Palomar Holdings, Inc. Reports Third Quarter 2021 Results 

Rhea-AI Summary

Palomar Holdings reported a significant turnaround in its third quarter 2021 results, achieving a net income of $0.2 million, rebounding from a net loss of $15.7 million the previous year. Adjusted net income also improved to $1.7 million from a loss of $15.2 million. Gross written premiums surged by 47.9% to $152.3 million, driven largely by growth in surplus lines and the earthquake market. The total loss ratio decreased to 44.0% from 97.7%, reflecting improved underwriting performance despite catastrophe losses from recent hurricanes. The company's annualized adjusted return on equity reached 1.8%, a notable improvement from negative results in the prior year.

Positive

• Net income increased to $0.2 million from a loss of $15.7 million YoY.
• Adjusted net income rose to $1.7 million from a loss of $15.2 million YoY.
• Gross written premiums grew by 47.9% to $152.3 million YoY.
• Total loss ratio improved significantly to 44.0% from 97.7% YoY.
• Annualized adjusted return on equity reached 1.8%, up from negative 16.5% YoY.

Negative

• Underwriting loss of approximately $1.8 million indicated challenges in managing costs.
• Combined ratio of 102.8% suggests an underwriting loss.

LA JOLLA, Calif., Nov. 03, 2021 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported net income of $0.2 million, or $0.01 per diluted share, for the third quarter of 2021 as compared to a net loss of $15.7 million, or $0.62 per diluted share, for the third quarter of 2020. Adjusted net income⁽¹⁾ was $1.7 million, or $0.07 per diluted share, for the third quarter of 2021 as compared to an adjusted net loss of $15.2 million, or $0.60 per diluted share, for the third quarter of 2020. 

The Company reported net income of $29.2 million, or $1.12 per diluted share, for the nine months ended September 30, 2021, as compared to $8.1 million, or $0.32 per diluted share, for the nine months ended September 30, 2020. Adjusted net income⁽¹⁾ was $34.2 million, or $1.31 per diluted share for the nine months ended September 30, 2021, as compared to $10.1 million, or $0.40 per diluted share, for the nine months ended September 30, 2020. 

Third Quarter 2021 Highlights  

• Gross written premiums increased by 47.9% to $152.3 million compared to $103.0 million in the third quarter of 2020 
• Net income of $0.2 million compared to a net loss of $15.7 million in the third quarter of 2020 
• Adjusted net income⁽¹⁾ of $1.7 million compared to an adjusted net loss of $15.2 million in the third quarter of 2020 
• Total loss ratio of 44.0% compared to 97.7% in the third quarter of 2020 
• Catastrophe loss ratio⁽¹⁾ of 27.0% compared to 86.9% in the third quarter of 2020
• Combined ratio of 102.8% compared to 157.1% in the third quarter of 2020 
• Adjusted combined ratio excluding catastrophe losses⁽¹⁾ of 73.2%, compared to 68.9% in the third quarter of 2020 
• Annualized return on equity of 0.3%, compared to negative 17.0% in the third quarter of 2020  
• Annualized adjusted return on equity⁽¹⁾ of 1.8%, compared to negative 16.5% in the third quarter of 2020 
  

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

“Our third quarter results demonstrated continued execution of Palomar’s commitment to building a market leading specialty insurer,” commented Mac Armstrong, Chairman and Chief Executive Officer. “The quarter’s results are highlighted by year-over-year gross written premium increases of 48% most notably in our surplus lines, or E&S operation, which delivered $41.4 million of gross written premium and 22% sequential growth.  Additionally, our core earthquake business grew at a healthy rate of 32% as our innovative products continued to capitalize on attractive market conditions. While our results reflect the impact of catastrophe losses from Hurricanes Ida and Nicholas as well as a single excess liability policy shock loss, we take solace in the fact that approximately 61% of the gross losses from these events came from discontinued lines of business and are non-recurring in nature. It is also worth noting those discontinued operations contributed 34% of our gross attritional losses in the quarter.

