Q1 2024 Palomar Holdings Inc Earnings Call

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Operator: Good morning, and welcome to the Palomar Holdings first quarter 2024 earnings conference call. During today's presentation, all parties will be in a listen-only mode.

Good morning, and welcome to the Palomar Holdings first quarter 2024 earnings Conference call.

During todays presentation, all parties will be in a listen only mode.

Operator: Following the presentation, the conference line will be open for questions with instructions to follow. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Chris Uchida, Chief Financial Officer. Please go ahead.

The presentation. The conference line will be opened for questions with instructions to follow.

As a reminder, this conference call is being recorded.

I would now like to turn the call over to Mr. Christian.

Keith I know it's awful.

Christian: Please go ahead Sir.

Toshio Christopher Uchida: Thank you, operator, and good morning, everyone. We appreciate your participation in our earnings call. With me here today is Mack Armstrong, our Chairman and Chief Executive Officer.

Christian: Thank you operator, and good morning, everyone. We appreciate your participation on our earnings call.

Christian: With me here today is Mac Armstrong, our chairman and Chief Executive Officer.

Toshio Christopher Uchida: Additionally, Jon Christianson, our President, is here to answer questions during the Q&A portion of the call. As a reminder, a telephonic replay of this call will be available on the Investor Relations section of our website at 11.59 p.m. Eastern Time on May 10, 2024. Before we begin, let me remind everyone that this call may contain certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Christian: Additionally, Jon Christianson, our president is here to answer questions during the Q&A portion of the call.

As a reminder, the teller.

Christian: Before I can replay of this call will be available on the Investor Relations section of our website through 11 59 P. M. Eastern time on May 10, 2024.

Toshio Christopher Uchida: These include remarks about management's future expectations, beliefs, estimates, plans, and prospects. Such statements are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in our quarterly report on Form 10-Q filed with the Securities and Exchange Commission. We do not undertake any duty to update such forward-looking statements. Additionally, during today's call, we will discuss certain non-GAAP measures that we believe are useful in evaluating our performance.

Before we begin let me remind everyone that this call may contain certain statements that constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Christian: These include remarks about management's future expectations beliefs estimates plans and prospects.

Christian: Such statements are subject to a variety of risks uncertainties and other factors that could cause actual results to differ materially from those indicated or implied by such statements such risks and other factors are set forth in our quarterly report on Form 10-Q filed with the Securities and Exchange Commission.

We do not undertake any duty to update such forward looking statements.

Additionally, during today's call, we will discuss certain non-GAAP measures, which we believe are useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with U S. GAAP.

Toshio Christopher Uchida: The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to their most comparable GAAP measure can be found in our earnings release. At this point, I'll turn the call over to Matt.

Christian: A reconciliation of these non-GAAP measures to their most comparable GAAP measure can be found in our earnings release.

Christian: At this point I'll turn the call over to Mac.

Matthew John Carletti: Thank you, Chris, and good morning. During the first quarter, Palomar celebrated its 10th birthday, and this quarter is a terrific illustration of how much we've accomplished in our young history. We produced another quarter of profitable growth and again demonstrated our ability to grow where we want while delivering predictable earnings. Five product categories generated gross written premium growth of 47.2%, with especially strong contributions from our crop and casualty products. Likewise, we delivered net earned premium growth of 30% in that first quarter, a nice increase from the 14% growth we achieved in the fourth quarter of 2023.

Mac Armstrong: Thank you, Chris and good morning.

During the first quarter Palomar celebrated its 10th birthday and this quarter is a terrific illustration of how much we've accomplished in our young history.

Mac Armstrong: We produced another quarter of profitable growth and again, demonstrating our ability to grow where we want while delivering predictable earnings.

Mac Armstrong: Byproduct categories generated gross written premium growth of 47, 2% with especially strong contributions from our crop and casualty products.

Mac Armstrong: [noise] wise, we delivered net earned premium growth of 30% in that first quarter and nice increase from the 14% growth we achieved in the fourth quarter of 2023.

Matthew John Carletti: Crop, casualty, and certain other property lines, combined with our market-leading earthquake franchise, drove adjusted net income growth of 36% and an adjusted return on equity of 22.9%. Another exciting result of our financial performance this quarter is that our stockholder's equity surpassed $500 million, moving us into AM Best Financial Size Category 10. This level should help us open new market segments, distribution channels, and attract talent. The year is off to a strong start, and we are on track to achieve the Palomar 2X goal of doubling our adjusted net income over a three to five-year period. This goal was first introduced at our Investor Day in June 2022, which means we are tracking towards the shorter end of the timeframe objective.

Mac Armstrong: Crop casualty and certain other property lines combined with our market leading earthquake franchise drove adjusted net income growth of 36% and adjusted return on equity of 22, 9%.

Mac Armstrong: Other exciting result of our financial performance this quarter as our stockholders' equity surpassed 500 million moving us into am best financial size category.

Mac Armstrong: This level should help us open new market segments distribution channels and attract talent.

Mac Armstrong: The year is off to a strong start and we are on track to achieve the Palomar to X golf doubling our adjusted net income over a three to five year period.

Mac Armstrong: So it was first introduced at our Investor Day in June 'twenty, 'twenty, two which means we were tracking towards the shorter end of the timeframe objective.

Matthew John Carletti: We remain steadfast in our commitment to maintain profitable growth with best-in-class risk-adjusted returns. This first quarter puts us well on our way to attaining this objective in 2024 and beyond. Before I dive into our results, I'd like to point out that this quarter and going forward, we will provide performance commentary, including but not limited to gross written premium and market conditions in our five product categories, earthquake, inland marine, and other property, casualty, fronting, and crop.

Mac Armstrong: We remain steadfast in our commitment to maintain profitable growth with best in class risk adjusted returns.

Mac Armstrong: First quarter puts us well on our way to attaining this objective in 'twenty 'twenty four and beyond.

Speaker Change: Before I dive into our results I'd like to point out that this quarter and going forward, we will provide performance commentary, including but not limited to gross written premium and market conditions on our five product categories earthquake in the marine and other property casualty fronting and crop.

Matthew John Carletti: We believe this will help our investors better understand how our portfolio of businesses is performing as we move forward. Starting with the earthquake franchise, we grew premium by 13% in the first quarter of 2024. It is important to point out that the first quarter of 2023 benefited from a non-recurring premium transfer that came over in conjunction with the Strategic Carrier Partnership. Excluding this one-time benefit, our earthquake book grew 18% on a same-store basis.

Speaker Change: We believe this will help our investors better understand how our portfolio of businesses are performing as we move forward.

Speaker Change: With the earthquake franchise, we grew premium 13% in the first quarter of 2024. It is important to point out that the first quarter of 2023 benefited from a nonrecurring premium transfer that came over in conjunction with the strategic key strategic carrier partnership.

Excluding this onetime benefit our earthquake book grew 18% on a same store basis. We are confident that earthquake premiums will grow in the high teens to 20% in 2024.

Matthew John Carletti: We are confident that earthquake premiums will grow in the high teens to 20% in 2024. Our confidence stems from several factors, most notably a residential earthquake partnership with Cincinnati Financial, consummated in the fourth quarter of 2023 that did not go live until April, as well as new partnerships, one residential, one commercial, that should increase production in the second half of the year. The earthquake market remains stable and attractive from a pricing perspective.

Speaker Change: Our confidence stems from several factors, most notably a residential earthquake partnership with Cincinnati financial consummated in the fourth quarter of 2023 that did not go live until April as well as new partnerships, one residential won't commercial that should increase production in the second half of the year.

Speaker Change: The earthquake market remained stable and attractive from a pricing perspective commercial rates increased 11, 6% this quarter as compared to 18, 9% in the fourth quarter.

Matthew John Carletti: Commercial rates increased 11.6% this quarter, as compared to 18.9% in the fourth quarter. The 8-9% inflation guards of residential earthquake policies are now providing the cushion above inflationary levels and provide annual increases regardless of market conditions. While rate increases have moderated from 2023 levels, our key portfolio metrics, average annual loss, and 250-year probable maximum loss to premium ratio are at all-time best levels. This should translate into strong net-earned premium growth as the cost of excessive loss reinsurance moderates from previous levels over the near term. Looking forward, we remain positive about the growth and profitability prospects of our earthquake franchise.

Speaker Change: The eight nine.

Speaker Change: The 8% to 9% inflation guard to residential earthquake policies are now providing a cushion above inflationary levels and provide annual increases regardless of market condition.

Speaker Change: While rate increases have moderated from 2023 levels, our key portfolio metrics average annual loss and 250 year probable maximum loss to premium ratio are at all time best levels. This should translate into strong net earned premium growth as the cost of excess of loss reinsurance moderates from previous levels over the near term.

Speaker Change: Looking forward, we remain positive on the growth and profitability prospects of earthquake franchise.

Matthew John Carletti: Our Inland Marine and other property products business grew 46% year-over-year, driven by our Excess National Property, Hawaii Hurricane, and Builders Risk line of business. While growth in this product set has accelerated from the pace that we saw in recent quarters, I wanted to reiterate that this is the category that best typifies our grow where we want mantra and where we are judiciously managing, and in certain cases, reducing our exposure. Specifically, we are not adding limits in continental hurricane-prone areas and reducing our balance sheet exposure in Hawaii as we transition our policies to our La Lima Reciprocal Exchange.

Speaker Change: Our inland marine and other property products business grew 46% year over year, driven by our access national property, Hawaii Hurricane and builders risk line of business.

Speaker Change: While growth in this product that has accelerated from the pace that we saw in recent quarters I wanted to reiterate that this is a category that best typifies, our grow where we want mantra and where we are judiciously managing and in certain cases, reducing our exposure specifically.

Speaker Change: Specifically, we are not adding limit continent, hurricane prone areas and reducing our balance sheet exposure in Hawaii as we transition our policies to our la Lima reciprocal exchange.

Matthew John Carletti: Builders Risk, our largest in-the-marine product, had 16% same-story growth in the quarter. Our excess national property line saw approximately 178% year-over-year growth and 6% rate increases in the quarter as our teams built a portfolio of non-catexposed property business. For both builders' risk and excess national property, we hired experienced, regionally focused underwriters that we believe will sustain the growth in these lines of business for 2024. All risk business grew 21% while increasing rates 18%, down from 36% in the prior quarter. Flood-ridden premium grew 18% year-over-year in the first quarter, but the growth was somewhat muted by new business moratoriums throughout the quarter in California due to the heightened rain and flood activity.

