Palomar Holdings, Inc. Reports Second Quarter 2023 Results

LA JOLLA, Calif., Aug. 02, 2023 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported net income of $17.6 million, or $0.69 per diluted share, for the second quarter of 2023 compared to net income of $14.6 million, or $0.57 per diluted share, for the second quarter of 2022. Adjusted net income(1) was $21.8 million, or $0.86 per diluted share, for the second quarter of 2023 as compared to $22.4 million, or $0.87 per diluted share, for the second quarter of 2022. Effective December 31, 2022, the Company adjusts for net realized and unrealized gains and losses when calculating and presenting adjusted net income, diluted adjusted earnings per share, and adjusted return on equity. All prior period amounts have been adjusted accordingly.

Second Quarter 2023 Highlights

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

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

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

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

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

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

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

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

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

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

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

Conference Call
As previously announced, Palomar will host a conference call Thursday August 3, 2023, to discuss its second quarter 2023 results at 12:00 p.m. (Eastern Time). The conference call can be accessed live by dialing 1-877-423-9813 or for international callers, 1-201-689-8573, and requesting to be joined to the Palomar Second Quarter 2023 Earnings Conference Call. A replay will be available starting at 4:00 p.m. (Eastern Time) on August 3, 2023, and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the replay is 13737957. The replay will be available until 11:59 p.m. (Eastern Time) on August 10, 2023.

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

About Palomar Holdings, Inc.
Palomar Holdings, Inc. is the holding company of subsidiaries Palomar Specialty Insurance Company (“PSIC”), Palomar Specialty Reinsurance Company Bermuda Ltd., Palomar Insurance Agency, Inc. and Palomar Excess and Surplus Insurance Company (“PESIC”). Palomar is an innovative insurer serving residential and commercial clients in specialty markets including the market for earthquake insurance. Palomar’s insurance subsidiaries, Palomar Specialty Insurance Company, Palomar Specialty Reinsurance Company Bermuda Ltd., and Palomar Excess and Surplus Insurance Company, have a financial strength rating of “A-” (Excellent) from A.M. Best. 
To learn more, visit PLMR.com.

Non-GAAP and Key Performance Indicators

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Contact
Media Inquiries 
Lindsay Conner 
1-551-206-6217 
lconner@plmr.com

Investor Relations
Jamie Lillis
1-203-428-3223
investors@plmr.com 
Source: Palomar Holdings, Inc.

Summary of Operating Results:

The following table summarizes the Company’s results for the three and six months ended June 30, 2023 and 2022:

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

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

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

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

Condensed Consolidated Balance sheets
Palomar Holdings, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (unaudited) (in thousands, except shares and par value data)
		June 30,				December 31,
		2023				2022
		(Unaudited)
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $605,040 in 2023; $561,580 in 2022)		$	560,121			$	515,064
Equity securities, at fair value (cost: $43,297 in 2023; $42,352 in 2022)			41,428				38,576
Total investments			601,549				553,640
Cash and cash equivalents			58,310				68,108
Restricted cash			294				56
Accrued investment income			4,568				3,777
Premiums receivable			243,002				162,858
Deferred policy acquisition costs, net of ceding commissions and fronting fees			55,913				56,740
Reinsurance recoverable on paid losses and loss adjustment expenses			39,101				39,718
Reinsurance recoverable on unpaid losses and loss adjustment expenses			216,783				153,895
Ceded unearned premiums			242,452				204,084
Prepaid expenses and other assets			60,125				44,088
Deferred tax assets, net			10,617				10,622
Property and equipment, net			498				603
Goodwill and intangible assets, net			13,095				8,261
Total assets		$	1,546,307			$	1,306,450
Liabilities and stockholders' equity
Liabilities:
Accounts payable and other accrued liabilities		$	24,838			$	25,760
Reserve for losses and loss adjustment expenses			298,083				231,415
Unearned premiums			528,289				471,314
Ceded premium payable			199,611				146,127
Funds held under reinsurance treaty			10,378				10,680
Borrowings from credit agreements			71,400				36,400
Total liabilities			1,132,599				921,696
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2023 and December 31, 2022			—				—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 24,794,269 and 25,027,467 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively			3				3
Additional paid-in capital			341,413				333,558
Accumulated other comprehensive loss			(34,726	)			(36,515	)
Retained earnings			107,018				87,708
Total stockholders' equity			413,708				384,754
Total liabilities and stockholders' equity		$	1,546,307			$	1,306,450