Mr. Armstrong added, “Importantly, we embarked upon several initiatives during the quarter that will translate into profitable growth into 2022 and beyond. One such example is our entrance into the fronting sector of the U.S. insurance market, where we are partnering with reinsurers, insurance carriers, and managing general agents to design customized insurance programs. Our PLMR-FRONT initiative provides us access and deeper reach into attractive markets, high leverage of our talent and capital, and generates recurring fee income. Beyond PLMR-FRONT, we launched new products and made several terrific additions to our team who will broaden our product suite and addressable market.”  
  
Underwriting Results 
Gross written premiums increased 47.9% to $152.3 million compared to $103.0 million in the third quarter of 2020, while net earned premiums increased 54.0% compared to the prior year’s third quarter. Losses and loss adjustment expenses for the third quarter were $28.5 million due to attritional losses of $11.0 million and catastrophe losses of $17.5 million. The third quarter catastrophe loss results include Hurricanes Ida and Nicholas, the PG&E excess liability loss, and were partially offset by favorable prior period development.

The loss ratio for the quarter was 44.0%, comprised of a catastrophe loss ratio of 27.0%⁽¹⁾ and an attritional loss ratio of 17.0%, compared to a loss ratio of 97.7% during the same period last year comprised of a catastrophe loss ratio of 86.9%⁽¹⁾ and an attritional loss ratio of 10.8%. Non-catastrophe losses increased mainly due to growth of lines of business subject to attritional losses such as Specialty Homeowners, Flood, and Inland Marine.

Underwriting loss⁽¹⁾ was approximately $1.8 million resulting in a combined ratio of 102.8% compared to underwriting loss of $24.0 million and a combined ratio of 157.1% during the same period last year. The Company’s adjusted combined ratio excluding catastrophe losses⁽¹⁾  was 73.2% in the third quarter compared to 68.9% during the same period last year.

Investment Results 
Net investment income increased by 4.6% to $2.2 million compared to $2.1 million in the prior year’s third quarter. The year-over-year increase was primarily due to a higher average balance of investments held during the three months ended September 30, 2021, offset by lower yields on invested assets. Funds are generally invested in high quality securities, including government agency, asset and mortgage-backed securities, municipal and corporate bonds with an average credit quality of “A2/A”. The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 4.04 years at September 30, 2021. Cash and invested assets totaled $467.0 million at September 30, 2021. During the current year third quarter, the Company recognized realized and unrealized losses of $0.3 million due to unrealized losses on equity securities as compared to realized and unrealized gains of $0.02 million in last year’s third quarter. 

Tax Rate 
The effective tax rate for the three months ended September 30, 2021 was negative 101.6% compared to 28.2% for the three months ended September 30, 2020.  For both periods, the effective tax rate differed from the statutory rate primarily due to the tax impact of the permanent component of employee stock option exercises.

Stockholders’ Equity and Returns 
Stockholders' equity was $377.8 million at September 30, 2021, compared to $363.7 million at December 31, 2020. For the three months ended September 30, 2021, the Company’s annualized return on equity was 0.3% compared to negative 17.0% for the same period last year while annualized adjusted return on equity was 1.8% compared to negative 16.5% for the same period last year. 

The Company did not repurchase any of its shares during the current quarter relating to its previously announced $40 million share purchase authorization. For the current year to date, the Company has repurchased approximately $15.8 million or 239,000 shares of its common stock.

Fourth quarter 2021 Outlook 
For the fourth quarter of 2021, the Company expects to achieve adjusted net income of $17.0 million to $18.5 million, excluding any losses from a catastrophe.

Conference Call 
As previously announced, Palomar will host a conference call November 4, 2021, to discuss its third quarter 2021 results at 12:00 p.m. (Eastern Time). The conference call can be accessed by dialing 1-877-423-9813 (domestic) or 1-201-689-8573 (international) and asking for the Palomar Third Quarter 2021 Earnings Call. A telephonic replay will be available approximately two hours after the call and can be accessed by dialing 1-844-512-2921, or for international callers 1-412-317-6671 and providing the access code 13723673. The telephonic replay will be available until 11:59 pm (Eastern Time) on November 11, 2021. 

