Income before income taxes 151,196 103,642 67,551 Income tax expense 33,623 24,441 15,381 Net income $ 117,573 $ 79,201 $ 52,170 Other comprehensive income, net: Net unrealized gains (losses) on securities available for sale ( 2,854 ) 12,524 ( 41,827 ) Total comprehensive income $ 114,719 $ 91,725 $ 10,343 Per Share Data: Basic earnings per share $ 4.61 $ 3.19 $ 2.07 Diluted earnings per share $ 4.48 $ 3.13 $ 2.02 Weighted-average common shares outstanding: Basic 25,520,343 24,822,004 25,243,397 Diluted 26,223,842 25,327,091 25,796,008 ​ See accompanying notes. 88 Table of Contents Palomar Holdings, Inc. and Subsidiaries Consolidated Statements of Stockholders ’ Equity (in thousands, except share data) Accumulated Number of Other Common Additional Comprehensive Total Shares Common Paid-In Income Retained Stockholders' Outstanding Stock Capital (Loss) Earnings Equity Balance at December 31, 2021 25,428,929 $ 3 $ 318,902 $ 5,312 $ 69,952 $ 394,169 Other comprehensive loss, net of tax — — — ( 41,827 ) — ( 41,827 ) Stock-based compensation — — 11,624 — — 11,624 Issuance of common stock via employee stock purchase plan 13,990 — 760 — — 760 Issuance of common stock via equity incentive plan 205,963 — 2,272 — — 2,272 Repurchases of common stock ( 621,415 ) — — — ( 34,414 ) ( 34,414 ) Net income — — — — 52,170 52,170 Balance at December 31, 2022 25,027,467 $ 3 $ 333,558 $ ( 36,515 ) $ 87,708 $ 384,754 Other comprehensive income, net of tax — — — 12,524 — 12,524 Stock-based compensation — — 14,913 — — 14,913 Issuance of common stock via employee stock purchase plan 17,080 — 799 — — 799 Issuance of common stock via equity incentive plan 147,341 — 1,237 — — 1,237 Policy holder contribution to surplus — — 90 — — 90 Repurchases of common stock ( 418,901 ) — — — ( 22,266 ) ( 22,266 ) Net income — — — — 79,201 79,201 Balance at December 31, 2023 24,772,987 $ 3 $ 350,597 $ ( 23,991 ) $ 144,643 $ 471,252 Other comprehensive loss, net of tax — — — ( 2,854 ) — ( 2,854 ) Stock-based compensation — — 16,685 — — 16,685 Issuance of common stock in stock offering, net of offering costs 1,380,000 — 115,724 — — 115,724 Issuance of common stock via employee stock purchase plan 17,100 — 902 — — 902 Issuance of common stock via equity incentive plan 359,315 — 6,990 — — 6,990 Policy holder contribution to surplus — — 2,758 — — 2,758 Net income — — — — 117,573 117,573 Balance at December 31, 2024 26,529,402 $ 3 $ 493,656 $ ( 26,845 ) $ 262,216 $ 729,030 See accompanying notes. 89 Table of Contents Palomar Holdings, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2024 2023 2022 Operating activities Net income $ 117,573 $ 79,201 $ 52,170 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation expense 16,685 14,913 11,624 Depreciation and amortization expense 5,106 4,503 4,115 Allowance for credit loss on fixed maturity securities — — 236 Net realized and unrealized losses (gains) on investments ( 4,568 ) ( 2,941 ) 7,529 Amortization of premium on fixed maturity securities ( 945 ) ( 9 ) 1,607 Deferred income tax expense 2,110 ( 2,826 ) ( 3,519 ) Changes in operating assets and liabilities: Accrued investment income ( 3,158 ) ( 1,505 ) ( 1,052 ) Premium receivable ( 43,752 ) ( 99,114 ) ( 74,846 ) Deferred policy acquisition costs ( 33,891 ) ( 4,250 ) ( 787 ) Reinsurance recoverables ( 118,365 ) ( 83,181 ) ( 36,298 ) Ceded unearned premiums ( 10,429 ) ( 61,724 ) ( 145,768 ) Prepaid expenses and other assets ( 15,704 ) ( 24,885 ) ( 4,017 ) Accounts payable and other accrued liabilities 29,178 15,666 5,426 Reserve for losses and loss adjustment expenses 161,107 110,860 58,049 Unearned premiums 144,589 125,789 186,649 Ceded premiums payable 8,426 35,615 108,667 Funds held under reinsurance treaty 14,450 2,739 ( 202 ) Income taxes payable ( 7,255 ) 7,255 — Net cash provided by operating activities 261,157 116,106 169,583 Investing activities Purchases of property and equipment ( 243 ) ( 15 ) ( 313 ) Capitalized software costs ( 5,803 ) ( 6,744 ) ( 5,623 ) Purchases of fixed maturity securities ( 601,410 ) ( 233,770 ) ( 382,114 ) Purchases of equity securities ( 202 ) ( 945 ) ( 10,518 ) Purchase of equity method investment — ( 3,000 ) — Sales and maturities of fixed maturity securities 301,847 120,285 242,726 Sales of equity securities 9,014 295 — Change in securities receivable or payable, net ( 1,475 ) 950 ( 950 ) Investments in limited partnerships ( 5,485 ) — — Acquisitions, net of cash acquired — ( 5,534 ) ( 15 ) Purchase of policy renewal rights ( 2,487 ) — — Net cash used in investing activities ( 306,244 ) ( 128,478 ) ( 156,807 ) Financing activities Net (payments on) proceeds from line of credit ( 52,600 ) 16,200 36,400 Proceeds from common stock issued via employee stock purchase plan 902 799 760 Proceeds from common stock issued via stock option exercises 6,990 1,237 2,272 Policy holder contribution to surplus 2,758 90 — Repurchase of common stock — ( 22,266 ) ( 34,415 ) Proceeds from stock offering, net of offering costs 115,724 — — Net cash provided by (used in) financing activities 73,774 ( 3,940 ) 5,017 Net increase in cash, cash equivalents and restricted cash 28,687 ( 16,312 ) 17,793 Cash, cash equivalents and restricted cash at beginning of period 51,852 68,164 50,371 Cash, cash equivalents and restricted cash at end of period $ 80,539 $ 51,852 $ 68,164 Supplementary cash flow information: Cash paid for income taxes $ 38,454 $ 21,124 $ 18,890 Cash paid for interest $ 1,048 $ 3,682 $ 704 90 Table of Contents The following table summarizes our cash and cash equivalents and restricted cash within the consolidated balance sheets (in thousands): December 31, 2024 December 31, 2023 Cash and cash equivalents $ 80,438 $ 51,546 Restricted cash 101 306 Cash and cash equivalents and restricted cash $ 80,539 $ 51,852 See accompanying notes. ​ 91 Table of Contents Palomar Holdings, Inc. and Subsidiaries Notes to Consolidated Financial Statements ​ 1. Summary of Operations and Basis of Presentation Summary of Operations Palomar Holdings, Inc. (the “Company”) is a Delaware incorporated insurance holding company that was founded in 2014. The Company has several wholly owned subsidiaries including an Oregon domiciled insurance company, Palomar Specialty Insurance Company (“PSIC”), a Bermuda based reinsurance company, Palomar Specialty Reinsurance Company Bermuda Ltd. (“PSRE”), an Arizona domiciled surplus lines insurance company, Palomar Excess and Surplus Insurance Company (“PESIC”), a California domiciled property and casualty insurance agency, Palomar Insurance Agency, DBA Palomar General Insurance Agency (“PGIA”), and a Delaware incorporated management company, Palomar Underwriters Exchange Organization, Inc. ("PUEO"). PSIC is a property and casualty insurance company domiciled in the state of Oregon. 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. PSRE is a Bermuda captive reinsurance company that has historically been used to reinsure certain premiums on a quota share basis exclusively for PSIC. PESIC is an Arizona domiciled surplus lines insurance company. PESIC is licensed in Arizona to write surplus lines policies across all the Company’s lines of business and was formed and began writing policies in 2020. PGIA is a property and casualty general insurance agency for PSIC, PESIC, and unaffiliated insurance carriers. As a general insurance agency, PGIA assists in developing insurance products, underwriting insurance policies, and receiving and disbursing funds from premium and loss transactions under contracts on behalf of insurance companies. PGIA earns commissions from the product development, marketing, and servicing of the insurance companies’ programs. PGIA also earns fee income from policyholder transactions. PUEO is a Delaware corporation that was formed in 2023 and provides management services to Laulima Exchange ("Laulima"), a Hawaii domiciled reciprocal exchange, as its attorney-in-fact. Laulima was formed in 2023 and is comprised of an unincorporated association of Hawaii homeowners ("subscribers") that agree to insure one another. The Company operates as an insurance holding company system and is subject to the insurance holding company laws of the States of Oregon and Arizona, the states in which PSIC and PESIC are domiciled. The Company is also commercially domiciled in California, making it subject to California insurance holding company laws. 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. 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 The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. The consolidated financial statements also include the accounts of Laulima, as Laulima is a variable interest entity ("VIE") for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. 92 Table of Contents Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. All revisions to accounting estimates are recognized in the period in which the estimates are revised. Significant estimates reflected in the Company’s consolidated financial statements include, but are not limited to, reserves for losses and loss adjustment expenses, reinsurance recoverables on unpaid losses, and the fair values of investments. 2. Significant Accounting Policies Cash and Cash Equivalents Cash and cash equivalents include time deposits and marketable securities with original maturities of three months or less at acquisition and are stated at cost, which approximates fair value. The Company maintains cash balances in federally insured financial institutions. Restricted Cash Restricted cash includes cash on deposit with reinsurance carriers. Restricted cash also includes cash held in a fiduciary capacity for the benefit of third -party insurance carriers. Investments All of the Company’s investments in fixed maturity securities are classified as available-for-sale and are carried at fair value. Investment income consists primarily of interest and dividends. Interest income is recognized on an accrual basis. Premiums and discounts on mortgage-backed securities and asset-backed securities are amortized or accrued using the prospective method which considers anticipated prepayments at the date of purchase. To the extent that the estimated lives of such securities change as a result of changes in estimated prepayment rates, the adjustments are included in net investment income using the prospective method. Dividend income is recognized on the ex-dividend date. Net investment income represents investment income, net of expenses. Unrealized gains and losses related to fixed maturity securities are included in accumulated other comprehensive income as a separate component of stockholders’ equity. Equity securities are carried at fair value with unrealized gains and losses included as a component of net income on the Company’s consolidated statement of income and comprehensive income. The Company uses the specific-identification method to determine the cost of fixed maturity securities sold and the first -in, first -out method for lots of equity securities sold. The Company has one investment in a limited liability company which is accounted for under the equity method of accounting whereby the investment carrying amount is adjusted in subsequent periods to reflect the Company's share of earnings or losses. 