Palomar Holdings, Inc. Reports Second Quarter 2024 Results

Written by Customer Service on August 5, 2024. Posted in Earnings Releases And Operating Results.

LA JOLLA, Calif., Aug. 05, 2024 (GLOBE NEWSWIRE) — Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported net income of $25.7 million, or $1.00 per diluted share, for the second quarter of 2024 compared to net income of $17.6 million, or $0.69 per diluted share, for the second quarter of 2023. Adjusted net income⁽¹⁾ was $32.0 million, or $1.25 per diluted share, for the second quarter of 2024 as compared to $21.8 million, or $0.86 per diluted share, for the second quarter of 2023.

Second Quarter 2024 Highlights

Gross written premiums increased by 40.4% to $385.2 million compared to $274.3 million in the second quarter of 2023
Net income of $25.7 million, compared to $17.6 million in the second quarter of 2023
Adjusted net income⁽¹⁾ of $32.0 million, compared to $21.8 million in the second quarter of 2023
Total loss ratio of 24.9% compared to 21.5% in the second quarter of 2023
Combined ratio of 79.1% compared to 79.0% in the second quarter of 2023
Adjusted combined ratio⁽¹⁾ of 73.1%, compared to 72.2%, in the second quarter of 2023
Annualized return on equity of 19.9%, compared to 17.2% in the second quarter of 2023
Annualized adjusted return on equity⁽¹⁾ of 24.7%, compared to 21.3% in the second quarter of 2023

(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 second quarter results as we achieved record gross written premium and adjusted net income during the quarter. Additionally, our profitable growth remained robust with gross written premium and adjusted net income increasing 40% and 47%, respectively, year-over-year. Beyond the strong financial results achieved during the quarter, we had several other accomplishments including but not limited to: successfully placing our core excess of loss reinsurance program at June 1st on terms that were better than anticipated, bringing on several new leaders who will help scale the Company and execute our Palomar 2X strategy, and AM Best upgrading our Financial Strength Rating to an A.”

Mr. Armstrong continued, “We introduced our Palomar 2X strategy at our investor day in 2022 with designs of doubling our underwriting income over a three-to-five-year time frame while generating an adjusted ROE in excess of 20%. Our second quarter results and our further raising of adjusted net income guidance for the year clearly demonstrates that we are tracking ahead of these ambitious goals.”

Underwriting Results

Gross written premiums increased 40.4% to $385.2 million compared to $274.3 million in the second quarter of 2023, while net earned premiums increased 47.1% compared to the prior year’s second quarter.

Losses and loss adjustment expenses for the second quarter were $30.4 million, comprised of $27.0 million of attritional losses and $3.4 million of catastrophe losses from severe convective storms. The loss ratio for the quarter was 24.9%, comprised of an attritional loss ratio of 22.1% and a catastrophe loss ratio⁽¹⁾ of 2.8%, compared to a loss ratio of 21.5% during the same period last year comprised of an attritional loss ratio of 18.9% and a catastrophe loss ratio⁽¹⁾ of 2.6%.

Underwriting income⁽¹⁾ for the second quarter was $25.6 million resulting in a combined ratio of 79.1% compared to underwriting income of $17.4 million resulting in a combined ratio of 79.0% during the same period last year. The Company’s adjusted underwriting income⁽¹⁾ was $32.9 million resulting in an adjusted combined ratio⁽¹⁾ of 73.1% in the second quarter compared to adjusted underwriting income⁽¹⁾of $23.1 million and an adjusted combined ratio⁽¹⁾ of 72.2% during the same period last year.

Investment Results
Net investment income increased by 43.7% to $8.0 million compared to $5.5 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, 2024 due to cash generated from operations. The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.73 years at June 30, 2024. Cash and invested assets totaled $777.9 million at June 30, 2024. During the second quarter, the Company recorded immaterial net realized and unrealized gains related to its investment portfolio as compared to net realized and unrealized gains of $1.1 million during the same period last year.

Tax Rate
The effective tax rate for the three months ended June 30, 2024 was 22.9% compared to 23.7% for the three months ended June 30, 2023. 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 $532.6 million at June 30, 2024, compared to $413.7 million at June 30, 2023. For the three months ended June 30, 2024, the Company’s annualized return on equity was 19.9% compared to 17.2% for the same period in the prior year while adjusted return on equity⁽¹⁾ was 24.7% compared to 21.3% for the same period in the prior year. There were no share repurchases during the three months ended June 30, 2024.

