Palomar Holdings, Inc. (PLMR) September 2026 Conference Transcript

Let's move along and I'm really excited to welcome Chris Achita, CFO of Palomar, and John Christensen, the president, and turn it over for any opening comments before we jump into Q&A.

Yeah, thanks, Mayor. It's a pleasure to be here. Good to see everybody. You know, as we think about Palomar and to kind of set up the conversation for the next half hour or so, Really think of Palomar as a specialty insurance platform that has really diversified, particularly over the last five or six years. And so we are not just in property, but we're in casualty. We built a surety business, crop insurance business. Really nice and diversified both in commercial lines, personal lines, admitted, ENS, and really kind of geographic scope throughout the United States. So really delivering on strong diversification, consistent earnings. And really that's kind of translated into 15 consecutive earnings beats. We've raised our guidance for adjusting net income three times so far in 2026. And we're very confident in continuing to deliver on what we refer to as Palomar 2X, which is an operating philosophy of doubling adjusted net income in a three to five year time frame. So as we look at ourselves in 2026, really pleased with the composition of the book and our ability to continue to execute.

Great, thank you. So opening question, and we were chatting about this before, I want to talk about AI. What we're trying to get from companies in this conference is as concrete as possible, a picture of how you're using AI, where it's making a difference, where we on the outside will see it on financial statements. I I know it's a broad question because the applications are broad, but to the extent that you can flesh that out for us, that would be great.

Yeah, sure. I'll start, and Chris can jump in. As we think about leveraging AI within Palomar, it's really kind of across three primary areas. So one, obviously, is underwriting. We are an underwriting shop, so think about how we can leverage it for underwriting. Portfolio management and portfolio analytics would be the second area. And then kind of operational efficiency, which a lot of people are talking about. So as we look across those areas, we are employing and deploying our AI in a number of different ways. So a few concrete examples that we can speak of. One, we talked about it in our last earnings call, but Palomar.farm, the new technology platform that we've rolled off for crop insurance. I'm sure we'll talk about crop more later, but really one of the ways in which we can differentiate ourselves in the crop market is not through pricing, because that's set by the U.S. government or agent commissions, it's really kind of three things. One is customer service and relationships. Second is claims adjusting. And then the third is technology. So by bringing an AI forward, new platform into the market for crop insurance is really a differentiator, and AI has helped us do that and will continue to keep us ahead of the curve from a modernization standpoint. point. Second is on the underwriting side, improved AI enabled underwriting workbenches for our underwriters across a number of different products. As we get into kind of the operational efficiencies, we're bringing in AI into our operational workflows and customer service. And then lastly, really on the kind of portfolio analytics side, what we're able to do from catastrophe modeling. Obviously, catastrophe modeling is a big part of what we do on the property and particularly the earthquake side of our business. Really able to enrich the data that we're using for catastrophe modeling and improve our portfolio analytics that then translates into better risk selection and more appropriate pricing for those risks.

Okay. So when we look at your financial statements in, pick a year, three years, we should see that?

You're probably going to see it everywhere. I'd say the only place you're probably not going to see it or not to expect to see it would be acquisition expense. From our standpoint, you're going to see top line performance improve. You're going to see better loss ratio, better other writing expenses growing at a different rate than the top line. I'd even expect to see it in investment income. Ultimately, you're going to see it for better improvement and adjusted net income. The Palomar 2X philosophy, AI will help that, where we can double every three to five years. But I would expect to see it almost throughout the P&L, as John kind of described, right? Except for acquisition expense. Maybe we start a direct-to-consumer play at some point in time. Maybe you'd see it there. But overall, based on the way we're structured right now, I wouldn't expect to see it in acquisition expense. But every other line, you should see a benefit.

Okay. And I think, you know, from our underwriters' perspectives, really looking forward to being able to do more. So, you know, any one of our P&L owners say it was, you know, the individual that leaves our builder's risk, he's not looking forward to our AI enablement to be able to cut three heads next year. He's thinking about how he can do more with the team that he has and continue to grow in a very profitable fashion. So it's really more of what we, the excitement around what we can do by being better enabled with technology than it is to how are we going to cut heads.