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. Factors considered in the review include the extent to which the fair value has been less than amortized cost, and current market interest rates and whether the unrealized loss is credit-driven or a result of changes in market interest rates. The Company also considers factors specific to the issuer including the general financial condition of the issuer, the issuers industry and future business prospects, any past failure of issuer to make scheduled interest or principal payments, and the payment structure of the investment and the issuers ability to make contractual payments on the investment. The Company also considers whether it intends to sell the security or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost. When assessing whether it intends to sell a fixed-maturity security or if it is likely to be required to sell a fixed-maturity security before recovery of its amortized cost, the Company evaluates facts and circumstances including, but not limited to, decisions to reposition the investment portfolio, potential sales of investments to meet cash flow needs, and potential sales of investments to capitalize on favorable pricing. 93 Table of Contents For fixed-maturity securities where a decline in fair value is below the amortized cost basis and the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, a credit-loss charge is recognized in net income based on the fair value of the security at the time of assessment. For fixed-maturity securities that the Company has the intent and ability to hold, the Company compares the estimated present value of the cash flows expected to be collected to the amortized cost of the security. The extent to which the estimated present value of the cash flows expected to be collected is less than the amortized cost of the security represents the credit-related portion of the impairment, which is recognized in net income through an allowance for credit losses. Any remaining decline in fair value represents the noncredit portion of the impairment, which is recognized in other comprehensive income. The Company reports accrued interest receivable as a component of accrued investment income on its consolidated balance sheet which is presented separately from available-for-sale securities. 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. Fair Value 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. The three -tier hierarchy of inputs is summarized in the three broad levels listed below: Level 1—Unadjusted quoted prices are available in active markets for identical investments as of the reporting date. Level 2—Pricing inputs are quoted prices for similar investments in active markets; quoted prices for identical or similar investments in inactive markets; or valuation based on models where the significant inputs are observable or can be corroborated by observable market data. Level 3—Pricing inputs into models are unobservable for the investment. The unobservable inputs require significant management judgment or estimation. To measure fair value, the Company obtains quoted market prices for its investment securities from its outside investment managers. If a quoted market price is not available, the Company uses prices of similar securities. The fair values obtained from the outside investment managers are reviewed for reasonableness and any discrepancies are investigated for final valuation. The fair value of the Company’s investments in fixed maturity securities is estimated using relevant inputs, including available market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. An Option Adjusted Spread model is also used to develop prepayment and interest rate scenarios. Industry standard models are used to analyze and value securities with embedded options or prepayment sensitivities. These fair value measurements are estimated based on observable, objectively verifiable market information rather than market quotes; therefore, these investments are classified and disclosed in Level 2 of the hierarchy. The fair value of the Company’s investments in equity securities is based on quoted prices available in active markets and classified and disclosed in Level 1 of the hierarchy. 94 Table of Contents Variable Interest Entities ("VIE") A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not participate in the gains and losses of the entity. The Company consolidates VIEs in which the Company is deemed the primary beneficiary. The primary beneficiary is the entity that has both ( 1 ) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE and ( 2 ) the power to direct the activities of the VIE that most significantly affect that entity’s economic performance. Concentration of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, fixed maturity securities and reinsurance recoverables. The Company places its cash and cash equivalents with high credit quality financial institutions and its fixed maturity securities in securities of the U.S. government, U.S. government agencies, and high credit quality issuers of debt securities. The Company evaluates the financial condition of its reinsurers and reinsures its business with highly rated reinsurers and sometimes requires letters of credit or retains funds from reinsurers (see Note 10 ). Premiums Receivable Premiums receivable represent amounts due from policyholders, insurance agents, or program administrators for policies written. Generally, premiums are collected prior to providing risk coverage, minimizing the Company’s exposure to credit risk. Premiums receivable are short-term in nature and due within a year. The Company has established an allowance for uncollectible premiums related to its credit risk, which it reviews on a quarterly basis and adjusts as appropriate. 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, 2024 and December 31, 2023 , and believes that all other amounts are collectable. Earned Premiums Gross premiums written are recorded at policy inception and are earned as revenue ratably over the term of the respective policies. Premiums written not yet recognized as revenue are reflected as unearned premiums on the balance sheet, or as advanced premiums if received prior to the policy effective date. Premiums written where cash is not yet received are recognized as premiums receivable. A premium deficiency is recognized if the sum of expected losses and loss adjustment expenses, unamortized acquisition costs, and policy maintenance costs exceeds the remaining unearned premiums. A premium deficiency would first be recognized by charging any unamortized acquisition costs to expense to the extent required to eliminate the deficiency. If the premium deficiency were greater than unamortized acquisition costs, a liability would be accrued for the excess deficiency. The Company does not consider anticipated investment income when determining if a premium deficiency exists. There was no premium deficiency at December 31, 2024 or 2023 . Deferred Policy Acquisition Costs The costs of successfully acquiring new business, principally commission expense and premium taxes, are deferred and amortized over the terms of the policies in force, net of any ceding commissions or fronting fees and are shown as acquisition expenses in the accompanying consolidated statements of income and comprehensive income. Commission and Other Income 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. Property and Equipment Property and equipment are capitalized and carried at cost less accumulated depreciation. Depreciation for property and equipment is calculated on a straight-line basis using useful lives of 3 to 5 years. Leasehold improvements and other fixed assets are capitalized and depreciated over the useful lives of the properties and equipment. Expenditure for maintenance and repairs are charged to operations as incurred. Upon disposition, the asset cost and related depreciation are removed from the accounts and the resulting gain or loss is included in the Company’s results of operations. 95 Table of Contents Capitalized Software Costs associated with the implementation of certain internal systems are capitalized and carried at capitalized cost less accumulated amortization and are included as a component of prepaid expenses and other assets on the Company’s consolidated balance sheet. Costs capitalized include internal personnel costs, external developer costs, and interest. The implementation costs relate to systems built on software which the Company purchases under a cloud computing arrangement and accounts for as a service contract. As such, capitalized costs are amortized over the term of the service contract. Intangible Assets and Goodwill Intangible assets consist of both finite and indefinite lived assets. 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. Goodwill was recognized as a result of a business acquisition during 2023. Intangible assets and goodwill are initially recognized and measured at fair value and are subsequently evaluated for impairment annually or more frequently if circumstances warrant. No impairments of intangible assets or goodwill were recognized for the years ended December 31, 2024 , 2023 or 2022 . Impairment of Long-Lived Assets Long-lived assets with finite lives are tested for impairment whenever recognized events or changes in circumstances indicate the carrying value of these assets may not be recoverable. If indicators of impairment are present, the fair value is calculated using estimated future cash flows expected to be generated from the use of those assets. An impairment loss is recognized only if the carrying amount of a long-lived asset or asset group is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. This assessment is based on the carrying amount of the asset or asset group at the date it is tested for recoverability. An impairment loss is measured as the amount by which the carrying amount of a long-lived asset or asset group exceeds its fair value. No impairments of long-lived assets were recognized for the years ended December 31, 2024 , 2023 or 2022 . Reserve for Losses and Loss Adjustment Expenses The reserve for unpaid losses and loss adjustment expenses includes estimates for unpaid claims and claim adjustment expenses on reported losses and estimates of losses incurred but not reported (“IBNR”), net of salvage and subrogation recoveries. The liability is based on individual claims, case reserves and other estimates reported by policyholders, as well as management estimates of ultimate losses and loss adjustment expenses. Inherent in the estimates of ultimate losses and loss adjustment expenses are expected trends in claims severity and frequency and other factors that could vary significantly as claims are settled. The Company’s estimates of ultimate losses and loss adjustment expenses are based in part upon the estimation of claims resulting from natural disasters such as hurricanes and earthquakes. Estimation by management of the ultimate losses and loss adjustment expenses resulting from catastrophic events is inherently difficult because of the potential severity of property catastrophe claims. Therefore, the Company uses both proprietary and commercially available models, as well as historic claims experience, for purposes of providing an estimate of ultimate losses and loss adjustment expenses. Reserves for IBNR are established in accordance with industry practice to provide for (i) the estimated amount of future loss payments on incurred claims not yet reported, and (ii) potential development on reported claims. IBNR reserves are estimated based on generally accepted actuarial reserving techniques that consider quantitative loss experience data and, where appropriate, qualitative factors. 