Full Year 2024 Outlook
For the full year 2024, the Company is increasing its guidance range and now expects to achieve adjusted net income of $124 million to $130 million. This range includes $6.8 million of catastrophe losses incurred during the six months ended June 30, 2024 and additional catastrophe losses incurred during the third quarter of 2024 of approximately $5 million to $7 million related to Hurricanes Beryl and Debby.

Conference Call
As previously announced, Palomar will host a conference call Tuesday, August 6, 2024, to discuss its second quarter 2024 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 2024 Earnings Conference Call. A replay will be available starting at 4:00 p.m. (Eastern Time) on August 6, 2024, and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the replay is 13747528. The replay will be available until 11:59 p.m. (Eastern Time) on August 13, 2024.

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

To learn more, visit PLMR.com.

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 tables summarize the Company’s results for the three and six months ended June 30, 2024 and 2023:

	Three Months Ended
	June 30,
	2024			2023			Change			% Change
	($ in thousands, except per share data)
Gross written premiums	$	385,184		$	274,296		$	110,888			40.4	%
Ceded written premiums		(209,181	)		(169,109	)		(40,072	)		23.7	%
Net written premiums		176,003			105,187			70,816			67.3	%
Net earned premiums		122,285			83,107			39,178			47.1	%
Commission and other income		792			621			171			27.5	%
Total underwriting revenue⁽¹⁾		123,077			83,728			39,349			47.0	%
Losses and loss adjustment expenses		30,431			17,905			12,526			70.0	%
Acquisition expenses, net of ceding commissions and fronting fees		35,806			26,057			9,749			37.4	%
Other underwriting expenses		31,233			22,350			8,883			39.7	%
Underwriting income⁽¹⁾		25,607			17,416			8,191			47.0	%
Interest expense		(225	)		(1,064	)		839			(78.9	)%
Net investment income		7,960			5,541			2,419			43.7	%
Net realized and unrealized gains on investments		32			1,127			(1,095	)		(97.2	)%
Income before income taxes		33,374			23,020			10,354			45.0	%
Income tax expense		7,645			5,458			2,187			40.1	%
Net income	$	25,729		$	17,562		$	8,167			46.5	%
Adjustments:
Net realized and unrealized gains on investments		(32	)		(1,127	)		1,095			(97.2	)%
Expenses associated with transactions		472			—			472			—	%
Stock-based compensation expense		3,968			3,697			271			7.3	%
Amortization of intangibles		389			389			—			—	%
Expenses associated with catastrophe bond		2,483			1,590			893			56.2	%
Tax impact		(1,029	)		(317	)		(712	)		224.6	%
Adjusted net income⁽¹⁾	$	31,980		$	21,794		$	10,186			46.7	%
Key Financial and Operating Metrics
Annualized return on equity		19.9	%		17.2	%
Annualized adjusted return on equity⁽¹⁾		24.7	%		21.3	%
Loss ratio		24.9	%		21.5	%
Expense ratio		54.2	%		57.5	%
Combined ratio		79.1	%		79.0	%
Adjusted combined ratio⁽¹⁾		73.1	%		72.2	%
Diluted earnings per share	$	1.00		$	0.69
Diluted adjusted earnings per share⁽¹⁾	$	1.25		$	0.86
Catastrophe losses	$	3,441		$	2,159
Catastrophe loss ratio⁽¹⁾		2.8	%		2.6	%
Adjusted combined ratio excluding catastrophe losses⁽¹⁾		70.3	%		69.6	%
Adjusted underwriting income⁽¹⁾	$	32,919		$	23,092		$	9,827			42.6	%
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.

