Palomar Holdings, Inc. Reports Second Quarter 2022 Results| MENAFN.COM

Friday, 12 August 2022 12:54 GMT

Palomar Holdings, Inc. Reports Second Quarter 2022 Results


(MENAFN- GlobeNewsWire - Nasdaq)

LA JOLLA, Calif., Aug. 03, 2022 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or“Company”) reported net income of $14.6 million, or $0.57 per diluted share, for the second quarter of 2022 compared to $12.3 million, or $0.47 per diluted share, for the second quarter of 2021. Adjusted net income(1) was $18.7 million, or $0.73 per diluted share, for the second quarter of 2022 as compared to $13.2 million, or $0.51 per diluted share, for the second quarter of 2021.

Second Quarter 2022 Highlights

  • Gross written premiums increased by 69.1% to $218.7 million compared to $129.4 million in the second quarter of 2021
  • Net income of $14.6 million, compared to $12.3 million in the second quarter of 2021
  • Adjusted net income(1) of $18.7 million, compared to $13.2 million in the second quarter of 2021
  • Total loss ratio of 17.9% compared to 13.3% in the second quarter of 2021
  • Combined ratio of 75.1% compared to 76.0% in the second quarter of 2021
  • Adjusted combined ratio(1) of 69.1%, compared to 73.8% in the second quarter of 2021
  • Annualized return on equity of 15.4%, compared to 13.1% in the second quarter of 2021
  • Annualized adjusted return on equity(1) of 19.7%, compared to 14.1% in the second quarter of 2021

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

Mac Armstrong, Chairman and Chief Executive Officer, commented,“Simply put, Palomar had a very strong second quarter. Our results clearly demonstrate further execution of our 2022 strategic objectives and“Palomar 2X”, our intermediate term strategic plan of doubling our adjusted underwriting income and delivering an adjusted return on equity of 20%. Highlights of the quarter included 69% year-over-year gross written premium growth, the successful placement of our excess of loss reinsurance program, the conversion of our Texas Specialty Homeowner's product to a fronting program and incremental traction in our new products including professional liability and PLMR-FRONT.”

“Predictable, profitable growth is a key tenant of Palomar 2X and the second quarter results embodied this tenant. During the quarter, we achieved an adjusted combined ratio of approximately 69.1%, an annualized adjusted ROE of 19.7%, and year-over-year adjusted net income growth of 41.3%, even with $4.6 million of unrealized losses in our equity portfolio,' concluded Mr. Armstrong.

Underwriting Results
Gross written premiums increased 69.1% to $218.7 million compared to $129.4 million in the second quarter of 2021, while net earned premiums increased 48.0% compared to the prior year's second quarter.

Losses and loss adjustment expenses for the second quarter were $14.4 million including $13.9 million of non-catastrophe attritional losses, and $0.5 million of catastrophe losses from unfavorable prior period development. The loss ratio for the quarter of 17.9% was comprised of a catastrophe loss ratio of 0.7% and an attritional loss ratio of 17.2%, compared to a loss ratio of 13.3% during the same period last year comprised of a catastrophe loss ratio of negative 2.1% and an attritional loss ratio of 15.4%. Non-catastrophe losses and loss ratio increased mainly due to the growth of lines of business subject to attritional losses, such as Inland Marine, Flood, and Commercial All Risk.

Underwriting income(1) was $20.0 million resulting in a combined ratio of 75.1% compared to underwriting income of $13.0 million and a combined ratio of 76.0% during the same period last year. Excluding expenses related to stock-based compensation, amortization of intangibles, and catastrophe bonds, the Company's adjusted combined ratio(1) was 69.1% in the second quarter compared to 73.8% during the same period last year. The adjusted combined ratio(1) decreased primarily due to a lower expense ratio offset by a higher loss ratio during the quarter.

Investment Results
Net investment income increased by 43.1% to $3.1 million compared to $2.2 million in the prior year's second quarter. The year over year increase was a result of a higher average balance of investments held during the three months ended June 30, 2022 due to cash generated from operations and higher yields on fixed income investments. Funds are generally invested conservatively in high quality securities, including government agency, asset and mortgage-backed securities, municipal and corporate bonds with an average credit quality of 'A1/A' with a small portion of our portfolio invested in equity securities. The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 4.18 years at June 30, 2022. Cash and invested assets totaled $552.5 million at June 30, 2022. During the second quarter, the Company recorded realized and unrealized losses of $4.7 million related to its equity investment portfolio as compared to realized and unrealized gains of $0.3 million in last year's second quarter.

