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Palomar Holdings, Inc. Reports Second Quarter 2023 Results

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Rhea-AI Summary
Palomar Holdings, Inc. reports net income of $17.6 million for Q2 2023, an increase of 20% compared to Q2 2022. Gross written premiums increased by 25.4% to $274.3 million. Adjusted net income was $21.8 million. The company raised its adjusted net income guidance for the full year to $89 million to $93 million.
Positive
  • Palomar Holdings reports a 20% increase in net income for Q2 2023 compared to Q2 2022
  • Gross written premiums increased by 25.4% to $274.3 million
  • Adjusted net income was $21.8 million
  • The company raised its adjusted net income guidance for the full year to $89 million to $93 million
Negative
  • None.

LA JOLLA, Calif., Aug. 02, 2023 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported net income of $17.6 million, or $0.69 per diluted share, for the second quarter of 2023 compared to net income of $14.6 million, or $0.57 per diluted share, for the second quarter of 2022. Adjusted net income(1) was $21.8 million, or $0.86 per diluted share, for the second quarter of 2023 as compared to $22.4 million, or $0.87 per diluted share, for the second 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.

Second Quarter 2023 Highlights

  • Gross written premiums increased by 25.4% to $274.3 million compared to $218.7 million in the second quarter of 2022
  • Net income of $17.6 million, compared to $14.6 million in the second quarter of 2022
  • Adjusted net income(1) of $21.8 million, compared to $22.4 million in the second quarter of 2022
  • Total loss ratio of 21.5% compared to 17.9% in the second quarter of 2022
  • Combined ratio of 79.0% compared to 75.1% in the second quarter of 2022
  • Adjusted combined ratio(1) of 72.2%, compared to 69.1%, in the second quarter of 2022
  • Annualized return on equity of 17.2%, compared to 15.4% in the second quarter of 2022
  • Annualized adjusted return on equity(1) of 21.3%, compared to 23.7% in the second quarter of 2022

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

Mac Armstrong, Chairman and Chief Executive Officer, commented, “I am very pleased with our strong second quarter results. Our team successfully executed our Palomar 2X strategy of profitable growth despite the elevated catastrophe activity and the historically hard reinsurance market that has significantly impacted the insurance industry. In the quarter, we focused our capital and resources towards targeted segments of our book of business, such as earthquake, inland marine, and casualty to maximize our risk-adjusted returns while we continued to reduce exposure to segments of our book that add volatility to our results. This prudent approach resulted in gross written premium growth of 25% and, importantly, an adjusted return on equity of 21.3%.”

Mr. Armstrong continued, “Beyond the strong financial results, the quarter featured several noteworthy accomplishments that position us well for near and long-term success. We effectively placed our June 1 reinsurance program in line with our expectations and subsequently raised our adjusted net income guidance for the full year. We also hired a team of professional liability underwriters to expand the expertise within our casualty franchise, and, in July, we received a “positive outlook” from A.M Best. On the heels of this quarter, we are further raising our adjusted net income guidance range to $89 million to $93 million for 2023.”

Underwriting Results
Gross written premiums increased 25.4% to $274.3 million compared to $218.7 million in the second quarter of 2022, while net earned premiums increased 3.5% compared to the prior year’s second quarter.

Losses and loss adjustment expenses for the second quarter were $17.9 million including $15.7 million of non-catastrophe attritional losses, and $2.2 million of catastrophe losses from severe convective storms during the second quarter offset slightly by favorable prior period development of catastrophe losses. The loss ratio for the quarter was 21.5%, comprised of a catastrophe loss ratio(1) of 2.6% and an attritional loss ratio of 18.9%, compared to a loss ratio of 17.9% during the same period last year comprised of a catastrophe loss ratio(1) of 0.7% and attritional loss ratio of 17.2%.

