Palomar Holdings, Inc. 10-Q

Item 1: Financial Statements Palomar Holdings, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except shares and par value data) March 31, December 31, 2025 2024 (Unaudited) Assets Investments: Fixed maturity securities available for sale, at fair value (amortized cost: $ 1,015,892 in 2025; $ 973,330 in 2024) $ 991,759 $ 939,046 Equity securities, at fair value (cost: $ 44,462 in 2025; $ 32,987 in 2024) 44,367 40,529 Equity method investment 2,259 2,277 Other investments 11,031 5,863 Total investments 1,049,416 987,715 Cash and cash equivalents 119,312 80,438 Restricted cash 15 101 Accrued investment income 8,590 8,440 Premiums receivable 334,247 305,724 Deferred policy acquisition costs, net of ceding commissions and fronting fees 102,861 94,881 Reinsurance recoverable on paid losses and loss adjustment expenses 30,361 47,076 Reinsurance recoverable on unpaid losses and loss adjustment expenses 361,227 348,083 Ceded unearned premiums 295,275 276,237 Prepaid expenses and other assets 92,292 91,086 Deferred tax assets, net 5,596 8,768 Property and equipment, net 2,393 429 Goodwill and intangible assets, net 24,925 13,242 Total assets $ 2,426,510 $ 2,262,220 Liabilities and stockholders' equity Liabilities: Accounts payable and other accrued liabilities $ 65,405 $ 70,079 Reserve for losses and loss adjustment expenses 543,889 503,382 Unearned premiums 813,462 741,692 Ceded premium payable 179,105 190,168 Funds held under reinsurance treaty 34,200 27,869 Total liabilities 1,636,061 1,533,190 Stockholders' equity: Preferred stock, $ 0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2025 and December 31, 2024 — — Common stock, $ 0.0001 par value, 500,000,000 shares authorized, 26,735,132 and 26,529,402 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively 3 3 Additional paid-in capital 501,950 493,656 Accumulated other comprehensive loss ( 16,642 ) ( 26,845 ) Retained earnings 305,138 262,216 Total stockholders' equity 790,449 729,030 Total liabilities and stockholders' equity $ 2,426,510 $ 2,262,220 See accompanying notes. 3 Table of Contents Palomar Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Income and Comprehensive Income (Loss) (Unaudited) (in thousands, except shares and per share data) Three Months Ended March 31, 2025 2024 Revenues: Gross written premiums $ 442,163 $ 368,078 Ceded written premiums ( 230,745 ) ( 228,171 ) Net written premiums 211,418 139,907 Change in unearned premiums ( 47,348 ) ( 32,041 ) Net earned premiums 164,070 107,866 Net investment income 12,071 7,139 Net realized and unrealized (losses) gains on investments ( 2,338 ) 3,002 Commission and other income 830 528 Total revenues 174,633 118,535 Expenses: Losses and loss adjustment expenses 38,743 26,837 Acquisition expenses, net of ceding commissions and fronting fees 46,359 31,798 Other underwriting expenses 35,733 24,804 Interest expense 85 740 Total expenses 120,920 84,179 Income before income taxes 53,713 34,356 Income tax expense 10,791 7,974 Net income $ 42,922 $ 26,382 Other comprehensive income, net: Net unrealized gains (losses) on securities available for sale 10,203 ( 2,514 ) Net comprehensive income $ 53,125 $ 23,868 Per Share Data: Basic earnings per share $ 1.61 $ 1.06 Diluted earnings per share $ 1.57 $ 1.04 Weighted-average common shares outstanding: Basic 26,658,106 24,862,367 Diluted 27,399,997 25,468,564 See accompanying notes. 4 Table of Contents Palomar Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Changes in Stockholders ’ Equity (Unaudited) (in thousands, except share data) Number of Accumulated Common Additional Other Total Shares Common Paid-In Comprehensive Retained Stockholders' Outstanding Stock Capital Income (Loss) Earnings Equity Balance at December 31, 2023 24,772,987 $ 3 $ 350,597 $ ( 23,991 ) $ 144,643 $ 471,252 Other comprehensive loss, net of tax — — — ( 2,514 ) — ( 2,514 ) Stock-based compensation — — 3,820 — — 3,820 Issuance of common stock via employee stock purchase plan 9,806 — 434 — — 434 Issuance of common stock via equity incentive plan 138,267 — 1,857 — — 1,857 Policyholder contribution to surplus — — 427 — — 427 Net income — — — — 26,382 26,382 Balance at March 31, 2024 24,921,060 $ 3 $ 357,135 $ ( 26,505 ) $ 171,025 $ 501,658 See accompanying notes. 5 Table of Contents Palomar Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Changes in Stockholders ’ Equity (Unaudited) (in thousands, except share data) Number of Accumulated Common Additional Other Total Shares Common Paid-In Comprehensive Retained Stockholders' Outstanding Stock Capital Income (Loss) Earnings Equity Balance at December 31, 2024 26,529,402 $ 3 $ 493,656 $ ( 26,845 ) $ 262,216 $ 729,030 Other comprehensive income, net of tax — — — 10,203 — 10,203 Stock-based compensation — — 4,745 — — 4,745 Issuance of common stock via employee stock purchase plan 6,310 — 526 — — 526 Issuance of common stock via equity incentive plan 199,420 — 2,377 — — 2,377 Policyholder contribution to surplus — — 777 — — 777 Offering Costs (related to prior year offering) — — ( 131 ) — — ( 131 ) Net income — — — — 42,922 42,922 Balance at March 31, 2025 26,735,132 $ 3 $ 501,950 $ ( 16,642 ) $ 305,138 $ 790,449 See accompanying notes. 6 Table of Contents Palomar Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Three Months Ended March 31, 2025 2024 Operating activities Net cash provided by operating activities $ 87,183 $ 33,125 Investing activities Purchases of property and equipment ( 35 ) — Capitalized software costs ( 1,387 ) ( 1,305 ) Purchases of fixed maturity securities ( 315,026 ) ( 176,989 ) Purchases of equity securities ( 6,645 ) — Sales and maturities of fixed maturity securities 291,896 154,820 Sales of equity securities 8,447 9,014 Change in securities receivable or payable, net ( 195 ) — Investments in limited partnerships ( 4,972 ) ( 1,871 ) Acquisitions, net of cash acquired ( 24,027 ) — Net cash used in investing activities ( 51,944 ) ( 16,331 ) Financing activities Net (payments on) proceeds from line of credit — ( 9,600 ) Offering costs (related to prior year offering) ( 131 ) — Proceeds from common stock issued via employee stock purchase plan 526 434 Proceeds from common stock issued via stock option exercises 2,377 1,857 Policy holder contribution to surplus 777 427 Net cash provided by (used in) financing activities 3,549 ( 6,882 ) Net increase in cash, cash equivalents and restricted cash 38,788 9,912 Cash, cash equivalents and restricted cash at beginning of period 80,539 51,852 Cash, cash equivalents and restricted cash at end of period $ 119,327 $ 61,764 Supplementary cash flow information: Cash paid for income taxes $ 6 $ 6,560 Cash paid for interest $ 60 $ 714 The following table summarizes our cash and cash equivalents and restricted cash and cash equivalents within the condensed consolidated balance sheets (in thousands): March 31, December 31, 2025 2024 (unaudited) Cash and cash equivalents $ 119,312 $ 80,438 Restricted cash 15 101 Cash and cash equivalents and restricted cash $ 119,327 $ 80,539 See accompanying notes. 7 Table of Contents Palomar Holdings, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) 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, Inc., DBA Palomar General Insurance Agency (“PGIA”), a Delaware incorporated management company, Palomar Underwriters Exchange Organization, Inc. ("PUEO"), that provides services to a Hawaii domiciled reciprocal exchange, Laulima Exchange (“Laulima”), as its attorney-in-fact, a New Jersey domiciled insurance carrier specializing in surety bonds, First Indemnity of America Insurance Co. ("FIA") and a Delaware incorporated insurance management company, Palomar Crop Insurance Services, Inc. ("PCIS"). 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 Condensed 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 U.S. generally accepted accounting principles (“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 condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and include the accounts of the Company and its wholly‑owned subsidiaries. The condensed 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. These condensed consolidated financial statements do not contain all information and footnotes required by GAAP for complete consolidated financial statements. For a more complete description of the Company’s business and accounting policies, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2024 , filed with the SEC on February 25, 2025 ( the “2024 Annual Report on Form 10 -K”). In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. All intercompany balances and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results of operations for the full year. 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 condensed 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 condensed 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. Recent Accounting Pronouncements Recently adopted accounting pronouncements The Company has not adopted any new accounting guidance during the three months ended March 31, 2025. Recently issued accounting pronouncements not yet adopted Income Taxes In December 2023, the FASB issued ASU No. 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures ("ASU 2023 - 09" ) . 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 beginning after December 15, 2024. The Company will adopt this guidance beginning with the Annual Report on Form 10 -K for the year ending December 31, 2025 and the adoption is not expected to have a significant impact on the Company's required disclosures. Income Statement Expenses In November 2024, the FASB issued ASU No. 2024 - 03, Disaggregation of Income Statement Expenses ("ASU 2023 - 03" ) , 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. 8 Table of Contents 2. Investments The Company’s available‑for‑sale investments are summarized as follows: Gross Gross Allowance Amortized Unrealized Unrealized for Fair March 31, 2025 Cost or Cost Gains Losses Credit Losses Value (in thousands) Fixed maturities: U.S. Governments $ 16,567 $ 39 $ ( 440 ) $ — $ 16,166 U.S. States, Territories, and Political Subdivisions 19,876 42 ( 1,530 ) — 18,388 Special revenue excluding mortgage/asset-backed securities 19,440 15 ( 2,395 ) — 17,060 Corporate and other 520,041 3,042 ( 14,455 ) — 508,628 Mortgage/asset-backed securities 439,968 2,601 ( 11,052 ) — 431,517 Total available-for-sale investments $ 1,015,892 $ 5,739 $ ( 29,872 ) $ — $ 991,759 Gross Gross Allowance Amortized Unrealized Unrealized for Fair December 31, 2024 Cost or Cost Gains Losses Credit Losses 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 Security holdings in an unrealized loss position As of March 31, 2025 , the Company held 640 fixed maturity securities in an unrealized loss position with a total estimated fair value of $ 602.5 million and total gross unrealized losses of $ 29.9 million. 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. 