Speaker Change: Builder's risk our largest in the marine product at 16% same store growth in the quarter, our excess national property lines saw approximately 178% year over year growth and 6% rate increases in the quarter as our teams build a portfolio of non cat exposed property business.

Builder's risk in excess national property, we hired experienced regionally focused underwriters that we believe will sustain the growth in these lines of business for 2024.

Speaker Change: All risk business grew 21%, while increasing rates, 18% down from 36% in the prior quarter.

Speaker Change: Blood written premium grew 18% year over year in the first quarter. The growth was somewhat muted by new business moratoriums throughout the quarter in California due to the heightened rain in flight activity.

Matthew John Carletti: Importantly, catastrophe losses associated with the major floods in California in January were in line with the estimate provided on last quarter's call. Hawaii Hurricane premiums grew 30% in the first quarter, a combination of rate increases, our inflation guard, and new business written on Laulima paper. Importantly, our policyholders are embracing Laulima, with approximately 92% of policies converting from Palomar Specialty Insurance Company in the quarter. It is worth reiterating that the migration of policies to La Lima transitions our business model from one that is risk-bearing to one that is degenerative. Once complete, we will all but eliminate balance sheet exposure to hurricane losses in Hawaii.

Speaker Change: Currently catastrophe losses associated with the major floods in California in January were in line with the estimate provided on last quarter's call.

Speaker Change: Hawaii Hurricane premiums grew 30% in the first quarter, the combination of rate increases or inflation guard and new business written on our Lima paper importantly, our policyholders are embracing loudly with approximately 92% of policies converting for Palomar specialty insurance company in the quarter.

Speaker Change: It is worth reiterating that the migration of policies to allow Lima transitions our business model from one that is risk bearing to one that is fee generative.

Speaker Change: Once complete we will all but eliminate balance sheet exposure to hurricane losses in Hawaii.

Matthew John Carletti: Our casualty product set saw robust growth in the first quarter as premiums increased 327% over the previous year. Strong performing lines in the quarter were commercial contractors, general and excess liability, real estate errors and omissions, and miscellaneous professional liability. Excess liability particularly stood out as the investments made in talent and distribution over the course of 2023 allowed the book to grow five-fold year-over-year and 65% sequentially. Our Contractors General Liability Book had close to an identical sequential growth rate at 64% while growing 375% year-over-year.

Speaker Change: Casualty product set saw robust growth in the first quarter as premiums increased 327% over the previous year.

Speaker Change: Top performing lines in the quarter, where commercial contractors general and excess liability real estate errors and omissions and miscellaneous professional liability.

Speaker Change: Excess liability, particularly stood out as the investments made in talent and distribution over the course of 2023 allowed the book to grow fivefold year over year and 65% sequentially.

Speaker Change: Our contractors general liability book had close to an identical sequential growth rate of 64%, while growing 375% year over year.

Matthew John Carletti: Our professional liability line grew premiums 81% year-over-year while seeing a 28% sequential increase. Our strong growth and casualty products, which still comprise less than 15% of our total book, remain anchored in a conservative approach to our underwriting targeted in each segment of the market. We employ prudent risk management tactics such as modest gross and net line size, avoidance of heavy bodily injury and other high-severity exposure, and conservative reinsurance to cull our loss potential in the classes we write.

Speaker Change: Our professional liability line grew premiums, 81% year over year, while seeing a 28% sequential increase.

Speaker Change: Our strong growth in casualty products, which still comprise less than 15% of our total book remains anchored in a conservative approach to our underwriting targeted in each segments of the market, we employ prudent risk management tactics, such as modest gross to net line size avoidance of heavy bodily injury and other high severity exposure and conservative reinsurance to Carlos.

Speaker Change: Potential in the classes we write.

Matthew John Carletti: Additionally, we continue to see decent rate increases across the casualty book. Our professional liability products saw a blended increase of 6.5%, with real estate and errors and omissions rates increasing 10.6%. The excess liability book was up 6.7%, and the contractor's general liability book saw an increase of 9.9%. While there are certain pockets of our casualty book that are softer from a pricing perspective—private company DNO is up 2.4%—we continue to believe our rates are staying ahead of lost costs. For the quarter, Casler G. Books' law space remained in line with our conservative law specifications.

Speaker Change: Additionally, we continue to see decent rate increases across the casualty book, our professional liability products saw a blended increase of six 5% with real estate and errors and omissions rates, increasing 10, 6% the excess liability book was up six 7% of the contractors general liability book.

Speaker Change: A nine 9%.

While there are certain pockets of our casualty book that are softer from a pricing perspective private company D&O was up two 4%. We continue to believe our rates are staying ahead of loss cost for the quarter. The casualty books loss ratio remained in line with our conservative loss picks as the predominance of the book is less than two years old. We are focused on building a sizable reverse reserve base.

Matthew John Carletti: As the predominance of the book is less than two years old, we are focused on building a sizable reserve base that we believe will develop favorably over time. Our fronting business modestly grew premiums 3% year over year in the first quarter. However, growth in the quarter was impacted by a few things.

Speaker Change: And we believe will develop favorably over time.

Speaker Change: Our fronting business modestly grew premiums 3% year over year in the first quarter.

Speaker Change: Growth in the quarter was impacted by a few things first our cyber fronting program continued to see heightened competition and soft pricing that is its average renewal decreased six 7%.

Matthew John Carletti: First, our cyber fronting program continued to see heightened competition and soft pricing as its average renewal decreased 6.7%. Second, two new partnerships were slower to ramp than initially forecast. Lastly, while our pipeline is strong, we did not add any new clients this quarter. As a reminder, we take a very selective approach to security in our front-team partner portfolio to ensure comprehensive management of the programs and no surprises.

Second two new partnerships were slower to ramp than initially forecast lastly, while our pipeline is strong we did not add any new clients this quarter.

Speaker Change: As a reminder, we take a very selective approach security in our fronting partner portfolio to ensure a comprehensive management of the programs and no surprises.

Matthew John Carletti: We do expect to bring in new front team relationships in the second half of the year, but this product set will experience slower growth in 2024 than the others. Conversely, our newest product group, Crop, had a very strong start to 2024, riding $38.7 million in premium in the first quarter. Our success in market acceptance is a function of our expertise and our strong partnership with Advanced Ag Protection. We successfully marry Palomar's data-driven risk management underwriting model with Advanced Ag Protection's longstanding market relationships, technology, and customer service to assemble an attractive and geographically diverse book this quarter.

Speaker Change: We do expect to bring on new fronting relationships in the second half of the year, but this product set with experienced slower growth in 2024, then the others.

Speaker Change: Conversely, our newest product group crop had a very strong start to 2020 for writing $38 7 million of premium in the first quarter.

Our success in market acceptance are function of our expertise and our strong partnership with Advanced Act protection.

Speaker Change: We successfully marry Palomar is data driven risk management and underwriting model with advanced Act protections long standing market relationships technology and customer service to assemble an attractive and geographically diverse book this quarter.

Matthew John Carletti: As a reminder, for 2024, our crop business is a participatory front where we are taking 5% of the risk. The expectation is that we will take a more meaningful risk participation in 2025. Production exceeded our expectations, and we are now forecasting more than $125 million in premium in 2024, up from the previous guidance of more than $100 million. Also, see CropRent and Premium.

Speaker Change: As a reminder, for 2020 for our crop business as a participant Jerry front, where.

Speaker Change: Well, we are taking 5% risk.

Our expectation is that we will take a more meaningful risk participation in 2025 production exceeded our expectations and we are now forecasting more than $125 million of premium in 2024.

Speaker Change: Up from the previous guidance of more than $100 million.

Speaker Change: Also crop written premiums.

Matthew John Carletti: Seasonal, so you should not expect much in the way of written premium next quarter. We are pleased with the traction to date and are confident that we will generate meaningful net earned premium in the years ahead. Turning to reinsurance, the first quarter is lighter in activity.

Speaker Change: Seasonal so she's not so you should not expect much in the way of written premium next quarter. We are pleased with the traction to date and are confident that we will generate meaningful net earned premium in the years ahead.

Speaker Change: Turning to reinsurance the first quarter is lighter and activity that said, we were still engaged on several placements, including our June 1st core excess of loss placements and two quota share treaties casualty and builders risk.

Matthew John Carletti: That said, we were still engaged on several placements, including our June 1st core excess of loss placement and two quarter share treaties, casualty and builder's risk. We are pleased that the seating commission on the casualty quota share renewed to slightly better terms than expiring, and we enhanced the treaty's terms and conditions. We also improve the economics on our builder's risk quota share while increasing our growth and net line capacity. We are amid the 6.1 core XOL placement, as well as marketing Torrey Pines Re, our fifth catastrophe bond.

We are pleased that the ceding commission on the casualty quota share renewed its slightly better terms and expiring and we enhanced the charity Chi treaties terms and conditions.

Speaker Change: We also improved the economics on a builders risk quota share, while increasing our gross and net line capacity.

Speaker Change: We have made the six one core ex ol placement as well as marketing Torrey Pines <unk>, our fifth catastrophe bond.

Matthew John Carletti: We are encouraged by the progress to date on both key endeavors. As we discussed last quarter, we had two earthquake treaties renewed on January 1st at risk-adjusted decreases of approximately 5%. As we sit here today, certain layers of our core tower are bound, and the implied risk-adjusted decrease is directionally similar to the earthquake treaties renewed on January 1st. While most of the placement is still outstanding, we are encouraged by the results so far.

Speaker Change: We are encouraged by the progress to date on both key endeavors as we discussed last quarter. We had two earthquake treaties renewed on January 1st at risk adjusted decreases of approximately 5%.

Speaker Change: As we sit here today certain layers of our core tower are bound and the implied risk adjusted decrease was directionally similar to the earthquake treaties renewed on January one.

Speaker Change: While most of the placement is still outstanding we are encouraged with the results so far and affords us confidence that we'll meet or beat the 5% price increase embedded in our 20, our full year 2020 for guidance.