96 Table of Contents Ultimate losses and loss adjustment expenses may vary materially from the amounts provided in the consolidated financial statements. Estimates of unpaid losses and loss adjustment expenses are reviewed regularly and, as experience develops and new information becomes known, the liabilities are adjusted as necessary. Such adjustments, if any, are reflected in operations in the period in which they become known and are accounted for as changes in estimates. The Company does not discount its liability for unpaid losses and loss adjustment expenses. Reinsurance The Company purchases excess of loss and quota share reinsurance to protect it against the impact of losses. The Company also writes premiums under fronting agreements where it cedes the majority of premium and risk to reinsurers in exchange for a fronting fee. Reinsurance premiums, commissions, and ceded unearned premiums are accounted for on bases consistent with the underlying terms of the reinsurance contracts and in proportion to the amount of insurance protection provided. The Company receives ceding commissions and fronting fees in connection with quota share and fronting reinsurance contracts. The ceding commissions and fronting fees are capitalized and amortized as a reduction of acquisition expenses. Amounts applicable to ceded unearned premiums are reported as assets in the accompanying consolidated balance sheets. Premiums earned and losses and loss adjustment expenses incurred are stated in the accompanying consolidated statements of income and comprehensive income net of amounts ceded to reinsurers. Reinsurance recoverables represent balances due to the Company from its reinsurers for paid and unpaid losses and loss adjustment expenses. The Company is exposed to credit losses from reinsurers being unable to meet their obligations. The Company evaluates the financial condition of potential reinsurers and reinsures its business with highly rated reinsurers with a rating of “A-“ (Excellent) (Outlook Stable) or better from A.M. Best. Reinsurers who do not meet the Company’s rating criteria are required to post collateral. The Company reviews credit quality of its reinsurers on a quarterly basis. The Company’s reinsurance contracts also include special termination provisions that allow the Company to cancel and replace any participating reinsurer that is downgraded below a rating of “A−” from A.M. Best, or whose surplus drops by more than 20%. 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 Stock-based compensation expense is recognized on a straight-line basis over the vesting period of awards. The Company does not apply a forfeiture rate to unvested awards and accounts for forfeitures as they occur. For stock option grants, the fair value of awards is estimated using the Black Scholes Model. The fair value of restricted stock units is determined using the closing price of the Company's common stock on the grant date. The fair value of performance stock units containing employee service or company financial performance-based conditions is determined using the closing price of the Company's common stock on the grant date. The fair value of performance stock units containing conditions based on performance of the Company’s stock is determined using a Monte Carlo simulation. All stock-based compensation is included in other underwriting expenses in the Company’s consolidated statements of income and comprehensive income. ​ Income Taxes The Company is taxed as a property/casualty insurer for federal income tax purposes. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and the tax bases of assets and liabilities, using enacted tax rates expected to be in effect during the year in which the basis differences reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. 97 Table of Contents The Company recognizes the tax benefit of uncertain tax positions where the position is more likely than not to be sustained assuming examination by taxing authorities. Based on its evaluation for the tax years ended December 31, 2024 and 2023 , the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. The Company recognizes interest and penalties related to uncertain tax positions, if any, as a component of income tax expense. The Company has not been assessed interest or penalties by any major tax jurisdictions for the respective tax years ended December 31, 2024 , 2023 , or 2022 . Earnings Per Share Basic earnings per share is calculated by dividing net income by the weighted-average common shares outstanding for the period. Diluted earnings per share reflects the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method. When inclusion of additional common share equivalents increases the earnings per share or reduces the loss per share, the effect on earnings per share is anti-dilutive, and the diluted net earnings or net loss per share is computed excluding these common share equivalents. Recently adopted accounting pronouncements In November 2023, the FASB issued ASU No. 2023 - 07, Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, allowing financial statement users to better understand the components of a segment's profit or loss to assess potential future cash flows for each reportable segment and the entity as a whole. The amendments expand a public entity's segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"), clarifying when an entity may report one or more additional measures to assess segment performance, requiring enhanced interim disclosures, providing new disclosure requirements for entities with a single reportable segment, and requiring other new disclosures. 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. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements. Income Taxes In December 2023, the FASB issued ASU No. 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures. ASU 2023 - 09 requires public business entities to disclose additional information with respect to the reconciliation of the effective tax rate to the statutory rate. Additionally, public business entities will need to disaggregate federal, state and foreign taxes paid in their financial statements. ASU 2023 - 09 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements. 3. Investments The Company’s available-for-sale investments are summarized as follows: December 31, 2024 Amortized Cost or Cost ​Gross Unrealized Gains ​Gross Unrealized Losses Allowance for Credit Losses Fair Value (in thousands) Fixed maturities: ​ ​ ​ ​ ​ U.S. Governments $ 33,449 $ 6 $ ( 649 ) $ — $ 32,806 U.S. States, Territories, and Political Subdivisions 10,606 29 ( 857 ) — 9,778 Special revenue excluding mortgage/asset-backed securities 30,283 85 ( 3,734 ) — 26,634 Corporate and other 492,395 1,689 ( 18,349 ) ( 244 ) 475,491 Mortgage/asset-backed securities 406,597 1,408 ( 13,668 ) — 394,337 Total available-for-sale investments $ 973,330 $ 3,217 $ ( 37,257 ) $ ( 244 ) $ 939,046 ​ ​ 98 Table of Contents December 31, 2023 Amortized Cost or Cost ​Gross Unrealized Gains ​Gross Unrealized Losses Allowance for Credit Losses Fair Value (in thousands) Fixed maturities: ​ ​ ​ ​ ​ U.S. Governments $ 40,836 $ — $ ( 1,416 ) $ — $ 39,420 U.S. States, Territories, and Political Subdivisions 10,641 100 ( 839 ) — 9,902 Special revenue excluding mortgage/asset-backed securities 32,513 147 ( 3,149 ) — 29,511 Corporate and other 316,590 1,750 ( 17,197 ) ( 904 ) 300,239 Mortgage/asset-backed securities 274,550 1,879 ( 11,702 ) — 264,727 Total available-for-sale investments $ 675,130 $ 3,876 $ ( 34,303 ) $ ( 904 ) $ 643,799 ​ Security holdings in an unrealized loss position As of December 31, 2024 , the Company held 595 fixed maturity securities in an unrealized loss position with a total estimated fair value of $ 664.0 million and total gross unrealized losses of $ 37.3 million. As of December 31, 2023 , the Company held 483 fixed maturity securities in an unrealized loss position with a total estimated fair value of $ 451.0 million and total gross unrealized losses of $ 34.3 million. The aggregate fair value and gross unrealized losses of the Company’s investments aggregated by investment category and the length of time these individual securities have been in a continuous unrealized loss position as of December 31, 2024 and 2023 , are as follows: ​ Less Than 12 Months More Than 12 Months Total ​ Fair Unrealized Fair Unrealized Fair Unrealized December 31, 2024 Value Losses Value Losses Value Losses (in thousands) Fixed maturity securities: U.S. Governments $ 16,507 $ ( 65 ) $ 14,291 $ ( 584 ) $ 30,798 $ ( 649 ) U.S. States, Territories, and Political Subdivisions 2,614 ( 419 ) 5,076 ( 438 ) 7,690 ( 857 ) Special revenue excluding mortgage/asset-backed securities 2,182 ( 426 ) 21,733 ( 3,308 ) 23,915 ( 3,734 ) Corporate and other 181,179 ( 4,996 ) 176,531 ( 13,353 ) 357,710 ( 18,349 ) Mortgage/asset-backed securities 152,287 ( 2,820 ) 91,572 ( 10,848 ) 243,859 ( 13,668 ) Total $ 354,769 $ ( 8,726 ) $ 309,203 $ ( 28,531 ) $ 663,972 $ ( 37,257 ) ​ ​ ​ Less Than 12 Months More Than 12 Months Total ​ Fair Unrealized Fair Unrealized Fair Unrealized December 31, 2023 Value Losses Value Losses Value Losses ​ (in thousands) Fixed maturity securities: ​ ​ ​ ​ ​ ​ U.S. Governments $ 738 $ ( 1 ) $ 38,063 $ ( 1,415 ) $ 38,801 $ ( 1,416 ) U.S. States, Territories, and Political Subdivisions — — 6,196 ( 839 ) 6,196 ( 839 ) Special revenue excluding mortgage/asset-backed securities — — 26,736 ( 3,149 ) 26,736 ( 3,149 ) Corporate and other 28,872 ( 480 ) 204,034 ( 16,717 ) 232,906 ( 17,197 ) Mortgage/asset-backed securities 29,334 ( 245 ) 117,016 ( 11,457 ) 146,350 ( 11,702 ) Total $ 58,944 $ ( 726 ) $ 392,045 $ ( 33,577 ) $ 450,989 $ ( 34,303 ) ​ 99 Table of Contents The Company reviewed the above securities at each balance sheet date to consider whether it was necessary to recognize a credit loss related to any of these securities. An allowance for credit losses of $ 0.2 million and $ 0.9 million was recorded pertaining to one investment security as of December 31, 2024 and 2023 , respectively. For the remaining securities, the Company determined that the fixed maturity securities’ unrealized losses were primarily the result of the interest rate environment and not the credit quality of the issuers. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before the recovery of their amortized cost basis. Contractual maturities of available-for-sale fixed maturity securities The amortized cost and fair value of fixed maturity securities at December 31, 2024 , by contractual maturity, are shown below. ​ Amortized Fair ​ Cost Value ​ (in thousands) Due within one year $ 76,696 $ 76,089 Due after one year through five years 195,931 190,627 Due after five years through ten years 192,924 183,560 Due after ten years 101,182 94,433 Mortgage and asset-backed securities 406,597 394,337 ​ $ 973,330 $ 939,046 ​ ​ Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations. Change in unrealized gains (losses) of investments The following table presents the change in available-for-sale gross unrealized gains or losses by investment type: ​ Year Ended December 31, ​ 2024 2023 2022 ​ (in thousands) Change in net unrealized gains (losses) ​ ​ ​ Fixed maturities $ ( 2,953 ) $ 15,185 $ ( 53,076 ) Net increase (decrease) $ ( 2,953 ) $ 15,185 $ ( 53,076 ) ​ Net investment income summary Net investment income is summarized as follows: ​ Year Ended December 31, ​ 2024 2023 2022 ​ (in thousands) Interest income $ 35,433 $ 23,349 $ 13,631 Dividend income 1,075 871 739 Investment expense ( 684 ) ( 515 ) ( 493 ) Net investment income $ 35,824 $ 23,705 $ 13,877 ​ ​ 100 Table of Contents Net realized and unrealized investment gains and losses The following table presents net realized and unrealized investment gains and losses: ​ Year Ended ​ December 31, ​ 2024 2023 2022 ​ (in thousands) Realized gains: Gains on sales of fixed maturity securities $ 179 $ 89 $ 14 Gains on sales of equity securities 20 — — Total realized gains 199 89 14 Realized losses: Losses on sales of fixed maturity securities ( 2,489 ) ( 32 ) ( 2,340 ) Losses on sales of equity securities — — — Total realized losses ( 2,489 ) ( 32 ) ( 2,340 ) Net realized investment gains (losses) ( 2,290 ) 57 ( 2,326 ) Change in allowance for credit losses 659 ( 667 ) — Net unrealized gains (losses) on equity securities 6,161 3,933 ( 5,203 ) Net unrealized losses on equity method investment ( 340 ) ( 382 ) — Net unrealized gains on other investments 378 Net realized and unrealized gains (losses) on investments $ 4,568 $ 2,941 $ ( 7,529 ) ​ Proceeds from the sale of fixed maturity securities were $ 6.3 million, $ 10.1 million and $ 19.7 million for the years ended December 31, 2024 , 2023 and 2022 , respectively. The Company places securities on statutory deposit with certain state agencies to retain the right to do business in those states. These securities are included in available-for-sale investments on the consolidated balance sheets. 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. 4. Fair value measurements The following tables present the Company’s fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 and 2023 : December 31, 2024 Level 1 Level 2 Level 3 Total ​ (in thousands) Assets: ​ ​ ​ ​ Fixed maturity securities ​ ​ ​ ​ U.S. Governments $ — $ 32,806 $ — $ 32,806 U.S. 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 Total assets $ 121,068 $ 939,046 $ — $ 1,060,114 ​ 101 Table of Contents December 31, 2023 Level 1 Level 2 Level 3 Total ​ (in thousands) Assets: ​ ​ ​ ​ Fixed maturity securities ​ ​ ​ ​ U.S. Governments $ — $ 39,420 $ — $ 39,420 U.S. 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 51,852 — — 51,852 Total assets $ 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. 5. Policy Acquisition Costs The following tables present the policy acquisition costs deferred and amortized over the terms of the policies in force: ​ Year ended December 31, ​ 2024 2023 2022 ​ (in thousands) Deferred Policy Acquisition Costs: ​ ​ ​ Balance, beginning of year $ 60,990 $ 56,740 $ 55,953 Additions to deferred balance: ​ ​ ​ Direct commissions 318,474 220,822 209,061 Ceding commissions and fronting fees ( 159,925 ) ( 123,911 ) ( 109,302 ) Premium taxes 15,491 13,690 10,166 Total net additions 174,040 110,601 109,925 Amortization of net policy acquisition costs ( 140,149 ) ( 106,351 ) ( 109,138 ) Balance, end of year $ 94,881 $ 60,990 $ 56,740 Acquisition expenses: Amortization of net policy acquisition costs $ 140,149 $ 106,351 $ 109,138 Period costs 9,508 1,394 1,633 Total Acquisition expenses $ 149,657 $ 107,745 $ 110,771 ​ 102 Table of Contents 6. Intangible Assets and Goodwill Intangible assets consist of the following: ​ December 31, ​ 2024 2023 ​ (in thousands) Goodwill: Acquisitions $ 3,755 $ 3,755 Indefinite-lived intangibles: State insurance licenses $ 744 $ 744 Finite-lived intangibles: Customer relationships 14,288 11,803 Accumulated amortization on finite-lived intangibles ( 5,545 ) ( 3,987 ) Total intangible assets $ 13,242 $ 12,315 ​ State insurance licenses consist of licenses acquired at the inception of PSIC. ​ 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 . ​ 7. Capitalized Assets Capitalized software is included as a component of prepaid expenses and other assets in the Company’s consolidated balance sheet. The balances are as follows: Accumulated Net December 31, 2024 Cost Amortization Book Value ​ (in thousands) Capitalized Software $ 30,690 $ ( 12,207 ) $ 18,483 Accumulated Net December 31, 2023 Cost Amortization Book Value ​ (in thousands) Capitalized Software $ 25,356 $ ( 9,079 ) $ 16,277 ​ ​ Amortization expense relating to capitalized software for the years ended December 31, 2024 , 2023 and 2022 was $ 3.4 million, $ 2.8 million, and $ 2.6 million, respectively. ​ Property and Equipment consists of the following: Accumulated Net December 31, 2024 Cost Depreciation Book Value ​ (in thousands) Leasehold improvements $ 879 $ ( 879 ) $ — Computer hardware 467 ( 332 ) 135 Office equipment and furniture 917 ( 623 ) 294 Total $ 2,263 $ ( 1,834 ) $ 429 ​ Accumulated Net December 31, 2023 Cost Depreciation Book Value ​ (in thousands) Leasehold improvements $ 879 $ ( 811 ) $ 68 Computer hardware 418 ( 272 ) 146 Office equipment and furniture 724 ( 565 ) 159 Total $ 2,021 $ ( 1,648 ) $ 373 ​ ​ 103 Table of Contents Depreciation expense for the years ended December 31, 2024 , 2023 and 2022 was immaterial. ​ 8. Leases ​ The Company has operating leases for office space used to conduct its insurance operations and administration activities. Operating lease right-of-use (“ROU”) assets are a component of prepaid expenses and other assets and operating lease liabilities are included in accounts payable and other accrued liabilities in the Company's consolidated balance sheets. ​ The Company determines whether an arrangement is a lease at its inception. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. To determine the present value of lease payments, the Company uses its incremental borrowing rate, which it calculates based on information available at the lease commencement date. For certain leases that contain options to extend, the options are included in lease liabilities only if the company is reasonably certain the option will be exercised. Variable lease costs such as parking are expensed in the period the obligation is incurred and are not included in the Company’s operating lease liability. The Company's lease agreements do not contain any residual value guarantees. ​ Operating lease costs for the years ended December 31, 2024 , 2023 and 2022 were $ 0.8 million, $ 0.8 million and $ 0.8 million, respectively. Operating lease costs are comprised of rental expense for operating leases. Lease expense is recognized on a straight-line basis over the lease term and is included as a component of other underwriting expenses in the Company’s consolidated statements of income and comprehensive income. ​ The following tables provide supplementary information about the Company’s leases: Year ended December 31, 2024 ($ in thousands) Operating cash outflows from operating leases $ 882 ​ December 31, 2024 ($ in thousands) Operating lease ROU assets $ 7,639 Operating lease liabilities $ 7,764 Weighted-average remaining lease term on operating leases (years) 9.2 Weighted-average discount rate on operating leases 5.1 % ​ ​ Future minimum lease payments as of December 31, 2024 are as follows: Years ending December 31, ($ in thousands) 2025 1,050 2026 948 2027 856 2028 985 2029 1,014 Thereafter 5,053 Total future minimum lease payments $ 9,906 Less: imputed interest ( 2,142 ) Total operating lease liability $ 7,764 ​ ​ 104 Table of Contents 9. Reserve for Losses and Loss Adjustment Expenses Loss and loss adjustment expenses reserves represent management’s best estimate of the ultimate cost of all reported and unreported losses incurred for the years ended December 31, 2024 , 2023 , and 2022 . The Company does not discount loss and loss adjustment expense reserves. The reserves for unpaid losses and loss adjustment expenses are estimated using individual case-basis valuations and statistical analyses. Those estimates are subject to the effects of trends in loss severity and frequency. In addition to case reserves, which are generally based on reported claims, the Company establishes reserves for incurred but not reported claims (“IBNR”). IBNR reserves are developed to provide for (i) the estimated amount of future loss payments on incurred claims not yet reported, and (ii) potential development on reported claims. IBNR reserves are estimated based on generally accepted actuarial reserving techniques that consider quantitative loss experience data and, where appropriate, qualitative factors. 