9 Table of Contents 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 March 31, 2025 and December 31, 2024 , are as follows: Less Than 12 Months More Than 12 Months Total Fair Unrealized Fair Unrealized Fair Unrealized March 31, 2025 Value Losses Value Losses Value Losses (in thousands) Fixed maturity securities: U.S. Governments $ 2,084 $ ( 1 ) $ 10,937 $ ( 439 ) $ 13,021 $ ( 440 ) U.S. States, Territories, and Political Subdivisions 7,412 ( 1,077 ) 8,773 ( 453 ) 16,185 ( 1,530 ) Special revenue excluding mortgage/asset-backed securities 799 ( 80 ) 14,526 ( 2,315 ) 15,325 ( 2,395 ) Corporate and other 169,591 ( 4,438 ) 156,463 ( 10,017 ) 326,054 ( 14,455 ) Mortgage/asset-backed securities 138,929 ( 1,256 ) 92,941 ( 9,796 ) 231,870 ( 11,052 ) Total available-for-sale investments $ 318,815 $ ( 6,852 ) $ 283,640 $ ( 23,020 ) $ 602,455 $ ( 29,872 ) 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 available-for-sale investments $ 354,769 $ ( 8,726 ) $ 309,203 $ ( 28,531 ) $ 663,972 $ ( 37,257 ) 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. The Company considers numerous factors in its review as described in Note 1 of the Notes to the Consolidated Financial Statements in the 2024 Annual Report on Form 10 -K. Based on the Company’s review as of March 31, 2025 , 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. 10 Table of Contents Contractual maturities of available ‑ for ‑ sale fixed maturity securities The amortized cost and fair value of fixed maturity securities at March 31, 2025 , by contractual maturity, are shown below. Amortized Fair Cost Value (in thousands) Due within one year $ 70,521 $ 70,386 Due after one year through five years 204,784 200,660 Due after five years through ten years 184,930 179,685 Due after ten years 115,689 109,511 Mortgage and asset-backed securities 439,968 431,517 $ 1,015,892 $ 991,759 Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations. Net investment income summary Net investment income is summarized as follows: Three Months Ended March 31, 2025 2024 (in thousands) Interest income $ 11,965 $ 7,326 Dividend income 317 197 Investment expense ( 211 ) ( 384 ) Net investment income $ 12,071 $ 7,139 Net realized and unrealized investment gains and losses The following table presents net realized and unrealized investment gains and losses: Three Months Ended March 31, 2025 2024 (in thousands) Realized gains: Gains on sales of fixed maturity securities $ 25 $ — Gains on sales of equity securities 16 — Total realized gains 41 — Realized losses: Losses on sales of fixed maturity securities ( 460 ) ( 2 ) Losses on sales of equity securities ( 9 ) ( 1,204 ) Total realized losses ( 469 ) ( 1,206 ) Net realized investment losses ( 428 ) ( 1,206 ) Change in allowance for credit losses 244 — Net unrealized (losses) gains on equity securities ( 2,332 ) 4,229 Net unrealized losses on equity method investment ( 18 ) ( 21 ) Net unrealized gains on other investments 196 — Net realized and unrealized (losses) gains on investments $ ( 2,338 ) $ 3,002 Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date. 11 Table of Contents Proceeds from the sale of fixed maturity securities were $ 2.0 million and $ 2.2 million for the three months ended March 31, 2025 and 2024 , respectively. Proceeds from the sale of equity securities were $ 1.8 and insignificant for the three months ended March 31, 2025 and 2024 , 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 balance sheet. As of March 31, 2025 and December 31, 2024 , the carrying value of securities on deposit with state regulatory authorities was $ 12.0 million and $ 9.9 million, respectively. The Company has investments in limited partnerships, recorded in the Other Investments line of the Unaudited Condensed Consolidated Balance Sheets. These investments represent capital commitments to private equity funds structured as limited partnerships, which primarily hold illiquid securities. The funds have a ten -year term with no redemption rights. Capital is contributed as called by the general partners, and distributions are received as proceeds are generated from the underlying investments. These investments are measured at estimated fair value utilizing a net asset value per share (or its equivalent) as a practical expedient. As of March 31, 2025 , the Company had unfunded commitments to invest an additional $ 75.5 million in these limited partnerships. 3. Fair Value Measurements 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 valuations 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. 12 Table of Contents The following tables present the hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024 . March 31, 2025 Level 1 Level 2 Level 3 Total (in thousands) Assets: Fixed maturity securities U.S. Governments $ — $ 16,166 $ — $ 16,166 U.S. States, Territories, and Political Subdivisions — $ 18,388 — 18,388 Special revenue excluding mortgage/asset-backed securities — $ 17,060 — 17,060 Corporate and other — $ 508,628 — 508,628 Mortgage/asset-backed securities — 431,517 — 431,517 Equity securities 44,367 — — 44,367 Cash, cash equivalents, and restricted cash 119,327 — — 119,327 Total assets $ 163,694 $ 991,759 $ — $ 1,155,453 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 The carrying amounts of financial assets and liabilities reported in the accompanying condensed consolidated balance sheet including cash and cash equivalents, restricted cash, receivables, reinsurance recoverable, and accounts payable and other accrued liabilities approximate fair value due to their short term‑maturity. The carrying amount of any borrowings under the Federal Home Loan Bank (“FHLB”) line of credit and U.S. Bank credit agreement (the “Credit Agreement”) approximate fair value as the credit agreements have variable rates which frequently reprice at market rates. Transfers between Level 3 and Level 2 securities result from changes in the availability of observable market inputs and are recorded at the beginning of the reporting period. As of March 31, 2025 and December 31, 2024 , the Company had no fixed income securities classified as Level 3. 13 Table of Contents 4. Reserve for Losses and Loss Adjustment Expenses The following table represents a reconciliation of changes in the ending reserve balances for losses and loss adjustment expenses (“LAE”): Three Months Ended March 31, 2025 2024 (in thousands) Reserve for losses and LAE net of reinsurance recoverables at beginning of period $ 155,299 $ 97,653 Add: Balance acquired from FIA (1) 6,788 — Add: Incurred losses and LAE, net of reinsurance, related to: Current year 43,059 26,333 Prior years ( 4,316 ) 504 Total incurred 38,743 26,837 Deduct: Loss and LAE payments, net of reinsurance, related to: Current year 4,998 4,895 Prior years 13,170 9,432 Total payments 18,168 14,327 Reserve for losses and LAE net of reinsurance recoverables at end of period 182,662 110,163 Add: Reinsurance recoverables on unpaid losses and LAE at end of period 361,227 292,024 Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period $ 543,889 $ 402,187 ( 1 ) - Represents amounts recognized in Reserve for losses and LAE net of reinsurance recoverables upon acquisition of FIA on 1/1/2025, in accordance with ASC 805, Business Combinations. See Note 12 for additional information regarding the acquisition. Considerable variability is inherent in the estimate of the reserve for losses and LAE. Although management believes the liability recorded for losses and LAE is adequate, the variability inherent in this estimate could result in changes to the ultimate liability, which may be material to stockholders’ equity. The Company experienced favorable prior year development of $ 4.3 million and adverse prior year development $ 0.5 million during the three months ended March 31, 2025 and 2024 , respectively. Favorable prior year development during the three months ended March 31, 2025 was primarily due to lower than anticipated severity of attritional losses. Adverse prior year development during the three months ended March 31, 2024 was primarily due to higher than anticipated severity of attritional losses on certain discontinued lines of business. 5. Stockholders ’ Equity As of March 31, 2025 and December 31, 2024 , the Company had 5,000,000 preferred shares authorized with a par value of $ 0.0001 and no preferred shares issued and outstanding. As of March 31, 2025 and December 31, 2024 , the Company had 500,000,000 common shares authorized and 26,735,132 and 26,529,402 common shares issued and outstanding, respectively, with a par value of $0.0001 . Additional paid in capital was $ 502.0 million as of March 31, 2025 and $ 493.7 million as of December 31, 2024 . Common stock reserved for future issuance Common stock reserved for future issuance consists of the following as of March 31, 2025 : Stock options outstanding under 2019 Equity Incentive Plan 529,610 Restricted stock units outstanding under 2019 Equity Incentive Plan 322,630 Performance stock units outstanding under 2019 Equity Incentive Plan, at target 502,155 Shares authorized for future issuance under 2019 Equity Incentive Plan 4,242,905 Shares authorized for future issuance under 2019 Employee Stock Purchase Plan 1,587,360 Total 7,184,660 14 Table of Contents Stock based compensation The below table summarizes the Company’s stock-based compensation expense for each period presented: Three Months Ended March 31, 2025 2024 (in thousands) Stock-Based Compensation $ 4,745 $ 3,820 Stock-based compensation expense is recognized on a straight-line basis over the vesting period of equity-based awards. For performance stock units (“PSUs”), any changes to expense resulting from differences in actual performance versus target are recognized over the remaining vesting period of the 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 unaudited condensed consolidated statement 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. The following table summarizes stock option transactions for the three months ended March 31, 2025 : Number of shares Weighted-average exercise price Weighted-average remaining contractual term (in years) Aggregate intrinsic value (in thousands) Outstanding at January 1, 2025 588,385 $ 33.76 4.9 $ 42,273 Options granted — — Options exercised ( 58,447 ) 40.66 Options cancelled ( 328 ) 94.84 Outstanding at March 31, 2025 529,610 $ 32.96 4.7 $ 26,659 Vested and Exercisable at March 31, 2025 528,554 $ 32.87 4.6 $ 26,651 As of March 31, 2025 , the Company had immaterial unrecognized stock-based compensation expense related to stock options expected to be recognized over a weighted-average period of 0.5 years. 15 Table of Contents Restricted Stock Units RSUs are valued using the closing price of the Company’s common stock on their grant date. The Company has issued RSUs with vesting periods of one to five years. All vesting is subject to continued service. The following table summarizes RSU transactions for the three months ended March 31, 2025 : Number of shares Weighted-average grant date fair value Outstanding at January 1, 2025 320,411 $ 65.03 Granted 104,384 109.74 Released ( 99,573 ) 57.12 Forfeited ( 2,592 ) 76.52 Non-vested outstanding at March 31, 2025 322,630 $ 81.85 As of March 31, 2025 , the Company had approximately $ 23.3 million of total unrecognized stock-based compensation expense related to RSUs expected to be recognized over a weighted-average period of 2.0 years. Performance Stock Units The Company issues PSUs 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. As of March 31, 2025 , two stock price milestones have been achieved solely with respect to the PSU award granted to the Chief Executive Officer. These PSUs have been earned, but will not vest until the fifth anniversary of the grant date, subject to continued service. 