• Palomar Holdings, Inc. Reports Fourth Quarter & Full Year 2021 Results

    Source: Nasdaq GlobeNewswire / 16 Feb 2022 15:15:01   America/Chicago

    LA JOLLA, Calif., Feb. 16, 2022 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported net income of $16.6 million, or $0.64 per diluted share, for the fourth quarter of 2021 compared to a net loss of $1.8 million, or $0.07 per diluted share, for the fourth quarter of 2020. Adjusted net income(1) was $19.2 million, or $0.74 per diluted share, for the fourth quarter of 2021 as compared to an adjusted net loss of $1.3 million, or $0.05 per diluted share, for the fourth quarter of 2020.

    Fourth Quarter 2021 Highlights

    • Gross written premiums increased by 56.0% to $149.9 million compared to $96.1 million in the fourth quarter of 2020
    • Net income of $16.6 million, compared to a net loss of $1.8 million in the fourth quarter of 2020
    • Adjusted net income(1) of $19.2 million, compared to an adjusted net loss of $1.3 million in the fourth quarter of 2020
    • Total loss ratio of 15.0% compared to 44.2% in the fourth quarter of 2020
    • Combined ratio of 75.0% compared to 112.8% in the fourth quarter of 2020
    • Adjusted combined ratio (1) of 70.7%, compared to 111.0% in the fourth quarter of 2020
    • Annualized return on equity of 17.2%, compared to negative 2.0% in the fourth quarter of 2020
    • Annualized adjusted return on equity(1) of 19.9%, compared to negative 1.4% in the fourth quarter of 2020

    Full Year 2021 Highlights

    • Gross written premiums increased by 51.0% to $535.2 million compared to $354.4 million in 2020
    • Net income of $45.8 million, compared to $6.3 million in 2020
    • Adjusted net income(1) of $53.4 million, compared to $8.9 million in 2020
    • Total loss ratio of 17.7%, compared to 41.3% in 2020
    • Combined ratio of 80.0%, compared to 102.5% in 2020
    • Adjusted combined ratio(1) of 76.1%, compared to 100.4% in 2020
    • Return on equity of 12.1%, compared to 2.1% in 2020
    • Adjusted return on equity(1) of 14.1%, compared to 3.0% in 2020

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

    Mac Armstrong, Chairman and Chief Executive Officer, commented, “At the onset of 2021, Palomar announced four key strategic initiatives that it intended to implement over the course of the year. First, we would grow our core book of business at a level similar to that of 2020; next, we would build our newly launched E&S company, Palomar Excess & Surplus Insurance Company (“PESIC”); additionally, we would launch several new initiatives that would position Palomar for sustained long-term, profitable growth; and lastly, we would reduce the volatility of our operating results through the exit of unprofitable business segments, underwriting enhancements and conservative risk transfer solutions. I am pleased to report that our results in 2021 reflect the significant progress made on each of these initiatives.”

    “Our gross written premium grew 51.0% for the year and at an even more impressive 56.0% in the fourth quarter. PESIC wrote $152.1 million of premium in 2021, its first full year of operation and exited the year on an over $200 million annual run rate. We also made investments in our business that plant the seeds for future growth, including the expansion of our casualty underwriting team and the launch of PLMR-FRONT, that we expect to contribute meaningful net income in the years ahead. While expanding our business is important, we remained acutely focused on delivering predictable results over time. To accomplish this, during the year we successfully ran-off our Admitted All Risk business, took meaningful rate increases across the portfolio, made enhancements to our underwriting guidelines and purchased an aggregate reinsurance cover which not only protects our business from losses generated from multiple severe catastrophic events but also put a floor on our 2021 adjusted ROE.”

    Mr. Armstrong continued, “Our strong fourth quarter results, most notably the 19.9% adjusted ROE and the aforementioned top line growth of 56%, demonstrate the momentum in our business and the confidence we have in our ability to profitably grow Palomar in 2022 and beyond.”   

    Underwriting Results
    Gross written premiums increased 56.0% to $149.9 million compared to $96.1 million in the fourth quarter of 2020, while net earned premiums increased 74.3% compared to the prior year’s fourth quarter.