Underwriting income(1) for the second quarter was $17.4 million resulting in a combined ratio of 79.0% compared to underwriting income of $20.0 million resulting in a combined ratio of 75.1% during the same period last year. The Company’s adjusted underwriting income(1) was $23.1 million resulting in an adjusted combined ratio(1) of 72.2% in the second quarter compared to adjusted underwriting income(1) of $24.8 million and an adjusted combined ratio(1) of 69.1% during the same period last year.

Investment Results
Net investment income increased by 76.5% to $5.5 million compared to $3.1 million in the prior year’s second 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 June 30, 2023 due to cash generated from operations. The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.86 years at June 30, 2023. Cash and invested assets totaled $660.2 million at June 30, 2023. During the second quarter, the Company recorded net realized and unrealized gains of $1.1 million related to its investment portfolio as compared to net realized and unrealized losses of $4.7 million in last year’s second quarter.

Tax Rate
The effective tax rate for the three months ended June 30, 2023 was 23.7% compared to 20.2% for the three months ended June 30, 2022. For the current quarter, the Company’s income tax rate differed from the statutory rate due primarily to the non-deductible executive compensation expense.
  

Stockholders Equity and Returns
Stockholders' equity was $413.7 million at June 30, 2023, compared to $378.1 million at June 30, 2022. For the three months ended June 30, 2023, the Company’s annualized return on equity was 17.2% compared to 15.4% for the same period in the prior year while adjusted return on equity(1) was 21.3% compared to 23.7% for the same period in the prior year. During the current quarter, the Company repurchased 166,482 shares for $8.7 million pursuant to the Company’s previously announced $100 million share repurchase authorization. As of June 30, 2023, $50.0 million remains available for future repurchases.

Full Year 2023 Outlook
For the full year 2023, the Company expects to achieve adjusted net income of $89 million to $93 million. This includes catastrophe losses incurred in the first and second quarters of approximately $4.0 million. The expected results do not include any additional catastrophe losses for the remainder of the year.

Conference Call
As previously announced, Palomar will host a conference call Thursday August 3, 2023, to discuss its second 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 Second Quarter 2023 Earnings Conference Call. A replay will be available starting at 4:00 p.m. (Eastern Time) on August 3, 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 August 10, 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 goodwill and 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 and six months ended June 30, 2023 and 2022:

  Three Months Ended         
  June 30,         
  2023  2022  Change  % Change 
  ($ in thousands, except per share data) 
Gross written premiums $274,296  $218,689  $55,607   25.4%
Ceded written premiums  (169,109)  (122,627)  (46,482)  37.9%
Net written premiums  105,187   96,062   9,125   9.5%
Net earned premiums  83,107   80,265   2,842   3.5%
Commission and other income  621   990   (369)  (37.3)%
Total underwriting revenue (1)  83,728   81,255   2,473   3.0%
Losses and loss adjustment expenses  17,905   14,398   3,507   24.4%
Acquisition expenses, net of ceding commissions and fronting fees  26,057   28,663   (2,606)  (9.1)%
Other underwriting expenses  22,350   18,195   4,155   22.8%
Underwriting income (1)  17,416   19,999   (2,583)  (12.9)%
Interest expense  (1,064)  (111)  (953)  NM 
Net investment income  5,541   3,140   2,401   76.5%
Net realized and unrealized gains (losses) on investments  1,127   (4,735)  5,862   (123.8)%
Income before income taxes  23,020   18,293   4,727   25.8%
Income tax expense  5,458   3,704   1,754   47.4%
Net income $17,562  $14,589  $2,973   20.4%
Adjustments:                
Net realized and unrealized (gains) losses on investments(2)  (1,127)  4,735   (5,862)  (123.8)%
Stock-based compensation expense  3,697   2,704   993   36.7%
Amortization of intangibles  389   313   76   24.3%
Expenses associated with catastrophe bond  1,590   1,792   (202)  (11.3)%
Tax impact  (317)  (1,689)  1,372   (81.2)%
Adjusted net income (1)(2) $21,794  $22,444  $(650)  (2.9)%
Key Financial and Operating Metrics                
Annualized return on equity  17.2%  15.4%        
Annualized adjusted return on equity (1)  21.3%  23.7%        
Loss ratio  21.5%  17.9%        
Expense ratio  57.5%  57.1%        
Combined ratio  79.0%  75.1%        
Adjusted combined ratio (1)  72.2%  69.1%        
Diluted earnings per share $0.69  $0.57         
Diluted adjusted earnings per share (1) $0.86  $0.87         
Catastrophe losses $2,159  $548         
Catastrophe loss ratio (1)  2.6%  0.7%        
Adjusted combined ratio excluding catastrophe losses (1)  69.6%  68.4%        
Adjusted underwriting income (1) $23,092  $24,808  $(1,716)  (6.9)%