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. 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 also subject to a required service period of approximately three years from the grant date before vesting and being issued as common stock. Effective starting with 2025 grants, PSUs issued to executives include a relative total shareholder return (“RTSR”) modifier. The RTSR modifier adjusts PSU payouts up or down based on the Company's shareholder return relative to the S&P 1500 Property & Casualty Insurance Index (the “Index”) over a three -year measurement period. The following table summarizes PSU transactions for the three months ended March 31, 2025 : Number of shares Weighted-average grant date fair value Outstanding at January 1, 2025 460,450 $ 40.43 Granted 85,157 98.60 Vested ( 41,400 ) 50.35 Forfeited ( 2,052 ) 63.82 Non-vested outstanding at March 31, 2025 502,155 $ 49.38 The PSU grants above represent the number of shares that would vest based on achievement of all stock price milestones in the 2021 executive stock grants and the 100 % achievement of the predetermined 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. As of March 31, 2025 , the Company had approximately $ 14.8 million of total unrecognized stock-based compensation expense related to PSUs expected to be recognized over a weighted-average period of 1.6 years. 16 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 6,310 shares pursuant to the ESPP during the three months ended March 31, 2025 . Share repurchases The Company's share repurchase program ended on March 31, 2024. There were no share repurchases made during the three months ended March 31, 2025. 6. Accumulated Other Comprehensive Income Changes in accumulated other comprehensive income (loss) (“AOCI”) are as follows: Three Months Ended March 31, 2025 2024 (in thousands) Beginning Balance $ ( 26,845 ) $ ( 23,991 ) Other comprehensive income (loss) before reclassification 11,829 ( 3,185 ) Federal income tax (benefit) expense ( 1,970 ) 669 Other comprehensive income (loss) before reclassification, net of tax 9,859 ( 2,516 ) Amounts reclassified from AOCI 435 2 Federal income tax benefit ( 91 ) — Amounts reclassified from AOCI, net of tax 344 2 Other comprehensive income (loss) 10,203 ( 2,514 ) Balance at end of period $ ( 16,642 ) $ ( 26,505 ) 17 Table of Contents 7. Underwriting Information The Company has a single reportable segment and offers specialty insurance products. Gross written premiums (“GWP”) by product are presented below: Three Months Ended March 31, 2025 2024 ($ in thousands) % of % of Amount GWP Amount GWP Product Earthquake $ 130,245 29.5 % $ 105,729 28.7 % Casualty 110,487 25.0 % 51,935 14.1 % Inland Marine and Other Property 99,284 22.5 % 76,876 20.9 % Fronting 53,927 12.2 % 94,831 25.8 % Crop 48,220 10.9 % 38,707 10.5 % Total Gross Written Premiums $ 442,163 100.0 % $ 368,078 100.0 % Gross written premiums by state are as follows: Three Months Ended March 31, 2025 2024 ($ in thousands) % of % of Amount GWP Amount GWP State California $ 139,723 31.6 % $ 157,217 42.7 % Texas 44,991 10.2 % 40,795 11.1 % Hawaii 20,358 4.6 % 12,516 3.4 % Florida 18,641 4.2 % 13,924 3.8 % Washington 15,669 3.5 % 12,002 3.3 % New York 14,597 3.3 % 8,030 2.2 % New Mexico 12,395 2.8 % 7,469 2.0 % Colorado 12,168 2.8 % 9,605 2.6 % Other 163,621 37.0 % 106,520 28.9 % Total Gross Written Premiums $ 442,163 100.0 % $ 368,078 100.0 % Gross written premiums by insurance subsidiary are as follows: Three Months Ended March 31, 2025 2024 ($ in thousands) % of % of Amount GWP Amount GWP Subsidiary PSIC $ 230,917 52.2 % $ 222,657 60.5 % PESIC 190,786 43.1 % 136,493 37.1 % Laulima 16,037 3.7 % 8,928 2.4 % FIA 4,423 1.0 % — — % Total Gross Written Premiums $ 442,163 100.0 % $ 368,078 100.0 % 18 Table of Contents 8. Income Taxes The Company calculates its tax provision in interim periods using its best estimate of the effective tax rate expected for the full year. During the three months ended March 31, 2025 , the Company’s income tax rate of 20.1 % was lower than the statutory rate of 21 % due primarily to the tax impact of the permanent component of employee stock option exercises offset by non-deductible executive compensation expense. During the three months ended March 31, 2024 , the Company’s income tax rate of 23.2 % was higher than the statutory rate of 21 % due primarily to non-deductible executive compensation expense. 9. Earnings Per Share The following table sets out earnings per share of common stock: Three Months Ended March 31, 2025 2024 (in thousands, except shares and per share data) Net income $ 42,922 $ 26,382 Weighted average common shares outstanding: Basic 26,658,106 24,862,367 Common Share equivalents 741,891 606,197 Diluted 27,399,997 25,468,564 Earnings per share: Basic $ 1.61 $ 1.06 Diluted $ 1.57 $ 1.04 Common share equivalents relate primarily 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. 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 utilizes both excess of loss (XOL) and quota share reinsurance. As of March 31, 2025 , 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 March 31, 2025 , the Company’s XOL reinsurance structure provides protection up to $ 3.2 billion for earthquake events, $ 735 million for Hawaii hurricane events, and $ 117.5 million for continental U.S. hurricane events. 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 second quarter of 2022, the Company closed a $ 275 million 144A catastrophe bond which 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 which 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. 11. Credit Agreements U.S. Bank Credit Agreement In December 2021, the Company entered into a Credit Agreement with U.S. Bank National Association which provides a revolving credit facility of up to $ 100 million through December 8, 2026. Interest on the credit facility 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 0.75 %. A loan may be either a SOFR rate loan or a base rate loan, at the Company’s discretion. Outstanding amounts under the Credit Agreement 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. In addition to interest on funds borrowed, the Company must pay an unused line fee of 0.25 % on any amounts not borrowed. 19 Table of Contents 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. The financial covenants include requirements to maintain a permissible debt to capital ratio, a minimum consolidated net worth, a minimum risk-based capital ratio and minimum A.M. Best financial strength rating. The Credit Agreement also contains customary events of default, such as non-compliance with financial covenants. If an event of default occurs, any debt may be declared immediately due and payable. As of March 31, 2025 , the Company was in compliance with all debt covenants. As of March 31, 2025 and December 31, 2024 , the Company had no borrowings outstanding on the Credit Agreement. Interest expense on the Credit Agreement was $ 0.1 million for both the three months ended March 31, 2025 and March 31, 2024 . 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 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 March 31, 2025 and December 31, 2024 , the Company had no borrowings outstanding through the FHLB. Interest expense on the FHLB line of credit was immaterial and $ 0.7 million for the three months ended March 31, 2025 and March 31, 2024 , respectively. 20 Table of Contents 12. Business Acquisitions On January 1, 2025, the Company completed the acquisition of FIA. The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. As the acquisition did not meet the significance thresholds under Rule 3 - 05 of Regulation S- X, separate financial statements of FIA are not required to be filed. In connection with the acquisition, the Company recognized the acquired assets and assumed liabilities of FIA at their estimated fair values as of the acquisition date. Accordingly, the Company’s financial statements as of March 31, 2025 reflect adjustments to record opening balances for the assets acquired and liabilities assumed. These adjustments primarily result from purchase accounting fair value measurements and cause some balances as of January 1, 2025 to differ from the amounts reported as of December 31, 2024. Item 2. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations Forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 appear throughout this report. These forward looking statements generally include words such as “expect,” “predict,” “estimate,” “will,” “should,” “anticipate,” “believe” and similar expressions. Such assumptions are, in turn, based on information available and internal estimates and analyses of general economic conditions, competitive factors, conditions specific to the property and casualty insurance and reinsurance industries, claims development and the impact thereof on our loss reserves, the adequacy and financial security of our reinsurance programs, developments in the securities market and the impact on our investment portfolio, regulatory changes and conditions and other factors. These assumptions are subject to various risks, uncertainties and other factors, including, without limitation those set forth in “Item 1A. Risk Factors” within the Annual Report on Form 10-K for the year ended December 31, 2024 and Part II within this report. Actual results could differ materially from those expressed in, or implied by, these forward looking statements. Forward looking statements reflect the Company’s expectations, plans or forecasts of future events and views as of the date of this report. While the Company may elect to update these forward looking statements at some point in the future, the Company specifically disclaims any obligation to do so. You should review the various risks, uncertainties and other factors listed from time to time in our Securities and Exchange Commission filings. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2025, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report, and in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K as filed with the SEC on February 25, 2025. References to the "Company," "Palomar," "we," "us," and "our" are to Palomar Holdings, Inc. and its subsidiaries, unless the context otherwise requires. Overview We are a specialty insurance company that provides property and casualty insurance products to individuals and businesses. We use our underwriting and analytical expertise to provide innovative solutions in five product categories: Earthquake, Inland Marine and Other Property, Casualty, Fronting, and Crop. We use proprietary data analytics and a modern technology platform to offer our customers flexible products with customized and granular pricing for both the admitted and excess and surplus lines (“E&S”) markets. Our insurance company subsidiaries, Palomar Specialty Insurance Company (“PSIC”), and Palomar Excess and Surplus Insurance Company (“PESIC”) carry an “A” rating from A.M. Best Company (“A.M. Best”), a leading rating agency for the insurance industry. First Indemnity of America Insurance Co. ("FIA") carries an “A-” (Stable) rating from A.M. Best. We distribute our products through multiple channels, including retail agents, program administrators, wholesale brokers, and partnerships with other insurance companies. Our business strategy is supported by a comprehensive risk transfer program with reinsurance coverage that we believe reduces earnings volatility and provides appropriate levels of protection from catastrophic events. Our management team combines decades of insurance industry experience across specialty underwriting, reinsurance, program administration, distribution, and analytics. Founded in 2014, we have significantly grown our business and have generated attractive returns. We have organically increased gross written premiums from $16.6 million in our first year of operations to $1.5 billion for the year ended December 31, 2024, which reflects a compound annual growth rate of approximately 57%. We have also been profitable since 2016 and our net income growth since 2016 reflects a compound annual growth rate of 43%. We seek to continuously grow our income by developing product offerings for lines of business that harness our core competencies and where we believe we can generate attractive risk adjusted returns. In recent years, we have introduced several new products including Crop, Environmental Liability, and E&S Casualty. These new products diversify our book of business and broaden our product portfolio. We believe that our market opportunity, distinctive products, and differentiated business model position us to grow our business profitably. Recent Developments In April 2025, the Company completed the acquisition of Advanced AgProtection (“AAP”), a Texas-domiciled managing general agent specializing in Crop insurance. The AAP team brings extensive industry experience, longstanding client, carrier and reinsurer relationships, and a demonstrated track record of performance in the Crop insurance sector. The Company is currently in the market with a 144A catastrophe bond which is scheduled to close during the second quarter of 2025. Components of Our Results of Operations Gross Written Premiums Gross written premiums are the amounts received or to be received for insurance policies written or assumed by us during a specific period of time without reduction for policy acquisition costs, reinsurance costs or other deductions. The volume of our gross written premiums in any given period is generally influenced by: ● Volume of new business submissions in existing products or partnerships; ● Binding of new business submissions in existing products or partnerships into policies; 21 Table of Contents ● Entrance into new partnerships or the offering of new types of insurance products; ● Exits from existing partnerships or reducing or ceasing to offer existing insurance products; ● Renewal rates of existing policies; and ● Average size and premium rate of bound policies. Our gross written premiums are also impacted when we assume unearned in-force premiums due to new partnerships or other business reasons. In periods where we assume a large volume of unearned premiums, our gross written premiums may increase significantly compared to prior periods and the increase may not be indicative of future trends. The majority of our Crop written premiums are recognized in the third quarter, as we receive the requisite reporting from insureds at that time. Ceded Written Premiums Ceded written premiums are the amount of gross written premiums ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential losses and to provide additional capacity for growth. We cede premiums through excess of loss (“XOL”) agreements, quota share agreements, and fronting agreements. Ceded written premiums are earned pro-rata over the period of risk covered. The volume of our ceded written premiums is impacted by the amount of our gross written premiums and our decisions to increase or decrease limits or retention levels in our XOL agreements and co-participation levels in our quota share agreements. The volume of ceded written premiums is also impacted by the amount of premium we write under fronting agreements. Our ceded written premiums can be impacted significantly in certain periods due to changes in quota share agreements. In periods where we modify a quota share agreement, ceded written premiums may increase or decrease significantly compared to prior periods and these fluctuations may not be indicative of future trends. Our XOL costs as a percentage of gross earned premiums also may vary each period due to changes in cost of XOL between contract periods, changes of premium in-force during the XOL contract period, or due to acceleration of XOL charges or the need to purchase additional XOL reinsurance due to losses. In addition, the volume of premiums ceded in fronting agreements each period may vary due to the timing of entering new fronting partnerships and terminations of fronting partnerships. Net Earned Premiums Net earned premiums represent the earned portion of our gross written premiums, less the earned portion that is ceded to third-party reinsurers under our reinsurance agreements. The majority of our insurance policies have a term of one year and premiums are earned pro rata over the terms of the policies. Crop premiums are earned ratably over the risk period. The requisite reporting of Crop premiums is primarily received in the third quarter, after the start of the risk period, and earned premium is caught up to cover the period between the start of the risk period and receipt of reporting. Generally, this process results in most of the Crop earned premiums being recognized in the third quarter of each year. Commission and Other Income Commission and other income consist of commissions earned on policies written on behalf of third-party insurance companies where we have no exposure to the insured risk and certain fees earned in conjunction with underwriting policies. Commission and other income are earned on the effective date of the underlying policy. Losses and Loss Adjustment Expenses Losses and loss adjustment expenses represent the costs incurred for losses, net of any losses ceded to reinsurers. These expenses are a function of the size and term of the insurance policies we write and the loss experience associated with the underlying coverage. Certain policies we write subject us to attritional losses such as building fires or casualty claims. In addition, many of the policies we write subject us to catastrophe losses. Catastrophe losses are certain losses resulting from events involving multiple claims and policyholders, including earthquakes, hurricanes, floods, convective storms, terrorist acts or other aggregating events. Our losses and loss adjustment expenses are generally affected by: ● The occurrence, frequency, and severity of catastrophe events in the areas where we underwrite policies relating to these perils; ● The occurrence, frequency, and severity of non‑catastrophe attritional losses; 22 Table of Contents ● The mix of business written by us; ● The reinsurance agreements we have in place at the time of a loss; ● The geographic location and characteristics of the policies we underwrite; ● Changes in the legal or regulatory environment related to the business we write; ● Trends in legal defense costs; ● Inflation in housing and construction costs; and ● Increases in amounts awarded by courts and juries. Losses and loss adjustment expenses are based on an actuarial analysis of the estimated losses, including losses incurred during the period and changes in estimates from prior periods. Losses and loss adjustment expenses may be paid out over multiple years. Acquisition Expenses Acquisition expenses are principally comprised of the commissions we pay retail agents, program administrators and wholesale brokers, net of ceding commissions and fronting fees we receive on business ceded under quota share and fronting reinsurance agreements. In addition, acquisition expenses include premium‑related taxes and other fees. Acquisition expenses related to each policy we write are deferred and expensed pro rata over the term of the policy. We earn fronting fees consistent with how we earn premiums on the underlying insurance policies, on a pro-rata basis over the terms of the policies. Other Underwriting Expenses Other underwriting expenses represent the general and administrative expenses of our insurance operations including employee salaries and benefits, software and technology costs, office rent, stock-based compensation, licenses and fees, and professional services fees such as legal, accounting, and actuarial services. Interest Expense Interest expense consists of interest incurred on borrowings from our U.S. Bank credit agreement and FHLB line of credit and the unused line fee and amortization of the commitment fee on our U.S. Bank credit agreement. Net Investment Income We earn investment income on our portfolio of invested assets. We invest primarily in investment grade fixed maturity securities, including U.S. government issues, state government issues, mortgage and asset-backed obligations, and corporate bonds with a small portion of our portfolio in equity securities and cash and cash equivalents. The principal factors that influence net investment income are the size of our investment portfolio, the yield on that portfolio, and investment management expenses. As measured by amortized cost, which excludes fair value fluctuations from changes in interest rates or other factors, the size of our investment portfolio is mainly a function of our invested capital along with premium we receive from our insureds, less payments on policyholder claims and other operating expenses. 