Palomar Holdings, Inc. Reports First Quarter 2023 Results

LA JOLLA, Calif., May 03, 2023 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported net income of $17.3 million, or $0.68 per diluted share, for the first quarter of 2023 compared to net income of $14.5 million, or $0.56 per diluted share, for the first quarter of 2022. Adjusted net income⁽¹⁾ was $20.4 million, or $0.80 per diluted share, for the first quarter of 2023 as compared to $18.6 million, or $0.72 per diluted share, for the first quarter of 2022. Effective December 31, 2022, the Company adjusts for net realized and unrealized gains and losses when calculating and presenting adjusted net income, diluted adjusted earnings per share, and adjusted return on equity. All prior period amounts have been adjusted accordingly.

First Quarter 2023 Highlights

• Gross written premiums increased by 46.3% to $250.1 million compared to $170.9 million in the first quarter of 2022
• Net income of $17.3 million, compared to $14.5 million in the first quarter of 2022
• Adjusted net income⁽¹⁾ of $20.4 million, compared to $18.6 million in the first quarter of 2022
• Total loss ratio of 24.8% compared to 19.7% in the first quarter of 2022
• Combined ratio of 77.9% compared to 76.5% in the first quarter of 2022
• Adjusted combined ratio⁽¹⁾ of 73.3%, compared to 72.1%, in the first quarter of 2022
• Annualized return on equity of 17.5%, compared to 15.0% in the first quarter of 2022
• Annualized adjusted return on equity⁽¹⁾ of 20.7%, compared to 19.2% in the first quarter of 2022

(1) See discussion of “Non-GAAP and Key Performance Indicators” below.

Mac Armstrong, Chairman and Chief Executive Officer, commented, “Following a record year in 2022, I am pleased with the strong start to 2023. Our first quarter results demonstrate continued momentum in our business and further execution of our Palomar 2X strategy. Highlights for the quarter include gross written premium growth of 46%, an adjusted combined ratio of 73.3%, and an adjusted return on equity of 20.7%. Importantly, these results were achieved even with elevated catastrophe activity during the quarter.”

Mr. Armstrong continued, “Additionally, in March we secured approximately $188 million of incremental excess of loss (“XOL”) limit providing support for further growth in our core earthquake business. Pricing for the recent XOL placement was in line with budgeted expectations and as a result, we remain confident in our ability to deliver our full-year target of $86 million to $90 million of adjusted net income.”

Underwriting Results
Gross written premiums increased 46.3% to $250.1 million compared to $170.9 million in the first quarter of 2022, while net earned premiums increased 9.5% compared to the prior year’s first quarter.

Losses and loss adjustment expenses for the first quarter were $20.7 million including $18.9 million of non-catastrophe attritional losses, and $1.8 million of catastrophe losses from the California flood activity during the first quarter offset slightly by favorable prior period development of catastrophe losses. The loss ratio for the quarter was 24.8%, comprised of a catastrophe loss ratio⁽¹⁾ of 2.2% and an attritional loss ratio of 22.6%, compared to a loss ratio of 19.7% during the same period last year comprised of a catastrophe loss ratio⁽¹⁾ of 0.6% and attritional loss ratio of 19.1%.

Underwriting income⁽¹⁾ for the first quarter was $18.4 million resulting in a combined ratio of 77.9% compared to underwriting income of $17.9 million resulting in a combined ratio of 76.5% during the same period last year. The Company’s adjusted underwriting income⁽¹⁾ was $22.2 million resulting in an adjusted combined ratio⁽¹⁾ of 73.3% in the first quarter compared to adjusted underwriting income⁽¹⁾ of $21.2 million and an adjusted combined ratio⁽¹⁾ of 72.1% during the same period last year.