	Six Months Ended
	June 30,
	2024			2023			Change			% Change
	($ in thousands, except per share data)
Gross written premiums	$	753,262		$	524,407		$	228,855			43.6	%
Ceded written premiums		(437,352	)		(339,453	)		(97,899	)		28.8	%
Net written premiums		315,910			184,954			130,956			70.8	%
Net earned premiums		230,151			166,347			63,804			38.4	%
Commission and other income		1,320			1,316			4			0.3	%
Total underwriting revenue⁽¹⁾		231,471			167,663			63,808			38.1	%
Losses and loss adjustment expenses		57,268			38,557			18,711			48.5	%
Acquisition expenses, net of ceding commissions and fronting fees		67,604			51,736			15,868			30.7	%
Other underwriting expenses		56,036			41,572			14,464			34.8	%
Underwriting income⁽¹⁾		50,563			35,798			14,765			41.2	%
Interest expense		(965	)		(2,084	)		1,119			(53.7	)%
Net investment income		15,098			10,661			4,437			41.6	%
Net realized and unrealized gains on investments		3,034			1,273			1,761			138.3	%
Income before income taxes		67,730			45,648			22,082			48.4	%
Income tax expense		15,619			10,774			4,845			45.0	%
Net income	$	52,111		$	34,874		$	17,237			49.4	%
Adjustments:
Net realized and unrealized gains on investments		(3,034	)		(1,273	)		(1,761	)		138.3	%
Expenses associated with transactions		472			—			472			—	%
Stock-based compensation expense		7,789			7,147			642			9.0	%
Amortization of intangibles		779			703			76			10.8	%
Expenses associated with catastrophe bond		2,483			1,640			843			51.4	%
Tax impact		(825	)		(857	)		32			(3.7	)%
Adjusted net income⁽¹⁾	$	59,775		$	42,234		$	17,541			41.5	%
Key Financial and Operating Metrics
Annualized return on equity		20.8	%		17.5	%
Annualized adjusted return on equity⁽¹⁾		23.8	%		21.2	%
Loss ratio		24.9	%		23.2	%
Expense ratio		53.1	%		55.3	%
Combined ratio		78.0	%		78.5	%
Adjusted combined ratio⁽¹⁾		73.0	%		72.8	%
Diluted earnings per share	$	2.04		$	1.37
Diluted adjusted earnings per share⁽¹⁾	$	2.34		$	1.66
Catastrophe losses	$	6,800		$	3,965
Catastrophe loss ratio⁽¹⁾		3.0	%		2.4	%
Adjusted combined ratio excluding catastrophe losses⁽¹⁾		70.1	%		70.4	%
Adjusted underwriting income⁽¹⁾	$	62,086		$	45,288		$	16,798			37.1	%

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,
	2024			2023
	(Unaudited)
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $723,940 in 2024; $675,130 in 2023)	$	687,138		$	643,799
Equity securities, at fair value (cost: $32,987 in 2024; $43,003 in 2023)		37,761			43,160
Equity method investment		2,351			2,617
Other investments		2,641			—
Total investments		729,891			689,576
Cash and cash equivalents		47,840			51,546
Restricted cash		179			306
Accrued investment income		5,930			5,282
Premiums receivable		357,267			261,972
Deferred policy acquisition costs, net of ceding commissions and fronting fees		82,486			60,990
Reinsurance recoverable on paid losses and loss adjustment expenses		33,309			32,172
Reinsurance recoverable on unpaid losses and loss adjustment expenses		347,840			244,622
Ceded unearned premiums		303,477			265,808
Prepaid expenses and other assets		86,590			72,941
Deferred tax assets, net		9,450			10,119
Property and equipment, net		253			373
Goodwill and intangible assets, net		11,537			12,315
Total assets	$	2,016,049		$	1,708,022
Liabilities and stockholders’ equity
Liabilities:
Accounts payable and other accrued liabilities	$	52,052		$	42,376
Reserve for losses and loss adjustment expenses		466,601			342,275
Unearned premiums		720,528			597,103
Ceded premium payable		231,182			181,742
Funds held under reinsurance treaty		13,080			13,419
Income taxes payable		—			7,255
Borrowings from credit agreements		—			52,600
Total liabilities		1,483,443			1,236,770
Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2024 and December 31, 2023		—			—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 24,984,638 and 24,772,987 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		3			3
Additional paid-in capital		363,904			350,597
Accumulated other comprehensive loss		(28,055	)		(23,991	)
Retained earnings		196,754			144,643
Total stockholders’ equity		532,606			471,252
Total liabilities and stockholders’ equity	$	2,016,049		$	1,708,022