(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.


  Six Months Ended         
  June 30,         
  2023  2022  Change  % Change 
  ($ in thousands, except per share data) 
Gross written premiums $524,407  $389,623  $134,784   34.6%
Ceded written premiums  (339,453)  (212,179)  (127,274)  60.0%
Net written premiums  184,954   177,444   7,510   4.2%
Net earned premiums  166,347   156,297   10,050   6.4%
Commission and other income  1,316   1,767   (451)  (25.5)%
Total underwriting revenue (1)  167,663   158,064   9,599   6.1%
Losses and loss adjustment expenses  38,557   29,351   9,206   31.4%
Acquisition expenses, net of ceding commissions and fronting fees  51,736   56,718   (4,982)  (8.8)%
Other underwriting expenses  41,572   34,119   7,453   21.8%
Underwriting income (1)  35,798   37,876   (2,078)  (5.5)%
Interest expense  (2,084)  (204)  (1,880)  NM 
Net investment income  10,661   5,719   4,942   86.4%
Net realized and unrealized gains (losses) on investments  1,273   (6,014)  7,287   (121.2)%
Income before income taxes  45,648   37,377   8,271   22.1%
Income tax expense  10,774   8,251   2,523   30.6%
Net income $34,874  $29,126  $5,748   19.7%
Adjustments:                
Net realized and unrealized (gains) losses on investments(2)  (1,273)  6,014   (7,287)  (121.2)%
Expenses associated with transactions     85   (85)  (100.0)%
Stock-based compensation expense  7,147   5,463   1,684   30.8%
Amortization of intangibles  703   628   75   11.9%
Expenses associated with catastrophe bond  1,640   1,992   (352)  (17.7)%
Tax impact  (857)  (2,282)  1,425   (62.4)%
Adjusted net income (1)(2) $42,234  $41,026  $1,208   2.9%
Key Financial and Operating Metrics                
Annualized return on equity  17.5%  15.1%        
Annualized adjusted return on equity (1)  21.2%  21.3%        
Loss ratio  23.2%  18.8%        
Expense ratio  55.3%  57.0%        
Combined ratio  78.5%  75.8%        
Adjusted combined ratio (1)  72.8%  70.5%        
Diluted earnings per share $1.37  $1.13         
Diluted adjusted earnings per share (1) $1.66  $1.59         
Catastrophe losses $3,965  $1,029         
Catastrophe loss ratio (1)  2.4%  0.7%        
Adjusted combined ratio excluding catastrophe losses (1)  70.4%  69.9%        
Adjusted underwriting income (1) $45,288  $46,044  $(756)  (1.6)%
 


Condensed Consolidated Balance sheets
 Palomar Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

(in thousands, except shares and par value data)
 
