Palomar Holdings, Inc. Announces Successful Completion of June 1 Reinsurance Renewal

Rhea-AI Summary

Palomar Holdings announced the successful completion of its June 1, 2024, reinsurance programs, raising the company's full-year 2024 adjusted net income guidance to $122-$128 million from $113-$118 million.

The company secured an additional $400 million in reinsurance to support its earthquake franchise, now totaling $3.06 billion in coverage for earthquake events, $735 million for Hawaii hurricanes, and $117.5 million for continental U.S. hurricanes.

Palomar's per occurrence event retention was reduced to $15.5 million for hurricanes and remains at $20 million for earthquakes. A new $420 million catastrophe bond, Torrey Pines Re Series 2024-1, was issued as part of this coverage expansion.

The reinsurance panel includes 90 reinsurers, all rated 'A-' or better, and provides $895 million in multi-year ILS capacity. This renewal reflects better-than-expected terms and pricing, along with broad-based market support for Palomar's risk profile.

Positive

• Full-year 2024 adjusted net income guidance increased to $122-$128 million.
• Secured $400 million additional reinsurance for earthquake coverage.
• Total earthquake coverage now $3.06 billion.
• $420 million sourced through new catastrophe bond Torrey Pines Re Series 2024-1.
• Per occurrence event retention for hurricanes reduced to $15.5 million.
• Reinsurance panel includes 90 reinsurers, all rated 'A-' or better.
• $895 million in multi-year ILS capacity included in reinsurance program.
• Better-than-expected terms and pricing for reinsurance renewal.

Negative

• Per occurrence event retention for earthquakes remains at $20 million, which could still impact finances in the event of significant losses.
• Despite the reinsurance, the company faces a pre-tax net loss risk of up to $15.5 million for hurricanes and $20 million for earthquakes.

Insights

Financial Analyst

Palomar Holdings' announcement of the successful reinsurance renewal and updated income guidance is key for investors tracking the company's financial health and growth prospects. The increase in full-year 2024 adjusted net income guidance to $122 million-$128 million from the previous $113 million-$118 million signals optimistic expectations about the company's future performance.

The procurement of $400 million of incremental reinsurance limit for earthquake coverage and the extension of total coverage to $3.06 billion for earthquake events is a significant strategic move. This extended coverage implies enhanced protection against potential massive losses, which is reassuring for investors. It's important to note that the per occurrence event retention for hurricane events has been reduced from $17.5 million to $15.5 million, suggesting a lower financial burden on the company in the event of such catastrophes.

A notable inclusion is the issuance of a new catastrophe bond, Torrey Pines Re Series 2024-1, contributing $420 million to the earthquake limit. This indicates an adept use of innovative financial instruments to bolster reinsurance capacity. It's also worth examining the diversified investor base comprising 90 reinsurers and ILS investors, most holding high financial strength ratings, which speaks to the company's strong market reputation.

From a financial standpoint, the improved terms and pricing of the reinsurance program and the associated reduced event retentions are expected to enhance earnings stability. This translates to a potentially more stable dividend policy and could positively impact the company's stock valuation in the long term.

Insurance Market Analyst

The successful completion of Palomar's June 1 reinsurance renewal highlights the company's effective risk management strategy. The expanded reinsurance coverage across multiple regions, notably the earthquake and hurricane segments, underpins Palomar's preparedness for significant catastrophic events. The 1:250-year peak zone Probable Maximum Loss coverage level indicates a robust risk mitigation approach.

The use of multi-year ILS capacity worth $895 million to diversify collateralized reinsurance capital is a smart move. It reflects the company's ability to attract and maintain a broad reinsurance panel, enhancing financial flexibility and stability. This strategy is aimed at reducing volatility in annual earnings, thereby offering more predictable results, which is valuable for long-term investors.

The prepaid reinstatements for nearly all layers with a reinstatement provision are another noteworthy feature. This mechanism limits the pre-tax net loss to $15.5 million for hurricane events and $20 million for earthquake events. This protective measure ensures that any significant events do not disproportionately affect the company's profitability, aligning with the management's goal of maintaining financial resilience.

~ Full Year 2024 Adjusted Net Income Guidance Increased to $122 Million to $128 Million ~

LA JOLLA, Calif., May 28, 2024 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ: PLMR) (“Palomar” or the “Company”) today announced the successful completion of certain reinsurance programs incepting June 1, 2024, and increased the Company’s full year 2024 adjusted net income guidance.

The Company procured approximately $400 million of incremental limit to support the growth of its Earthquake franchise. Palomar’s reinsurance coverage now extends to $3.06 billion for earthquake events, $735 million for Hawaii hurricane events, and $117.5 million for all continental United States hurricane events. The reinsurance program provides ample capacity for the Company’s growth in the subject business lines as well as coverage to a level exceeding Palomar’s 1:250-year peak zone Probable Maximum Loss.

Palomar’s per occurrence event retention is $15.5 million for hurricane events, reduced from $17.5 million the previous year, and $20 million for earthquake events, levels that continue to be meaningfully within management’s previously stated guideposts of less than one quarter’s adjusted net income and less than 5% of the Company’s surplus on an after-tax basis.

$420 million of the $3.06 billion earthquake limit was sourced through a new catastrophe bond, Torrey Pines Re Series 2024-1. The new catastrophe bond issuance is the fifth Insurance Linked Securities (“ILS”) transaction Palomar has sponsored.