Investment Results
Net investment income increased by 98.5% to $5.1 million compared to $2.6 million in the prior year’s first quarter. The 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, 2023 due to cash generated from operations. The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.93 years at March 31, 2023. Cash and invested assets totaled $674.2 million at March 31, 2023. During the first quarter, the Company recorded net realized and unrealized gains of $0.1 million related to its investment portfolio as compared to realized and unrealized losses of $1.3 million in last year’s first quarter.

Tax Rate
The effective tax rate for the three months ended March 31, 2023 was 23.5% compared to 23.8% for the three months ended March 31, 2022. For the current quarter and prior year quarter, the Company’s income tax rate differed from the statutory rate due primarily to the non-deductible executive compensation expense, offset slightly by the tax impact of the permanent component of employee stock option exercises.

Stockholders’ Equity and Returns
Stockholders' equity was $404.6 million at March 31, 2023, compared to $380.4 million at March 31, 2022. For the three months ended March 31, 2023, the Company’s annualized return on equity was 17.5% compared to 15.0% for the same period in the prior year while adjusted return on equity⁽¹⁾ was 20.7% compared to 19.2% for the same period in the prior year. During the current quarter, the Company repurchased 134,680 shares for $6.8 million of the Company’s previously announced $100 million share repurchase authorization. As of March 31, 2023, $58.8 million remains available for future repurchases.

Full Year 2023 Outlook
For the full year 2023, the Company expects to achieve adjusted net income of $86 million to $90 million. This includes catastrophe losses incurred in the first quarter of approximately $1.8 million. The expected results do not include any additional catastrophe losses.

Conference Call
As previously announced, Palomar will host a conference call Thursday May 4, 2023, to discuss its first quarter 2023 results at 12:00 p.m. (Eastern Time). The conference call can be accessed live by dialing 1-877-423-9813 or for international callers, 1-201-689-8573, and requesting to be joined to the Palomar First Quarter 2023 Earnings Conference Call. A replay will be available starting at 4:00 p.m. (Eastern Time) on May 4, 2023, and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the replay is 13737957. The replay will be available until 11:59 p.m. (Eastern Time) on May 11, 2023.

Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the investor relations section of the Company’s website at http://ir.palomarspecialty.com/. The online replay will remain available for a limited time beginning immediately following the call.

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. and Palomar Excess and Surplus Insurance Company (“PESIC”). Palomar is an innovative insurer serving residential and commercial clients in specialty markets including the market for earthquake insurance. 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.

Non-GAAP and Key Performance Indicators

Palomar discusses certain key performance indicators, described below, which provide useful information about the Company’s business and the operational factors underlying the Company’s financial performance.

Underwriting revenue is a non-GAAP financial measure defined as total revenue, excluding net investment income and net realized and unrealized gains and losses on investments. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of total revenue calculated in accordance with GAAP to underwriting revenue.

Underwriting income is a non-GAAP financial measure defined as income before income taxes excluding net investment income, net realized and unrealized gains and losses on investments, and interest expense. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of income before income taxes calculated in accordance with GAAP to underwriting income.

Adjusted net income is a non-GAAP financial measure defined as net income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact. Palomar calculates the tax impact only on adjustments which would be included in calculating the Company’s income tax expense using the estimated tax rate at which the company received a deduction for these adjustments. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of net income calculated in accordance with GAAP to adjusted net income.

Annualized Return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.

Annualized adjusted return on equity is a non-GAAP financial measure defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of return on equity calculated using unadjusted GAAP numbers to adjusted return on equity.

Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses, to net earned premiums.

Expense ratio, expressed as a percentage, is the ratio of acquisition and other underwriting expenses, net of commission and other income to net earned premiums.

Combined ratio is defined as the sum of the loss ratio and the expense ratio. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.

Adjusted combined ratio is a non-GAAP financial measure defined as the sum of the loss ratio and the expense ratio calculated excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of combined ratio calculated using unadjusted GAAP numbers to adjusted combined ratio.

Diluted adjusted earnings per share is a non-GAAP financial measure defined as adjusted net income divided by the weighted-average common shares outstanding for the period, reflecting the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of diluted earnings per share calculated in accordance with GAAP to diluted adjusted earnings per share.