Okay. And just to follow up on that to flesh it out, it sounds very much like you're confident that not everyone that you're competing with has these capabilities.

Well, I think different organizations are going to be able to progress at different speeds. One of the other benefits that we have at Palomar is very entrepreneurial culture, you know, founder-led business, which started 12 years ago, we're a bit more nimble maybe than some of the other players in the market. Not to say that a more entrenched legacy carrier platform can't be enabled by AI tooling but to have a more modern technology stack and probably allows us to be a bit more nimble than some of our peers might be.

Okay, fantastic. Over the course of this session if you have questions please don't hesitate to raise your hand we'll get you the mic and go from there but I'm gonna delve into individual lines now. I want to start with earthquake because I have a bunch of basic questions just want to make sure I get the facts That's right. I know there are earthquakes every day. We've had a few major earthquakes that have been tragic in Colombia and in Indonesia most recently. We have three questions stemming from that. One, scientifically, when you've got those incidents, are the tectonic plates more or less stable after those events, to the extent that you can tell? What do events like that outside of the U.S., what impact do they have on U.S. demand for earthquake coverage? And I've asked Chris this question a million times, so I'm acknowledging that I'm asking again, what are the growth prospects for Palomar outside the U.S. for earthquake?

Yeah, sure. So first, as you mentioned, Indonesia and Colombia and Venezuela would go into that category as well. And certainly, as we think back and reflect on the last few months of those earthquakes, it's taken a significant human toll. So, you know, that is worth acknowledging in the beginning. But also, it's also worth acknowledging that in those areas, maybe not so much Indonesia, but for Venezuela and Colombia, the building code adherence and the building stock is more vulnerable in other areas and that sadly led to some of the the human cost of those events from a scientific perspective as we think about you know broader tectonic movements while there has been a clustering and we see this in the news cycle there has been this clustering of large events that have made headlines over the course of 2026 last 12 months last five years there's no demonstrable change in tectonic activity so whenever you see a clustering of these events happen in a short period of time it's natural to think has something changed expert opinions have not suggested that there's anything that's changing tectonic movements are happening as they always have they just tend to cluster from time to time and that's what's happened in recent months it does bring to light the need and the value of having earthquake insurance and so going back 12 and a half years since we started the company anytime that we've seen kind of headline grabbing events whether it be earthquakes like what we've had over the course of the summer or frankly even go back to like 2017 with hurricane harvey we'd always see increases in demand for a voluntary product like earthquake. And what I mean by voluntary product is that it's not mandated that customers buy earthquake insurance in California or other regions of the United States. It is a voluntary purchase, a luxury item to buy earthquake insurance. And so what we find is that after these events, awareness has increased and we have a number of new customers that come into the market, which is a good thing. It does here in the U.S. decrease or lessen the insurance gap, and Palomar is a natural option for customers to seek out coverage. So we do, after all of these events, we always see an increase in new business, and the renewal retentions on particularly the residential earthquake are very consistent. And then we have focused our capital in the United States, so we do not have any exposure to the South American or Asian earthquakes recently. We're familiar with those markets. That is an area that we have looked at, but right now we feel like our capital is best pointed at the U.S. market as we do see this market still being an opportunity for growth.

One thing I'd expand on that John was talking about is when you think about the overall take-up rate, California is obviously the state with the most earthquake business and where we ride the most. Right now, we estimate that only about 13% of that market actually buys earthquake. It's a voluntary product. We think that post-event, and you see this uptick after small events in California, would probably be closer to 30%, right? So there's still a significant, call it TAM, available for the earthquake market.

Right. I remain personally surprised that the banks don't insist on it if, you know, you're- If you have any sway, we would be happy to take it.

And that's a long story for another fireside probably.

That's why they don't require it. Yeah. I was only expressing a surprise, but no one cares what I say. I do want to spend some time. John started off talking about the diversification of Palomar, and I think that's an interesting story. And I want to talk about like the individual lines that you're in, but I have like one background meta question. You've attracted a lot of talent. Because you're not entering these lines without underwriting and other expertise. How do you keep that talent? How do you make sure that they're happy at Palomar and they don't go somewhere else afterwards?