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,
	2024			2023			2024			2023
Revenues:
Gross written premiums	$	385,184		$	274,296		$	753,262		$	524,407
Ceded written premiums		(209,181	)		(169,109	)		(437,352	)		(339,453	)
Net written premiums		176,003			105,187			315,910			184,954
Change in unearned premiums		(53,718	)		(22,080	)		(85,759	)		(18,607	)
Net earned premiums		122,285			83,107			230,151			166,347
Net investment income		7,960			5,541			15,098			10,661
Net realized and unrealized gains on investments		32			1,127			3,034			1,273
Commission and other income		792			621			1,320			1,316
Total revenues		131,069			90,396			249,603			179,597
Expenses:
Losses and loss adjustment expenses		30,431			17,905			57,268			38,557
Acquisition expenses, net of ceding commissions and fronting fees		35,806			26,057			67,604			51,736
Other underwriting expenses		31,233			22,350			56,036			41,572
Interest expense		225			1,064			965			2,084
Total expenses		97,695			67,376			181,873			133,949
Income before income taxes		33,374			23,020			67,730			45,648
Income tax expense		7,645			5,458			15,619			10,774
Net income	$	25,729		$	17,562		$	52,111		$	34,874
Other comprehensive income, net:
Net unrealized (losses) gains on securities available for sale		(1,550	)		(3,685	)		(4,064	)		1,789
Net comprehensive income	$	24,179		$	13,877		$	48,047		$	36,663
Per Share Data:
Basic earnings per share	$	1.03		$	0.71		$	2.09		$	1.40
Diluted earnings per share	$	1.00		$	0.69		$	2.04		$	1.37

Weighted-average common shares outstanding:
Basic		24,946,987			24,833,852			24,904,677			24,901,403
Diluted		25,617,916			25,309,526			25,554,445			25,384,409

Underwriting Segment Data

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

	Three Months Ended June 30,
	2024					2023
	($ in thousands)
			% of					% of					%
	Amount		GWP			Amount		GWP			Change		Change
Product⁽¹⁾
Earthquake	$	135,029		35.1	%	$	107,929		39.3	%	$	27,100		25.1	%
Fronting		95,896		24.9	%		79,724		29.1	%		16,172		20.3	%
Inland Marine and Other Property		93,453		24.3	%		69,779		25.4	%		23,674		33.9	%
Casualty		58,605		15.2	%		16,376		6.0	%		42,229		257.9	%
Crop		2,201		0.6	%		488		0.2	%		1,713		NM
Total Gross Written Premiums	$	385,184		100.0	%	$	274,296		100.0	%	$	110,888		40.4	%
NM – not meaningful

	Six Months Ended June 30,
	2024					2023
	($ in thousands)
			% of					% of
	Amount		GWP			Amount		GWP			Change		Change
Product⁽¹⁾
Earthquake	$	240,759		32.0	%	$	201,424		38.4	%	$	39,335		19.5	%
Fronting		190,727		25.3	%		171,479		32.7	%		19,248		11.2	%
Inland Marine and Other Property		170,329		22.6	%		122,484		23.4	%		47,845		39.1	%
Casualty		110,539		14.7	%		28,532		5.4	%		82,007		287.4	%
Crop		40,908		5.4	%		488		0.1	%		40,420		NM
Total Gross Written Premiums	$	753,262		100.0	%	$	524,407		100.0	%	$	228,855		43.6	%
NM – not meaningful

(1) – Beginning in 2024, the Company has updated the categorization of its products to align with management’s current strategy and view of the business. Prior year amounts have been reclassified for comparability purposes. The recategorization is for presentation purposes only and does not impact overall gross written premiums.

	Three Months Ended June 30,										Six Months Ended June 30,
	2024					2023					2024					2023
	($ in thousands)										($ in thousands)
			% of					% of					% of					% of
	Amount		GWP			Amount		GWP			Amount		GWP			Amount		GWP
State
California	$	183,396		47.6	%	$	157,057		57.3	%	$	340,614		45.2	%	$	288,946		55.1	%
Florida		29,796		7.7	%		12,664		4.6	%		43,720		5.8	%		24,760		4.7	%
Texas		28,600		7.4	%		25,231		9.2	%		69,396		9.2	%		48,441		9.2	%
Hawaii		18,235		4.7	%		12,228		4.5	%		30,751		4.1	%		22,333		4.3	%
Washington		13,063		3.4	%		13,645		5.0	%		25,066		3.3	%		25,617		4.9	%
New York		7,980		2.1	%		3,785		1.4	%		16,010		2.1	%		7,656		1.5	%
Oregon		5,776		1.5	%		5,907		2.2	%		12,851		1.7	%		12,687		2.4	%
Michigan		5,008		1.3	%		848		0.3	%		6,711		0.9	%		1,711		0.3	%
Other		93,330		24.2	%		42,931		15.7	%		208,143		27.6	%		92,256		17.6	%
Total Gross Written Premiums	$	385,184		100.0	%	$	274,296		100.0	%	$	753,262		100.0	%	$	524,407		100.0	%