23 Table of Contents Net Realized and Unrealized Gains and Losses on Investments Net realized and unrealized gains and losses on investments are a function of the difference between the amount received by us on the sale of a security and the security’s cost-basis, mark-to-market adjustments, credit losses recognized in earnings, and unrealized gains and losses on equity securities and equity method investments. Unrealized gains and losses on fixed maturity securities are recognized as a component of other comprehensive income and do not impact our net income. Income Tax Expense Currently our income tax expense consists mainly of federal income taxes imposed on our operations. Our effective tax rates are dependent upon the components of pretax earnings and the related tax effects. Key Financial and Operating Metrics We discuss certain key financial and operating metrics, described below, which provide useful information about our business and the operational factors underlying our financial performance. Underwriting revenue is a non‑GAAP financial measure defined as total revenue, excluding net investment income and net realized and unrealized gains and losses on investments. See “Reconciliation of Non‑GAAP Financial Measures” for a reconciliation of total revenue calculated in accordance with GAAP to underwriting revenue. Underwriting income is a non‑GAAP financial measure defined as income before income taxes excluding net investment income, net realized and unrealized gains and losses on investments, and interest expense. See “Reconciliation of Non‑GAAP Financial Measures” for a reconciliation of income before income taxes calculated in accordance with GAAP to underwriting income. Adjusted net income is a non‑GAAP financial measure defined as net income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact. We calculate the tax impact only on adjustments which would be included in calculating our income tax expense using the estimated tax rate at which the company received a deduction for these adjustments. See “Reconciliation of Non‑GAAP Financial Measures” for a reconciliation of net income calculated in accordance with GAAP to adjusted net income. Annualized return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. Annualized adjusted return on equity is a non‑GAAP financial measure defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. See “Reconciliation of Non‑GAAP Financial Measures” for a reconciliation of return on equity calculated using unadjusted GAAP numbers to adjusted return on equity. Loss ratio , expressed as a percentage, is the ratio of losses and loss adjustment expenses, to net earned premiums. Expense ratio, expressed as a percentage, is the ratio of acquisition and other underwriting expenses, net of commission and other income to net earned premiums. Combined ratio is defined as the sum of the loss ratio and the expense ratio. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss. Adjusted combined ratio is a non‑GAAP financial measure defined as the sum of the loss ratio and the expense ratio calculated excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook. See “Reconciliation of Non‑GAAP Financial Measures” for a reconciliation of combined ratio calculated using unadjusted GAAP numbers to adjusted combined ratio. 24 Table of Contents Diluted adjusted earnings per share is a non‑GAAP financial measure defined as adjusted net income divided by the weighted-average common shares outstanding for the period, reflecting the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method. See “Reconciliation of Non‑GAAP Financial Measures” for a reconciliation of diluted earnings per share calculated in accordance with GAAP to diluted adjusted earnings per share. Catastrophe loss ratio is a non‑GAAP financial measure defined as the ratio of catastrophe losses to net earned premiums. See “Reconciliation of Non‑GAAP Financial Measures” for a reconciliation of loss ratio calculated using unadjusted GAAP numbers to catastrophe loss ratio. Adjusted combined ratio excluding catastrophe losses is a non‑GAAP financial measure defined as adjusted combined ratio excluding the impact of catastrophe losses. See “Reconciliation of Non‑GAAP Financial Measures” for a reconciliation of combined ratio calculated using unadjusted GAAP numbers to adjusted combined ratio excluding catastrophe losses. Adjusted underwriting income is a non-GAAP financial measure defined as underwriting income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of income before income taxes calculated in accordance with GAAP to adjusted underwriting income. Tangible stockholders ’ equity is a non‑GAAP financial measure defined as stockholders’ equity less intangible assets. See “Reconciliation of Non‑GAAP Financial Measures” for a reconciliation of stockholders’ equity calculated in accordance with GAAP to tangible stockholders’ equity. 25 Table of Contents Results of Operations Three months ended March 31, 2025 compared to three months ended March 31, 2024 The following table summarizes our results for the three months ended March 31, 2025 and 2024: Three Months Ended March 31, 2025 2024 Change % Change ($ in thousands, except per share data) Gross written premiums $ 442,163 $ 368,078 $ 74,085 20.1 % Ceded written premiums (230,745 ) (228,171 ) (2,574 ) 1.1 % Net written premiums 211,418 139,907 71,511 51.1 % Net earned premiums 164,070 107,866 56,204 52.1 % Commission and other income 830 528 302 57.2 % Total underwriting revenue (1) 164,900 108,394 56,506 52.1 % Losses and loss adjustment expenses 38,743 26,837 11,906 44.4 % Acquisition expenses, net of ceding commissions and fronting fees 46,359 31,798 14,561 45.8 % Other underwriting expenses 35,733 24,804 10,929 44.1 % Underwriting income (1) 44,065 24,955 19,110 76.6 % Interest expense (85 ) (740 ) 655 (88.5 )% Net investment income 12,071 7,139 4,932 69.1 % Net realized and unrealized (losses) gains on investments (2,338 ) 3,002 (5,340 ) (177.9 )% Income before income taxes 53,713 34,356 19,357 56.3 % Income tax expense 10,791 7,974 2,817 35.3 % Net income $ 42,922 $ 26,382 $ 16,540 62.7 % Adjustments: Net realized and unrealized losses (gains) on investments 2,338 (3,002 ) 5,340 (177.9 )% Expenses associated with transactions 2,088 — 2,088 — % Stock-based compensation expense 4,745 3,820 925 24.2 % Amortization of intangibles 707 390 317 81.3 % Tax impact (1,494 ) 204 (1,698 ) NM Adjusted net income (1) $ 51,306 $ 27,794 $ 23,512 84.6 % Key Financial and Operating Metrics Annualized return on equity 22.6 % 21.7 % Annualized adjusted return on equity (1) 27.0 % 22.9 % Loss ratio 23.6 % 24.9 % Expense ratio 49.5 % 52.0 % Combined ratio 73.1 % 76.9 % Adjusted combined ratio (1) 68.5 % 73.0 % Diluted earnings per share $ 1.57 $ 1.04 Diluted adjusted earnings per share (1) $ 1.87 $ 1.09 Catastrophe losses $ (542 ) $ 3,359 Catastrophe loss ratio (1) (0.3 )% 3.1 % Adjusted combined ratio excluding catastrophe losses (1) 68.9 % 69.8 % Adjusted underwriting income (1) $ 51,605 $ 29,165 $ 22,440 76.9 % NM - not meaningful (1) Indicates non-GAAP financial measure; see “Reconciliation of Non‑GAAP Financial Measures” for a reconciliation of the non‑GAAP financial measures to their most directly comparable financial measures prepared in accordance with GAAP. 26 Table of Contents Gross Written Premiums Gross written premiums increased $74.1 million, or 20.1%, to $442.2 million for the three months ended March 31, 2025 compared to $368.1 million for the three months ended March 31, 2024. Premium growth was primarily due to an increased volume of policies in the majority of our lines of business which was driven by new business generated with existing partners, strong premium retention rates for existing business, expansion of our distribution footprint, and new partnerships. The following table summarizes our gross written premiums by line of business and shows each line’s percentage of total gross written premiums for each period: Three Months Ended March 31, 2025 2024 ($ in thousands) % of % of % Amount GWP Amount GWP Change Change Product Earthquake $ 130,245 29.5 % $ 105,729 28.7 % $ 24,516 23.2 % Casualty 110,487 25.0 % 51,935 14.1 % 58,552 112.7 % Inland Marine and Other Property 99,284 22.5 % 76,876 20.9 % 22,408 29.1 % Fronting 53,927 12.2 % 94,831 25.8 % (40,904 ) (43.1 )% Crop 48,220 10.9 % 38,707 10.5 % 9,513 24.6 % Total Gross Written Premiums $ 442,163 100.0 % $ 368,078 100.0 % $ 74,085 20.1 % Fronting premiums represent premium where we subsequently cede the majority of the premium and risk in exchange for a fronting fee, which is our primary source of profit in the arrangement. The volume of fronting premiums written each period may vary due to the timing of entering new fronting partnerships and terminations of existing fronting partnerships. A large fronting partnership terminated in the third quarter of 2024, causing the decline in fronting premiums shown above. The following table summarizes our gross written premiums by insurance subsidiary: Three Months Ended March 31, 2025 2024 ($ in thousands) % of % of % Amount GWP Amount GWP Change Change Subsidiary PSIC $ 230,917 52.2 % $ 222,657 60.5 % $ 8,260 3.7 % PESIC 190,786 43.1 % 136,493 37.1 % 54,293 39.8 % Laulima 16,037 3.7 % 8,928 2.4 % 7,109 79.6 % FIA 4,423 1.0 % — — % 4,423 — % Total Gross Written Premiums $ 442,163 100.0 % $ 368,078 100.0 % $ 74,085 20.1 % 27 Table of Contents Ceded Written Premiums Ceded written premiums increased $2.6 million, or 1.1%, to $230.7 million for the three months ended March 31, 2025 from $228.2 million for the three months ended March 31, 2024. The increase was primarily due to an increase in XOL reinsurance expense driven by growth in exposure, offset by a decrease in quota share cessions primarily driven by lower fronting written premiums. Although our volume of ceded written premiums increased, ceded written premiums as a percentage of gross written premiums decreased to 52.2% for the three months ended March 31, 2025 from 62.0% for the three months ended March 31, 2024. This percentage decrease was driven by changes in our composition of business whereby premiums written in the current period were subject to lower quota share or XOL cession percentages compared to premiums written in the prior period. Net Written Premiums Net written premiums increased $71.5 million, or 51.1%, to $211.4 million for the three months ended March 31, 2025 from $139.9 million for the three months ended March 31, 2024. The increase was primarily due to an increase in gross written premiums, primarily in our Casualty and Earthquake lines, partially offset by increased ceded written premiums. Net Earned Premiums Net earned premiums increased $56.2 million, or 52.1%, to $164.1 million for the three months ended March 31, 2025 from $107.9 million for the three months ended March 31, 2024 due primarily to the earning of increased gross written premiums offset by the earning of ceded written premiums under reinsurance agreements. The table below shows the amount of premiums we earned on a gross and net basis and net earned premiums as a percentage of gross earned premiums in each period presented: Three Months Ended March 31, 2025 2024 Change % Change ($ in thousands) Gross earned premiums $ 375,776 $ 302,872 $ 72,904 24.1 % Ceded earned premiums (211,706 ) (195,006 ) (16,700 ) 8.6 % Net earned premiums $ 164,070 $ 107,866 $ 56,204 52.1 % Net earned premium ratio 43.7 % 35.6 % Our net earned premium ratio increased due to changes in our composition of business whereby premiums earned in the current period were subject to lower quota share or XOL cession percentages compared to premiums earned in the prior period. Commission and Other Income Commission and other income increased $0.3 million to $0.8 million for the three months ended March 31, 2025 from $0.5 million for the three months ended March 31, 2024. The balance increased due to an increase in commissions and policy related fees driven by increased premiums written. 