Yeah, sure. You know, and I think this is a topic that a lot of leaders in the insurance space are thinking about is, you know, attracting and maintaining talent. One of the unique elements of Palomar is that, again, like I mentioned earlier, we are a founder-led business, relatively new. we've been successful. So, you know, growing, you know, 20 plus percent, you know, earnings for the first half of the year, year over year, grew 27 percent, ROEs above 20 percent. There's a lot of really kind of nice story around what we're doing at Palomar. That kind of success breeds further their success, and allows us to go and attract other like-minded individuals that are very entrepreneurial, fit the company culture, are builders, and when you have an organization that continues to kind of deliver bottom-line growth and a strong ROE, you can't do that without having some degree of a meritocracy type of a culture, and strong performers tend to gravitate towards meritocracies and so i think starting out company culture wise we are an attractive place for strong talent to go want to want to join um and then you know certainly from a compensation's part of that because you can't just um attract you know individuals solely based on kind of entrepreneurial culture and so as we think about um as being a publicly traded company now to be able to compensate and incentivize P&L owners based on not only just the overall company performance, the division's performance, but we're able to structure compensation around that kind of is in alignment with our Palomar 2X operating philosophy that really kind of rewards strong performance over time. And so as we think about how we may differentiate from others in the market, that is certainly a selling point, being publicly traded. And that's frankly when we IPO'd in 2019, that was one of the doors that were open for us in terms of being able to attract and maintain strong talent.

But yeah, the only thing I'd add to that, and you kind of alluded to it, is the fact that these, the compensation is tied to individual and company goals, right? So we want to make sure that underwriting performance is key to what these people are doing so that they need to walk away from a deal they can but because they're also evaluated on the overall performance of the full company they can still get bonuses and still get increased compensation because the company is performing well so we want them to think about one their individual goals but also the overall philosophy of the organization so that they are doing the right thing for Palomar not just for Joe Underwriter right and just going one step further on that can you talk about the I was asking you know what lines are going into next is probably an unfair question, but the level of talent interest in Palomar and how that's been trending over the last year or so.

Yeah, I mean, so we've, you know, as we looked at some of if we were to look at some of the more recent lines or extensions that we've gone into over the course of the last 12 to 24 months, we've seen, you know, strong gains in our builders risk franchise, we recruited a couple really strong leaders in the engineer construction space second half of last year part of the ability to go out and bring those individuals in was to show what we'd done in other uh segments of builders risk market and use that as kind of an archetype for what they could do at palomar and the resources that we bring to bear to make them successful we've also seen some strong growth in the crop insurance base and so again the leaders that we've brought in have deep networks to be able to go out and recruit others that they respect in the market to be able to come kind of join in. And then on the surety side, that's another area that we've seen growth. We've had some great leadership come through the acquisition of the Great Casualty and Surety Company that closed at the end of January of 26. So we've seen really good leadership come into Palomar over the last couple of years, particularly in those areas that we've seen nice growth. Okay.

One of the implications of a more diversified book, I would imagine, all else equal, is less reliance on reinsurance. And I remember during the IPO, when Palomar was very, very heavily focused on Earthquake, the comprehensiveness of the reinsurance tower was a very, very important talking point. And I think Mac has said many times that his first or his second hire was someone to lead reinsurance purchasing. How should we think about that the structure of the reinsurance tower, maybe the ideal number of reinsurance partners as Palomar becomes bigger, becomes more diversified.

Yeah, really, you know, and I think you're probably speaking most directly to the earthquake reinsurance that we buy on the property cat side. But as a reminder, reinsurance is a big part of what we do across all of our lines of business. So whether it be excessive loss in the property cat space to support the earthquake growth, both some of the quota shares that we use for some of the newer casualty lines and grown casualty lines, access to the loss that we buy for surety, or the combination of quota share and stop loss that we buy for crops. So we have different strategies across different lines of business, but it is something that permeates most of our lines in terms of how we think about risk transfer. On the earthquake side, we do trade with over 100 different counterparties, individual balance sheets on a counterparty basis, as we look at our almost $4 billion reinsurance tower. We like having a lot of diversification. No single reinsurer has above a certain amount of our overall tower. We like to have, in case there's changing appetites in the market, we want to make sure that we're not beholden to any single reinsurer. so it is a very diversified spread obviously counterparty credit is important we trade in both the traditional reinsurance market as well as the insurance securities market so we have the Torrey Pines re series of catastrophe bonds that we issue and so that's a that's a common approach that we any given year will have you know upstanding Torrey Pines re issuances all of this to similar to what we do on the on the direct side on the insurance business of wanting to have diversification we do the same thing with regard to our risk transfer strategy we want it we want to have broad diversification from a duration standpoint most of our traditional reinsurance you know it's typical to have kind of annual terms on the ILS you have multi-year terms again trying to not only diversify across counterparties but also across durations Okay.