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. The Company regularly reviews its reserve estimates and adjusts them as necessary as experience develops or as new information becomes known. Such adjustments are included in current operations. During the loss settlement period, if there are indications that claims frequency or severity exceeds initial expectations, the Company generally increases its reserves for losses and loss adjustment expenses. Conversely, when claims frequency and severity trends are more favorable than initially anticipated, the Company generally reduces its reserves for losses and loss adjustment expenses once it has sufficient data to confirm the validity of the favorable trends. Even after such adjustments, the ultimate liability may exceed or be less than the revised estimates. Accordingly, the ultimate settlement of losses and the related loss adjustment expenses may vary significantly from the estimate included in the Company’s consolidated financial statements. Although considerable variability is inherent in such estimates, management believes the reserves for losses and loss adjustment expenses are adequate. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes known. Any adjustments to estimates are recorded in the current period. 105 Table of Contents The following table provides a reconciliation of the beginning and ending reserve balances for losses and LAE on a net of reinsurance basis to the gross amounts reported in the accompanying consolidated balance sheets: ​ Year Ended December 31, ​ 2024 2023 2022 ​ (in thousands) Reserve for losses and loss adjustment expense, net of reinsurance recoverables at beginning of period $ 97,653 $ 77,520 $ 45,419 Add: Incurred losses and loss adjustment expenses, net of reinsurance, related to: Current year 137,797 70,363 76,289 Prior years ( 3,038 ) 2,229 2,383 Total incurred 134,759 72,592 78,672 Deduct: Loss and loss adjustment expense payments, net of reinsurance, related to: Current year 43,582 19,631 21,802 Prior years 33,531 32,828 24,769 Total payments 77,113 52,459 46,571 Reserve for losses and loss adjustment expense net of reinsurance recoverables at end of period 155,299 97,653 77,520 Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period 348,083 244,622 153,895 Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period $ 503,382 $ 342,275 $ 231,415 ​ 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. 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. For the purpose of defining claims frequency, the number of reported claims is by loss occurrence and includes claims that do not result in a liability or payment associated with them. The following tables show information about the Company’s incurred and paid loss development as of December 31, 2024, net of reinsurance, as well as cumulative claim frequency, the total of IBNR liabilities included within the net incurred loss amounts and the average historical claims duration as of December 31, 2024. The loss information has been disaggregated so that losses that are expected to develop in a similar manner are grouped together. The information provided herein about incurred and paid accident year claims development for the years ended December 31, 2024 and prior is presented as unaudited supplementary information. 106 Table of Contents Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Property Insurance (in thousands) ( 1 ) As of December 31, 2024 Year Ended December 31, Incurred but Not Reported Cumulative Number of Accident Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Liabilities Claims 2015 $ 2,678 $ 2,504 $ 2,329 $ 2,307 $ 2,320 $ 2,313 $ 2,316 $ 2,304 $ 2,324 $ 2,301 $ - $ 582 2016 $ 7,450 7,127 6,972 7,090 7,075 7,062 7,125 5,730 5,730 - 1,384 2017 12,425 10,893 10,644 10,652 10,561 10,668 12,339 11,978 - 3,623 2018 8,163 8,103 7,939 7,950 7,941 8,010 7,978 - 1,197 2019 4,575 4,223 3,947 4,293 4,350 4,365 - 1,689 2020 61,434 57,248 59,565 56,008 56,859 33 5,018 2021 29,836 25,158 25,733 27,902 832 5,254 2022 42,887 44,943 42,358 3,249 4,162 2023 40,921 36,587 6,071 4,703 2024 77,421 32,641 8,069 Total $ 273,479 $ 42,826 $ 35,681 Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Property Insurance (in thousands) ( 1 ) ​ ​ Year Ended December 31, Accident Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015 $ 1,125 $ 1,817 $ 2,109 $ 2,241 $ 2,300 $ 2,309 $ 2,316 $ 2,304 $ 2,324 $ 2,300 2016 $ 4,823 6,420 6,801 7,051 7,072 7,062 7,125 5,729 5,729 2017 9,102 10,719 10,639 10,640 10,560 10,636 12,339 11,978 2018 4,409 7,889 7,931 7,943 7,943 7,999 7,978 2019 2,179 3,510 3,757 4,170 4,345 4,365 2020 31,862 49,222 55,504 55,619 56,712 2021 11,355 22,500 24,408 26,466 2022 12,647 30,042 35,271 2023 14,226 26,378 2024 32,850 Total $ 210,027 Reserve for losses and loss adjustment expense, net of reinsurance $ 63,452 ( 1 ) Data presented for these calendar years is required supplementary information, which is unaudited. Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Property Insurance (unaudited) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 (2) Year 9 Year 10 (2) Payout percentage 52.22 % 32.26 % 6.89 % 3.90 % 1.36 % 0.40 % 3.84 % ( 9.30 )% 0.44 % ( 1.05 )% ( 2 ) Negative payout percentages are due to timing of reinsurance payments, allocations of reinsurance between different lines of business based on actual results, and allocation of reinsurance to different periods for reinsurance treaties in effect for multiple periods. These are primarily associated with larger recoveries from catastrophe events in earlier years of operation. 107 Table of Contents Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Other Liability Occurrence (in thousands) ( 1 ) As of December 31, 2024 Incurred but Not Reported Cumulative Number of Accident Year 2021 2022 2023 2024 Liabilities Claims Prior $ 109 $ 35 $ 46 $ 47 $ — 7 2021 2,138 1,641 2,172 2,428 1,063 27 2022 7,160 8,755 9,425 3,867 74 2023 5,005 8,335 3,235 111 2024 21,811 20,011 267 Total $ 42,046 $ 28,176 486 Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Other Liability Occurrence (in thousands) ( 1 ) Accident Year 2021 2022 2023 2024 Prior $ 109 $ 35 $ 46 $ 47 2021 141 347 653 906 2022 746 1,603 3,445 2023 372 1,146 2024 869 Total $ 6,413 Reserve for losses and loss adjustment expense, net of reinsurance $ 35,633 ( 1 ) Data presented for these calendar years is required supplementary information, which is unaudited. Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Other Liability Occurrence (unaudited) Year 1 Year 2 Year 3 Year 4 Payout percentage 5.54 % 8.96 % 16.07 % 10.40 % Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Other Liability Claims Made (in thousands) ( 1 ) As of December 31, 2024 Incurred but Not Reported Cumulative Number of Accident Year 2020 2021 2022 2023 2024 Liabilities Claims Prior $ 48 $ 26 $ 7 $ — $ 286 $ 285 7 2021 3,429 3,299 2,928 2,252 1,231 109 2022 8,871 8,873 7,674 4,157 430 2023 12,580 12,110 7,144 956 2024 18,503 10,785 1,324 Total $ 40,825 $ 23,602 2,826 Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Other Liability Claims Made (in thousands) ( 1 ) Accident Year 2020 2021 2022 2023 2024 Prior $ — $ — $ — $ — $ 1 2021 62 221 449 1,009 2022 481 1,584 2,776 2023 1,382 3,310 2024 4,168 Total $ 11,264 Reserve for losses and loss adjustment expense, net of reinsurance $ 29,561 ( 1 ) Data presented for these calendar years is required supplementary information, which is unaudited. Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Other Liability Claims Made (unaudited) Year 1 Year 2 Year 3 Year 4 Payout percentage 10.74 % 12.45 % 12.83 % 24.85 % 108 Table of Contents The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses in the consolidated balance sheets is as follows: 2024 (in thousands) Reserve for losses and loss adjustment expense, net of reinsurance recoverables: Property $ 63,452 Other liability occurrence 35,633 Other liability claims made 29,561 Reinsurance - Nonproportional assumed property (1) 12,018 Other 14,635 Total reserve for losses and loss adjustment expense, net of reinsurance recoverables 155,299 Reinsurance recoverable on unpaid claims: Property $ 97,583 Other liability occurrence 20,074 Other liability claims made 73,875 Other 156,551 Total reinsurance recoverable on unpaid claims 348,083 Total reserve for losses and loss adjustment expenses $ 503,382 ( 1 ) Reflects the Company’s share of Loss and Loss Adjustment Expense related to non-proportional assumed reinsurance business. 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 share arrangement. The Company does not use claim frequency information in the determination of loss reserves or for other internal purposes. Based on these considerations, the Company does not believe providing claims frequency information is practicable as it relates to this line of business. 10. Reinsurance The Company utilizes reinsurance in order to limit its exposure to losses and enable it to underwrite policies with sufficient limits to meet policyholder needs. The Company primarily utilizes excess of loss (XOL) and quota share reinsurance to protect against catastrophe and attritional losses. The Company also writes premiums under fronting agreements, whereby the majority of premium and risk is ceded to reinsurers and the Company receives a fronting fee. 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, 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. hurricane events. In a quota share agreement, the Company transfers, or cedes, a portion of its premiums to reinsurers and, in return, the reinsurer must share an agreed upon portion of losses and pay a ceding commission to the Company. In a fronting agreement, the Company writes premium and then cedes the majority of the premium and risk in exchange for a fronting fee, which is the primary source of profit in the arrangement. The following table shows ceded written premiums under fronting and quota share arrangements by line of business for the years ended December 31, 2024 , 2023 and 2022 : Year Ended December 31, 2024 2023 2022 (in thousands) Fronting $ 312,173 $ 339,376 $ 237,285 Crop 109,975 12,110 — Inland Marine and Other Property 103,863 108,409 84,045 Casualty 86,120 36,677 23,398 Earthquake 42,466 29,708 23,398 Total $ 654,597 $ 526,280 $ 368,126 ​ 109 Table of Contents The Company recognizes ceded unearned premiums related to quota share agreements as an asset on its consolidated balance sheets. As of December 31, 2024 and 2023 , ceded unearned premiums totaled $ 276.2 million and $ 265.8 million, respectively. 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, 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. Ltd. (“Torrey Pines Re Pte.”). Torrey Pines Re Pte. 