    Losses and loss adjustment expenses for the fourth quarter were $10.2 million including $11.9 million of non-catastrophe attritional losses, offset by $1.7 million of favorable development on catastrophe losses from prior periods. The loss ratio for the quarter was 15.0%, comprised of a catastrophe loss ratio of negative 2.5%(1) and an attritional loss ratio of 17.5%, compared to a loss ratio of 44.2% during the same period last year comprised of a catastrophe loss ratio of 37.2% and attritional loss ratio of 7.0%. Underwriting income(1) was $17.0 million resulting in a combined ratio of 75.0% compared to underwriting loss of $5.0 million and a combined ratio of 112.8% during the same period last year. Excluding expenses related to transactions, stock-based compensation, amortization of intangibles, and catastrophe bonds, the Company’s adjusted combined ratio(1) was 70.7% in the fourth quarter compared to 111.0% during the same period last year. Non-catastrophe losses and loss ratio increased mainly due to the growth of lines of business subject to attritional losses, such as Specialty Homeowners, Flood, and Inland Marine.

    Investment Results
    Net investment income increased by 4.6% to $2.4 million compared to $2.3 million in the prior year’s fourth quarter. The year over year increase was primarily due to a higher average balance of investments held during the three months ended December 31, 2021 due to cash generated from operations, offset by lower yields on invested assets. 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". The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.99 years at December 31, 2021. Cash and invested assets totaled $516.3 million at December 31, 2021. During the fourth quarter, the Company recorded realized and unrealized gains of $2.0 million related to its investment portfolio as compared to realized and unrealized gains of $245 thousand in last year’s fourth quarter.

    Tax Rate
    The effective tax rate for the three months ended December 31, 2021 was 22.3% compared to 23.1% for the three months ended December 31, 2020. For the current quarter, the Company’s income tax rate differed from the statutory rate due primarily to non-deductible executive compensation expense. The 2020 fourth quarter tax rate differed from the statutory rate due to the tax impact of the permanent component of employee stock option exercises.

    Stockholders’ Equity and Returns
    Stockholders' equity was $394.2 million at December 31, 2021, compared to $363.7 million at December 31, 2020. For the three months ended December 31, 2021, the Company’s annualized return on equity was 17.2% compared to negative 2.0% for the same period in the prior year while adjusted return on equity(1) was 19.9% compared to negative 1.4% for the same period in the prior year.

    Full Year 2022 Outlook
    For the full year 2022, the Company expects to achieve adjusted net income of $80 million to $85 million.

    Conference Call
    As previously announced, Palomar will host a conference call Thursday February 17, 2022, to discuss its fourth quarter and full year 2021 results at 12:00 p.m. (Eastern Time). The conference call can be accessed by dialing 1-877-423-9813 (domestic) or 1-201-689-8573 (international) and asking for the Palomar Fourth Quarter and Full Year 2021 Earnings Call. A telephonic replay will be available approximately two hours after the call and can be accessed by dialing 1-844-512-2921, or for international callers 1-412-317-6671 and providing the access code 13726650. The telephonic replay will be available until 11:59 pm (Eastern Time) on February 24, 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 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 that focuses on the provision of specialty insurance for residential and commercial clients. Palomar’s underwriting and analytical expertise allow it to concentrate on certain markets that it believes are underserved by other insurance companies, such as the markets for earthquake, hurricane and flood insurance. Palomar’s insurance subsidiaries, Palomar Specialty Insurance Company, Palomar Specialty Reinsurance Company Bermuda Ltd., and Palomar Excess and Surplus Insurance Company, have a financial strength rating of “A-” (Excellent) from A.M. Best.

    To learn more, visit PLMR.com.