	Three Months Ended June 30,										Six Months Ended June 30,
	2024					2023					2024					2023
	($ in thousands)										($ in thousands)
			% of					% of					% of					% of
	Amount		GWP			Amount		GWP			Amount		GWP			Amount		GWP
Subsidiary
PSIC	$	193,709		50.3	%	$	159,846		58.3	%	$	416,366		55.3	%	$	310,550		59.2	%
PESIC		177,109		46.0	%		114,450		41.7	%		313,603		41.6	%		213,857		40.8	%
Laulima		14,366		3.7	%		—		—	%		23,293		3.1	%		—		—	%
Total Gross Written Premiums	$	385,184		100.0	%	$	274,296		100.0	%	$	753,262		100.0	%	$	524,407		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,
	2024			2023			Change			% Change			2024			2023			Change			% Change
	($ in thousands)												($ in thousands)
Gross earned premiums	$	326,964		$	242,189		$	84,775			35.0	%	$	629,835		$	467,432		$	162,403			34.7	%
Ceded earned premiums		(204,679	)		(159,082	)		(45,597	)		28.7	%		(399,684	)		(301,085	)		(98,599	)		32.7	%
Net earned premiums	$	122,285		$	83,107		$	39,178			47.1	%	$	230,151		$	166,347		$	63,804			38.4	%

Net earned premium ratio		37.4	%		34.3	%								36.5	%		35.6	%

Loss detail

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2024		2023		Change		% Change			2024		2023		Change		% Change
	($ in thousands)									($ in thousands)
Catastrophe losses	$	3,441	$	2,159	$	1,282		59.4	%	$	6,800	$	3,965	$	2,835		71.5	%
Non-catastrophe losses		26,990		15,746		11,244		71.4	%		50,468		34,592		15,876		45.9	%
Total losses and loss adjustment expenses	$	30,431	$	17,905	$	12,526		70.0	%	$	57,268	$	38,557	$	18,711		48.5	%

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,
	2024			2023			2024			2023
	(in thousands)						(in thousands)
Reserve for losses and LAE net of reinsurance recoverables at beginning of period	$	110,163		$	81,366		$	97,653		$	77,520
Add: Incurred losses and LAE, net of reinsurance, related to:
Current year		33,355			18,539			59,688			35,839
Prior years		(2,924	)		(634	)		(2,420	)		2,718
Total incurred		30,431			17,905			57,268			38,557
Deduct: Loss and LAE payments, net of reinsurance, related to:
Current year		6,861			6,176			11,756			7,569
Prior years		14,972			11,795			24,404			27,208
Total payments		21,833			17,971			36,160			34,777
Reserve for losses and LAE net of reinsurance recoverables at end of period		118,761			81,300			118,761			81,300
Add: Reinsurance recoverables on unpaid losses and LAE at end of period		347,840			216,783			347,840			216,783
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period	$	466,601		$	298,083		$	466,601		$	298,083

Reconciliation of Non-GAAP Financial Measures

For the three and six months ended June 30, 2024 and 2023, 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,
	2024			2023			2024			2023
	(in thousands)						(in thousands)
Total revenue	$	131,069		$	90,396		$	249,603		$	179,597
Net investment income		(7,960	)		(5,541	)		(15,098	)		(10,661	)
Net realized and unrealized gains on investments		(32	)		(1,127	)		(3,034	)		(1,273	)
Underwriting revenue	$	123,077		$	83,728		$	231,471		$	167,663

Underwriting income and adjusted underwriting income

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
	(in thousands)						(in thousands)
Income before income taxes	$	33,374		$	23,020		$	67,730		$	45,648
Net investment income		(7,960	)		(5,541	)		(15,098	)		(10,661	)
Net realized and unrealized gains on investments		(32	)		(1,127	)		(3,034	)		(1,273	)
Interest expense		225			1,064			965			2,084
Underwriting income	$	25,607		$	17,416		$	50,563		$	35,798
Expenses associated with transactions		472			—			472			—
Stock-based compensation expense		3,968			3,697			7,789			7,147
Amortization of intangibles		389			389			779			703
Expenses associated with catastrophe bond		2,483			1,590			2,483			1,640
Adjusted underwriting income	$	32,919		$	23,092		$	62,086		$	45,288