Matthew John Carletti: It affords us confidence that we will meet or beat the 5% price increase embedded in our full year 2024 guidance. To conclude, we are encouraged by the trends in our business and are raising the guidance range for our full year 2024 adjusted net income from $110 million to $115 million. And to reiterate, our guidance does assume a 5% risk-adjusted increase in our 6.1 Core Excessive Loss Program. Lastly, the midpoint of our guidance applies an adjusted ROE above our Palomar 2X target of 20%. With that, I'll turn the call over to Chris to discuss our results in more detail.

Speaker Change: To conclude we are encouraged by the trends in our business and are raising the guidance range for our full year 2024, adjusted net income to $113 million to $118 million from $110 million $215 million and to reiterate our guidance does assume a 5% risk adjusted increase on our six one core excess of loss program.

Speaker Change: Lastly, the midpoint of our guidance implies an adjusted ROE above our Palomar to X target of 20%.

Speaker Change: With that I'll turn the call over to Chris to discuss our results in more detail.

Chris: Thank you Mac.

Toshio Christopher Uchida: Please note that during my portion, when referring to any per-share figure, I'm referring to per diluted common share as calculated using the treasury stock method. This methodology requires us to include common share equivalents, such as outstanding stock options, during profitable periods and exclude them in periods when we incur a net loss.

Chris: Please note that during my portion when referring to any per share figure I'm, referring to your per diluted common share as calculated using the treasury stock method. This methodology requires us to include common share equivalents, such as outstanding stock options during profitable periods and exclude them in periods when we incur a net loss.

Toshio Christopher Uchida: For the first quarter of 2024, our adjusted net income was $27.8 million, or $1.09 per share, compared to adjusted net income of $20.4 million, or $0.80 per share for the same quarter of 2023. Adjusted net income and earnings per share growth of 36%. Our first quarter adjusted underwriting income was $29.2 million compared to $22.2 million last year. Our adjusted combined ratio was 73% for the first quarter compared to 73.3% in the first quarter of 2023.

For the first quarter of 2024, our adjusted net income was $27 8 million.

Chris: Our $1 90 per share compared to adjusted net income of $24 million or <unk> <unk> per share for the same quarter of 2023.

Chris: Adjusted net income and earnings per share growth of 36%.

Chris: Our first quarter adjusted underwriting income was $29 2 million.

Chris: Third to $22 $2 million last year.

Our adjusted combined ratio was 73% for the first quarter compared to 73, 3% in the first quarter of 2023.

Toshio Christopher Uchida: Excluding catastrophes, our adjusted combined ratio was 69.8% for the quarter compared to 71.2% last year. For the first quarter of 2024, our annualized adjusted return on equity was 22.9%, compared to 20.7% for the same period last year. The first quarter adjusted return on equity continues to validate our ability to maintain top line growth with a predictable rate of return above our Palomar 2X target of 20%.

Chris: Excluding catastrophes, our adjusted combined ratio was 69, 8% for the quarter compared to 71, 2% last year.

Chris: For the first quarter of 2024, our annualized adjusted return on equity was 22, 9% compared to 27% for the same period last year.

Chris: The first quarter adjusted return on equity continues to validate our ability to maintain top line growth with a predictable rate of return above our tau Palomar to <unk> target of 20%.

Toshio Christopher Uchida: Growth in premiums for the first quarter was $368.1 million, an increase of 47.2% compared to the prior year's first quarter. Along with breaking out crop, we also regrouped our written premium to align with our five key specialty insurance products—earthquake, marine and other property, casualty, fronting, and crop. It is important to remember the seasonality of our crop premium.

Chris: Gross written premiums for the first quarter were $368 1 million.

An increase of 47, 2% compared to the prior year's first quarter.

Chris: Along with breaking out crop, we also regrouped our written premium to align with our five key specialty insurance products earthquake in the marine and other property casualty fronting and crop.

Chris: It is important to remember the seasonality of our crop premium.

Toshio Christopher Uchida: Based on our current expectations, the majority of our crop premium will be written in the third quarter of each year, with only modest premium in the second and fourth quarters. The $38.7 million of crop premium written in the first quarter should represent about 30% of the premium expected for the year. Net earned premiums for the first quarter were $107.9 million, an increase of 29.6% compared to the prior year's first quarter. For the first quarter of 2024, our ratio of net-earned premiums as a percentage of gross-earned premiums was 35.6%, compared to 37% in the first quarter of 2023 and compared sequentially to 33.9% in the fourth quarter of 2023.

Chris: Our current expectations. The majority of our crop premium will be written in the third quarter of each year with only modest premium in the second and fourth quarters.

Chris: The $38 $7 million of crop premium written in the first quarter should represent about 30% of the premium expected for the year.

Chris: Net earned premiums for the first quarter were $107 9 million.

Chris: An increase of 29, 6% compared to the prior year's first quarter.

Chris: So for the first quarter of 2024, our ratio of net earned premiums as a percentage as a percentage of gross earned premiums were 35, 6% compared to 37% in the first quarter of 2023 and compared sequentially to 33, 9% in the fourth quarter of 2023.

Toshio Christopher Uchida: The year-over-year decrease is reflective of our growth in fronting and lines of business that use Quota Share Reinsurance and the increased cost of our Excessive Loss Reinsurance Program that was renewed last June. With the mix of business maturing and our excess of loss-bringing insurance program in place, our net-earned premium ratio has continued to increase from its low point in the third quarter of 2023. Based on our assumption that the excess of lost reinsurance costs will increase modestly, on a risk-adjusted basis, we expect our net-earned premiums ratio to follow a similar pattern as last year.

Chris: Year over year decrease is reflective of our growth in fronting and lines of business that use quota share reinsurance and the increased cost of our excess of loss reinsurance program that renewed last June.

Chris: With the mix of business maturing and our excess of loss reinsurance program in place. Our net earned premium ratio has continued to increase from its low point in the third quarter of 2023.

Chris: Based on our assumption that the excess of loss reinsurance costs will increase modestly a risk adjusted on a risk adjusted basis. We expect our net earned premiums ratio to follow a similar pattern as last year.

Toshio Christopher Uchida: We expect a slight decrease in the net earned premium ratio for the second quarter with a low point for this ratio in the third quarter, the first full quarter of our June 1st reinsurance renewal. From there, we expect the ratio to increase through the treaty year, similar to what we have seen over the current treaty year.

Chris: We expect a slight decrease in the net earned premium ratio for the second quarter with a low point of this ratio in the third quarter.

Chris: The first full quarter of our June one reinsurance renewal.

Chris: From there we expect the ratio to increase through the treaty year similar pattern to what we've seen over the current treaty year.

Toshio Christopher Uchida: Losses and loss adjustment expenses for the first quarter were $26.8 million, comprised of $23.4 million of non-catastrophe attritional losses and $3.4 million of catastrophe losses from flood activity. The loss ratio for the quarter was 24.9% compared to a loss ratio of 24.8% a year ago. For the first quarter, our attritional loss ratio was 21.8%, and our catastrophe loss ratio was 3.1%.

Chris: Losses and loss adjustment expenses for the first quarter were $26 $8 million comprised of $23 4 million of non catastrophe attritional losses, and $3 $4 million of a catastrophe losses from flood activity.

Chris: The loss ratio for the quarter was 24, 9% compared to a loss ratio of 24, 8% a year ago for.

Chris: For the first quarter, our Attritional loss ratio was 21, 8% and our catastrophe loss ratio was three 1%.

Toshio Christopher Uchida: We continue to expect our loss ratio to be approximately 21 to 25 percent for the year. Our acquisition expense as a percentage of gross earned premium for the first quarter was 10.5% compared to 11.4% in the first quarter of last year and in line with the fourth quarter of 2023. Additional seating commission and funding fees continue to drive the year-over-year improvement.

Chris: We continue to expect our loss ratio to be approximately 21% to 25% for the year.

Chris: Our acquisition expense as a percentage of gross earned premium for the first quarter was 10, 5% compared to 11, 4% in the first quarter of last year and in line with the fourth quarter of 2023.

Chris: Additional ceding commission and funding fees continue to drive the year over year improvement.

Toshio Christopher Uchida: With our growth and mix of business, we expect this ratio to be flat for the full year, with some potential for improvement. The ratio of other underwriting expenses, including adjustments to gross earned premiums for the first quarter was 6.8%, the same as the first quarter last year, and compared sequentially to 6.9% in the fourth quarter of 2023, in line with our expectations as we continue to invest in our organization as we continue to grow.

Chris: With our growth in mix of business. We expect this ratio to be flat for the full year with some potential for improvement.

Chris: The ratio of other underwriting expenses, including adjustments to gross earned premiums for the first quarter was six 8% the same as the first quarter last year and compared sequentially to six 9% in the fourth quarter of 2023.

Chris: In line with our expectations as we continue to invest in our organization as we continue to grow.

Toshio Christopher Uchida: We continue to expect long-term scale in this ratio, while we may see periods of sequential flatness as we continue to invest in scaling the organization. Our investment income for the first quarter was $7.1 million, an increase of 39.4% compared to the prior year's first quarter. The year-over-year increase was primarily due to higher yields on invested assets and a higher average balance of investments held during the three months ended March 31, 2024 due to cash generated from operations.

Chris: We continue to expect long term scale and this ratio, while we may see periods of sequential flatness as we continue to invest in scaling the organization.

Chris: Our investment income for the first quarter was $7 1 million <unk>.

Chris: An increase of 39, 4% compared to the prior year's first quarter.

Chris: The year over year increase was primarily due to higher yields on invested assets and a higher average balance of investments held during the three months ended March 31, 2024 due to cash generated from operations.

Toshio Christopher Uchida: Our yield in the first quarter was 4.2%, compared to 3.4% in the first quarter of last year. The average yield of investments made in the first quarter was 5.6%, compared to We continue to conservatively allocate our positions to assets that generate attractive risk-adjusted returns. There were no shares repurchased during the quarter.

Chris: Our yield in the first quarter was four 2% compared to three 4% in the first quarter of last year. The average yield on investments made in the first quarter was five 6% compared.

Chris: We continue can certainly allocate our out our positions your assets that generate attractive risk adjusted return.

Chris: There were no shares repurchased during the quarter.