Catastrophe loss ratio is a non-GAAP financial measure defined as the ratio of catastrophe losses to net earned premiums. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of loss ratio calculated using unadjusted GAAP numbers to catastrophe loss ratio.

Adjusted combined ratio excluding catastrophe losses is a non-GAAP financial measure defined as adjusted combined ratio excluding the impact of catastrophe losses.  See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of combined ratio calculated using unadjusted GAAP numbers to adjusted combined ratio excluding catastrophe losses.

Adjusted underwriting income is a non-GAAP financial measure defined as underwriting income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of income before income taxes calculated in accordance with GAAP to adjusted underwriting income.

Tangible stockholders’ equity is a non-GAAP financial measure defined as stockholders’ equity less intangible assets. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of stockholders’ equity calculated in accordance with GAAP to tangible stockholders’ equity.

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.

Summary of Operating Results:

The following table summarizes the Company’s results for the three months ended March 31, 2023 and 2022:

		Three months ended
		March 31,
		2023			2022			Change			% Change
		($ in thousands, except per share data)
Gross written premiums		$	250,112		$	170,934		$	79,178		46.3	%
Ceded written premiums			(170,344)			(89,552)			(80,792)		90.2	%
Net written premiums			79,768			81,382			(1,614)		(2.0)	%
Net earned premiums			83,241			76,032			7,209		9.5	%
Commission and other income			695			777			(82)		(10.6)	%
Total underwriting revenue(1)			83,936			76,809			7,127		9.3	%
Losses and loss adjustment expenses			20,652			14,954			5,698		38.1	%
Acquisition expenses, net of ceding commissions and fronting fees			25,679			28,054			(2,375)		(8.5)	%
Other underwriting expenses			19,222			15,925			3,297		20.7	%
Underwriting income(1)			18,383			17,876			507		2.8	%
Interest expense			(1,020)			(93)			(927)		NM
Net investment income			5,120			2,579			2,541		98.5	%
Net realized and unrealized gains (losses) on investments			146			(1,278)			1,424		(111.4)	%
Income before income taxes			22,629			19,084			3,545		18.6	%
Income tax expense			5,316			4,547			769		16.9	%
Net income		$	17,313		$	14,537		$	2,776		19.1	%
Adjustments:
Net realized and unrealized (gains) losses on investments(2)			(146)			1,278			(1,424)		(111.4)	%
Expenses associated with transactions			—			86			(86)		(100.0)	%
Stock-based compensation expense			3,450			2,760			690		25.0	%
Amortization of intangibles			313			315			(2)		(0.6)	%
Expenses associated with catastrophe bond			50			200			(150)		(75.0)	%
Tax impact			(540)			(592)			52		(8.8)	%
Adjusted net income(1)(2)		$	20,440		$	18,584		$	1,856		10.0	%
Key Financial and Operating Metrics
Annualized return on equity			17.5	%		15.0	%
Annualized adjusted return on equity(1)			20.7	%		19.2	%
Loss ratio			24.8	%		19.7	%
Expense ratio			53.1	%		56.8	%
Combined ratio			77.9	%		76.5	%
Adjusted combined ratio(1)			73.3	%		72.1	%
Diluted earnings per share		$	0.68		$	0.56
Diluted adjusted earnings per share(1)		$	0.80		$	0.72
Catastrophe losses		$	1,806		$	481
Catastrophe loss ratio(1)			2.2	%		0.6	%
Adjusted combined ratio excluding catastrophe losses(1)			71.2	%		71.4	%
Adjusted underwriting income(1)		$	22,196		$	21,237		$	959		4.5	%
NM - not meaningful

(1)- Indicates Non-GAAP financial measure- see above for definition of Non-GAAP financial measures and see below for reconciliation of Non-GAAP financial measures to their most directly comparable measures prepared in accordance with GAAP.