  June 30,  December 31, 
  2023  2022 
  (Unaudited)     
Assets        
Investments:        
Fixed maturity securities available for sale, at fair value (amortized cost: $605,040 in 2023; $561,580 in 2022) $560,121  $515,064 
Equity securities, at fair value (cost: $43,297 in 2023; $42,352 in 2022)  41,428   38,576 
Total investments  601,549   553,640 
Cash and cash equivalents  58,310   68,108 
Restricted cash  294   56 
Accrued investment income  4,568   3,777 
Premiums receivable  243,002   162,858 
Deferred policy acquisition costs, net of ceding commissions and fronting fees  55,913   56,740 
Reinsurance recoverable on paid losses and loss adjustment expenses  39,101   39,718 
Reinsurance recoverable on unpaid losses and loss adjustment expenses  216,783   153,895 
Ceded unearned premiums  242,452   204,084 
Prepaid expenses and other assets  60,125   44,088 
Deferred tax assets, net  10,617   10,622 
Property and equipment, net  498   603 
Goodwill and intangible assets, net  13,095   8,261 
Total assets $1,546,307  $1,306,450 
Liabilities and stockholders' equity        
Liabilities:        
Accounts payable and other accrued liabilities $24,838  $25,760 
Reserve for losses and loss adjustment expenses  298,083   231,415 
Unearned premiums  528,289   471,314 
Ceded premium payable  199,611   146,127 
Funds held under reinsurance treaty  10,378   10,680 
Borrowings from credit agreements  71,400   36,400 
Total liabilities  1,132,599   921,696 
Stockholders' equity:        
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2023 and December 31, 2022      
Common stock, $0.0001 par value, 500,000,000 shares authorized, 24,794,269 and 25,027,467 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively  3   3 
Additional paid-in capital  341,413   333,558 
Accumulated other comprehensive loss  (34,726)  (36,515)
Retained earnings  107,018   87,708 
Total stockholders' equity  413,708   384,754 
Total liabilities and stockholders' equity $1,546,307  $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  Six Months Ended 
  June 30,  June 30, 
  2023  2022  2023  2022 
Revenues:                
Gross written premiums $274,296  $218,689  $524,407  $389,623 
Ceded written premiums  (169,109)  (122,627)  (339,453)  (212,179)
Net written premiums  105,187   96,062   184,954   177,444 
Change in unearned premiums  (22,080)  (15,797)  (18,607)  (21,147)
Net earned premiums  83,107   80,265   166,347   156,297 
Net investment income  5,541   3,140   10,661   5,719 
Net realized and unrealized gains (losses) on investments  1,127   (4,735)  1,273   (6,014)
Commission and other income  621   990   1,316   1,767 
Total revenues  90,396   79,660   179,597   157,769 
Expenses:                
Losses and loss adjustment expenses  17,905   14,398   38,557   29,351 
Acquisition expenses, net of ceding commissions and fronting fees  26,057   28,663   51,736   56,718 
Other underwriting expenses  22,350   18,195   41,572   34,119 
Interest expense  1,064   111   2,084   204 
Total expenses  67,376   61,367   133,949   120,392 
Income before income taxes  23,020   18,293   45,648   37,377 
Income tax expense  5,458   3,704   10,774   8,251 
Net income  17,562   14,589   34,874   29,126 
Other comprehensive income (loss), net:                
Net unrealized gains (losses) on securities available for sale  (3,685)  (14,065)  1,789   (32,528)
Net comprehensive income (loss) $13,877  $524  $36,663  $(3,402)
Per Share Data:                
Basic earnings per share $0.71  $0.58  $1.40  $1.15 
Diluted earnings per share $0.69  $0.57  $1.37  $1.13 
                 
Weighted-average common shares outstanding:                
Basic  24,833,852   25,211,924   24,901,403   25,283,222 
Diluted  25,309,526   25,746,780   25,384,409   25,817,442 
 

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 June 30,         
  2023  2022         
  ($ in thousands)     
      % of      % of      % 
  Amount  GWP  Amount  GWP  Change  Change 
Product                        
Fronting Premiums $80,211   29.2% $42,154   19.3% $38,057   90.3%
Residential Earthquake  65,102   23.7%  54,090   24.7%  11,012   20.4%
Commercial Earthquake  42,826   15.6%  33,103   15.1%  9,723   29.4%
Inland Marine  35,539   13.0%  23,134   10.6%  12,405   53.6%
Casualty  14,988   5.5%  7,804   3.6%  7,184   92.1%
Commercial All Risk  11,770   4.3%  21,213   9.7%  (9,443)  (44.5)%
Hawaii Hurricane  9,595   3.5%  8,240   3.8%  1,355   16.4%
Residential Flood  5,469   2.0%  3,583   1.6%  1,886   52.6%
Specialty Homeowners  (38)  (0.0)%  13,891   6.4%  (13,929)  (100.3)%
Other  8,834   3.2%  11,477   5.2%  (2,643)  (23.0)%
Total Gross Written Premiums $274,296   100.0% $218,689   100.0% $55,607   25.4%