28 Table of Contents Losses and Loss Adjustment Expenses Losses and loss adjustment expenses increased $11.9 million, or 44.4% to $38.7 million for the three months ended March 31, 2025 from $26.8 million for the three months ended March 31, 2024. Losses and loss adjustment expenses consisted of the following elements during the respective periods: Three Months Ended March 31, 2025 2024 Change % Change ($ in thousands) Catastrophe losses $ (542 ) $ 3,359 $ (3,901 ) (116.1 )% Non-catastrophe losses 39,285 23,478 15,807 67.3 % Total losses and loss adjustment expenses $ 38,743 $ 26,837 $ 11,906 44.4 % Catastrophe loss ratio (0.3 )% 3.1 % Non-catastrophe loss ratio 23.9 % 21.8 % Total loss ratio 23.6 % 24.9 % Catastrophe loss activity for the quarter ended March 31, 2025 was related to favorable development on prior period catastrophe events. Catastrophe loss activity for the quarter ended March 31, 2024 was primarily related to flood losses. Non-catastrophe losses increased for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 due mainly to higher attritional losses driven by premium growth on lines of business subject to attritional losses such as Casualty and Inland Marine and Other Property. Acquisition Expenses Acquisition expenses increased $14.6 million, or 45.8%, to $46.4 million for the three months ended March 31, 2025 from $31.8 million for the three months ended March 31, 2024. The increase was primarily due to higher commissions and premium-related taxes resulting from higher gross earned premiums. Acquisition expenses as a percentage of gross earned premiums were 12.3% for the three months ended March 31, 2025 compared to 10.5% for the three months ended March 31, 2024. Acquisition expenses as a percentage of gross earned premiums increased due to higher commissions and premium-related taxes as a percentage of gross earned premiums and lower ceded commissions and fronting fees as a percentage of gross earned premiums due to changes in the composition of our business. Other Underwriting Expenses Other underwriting expenses increased $10.9 million, or 44.1%, to $35.7 million for the three months ended March 31, 2025 from $24.8 million for the three months ended March 31, 2024. The increase was primarily due to the Company incurring higher payroll, technology, and stock-based compensation expenses associated with growth of the Company. Other underwriting expenses as a percentage of gross earned premiums were 9.5% for the three months ended March 31, 2025 compared to 8.2% for the three months ended March 31, 2024. Excluding the impact of expenses relating to transactions, stock-based compensation, and amortization of intangibles, other underwriting expenses as a percentage of gross earned premiums were 7.5% for the three months ended March 31, 2025 compared to 6.8% for the three months ended March 31, 2024. Other underwriting expenses as a percentage of gross earned premiums may fluctuate period over period based on timing of certain expenses relative to premium growth. 29 Table of Contents Net Investment Income and Net Realized and Unrealized Gains (Losses) on Investments Net investment income increased $4.9 million, or 69.1%, to $12.1 million for the three months ended March 31, 2025 from $7.1 million for the three months ended March 31, 2024. The increase was primarily due to a higher average balance of investments during the three months ended March 31, 2025 due primarily to the use of proceeds from our August 2024 secondary offering and also due to higher yields on invested assets versus the prior year. The Company incurred $2.3 million of net realized and unrealized losses on investments for the three months ended March 31, 2025 compared to $3.0 million of net realized and unrealized gains for the three months ended March 31, 2024 In both periods, the balance was primarily driven by unrealized gains and losses on our equity securities. Unrealized gains and losses on fixed maturity securities are recognized as a component of other comprehensive income and do not impact our net income. The following table summarizes the components of our investment income for each period presented: Three Months Ended March 31, 2025 2024 Change % Change ($ in thousands) Interest income $ 11,965 $ 7,326 $ 4,639 63.3 % Dividend income 317 197 120 60.9 % Investment management fees and expenses (211 ) (384 ) 173 (45.1 )% Net investment income 12,071 7,139 4,932 69.1 % Net realized and unrealized (losses) gains on investments (2,338 ) 3,002 (5,340 ) (177.9 )% Total $ 9,733 $ 10,141 $ (408 ) (4.0 )% Income Tax Expense Income tax expense increased $2.8 million to $10.8 million for the three months ended March 31, 2025 from $8.0 million for the three months ended March 31, 2024 due to higher pre-tax income for the period ended March 31, 2025. During the three months ended March 31, 2025, our income tax rate of 20.1% was lower than the statutory rate of 21% due primarily to permanent component of employee stock option exercises offset by non-deductible executive compensation expense. During the three months ended March 31, 2024, our income tax rate of 23.2% was higher than the statutory rate of 21% due primarily to non-deductible executive compensation expense. 30 Table of Contents Reconciliation of Non ‑ GAAP Financial Measures Underwriting Revenue We define underwriting revenue as total revenue excluding net investment income and net realized and unrealized gains and losses on investments. Underwriting revenue represents revenue generated by our underwriting operations and allows us to evaluate our underwriting performance without regard to investment results. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. Underwriting revenue should not be viewed as a substitute for total revenue calculated in accordance with GAAP, and other companies may define underwriting revenue differently. Total revenue calculated in accordance with GAAP reconciles to underwriting revenue as follows: Three Months Ended March 31, 2025 2024 (in thousands) Total revenue $ 174,633 $ 118,535 Net investment income (12,071 ) (7,139 ) Net realized and unrealized losses (gains) on investments 2,338 (3,002 ) Underwriting revenue $ 164,900 $ 108,394 Underwriting Income and Adjusted Underwriting Income We define underwriting income as income before income taxes excluding net investment income, net realized and unrealized gains and losses on investments, and interest expense. Underwriting income represents the pre‑tax profitability of our underwriting operations and allows us to evaluate our underwriting performance without regard to investment results. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. Underwriting income should not be viewed as a substitute for pre‑tax income calculated in accordance with GAAP, and other companies may define underwriting income differently. We define adjusted underwriting income as underwriting income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. Adjusted underwriting income should not be viewed as a substitute for pre‑tax income calculated in accordance with GAAP. Other companies may define adjusted underwriting income differently. Income before income taxes calculated in accordance with GAAP reconciles to underwriting income and adjusted underwriting income as follows: Three Months Ended March 31, 2025 2024 (in thousands) Income before income taxes $ 53,713 $ 34,356 Net investment income (12,071 ) (7,139 ) Net realized and unrealized losses (gains) on investments 2,338 (3,002 ) Interest expense 85 740 Underwriting income $ 44,065 $ 24,955 Expenses associated with transactions 2,088 — Stock-based compensation expense 4,745 3,820 Amortization of intangibles 707 390 Adjusted underwriting income $ 51,605 $ 29,165 Adjusted Net Income We define adjusted net income as net income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact. We calculate the tax impact only on adjustments which would be included in calculating our income tax expense using the estimated tax rate at which the company received a deduction for these adjustments. We use adjusted net income as an internal performance measure in the management of our operations because we believe it gives our management and financial statement users useful insight into our results of operations and our underlying business performance. Adjusted net income does not reflect the overall profitably of our business and should not be viewed as a substitute for net income calculated in accordance with GAAP. Other companies may define adjusted net income differently. 31 Table of Contents Net income calculated in accordance with GAAP reconciles to adjusted net income as follows: Three Months Ended March 31, 2025 2024 (in thousands) Net income $ 42,922 $ 26,382 Adjustments: Net realized and unrealized losses (gains) on investments 2,338 (3,002 ) Expenses associated with transactions 2,088 — Stock-based compensation expense 4,745 3,820 Amortization of intangibles 707 390 Tax impact (1,494 ) 204 Adjusted net income $ 51,306 $ 27,794 Annualized Adjusted Return on Equity We define annualized adjusted return on equity as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. We use annualized adjusted return on equity as an internal performance measure in the management of our operations because we believe it gives our management and financial statement users useful insight into our results of operations and our underlying business performance. Annualized adjusted return on equity should not be viewed as a substitute for return on equity calculated using unadjusted GAAP numbers, and other companies may define adjusted return on equity differently. Annualized adjusted return on equity is calculated as follows: Three Months Ended March 31, 2025 2024 (in thousands) Annualized adjusted net income $ 205,224 $ 111,176 Average stockholders' equity $ 759,739 $ 486,455 Annualized adjusted return on equity 27.0 % 22.9 % Adjusted Combined Ratio We define adjusted combined ratio as the sum of the loss ratio and the expense ratio calculated excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook. We use adjusted combined ratio as an internal performance measure in the management of our operations because we believe it gives our management and financial statement users useful insight into our results of operations and our underlying business performance. Adjusted combined ratio should not be viewed as a substitute for combined ratio calculated using unadjusted GAAP numbers, and other companies may define adjusted combined ratio differently. 32 Table of Contents Adjusted combined ratio is calculated as follows: Three Months Ended March 31, 2025 2024 (in thousands) Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $ 120,005 $ 82,911 Denominator: Net earned premiums $ 164,070 $ 107,866 Combined ratio 73.1 % 76.9 % Adjustments to numerator: Expenses associated with transactions $ (2,088 ) $ — Stock-based compensation expense (4,745 ) (3,820 ) Amortization of intangibles (707 ) (390 ) Adjusted combined ratio 68.5 % 73.0 % Diluted Adjusted Earnings Per Share We define diluted adjusted earnings per share as adjusted net income divided by the weighted-average common shares outstanding for the period, reflecting the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method. We use diluted adjusted earnings per share as an internal performance measure in the management of our operations because we believe it gives our management and financial statement users useful insight into our results of operations and our underlying business performance. Diluted adjusted earnings per share should not be viewed as a substitute for diluted earnings per share calculated in accordance with GAAP, and other companies may define diluted adjusted earnings per share differently. Diluted adjusted earnings per share is calculated as follows: Three Months Ended March 31, 2025 2024 (in thousands, except per share data) Adjusted net income $ 51,306 $ 27,794 Weighted-average common shares outstanding, diluted 27,399,997 25,468,564 Diluted adjusted earnings per share $ 1.87 $ 1.09 Catastrophe Loss Ratio Catastrophe loss ratio is defined as the ratio of catastrophe losses to net earned premiums. Although we are inherently subject to catastrophe losses, the frequency and severity of catastrophe losses is unpredictable and their impact on our operating results may vary significantly between periods and obscure other trends in our business. Therefore, we are providing this metric because we believe it gives our management and other financial statement users useful insight into our results of operations and trends in our financial performance without the volatility caused by catastrophe losses. Catastrophe loss ratio should not be viewed as a substitute for loss ratio calculated using unadjusted GAAP numbers, and other companies may define catastrophe loss ratio differently. 