Condensed Consolidated Income Statement
Palomar Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Income and Comprehensive Income (loss) (Unaudited) (in thousands, except shares and per share data)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2023				2022				2023				2022
Revenues:
Gross written premiums		$	274,296			$	218,689			$	524,407			$	389,623
Ceded written premiums			(169,109	)			(122,627	)			(339,453	)			(212,179	)
Net written premiums			105,187				96,062				184,954				177,444
Change in unearned premiums			(22,080	)			(15,797	)			(18,607	)			(21,147	)
Net earned premiums			83,107				80,265				166,347				156,297
Net investment income			5,541				3,140				10,661				5,719
Net realized and unrealized gains (losses) on investments			1,127				(4,735	)			1,273				(6,014	)
Commission and other income			621				990				1,316				1,767
Total revenues			90,396				79,660				179,597				157,769
Expenses:
Losses and loss adjustment expenses			17,905				14,398				38,557				29,351
Acquisition expenses, net of ceding commissions and fronting fees			26,057				28,663				51,736				56,718
Other underwriting expenses			22,350				18,195				41,572				34,119
Interest expense			1,064				111				2,084				204
Total expenses			67,376				61,367				133,949				120,392
Income before income taxes			23,020				18,293				45,648				37,377
Income tax expense			5,458				3,704				10,774				8,251
Net income			17,562				14,589				34,874				29,126
Other comprehensive income (loss), net:
Net unrealized gains (losses) on securities available for sale			(3,685	)			(14,065	)			1,789				(32,528	)
Net comprehensive income (loss)		$	13,877			$	524			$	36,663			$	(3,402	)
Per Share Data:
Basic earnings per share		$	0.71			$	0.58			$	1.40			$	1.15
Diluted earnings per share		$	0.69			$	0.57			$	1.37			$	1.13
Weighted-average common shares outstanding:
Basic			24,833,852				25,211,924				24,901,403				25,283,222
Diluted			25,309,526				25,746,780				25,384,409				25,817,442

Underwriting Segment Data

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

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

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

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

		Three Months Ended June 30,																Six Months Ended June 30,
		2023								2022								2023								2022
		($ in thousands)																($ in thousands)
						% of								% of								% of								% of
		Amount				GWP				Amount				GWP				Amount				GWP				Amount				GWP
Subsidiary
PSIC		$	159,846				58.3	%		$	116,338				53.2	%		$	310,550				59.2	%		$	220,342				56.6	%
PESIC			114,450				41.7	%			102,351				46.8	%			213,857				40.8	%			169,281				43.4	%
Total Gross Written Premiums		$	274,296				100.0	%		$	218,689				100.0	%		$	524,407				100.0	%		$	389,623				100.0	%

Gross and net earned premiums

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

		Three Months Ended																Six Months Ended
		June 30,																June 30,
		2023				2022				Change				% Change				2023				2022				Change				% Change
		($ in thousands)																($ in thousands)
Gross earned premiums		$	242,189			$	158,142			$	84,047				53.1	%		$	467,432			$	297,067			$	170,365				57.3	%
Ceded earned premiums			(159,082	)			(77,877	)			(81,205	)			104.3	%			(301,085	)			(140,770	)			(160,315	)			113.9	%
Net earned premiums		$	83,107			$	80,265			$	2,842				3.5	%		$	166,347			$	156,297			$	10,050				6.4	%
Net earned premium ratio			34.3	%			50.8	%											35.6	%			52.6	%

Loss detail

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

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

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

Reconciliation of Non-GAAP Financial Measures

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

Underwriting revenue

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

Underwriting income and adjusted underwriting income

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

Adjusted net income

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

Annualized adjusted return on equity

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

Adjusted combined ratio

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

Diluted adjusted earnings per share

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

Catastrophe loss ratio

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

Adjusted combined ratio excluding catastrophe losses

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

Tangible Stockholders’ equity

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