(2)- We now include the impact of net realized and unrealized losses and gains on investments as an adjustment to our net income. As this line is primarily driven by equity market fluctuations rather than our underlying business performance, we believe adding this adjustment provides a more meaningful comparison of our performance. We have also changed the prior year adjusted net income to conform to this presentation.

Condensed Consolidated Balance sheets

Palomar Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(in thousands, except shares and par value data)
		March 31,			December 31,
		2023			2022
		(Unaudited)
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $594,736 in 2023; $561,580 in 2022)		$	554,489		$	515,064
Equity securities, at fair value (cost: $42,352 in 2023; $42,352 in 2022)			39,356			38,576
Total investments			593,845			553,640
Cash and cash equivalents			80,295			68,108
Restricted cash			65			56
Accrued investment income			4,077			3,777
Premiums receivable			187,910			162,858
Deferred policy acquisition costs, net of ceding commissions and fronting fees			54,187			56,740
Reinsurance recoverable on paid losses and loss adjustment expenses			45,801			39,718
Reinsurance recoverable on unpaid losses and loss adjustment expenses			183,601			153,895
Ceded unearned premiums			232,425			204,084
Prepaid expenses and other assets			41,291			44,088
Deferred tax assets, net			9,005			10,622
Property and equipment, net			540			603
Intangible assets, net			7,948			8,261
Total assets		$	1,440,990		$	1,306,450
Liabilities and stockholders' equity
Liabilities:
Accounts payable and other accrued liabilities		$	19,401		$	25,760
Reserve for losses and loss adjustment expenses			264,967			231,415
Unearned premiums			496,182			471,314
Ceded premium payable			173,035			146,127
Funds held under reinsurance treaty			11,356			10,680
Borrowings from credit agreements			71,400			36,400
Total liabilities			1,036,341			921,696
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2023 and December 31, 2022			—			—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 24,942,196 and 25,027,467 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively			3			3
Additional paid-in capital			337,492			333,558
Accumulated other comprehensive loss			(31,041)			(36,515)
Retained earnings			98,195			87,708
Total stockholders' equity			404,649			384,754
Total liabilities and stockholders' equity		$	1,440,990		$	1,306,450

Condensed Consolidated Income Statement

Palomar Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Comprehensive Income (loss) (Unaudited)
(in thousands, except shares and per share data)
		Three Months Ended
		March 31,
		2023			2022
Revenues:
Gross written premiums		$	250,112		$	170,934
Ceded written premiums			(170,344)			(89,552)
Net written premiums			79,768			81,382
Change in unearned premiums			3,473			(5,350)
Net earned premiums			83,241			76,032
Net investment income			5,120			2,579
Net realized and unrealized gains (losses) on investments			146			(1,278)
Commission and other income			695			777
Total revenues			89,202			78,110
Expenses:
Losses and loss adjustment expenses			20,652			14,954
Acquisition expenses, net of ceding commissions and fronting fees			25,679			28,054
Other underwriting expenses			19,222			15,925
Interest expense			1,020			93
Total expenses			66,573			59,026
Income before income taxes			22,629			19,084
Income tax expense			5,316			4,547
Net income			17,313			14,537
Other comprehensive income (loss), net:
Net unrealized gains (losses) on securities available for sale			5,474			(18,463)
Net comprehensive income (loss)		$	22,787		$	(3,926)
Per Share Data:
Basic earnings per share		$	0.69		$	0.57
Diluted earnings per share		$	0.68		$	0.56
Weighted-average common shares outstanding:
Basic			24,969,703			25,362,179
Diluted			25,442,902			25,899,290

Underwriting Segment Data

The Company has a single reportable segment and offers primarily property and casualty insurance products. Gross written premiums (GWP) by product, location and company are presented below:

		Three Months Ended March 31,
		2023					2022
		($ in thousands)
					% of					% of
		Amount			GWP		Amount			GWP
Product
Fronting Premiums		$	91,755		36.7	%	$	29,845		17.5	%
Residential Earthquake			55,725		22.3	%		46,336		27.1	%
Commercial Earthquake			37,770		15.1	%		25,144		14.7	%
Inland Marine			31,049		12.4	%		18,237		10.7	%
Casualty			11,733		4.7	%		5,007		2.9	%
Commercial All Risk			8,376		3.3	%		11,210		6.6	%
Hawaii Hurricane			8,073		3.2	%		6,914		4.0	%
Residential Flood			4,235		1.7	%		2,993		1.8	%
Specialty Homeowners			(59)		—	%		16,284		9.5	%
Other			1,455		0.6	%		8,964		5.2	%
Total Gross Written Premiums		$	250,112		100.0	%	$	170,934		100.0	%

		Three Months Ended March 31,
		2023					2022
		($ in thousands)
					% of					% of
		Amount			GWP		Amount			GWP
State
California		$	131,889		52.7	%	$	68,718		40.2	%
Texas			23,210		9.3	%		18,979		11.1	%
Florida			12,096		4.8	%		4,962		2.9	%
Washington			11,972		4.8	%		6,881		4.0	%
Hawaii			10,105		4.0	%		8,540		5.0	%
Oregon			6,780		2.7	%		4,373		2.6	%
Illinois			4,702		1.9	%		4,273		2.5	%
New York			3,871		1.5	%		2,380		1.4	%
Other			45,487		18.3	%		51,828		30.3	%
Total Gross Written Premiums		$	250,112		100.0	%	$	170,934		100.0	%

		Three Months Ended March 31,
		2023					2022
		($ in thousands)
					% of					% of
		Amount			GWP		Amount			GWP
Subsidiary
PSIC		$	150,704		60.3	%	$	104,004		60.8	%
PESIC			99,408		39.7	%		66,930		39.2	%
Total Gross Written Premiums		$	250,112		100.0	%	$	170,934		100.0	%

Gross and net earned premiums

The table below shows the amount of premiums the Company earned on a gross and net basis and the Company’s net earned premiums as a percentage of gross earned premiums for each period presented:

		Three Months Ended
		March 31,
		2023			2022			Change			% Change
		($ in thousands)
Gross earned premiums		$	225,243		$	138,924		$	86,319		62.1	%
Ceded earned premiums			(142,002)			(62,892)			(79,110)		125.8	%
Net earned premiums		$	83,241		$	76,032		$	7,209		9.5	%
Net earned premium ratio			37.0%			54.7%

Loss detail

		Three Months Ended
		March 31,
		2023			2022			Change			% Change
		($ in thousands)
Catastrophe losses		$	1,806		$	481		$	1,325		275.5	%
Non-catastrophe losses			18,846			14,473			4,373		30.2	%
Total losses and loss adjustment expenses		$	20,652		$	14,954		$	5,698		38.1	%

The following table represents a reconciliation of changes in the ending reserve balances for losses and loss adjustment expenses:

		Three Months Ended March 31,
		2023			2022
			(in thousands)
Reserve for losses and LAE net of reinsurance recoverables at beginning of period		$	77,520		$	45,419
Add: Incurred losses and LAE, net of reinsurance, related to:
Current year			17,300			13,449
Prior years			3,352			1,505
Total incurred			20,652			14,954
Deduct: Loss and LAE payments, net of reinsurance, related to:
Current year			1,393			1,490
Prior years			15,413			7,497
Total payments			16,806			8,987
Reserve for losses and LAE net of reinsurance recoverables at end of period			81,366			51,386
Add: Reinsurance recoverables on unpaid losses and LAE at end of period			183,601			113,726
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period		$	264,967		$	165,112

Reconciliation of Non-GAAP Financial Measures

For the three months and year ended March 31, 2023 and 2022, the Non-GAAP financial measures discussed above reconcile to their most comparable GAAP measures as follows:

Underwriting revenue

		Three Months Ended
		March 31,
		2023			2022
		(in thousands)
Total revenue		$	89,202		$	78,110
Net investment income			(5,120)			(2,579)
Net realized and unrealized (gains) losses on investments			(146)			1,278
Underwriting revenue		$	83,936		$	76,809

Underwriting income and adjusted underwriting income

		Three Months Ended
		March 31,
		2023			2022
		(in thousands)
Income before income taxes		$	22,629		$	19,084
Net investment income			(5,120)			(2,579)
Net realized and unrealized (gains) losses on investments			(146)			1,278
Interest expense			1,020			93
Underwriting income		$	18,383		$	17,876
Expenses associated with transactions			—			86
Stock-based compensation expense			3,450			2,760
Amortization of intangibles			313			315
Expenses associated with catastrophe bond			50			200
Adjusted underwriting income		$	22,196		$	21,237

Adjusted net income

		Three Months Ended
		March 31,
		2023			2022
		(in thousands)
Net income		$	17,313		$	14,537
Adjustments:
Net realized and unrealized (gains) losses on investments			(146)			1,278
Expenses associated with transactions			—			86
Stock-based compensation expense			3,450			2,760
Amortization of intangibles			313			315
Expenses associated with catastrophe bond			50			200
Tax impact			(540)			(592)
Adjusted net income		$	20,440		$	18,584

Annualized adjusted return on equity

		Three Months Ended
		March 31,
		2023			2022
		($ in thousands)
Annualized adjusted net income		$	81,761		$	74,336
Average stockholders' equity		$	394,701		$	387,284
Annualized adjusted return on equity			20.7	%		19.2	%

Adjusted combined ratio

		Three Months Ended
		March 31,
		2023			2022
		($ in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income		$	64,858		$	58,156
Denominator: Net earned premiums		$	83,241		$	76,032
Combined ratio			77.9	%		76.5	%
Adjustments to numerator:
Expenses associated with transactions		$	—		$	(86)
Stock-based compensation expense			(3,450)			(2,760)
Amortization of intangibles			(313)			(315)
Expenses associated with catastrophe bond			(50)			(200)
Adjusted combined ratio			73.3	%		72.1	%

Diluted adjusted earnings per share

		Three Months Ended
		March 31,
		2023			2022
		(in thousands, except per share data)
Adjusted net income		$	20,440		$	18,584
Weighted-average common shares outstanding, diluted			25,442,902			25,899,290
Diluted adjusted earnings per share		$	0.80		$	0.72

Catastrophe loss ratio

		Three Months Ended
		March 31,
		2023			2022
		($ in thousands)
Numerator: Losses and loss adjustment expenses		$	20,652		$	14,954
Denominator: Net earned premiums		$	83,241		$	76,032
Loss ratio			24.8	%		19.7	%
Numerator: Catastrophe losses		$	1,806		$	481
Denominator: Net earned premiums		$	83,241		$	76,032
Catastrophe loss ratio			2.2	%		0.6	%

Adjusted combined ratio excluding catastrophe losses

		Three Months Ended
		March 31,
		2023			2022
		($ in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income		$	64,858		$	58,156
Denominator: Net earned premiums		$	83,241		$	76,032
Combined ratio			77.9	%		76.5	%
Adjustments to numerator:
Expenses associated with transactions		$	—		$	(86)
Stock-based compensation expense			(3,450)			(2,760)
Amortization of intangibles			(313)			(315)
Expenses associated with catastrophe bond			(50)			(200)
Catastrophe losses			(1,806)			(481)
Adjusted combined ratio excluding catastrophe losses			71.2	%		71.4	%

Tangible Stockholders’ equity

		March 31,			December 31,
		2023			2022
		(in thousands)
Stockholders' equity		$	404,649		$	384,754
Intangible assets			(7,948)			(8,261)
Tangible stockholders' equity		$	396,701		$	376,493