Tax Rate
The effective tax rate for the three months ended June 30, 2022 was 20.2% compared to 20.5% for the three months ended June 30, 2021. For the current quarter and prior year quarter, the Company's income tax rate was lower than the statutory rate of 21% due primarily to the tax impact of the permanent component of employee stock option exercises.

Stockholders' Equity and Returns
Stockholders' equity was $378.1 million at June 30, 2022, compared to $376.7 million at June 30, 2021. For the three months ended June 30, 2022, the Company's annualized return on equity was 15.4% compared to 13.1% for the same period in the prior year while adjusted return on equity(1) was 19.7% compared to 14.1% for the same period in the prior year. During the current quarter, the Company repurchased 127,952 shares, or $7.3 million, of the Company's previously announced $100 million share repurchase authorization. As of June 30 2022, $79.7 million remains available for future repurchases.

Full Year 2022 Outlook
For the full year 2022, the Company maintains its outlook to achieve adjusted net income of $80 million to $85 million, including $5.9 million of pre-tax unrealized losses on equity security holdings. This range is equivalent to adjusted net income of $85 million to $90 million excluding unrealized gains and losses for the year.

Conference Call
As previously announced, Palomar will host a conference call Thursday August 4, 2022, to discuss its second quarter 2022 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 2022 Earnings Conference Call. A replay will be available starting at 3:00 p.m. (Eastern Time) on August 4, 2022, and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the replay is 13730139. The replay will be available until 11:59 p.m. (Eastern Time) on August 11, 2022.

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 . 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 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, net realized and unrealized gains and losses on investments, and interest expense. See“Reconciliation of Non-GAAP Financial Measures” for a reconciliation of income before income taxes calculated in accordance with GAAP to underwriting income.

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

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

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

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

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

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

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

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

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

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

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

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

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

Contact
Media Inquiries
Bill Bold
1-619-890-5972

Investor Relations
Jamie Lillis
1-203-428-3223

Source: Palomar Holdings, Inc.

Summary of Operating Results

The following table summarizes the Company's results for the three months ended June 30, 2022 and 2021:

Three months ended
June 30,
2022 2021 Change % Change
($ in thousands, except per share data)
Gross written premiums $ 218,689 $ 129,359 $ 89,330 69.1 %
Ceded written premiums (122,627 ) (51,568 ) (71,059 ) 137.8 %
Net written premiums 96,062 77,791 18,271 23.5 %
Net earned premiums 80,265 54,215 26,050 48.0 %
Commission and other income 990 1,006 (16 ) (1.6 %
Total underwriting revenue (1) 81,255 55,221 26,034 47.1 %
Losses and loss adjustment expenses 14,398 7,235 7,163 99.0 %
Acquisition expenses 28,663 22,424 6,239 27.8 %
Other underwriting expenses 18,195 12,539 5,656 45.1 %
Underwriting income (1) 19,999 13,023 6,976 53.6 %
Interest expense (111 ) (111 ) NM
Net investment income 3,140 2,194 946 43.1 %
Net realized and unrealized gains (losses) on investments (4,735 ) 300 (5,035 ) NM
Income before income taxes 18,293 15,517 2,776 17.9 %
Income tax expense 3,704 3,177 527 16.6 %
Net income $ 14,589 $ 12,340 $ 2,249 18.2 %
Adjustments:
Stock-based compensation expense 2,704 907 1,797 198.1 %
Amortization of intangibles 313 252 61 24.2 %
Expenses associated with catastrophe bond, net of rebate 1,792 16 1,776 NM
Tax impact (695 ) (278 ) (417 ) 150.0 %
Adjusted net income (1) $ 18,703 $ 13,237 $ 5,466 41.3 %
Key Financial and Operating Metrics
Annualized return on equity 15.4 % 13.1 %
Annualized adjusted return on equity (1) 19.7 % 14.1 %
Loss ratio 17.9 % 13.3 %
Expense ratio 57.1 % 62.6 %
Combined ratio 75.1 % 76.0 %
Adjusted combined ratio (1) 69.1 % 73.8 %
Diluted earnings per share $ 0.57 $ 0.47
Diluted adjusted earnings per share (1) $ 0.73 $ 0.51
Catastrophe losses $ 548 $ (1,137 )
Catastrophe loss ratio (1) 0.7 % (2.1 )%
Adjusted combined ratio excluding catastrophe losses (1) 68.4 % 75.9 %
Adjusted underwriting income (1) $ 24,808 $ 14,198 10,610 74.7 %
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 six months ended June 30, 2022 and 2021:

Six months ended
June 30,
2022 2021 Change % Change
($ in thousands, except per share data)
Gross written premiums $ 389,623 $ 232,936 $ 156,687 67.3 %
Ceded written premiums (212,179 ) (94,932 ) (117,247 ) 123.5 %
Net written premiums 177,444 138,004 39,440 28.6 %
Net earned premiums 156,297 101,268 55,029 54.3 %
Commission and other income 1,767 1,717 50 2.9 %
Total underwriting revenue (1) 158,064 102,985 55,079 53.5 %
Losses and loss adjustment expenses 29,351 2,813 26,538 NM
Acquisition expenses 56,718 41,737 14,981 35.9 %
Other underwriting expenses 34,119 26,786 7,333 27.4 %
Underwriting income (1) 37,876 31,649 6,227 19.7 %
Interest expense (204 ) (204 ) NM
Net investment income 5,719 4,413 1,306 29.6 %
Net realized and unrealized losses on investments (6,014 ) (439 ) (5,575 ) NM
Income before income taxes 37,377 35,623 1,754 4.9 %
Income tax expense 8,251 6,653 1,598 24.0 %
Net income $ 29,126 $ 28,970 $ 156 0.5 %
Adjustments:
Expenses associated with transactions 85 411 (326 ) (79.3 )%
Stock-based compensation expense 5,463 1,845 3,618 196.1 %
Amortization of intangibles 628 589 39 6.6 %
Expenses associated with catastrophe bond, net of rebate 1,992 1,698 294 17.3 %
Tax impact (1,019 ) (990 ) (29 ) 2.9 %
Adjusted net income (1) $ 36,275 $ 32,523 $ 3,752 11.5 %
Key Financial and Operating Metrics
Annualized return on equity 15.1 % 15.6 %
Annualized adjusted return on equity (1) 18.8 % 17.6 %
Loss ratio 18.8 % 2.8 %
Expense ratio 57.0 % 66.0 %
Combined ratio 75.8 % 68.7 %
Adjusted combined ratio (1) 70.5 % 64.3 %
Diluted earnings per share $ 1.13 $ 1.11
Diluted adjusted earnings per share (1) $ 1.41 $ 1.24
Catastrophe losses $ 1,029 $ (10,768 )
Catastrophe loss ratio (1) 0.7 % (10.6 )%
Adjusted combined ratio excluding catastrophe losses (1) 69.9 % 74.9 %
Adjusted underwriting income (1) $ 46,044 $ 36,192 9,852 27.2 %
NM- not meaningful

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,
2022 2021
(Unaudited)
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $513,166 in 2022; $426,122 in 2021) $ 478,477 $ 432,682
Equity securities, at fair value (cost: $41,990 in 2022; $31,834 in 2021) 37,509 33,261
Total investments 515,986 465,943
Cash and cash equivalents 36,471 50,284
Restricted cash 37 87
Accrued investment income 3,221 2,725
Premium receivable 119,698 88,012
Deferred policy acquisition costs 55,731 55,953
Reinsurance recoverable on unpaid losses and loss adjustment expenses 107,898 127,947
Reinsurance recoverable on paid losses and loss adjustment expenses 24,748 29,368
Ceded unearned premiums 129,724 58,315
Prepaid expenses and other assets 40,519 37,072
Deferred tax assets, net 7,533
Property and equipment, net 687 527
Intangible assets, net 8,888 9,501
Total assets $ 1,051,141 $ 925,734
Liabilities and stockholders' equity
Liabilities:
Accounts payable and other accrued liabilities $ 17,646 $ 21,284
Reserve for losses and loss adjustment expenses 163,667 173,366
Unearned premiums 376,809 284,665
Ceded premium payable 85,592 37,460
Funds held under reinsurance treaty 6,362 10,882
Deferred tax liabilities, net 3,908
Borrowings from credit agreements 23,000
Total liabilities 673,076 531,565
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021
Common stock, $0.0001 par value, 500,000,000 shares authorized, 25,220,131 and 25,428,929 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively 3 3
Additional paid-in capital 326,473 318,902
Accumulated other comprehensive income (loss) (27,216) 5,312
Retained earnings 78,805 69,952
Total stockholders' equity 378,065 394,169
Total liabilities and stockholders' equity $ 1,051,141 $ 925,734