    Follow Palomar on Facebook, LinkedIn and Twitter: @PLMRInsurance

    Non-GAAP and Key Performance Indicators

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Contact
    Media Inquiries
    Bill Bold
    1-619-890-5972
    bbold@plmr.com

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

    Summary of Operating Results

    The following table summarizes the Company’s results for the three months ended December 31, 2021 and 2020:

      Three months ended       
      December 31,     Percent 
      2021 2020 Change Change 
        
      ($ in thousands, except per share data) 
    Gross written premiums $149,908 $96,092 $53,816 56.0%
    Ceded written premiums  (70,437)  (53,839)  (16,598) 30.8%
    Net written premiums  79,471  42,253  37,218 88.1%
    Net earned premiums  67,840  38,922  28,918 74.3%
    Commission and other income  872  803  69 8.6%
    Total underwriting revenue (1)  68,712  39,725  28,987 73.0%
    Losses and loss adjustment expenses  10,169  17,214  (7,045) (40.9)%
    Acquisition expenses  27,284  18,131  9,153 50.5%
    Other underwriting expenses  14,285  9,356  4,929 52.7%
    Underwriting income (loss) (1)  16,974  (4,976)  21,950 (441.1)%
    Interest expense  (40)  —  (40) NM 
    Net investment income  2,431  2,325  106 4.6%
    Net realized and unrealized gains on investments  2,029  245  1,784 NM 
    Income (loss) before income taxes  21,394  (2,406)  23,800 NM 
    Income tax expense (benefit)  4,762  (557)  5,319 NM 
    Net income (loss) $16,632 $(1,849) $18,481 NM 
    Adjustments:            
    Expenses associated with transactions and stock offerings  153  —  153 NM 
    Stock-based compensation expense  2,214  710  1,504 211.8%
    Amortization of intangibles  547  —  547 NM 
    Expenses associated with catastrophe bond  5  —  5 NM 
    Tax impact  (350)  (130)  (220) 169.2%
    Adjusted net income (loss) (1) $19,201 $(1,269) $20,470 NM 
    Key Financial and Operating Metrics            
    Annualized return on equity  17.2% (2.0)%     
    Annualized adjusted return on equity (1)  19.9% (1.4)%     
    Loss ratio  15.0% 44.2%     
    Expense ratio  60.0% 68.6%     
    Combined ratio  75.0% 112.8%     
    Adjusted combined ratio (1)  70.7% 111.0%     
    Diluted earnings (loss) per share $0.64 $(0.07)      
    Diluted adjusted earnings (loss) per share (1) $0.74 $(0.05)      
    Catastrophe losses $(1,704) $14,474      
    Catastrophe loss ratio (1)  (2.5)% 37.2%     
    Adjusted combined ratio excluding catastrophe losses (1)  73.2% 73.8%     
    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 year ended December 31, 2021 and 2020:

      Year ended       
      December 31,     Percent 
      2021 2020 Change Change 
        
      ($ in thousands, except per share data) 
    Gross written premiums $535,175 $354,360 $180,815 51.0%
    Ceded written premiums  (223,443)  (155,102)  (68,341) 44.1%
    Net written premiums  311,732  199,258  112,474 56.4%
    Net earned premiums  233,826  155,068  78,758 50.8%
    Commission and other income  3,608  3,295  313 9.5%
    Total underwriting revenue (1)  237,434  158,363  79,071 49.9%
    Losses and loss adjustment expenses  41,457  64,115  (22,658) (35.3)%
    Acquisition expenses  95,433  64,041  31,392 49.0%
    Other underwriting expenses  53,723  34,084  19,639 57.6%
    Underwriting income (loss) (1)  46,821  (3,877)  50,698 NM 
    Interest expense  (40)  —  (40) NM 
    Net investment income  9,080  8,612  468 5.4%
    Net realized and unrealized gains on investments  1,277  1,488  (211) (14.2)%
    Income before income taxes  57,138  6,223  50,915 NM 
    Income tax expense (benefit)  11,291  (34)  11,325 NM 
    Net income  $45,847 $6,257 $39,590 NM 
    Adjustments:            
    Expenses associated with transactions and stock offerings  563  708  (145) (20.5)%
    Stock-based compensation expense  5,584  2,167  3,417 157.7%
    Amortization of intangibles  1,251  —  1,251 NM 
    Expenses associated with catastrophe bond  1,704  399  1,305 327.1%
    Tax impact  (1,506)  (664)  (842) 126.8%
    Adjusted net income (1) $53,443 $8,867 $44,576 502.7%
    Key Financial and Operating Metrics            
    Return on equity  12.1% 2.1%     
    Adjusted return on equity (1)  14.1% 3.0%     
    Loss ratio  17.7% 41.3%     
    Expense ratio  62.2% 61.2%     
    Combined ratio  80.0% 102.5%     
    Adjusted combined ratio (1)  76.1% 100.4%     
    Diluted earnings per share $1.76 $0.24      
    Diluted adjusted earnings per share (1) $2.05 $0.35      
    Catastrophe losses $5,015 $50,986      
    Catastrophe loss ratio (1)  2.1% 32.9%     
    Adjusted combined ratio excluding catastrophe losses (1)  73.9% 67.5%     
    NM-Not Meaningful            