33 Table of Contents Loss ratio and catastrophe loss ratio are calculated as follows: Three Months Ended March 31, 2025 2024 (in thousands) Numerator: Losses and loss adjustment expenses $ 38,743 $ 26,837 Denominator: Net earned premiums $ 164,070 $ 107,866 Loss ratio 23.6 % 24.9 % Numerator: Catastrophe losses $ (542 ) $ 3,359 Denominator: Net earned premiums $ 164,070 $ 107,866 Catastrophe loss ratio (0.3 )% 3.1 % Adjusted Combined Ratio Excluding Catastrophe Losses Adjusted combined ratio excluding catastrophe losses is defined as adjusted combined ratio excluding the impact of catastrophe losses. Although we are inherently subject to catastrophe losses, the frequency and severity of catastrophe losses is unpredictable and their impact on our operating results may vary significantly between periods and obscure other trends in our business. Therefore, we are providing this metric because we believe it gives our management and other financial statement users useful insight into our results of operations and trends in our financial performance without the volatility caused by catastrophe losses. Adjusted combined ratio excluding catastrophe losses should not be viewed as a substitute for combined ratio calculated using unadjusted GAAP numbers, and other companies may define adjusted combined ratio excluding catastrophe losses differently. Adjusted combined ratio excluding catastrophe losses is calculated as follows: Three Months Ended March 31, 2025 2024 (in thousands) Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $ 120,005 $ 82,911 Denominator: Net earned premiums $ 164,070 $ 107,866 Combined ratio 73.1 % 76.9 % Adjustments to numerator: Expenses associated with transactions $ (2,088 ) $ — Stock-based compensation expense (4,745 ) (3,820 ) Amortization of intangibles (707 ) (390 ) Catastrophe losses 542 (3,359 ) Adjusted combined ratio excluding catastrophe losses 68.9 % 69.8 % Tangible Stockholders ’ Equity We define tangible stockholders’ equity as stockholders’ equity less intangible assets. Our definition of tangible stockholders’ equity may not be comparable to that of other companies, and it should not be viewed as a substitute for stockholders’ equity calculated in accordance with GAAP. We use tangible stockholders’ equity internally to evaluate the strength of our balance sheet and to compare returns relative to this measure. Stockholders’ equity calculated in accordance with GAAP reconciles to tangible stockholders’ equity as follows: March 31, December 31, 2025 2024 (in thousands) Stockholders' equity $ 790,449 $ 729,030 Goodwill and intangible assets (24,925 ) (13,242 ) Tangible stockholders' equity $ 765,524 $ 715,788 34 Table of Contents Liquidity and Capital Resources Sources and Uses of Funds We operate as a holding company with no business operations of our own. Consequently, our ability to pay dividends to stockholders and pay taxes and administrative expenses is largely dependent on dividends or other distributions from our subsidiaries and affiliates, whose ability to pay us is highly regulated. The Company’s U.S. insurance company subsidiaries, PSIC, PESIC and FIA, 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 statutes 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. 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. The Company is subject to New Jersey law, such that all dividend payments require 30-day prior approval of the New Jersey Commissioner of Banking and Insurance ("the Commissioner"). The maximum dividend, which may be paid in any twelve-month period, is limited to the greater of 10% of statutory surplus as of December 31 of the preceding year or the net gain from operations of the preceding calendar year. Cash dividends may only be paid out of surplus derived from realized net profits. Based on these limitations, FIA has capacity to pay a dividend of $2.3 million in 2025, conditional upon the Commissioner's approval. State insurance regulators have broad powers to prevent the reduction of statutory surplus to inadequate levels, and there is no assurance that dividends up to the maximum amounts calculated under any applicable formula would be permitted. In addition, state insurance regulators may adopt statutory provisions and dividend limitations more restrictive than those currently in effect in the future. 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. If a Class 3A insurer has failed to meet its minimum solvency margin on the last day of any financial year, it will also be prohibited, without the approval of the Bermuda Monetary Authority ("BMA"), from declaring or paying any dividends during the next financial year. Furthermore, the Insurance Act limits the ability of PSRE to pay dividends or make capital distributions by stipulating certain margin and solvency requirements and by requiring approval from the BMA prior to a reduction of 15% or more of a Class 3A insurer’s total statutory capital as reported on its prior year statutory balance sheet. Moreover, an insurer must submit an affidavit to the BMA, sworn by at least two directors and the principal representative in Bermuda of the Class 3A insurer, at least seven days prior to payment of any dividend which would exceed 25% of that insurer’s total statutory capital and surplus as reported on its prior year statutory balance sheet. The affidavit must state that in the opinion of those swearing the declaration of such dividend, such dividend has not caused the insurer to fail to meet its relevant margins. 35 Table of Contents Further, under the Companies Act (as defined below), PSRE may only declare or pay a dividend, or make a distribution out of contributed surplus, if it has no reasonable grounds for believing that: (1) it is, or would after the payment be, unable to pay its liabilities as they become due or (2) the realizable value of its assets would be less than its liabilities. 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 from PSRE during 2025 is calculated to be approximately $4.2 million. However, this dividend amount is subject to annual enhanced solvency requirement calculations. One of our insurance company subsidiaries, PSIC, is a member of the Federal Home Loan Bank of San Francisco (FHLB). Membership allows PSIC access to collateralized advances, which may be used to support and enhance liquidity management. The amount of advances that may be taken is dependent on statutory admitted assets. Cash Flows Our primary sources of cash flow are written premiums, investment income, reinsurance recoveries, sales and redemptions of investments, and proceeds from borrowings on our lines of credit. We use our cash flows primarily to pay reinsurance premiums, operating expenses, losses and loss adjustment expenses, and income taxes. Our cash flows from operations may differ substantially from our net income due to non‑cash charges or due to changes in balance sheet accounts. The timing of our cash flows from operating activities can also vary among periods due to the timing by which payments are made or received. Some of our payments and receipts, including loss settlements and subsequent reinsurance receipts, can be significant. Therefore, their timing can influence cash flows from operating activities in any given period. The potential for a large claim under an insurance or reinsurance contract means that our insurance subsidiaries may need to make substantial payments within relatively short periods of time, which would have a negative impact on our operating cash flows. Management believes that our current liquidity and cash receipts from written premiums, investment income, proceeds from investment sales and redemptions, and reinsurance recoveries, if necessary, are sufficient to cover cash outflows for each of the Company’s insurance subsidiaries in the foreseeable future. The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024: Three Months Ended March 31, 2025 2024 ($ in thousands) Cash provided by (used in): Operating activities $ 87,183 $ 33,125 Investing activities (51,944 ) (16,331 ) Financing activities 3,549 (6,882 ) Change in cash, cash equivalents, and restricted cash $ 38,788 $ 9,912 Our cash flow from operating activities was positive during the three months ended March 31, 2025 and 2024 due to net income and a decrease in net operating assets in each period. Variations in operating cash flow between periods are primarily driven by variations in our gross and ceded written premiums and the volume and timing of premium receipts, claim payments, reinsurance payments, and reinsurance recoveries on paid losses. In addition, fluctuations in losses and loss adjustment expenses and other insurance operating expenses impact operating cash flows. 