“We are very pleased with the successful June 1 placement and are very grateful for the continued support of our reinsurance and ILS partners,” commented Mac Armstrong, Palomar’s Chairman and Chief Executive Officer. “Importantly, we renewed our reinsurance program at terms and pricing that were better than our initial expectations and reduced our hurricane event retention. As a result, we are raising our full year 2024 adjusted net income guidance to a range of $122 million to $128 million from the previously indicated range of $113 million to $118 million.”

Other highlights of the Company’s reinsurance program include:

• $895 million of multi-year ILS capacity providing diversifying collateralized reinsurance capital;
  
  
• A reinsurance panel of 90 reinsurers and ILS investors, including multiple new reinsurers, all of which have an “A-” (Excellent) or better financial strength rating from A.M. Best and/or S&P (Standard & Poor’s) or are fully collateralized;
  
  
• Prepaid reinstatements for substantially all layers that include a reinstatement provision, thereby limiting the pre-tax net loss to $15.5 million for hurricane events and $20 million for earthquake events, with modest additional reinsurance premium due.

Palomar’s Chief Risk Officer, Jon Knutzen, added, “We are grateful for the broad-based support we received from the reinsurance market. It is a testament to our business mix and risk profile, which has been curated with the goal of delivering more stable, predictable results. We appreciate all our incumbent and new reinsurance partners who have helped us successfully complete our June 1 placement.” 

About Palomar Holdings, Inc.
Palomar Holdings, Inc. is the holding company of subsidiaries Palomar Specialty Insurance Company (“PSIC”), Palomar Specialty Reinsurance Company Bermuda Ltd., Palomar Insurance Agency, Inc., Palomar Excess and Surplus Insurance Company (“PESIC”), and Palomar Underwriters Exchange Organization, Inc. Palomar's consolidated results also include Laulima Reciprocal Exchange, a variable interest entity for which the Company is the primary beneficiary. Palomar is an innovative specialty insurer serving residential and commercial clients in five product categories: Earthquake, Inland Marine and Other Property, Casualty, Fronting, and Crop. Palomar’s insurance subsidiaries, Palomar Specialty Insurance Company, Palomar Specialty Reinsurance Company Bermuda Ltd., and Palomar Excess and Surplus Insurance Company, have a financial strength rating of “A-” (Excellent) from A.M. Best.

To learn more, visit PLMR.com.

Follow Palomar on LinkedIn: @PLMRInsurance

Safe Harbor Statement
Palomar cautions you that statements contained in this press release may regard matters that are not historical facts but are forward-looking statements. These statements are based on the company’s current beliefs and expectations. The inclusion of forward-looking statements should not be regarded as a representation by Palomar that any of its plans will be achieved. Actual results may differ from those set forth in this press release due to the risks and uncertainties inherent in the Company’s business. The forward-looking statements are typically, but not always, identified through use of the words "believe," "expect," "enable," "may," "will," "could," "intends," "estimate," "anticipate," "plan," "predict," "probable," "potential," "possible," "should," "continue," and other words of similar meaning. Actual results could differ materially from the expectations contained in forward-looking statements as a result of several factors, including unexpected expenditures and costs, unexpected results or delays in development and regulatory review, regulatory approval requirements, the frequency and severity of adverse events and competitive conditions. These and other factors that may result in differences are discussed in greater detail in the Company's filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Contact
Media Inquiries
Lindsay Conner
1-551-206-6217
lconner@plmr.com

Investor Relations
Jamie Lillis
1-203-428-3223
investors@plmr.com

Source: Palomar Holdings, Inc.

FAQ

What is the new full-year 2024 adjusted net income guidance for Palomar (PLMR)?

Palomar's new full-year 2024 adjusted net income guidance is between $122 million and $128 million.

How much reinsurance coverage did Palomar (PLMR) secure for earthquake events in 2024?

Palomar secured $3.06 billion in reinsurance coverage for earthquake events in 2024.

What is the retention per occurrence for hurricane events for Palomar (PLMR) in 2024?

Palomar's per occurrence retention for hurricane events is $15.5 million in 2024, reduced from $17.5 million the previous year.

How much additional reinsurance did Palomar (PLMR) secure to support its earthquake franchise?

Palomar secured an additional $400 million in reinsurance to support its earthquake franchise.

What is the value of the new catastrophe bond issued by Palomar (PLMR) in 2024?

The new catastrophe bond, Torrey Pines Re Series 2024-1, is valued at $420 million.

How many reinsurers are included in Palomar's (PLMR) reinsurance panel for 2024?

Palomar's reinsurance panel includes 90 reinsurers for 2024.

How much coverage does Palomar (PLMR) have for hurricane events in the continental U.S.?

Palomar has $117.5 million in reinsurance coverage for hurricane events in the continental United States.

What is the total capacity of Palomar's (PLMR) multi-year ILS reinsurance?

Palomar's multi-year ILS reinsurance capacity totals $895 million.

What are the financial strength ratings of the reinsurers in Palomar's (PLMR) reinsurance panel?

All reinsurers in Palomar's reinsurance panel have an 'A-' (Excellent) or better financial strength rating from A.M. Best and/or S&P, or are fully collateralized.