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.plmr.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. Palomar is an innovative insurer that focuses on the provision of specialty insurance for residential and commercial clients. Palomar’s underwriting and analytical expertise allow it to concentrate on certain markets that it believes are underserved by other insurance companies, such as the markets for earthquake, hurricane and flood 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

Follow Palomar on Facebook, LinkedIn and Twitter: @PLMRInsurance

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 and net realized and unrealized gains and losses on investments. 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.

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

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.

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
Bill Bold
1-619-890-5972
bbold@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 September 30, 2021 and 2020:

		Three months ended
		September 30,
		2021				2020				Change				% Change
		($ in thousands, except per share data)
Gross written premiums		$	152,332			$	102,967			$	49,365			47.9	%
Ceded written premiums			(58,073	)			(41,570	)			(16,503	)		39.7	%
Net written premiums			94,259				61,397				32,862			53.5	%
Net earned premiums			64,720				42,020				22,700			54.0	%
Commission and other income			1,018				816				202			24.8	%
Total underwriting revenue (1)			65,738				42,836				22,902			53.5	%
Losses and loss adjustment expenses			28,475				41,060				(12,585	)		(30.7)	%
Acquisition expenses			26,412				17,976				8,436			46.9	%
Other underwriting expenses			12,652				7,805				4,847			62.1	%
Underwriting income (loss) (1)			(1,801	)			(24,005	)			22,204			(92.5)	%
Net investment income			2,236				2,138				98			4.6	%
Net realized and unrealized gains (losses) on investments			(313	)			24				(337	)		(1,404.2)	%
Income (loss) before income taxes			122				(21,843	)			21,965			(100.6)	%
Income tax expense			(124	)			(6,158	)			6,034			(98.0)	%
Net income (loss)		$	246			$	(15,685	)		$	15,931			(101.6)	%
Adjustments:
Stock-based compensation expense			1,525				551				974			176.8	%
Amortization of intangibles			115				—				115			NM
Tax impact			(166	)			(101	)			(65	)		NM
Adjusted net income (loss) (1)		$	1,720			$	(15,235	)		$	16,955			(111.3)	%
Key Financial and Operating Metrics
Annualized return on equity			0.3	%			(17.0	)%
Annualized adjusted return on equity (1)			1.8	%			(16.5)	%
Loss ratio			44.0	%			97.7	%
Expense ratio			58.8	%			59.4	%
Combined ratio			102.8	%			157.1	%
Adjusted combined ratio (1)			100.2	%			155.8	%
Diluted earnings per share		$	0.01			$	(0.62	)
Diluted adjusted earnings per share (1)		$	0.07			$	(0.60	)
Catastrophe losses		$	17,487			$	36,512
Catastrophe loss ratio (1)			27.0	%			86.9	%
Adjusted combined ratio excluding catastrophe losses (1)			73.2	%			68.9	%
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.

The following table summarizes the Company’s results for the nine months ended September 30, 2021 and 2020:

		Nine months ended
		September 30,
		2021				2020				Change				% Change
		($ in thousands, except per share data)
Gross written premiums		$	385,267			$	258,268			$	126,999			49.2	%
Ceded written premiums			(153,005	)			(101,264	)			(51,741	)		51.1	%
Net written premiums			232,262				157,004				75,258			47.9	%
Net earned premiums			165,988				116,145				49,843			42.9	%
Commission and other income			2,735				2,492				243			9.8	%
Total underwriting revenue (1)			168,723				118,637				50,086			42.2	%
Losses and loss adjustment expenses			31,288				46,901				(15,613	)		(33.3)	%
Acquisition expenses			68,150				45,909				22,241			48.4	%
Other underwriting expenses			39,438				24,732				14,706			59.5	%
Underwriting income (1)			29,847				1,095				28,752			2,625.8	%
Net investment income			6,649				6,287				362			5.8	%
Net realized and unrealized gains (losses) on investments			(752	)			1,243				(1,995	)		(160.5)	%
Income before income taxes			35,744				8,625				27,119			314.4	%
Income tax expense			6,529				523				6,006			1,148.4	%
Net income		$	29,215			$	8,102			$	21,113			260.6	%
Adjustments:
Expenses associated with transactions and stock offerings			411				708				(297	)		NM
Stock-based compensation expense			3,370				1,457				1,913			131.3	%
Amortization of intangibles			704				—				704			NM
Expenses associated with catastrophe bond, net of rebate			1,698				399				1,299			NM
Tax impact			(1,156	)			(534	)			(622	)		NM
Adjusted net income (1)		$	34,242			$	10,132			$	24,110			238.0	%
Key Financial and Operating Metrics
Annualized return on equity			10.5	%			3.7	%
Annualized adjusted return on equity (1)			12.3	%			4.7	%
Loss ratio			18.8	%			40.4	%
Expense ratio			63.2	%			58.7	%
Combined ratio			82.0	%			99.1	%
Adjusted combined ratio (1)			78.3	%			96.8	%
Diluted earnings per share		$	1.12			$	0.32
Diluted adjusted earnings per share (1)		$	1.31			$	0.40
Catastrophe losses		$	6,719			$	36,512
Catastrophe loss ratio (1)			4.0	%			31.4	%
Adjusted combined ratio excluding catastrophe losses (1)			74.2	%			65.4	%
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.

Condensed Consolidated Balance sheets

Palomar Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(in thousands, except shares and par value data)

		September 30,			December 31,
		2021			2020
		(Unaudited)
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $397,955 in 2021; $381,279 in 2020)		$	408,046		$	397,987
Equity securities, at fair value (cost: $17,829 in 2021; $22,291 in 2020)			17,358			24,322
Total investments			425,404			422,309
Cash and cash equivalents			41,405			33,538
Restricted cash			229			248
Accrued investment income			2,506			2,545
Premium receivable			75,543			48,842
Deferred policy acquisition costs			53,995			35,481
Reinsurance recoverable on unpaid losses and loss adjustment expenses			129,044			94,566
Reinsurance recoverable on paid losses and loss adjustment expenses			54,431			10,162
Ceded unearned premiums			42,949			35,031
Prepaid expenses and other assets			40,212			34,119
Property and equipment, net			578			739
Intangible assets, net			10,512			11,512
Total assets		$	876,808		$	729,092
Liabilities and stockholders' equity
Liabilities:
Accounts payable and other accrued liabilities		$	21,551		$	20,730
Reserve for losses and loss adjustment expenses			175,687			129,036
Unearned premiums			257,667			183,489
Ceded premium payable			32,426			22,233
Funds held under reinsurance treaty			7,282			4,515
Deferred tax liabilities, net			4,418			5,376
Total liabilities			499,031			365,379
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020			—			—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 25,415,299 and 25,525,796 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively			3			3
Additional paid-in capital			316,352			310,507
Accumulated other comprehensive income			8,102			13,246
Retained earnings			53,320			39,957
Total stockholders' equity			377,777			363,713
Total liabilities and stockholders' equity		$	876,808		$	729,092

Condensed Consolidated Income Statement

Palomar Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)
(in thousands, except shares and per share data)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Revenues:
Gross written premiums		$	152,332			$	102,967			$	385,267			$	258,268
Ceded written premiums			(58,073	)			(41,570	)			(153,005	)			(101,264	)
Net written premiums			94,259				61,397				232,262				157,004
Change in unearned premiums			(29,539	)			(19,377	)			(66,274	)			(40,859	)
Net earned premiums			64,720				42,020				165,988				116,145
Net investment income			2,236				2,138				6,649				6,287
Net realized and unrealized gains (losses) on investments			(313	)			24				(752	)			1,243
Commission and other income			1,018				816				2,735				2,492
Total revenues			67,661				44,998				174,620				126,167
Expenses:
Losses and loss adjustment expenses			28,475				41,060				31,288				46,901
Acquisition expenses			26,412				17,976				68,150				45,909
Other underwriting expenses			12,652				7,805				39,438				24,732
Total expenses			67,539				66,841				138,876				117,542
Income (loss) before income taxes			122				(21,843	)			35,744				8,625
Income tax expense			(124	)			(6,158	)			6,529				523
Net income (loss)			246				(15,685	)			29,215				8,102
Other comprehensive income, net:
Net unrealized gains (losses) on securities available for sale for the three and nine months ended September 30, 2021 and 2020, respectively			(1,655	)			909				(5,144	)			5,752
Net comprehensive income (loss)		$	(1,409	)		$	(14,776	)		$	24,071			$	13,854
Per Share Data:
Basic earnings per share		$	0.01			$	(0.62)			$	1.15			$	0.33
Diluted earnings per share		$	0.01			$	(0.62)			$	1.12			$	0.32
Weighted-average common shares outstanding:
Basic			25,388,630				25,492,274				25,473,006				24,654,722
Diluted			26,043,680				25,492,274				26,133,664				25,384,518