36 Table of Contents Cash used in investing activities for the three months ended March 31, 2025 and 2024 related primarily to purchases of fixed maturity securities in excess of sales and maturities in each period. Cash provided by financing activities for the three months ended March 31, 2025 was related to the receipt of $2.4 million in proceeds from stock option exercises, the receipt of $0.5 million in proceeds from our employee stock purchase plan and the receipt of $0.8 million in proceeds from policy holder contributions of surplus, offset by $0.1 million in offering costs from the August 2024 Secondary Offering. Cash used in financing activities for three months ended March 31, 2024 was related to $9.6 million in payments on our FHLB line of credit, offset by the receipt of $1.9 million in proceeds from stock option exercises and the receipt of $0.4 million in proceeds from our employee stock purchase plan. We do not have any current plans for material capital expenditures other than current operating requirements. We believe that we will generate sufficient cash flows from operations to satisfy our liquidity requirements for at least the next 12 months and beyond. The key factor that will affect our future operating cash flows is the frequency and severity of catastrophe losses. To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $1,168.7 million in cash and investment securities available at March 31, 2025. We also have the ability to access additional capital through pursuing third‑party borrowings, sales of our equity or debt securities or entrance into a reinsurance arrangement. Share Repurchases Our share repurchase program expired on March 31, 2024 and we did not make any share repurchases during the three months ended March 31, 2025. Credit Agreements We have the ability to access additional capital through multiple credit agreements. In December 2021, we entered into a Credit Agreement (the “Credit Agreement”) with U.S. Bank National Association which provides a revolving credit facility of up to $100 million through December 8, 2026. Interest on the credit facility 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 0.75%. A loan may be either a SOFR rate loan or a base rate loan, at our discretion. Outstanding amounts under the Credit Agreement 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. Currently, $5.6 million of the borrowing capacity of the Credit Agreement is pledged as collateral and not able to be utilized. As of March 31, 2025, we had no borrowings outstanding through the Credit Agreement. Our 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 equal to 10% of PSIC’s statutory admitted assets. All advances have predetermined term and the interest rate varies based on the term of the advance. As of March 31, 2025, we had no borrowings outstanding through the FHLB line of credit. Stockholders ’ Equity At March 31, 2025 total stockholders’ equity was $790.4 million and tangible stockholders’ equity was $765.5 million, compared to total stockholders’ equity of $729.0 million and tangible stockholders’ equity of $715.8 million as of December 31, 2024. Stockholders' equity increased due to net income earned for the period, activity related to stock-based compensation, and unrealized gains on fixed maturity securities. 37 Table of Contents Tangible stockholders’ equity is a non‑GAAP financial measure. See “Reconciliation of Non‑GAAP Financial Measures” for a reconciliation of stockholders’ equity in accordance with GAAP to tangible stockholders’ equity. Investment Portfolio Our primary investment objectives are to maintain liquidity, preserve capital and generate a stable level of investment income. We purchase securities that we believe are attractive on a relative value basis and seek to generate returns in excess of predetermined benchmarks. Our Board of Directors approves our investment guidelines in compliance with applicable regulatory restrictions on asset type, quality and concentration. Our current investment guidelines allow us to invest in taxable and tax‑exempt fixed maturities, as well as publicly traded mutual funds and common stock of individual companies. Our cash and invested assets consist of cash and cash equivalents, fixed maturity securities, and equity securities. As of March 31, 2025, the majority of our investment portfolio, or $991.8 million, was comprised of fixed maturity securities that are classified as available‑for‑sale and carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income. Also included in our investment portfolio were $44.4 million of equity securities, $2.3 million of equity method investments and $11.0 million of investments in limited partnerships. In addition, we maintained a non‑restricted cash and cash equivalent balance of $119.3 million at March 31, 2025. Our fixed maturity securities, including cash equivalents, had a weighted average effective duration of 4.09 and 4.04 years and an average rating of “A1/A+” and “A1/A+” at March 31, 2025 and December 31, 2024, respectively. Our fixed income investment portfolio had a book yield of 4.65% as of March 31, 2025, compared to 4.59% as of December 31, 2024. At March 31, 2025 and December 31, 2024 the amortized cost and fair value on available‑for‑sale securities were as follows: Amortized Fair % of Total March 31, 2025 Cost or Cost Value Fair Value ($ in thousands) Fixed maturities: U.S. Governments $ 16,567 $ 16,166 1.6 % U.S. States, Territories, and Political Subdivisions 19,876 18,388 1.9 % Special revenue excluding mortgage/asset-backed securities 19,440 17,060 1.7 % Corporate and other 520,041 508,628 51.3 % Mortgage/asset-backed securities 439,968 431,517 43.5 % Total available-for-sale investments $ 1,015,892 $ 991,759 100.0 % Amortized Fair % of Total December 31, 2024 Cost or Cost Value Fair Value ($ in thousands) Fixed maturities: U.S. Governments $ 33,449 $ 32,806 3.5 % U.S. States, Territories, and Political Subdivisions 10,606 9,778 1.0 % Special revenue excluding mortgage/asset-backed securities 30,283 26,634 2.8 % Corporate and other 492,395 475,491 50.6 % Mortgage/asset-backed securities 406,597 394,337 42.0 % Total available-for-sale investments $ 973,330 $ 939,046 100.0 % 38 Table of Contents The following tables provide the credit quality of investment securities as of March 31, 2025 and December 31, 2024: Estimated % of March 31, 2025 Fair Value Total ($ in thousands) Rating AAA $ 139,730 14.1 % AA 306,807 30.9 % A 284,674 28.7 % BBB 246,269 24.9 % BB 13,186 1.3 % B 1,092 0.1 % CCC & Below 1 — % $ 991,759 100.0 % Estimated % of December 31, 2024 Fair Value Total ($ in thousands) Rating AAA $ 130,161 13.9 % AA 305,267 32.5 % A 254,890 27.1 % BBB 236,855 25.2 % BB 10,614 1.1 % B 1,258 0.1 % CCC & Below 1 0.0 % $ 939,046 100.0 % The amortized cost and fair value of our available‑for‑sale investments in fixed maturity securities summarized by contractual maturity as of March 31, 2025 were as follows: Amortized Fair % of Total March 31, 2025 Cost Value Fair Value ($ in thousands) Due within one year $ 70,521 $ 70,386 7.1 % Due after one year through five years 204,784 200,660 20.2 % Due after five years through ten years 184,930 179,685 18.1 % Due after ten years 115,689 109,511 11.0 % Mortgage and asset-backed securities 439,968 431,517 43.5 % $ 1,015,892 $ 991,759 100.0 % Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations. 39 Table of Contents Reinsurance We purchase a significant amount of reinsurance from third parties that we believe enhances our business by reducing our exposure to potential catastrophe losses, limiting volatility in our underwriting performance, and providing us with greater visibility into our future earnings. Reinsurance involves transferring, or ceding, a portion of our risk exposure on policies that we write to another insurer, the reinsurer, in exchange for a premium. To the extent that our reinsurers are unable to meet the obligations they assume under our reinsurance agreements, we remain liable for the entire insured loss; see “Risk Factors—Risks Related to Our Business and Industry—We may be unable to purchase third-party reinsurance or otherwise expand our catastrophe coverage in amounts we desire on commercially acceptable terms or on terms that adequately protect us, and this inability may materially adversely affect our business, financial condition and results of operations.” We use treaty reinsurance and, on a limited basis, facultative reinsurance coverage. Treaty coverage refers to a reinsurance contract that is applied to a group or class of business where all the risks written meet the criteria for that class. Our treaty reinsurance program primarily consists of catastrophe XOL coverage, in which the reinsurer(s) agree to assume all or a portion of the ceding company’s losses relating to a group of policies occurring in relation to specified events, subject to customary exclusions, in excess of a specified amount. Additionally, we buy program specific reinsurance coverage for specific lines of business on a quota share, property per risk or a facultative basis. In quota share reinsurance, the reinsurer agrees to assume a specified percentage of the ceding company’s losses arising out of a defined class of business in exchange for a corresponding percentage of premiums, net of a ceding commission. Property per risk coverage is similar to catastrophe XOL coverage except that the treaty applies in individual property losses rather than in the aggregate for all claims associated with a single catastrophic loss occurrence. Facultative coverage refers to a reinsurance contract on individual risks as opposed to a group or class of business. We use facultative reinsurance selectively to supplement limits or to cover risks or perils excluded from other reinsurance contracts. We have a robust program utilizing a mix of traditional reinsurers and insurance linked securities. We currently purchase reinsurance from over 100 reinsurers, who either have an “A−” (Excellent) (Outlook Stable) or better financial strength rating by A.M. Best or post collateral. Our reinsurance contracts include special termination provisions that allow us to cancel and replace any participating reinsurer that is downgraded below a rating of “A−” (Excellent) (Outlook Stable) from A.M. Best, or whose surplus drops by more than 20%. In addition to reinsurance from traditional reinsurers, we utilize collateralized protection via catastrophe bonds. We currently have $895 million of multi-year indemnity-based reinsurance coverage for earthquake events, all issued through Torrey Pines Re Ltd, a Bermuda-domiciled special purpose insurer. 40 Table of Contents Our catastrophe event retention is $20 million for earthquake events and $15.5 million for hurricane events and all other perils. Our reinsurance coverage exhausts at $3.2 billion for earthquake events, $735 million for Hawaii hurricane events, and $117.5 million for continental U.S. hurricane events, providing coverage in excess of our 1 in 250-year peak zone PML and in excess of our A.M. Best requirement. In addition, we maintain reinsurance coverage equivalent to or better than the 1 in 250-year PML for our other lines. In the event that multiple catastrophe events occur in a period, many of our contracts include the right to reinstate reinsurance limits for potential future recoveries during the same contract year and preserve our limit for subsequent events. This feature for subsequent event coverage is known as a “reinstatement.” Critical Accounting Estimates We identified the accounting estimates which are critical to the understanding of our financial position and results of operations. Critical accounting estimates are defined as those estimates that are both important to the portrayal of our financial condition and results of operations and require us to exercise significant judgment. We use significant judgment concerning future results and developments in applying these critical accounting estimates and in preparing our condensed consolidated financial statements. These judgments and estimates affect our reported amounts of assets, liabilities, revenues and expenses and the disclosure of our material contingent assets and liabilities. Actual results may differ materially from the estimates and assumptions used in preparing the condensed consolidated financial statements. We evaluate our estimates regularly using information that we believe to be relevant. Our critical accounting policies and estimates are described in our annual consolidated financial statements and the related notes in our 2024 Annual Report on Form 10-K. There have been no material changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Operations included in our 2024 Annual Report on Form 10-K.