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
Six Months Ended
June 30,
June 30,
2022 2021 2022 2021
Revenues:
Gross written premiums $ 218,689 $ 129,359 $ 389,623 $ 232,936
Ceded written premiums (122,627 ) (51,568 ) (212,179 ) (94,932 )
Net written premiums 96,062 77,791 177,444 138,004
Change in unearned premiums (15,797 ) (23,576 ) (21,147 ) (36,736 )
Net earned premiums 80,265 54,215 156,297 101,268
Net investment income 3,140 2,194 5,719 4,413
Net realized and unrealized gains (losses) on investments (4,735 ) 300 (6,014 ) (439 )
Commission and other income 990 1,006 1,767 1,717
Total revenues 79,660 57,715 157,769 106,959
Expenses:
Losses and loss adjustment expenses 14,398 7,235 29,351 2,813
Acquisition expenses 28,663 22,424 56,718 41,737
Other underwriting expenses 18,195 12,539 34,119 26,786
Interest expense 111 204
Total expenses 61,367 42,198 120,392 71,336
Income before income taxes 18,293 15,517 37,377 35,623
Income tax expense 3,704 3,177 8,251 6,653
Net income 14,589 12,340 29,126 28,970
Other comprehensive income (loss), net:
Net unrealized gains (losses) on securities available for sale for the three and six months ended June 30, 2022 and 2021, respectively (14,065 ) 2,710 (32,528 ) (3,489 )
Net comprehensive income (loss) $ 524 $ 15,050 $ (3,402 ) $ 25,481
Per Share Data:
Basic earnings per share $ 0.58 $ 0.48 $ 1.15 $ 1.14
Diluted earnings per share $ 0.57 $ 0.47 $ 1.13 $ 1.11
Weighted-average common shares outstanding:
Basic 25,211,924 25,479,561 25,283,222 25,515,893
Diluted 25,746,780 26,104,880 25,817,442 26,181,206

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, location and company are presented below:

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
($ in thousands) ($ in thousands)
% of % of % of % of
Amount GWP Amount GWP Amount GWP Amount GWP
Product
Residential Earthquake $ 54,090 24.7 % $ 42,192 32.6 % $ 100,426 25.8 % $ 78,090 33.5 %
Fronting Premiums 42,154 19.3 % 0.0 % 71,999 18.5 % 0.0 %
Commercial Earthquake 33,103 15.1 % 17,343 13.4 % 58,247 14.9 % 38,619 16.6 %
Inland Marine 23,134 10.6 % 11,681 9.0 % 41,371 10.6 % 19,515 8.4 %
Commercial All Risk 21,213 9.7 % 14,976 11.6 % 31,791 8.2 % 23,165 9.9 %
Specialty Homeowners 13,891 6.4 % 19,135 14.8 % 30,176 7.7 % 33,138 14.2 %
Hawaii Hurricane 8,240 3.8 % 7,788 6.0 % 15,154 3.9 % 13,925 6.0 %
Residential Flood 3,583 1.6 % 2,865 2.2 % 6,577 1.7 % 5,149 2.2 %
Other 19,281 8.8 % 13,379 10.4 % 33,882 8.7 % 21,335 9.2 %
Total Gross Written Premiums $ 218,689 100.0 % $ 129,359 100.0 % $ 389,623 100.0 % $ 232,936 100.0 %


Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
($ in thousands) ($ in thousands)
% of % of % of % of
Amount GWP Amount GWP Amount GWP Amount GWP
State
California $ 93,130 42.6 % $ 54,223 41.9 % $ 161,848 41.5 % $ 104,725 45.0 %
Texas 26,286 12.0 % 17,373 13.4 % 45,265 11.6 % 28,427 12.2 %
Florida 14,809 6.8 % 11,697 9.0 % 19,771 5.1 % 17,755 7.6 %
Hawaii 10,191 4.7 % 9,041 7.0 % 18,731 4.8 % 15,970 6.9 %
Washington 8,937 4.1 % 4,663 3.6 % 15,818 4.1 % 8,751 3.8 %
Illinois 4,676 2.1 % 3,173 2.5 % 8,949 2.3 % 5,775 2.4 %
Oregon 4,371 2.0 % 2,818 2.2 % 8,745 2.2 % 5,723 2.4 %
North Carolina 3,700 1.7 % 4,264 3.3 % 7,778 2.0 % 8,152 3.5 %
Other 52,589 24.0 % 22,107 17.1 % 102,718 26.4 % 37,658 16.2 %
Total Gross Written Premiums $ 218,689 100.0 % $ 129,359 100.0 % $ 389,623 100.0 % $ 232,936 100.0 %


Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
($ in thousands) ($ in thousands)
% of % of % of % of
Amount GWP Amount GWP Amount GWP Amount GWP
Subsidiary
PSIC $ 116,338 53.2 % $ 95,271 73.6 % $ 220,342 56.6 % $ 175,117 75.2 %
PESIC 102,351 46.8 % 34,088 26.4 % 169,281 43.4 % 57,819 24.8 %
Total Gross Written Premiums $ 218,689 100.0 % $ 129,359 100.0 % $ 389,623 100.0 % $ 232,936 100.0 %

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,
2022 2021 Change % Change 2022 2021 Change % Change
($ in thousands)
($ in thousands)
Gross earned premiums $ 158,142 $ 102,520 $ 55,622 54.3 % $ 297,067 $ 193,812 $ 103,255 53.3 %
Ceded earned premiums (77,877 ) (48,305 ) (29,572 ) 61.2 % (140,770 ) (92,544 ) (48,226 ) 52.1 %
Net earned premiums $ 80,265 $ 54,215 $ 26,050 48.0 % $ 156,297 $ 101,268 $ 55,029 54.3 %
Net earned premium ratio 50.8 % 52.9 % 52.6 % 52.3 %

Loss detail

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change % Change 2022 2021 Change % Change
($ in thousands) ($ in thousands)
Catastrophe losses $ 548 $ (1,137 ) $ 1,685 NM $ 1,029 $ (10,768 ) $ 11,797 NM
Non-catastrophe losses 13,850 8,372 5,478 65.4 % 28,322 13,581 14,741 108.5 %
Total losses and loss adjustment expenses $ 14,398 $ 7,235 $ 7,163 99.0 % $ 29,351 $ 2,813 $ 26,538 NM

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,
2022 2021 2022 2021
(in thousands) (in thousands)
Reserve for losses and LAE net of reinsurance recoverables at beginning of period $ 51,386 $ 19,016 $ 45,419 $ 34,470
Add: Incurred losses and LAE, net of reinsurance, related to:
Current year 14,350 7,612 27,799 5,916
Prior years 48 (377 ) 1,552 (3,103 )
Total incurred 14,398 7,235 29,351 2,813
Deduct: Loss and LAE payments, net of reinsurance, related to:
Current year 4,399 (1,060 ) 5,889 620
Prior years 5,615 3,678 13,112 13,030
Total payments 10,014 2,618 19,001 13,650
Reserve for losses and LAE net of reinsurance recoverables at end of period 55,769 23,633 55,769 23,633
Add: Reinsurance recoverables on unpaid losses and LAE at end of period 107,898 145,459 107,898 145,459
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period $ 163,667 $ 169,092 $ 163,667 $ 169,092

Reconciliation of Non-GAAP Financial Measures

For the three and six months ended June 30, 2022 and 2021, 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,
2022 2021 2022 2021
(in thousands)
(in thousands)
Total revenue $ 79,660 $ 57,715 $ 157,769 $ 106,959
Net investment income (3,140 ) (2,194 ) (5,719 ) (4,413 )
Net realized and unrealized (gains) losses on investments 4,735 (300 ) 6,014 439
Underwriting revenue $ 81,255 $ 55,221 $ 158,064 $ 102,985