Toshio Christopher Uchida: While the previous plan has expired, as a matter of good corporate governance, we will be authorizing a new share repurchase program. At the end of the quarter, our net written premium to equity ratio is.94 to 1. Our stockholders' equity has reached $501.7 million, a testament to our profitable growth.

Chris: The previous plan has expired as a matter of good corporate governance, we will be authorizing a new share repurchase program at.

Chris: At the end of the quarter, our net written premium to equity ratio was <unk> 94 to one.

Chris: Our stockholders equity has reached $501 7 million or <unk>.

Chris: Testament to our profitable growth.

Toshio Christopher Uchida: As Mack mentioned, we are raising our full-year 2024 Adjusted Net Income Guidance to range from $113 million to $118 million, implying 23.5% adjusted net income growth at the midpoint of the range. It is important to remember that our loss estimates and guidance include our expectations of mini-cats, such as severe convective storm activity. For the year, we expect our loss ratio to be approximately 21-25%, including our estimate of mini-cats, which represent approximately 2-3 points of our expected loss ratio.

Chris: As Mac mentioned, we are raising our full year 2024, adjusted net income guidance to range to a $113 million to $118 million.

Chris: <unk> 23, 5% adjusted net income growth at the midpoint of the range.

Chris: It is important to remember that our loss estimates and guidance include our expectations of minicab, such as severe conductive convective storm activity.

Chris: For the year, we expect our loss ratio to be approximately 21% to 25%, including our estimate of many cats, which represent approximately 2% to three points of our expected loss ratio.

Toshio Christopher Uchida: With that, I'd like to ask the operator to open the line for any questions. Operator? Thank you.

Chris: With that I'd like to ask Scott to ask the operator to open the line for any questions operator.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we call for questions. Our first question is from Paul Newsome with Piper Sandler. Please proceed with your question.

Scott: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from Mikael for participants using speaker equipment and may be necessary to pick up your handset before pressing the SRU.

Scott: One moment, please while we poll for questions.

Scott: Our first question is from Paul Newsome with Piper Sandler. Please proceed with your question.

Jon Paul Newsome: Good morning. Congratulations on the quarter. Is it fair to say, as we look out past 24, that the nutritional loss ratios should continue to rise? I think that was the answer in the past, but I just wanted to confirm that was still the case.

Jon Paul Newsome: Good morning, congrats on the quarter.

Jon Paul Newsome: Is it is it fair to say that as we look out past 2000 and for the Attritional loss ratios should.

Jon Paul Newsome: Continue to rise I think that was the.

Jon Paul Newsome: The answer in the past, but I just wanted to confirm that was still the case.

Toshio Christopher Uchida: Hi Paul. Thanks for the comments. Yeah, no, good point. We still expect the attritional loss ratio to continue to tick up throughout 2024 and then obviously into 2025 as well, as the overall mix of business does change. And we continue to grow in lines like property in the marine, special property, casualty, and also crop. But those lines will have attritional losses associated with them. And so we expect that to tick up moderately. Again, we don't expect it to go from, let's call it, 21% this quarter to 40% next quarter. This is going to just go up moderately, maybe a point or two a quarter.

Speaker Change: Hi, Paul Thanks for the comments Yeah, no. Good point, we still expect the attritional loss ratio to continue to tick up.

<unk> 2024, and then obviously into 2025 as well as the overall mix of business does change and we continue to grow in lines like.

Property in the marine and specialty property casualty and also across those lines will have attritional losses associated with them and so we expect that to tick up moderately again, we don't expect that to go from let's call. It 21% this quarter to 40% next quarter is going to just go up moderately maybe a point or two a quarter.

Mac Armstrong: Yeah, Paul, this is Mac. I would agree. The only thing that I would add is... Like Chris said, it won't swing wildly because of our use of quota share and our balanced risk participation in the lines that he referenced. And then our earthquake business, we still feel like it's gonna grow 18 to 20% this year, so it's not gonna meaningfully under-index the growth, and that provides a nice anchor with its attritional loss ratio of zero.

Speaker Change: Yeah. Paul This is Mac I would agree the only thing I would add is like Chris said it won't swing.

Wildly because of our use of quota share.

Mac Armstrong: Our balance risk participation in the lines that he referenced and then our earthquake business, we still feel like it's going to grow 18% to 20%. This year, so it's not going to.

Mac Armstrong: Meaningfully under indexed to growth and that provides a nice anchor with its attritional loss ratio of zero.

Jon Paul Newsome: Great. And could you maybe, in the big picture, give us your most recent thoughts on the competitive environment for specialty, commercial, and e-net? There's been lots of talk in the last several weeks because of the mixed data that came out of some of the SAMP data from E&S, and I know that's a very simple way to look at what goes to ENS, but your thoughts would be great, just as an update on your most recent thoughts of what you think you're seeing out there from a competitive perspective.

Mac Armstrong: Great.

And could you maybe big picture.

Mac Armstrong: Give us your most recent thoughts on the competitive environment for specialty commercial and E&S.

Mac Armstrong: There's lots of talk over the last several weeks because of today.

Mac Armstrong: Next data that came out of symptom data from E&S and.

Mac Armstrong: No that's a very simple way to look at.

Mac Armstrong: Growth in E&S.

Mac Armstrong: But.

Speaker Change: Your thoughts would be great.

Speaker Change: Just an update on your most recent thoughts what you think you are seeing out there.

Speaker Change: Okay.

Mac Armstrong: Yeah, sure, Paul. I would say, you know, the term that I would use broadly to describe the market right now, and this was a year ago, probably would have leaned more on the property side, but now I would say it's broad-based in that there's great integrity in the market. You know, I would say that there is discipline in pricing. You're still seeing rate increases in property that may not be at the same level that you were seeing a year ago when it was more severely dislocated.

Speaker Change: Yeah sure Paul I would say.

Jon Paul Newsome: The term that I would use broadly to describe the market right now.

Jon Paul Newsome: And this was a year ago I, probably would lean more on the property side, but now I would say, it's broad based and that theres rate integrity in the market.

Jon Paul Newsome: I would say that there is disciplined in pricing.

Jon Paul Newsome: Youre still seeing rate increases in property.

That may.

Jon Paul Newsome: May not be at the same level that you were seeing a year ago. When it was more severely dislocated and then in casualty in and as I highlighted we did see consistent rate increases really with the exception of cyber and the private company D&O component of our MPL that was up.

Mac Armstrong: And then in casualty, and as I highlighted, you know, we did see consistent rate increases, really with the exception of cyber and, you know, the private company DNO component of our MPL that was up and in excess of loss costs.

Mac Armstrong: So I would say that there is rate integrity in the market, and there is stability there. The other thing as it pertains to the E&S side, you know, what we are writing on the E&S side of our E&S company is traditional E&S business, and we are not seeing flows out into the admitted side. And I think what I would say, or specifically point out, like for earthquakes, for instance, our residential book has always been admitted business, but commercial earthquakes, since before Palomar's formation, have always been an E&S product.

Jon Paul Newsome: And in excess of loss cost. So I would say that there is rate integrity in the market and there is stability there the other thing as it pertains to the E&S side, what we're riding on the E&S.

Jon Paul Newsome: With on our E&S company is traditional E&S business and we are not seeing flows out into the admitted side.

Jon Paul Newsome: And I think what I would say are specifically point out I think for earthquake for instance, our residential book has always been admitted.

Jon Paul Newsome: Business, but commercial earthquake since before Palomar formation has always been an E&S product and even if you can write it on an admitted basis you deal with the filing that basically mirrors, the E&S market from a coverage flexibility Andrew rating flexibility so as it pertains to our book.

Mac Armstrong: And even if you can write it on an admitted basis, you do it with the filing that basically mirrors the E&S market from a coverage flexibility and a rating flexibility standpoint. So as it pertains to our book, we are not seeing flows out of E&S into the admitted market, and I think we're seeing rate integrity.

Jon Paul Newsome: We are not seen flows out of E&S into the admitted market and I think we're seeing rate integrity.

Jon Paul Newsome: Great.

Jon Paul Newsome: Maybe a little bit trivial, but any impact you see from that little earthquake we had on the East Coast and... happened from there. I just got the question this morning. Yeah, yeah.

Speaker Change: Maybe a little bit trivial, but.

Speaker Change:

Speaker Change: Any impact you see from that little earthquake, we had on the east coast.

Speaker Change: You either from a product interest.

Speaker Change: The interest perspective or anything else that we might.

Speaker Change: Just a couple of questions. This morning.

Mac Armstrong: Yeah, yeah, we jokingly call those marketing events, and there's actually an earthquake in the Inland Empire, California, a densely populated part of the state, about 4.3 magnitude, enough to be on the cover of the newspapers and the evening news and enough for people to feel it. So we like those because it drives awareness and it does lead to a little bit of a tick up in new business sales. An earthquake in New York is, we don't write a lot about New York, but that does garner some media attention, so that's not a bad thing.

Yeah, Yeah, we jokingly call those marketing events.

And so and there is actually an earthquake.

Speaker Change: In the inland Empire, California density populated part of the state.

By a $4 three magnitude enough too.

Speaker Change: Beyond that to cover the newspapers in the evening news and enough for people to feel it. So we like those because it drives awareness and it does lead to a little bit of a tick up in new business sales.

Speaker Change: An earthquake in New York as we don't write a lot in New York, So, but that does garner some media attention. So that's not a bad thing.

Jon Paul Newsome: I appreciate the help, as always. Thank you. Thank you.

I appreciate the help as always thank you.

Speaker Change: Thanks, Paul.

Speaker Change: Yes.

Mark Douglas Hughes: Our next question is from Mark Hughes with True Security. Please proceed.

Speaker Change: Our next question is from Mark Hughes with <unk> Securities. Please proceed with your question.

Mark Douglas Hughes: Yeah, thank you. Good morning. Good morning, Mark.

Mark Douglas Hughes: Yes. Thank you good morning.

Mark Douglas Hughes: The net earned premium ratio, do you think it'll bottom out? I think last year's third quarter was 33%. Will it? Would one anticipate that? Or maybe a little bit better this year, maybe 34%.

Good morning, Marty net.

Mark Douglas Hughes: Net earned premium ratio do you think it'll bottom out I think last year's third quarter was 33% will it.