  Six Months Ended June 30,         
  2023  2022         
  ($ in thousands)     
      % of      % of         
  Amount  GWP  Amount  GWP  Change  Change 
Product                        
Fronting Premiums $171,967   32.8% $71,999   18.5% $99,968   138.8%
Residential Earthquake  120,827   23.0%  100,426   25.8%  20,401   20.3%
Commercial Earthquake  80,597   15.4%  58,247   14.9%  22,350   38.4%
Inland Marine  66,588   12.7%  41,371   10.6%  25,217   61.0%
Casualty  26,722   5.1%  12,804   3.3%  13,918   108.7%
Commercial All Risk  20,146   3.8%  31,791   8.2%  (11,645)  (36.6)%
Hawaii Hurricane  17,667   3.4%  15,154   3.9%  2,513   16.6%
Residential Flood  9,705   1.9%  6,577   1.7%  3,128   47.6%
Specialty Homeowners  (97)  (0.0)%  30,176   7.7%  (30,273)  (100.3)%
Other  10,285   1.9%  21,078   5.4%  (10,793)  (51.2)%
Total Gross Written Premiums $524,407   100.0% $389,623   100.0% $134,784   34.6%


  Three Months Ended June 30,  Six Months Ended June 30, 
  2023  2022  2023  2022 
  ($ in thousands)  ($ in thousands) 
      % of      % of      % of      % of 
  Amount  GWP  Amount  GWP  Amount  GWP  Amount  GWP 
State                                
California $157,057   57.3% $93,130   42.6% $288,946   55.1% $161,848   41.5%
Texas  25,231   9.2%  26,286   12.0%  48,441   9.2%  45,265   11.6%
Washington  13,645   5.0%  8,937   4.1%  25,617   4.9%  15,818   4.1%
Florida  12,664   4.6%  14,809   6.8%  24,760   4.7%  19,771   5.1%
Hawaii  12,228   4.5%  10,191   4.7%  22,333   4.3%  18,731   4.8%
Oregon  5,907   2.2%  4,371   2.0%  12,687   2.4%  8,745   2.2%
Illinois  4,471   1.6%  4,676   2.1%  9,173   1.7%  8,949   2.3%
Utah  3,938   1.4%  2,316   1.1%  7,053   1.3%  4,191   1.1%
Other  39,155   14.3%  53,973   24.7%  85,397   16.4%  106,305   27.3%
Total Gross Written Premiums $274,296   100.0% $218,689   100.0% $524,407   100.0% $389,623   100.0%
 


  Three Months Ended June 30,  Six Months Ended June 30, 
  2023  2022  2023  2022 
  ($ in thousands)  ($ in thousands) 
      % of      % of      % of      % of 
  Amount  GWP  Amount  GWP  Amount  GWP  Amount  GWP 
Subsidiary                                
PSIC $159,846   58.3% $116,338   53.2% $310,550   59.2% $220,342   56.6%
PESIC  114,450   41.7%  102,351   46.8%  213,857   40.8%  169,281   43.4%
Total Gross Written Premiums $274,296   100.0% $218,689   100.0% $524,407   100.0% $389,623   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           Six Months Ended         
  June 30,          June 30,         
  2023  2022  Change  % Change  2023  2022  Change  % Change 
  ($ in thousands)  ($ in thousands) 
Gross earned premiums $242,189  $158,142  $84,047   53.1% $467,432  $297,067  $170,365   57.3%
Ceded earned premiums  (159,082)  (77,877)  (81,205)  104.3%  (301,085)  (140,770)  (160,315)  113.9%
Net earned premiums $83,107  $80,265  $2,842   3.5% $166,347  $156,297  $10,050   6.4%
                                 