Yeah, and I think you mentioned that, obviously, as we grow, right, the goal or the thesis we'll be putting more and more onto our own balance sheet. Crop is a very good example of that, where we started off seeding up 95%, and this year we're only seeding up 50%. But when the reinsurance market is cooperative, right, we will go the other direction. Earthquake is a good example of that, where our retention has not changed over the last few years, where we only retain $20 million, where our tower has gone from $3 billion to closer to $4 billion. So when the reinsurance marketplace is favorable to us, we will happily cede more, right? We will play both sides or move the lever of both directions as we continue to grow and have that capability on our own balance sheet.

Yeah, and we used to, with regard to that earthquake retention, we've talked about this in past earnings calls, but we used to talk about how we wanted to keep our retention within one quarter's earnings. And now, if you've looked at the last quarters of earnings, our retention of $20 million is, you know, within a month of earnings. And so, to Chris's point, as we look at the pricing of those lower layers in favorable environments from a reinsurance pricing perspective, it may make sense for us to keep the retention at that point. But that allows us optionality as market changes to give us some optionality with regard to how we set our retention.

Yeah, I was, for whatever it's worth, expecting the retention to drift up. This is not a secret. It's in my model. But I completely get the point that, you know, financially it may not make sense, given other things that are going on. And it will be interesting to see how that manifests itself over the next 12 months. Because if nothing else, the takeaway from Monte Carlo is that the cost of reinsurance is going down, both on the property side and on the casualty side, where casualty ILS is becoming a bigger issue. So maybe if I can jump off with that, can you talk about your comfort level with casualty ILS or third-party capital?

I'd say from more broadly, I would just say as we think about our casualty business right now, a lot of what we buy is quota share on the casualty space. And as we look at that book continuing to grow, there's certain ways in which we can kind of mature our risk transfer strategies around casualty. One way that would not be a non-common approach would be to start to introduce some excess of loss coverage for that casualty book. And just like there's ways of maturing and evolving risk transfer between quota share and excess of loss reinsurance, certainly as we look at new pools of capital that come into this space, there's trade-offs and benefits, you know, to evaluate in different pools of capacity. So I won't necessarily get into any kind of specifics about how we think of one versus the other, other than there is, like I was saying on the property cat side, there's benefits of different pools of capital. But we have, you know, we are committed buyers and long-term buyers of in the traditional space as well. Okay, fantastic.

I want to spend a little time on El Nino because it's been a real big deal. It's probably one of the reasons that we're seeing or expectations of lower Atlantic hurricane losses. My view is that everyone's expecting there to be nothing. Who knows, that could change, but right now. But the counterpoint is that the Pacific is really hot and pretty active. And I was hoping you could talk about the exposure there. I'm thinking mostly Hawaii.

What other components of that should I think about in the context of Palomar? yeah no i think that's uh it's a good point you raise um and of course in the atlantic even though there is suppressed activity um doesn't mean that there's not going to be a landfall in hurricanes so you know there's always that that possibility but el nino does generally suppress hurricane activity in the north atlantic uh and conversely as you as you point out um the pacific tends to be elevated and so we've seen this historically so the fact that there's been more hurricane formations in the in the eastern pacific and central pacific is not a surprise uh it's kind of conforming with historical norms as we think about the enzo cycle so um uh you know our exposure there would be the hawaii hurricane product that we have um and you may recall a few years ago we we moved that book of business from palomar specialty our admitted carrier within the group to La Lima Exchange. So that is a Hawaii reciprocal that we started. We own the AIF and given the nature of reciprocals, that is member owned, but for the purposes of our financials, they're consolidated within the overall pound market financials. That we have a very low retention on. So 1.5 million is a retention in for La Lima with regard to Hawaii hurricane. So it's fairly insulated and mitigated against events that would that would hit the islands. But I don't know if you want to talk more about La Lima or anything.