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, 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, 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. The effect of reinsurance on premiums written and earned and on losses and LAE incurred for the years ended December 31, 2024 , 2023 and 2022 , is as follows: 2024 2023 2022 Written Earned Written Earned Written Earned (in thousands) Premiums Written and Earned: Direct $ 1,403,383 $ 1,301,901 $ 1,083,804 $ 959,614 $ 816,387 $ 628,973 Assumed 138,578 95,468 57,754 56,107 65,481 66,299 Ceded ( 897,111 ) ( 886,682 ) ( 731,531 ) ( 669,808 ) ( 524,575 ) ( 378,806 ) Net $ 644,850 $ 510,687 $ 410,027 $ 345,913 $ 357,293 $ 316,466 2024 Losses LAE Total (in thousands) Losses and LAE Incurred: Direct $ 367,276 $ 75,301 $ 442,577 Assumed 46,866 4,930 51,796 Ceded ( 305,336 ) ( 54,278 ) ( 359,614 ) Net $ 108,806 $ 25,953 $ 134,759 2023 Losses LAE Total (in thousands) Losses and LAE Incurred: Direct $ 228,441 $ 60,834 $ 289,275 Assumed 19,799 1,789 21,588 Ceded ( 186,706 ) ( 51,565 ) ( 238,271 ) Net $ 61,534 $ 11,058 $ 72,592 110 Table of Contents 2022 Losses LAE Total (in thousands) Losses and LAE Incurred: Direct $ 133,517 $ 38,004 $ 171,521 Assumed 23,574 5,998 29,572 Ceded ( 91,261 ) ( 31,159 ) ( 122,421 ) Net $ 65,829 $ 12,843 $ 78,672 The ceding of insurance does not legally discharge the Company from its primary liability for the full amount of the policy coverage, and therefore the Company will be required to pay the loss and bear collection risk if the reinsurer fails to meet its obligations under the reinsurance agreement. To minimize exposure to significant losses from reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk. To reduce credit exposure to reinsurance recoverable balances, the Company obtains acceptable forms of collateral from certain reinsurers that are not authorized as reinsurers under U.S. state insurance regulations. In addition, under the terms of its reinsurance contracts, the Company may retain funds due from reinsurers as security for those recoverable balances. As of December 31, 2024 and 2023 , the Company had retained $ 27.9 million and $ 13.4 million in funds from reinsurers, respectively. The Company is able to use the funds in the ordinary course of its business. The funds are held in cash and cash equivalents and investments with an offsetting liability on the accompanying consolidated balance sheets. For the year ended December 31, 2024 , reinsurance premiums ceded to the Company’s three largest reinsurers totaled $ 125.9 million, $ 67.9 million and $ 61.7 million, representing 28.5 % of the total balance. For the year ended December 31, 2023 , reinsurance premiums ceded to the Company’s three largest reinsurers totaled $ 152.4 million, $ 65.9 million and $ 47.4 million, representing 36.3 % of the total balance. For the year ended December 31, 2022 , reinsurance premiums ceded to the Company’s three largest reinsurers totaled $ 24.7 million, $ 22.9 million and $ 18.4 million, representing 23.9 % of the total balance. At December 31, 2024 reinsurance recoverable on unpaid losses by the Company’s three largest reinsurers were $ 137.0 million, $ 26.9 million and $ 24.4 million representing 47.7 % of the total balance. At December 31, 2023 reinsurance recoverable on unpaid losses by the Company’s three largest reinsurers were $ 69.5 million, $ 29.8 million and $ 25.5 million representing 45.7 % of the total balance. The Company seeks reinsurers that have an A.M. best rating of A− (excellent) or better or requires them to post collateral. 11. Credit Agreements U.S. Bank Credit Agreement ​ In December 2021, the Company entered into a Credit Agreement (the “Credit Agreement”) with certain lenders which provides a revolving credit facility of up to $ 100.0 million (the “Revolving Loan”). The maturity of the facility is December 8, 2026. The Revolving Loan may be either a SOFR rate loan or a base rate loan, at the Company’s discretion. The Revolving Loan may be prepaid in full or in part at any time with no prepayment premium and may be reduced in full or in part at any time upon prior notice. Interest on the Revolving Loan accrues on each SOFR rate loan at the applicable SOFR (as defined in the Credit Agreement) plus 1.75 % and on each base rate loan at the applicable Alternate Base Rate (as defined in the Credit Agreement) plus (ii) 0.75 %. In addition, the Company paid a commitment fee of $ 0.3 million upon closing of the Credit Agreement and must pay an unused line fee of 0.25 % per annum on any unborrowed amount under the Credit Agreement. ​ The Company’s obligations under the Credit Agreement are unsecured with a negative pledge against all assets of Palomar and its subsidiaries as described in the Credit Agreement. The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, financial covenants, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. ​ 111 Table of Contents The financial covenants in the Credit agreement require the Company not to exceed a maximum leverage ratio and maintain a minimum net worth at the end of each quarter. The Company’s 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 AM Best Financial Strength rating. As of December 31, 2024 , the Company was in compliance with all covenants. ​ The Credit Agreement provides for events of default customary for revolving loans of this type, including but not limited to non-payment, breaches, or defaults in the performance of covenants, insolvency, bankruptcy and the occurrence of a material adverse effect on Palomar. During the existence of an event of default, all outstanding amounts of the Revolving Loan shall bear interest at a rate per annum equal to the rate otherwise applicable thereto plus 2.00 %. ​ As of December 31, 2024 and 2023 , there were no outstanding borrowings under this Credit Agreement. For the years ended December 31, 2024 and 2023 , the Company incurred $ 0.3 million and $ 1.0 million, respectively, of interest related to borrowings and amortization of fees associated with the credit agreement. FHLB Line of Credit ​ The Company’s PSIC subsidiary is a member of the Federal Home Loan Bank of San Francisco (“FHLB”). Membership in the FHLB provides PSIC access to collateralized advances, which can be drawn for general corporate purposes and used to enhance liquidity management. All borrowings are fully secured by a pledge of specific investment securities of PSIC and the borrowing capacity is currently equal to 10 % of PSIC’s statutory admitted assets. All advances have a predetermined term and the interest rate varies based on the term of the advance. 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 . As of December 31, 2023 , the Company had $ 52.6 million of borrowings outstanding through the FHLB line of credit. Interest expense on the FHLB Line of Credit was $ 2.8 million for the year ended December 31, 2023 . 12. Stockholders ’ Equity As of December 31, 2024 and December 31, 2023 , the Company has 5,000,000 preferred shares authorized with a par value of $ 0.0001 and no preferred shares issued and outstanding. As of December 31, 2024 and December 31, 2023 , the Company has 500,000,000 common shares authorized and 26,529,402 and 24,772,987 common shares issued and outstanding, respectively, with a par value of $0.0001 . Additional paid in capital is $ 493.7 million as of December 31, 2024 and $ 350.6 million as of December 31, 2023 . 112 Table of Contents Common stock reserved for future issuance consists of the following as of December 31, 2024 : Stock options outstanding under 2019 Equity Incentive Plan 588,385 Restricted stock units outstanding under 2019 Equity Incentive Plan 320,411 Performance stock units outstanding under 2019 Equity Incentive Plan 460,450 Shares authorized for future issuance under 2019 Equity Incentive Plan 3,673,297 Shares authorized for future issuance under 2019 Employee Stock Purchase Plan 1,353,670 Total 6,396,213 ​ The Company does not maintain a treasury stock account and issues new shares to settle employee stock purchases, exercises of stock options, and vestings of other types of equity awards. The below table summarizes the Company’s stock-based compensation expense for each period presented: ​ Year ended December 31, ​ 2024 2023 2022 ​ (in thousands) Stock-Based Compensation Expense $ 16,685 $ 14,913 $ 11,624 ​ Stock-based compensation expense is recognized on a straight-line basis over the vesting period of awards. The Company does not apply a forfeiture rate to unvested awards and accounts for forfeitures as they occur. All stock-based compensation is included in other underwriting expenses in the Company’s consolidated statements of income and comprehensive income. 2019 Equity Incentive Plan On April 16, 2019, the Company’s 2019 Equity Incentive Plan (the “2019 Plan”) became effective. The 2019 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares and units, and other cash-based or share-based awards. In addition, the 2019 Plan contains a mechanism through which the Company may adopt a deferred compensation arrangement in the future. A total of 2,400,000 shares of common stock were initially authorized and reserved for issuance under the 2019 Plan. This reserve increases on January 1 of each year through 2029, by an amount equal to the smaller of: 3 % of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or an amount determined by the board of directors. Stock Options Recipients of stock options can purchase shares of the Company’s common stock at a price equal to the stock’s fair market value on the grant date, determined by the closing price of the Company's common stock on the grant date. Stock options vest over a period between two and four years with between 25 % and 50 % vesting on the first anniversary of the grant date and the remainder vesting monthly over the remaining period, subject to continued service to the Company. Stock options expire ten years after the grant date. 113 Table of Contents The following table summarizes stock option transactions for the year ended December 31, 2024 : Number of Weighted-average exercise Weighted average remaining contractual term Aggregate intrinsic value shares price (in years) (in thousands) Outstanding at January 1, 2024 807,685 $ 34.31 — $ — Options granted — — Options exercised ( 208,341 ) 33.54 Options canceled ( 10,959 ) 78.12 Outstanding at December 31, 2024 588,385 $ 33.76 4.85 $ 42,273 Vested and Exercisable at December 31, 2024 583,792 $ 33.55 4.83 $ 42,063 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. Restricted Stock Units Restricted stock units are valued on their grant date and generally vest either on the first anniversary of the grant date or over a three -year period with one third vesting on each anniversary date, subject to continued service with the Company. The fair value of RSUs is determined using the closing price of the Company's common stock on the grant date. 114 Table of Contents The following table summarizes RSU transactions for the year ended December 31, 2024 : Number of shares Weighted-average grant date fair value Non vested outstanding at January 1, 2024 332,077 $ 61.07 Granted 145,835 69.82 Vested ( 138,329 ) 61.99 Forfeited ( 19,172 ) 54.66 Non vested outstanding at December 31, 2024 320,411 $ 65.03 As of December 31, 2024 , the Company had approximately $ 14.9 million of total unrecognized stock-based compensation expense related to RSUs expected to be recognized over a weighted-average period of 1.6 years. Performance Stock Units ( “ PSUs ” ) ​ The Company issues PSUs to employees with a combination of service, performance, and market conditions. ​ The majority of PSUs were issued via grants made to certain executives during 2021. These PSUs are earned based on the achievement of stock price milestones. 