Mark Douglas Hughes: We would want to anticipate that or maybe a little bit better this year, maybe at 34.

Toshio Christopher Uchida: Hi Mark. No, that's a great question. I think, as we indicated in the prepared remarks, we are still expecting an increase in our reinsurance costs as we go into the 6.1 renewal. You know, I think there are some favorable wins out there, but right now, in our guidance and our expectations, we are still expecting a slight increase there. So, with that type of mechanic, and you kind of know the stairstep that you see with our excess of loss and how that plays out through the net earned premium, I would expect that, let's call it Q2, the net earned premium ratio might go down a little bit from where it was in Q1, but then, as you pointed out, Q3 should still be the low point of our net earned premium ratio based on our current assumptions. I think last year it was in the low 30s.

Mark Douglas Hughes: Hi, Barton that's a great question I think as we indicated in the prepared remarks, we are still expecting a increase in our reinsurance cost as we go into the six one renewal.

Speaker Change: I think there are some favor.

Barton: Favorable wins out there, but right now in our guidance and our expectations. We are still expecting a slight increase there so with that type of mechanic.

Barton: No the stair step that you see with our excess of loss and how that plays out through to net earned premium I would expect that let's call. It Q2 net earned premium ratio would might go down a little bit from where it was in Q1, but then as you pointed out Q3 should still be the low point of our net earned premium ratio based on our current assumptions.

I think last year. It was low <unk> I would expect a similar trend to play out in Q3 of this year as well, but similarly.

Toshio Christopher Uchida: I would expect a similar trend to play out in Q3 of this year as well. But similarly, over that next treaty year, I would expect a very similar pattern to what you saw in our net earned premium ratio this year. Really, I would say it depends on what that renewal looks like, but in our model, we have a slight increase. So, I would expect a slightly lower net earned premium ratio compared to last year, but very, very close to what you saw this year or over the last three years.

Barton: Over that the next treaty year, I would expect very similar pattern to what you saw in our net earned premium ratio. This year. It really obviously dependent on what that renewal it looks like but in our model. We have a slight increase so I would expect slightly.

Barton: Lower net earned premium ratio compared to last year were very very close to what you saw this year or over the last few year excuse me.

Mark Douglas Hughes: Okay, and then when we think about 2025, should that be going up a little bit, kind of offsetting some of the higher losses?

Barton: Okay, and then when we think about 2025 should that be migrating up.

Barton: A little bit.

Barton: Kind of offsetting some of the higher losses.

Mac Armstrong: Yeah, I marked his neck. I would say some of that's going to be driven frankly by crop. So crop right now is really more of a participatory front, as we describe it with the 5% risk participation. Going forward in 2025, we will take it more meaningful.

Barton: Yeah, Mark this is Mac I would say so some of that is going to be driven frankly by crop so crop.

Mac Armstrong: Right now is really more of a participatory front as we describe it with a 5% risk participation.

Mac Armstrong: Going forward in 2025, we will take a more meaningful so that would help drive it up.

Mac Armstrong: So that would help drive it up. If reinsurance pricing starts to decelerate or decline, that would be a driver of it. So you should expect decent net earned premium growth this year and that ratio potentially to tick up in 2025 because of our risk participation in lines like crop and maybe a selected group of casualty business that are beginning to mature and season more. That will help inform that as well.

Mac Armstrong: If reinsurance pricing.

Mac Armstrong: Starts to decelerate or decline that would be a driver of it so.

Mac Armstrong: You should expect decent net earned premium growth this year and that ratio potentially to tick up in 'twenty five because our risk participation.

In lines like crop and maybe a selected group of casualty business.

Mac Armstrong: Beginning to mature.

Mac Armstrong: Season more.

That will help inform that as well.

Mark Douglas Hughes: Yeah, when you think about it, when you say it's going to step up 5%, what's the trajectory on that? If it all goes as planned, what's the next step?

Speaker Change: Yeah, and when you think about when you say, it's going to step up.

Speaker Change: 5%.

Speaker Change: What's the trajectory on that.

Speaker Change: It all goes as planned.

Speaker Change: The next the next step.

Mark Douglas Hughes: I'm sorry, the 5% for the crop, is that what you're asking?

Speaker Change: Im sorry, the 5% for crop is that what youre asking.

Mac Armstrong: Yeah, yeah, yeah, I would say, you know, 15 to 20% type participation. We're bullish on the prospects for that line. I think we can, you know, build a very meaningful franchise there. And for what it's worth, you know, it was a very modest amount of premium that we wrote in 2023, but it was a very profitable book. We'd like to eat our...

Speaker Change: Yeah, Yeah, yeah yeah.

Speaker Change: I'd say, 15% to 20% type of participation.

Ladies and gentlemen.

Speaker Change: Yes.

Speaker Change: We're bullish on the prospects for that line and think we can build a very meaningful franchise there.

Speaker Change: For what it's worth it was a very modest amount of premium that we wrote in 2023, but it was a very profitable book.

Speaker Change: Okay, we'd like to eat.

Mark Douglas Hughes: Yeah, exactly. The commercial quake. Is that how much is that tied to just broader commercial property supply and demand? Or capacity and demand? Is there a separate dynamic within Commercial Quake, or does that tend to parallel the broader market? I think Commercial Quake is unique.

Speaker Change: Yeah exactly the commercial quake is.

Speaker Change: Is that.

Speaker Change: How much is that tied to just broader commercial property supply and demand.

Speaker Change: Or capacity and demand.

Speaker Change: Is there a separate dynamic within <unk>.

Speaker Change: Commercial quake or.

Speaker Change: Does that tend to parallel the broader market.

Mac Armstrong: I think earthquake is a unique line, you know, for commercial earthquakes, especially layered and shared business, you need to have that coverage to satisfy a large commercial loan. I think you're writing in areas where people are very mindful of protecting assets that have considerable equity value. So I don't think it mirrors the broader property market, especially because it is, you know, the tried and true layered and shared market where you have multiple participants on a singular risk.

Speaker Change: I think earthquake is a unique line.

Speaker Change: For commercial earthquake, especially layered in shared business you need to you need to have that coverage for.

Speaker Change: Just satisfy a large commercial loan I think you are writing in areas, where people are very mindful of protecting assets that have considerable equity value. So I don't think it mirrors.

Speaker Change: The broader property market, especially because it is the tried and true layered in shared market, where you have multiple participants on a singular risk. If you have a $500 million property schedule you are not going to have one quaking share youre going to have 10 to 15, so because of that nature I think.

Mac Armstrong: If you have a $500 million property schedule, you're not going to have one quake insurer; you're going to have 10 to 15. So because of that nature, I think it's pretty nuanced. And, you know, it does follow the cost of reinsurance to some degree, reinsurance pricing in the primary market, but not in the sense of coverage and participation.

Speaker Change: It's pretty nuanced and.

Speaker Change: It does follow the cost of reinsurance to some degree in reinsurance pricing in the primary market, but not in the sense of coverage and participants.

Speaker Change: Thank you I appreciate it.

Speaker Change: Thanks Mark.

Andrew E. Andersen: Our next question is from Peter Knudsen with Evercore ISR. Please proceed with your question.

Speaker Change: Our next question is from Peter Knutsen with Evercore ISI. Please proceed with your question.

Andrew E. Andersen: Hi, good morning. My first question is on midyear renewals. I believe you mentioned an increased expectation of costs in the prepared remarks, but I'm just wondering if you could expand a bit on those updated views and how that's shaping up.

Peter Knutsen: Hi, good morning.

My first question is on the mid year renewals I believe you mentioned an increased expectation of costs in the prepared remarks, but I'm just wondering if you could expand a bit.

Peter Knutsen: On this updated views and how that's shaping up.

Mac Armstrong: Yeah, happy to do so. Thanks for the question.

Peter Knutsen: Yes happy to do so thanks for the question what I would say is.

Speaker Change: Again, our guidance for the year to start of the year and what we just affirmed.

Mac Armstrong: What I would say is, you know, again, our guidance for the year, the start of the year, and what we just affirmed assumes a 5% increase in the cost of reinsurance. We are in the midst of our placement right now, and we are encouraged by the prospects of, as I said, beating that number. We did renew two small treaties on January 1 that were down plus or minus 5%. We have found some coverage in early April that Incepts at 6.1, but is bound and covered, and that is plus or minus down 5%.

Speaker Change: Assumes a 5% increase in the cost of reinsurance.

Speaker Change: We are in the midst of our placement right now and we are encouraged by the prospects of as I said.

Speaker Change: Beating that number we did renew two small treaties.

Speaker Change: January one that we're down plus or minus 5% we have bound some coverage in early April that.

Speaker Change: Incept at six one but is down and covered and that is plus.

Speaker Change: Plus or minus down 5%, so that constitutes roughly 10% to 15% of the total tower. So there are a lot more to do so we want to be conservative in what we are assuming but.

Mac Armstrong: So that constitutes roughly 10 to 15% of the total tower, so there's a lot more to do. So we want to be conservative in what we are assuming. But all indications, including what we are hearing in the initial price stuff that we put out in the market on our cap bond, are positive, giving us confidence that we will certainly achieve that level, if not exceed it.

All indications, including.

Speaker Change: With what we are hearing in the initial price talk that we put out in the market on our cap bond.

Speaker Change: Is.

Speaker Change: Feels gives us confidence that we will certainly achieve that level if not exceed it.

Andrew E. Andersen: Okay, yeah, great. Thank you. That's helpful. My second question is around the strong acceleration in casualty growth. I know you mentioned a little bit of the lines and the rate that was driving that, but I'm hoping you could talk a little bit more about the current market in some of those lines and how you guys are feeling about the rate and loss trend in that space, and then also if you're expecting that same strong growth to continue. Thanks.

Speaker Change: Okay, great. Thank you that's helpful.

My second question is around the strong acceleration in the casualty growth I know you mentioned a little bit of the lines and the rate that was driving that but I'm, hoping you could talk a little bit more about the current market.

Speaker Change: And some of those lines and how you guys are feeling about rate and loss trend in that space.

Speaker Change: And then also if you are expecting that same strong growth to continue.

Yes.

Mac Armstrong: Sure. Yeah, we do expect to see good growth from Casualty throughout the year. You know, we've made considerable investments in Casualty from, most importantly, a talent and leadership perspective. People like Ty Robbin, Brian Pushik, and Garrett Vanderkip have come across with great pedigrees and great followings and great experience in the market.