David Wright The high points right, the retention of $1.5 million is the important fact. But yeah, overall, its results are consolidated in the group results as a variable entity.

Right. So I'm curious about that on the accounting side. When does the fact that it's not entirely owned by Palomar impact the financial reporting? Like if we imagine bad news or how does that work?

Yeah. So not owned at all by Palomar. It's a variable interest entity from an accounting standpoint. So its results are consolidated. It looks like just one of our subsidiaries, but technically it is owned by its policyholders. So right now we have funded the surplus note because we have funded 100% of that surplus note. The accounting rules say we do need to consolidate those results. At some point in time, most likely when we have that note refinanced and there's no exact percentage calculation on if it's 60, 70. But let's say when the majority is no longer associated with Palomar, then we will no longer consolidate that entity. So right now it just looks like any other subsidiary. subsidiary but at some point in time it'll look more just like fee income as the attorney in fact that is administering that book.

But going back to your El Nino question those are as we think about the Palomar Book of Business those are probably the two elements that are most pronounced with regard to El Nino would be North Atlantic Hurricane, Eastern Pacific Hurricane.

Okay fantastic and again if there are questions in the room please don't hesitate to raise your hand. I want to spend a little bit of time on surety. A couple of years ago I wrote a report on surety I think I titled it Easy Money because I think it's a fantastic line of business. But I want to get more specifics. You've made a couple of acquisitions in the surety realm. What's the status of integrating those companies and the presumed distribution expansion accompanying what were somewhat regional surety players?

Yeah. So what Mary's referring to is in the beginning of 2025, we acquired FIA Surety, which was a kind of a small contract Surety specialist in the mid-Atlantic states. So based in New Jersey and wrote in two or three states kind of in the mid-Atlantic area. And then fast forward to the beginning of 2026, we completed the acquisition of the Gray Casualty and Surety Company. gray had was a larger scale and had a larger geographic footprint fortunately the one area that gray was a little bit light frankly was the mid-atlantic state so as we think about the combination of what was fia and what was gray surety now all branded as palomar surety the puzzle pieces fit together quite nicely and so that's really been a good platform for us to now continue to invest in Palomar Surety and grow it from an integration standpoint integration is largely complete at this point so acquisition closed at the end of January and the teams have all now been integrated common branding with Palomar Surety we went through the first reinsurance renewal as a combined entity and really largely that integration is now complete one of the things that gray had historically done really well was going into new markets and opening new offices small contract surety is really most effective effectively written in the market where the risk is located or the where the principal is located and so they've got a blueprint that that's worked out really well for them over the years of how they they bring in underwriting talent to a new market and grow it profitably. And so we're looking to continue to invest in what they've done successfully and continue to grow that. I think when you look back in five or 10 years, this will be an organic growth story for us, even though this was a platform that we did acquire in two different pieces and brought together. But we think that This really puts us in a position to become a top-20 surety rider in time.

If I can move on to crop, and I have to start by giving Chris kudos, because the crop seasonality in terms of things like net-to-gross earned premium and the loss ratio and the acquisition expense ratio, it can make things very complicated, and I do want to thank you for your patience in helping me eventually get there. Can you talk a little bit about how crop is shaping up? I know we're not done yet in terms of the overall growing season, but any insights you have in terms of how things have been manifesting so far?