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. 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 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. The earned PSUs are then subject to a required service period of approximately three years from the grant date before vesting and being issued as common stock. The following table summarizes PSU transactions for the year ended December 31, 2024 : Number of shares Weighted-average grant date fair value Non vested outstanding at January 1, 2024 423,621 $ 38.90 Granted 57,012 65.78 Vested ( 12,645 ) 96.74 Forfeited ( 7,538 ) 51.92 Non vested outstanding at December 31, 2024 460,450 $ 40.42 The PSU grants above represent the number of shares that would vest based on achievement of all stock price milestones in the executive stock grants and the 100 % achievement of the predetermined company performance conditions for the other PSU grants. The actual number of PSUs which will vest is subject to adjustment based on the Company’s actual stock price performance and financial performance relative to the predetermined targets and subject to recipient service requirements. As of December 31, 2024 , the Company had approximately $ 9.4 million of total unrecognized stock-based compensation expense related to PSUs expected to be recognized over a weighted-average period of 1.7 years. 2021 Executive Stock Grants ​ 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 quarterly thereafter. ​ The PSUs are earned based on the achievement of stock price milestones. 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. The Company’s CEO must remain as an employee through December 31, 2025, or as an employee and/or director through the fifth anniversary of the grant date the PSUs to vest. Other executives must remain as employees through December 31, 2026 for the PSUs to vest. As of December 31, 2024 , 28,125 PSU shares have become earned units and will vest upon completion of the requisite service period. ​ 115 Table of Contents ​ 2019 Employee Stock Purchase Plan On April 16, 2019, the Company's 2019 Employee Stock Purchase Plan (“the 2019 ESPP”) became effective. A total of 240,000 shares of common stock are initially authorized and reserved for issuance under the 2019 ESPP. In addition, the 2019 ESPP provides for annual increases in the number of shares available for issuance on January 1 of each year through 2029, equal to the smaller of 240,000 shares of the Company’s common stock or such other amount as may be determined by the board of directors. Under the 2019 ESPP, employees can purchase Company stock at a discount via payroll withholdings. The 2019 ESPP is administered through employee participation in discrete offering periods. During each discrete offering period employee funds are withheld, and the stock purchase occurs upon the conclusion of the offering period. The Company issued 17,100 and 17,080 shares pursuant to the ESPP during the years ended December 31, 2024 and December 31, 2023 , respectively. Share repurchases ​ The Company's share repurchase program expired on March 31, 2024. There were no share repurchases made during the year ended December 31, 2024. 13. Accumulated Other Comprehensive Income Changes in accumulated other comprehensive income (loss) (“AOCI”) are as follows: Year Ended December 31, 2024 2023 2022 (in thousands) Balance as of January 1 $ ( 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 2,311 ( 60 ) 2,325 Federal income tax (benefit) expense ( 485 ) 13 ( 489 ) Amounts reclassified from AOCI, net of tax 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 ) ​ 116 Table of Contents 14. Underwriting Information The Company has a single reportable segment and offers specialty insurance products. Gross written premiums (“GWP”) by product are presented below: Year Ended December 31, 2024 2023 2022 ($ in thousands) % of % of % of Amount GWP Amount GWP Amount GWP Product (1) Earthquake $ 522,864 33.9 % $ 436,897 38.3 % $ 345,480 39.2 % Inland Marine and Other Property 334,079 21.7 % 250,022 21.9 % 232,918 26.4 % Fronting 333,188 21.6 % 352,141 30.8 % 223,249 25.3 % Casualty 235,592 15.3 % 90,388 7.9 % 80,221 9.1 % Crop 116,239 7.5 % 12,110 1.1 % — — % Total Gross Written Premiums $ 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: Year Ended December 31, 2024 2023 2022 ($ in thousands) % of % of % of Amount GWP Amount GWP Amount GWP State California $ 668,635 43.4 % $ 600,791 52.6 % $ 418,809 47.5 % Texas 124,416 8.1 % 95,517 8.4 % 90,459 10.3 % Hawaii 72,558 4.7 % 47,388 4.2 % 40,157 4.5 % Florida 67,008 4.3 % 47,595 4.2 % 38,715 4.4 % Washington 57,900 3.8 % 49,494 4.3 % 41,827 4.7 % New York 38,919 2.5 % 18,424 1.6 % 12,510 1.5 % Oregon 29,550 1.9 % 23,220 2.0 % 24,108 2.7 % Illinois 20,901 1.4 % 22,340 2.0 % 17,368 2.0 % Other 462,075 30.0 % 236,789 20.7 % 197,915 22.4 % Total Gross Written Premiums $ 1,541,962 100.0 % $ 1,141,558 100.0 % $ 881,868 100.0 % Gross written premiums by insurance subsidiary are as follows: Year Ended December 31, 2024 2023 2022 ($ in thousands) % of % of % of Amount GWP Amount GWP Amount GWP Subsidiary PSIC $ 823,263 53.4 % $ 653,809 57.3 % $ 489,720 55.5 % PESIC 661,404 42.9 % 487,749 42.7 % 392,148 44.5 % Laulima 57,295 3.7 % — — % — — % Total Gross Written Premiums $ 1,541,962 100.0 % $ 1,141,558 100.0 % $ 881,868 100.0 % 117 Table of Contents 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, 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 . 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. 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, 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. 15. Retirement and Post-Employment Retirement Plans For employees meeting certain eligibility requirements, the Company provides a defined contribution retirement plan under IRC Section 401 (k). Under a safe-harbor plan, the Company contributes 3 % of each participant’s gross wages regardless of the employee’s contribution. For the years ended December 31, 2024 , 2023 and 2022 the Company’s contributions to the plan were $ 1.3 million, $ 0.9 million and $ 0.7 million, respectively. 16. Income Taxes The components of the Company’s income tax expense (benefit) are as follows: December 31, 2024 2023 2022 (in thousands) Current $ 31,560 $ 27,267 $ 18,842 Deferred 2,063 ( 2,826 ) ( 3,461 ) Income tax expense (benefit) $ 33,623 $ 24,441 $ 15,381 118 Table of Contents As of December 31, 2024 and 2023 , significant components of the Company’s deferred tax assets and liabilities were as follows: December 31, 2024 2023 (in thousands) Deferred tax assets: Losses and LAE reserve discount $ 1,711 $ 942 State tax net operating losses 3,372 3,486 Deferred Intercompany 605 656 Unearned premiums 19,550 13,895 Capitalized organizational costs 124 154 Unrealized losses on investments 5,134 5,829 Deferred compensation 2,533 2,425 Lease Liability 1,631 478 Other 2,230 1,223 Total deferred tax assets $ 36,890 $ 29,088 Deferred tax liabilities: Deferred acquisition costs $ ( 19,929 ) $ ( 12,128 ) Internally developed software ( 1,118 ) ( 1,276 ) State deferred tax liability ( 1,216 ) ( 1,150 ) Right-of-use Asset ( 1,604 ) ( 478 ) Other ( 837 ) ( 451 ) Total deferred tax liabilities ( 24,704 ) ( 15,483 ) Net deferred tax asset (liability) before valuation allowance 12,186 13,605 Valuation allowance ( 3,372 ) ( 3,486 ) Total net deferred tax assets (liabilities) $ 8,814 $ 10,119 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, 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 : Years Ended December 31, 2024 2023 2022 ($ in thousands) Expense computed at federal tax rate $ 31,750 21.00 % $ 21,765 21.00 % $ 14,186 21.00 % Stock-based compensation 429 0.28 % 1,523 1.47 % 153 0.23 % Dividend received deduction and tax‑exempt interest ( 90 ) ( 0.06 )% ( 96 ) ( 0.09 )% ( 101 ) ( 0.15 )% Meals & entertainment, penalties & parking 291 0.19 % 261 0.25 % 180 0.27 % State tax expense 601 0.40 % 303 0.29 % 773 1.14 % Valuation allowance ( 113 ) ( 0.08 )% 416 0.40 % 191 0.28 % Other 755 0.50 % 269 0.26 % ( 1 ) — % Income tax expense (benefit) $ 33,623 22.23 % $ 24,441 23.58 % $ 15,381 22.77 % ​ 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. 119 Table of Contents 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. This is not expected to change significantly during the next twelve months. The Company classifies interest and penalties, if any, related to the liability for unrecognized tax benefits as a component of the provision for income taxes. The Company’s federal income tax returns for 2021 through 2023 and state income tax returns for 2020 through 2023 remain subject to examination by the tax authorities. The 2024 income tax return is expected to be filed in 2025 and is subject to examination when filed. 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. 17. Earnings Per Share The following table sets forth the computation of earnings per share of common stock: Year ended December 31, 2024 2023 2022 (in thousands, except shares and per share data) Net income $ 117,573 $ 79,201 $ 52,170 Weighted average common shares outstanding: Basic 25,520,343 24,822,004 25,243,397 Common Share equivalents 703,499 505,087 552,611 Diluted 26,223,842 25,327,091 25,796,008 Earnings per share: Basic $ 4.61 $ 3.19 $ 2.07 Diluted $ 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. Statutory financial information U.S. U.S. state insurance laws and regulations prescribe accounting practices for determining statutory net income and capital and surplus for insurance companies. In addition, state regulators may permit statutory accounting practices that differ from prescribed practices. Statutory accounting practices (“SAP”) prescribed or permitted by regulatory authorities for the Company’s insurance subsidiaries differ from U.S. GAAP. The principal differences between SAP and GAAP as they relate to the financial statements of the Company’s insurance subsidiaries are (a) policy acquisition costs are expensed as incurred under SAP, whereas they are deferred and amortized under GAAP, (b) certain assets are not admitted for purposes of determining surplus under SAP, (c) investments in fixed income securities are carried at fair value under GAAP whereas such securities are carried at amortized cost under SAP, and (d) the criteria for recognizing net DTAs and the methodologies used to determine such amounts are different under SAP and GAAP. Combined statutory net income and statutory capital surplus for the U.S. insurance subsidiaries, PSIC and PESIC as of December 31, 2024 , 2023 and 2022 and for the years then ended are summarized as follows: December 31, 2024 2023 2022 (in thousands) Statutory net income (loss) $ 102,510 $ 97,391 $ 76,222 Statutory capital and surplus 451,719 439,264 314,508 ​ Risk-Based Capital (“RBC”) requirements promulgated by the NAIC require property/casualty insurers to maintain minimum capitalization levels determined based on formulas incorporating various business risks of the insurance subsidiaries. As of December 31, 2024 and 2023 , the company’s capital and surplus exceeds its authorized control level. 