Palomar Q2 2026 earnings: Premium growth offsets a higher loss ratio

Palomar Holdings (NASDAQ: PLMR) reported Q2 2026 total revenue of $314.4 million, up about 54.6% from $203.3 million, while diluted EPS increased to $1.94 from $1.68. Gross written premiums rose 27.0% and adjusted net income grew 31.4%, although a higher loss ratio reduced the underwriting margin benefit from rapid premium growth.

Core earnings data

Top-line growth extended beyond written premiums. Net earned premiums increased 59.5% as gross earned premiums grew 35.3% and ceded earned premiums rose only 16.2%, lifting the net earned premium ratio to 51.9% from 44.0%.

GAAP net income grew more slowly than adjusted net income as losses and loss adjustment expenses more than doubled, interest expense increased, and the effective tax rate rose to 24.7% from 22.3%. The company attributed the higher tax rate primarily to nondeductible executive compensation expense.

Business and product performance

Palomar reports a single operating segment, but its product data show a clear shift in the source of premium growth. Casualty produced the largest dollar increase, while Crop and Surety & Credit recorded the fastest percentage growth. Earthquake premiums were nearly unchanged, reducing that product’s share of total gross written premiums to 23.3% from 29.8%.

Beginning in 2026, Palomar updated its product categories to reflect management’s current view of the business. Prior-year amounts were reclassified for comparability, without changing total gross written premiums.

Profitability, investments, and the balance sheet

Net investment income increased 49.2% to $20.0 million, supported by higher yields and a larger average investment balance funded by cash generated from operations. Net realized and unrealized investment gains declined to $6.8 million from $8.3 million. At June 30, cash and invested assets totaled $1.7 billion, and the fixed-maturity portfolio had a weighted average duration of 4.33 years, including cash equivalents.

Stockholders’ equity reached $980.9 million, compared with $847.2 million a year earlier. Annualized adjusted return on equity improved to 26.3% from 23.7%, while GAAP return on equity declined to 21.7% from 22.7%.

The balance sheet also included a $295.8 million term loan that was not present at year-end 2025. Goodwill and intangible assets increased to $236.8 million from $61.1 million, while tangible stockholders’ equity declined to $744.2 million from $881.6 million. Q2 interest expense rose to $4.9 million from $0.1 million.

Palomar repurchased 368,719 shares for $41.0 million during the quarter. The board also declared an initial quarterly dividend of $0.45 per share, payable September 2, 2026, to shareholders of record on August 19.

Higher attritional losses offset part of the premium scale benefit

The central tension in the quarter was that losses grew faster than earned premiums. Losses and loss adjustment expenses increased 114.3% to $99.0 million, compared with 59.5% growth in net earned premiums. That pushed the loss ratio to 34.5% from 25.7%.

The deterioration was not driven by catastrophe losses. Catastrophe development was favorable by $0.4 million, producing a negative 0.1% catastrophe loss ratio. Attritional losses were $99.4 million, and the quarter included $6.2 million of losses on derivative instruments versus an insignificant amount a year earlier. Results also benefited from $14.3 million of favorable prior-year loss development, mainly related to Inland Marine and Property and prior Crop years.

Expense efficiency provided a partial offset: the expense ratio improved to 48.8% from 53.1%. Consequently, the combined ratio remained below 100%, and adjusted underwriting income still increased 38.4% to $67.0 million, but both reported and adjusted combined ratios were higher than a year earlier.

2026 guidance

Palomar increased its full-year adjusted net income outlook for the third time, according to management. The materials did not provide the previous range, so the size of the latest revision cannot be calculated.

Management perspective

Chairman and CEO Mac Armstrong emphasized premium growth, adjusted profitability, and continued investment in the Palomar 2X strategy. Operational developments included the launch of PLMR.Farm, the company’s crop policy administration system.

Armstrong also said the new quarterly dividend would not change Palomar’s growth strategy or its planned investment in businesses supporting Palomar 2X. Management presented the dividend as an additional use of capital alongside growth investment and share repurchases.

Recent insider transactions

Aggregate data for the preceding six months showed 160,437 shares purchased and 107,388 shares sold by insiders, for net purchases of 53,049 shares. The latest individually reported transactions provided in the source were concentrated among CEO Mac Armstrong and President Jon Marcus Christianson; no conclusion about management’s outlook can be drawn from these transactions alone.

Two additional recent source entries were omitted because their transaction type and value were not specified.

Risks investors need to watch

• Attritional loss pressure: The attritional loss ratio increased to 34.6% from 25.7%. Continued loss growth above earned-premium growth would place further pressure on underwriting margins.
• Higher premium retention: The net earned premium ratio rose to 51.9% from 44.0%. Retaining more premium supports revenue, but also makes loss performance increasingly important to earnings.
• Catastrophe variability: Q2 had favorable catastrophe development, while full-year guidance assumes $8 million to $12 million of catastrophe losses. Future events could change the underwriting result materially.
• Leverage and tangible equity: Palomar ended the quarter with a $295.8 million term loan, higher interest expense, and lower tangible stockholders’ equity than at year-end 2025.
• GAAP and adjusted earnings gap: Adjusted results exclude items including stock-based compensation, intangible amortization, catastrophe bond expenses, and investment gains. Investors should monitor both measures as these adjustments materially affect reported profitability.

Summary

Palomar’s Q2 2026 results combined rapid premium and adjusted earnings growth with weaker loss and combined ratios. Casualty, Crop, and Surety & Credit drove the premium expansion, while higher retained premiums and investment income supported profitability. The main issues to monitor are attritional losses, the balance-sheet effects of increased debt and intangible assets, catastrophe experience, and execution against the updated full-year adjusted net income guidance.