Underwriting Segment Data

The Company has a single reportable segment and offers primarily earthquake, wind, inland marine, and flood insurance products. Gross written premiums (GWP) by product and location are presented below:

		Three Months Ended September 30,												Nine Months Ended September 30,
		2021						2020						2021						2020
		($ in thousands)												($ in thousands)
					% of						% of						% of						% of
		Amount			GWP			Amount			GWP			Amount			GWP			Amount			GWP
Product
Residential Earthquake		$	50,075		32.9	%		$	40,507		39.3	%		$	128,165		33.3	%		$	103,503		40.1	%
Commercial Earthquake			27,433		18.0	%			18,061		17.5	%			66,052		17.1	%			40,727		15.8	%
Specialty Homeowners			19,881		13.1	%			17,048		16.6	%			53,018		13.8	%			38,461		14.9	%
Inland Marine			19,532		12.8	%			4,406		4.3	%			39,047		10.1	%			9,747		3.8	%
Hawaii Hurricane			8,996		5.9	%			4,360		4.2	%			22,921		5.9	%			10,296		4.0	%
Commercial All Risk			6,867		4.5	%			12,467		12.1	%			30,032		7.8	%			39,765		15.4	%
Residential Flood			3,228		2.1	%			2,170		2.1	%			8,377		2.2	%			5,728		2.2	%
Other			16,320		10.7	%			3,948		3.9	%			37,655		9.8	%			10,041		3.8	%
Total Gross Written Premiums		$	152,332		100.0	%		$	102,967		100.0	%		$	385,267		100.0	%		$	258,268		100.0	%

		Three Months Ended September 30,												Nine Months Ended September 30,
		2021						2020						2021						2020
		($ in thousands)												($ in thousands)
					% of						% of						% of						% of
		Amount			GWP			Amount			GWP			Amount			GWP			Amount			GWP
State
California		$	72,505		47.6	%		$	52,960		51.4	%		$	180,142		46.8	%		$	124,131		48.1	%
Texas			19,715		13.0	%			20,460		19.9	%			48,142		12.5	%			55,047		21.3	%
Hawaii			10,342		6.8	%			5,097		5.0	%			26,312		6.8	%			11,990		4.6	%
Florida			7,203		4.7	%			685		0.7	%			24,958		6.5	%			685		0.3	%
Washington			7,180		4.7	%			4,340		4.2	%			15,931		4.1	%			10,002		3.9	%
Oregon			3,964		2.6	%			2,912		2.8	%			9,686		2.5	%			7,298		2.8	%
North Carolina			3,719		2.4	%			2,839		2.8	%			11,871		3.1	%			7,131		2.8	%
Illinois			2,893		1.9	%			1,575		1.5	%			8,668		2.2	%			4,416		1.7	%
Other			24,811		16.3	%			12,099		11.7	%			59,557		15.5	%			37,568		14.5	%
Total Gross Written Premiums		$	152,332		100.0	%		$	102,967		100.0	%		$	385,267		100.0	%		$	258,268		100.0	%

During the three months ended September 30, 2021, PSIC accounted for $110.9 million or approximately 72.8% of our gross written premiums and PESIC accounted for $41.4 million or approximately 27.2% of our gross written premiums.