120 Table of Contents Bermuda Under the Bermuda Insurance Act, 1978 and related regulations, PSRE is required to maintain certain solvency and liquidity levels. The minimum statutory solvency margin required at December 31, 2024 and 2023 was approximately $ 1.2 million and $ 1.2 million, respectively. Actual statutory capital and surplus at December 31, 2024 and 2023 was $ 17.0 million and $ 16.1 million, respectively. PSRE had statutory net income of $ 0.4 million, $0.3 million and $0.2 million for 2024 , 2023 and 2022 , respectively. 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 is related to the valuation of investments. No dividends were paid in 2024 and 2023 . PSRE maintains a Class 3A license and thus must maintain a minimum liquidity ratio in which the value of its relevant assets is not less than 75.0 % of the amount of its relevant liabilities for general business. Relevant assets include cash and cash equivalents, fixed maturity securities, accrued interest income, premiums receivable, losses recoverable from reinsurers, and funds withheld. The relevant liabilities include total general business insurance reserves and total other liabilities, less sundry liabilities. As of December 31, 2024 and 2023 , the Company met the minimum liquidity ratio requirement. 19. Dividend Restrictions U.S. The Company’s U.S. insurance company subsidiaries, PSIC and PESIC are restricted by the statutes as to the amount of dividends that they may pay without prior approval by state insurance commissioners. Under California and Oregon statute which govern PSIC, dividends paid in a consecutive twelve month period cannot exceed the greater 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. Any dividends or distributions in excess of these amounts would require regulatory approval. In addition, under Oregon statute, PSIC may only declare a dividend from earned surplus, which does not include contributed capital. Surplus arising from unrealized capital gains or revaluation of assets is not considered part of earned surplus. 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. Based on the above restrictions, PESIC may pay a dividend or distribution of no greater than $4.2 million in 2025 without approval of the Arizona Insurance Commissioner. In addition to the above limitations, any dividend or distribution declared is also subject to state regulatory approval prior to payment. In the future, state insurance regulatory authorities may adopt statutory provisions and dividend limitations more restrictive than those currently in effect. 121 Table of Contents Bermuda Bermuda regulations limit the amount of dividends and return of capital paid by a regulated entity. A Class 3A insurer is prohibited from declaring or paying a dividend if it is in breach of its minimum solvency margin, its enhanced capital requirement, or its minimum liquidity ratio, or if the declaration or payment of such dividend would cause such a breach, or if there are reasonable grounds for believing there has been such a breach. Pursuant to Bermuda regulations, the maximum amount of dividends and return of capital available to be paid by a reinsurer is determined pursuant to a formula. Under this formula, the maximum amount of dividends and return of capital available to the Company from PSRE during 2024 is calculated to be approximately $4.2 million. However, this dividend amount is subject to annual enhanced solvency requirement calculations. 20. Commitments and Contingencies Litigation The Company is subject to legal proceedings arising from the normal conduct of its business. In the opinion of management, any ultimate liability that may arise from these proceedings will not have a material effect on the Company’s financial position. Letters of Credit and Trusts 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 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. 122 Table of Contents 21. Variable Interest Entities ("VIEs") Laulima Insurance Exchange, a Hawaii domiciled reciprocal exchange (“Laulima”) is a consolidated VIE. Laulima was formed in 2023 as an insurance carrier organized as an unincorporated association. The Company's PUEO entity manages the business operations of Laulima and receives a management fee for the services provided to Laulima. Upon formation of Laulima, PSIC provided capital of $ 15.0 million in the form of a contribution to the surplus note issued by Laulima, which remains outstanding as of December 31, 2024 . The Company holds an interest in the form of this surplus note which is included in other liabilities on the Statement of Assets and Liabilities of Laulima. In addition, the Company provides quota share reinsurance on the property business of Laulima. The Company has determined that is has the ability to direct the activities that most significantly impact the economic performance of the Laulima and, as it has provided capital to Laulima, would absorb any expected losses which could be significant to Laulima. As such, the Company is deemed the primary beneficiary and consolidates the results of Laulima. The Company does not own the equity of Laulima, which is owned by the policyholders. In the event of dissolution, policyholders would share any residual unassigned surplus but are not subject to assessment for any deficit in unassigned surplus of Laulima. 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 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. 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. 123 Table of Contents Note 22. Subsequent Events 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. Best. 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. 124 Table of Contents Schedule II Palomar Holdings, Inc. and Subsidiaries Balance Sheets (Parent Company) (In Thousands, except shares and par value data) December 31, 2024 December 31, 2023 Assets Investments: Fixed maturity securities available for sale, at fair value (amortized cost: $ 153,425 in 2024, $ 51,946 in 2023) $ 147,467 $ 48,626 Equity securities, at fair value: (cost: $ 1,725 in 2024, $ 1,725 in 2023) 2,182 1,835 Equity method investment 2,277 2,617 Total investments 151,926 53,078 Cash and cash equivalents 1,797 314 Accrued investment income 1,547 345 Prepaid expenses and other assets — 3,780 Receivables from subsidiaries 78,961 51,967 Note receivable from subsidiary 15,000 15,000 Investment in subsidiaries 580,535 530,690 Total assets $ 829,766 $ 655,174 Liabilities and Stockholders' equity Liabilities: Accounts payable and other liabilities $ 12,396 $ 10,120 Payables to subsidiaries 88,340 157,404 Federal income tax payable — 16,398 Total liabilities 100,736 183,922 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 3 3 Additional paid‑in capital 493,656 350,597 Accumulated other comprehensive income (loss) ( 26,845 ) ( 23,991 ) Retained earnings 262,216 144,643 Total stockholders' equity 729,030 471,252 Total liabilities and stockholders' equity $ 829,766 $ 655,174 ​ See accompanying notes. ​ 125 Table of Contents Schedule II Palomar Holdings, Inc. and Subsidiaries Statements of Income (Parent Company) (In Thousands) Year Ended December 31, 2024 2023 2022 Revenues: 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 Expenses: Other operating expenses 48,251 39,347 33,292 Loss before income taxes ( 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 Net income 117,573 79,201 52,170 Other comprehensive income: 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. ​ 126 Table of Contents Schedule II Palomar Holdings, Inc. and Subsidiaries Statements of Cash Flows (Parent Company) (In Thousands) Year Ended December 31, 2024 2023 2022 Operating activities Net income $ 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 10,513 10,426 8,820 Net realized and unrealized losses on investments ( 23 ) 209 320 Amortization of premium on fixed maturity securities 172 189 347 Deferred income tax expense ( 15,640 ) 2,787 7,210 Dividend received from subsidiary 95,000 — — 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 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 115,724 — — Proceeds from common stock issued via equity incentive plans 7,892 2,038 3,032 Policyholder contribution to surplus 2,758 90 — Repurchase of common stock — ( 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. ​ 127 Table of Contents Schedule II 1.Accounting Policies Organization Palomar Holdings, Inc. (“the Company”), is an insurance holding company that domesticated in Delaware in March 2019. Prior to domestication in Delaware, the Company was known as GC Palomar Holdings (“GCPH”), which was a Cayman Islands incorporated insurance holding company formed on October 4, 2013 when GC Palomar Investor LP (“GCPI”) acquired control of GCPH. Basis of Presentation The accompanying condensed financial statements have been prepared using the equity method. Under the equity method, the investment in consolidated subsidiaries is stated at cost plus equity in undistributed earnings of consolidated subsidiaries since the date of acquisition. These condensed financial statements should be read in conjunction with the Company’s consolidated financial statements. Estimates and Assumptions Preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Those estimates are inherently subject to change, and actual results may ultimately differ from those estimates. 128 Table of Contents Schedule V Palomar Holdings, Inc. and Subsidiaries Valuation and Qualifying Accounts Additions Deductions Balance at Amounts Amounts Balance at Beginning Charged to Written End of (in thousands) of Period Expense Off Period Year Ended December 31, 2024 Valuation Allowance for deferred tax assets $ 3,486 $ — $ 114 $ 3,372 Valuation Allowance for premium receivable $ 49 $ 30 16 $ 63 Year Ended December 31, 2023 Valuation Allowance for deferred tax assets $ 3,070 $ 416 $ — $ 3,486 Valuation Allowance for premium receivable $ 96 $ 42 89 $ 49 129 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ​ None. ​