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

    Condensed Consolidated Balance sheets

    Palomar Holdings, Inc. and Subsidiaries

    Condensed Consolidated Balance Sheets (unaudited)

    (in thousands, except shares and par value data)

         December 31,     December 31, 
      2021 2020
    Assets      
    Investments:      
    Fixed maturity securities available for sale, at fair value (amortized cost: $426,122 in 2021; $381,279 in 2020) $432,682 $397,987
    Equity securities, at fair value (cost: $31,834 in 2021; $22,291 in 2020)  33,261  24,322
    Total investments  465,943  422,309
    Cash and cash equivalents  50,284  33,538
    Restricted cash  87  248
    Accrued investment income  2,725  2,545
    Premium receivable  88,012  48,842
    Deferred policy acquisition costs  55,953  35,481
    Reinsurance recoverable on paid losses and loss adjustment expenses  29,368  10,162
    Reinsurance recoverable on unpaid losses and loss adjustment expenses  127,947  94,566
    Ceded unearned premiums  58,315  35,031
    Prepaid expenses and other assets  37,072  34,119
    Property and equipment, net  527  739
    Intangible assets, net  9,501  11,512
    Total assets $925,734 $729,092
    Liabilities and stockholders' equity      
    Liabilities:      
    Accounts payable and other accrued liabilities $21,284 $20,730
    Reserve for losses and loss adjustment expenses  173,366  129,036
    Unearned premiums  284,665  183,489
    Ceded premium payable  37,460  22,233
    Funds held under reinsurance treaty  10,882  4,515
    Deferred tax liabilities, net  3,908  5,376
    Total liabilities  531,565  365,379
    Stockholders' equity:      
    Preferred stock, $0.0001 par value, 5,000,000 shares authorized as of December 31, 2021 and December 31, 2020, 0 shares issued and outstanding as of December 31, 2021 and December 31, 2020  —  —
    Common stock, $0.0001 par value, 500,000,000 shares authorized, 25,428,929 and 25,525,796 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively  3  3
    Additional paid-in capital  318,902  310,507
    Accumulated other comprehensive income  5,312  13,246
    Retained earnings  69,952  39,957
    Total stockholders' equity  394,169  363,713
    Total liabilities and stockholders' equity $925,734 $729,092
           

    Condensed Consolidated Income Statement

    Palomar Holdings, Inc. and Subsidiaries

    Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)

    (in thousands, except shares and per share data)

      Three Months Ended  Year Ended
      December 31,  December 31, 
      2021 2020 2021 2020
    Revenues:            
    Gross written premiums $149,908 $96,092 $535,175 $354,360
    Ceded written premiums  (70,437)  (53,839)  (223,443)  (155,102)
    Net written premiums  79,471  42,253  311,732  199,258
    Change in unearned premiums  (11,631)  (3,331)  (77,906)  (44,190)
    Net earned premiums  67,840  38,922  233,826  155,068
    Net investment income  2,431  2,325  9,080  8,612
    Net realized and unrealized gains on investments  2,029  245  1,277  1,488
    Commission and other income  872  803  3,608  3,295
    Total revenues  73,172  42,295  247,791  168,463
    Expenses:            
    Losses and loss adjustment expenses  10,169  17,214  41,457  64,115
    Acquisition expenses  27,284  18,131  95,433  64,041
    Other underwriting expenses  14,285  9,356  53,723  34,084
    Interest expense  40  —  40  —
    Total expenses  51,778  44,701  190,653  162,240
    Income (loss) before income taxes  21,394  (2,406)  57,138  6,223
    Income tax expense (benefit)  4,762  (557)  11,291  (34)
    Net income (loss)  16,632  (1,849)  45,847  6,257
    Other comprehensive income, net:            
    Net unrealized (losses) gains on securities available for sale for the three months and years ended December 31, 2021 and 2020, respectively  (2,790)  2,808  (7,934)  8,560
    Net comprehensive income $13,842 $959 $37,913 $14,817
    Per Share Data:            
    Basic earnings (loss) per share $0.65 $(0.07) $1.80 $0.25
    Diluted earnings (loss) per share $0.64 $(0.07) $1.76 $0.24
                 