Speaker Change: Sure, Yes, we do expect to see good growth from casualty throughout the year.

Speaker Change: We have made considerable investments in casualty from most importantly talent and leadership perspective.

People liked hi, Robin, Brian <unk> and <unk>.

Speaker Change: <unk> have come across.

Speaker Change: With great categories, and great followings and great experience in the market. So we are investing in them from a system standpoint from a balance sheet standpoint from incremental underwriting resources and want to build a meaningful franchise in these niche market segment.

Mac Armstrong: So we are investing in them from a system standpoint, from a balance sheet standpoint, from incremental underwriting resources, and want to build a meaningful franchise in these niche market segments. What I would say right now, though, is that we are entering the market, and we are doing so in a meaningful fashion, but also in a conservative fashion. It's conservative from a risk selection standpoint, you know, whether we are avoiding severity-exposed classes on the general liability side or the professional liability side.

Speaker Change: <unk>.

Speaker Change: What we I would say right now, though is we are going into the market and we are doing so in a meaningful fashion, but also a conservative fashion is conservative from a risk selection standpoint, whether we are avoiding severity exposed classes.

Speaker Change: On the general liability side or the professional liability side its limits management.

Mac Armstrong: It limits management, whether, you know, our max gross line is $5 million, and net is $2 million. When you think about nuclear verdicts that are in the $100 million range, a $5 million gross line doesn't materially swing our balance sheet or our earnings base, for that matter. And then we have a lot of different underwriting controls, again, informed by the strong leadership that we have in place. Where we sit right now, we feel that we are getting an adequate rate to cover our loss costs.

Speaker Change: Whether our Max gross line is $5 million net is $2 million. When you think about nuclear verdicts that are in the $100 million range.

Speaker Change: $5 million gross line doesn't materially swing, our balance sheet, our earnings base for that matter.

And then we have a lot of different underwriting controls again, that's informed by the strong leadership that we have in place where we sit right now.

Speaker Change: We feel that we are getting adequate rate to cover our loss cost.

Mac Armstrong: You know, our general casualty book was up 9.9%. But we think that, against loss costs, that's probably 4 to 5%. Excess liability was up 6.7%, so I think that's a similar type of loss cost. It's not to say, again, as I mentioned earlier, that all lines in casualty are getting the same level of rate or have that term rate integrity. Financial lines are tough, and we do not write a lot of that, but we do write some private company DNO inside of our miscellaneous professional liability suite, and that's not getting the rate that we'd like. So we have to be mindful of how much exposure we have there. We think they're conservative.

Speaker Change: Our general Casualty book was up nine 9%, we think thats against loss cost, that's probably 4% to 5%.

Excess liability was up six 7% I think that's a similar type of loss cost.

Speaker Change: It's not to say again as I mentioned earlier that all.

Speaker Change: All lines and casualty are.

Speaker Change: Getting the same level of rate or have that term rate integrity financial lines are tough and we do not write a lot of that but we do write some private company D&O inside of our miscellaneous professional liability suite, that's not getting the rate that we'd like so we have to be mindful of how much. We exposure. We have there I think the last thing that I would say is when you look at our <unk>.

Speaker Change: Our loss picks we think theyre conservative they were just vetted by our reinsurance panel at six one or excuse me a four one with the renewal and we got improved terms and conditions and improved pricing. There. So I think thats a validation.

Mac Armstrong: They were just vetted by our reinsurance panel at 6-1, or, excuse me, at 4-1 with the renewal. And we got improved terms and conditions and improved pricing there. So I think that's a validation. But I think the greatest validation is that our loss picks meaningfully above the historical results of these underwriters that we've brought on. So I know that's a lot, but what I would say is we do feel good about our casualty strategy, the niche focus, and the exceptional leadership we have helping us execute upon that. And we don't think that we will be releasing reserves anytime soon, so we're going to be conservatively building a reserve base. That's really helpful, Collar.

Speaker Change: Greatest validation as our loss picks meaningfully above the historical results of these underwriters that we brought on so I know thats a lot, but what I would say is we do feel good about our casualty strategy. The niche focus feel exceptional about the leadership, we have helping us execute upon that.

Speaker Change: We don't.

Speaker Change: <unk>.

Speaker Change: I think that.

Speaker Change: We will revisit believing excuse me releasing reserves anytime soon so we're going to be conservatively building the reserve base.

Andrew E. Andersen: That's really helpful, Collar. Thanks so much.

Speaker Change: That's really helpful color. Thanks, so much.

Speaker Change: Yes.

Matthew John Carletti: Thank you. Our next question is from Matt Carletti with Citizens JNP. Please proceed with your question.

Speaker Change: Thank you. Our next question is from Matt <unk> with citizens J M.

Speaker Change: Sticking with your question.

Matt: Hey, Thanks, good morning.

Matthew John Carletti: Morning, Matt. Matt, what's up? Good morning.

Matt: Good morning, Matt, Matt Cassel Morgan.

Just hoping to ask a high level question on your.

Matthew John Carletti: I was hoping to ask a high-level question on your residential quake book. You're particularly thinking about California and other areas where the homeowner's market has gotten super tight, and rates have gone up a bunch. What have you seen in terms of retention in that resi quake book as that's happened? My thought process is that people are paying a ton more for homeowners. How sticky? Have you seen retentions change at all? Or are they feeling the wallet getting a little tight, and maybe retention is sliding a little bit?

Matt: Your residential quake book.

Particularly thinking like California, and other areas where.

Matt: The homeowners market had gotten super tight and rates have gone up a bunch.

Matt: Have you seen in terms of retention in that Rajiv Quake book.

Matt: Kind of as that has happened you my thought process is being like people are paying a ton more for homeowners.

Matt: How sticky have you seen retention has changed at all or are they or are they beyond the wallet getting a little tight.

Matt: And maybe retentions are sliding a little bit.

Mac Armstrong: Yeah, Matt, that's a great question. You know, I'm pleased to say that our retention has been consistent. You know, it's always been a mid to high 80s level. And you know, we have been able to continue to grow QuakeBook by taking share, by having great partnerships. But I would say that, you know, new home sales right now and increasing homeowners' premiums are a headwind. There's no question that it is.

Speaker Change: Yeah, Matt that's a great question I'm pleased to say that our retention has been consistent it's always been mid to high 80% level.

Speaker Change: And.

Speaker Change: We have been able to continue to grow the quake book.

Speaker Change: By taking share by having great partnerships, but I would say that new home sales right now and increasing homeowners.

Speaker Change: Premiums is a headwind it's no question that it is.

Mac Armstrong: But because of our franchise, because of our partnership strategy, and also because of the changes at the California Earthquake Authority, we've been able to sustain this kind of high teens and mid teens growth in residential quakes. We're optimistic, and we've been studying it. As rates come down and new home sales in more earthquake-exposed areas pick up again, and the inventory starts turning over a bit more, that could be turned from a headwind into a tailwind.

Speaker Change: Because of our franchise because of our partnership strategy and also because of the changes at the California earthquake authority, we've been able to sustain this kind of high teens mid teens growth in residential quake.

We're optimistic and we've been studying it.

Speaker Change: As rates come down and new home sales and more earthquake exposed areas pick up again.

Speaker Change: And the inventory starts turning over a bit more that could be turn from a headwind into a tailwind I'm just not going to call when.

Mac Armstrong: I'm just not going to call it a win. There are a lot of people that are focused on when rate changes are going to happen. We're going to just play with the current market as it is and hope that when rate changes come, it provides a nice tailwind for us.

Speaker Change: There are a lot of people that are focused on win rate changes are going to happen.

Speaker Change: We're going to just play with the current market as it is and hope that win rate changes come it provides a nice tailwind for us.

Matthew John Carletti: Great. Thanks, Matt. I appreciate it.

Great. Thanks, Matt appreciate it.

Speaker Change: Thank you Matt.

Andrew E. Andersen: Thank you. Our next question is from Andrew Andersen with Jefferies. Please proceed with your question.

Speaker Change: Thank you. Our next question is from Andrew Anderson with Jefferies. Please proceed with your question.

Andrew E. Andersen: Hey, good morning. On fronting, a little bit lower growth in the quarter, you mentioned some partnerships were slower to ramp. I think you had previously pointed to, for the full year, growth in the fronting index and growth of the overall company. Is that still the case?

Andrew E. Andersen: Hey, good morning on a fronting a little bit lower growth in the quarter. You mentioned some partnerships were slower to ramp I think you had previously pointed to for full year, perhaps growth in fronting indexing growth of overall company is that still the case.

Mac Armstrong: Yeah, Andrew, a good question. Thanks for asking it.

Andrew E. Andersen: Yeah, Andrew Good question. Thanks for asking it I think it is not the case I think it's going to under index to growth. So.

Mac Armstrong: I think it's not the case. I think it's going to under-index the growth. So, you know, the good thing is we have a portfolio of products in five different categories. Some are firing on all cylinders.

Speaker Change: The good thing is we have a portfolio of products in five different categories. Some are firing in all cylinders.

Andrew E. Andersen: Some are indexing the growth rate. I would say fronting is the one that is now under-indexing. A few of our new partnerships are slower to ramp up. There is a little bit of rate headwinds in one of our larger relationships that I brought up. We have a pipeline, and we do expect to add to our portfolio of fronting partnerships, but it's going to slow. Its growth is going to look more like the first quarter than it will the broader growth rate.

Speaker Change: Some are indexing the growth rate I would say fronting is the one that is now under indexing a few of our new <unk>.

Speaker Change: Partnerships are slower to ramp.

Speaker Change: There is a little bit of rate headwinds in one of our larger relationships that I brought up.

Speaker Change: A pipeline and we do expect to add to our portfolio of fronting partnerships, but.

Speaker Change: It's going to slow its growth is going to look more like the first quarter, then it will be broader growth rate of the company.

Andrew E. Andersen: Got it. Okay.

Speaker Change: Got it okay.

Speaker Change: And then on earthquake it sounds like hi.

Speaker Change: High teens, 20% ish for full year, if I think about the expense ratio here does the mix of product between residential and commercial have an impact on the expense ratio was one lower than the other.