Net earned premium ratio  34.3%  50.8%          35.6%  52.6%        
 

Loss detail

  Three Months Ended          Six Months Ended         
  June 30,          June 30,         
  2023  2022  Change  % Change  2023  2022  Change  % Change 
  ($ in thousands)  ($ in thousands) 
Catastrophe losses $2,159  $548  $1,611   294.0% $3,965  $1,029  $2,936   285.3%
Non-catastrophe losses  15,746   13,850   1,896   13.7%  34,592   28,322   6,270   22.1%
Total losses and loss adjustment expenses $17,905  $14,398  $3,507   24.4% $38,557  $29,351  $9,206   31.4%
 

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

  Three Months Ended June 30,  Six Months Ended June 30, 
  2023  2022  2023  2022 
  (in thousands)  (in thousands) 
Reserve for losses and LAE net of reinsurance recoverables at beginning of period $81,366  $51,386  $77,520  $45,419 
Add: Incurred losses and LAE, net of reinsurance, related to:                
Current year  18,539   14,350   35,839   27,799 
Prior years  (634)  48   2,718   1,552 
Total incurred  17,905   14,398   38,557   29,351 
Deduct: Loss and LAE payments, net of reinsurance, related to:                
Current year  6,176   4,399   7,569   5,889 
Prior years  11,795   5,615   27,208   13,112 
Total payments  17,971   10,014   34,777   19,001 
Reserve for losses and LAE net of reinsurance recoverables at end of period  81,300   55,769   81,300   55,769 
Add: Reinsurance recoverables on unpaid losses and LAE at end of period  216,783   107,898   216,783   107,898 
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period $298,083  $163,667  $298,083  $163,667 
 

Reconciliation of Non-GAAP Financial Measures

For the three and six months ended June 30, 2023 and 2022, the Non-GAAP financial measures discussed above reconcile to their most comparable GAAP measures as follows:

Underwriting revenue

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2023  2022  2023  2022 
  (in thousands)  (in thousands) 
Total revenue $90,396  $79,660  $179,597  $157,769 
Net investment income  (5,541)  (3,140)  (10,661)  (5,719)
Net realized and unrealized (gains) losses on investments  (1,127)  4,735   (1,273)  6,014 
Underwriting revenue $83,728  $81,255  $167,663  $158,064 
 

Underwriting income and adjusted underwriting income

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2023  2022  2023  2022 
  (in thousands)  (in thousands) 
Income before income taxes $23,020  $18,293  $45,648  $37,377 
Net investment income  (5,541)  (3,140)  (10,661)  (5,719)
Net realized and unrealized (gains) losses on investments  (1,127)  4,735   (1,273)  6,014 
Interest expense  1,064   111   2,084   204 
Underwriting income $17,416  $19,999  $35,798  $37,876 
Expenses associated with transactions           85 
Stock-based compensation expense  3,697   2,704   7,147   5,463 
Amortization of intangibles  389   313   703   628 
Expenses associated with catastrophe bond  1,590   1,792   1,640   1,992 
Adjusted underwriting income $23,092  $24,808  $45,288  $46,044 
 

Adjusted net income

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2023  2022  2023  2022 
  (in thousands)  (in thousands) 
Net income $17,562  $14,589  $34,874  $29,126 
Adjustments:                
Net realized and unrealized (gains) losses on investments  (1,127)  4,735   (1,273)  6,014 
Expenses associated with transactions           85 
Stock-based compensation expense  3,697   2,704   7,147   5,463 
Amortization of intangibles  389   313   703   628 
Expenses associated with catastrophe bond  1,590   1,792   1,640   1,992 
Tax impact  (317)  (1,689)  (857)  (2,282)
Adjusted net income $21,794  $22,444  $42,234  $41,026 
 