Yeah, I think the biggest change, at least from our standpoint, is our expectation on premium, right? We talked about that with the Q2 earnings release that we expect the crop gross written premium to be above 400 million this year versus, call it, lower 300 millions at the beginning of the year throughout the season. So we do think that it is shaping up well for us all. And John talked about overall underwriting performance a little bit, But kind of to your point, it is a different line of business. It does have different premium earnings ratios and that kind of impact how the losses impact our overall portfolio. It's had a lot of strong growth. That is a larger component of the Palomar portfolio at this stage. So it is it does move the needle, let's call it. We expect a lot of that movement to happen in the third quarter. If people are looking for a lot of specifics, we have put a slide in our investor deck that does talk about what we're expecting from crop, what we're expecting in the third quarter from some of these, but we do expect this to kind of drive some of the results in the third quarter. We expect a higher written premium, net earned premium, gross earned premium. We expect a higher loss ratio, highest combined ratio, all that happened in the third quarter, a lot of that driven from the crop book of business. Just the way that we write and earn the crop business while the risk period and the true writing of the policies does happen in March of this year because the acreage reports associated with that line of business are due in July. We do not recognize a lot of that written premium until July, so that all shows up in the third quarter. There's also a catch-up of the earned premium in the third quarter. It's got a generally shorter risk period that usually ends in October, so you end up earning a lot of that premium in the third quarter. And then, similarly, a lot of that, the losses associated with it, whether it be estimates or actuals, are showing up in the third quarter as well. And so with the size of that book in our overall portfolio, you will see a lot of needles move in the third quarter. It's also the first full quarter of our new reinsurance tower that we just purchased. And while pricing was favorable, we are also buying for growth. So the dollar spend is going to be higher. So we expect our lowest net earn premium ratio in the third quarter as well but then moving up from there over the next 12 month period of time so the third quarter does have a little bit of noise we've tried to provide to your point a lot of useful information in there in our investor deck about how people should be thinking about modeling it but crop does uh move the needle for us and john i don't know if you want to talk about the underwriting results of what you're we're seeing so far it's still we call early innings but yeah yeah i just underscore one thing that chris mentioned on the loss ratio side.

If you were to look at our book, Excluding Crop, it's been very stable loss ratios. So it's the seasonality of loss ratios that kind of add some of that noise to the loss ratios as you look at it on a quarter by quarter basis as opposed to an annual term. From a performance perspective, we see this year kind of within historic norms. So it's been a good year so far. We've got, you know, a lot of the crops are still in the ground, but it's been a good year. Commodity prices have held up quite well because, again, crop insurance is not just a function, not largely just a function of yield, but yield and commodity prices. And so the fact that commodity prices have been strong this year certainly helped the outlook.

And if we could just follow up briefly on one point.

So you mentioned, and this was true on the second quarter call, that you raised your expectation, your guidance for crop premium this here what do you think drove that like where where is the success manifesting itself there's a lot of excitement and momentum around um what what we're building at palomar on the crop side so um a lot of the existing players so again there's there's 12 of us that are allowed to write mpci uh in the united states um and of the 12 we are certainly one of the more dynamic if not the most dynamic company that's really investing in kind of reducing the friction for our agency partners. And so we've brought on individuals that have strong customer service relationships. They go back a long time. We've invested a lot in our claims staff. And so that's one of the ways in which you differentiate in the cost space. And then talked about it earlier, but But Palomar.farm, which is really the first new policy administration system that's been introduced into the crop space in a long time, that makes a big difference for our agency partners and our staff to be able to really deliver strong service to our agency partners. And that's really what makes the biggest difference in gaining share. But there's just a lot of positive momentum around what we're doing in the crop space.

Excellent. Again, I just want to look around to make sure I'm not overlooking any questions. I want to move next to flood, which has two components to it. Broadly, what's going on? And then you've got, at least from my standpoint, the question of what happens with the NFP. Let me try that again, the NFIP. And what happens in 2028 if there's a change in administration? How do you think about that level of uncertainty in terms of where you want to grow in flood?