During the nine months ended September 30, 2021, PSIC accounted for $286.0 million or approximately 74.2% of our gross written premiums and PESIC accounted for $99.3 million or approximately 25.8% of our gross written premiums.

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																Nine Months Ended
		September 30,																September 30,
		2021				2020				Change				% Change				2021				2020				Change				% Change
		($ in thousands)																($ in thousands)
Gross earned premiums		$	117,276			$	79,428			$	37,848			47.7	%			$	311,088			$	215,266			$	95,822			44.5	%
Ceded earned premiums			(52,556	)			(37,408	)			(15,148	)		40.5	%				(145,100	)			(99,120	)			(45,980	)		46.4	%
Net earned premiums		$	64,720			$	42,020			$	22,700			54.0	%			$	165,988			$	116,146			$	49,842			42.9	%
Net earned premium ratio			55.2%				52.9%												53.4%				54.0%

Loss detail

		Three Months Ended																Nine Months Ended
		September 30,																September 30,
		2021				2020				Change				% Change				2021				2020				Change				% Change
		($ in thousands)																($ in thousands)
Catastrophe losses		$	17,487			$	36,512			$	(19,025	)		(52.1)				$	6,719			$	36,512			$	(29,793	)		(81.6)
Non-catastrophe losses			10,988				4,548				6,440			141.6	%				24,569				10,389				14,180			136.5	%
Total losses and loss adjustment expenses		$	28,475			$	41,060			$	(12,585	)		(30.7)	%			$	31,288			$	46,901			$	(15,613	)		(33.3)	%

		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
			(in thousands)								(in thousands)
Reserve for losses and LAE net of reinsurance recoverables at beginning of period		$	23,633			$	7,087			$	34,470			$	3,869
Add: Incurred losses and LAE, net of reinsurance, related to:
Current year			28,286				40,803				34,202				46,867
Prior years			189				257				(2,914	)			34
Total incurred			28,475				41,060				31,288				46,901
Deduct: Loss and LAE payments, net of reinsurance, related to:
Current year			2,787				8,232				3,407				9,754
Prior years			2,678				375				15,708				1,476
Total payments			5,465				8,607				19,115				11,230
Reserve for losses and LAE net of reinsurance recoverables at end of period			46,643				39,540				46,643				39,540
Add: Reinsurance recoverables on unpaid losses and LAE at end of period			129,044				92,537				129,044				92,537
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period		$	175,687			$	132,077			$	175,687			$	132,077

Reconciliation of Non-GAAP Financial Measures

For the three and nine months ended September 30, 2021 and 2020, the Non-GAAP financial measures discussed above reconcile to their most comparable GAAP measures as follows:

Underwriting revenue

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
		(in thousands)								(in thousands)
Total revenue		$	67,661			$	44,998			$	174,620			$	126,167
Net investment income			(2,236	)			(2,138	)			(6,649	)			(6,287	)
Net realized and unrealized (gains) losses on investments			313				(24	)			752				(1,243	)
Underwriting revenue		$	65,738			$	42,836			$	168,723			$	118,637

Underwriting income (loss)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
		(in thousands)								(in thousands)
Income before income taxes		$	122			$	(21,843	)		$	35,744			$	8,625
Net investment income			(2,236	)			(2,138	)			(6,649	)			(6,287	)
Net realized and unrealized gains (losses) on investments			313				(24	)			752				(1,243	)
Underwriting income (loss)		$	(1,801	)		$	(24,005	)		$	29,847			$	1,095

Adjusted net income (loss)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
		(in thousands)								(in thousands)
Net income (loss)		$	246			$	(15,685	)		$	29,215			$	8,102
Adjustments:
Expenses associated with transactions and stock offerings			—				—				411				708
Stock-based compensation expense			1,525				551				3,370				1,457
Amortization of intangibles			115				—				704				—
Expenses associated with catastrophe bond, net of rebate			—				—				1,698				399
Tax impact			(166	)			(101	)			(1,156	)			(534	)
Adjusted net income (loss)		$	1,720			$	(15,235	)		$	34,242			$	10,132