Underwriting income and adjusted underwriting income

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
(in thousands)
Income before income taxes $ 18,293 $ 15,517 $ 37,377 $ 35,623
Net investment income (3,140 ) (2,194 ) (5,719 ) (4,413 )
Net realized and unrealized (gains) losses on investments 4,735 (300 ) 6,014 439
Interest expense 111 204
Underwriting income $ 19,999 $ 13,023 $ 37,876 $ 31,649
Expenses associated with transactions 85 411
Stock-based compensation expense 2,704 907 5,463 1,845
Amortization of intangibles 313 252 628 589
Expenses associated with catastrophe bond, net of rebate 1,792 16 1,992 1,698
Adjusted underwriting income $ 24,808 $ 14,198 $ 46,044 $ 36,192

Adjusted net income

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
(in thousands)
Net income $ 14,589 $ 12,340 $ 29,126 $ 28,970
Adjustments:
Expenses associated with transactions 85 411
Stock-based compensation expense 2,704 907 5,463 1,845
Amortization of intangibles 313 252 628 589
Expenses associated with catastrophe bond, net of rebate 1,792 16 1,992 1,698
Tax impact (695 ) (278 ) (1,019 ) (990 )
Adjusted net income $ 18,703 $ 13,237 $ 36,275 $ 32,523

Annualized adjusted return on equity

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
($ in thousands) ($ in thousands)
Annualized adjusted net income $ 74,812 $ 52,948 $ 72,550 $ 65,046
Average stockholders' equity $ 379,232 $ 376,563 $ 386,117 $ 370,229
Annualized adjusted return on equity 19.7 % 14.1 % 18.8 % 17.6 %

Adjusted combined ratio

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
($ in thousands)
($ in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $ 60,266 $ 41,192 $ 118,421 $ 69,619
Denominator: Net earned premiums $ 80,265 $ 54,215 $ 156,297 $ 101,268
Combined ratio 75.1 % 76.0 % 75.8 % 68.7
Adjustments to numerator:
Expenses associated with transactions $ $ $ (85 ) $ (411 )
Stock-based compensation expense (2,704 ) (907 ) (5,463 ) (1,845 )
Amortization of intangibles (313 ) (252 ) (628 ) (589 )
Expenses associated with catastrophe bond, net of rebate (1,792 ) (16 ) (1,992 ) (1,698 )
Adjusted combined ratio 69.1 % 73.8 % 70.5 % 64.3

Diluted adjusted earnings per share

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands, except per share data) (in thousands, except per share data)
Adjusted net income $ 18,703 $ 13,237 $ 36,275 $ 32,523
Weighted-average common shares outstanding, diluted 25,746,780 26,104,880 25,817,442 26,181,206
Diluted adjusted earnings per share $ 0.73 $ 0.51 $ 1.41 $ 1.24

Catastrophe loss ratio

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
($ in thousands) ($ in thousands)
Numerator: Losses and loss adjustment expenses $ 14,398 $ 7,235 $ 29,351 $ 2,813
Denominator: Net earned premiums $ 80,265 $ 54,215 $ 156,297 $ 101,268
Loss ratio 17.9 % 13.3 % 18.8 % 2.8 %
Numerator: Catastrophe losses $ 548 $ (1,137 ) $ 1,029 $ (10,768 )
Denominator: Net earned premiums $ 80,265 $ 54,215 ) $ 156,297 $ 101,268
Catastrophe loss ratio 0.7 % (2.1 % 0.7 % (10.6 )%

Adjusted combined ratio excluding catastrophe losses

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
($ in thousands)
($ in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $ 60,266 $ 41,192 $ 118,421 $ 69,619
Denominator: Net earned premiums $ 80,265 $ 54,215 $ 156,297 $ 101,268
Combined ratio 75.1 % 76.0 % 75.8 % 68.7 %
Adjustments to numerator:
Expenses associated with transactions $ $ $ (85 ) $ (411 )
Stock-based compensation expense (2,704 ) (907 ) (5,463 ) (1,845 )
Amortization of intangibles (313 ) (252 ) (628 ) (589 )
Expenses associated with catastrophe bond, net of rebate (1,792 ) (16 ) (1,992 ) (1,698 )
Catastrophe losses (548 ) 1,137 (1,029 ) 10,768
Adjusted combined ratio excluding catastrophe losses 68.4 % 75.9 % 69.9 % 74.9 %

Tangible Stockholders' equity

June 30, December 31,
2022 2021
(in thousands)
Stockholders' equity $ 378,065 $ 394,169
Intangible assets (8,888 ) (9,501 )
Tangible stockholders' equity $ 369,177 $ 384,668

 




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