Andrew E. Andersen: And then on earthquakes, it sounds like high teens 20% ish for full year. If I think about the expense ratio here, does the mix of product between residential and commercial have an impact on the expense ratio? Is one lower than the other?

Speaker Change: Historically residential earthquake had been a bit of a higher margin.

Speaker Change: Cost of acquisition is.

Speaker Change: This might be a little bit lower but right now in this market just because of the rate increases that we've seen in commercial earthquake. The underlying unit level economics are almost at parity. So.

Mac Armstrong: You know, historically, residential earthquakes had been a bit of a higher margin. The cost of acquisition is... might be a little bit lower. But right now in this market, just because of the rates, the increases that we've seen in commercial earthquake, the underlying unit level economics are almost at parity. So, you know, a residential earthquake policy or commercial earthquake policy in 2024 is gonna have the same margin. Yeah, one follow-up on that, would you?

Speaker Change: A residential earthquake policies, our commercial earthquake policy in 2024 are going to have the same margins.

Toshio Christopher Uchida: Yeah, one follow-up on that. When you look at our acquisition expense ratio on a gross basis, right, I think 10.5% for the quarter, we expect that to be pretty flat for the year, right? So overall mix of business, whether it be business or earthquake, commercial earthquake, or even changes in the fronting dynamic, we don't expect to have a material impact on that ratio as we go forward.

Speaker Change: Yeah, one follow up on that when you look at our acquisition expense ratio on a gross basis right I think 10, 5% for the quarter, we expect that to be pretty flat for the year right. So overall mix of business, whether it be for earthquake commercial earthquake or even changes in the fronting dynamic we don't expect to have a material impact on that ratio as we go forward.

Speaker Change: Thank you.

Thanks Peter.

Andrew E. Andersen: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Our next question is from Meyer Shields with KBW. Please proceed with your question.

As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Okay.

Speaker Change: Our next question is from Meyer Shields with <unk>. Please proceed with your question.

Meyer Shields: Good morning. I have a bunch of quick questions if you can. First, I know Cincinnati is targeting higher net worth homeowners, and I'm wondering if that translates into maybe writing accompanying residential earthquake on non-admitted paper?

Meyer Shields: Great. Thanks, good morning.

Meyer Shields: I have a bunch of quick.

Quick questions if I can.

First I know Cincinnati targeting higher net with homeowners.

Meyer Shields: And I'm wondering does that translate into maybe writing accompanying residential earthquake on non admitted paper.

Meyer Shields: Mayor, I apologize. We lost you for a second. Would you mind repeating that question? I heard the second half on non-admitted paper, but we didn't hear the first part.

Speaker Change: Mayor I apologize we lost you for a second would you mind repeating that question I heard the second half on non admitted paper, but we didn't hear the first part yes.

Meyer Shields: Yeah, no problem at all. So I know Cincinnati is looking to grow its high net worth homeowners, and I'm wondering whether that affords you the opportunity to write about the earthquake on non-admitted paper.

Speaker Change: Yes, no problem at all.

Speaker Change: Cincinnati is looking to grow it.

High net worth homeowners and whether that affords you the opportunity to raise the earthquake.

Speaker Change: On non admitted paper yes.

Mac Armstrong: Yes, I'm sorry. It is on a non-admitted basis. So we are writing that as an E&S policy and a company to their high net worth E&S offering in California.

Speaker Change: So I am sorry, yes. It is on a non admitted basis. So we're riding that is any of that policy isn't accompany their high net worth E&S offering in California.

Meyer Shields: Okay, perfect. On CROC, I think Chris said that 30% of the written premiums come in the first quarter and the balance in the third. Is that a normal run rate or when you're ramping?

Speaker Change: Okay perfect.

Speaker Change: On crop I think Chris said that 30% of the written premiums come in the first quarter and the balance in the third is that a normal run rate or when youre ramping up should we see higher percentages in the first quarter than this year.

Jon Marcus Christianson: Hey Mayor, it's Jon Christianson. You know, for the next few years, we'd expect that to be fairly consistent. And so you'll see the third quarter be by far the largest quarter of Grin premium. The second largest will be the first quarter, and then there'll be a little bit in the second and the fourth quarter, but really, the third quarter is going to be where you'd expect to see the largest premium share for the year.

Speaker Change: Yeah, Hey, Eric Jon Christianson.

Speaker Change: Over the next few years, we would expect that to be.

Jon Marcus Christianson: Fairly consistent.

Jon Marcus Christianson: And so you'll see you'll see the third quarter.

Jon Marcus Christianson: By far the largest quarter of <unk>.

The second largest will be the first quarter.

Jon Marcus Christianson: There'll be a little bit in the second and the fourth quarter, but really the third quarter is going to be where you would expect to see the largest premium share for the year.

Meyer Shields: Okay, perfect. And I know the retained premiums are going to be really, really low, but there are different approaches that a lot of crop insurers take in terms of booking profitability for that line of business. In other words, waiting until, let's say, the fourth quarter before taking the commodity ratio on the retained book below 100. How is Palomar planning on, I guess, booking that line of business?

Speaker Change: Okay, perfect and I know the retained premiums are going to be really really low.

Speaker Change: But there are different approaches that allowed the crop insurance take in terms of booking your profitability for that line of business in other words waiting until let's say the fourth quarter.

Speaker Change: Four.

Speaker Change: Taking the commodity issue on the retained book below 100.

Speaker Change: How is Palomar planning on.

Speaker Change: Bookings that line.

Jon Marcus Christianson: Yeah, no, it's a good question. The third quarter premium that we book will have a little bit of a catch-up effect with it. A lot of that premium is originated earlier, and then we wait for the acreage reports to come in, which generally will start coming in, you know, June-ish, but mostly in July. And so at that point in time, we will book all of the written premium, and then there will be a slight catch-up of earned premium, which obviously comes with a combined ratio.

Speaker Change: Yes, it's a good question.

Speaker Change: Third quarter premium that we book will have a little bit of a catch up effect with it a lot of that premium.

Speaker Change: As originated earlier and then we wait for the acreage reports that come in which generally will be started coming in June ish, but mostly in July and so at that point in time, we will book all of the written premium and then there will be a slight catch up of earned premium, which obviously comes with a combined ratio. So there will be some earning of it in the third quarter.

Jon Marcus Christianson: So there will be some earnings of it in the third quarter and then throughout the remainder of the year, as most of that does end at the end of the year. So we will be booking most of the written premium, but then some of those called profitability through the third and the fourth quarter for that book of business. Yeah, Mayor.

Speaker Change: <unk>.

Speaker Change: And then throughout the remainder of the year as most of that does end at the end of the year. So we will be booking.

Speaker Change: Most of the written premium, but then some of those called the profitability through the third and the fourth quarter for that book of business, Yes, I would say that.

Mac Armstrong: Yeah, Mayor, I'd say that, you know, we'll look similar to others in the market in terms of how we, you know, the timing of when those profits are taken in or recognized. Usually, the modeling becomes clear at the end of the third quarter and into the fourth quarter, which gives you more confidence in the loss ratio.

Speaker Change: We will look similar to others in the market in terms of how we.

Speaker Change: The timing of when those profits are taking in our recognized usually the modeling becomes clear at the end of the third quarter and into the fourth quarter, which gives you more confidence on the loss ratio for the year.

Meyer Shields: Okay, perfect. And last question. I'm not exactly sure how to ask this, but Matthew talked about being bigger and how that should allow for growth on more accounts. Is there any way of, I don't know, ballparking it or describing the relevance of the higher size category?

Speaker Change: Okay, perfect and last question.

Speaker Change: And.

I'm not exactly sure of assets, but Matt can you talk about being bigger and how that should <unk>.

Speaker Change: Now for growth on on more accounts.

Speaker Change: Is there any way I don't know ballpark in describing the relevance of the higher size category.

Mac Armstrong: Yeah, you know, um... Mayor, I think it's hard for us to quantify right now. We had a commercial underwriting meeting a week or two ago, and our underwriters were pleased that with the increase in the financial science quarter, it's probably most relevant for our environmental team and our professional liability team. But then they immediately asked, "When are we going to get an A rating?"

Speaker Change: Yes.

Matt: I think it's hard for us to quantify right now we had came in we just we had a commercial underwriting meeting a week or two ago and our underwriters were pleased that with the increase in financial size quarter, It's probably most relevant for.

Matt: Our <unk>.

Matt: Environmental team and our professional liability team, but that May immediately asked when are we going to get it.

Matt: Ratings, so that might be more impactful, so I would love to say.

Mac Armstrong: So that might be more impactful. So I would love to say it's a lot like what it was in 2020 when we got over $250 million. And that opened up a few different distribution channels that we couldn't see previously. Now it's just more about insured appetite and credit ratings. So, I can't quantify it right now. I think it's going to open up a lot, and I think it will definitely help from a recruiting standpoint, but I'd love to give you a dollar number. I just can't right now. Okay, fair enough. Thank you.

Matt: It's a lot like what it was in 2020 when we got.

Matt: Over $250 million of that opened up a few different distribution.

Matt: Channels that we Couldnt see previously now it's more about insured.

Matt: Appetite and.

The credit rating.

Matt: So.

Matt: Requirements for certain larger accounts, so can't quantify it right now I think it's going to open up a lot and I think we were definitely up from a recruiting standpoint, but.

Speaker Change: I'd Love to give you a dollar number I just cant right now.

Meyer Shields: Okay, fair enough. Thank you so much.

Okay fair enough. Thank you so much.

Speaker Change: Thanks Mary.

Pablo Augusto Serrano Singzon: Thank you. Our next question is from Pablo Singzon with J.P. Morgan. Please proceed with your question.

Speaker Change: Thank you. Our next question is from Pablo <unk> with.

Pablo: J P. Morgan. Please proceed with your question.

Pablo Augusto Serrano Singzon: Hi, good morning. Maybe for Mac or Chris, you mentioned about a 5% price increase on reinsurance embedded in the guidance. What dollar benefit would you get if prices went up by, say, only 4% or 3%? You know, I know the dollar cost of XO will also depend on exposure and structure, but holding all that constant, how much dollar savings do you get if reinsurance pricing is more favorable than what you're assuming

Pablo: Hi, good morning.