Annualized adjusted return on equity

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2023  2022  2023  2022 
  (in thousands)  (in thousands) 
                 
Annualized adjusted net income $87,176  $89,776  $84,468  $82,052 
Average stockholders' equity $409,178  $379,232  $399,230  $386,117 
Annualized adjusted return on equity  21.3%  23.7%  21.2%  21.3%
 

Adjusted combined ratio

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2023  2022  2023  2022 
  (in thousands)  (in thousands) 
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $65,691  $60,266  $130,549  $118,421 
Denominator: Net earned premiums $83,107  $80,265  $166,347  $156,297 
Combined ratio  79.0%  75.1%  78.5%  75.8%
Adjustments to numerator:                
Expenses associated with transactions $  $  $  $(85)
Stock-based compensation expense  (3,697)  (2,704)  (7,147)  (5,463)
Amortization of intangibles  (389)  (313)  (703)  (628)
Expenses associated with catastrophe bond  (1,590)  (1,792)  (1,640)  (1,992)
Adjusted combined ratio  72.2%  69.1%  72.8%  70.5%
 

Diluted adjusted earnings per share

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2023  2022  2023  2022 
  (in thousands, except per share data)  (in thousands, except per share data) 
                 
Adjusted net income $21,794  $22,444  $42,234  $41,026 
Weighted-average common shares outstanding, diluted  25,309,526   25,746,780   25,384,409   25,817,442 
Diluted adjusted earnings per share $0.86  $0.87  $1.66  $1.59 
 

Catastrophe loss ratio

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2023  2022  2023  2022 
  (in thousands)  (in thousands) 
Numerator: Losses and loss adjustment expenses $17,905  $14,398  $38,557  $29,351 
Denominator: Net earned premiums $83,107  $80,265  $166,347  $156,297 
Loss ratio  21.5%  17.9%  23.2%  18.8%
                 
Numerator: Catastrophe losses $2,159  $548  $3,965  $1,029 
Denominator: Net earned premiums $83,107  $80,265  $166,347  $156,297 
Catastrophe loss ratio  2.6%  0.7%  2.4%  0.7%
 

Adjusted combined ratio excluding catastrophe losses

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2023  2022  2023  2022 
  (in thousands)  (in thousands) 
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $65,691  $60,266  $130,549  $118,421 
Denominator: Net earned premiums $83,107  $80,265  $166,347  $156,297 
Combined ratio  79.0%  75.1%  78.5%  75.8%
Adjustments to numerator:                
Expenses associated with transactions $  $  $  $(85)
Stock-based compensation expense  (3,697)  (2,704)  (7,147)  (5,463)
Amortization of intangibles  (389)  (313)  (703)  (628)
Expenses associated with catastrophe bond  (1,590)  (1,792)  (1,640)  (1,992)
Catastrophe losses  (2,159)  (548)  (3,965)  (1,029)
Adjusted combined ratio excluding catastrophe losses  69.6%  68.4%  70.4%  69.9%
 

Tangible Stockholders equity

  June 30,  December 31, 
  2023  2022 
  (in thousands) 
Stockholders' equity $413,708  $384,754 
Goodwill and intangible assets  (13,095)  (8,261)
Tangible stockholders' equity $400,613  $376,493 

FAQ

What is the net income for Palomar Holdings in Q2 2023?

Palomar Holdings reported a net income of $17.6 million in Q2 2023.

What is the increase in gross written premiums for Palomar Holdings in Q2 2023?

Gross written premiums increased by 25.4% to $274.3 million in Q2 2023.

What is the adjusted net income for Palomar Holdings in Q2 2023?

The adjusted net income for Palomar Holdings in Q2 2023 was $21.8 million.

What is the adjusted net income guidance for the full year for Palomar Holdings?

Palomar Holdings raised its adjusted net income guidance for the full year to $89 million to $93 million.

Palomar Holdings, Inc.

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Insurance - Property & Casualty
Fire, Marine & Casualty Insurance
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United States of America
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