Adjusted net income

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
	(in thousands)						(in thousands)
Net income	$	25,729		$	17,562		$	52,111		$	34,874
Adjustments:
Net realized and unrealized gains on investments		(32	)		(1,127	)		(3,034	)		(1,273	)
Expenses associated with transactions		472			—			472			—
Stock-based compensation expense		3,968			3,697			7,789			7,147
Amortization of intangibles		389			389			779			703
Expenses associated with catastrophe bond		2,483			1,590			2,483			1,640
Tax impact		(1,029	)		(317	)		(825	)		(857	)
Adjusted net income	$	31,980		$	21,794		$	59,775		$	42,234

Annualized adjusted return on equity

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
	(in thousands)						(in thousands)

Annualized adjusted net income	$	127,920		$	87,176		$	119,550		$	84,468
Average stockholders’ equity	$	517,131		$	409,178		$	501,928		$	399,230
Annualized adjusted return on equity		24.7	%		21.3	%		23.8	%		21.2	%

Adjusted combined ratio

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
	(in thousands)						(in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income	$	96,678		$	65,691		$	179,588		$	130,549
Denominator: Net earned premiums	$	122,285		$	83,107		$	230,151		$	166,347
Combined ratio		79.1	%		79.0	%		78.0	%		78.5	%
Adjustments to numerator:
Expenses associated with transactions	$	(472	)	$	—		$	(472	)	$	—
Stock-based compensation expense		(3,968	)		(3,697	)		(7,789	)		(7,147	)
Amortization of intangibles		(389	)		(389	)		(779	)		(703	)
Expenses associated with catastrophe bond		(2,483	)		(1,590	)		(2,483	)		(1,640	)
Adjusted combined ratio		73.1	%		72.2	%		73.0	%		72.8	%

Diluted adjusted earnings per share

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
	(in thousands, except per share data)				(in thousands, except per share data)

Adjusted net income	$	31,980	$	21,794	$	59,775	$	42,234
Weighted-average common shares outstanding, diluted		25,617,916		25,309,526		25,554,445		25,384,409
Diluted adjusted earnings per share	$	1.25	$	0.86	$	2.34	$	1.66

Catastrophe loss ratio

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
	(in thousands)						(in thousands)
Numerator: Losses and loss adjustment expenses	$	30,431		$	17,905		$	57,268		$	38,557
Denominator: Net earned premiums	$	122,285		$	83,107		$	230,151		$	166,347
Loss ratio		24.9	%		21.5	%		24.9	%		23.2	%

Numerator: Catastrophe losses	$	3,441		$	2,159		$	6,800		$	3,965
Denominator: Net earned premiums	$	122,285		$	83,107		$	230,151		$	166,347
Catastrophe loss ratio		2.8	%		2.6	%		3.0	%		2.4	%

Adjusted combined ratio excluding catastrophe losses

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
	(in thousands)						(in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income	$	96,678		$	65,691		$	179,588		$	130,549
Denominator: Net earned premiums	$	122,285		$	83,107		$	230,151		$	166,347
Combined ratio		79.1	%		79.0	%		78.0	%		78.5	%
Adjustments to numerator:
Expenses associated with transactions	$	(472	)	$	—		$	(472	)	$	—
Stock-based compensation expense		(3,968	)		(3,697	)		(7,789	)		(7,147	)
Amortization of intangibles		(389	)		(389	)		(779	)		(703	)
Expenses associated with catastrophe bond		(2,483	)		(1,590	)		(2,483	)		(1,640	)
Catastrophe losses		(3,441	)		(2,159	)		(6,800	)		(3,965	)
Adjusted combined ratio excluding catastrophe losses		70.3	%		69.6	%		70.1	%		70.4	%

Tangible Stockholders’ equity

	June 30,			December 31,
	2024			2023
	(in thousands)
Stockholders’ equity	$	532,606		$	471,252
Goodwill and intangible assets		(11,537	)		(12,315	)
Tangible stockholders’ equity	$	521,069		$	458,937

Palomar Holdings, Inc. Reports Second Quarter 2024 Results

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