Pablo: For a macro Chris you mentioned about the 5% price increase on reinsurance embedded into the guidance.

Pablo: What dollar benefit would you get if prices go up by say only 4% or 3%.

Pablo: I know the dollar cost effects of it will also depend on exposure to structure, but holding all of that content.

Pablo: <unk> savings that you got the reinsurance pricing is more favorable than what youre assuming.

Toshio Christopher Uchida: Yeah, that's a great question. When you look at our book, and we've talked about it before, the cost of risk transfer on last June 1 was about $230 million. So we will be buying more excess of loss re-insurance to cover the increase in our exposure. So let's say our exposure went up 10%. Let's call it $250-ish million or $253 million that we're going to be spending. We're expecting some sort of rate increase. Right now, we're saying 5% on top of that.

Speaker Change: Yes, that's a great question when you look at our book and we've talked about it before that the <unk>.

Speaker Change: Cost of risk transfer last June one it was about $230 million right.

Speaker Change: We will be buying more excess of loss reinsurance to cover the increase in our exposure.

Speaker Change: Lets say our exposure went up 10%, let's call it 250 ish million $253 million of Urbino spending.

Speaker Change: We were expecting some sort of rate increase right now, we're saying 5% on top of that so you can kind of do that math. So I just kind of work it backwards. If you gave us.

Toshio Christopher Uchida: So you can kind of do that math. You just kind of work it backwards. If you have a 1% savings on $250 million, that's $2.5 million over the full treaty year. So from our standpoint, that's probably the right way to think about it when you go in. Now, I'm not saying that's our exposure change or anything like that. But just when you want to do the math and you want to think about it, that $230 million is probably the right base to think about what our opportunity is or what our potential additional cost is going to be at the next renewal.

Speaker Change: A 1% savings on $250 million at $2 $5 million over the full treaty year, yes. So from our standpoint, that's probably the right way to think about it when you go in now now, saying, that's our exposure change or anything like that but just when you would want to do the math and when it's a good rule of thumb that $230 million is probably the rate base to think about.

Speaker Change: What our opportunity is or what our potential additional costs is going to be at the next renewal.

Pablo Augusto Serrano Singzon: Yep, all that makes sense. And then the second question, just thinking about the business mix change. I think Chris, you had said on this call about one to two points of deterioration in the traditional per quarter. My memory might be rusty, but it seems like that might be a tad faster than what you said before. Is that because attrition lines are growing faster? And then as a follow-up to that, you know, I think in the 2022 investor that you guys have given all in combined racial guidance for earthquakes and let's just call it non-earthquakes, do those like margin, does that margin guidance still stand? And, you know, as we think about the

Speaker Change: Yes that makes sense and then second question just thinking about the business mix change.

Speaker Change: I think Chris you had said on this call about one to two points deterioration in the Attritional for a quarter.

My memory might be rest of you, but it seems like that might be a tad faster than what you said before.

Is that because of Tricia lines are growing faster and then as a follow up to that I think.

Speaker Change: 122, Investor Day, you guys had given all.

Speaker Change: All in combined ratio guidance for earthquake.

Speaker Change: Let's just call it <unk> quick.

Speaker Change: Do those.

Speaker Change: Margin.

Speaker Change: Does that margin guidance still stand and as we think about the mix here.

Toshio Christopher Uchida: Yeah, that's a good question. Yeah, I think maybe one to two points is, I would say, a little bit conservative. I think if we got up to the midpoint of our range of 21 to 25, which is kind of in that 23% range, we'd feel good about where it is for the full year. I think it does move around on a quarterly basis. You guys are very familiar with the insurance business.

Speaker Change: Yes, that's a good question, yes, I think maybe one to two points is I would say a little bit conservative I think if we get up to the midpoint of our range of 21% to 25, which is kind of in that 23% range. We feel good about where it is for the full year.

Speaker Change: It does move around on a quarterly basis, you guys are very familiar with the insurance business. Obviously, we don't control the losses, if it swings up a point or two points in a quarter. It doesn't mean anything is going wrong.

Toshio Christopher Uchida: Obviously, we don't control the losses. So if it swings up a point or two points in a quarter, it doesn't mean anything's going wrong. It's just naturally the way things go. And it can also go the other way, one or two points down.

So we're weighing things go and it can also go the other direction, one or two points down but overall, we're very comfortable with where things are going we are seeing very good strong growth in our lines of business that you have attritional.

Toshio Christopher Uchida: But overall, we're very comfortable with where things are going. We are seeing very good, strong growth in our lines of business at Geometricional. That's going to be the Inland Marine and Special Property. There will be some casualties.

Speaker Change: It's going to be in the marine and special property, that's going to be some casualties. So everything is going the way we expected.

Toshio Christopher Uchida: So everything is going the way we expected. We've got strong growth there. When I look back and think about Investor Day, I would have to, I'm going off a lot of memory here, but it does feel pretty consistent with how we've lined up. We haven't made significant changes to any of our quota shares.

Speaker Change: <unk> growth there when I look back and think about Investor day I'd have to go into a whole lot of memory Hibbett does feel pretty consistent with how we've lined up we haven't made significant changes to any of our quota shares we started taking a little bit more on some of those but not what I'd call a material variation from what we shared with Investor day and some.

Toshio Christopher Uchida: We started taking a little bit more on some of those, but not what I'd call a material variation from what we shared with Investor Day. And some of that thesis on Investor Day was maintaining the same participation. And so that is still, I would say, a lever we have to pull over time. As our balance sheet grows, we can start taking more and more on some of those lines, which will obviously help profitability or the bottom line continue to grow because these are profitable lines of business where we are, I would say, sharing a lot of that margin with the reinsurers, which over time, we will start putting on our balance sheet.

Speaker Change: That thesis in Investor day was maintaining the same participation and so that is still I would say a lever we have to pull over time is that we can see as our balance sheet growth. We can start taking more and more from me.

Speaker Change: Overall, which will obviously help profitability or bottom line continue to grow because these are profitable lines of business, where we are I would say sharing a lot of that margin with the reinsurers that over time, we will start putting on our balance sheet, that's not going to happen all next year, but I would say over a five to 10 year horizon more and more.

Toshio Christopher Uchida: That's not going to happen all at once next year, but I'd say over a five to 10-year horizon, more and more will start coming onto our balance sheet, which will help continue to grow that bottom line. And Pablo, the thing that I would add is we still feel very good about, you know, a sub-75 combined, even if that loss ratio moves up one or two points that Chris is describing.

Speaker Change: We'll start coming onto our balance sheet, which will help continue to grow that bottom line and probably the thing that I would add is we still feel very good about.

Speaker Change: Hub 75, combined even if that loss ratio moves up wonder.

Two points that Chris was describing.

Pablo Augusto Serrano Singzon: Yep, that makes sense. And then last for me, you had referenced better seating commissions and the cash flow equal to share, but then you also said that, as a percentage of gross earned, you think acquisition expenses stay flat. So it doesn't seem like that benefit on the seating is that meaningful, right? Is that the correct reading? I mean, it didn't involve a number, I guess that's the more appropriate thing to say. Is that fair?

Yep Yep.

Speaker Change: That makes sense and then last for me.

Speaker Change: You had referenced better ceding commissions on casualty quota share.

Speaker Change: But then you also said that.

Speaker Change: As a percentage as a percentage of gross earned you think acquisition expenses stay flat so it.

Speaker Change: Does it seem like that.

Speaker Change: The benefit on the seating.

Speaker Change: Is that meaningful right is that the correct read.

Speaker Change: And then will give all the number I guess.

Speaker Change: That's a more appropriate thing to say is that is that fair.

Toshio Christopher Uchida: Yeah, I mean, I think it's just a matter of business mix, right? You know, the earthquake and the other property casualties only 14% of the business, and what was in that quota share probably constitutes about 40% of that number. So you know, that's called 5% of that overall did see, you know, a slightly improved seeding commission. It's just business mix. Yeah, yeah.

Speaker Change: Yes, I mean, I think it's a matter of business mix right.

Speaker Change: Earthquake and the other property casualty is only 14% of the business and what was in that quota share probably constitutes about.

40% of that number so.

Speaker Change: That's call it 5% of that overall did see it slightly.

Speaker Change: Slightly improved ceding commission.

Speaker Change: It's just business mix, yes.

Pablo Augusto Serrano Singzon: Yep. Yep. Okay. Thank you.

Speaker Change: Okay. Thank you.

Operator: Thank you. There are no further questions at this point. I would like to hand the floor back over to Matt Armstrong for any closing comments. Well, thank you, operator, and thank you, too.

Speaker Change: Thank you there are no further questions at this call I would like to hand, the floor back over to Mac Armstrong for any closing comments.

Matthew John Carletti: Well, thank you, operator, and thank you to all who joined us this morning. We appreciate your participation, your questions, and, most of all, your continued support. You know, to conclude, we're off to a strong start to the year, and I would be remiss if I didn't thank our team at Palomar for their continued dedication and hard work, which is ultimately the driving force behind our terrific results and success, not just this quarter but these past ten years.

Mac Armstrong: Well. Thank you operator, and thank you do all who joined US. This morning. We appreciate your participation your questions and most of all your continued support to conclude we are off to a strong start to the year end.

Mac Armstrong: I would be remiss, if I didn't thank our team at Palomar for their continued dedication and hard work, which is ultimately the driving force behind our terrific results and success not just this quarter, but these past 10 years I remain confident in the growth trajectory of our business combined with our continued focus and our ability to deliver predictable earnings and returns.

Matthew John Carletti: I remain confident in the growth trajectory of our business combined with our continued focus and our ability to deliver predictable earnings and returns. You know, as an aside, in addition to our 10-year anniversary, we recently celebrated our fifth year as a public company, and so I want to thank our investors for their support during these last five years. We will continue to work in earnest on your behalf and will drive shareholder value. Thank you very much, have a nice day, and speak to you next quarter.

Mac Armstrong: And as an aside in addition to our 10 year anniversary, we recently celebrated our fifth year as a public company. So I want to thank our investors for their support. These last five years, we will continue to work in earnest on your behalf and will drive shareholder value.

Mac Armstrong: Thank you very much have a nice day and speak to you next quarter.

Operator: This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's conference call your lines at this time, thank you for your participation.

Speaker Change: Okay.