Annualized adjusted return on equity

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
		($ in thousands)								($ in thousands)
Annualized adjusted net income		$	6,880			$	(60,940)			$	45,656			$	13,509
Average stockholders' equity		$	377,260			$	368,568			$	370,745			$	290,225
Annualized adjusted return on equity			1.8	%			(16.5)	%			12.3	%			4.7	%

Adjusted combined ratio

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
		($ in thousands)								($ in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income		$	66,521			$	66,025			$	136,141			$	115,050
Denominator: Net earned premiums		$	64,720			$	42,020			$	165,988			$	116,145
Combined ratio			102.8	%			157.1	%			82.0	%			99.1	%
Adjustments to numerator:
Expenses associated with transactions and stock offerings		$	—			$	—			$	(411	)		$	(708	)
Stock-based compensation expense			(1,525	)			(551	)			(3,370	)			(1,457	)
Amortization of intangibles			(115	)			—				(704	)			—
Expenses associated with catastrophe bond, net of rebate			—				—				(1,698	)			(399	)
Adjusted combined ratio			100.2	%			155.8	%			78.3	%			96.8	%

Diluted adjusted earnings per share

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
		(in thousands, except per share data)								(in thousands, except per share data)
Adjusted net income (loss)		$	1,720			$	(15,235	)		$	34,242			$	10,132
Weighted-average common shares outstanding, diluted		$	26,043,680				25,492,274				26,133,664				25,384,518
Diluted adjusted earnings per share		$	0.07			$	(0.60	)		$	1.31			$	0.40

Catastrophe loss ratio

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
		($ in thousands)								($ in thousands)
Numerator: Losses and loss adjustment expenses		$	28,475			$	41,060			$	31,288			$	46,901
Denominator: Net earned premiums		$	64,720			$	42,020			$	165,988			$	116,145
Loss ratio			44.0	%			97.7	%			18.8	%			40.4	%
Numerator: Catastrophe losses		$	17,487			$	36,512			$	6,719			$	36,512
Denominator: Net earned premiums		$	64,720			$	42,020			$	165,988			$	116,145
Catastrophe loss ratio			27.0	%			86.9	%			4.0	%			31.4	%

Adjusted combined ratio excluding catastrophe losses

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
		($ in thousands)								($ in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income		$	66,521			$	66,025			$	136,141			$	115,050
Denominator: Net earned premiums		$	64,720			$	42,020			$	165,988			$	116,145
Combined ratio			102.8	%			157.1	%			82.0	%			99.1	%
Adjustments to numerator:
Expenses associated with transactions and stock offerings		$	—			$	—			$	(411	)		$	(708	)
Stock-based compensation expense			(1,525	)			(551	)			(3,370	)			(1,457	)
Amortization of intangibles			(115	)			—				(704	)			—
Expenses associated with catastrophe bond, net of rebate			—				—				(1,698	)			(399	)
Catastrophe losses			(17,487	)			(36,512	)			(6,719	)			(36,512	)
Adjusted combined ratio excluding catastrophe losses			73.2	%			68.9	%			74.2	%			65.4	%

Tangible Stockholders’ equity

		September 30,				December 31,
		2021				2020
		(in thousands)
Stockholders' equity		$	377,777			$	363,713
Intangible assets			(10,512	)			(11,512	)
Tangible stockholders' equity		$	367,265			$	352,201

 

FAQ

What were Palomar Holdings' net income results for Q3 2021?

Palomar Holdings reported a net income of $0.2 million for the third quarter of 2021.

How did Palomar's gross written premiums change in Q3 2021?

Gross written premiums increased by 47.9% to $152.3 million in Q3 2021.

What is the significance of the total loss ratio for Palomar in Q3 2021?

The total loss ratio improved to 44.0% in Q3 2021, down from 97.7% in Q3 2020, indicating better underwriting performance.

What guidance has Palomar given for adjusted net income in Q4 2021?

For Q4 2021, Palomar expects to achieve adjusted net income of $17.0 million to $18.5 million.

How did Palomar's annualized return on equity change year over year?

Palomar's annualized adjusted return on equity rose to 1.8% in Q3 2021, compared to negative 16.5% in Q3 2020.