Yeah, sure. And just as a little bit of a backdrop for everybody, Palomar has been in the flood space since 2017. We were one of the first writers of admitted flood, really focusing on an inland footprint of our flood book for a number of years as we were getting going. It was a good grower for us. And then this last year, just almost a year ago, partnered with Neptune Flood. And I know Trevor Burgess was on the stage yesterday and taking meetings here as well. And we think very highly of Neptune as an organization and really allowed us to take what was more of an inland admitted flood product and move it on an ENS basis towards the coast and kind of open up and broaden our scope of ridings and doing it with a partner that we really respect in Neptune. soon. So, you know, I think as we as we look at that market, that is an area that we feel like there's great growth prospects and with or without a change to the NFIP. I think there's for a number of years now, we've seen some movement and acceptance from lenders that require flood insurance on a property to accept a private market alternative to the NFIP. And I think as we've seen Congress either delay the reauthorization of or allow for a temporary lapse in the NFIP that kind of hampers the ability or government shutdowns. All of those changes over time have really shown the benefit of the private market and having an alternative to the NFIP. So I think regardless of administration change, you know, regardless of kind of the status of the NFIP, I think there is a lot of tailwinds for the private market and for Palomar in particular, along with Neptune, to continue to grow share. And then obviously, if there was a bigger, more structural change to the NFIP, I think there's even more upside.

If we move to casualty, I guess one basic question is just one of the themes we're hearing is that casualty rate increases broadly are slowly decelerating and how that impacts growth. And then a broader question, we touched on this earlier, but I want to flesh it out a little bit. From our perspective, two main considerations are, one, how seasoned is the Palomar Book of Casualty Business, which would translate into more comfort. And the second is what's going on with casualty reinsurance pricing. What are the other considerations as you look to a 2027 casualty reinsurance plan?

Yeah, I can kick this off and maybe we can kind of go back and forth on this one. So, you know, I think one thing I'd say, as we talk about the five categories of business that Palomar has with Earthquake, Illumarino, the property, Casualty, Surety, and Crop, that casualty segment is comprised of a bunch of different products that are all kind of niche and unique specialty casualty lines of business. And these range, and when I say that, I mean, we've got environmental liability, we've got healthcare liability, we've got real estate agent E&O. So it's all these kind of niche different lines of business that all within the overall broad casualty segment have their own market cycles that they play through. So within the product set that we have, there could be one product that is a little bit more of a soft market cycle and there could be another product that's in a bit more of a hard market cycle. So unlike some casualty platforms that are more uniform in the product offerings that they that may they may have we have a lot of diversification and i don't know if we say that enough i think sometimes people think that we're writing general liability across the united states and that or you know commercial auto or something like that and that is not the case it's it's very niche specialty classes of of casualty business um a lot of those are supported um or or all of them are supported in some way shape or form with quota share reinsurance and so one of the aspects that we like about the quota share participation is that as we are growing these casualty books of business we have a strong partner sitting alongside of us on a first dollar basis to you know help us evaluate underwrite and you know uh conservatively grow those those books of business and uh and actually speaking of the casualty reinsurance partners that we have over the course of the second quarter all of those treaties that we had renew all renewed at at more favorable terms so i think as we're looking at um that market uh and what we're doing there's some validation in the sense that those that are standing alongside of us on on a dollar one basis um are growing in their conviction of what we're doing that translates into to better terms but chris if you want to yeah no i think obviously we are still i'd call it

we're in the probably the middle innings of the the book right as we continue to grow that book write that book i'd say this is middle inning so we're happy with the overall performance of how it's been going so far I think we have seen on some of the older books and some of the books that were part of our old fronting program we have seen some favorability there so we saw some favorability in the results in the second quarter from that most of the favorability still driven from our property side but overall we feel good about how the casualty book has been developing right we're happy with what we're seeing there but we'd still say it's middle-inning so we still view ourselves as very conservative on the reserving on the casualty side. We have about 84% of our overall reserves sitting in IBNR, which is definitely above where you could pick it if we were picking it perfectly, right? So overall we feel happy with how we're doing there, but it's still probably middle innings and still more to come as we continue to grow.

And Chris has said this for multiple earnings calls now, but we prefer to take the approach of setting a conservative expected loss ratio when when we get into a line of business, taking bad news fast and being very deliberate in recognizing any kind of good news on the cash news side.

Okay, and if I can speak on behalf of everyone, no one regrets that decision. Not everyone adheres to it, even if they say it, but when that's the actual reality, I think we appreciate it. With that, we have come to the end of our session. I want to thank John and Chris. This was phenomenally informative. We covered, I think, a lot of ground. So thank you and good luck. Thanks, man.