    Weighted-average common shares outstanding:            
    Basic  25,419,477  25,520,111  25,459,514  24,872,251
    Diluted  26,045,213  25,520,111  26,111,904  25,598,647

    Underwriting Segment Data

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

      Three Months Ended December 31,   Year Ended December 31,  
      2021 2020  2021 2020 
           
      ($ in thousands)  ($ in thousands) 
         % of    % of     % of    % of 
      Amount GWP Amount GWP  Amount GWP Amount GWP 
    Product                      
    Residential Earthquake $42,883 28.6%$37,432 39.0% $171,048 32.0%$140,934 39.8%
    Commercial Earthquake  24,500 16.3% 18,163 18.9%  90,552 16.9% 58,890 16.6%
    Inland Marine  18,077 12.1% 5,676 5.9%  57,124 10.7% 15,423 4.3%
    Specialty Homeowners  14,875 9.9% 11,388 11.9%  67,894 12.7% 49,849 14.1%
    Commercial All Risk  8,609 5.7% 14,185 14.8%  38,640 7.2% 53,933 15.2%
    Hawaii Hurricane  7,377 4.9% 3,528 3.7%  30,298 5.6% 13,824 3.9%
    Residential Flood  3,218 2.2% 2,448 2.5%  11,652 2.2% 8,176 2.3%
    Other  30,369 20.3% 3,272 3.3%  67,967 12.7% 13,331 3.8%
    Total Gross Written Premiums $149,908 100.0%$96,092 100.0% $535,175 100.0%$354,360 100.0%
                           


      Three Months Ended December 31,   Year Ended December 31,  
      2021 2020  2021 2020 
           
      ($ in thousands)  ($ in thousands) 
         % of    % of     % of    % of 
      Amount GWP Amount GWP  Amount GWP Amount GWP 
    State                      
    California $63,956 42.7%$48,857 50.8% $244,416 45.7%$172,765 48.8%
    Texas  14,729 9.8% 12,927 13.5%  62,893 11.7% 67,974 19.2%
    Hawaii  8,680 5.8% 4,408 4.6%  34,993 6.5% 16,398 4.6%
    Florida  8,407 5.6% 5,110 5.3%  27,386 5.1% 5,795 1.7%
    Washington  7,671 5.1% 4,326 4.5%  23,608 4.4% 14,328 4.0%
    Oregon  3,991 2.7% 2,740 2.9%  13,677 2.6% 10,038 2.8%
    Illinois  3,465 2.3% 1,717 1.8%  12,133 2.3% 6,133 1.7%
    North Carolina  3,337 2.2% 4,011 4.2%  15,271 2.9% 11,143 3.1%
    Other  35,672 23.8% 11,996 12.4%  100,798 18.8% 49,786 14.1%
    Total Gross Written Premiums $149,908 100.0%$96,092 100.0% $535,175 100.0%$354,360 100.0%
                           

    During the three months ended December 31, 2021, PSIC accounted for $97.1 million or approximately 64.7% of our gross written premiums and PESIC accounted for $52.8 million or approximately 35.3% of our gross written premiums.

    During the year ended December 31, 2021, PSIC accounted for $383.1 million or approximately 71.6% of our gross written premiums and PESIC accounted for $152.1 million or approximately 28.4% of our gross written premiums.

    Gross and net earned premiums

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

                              
      Three Months Ended        Year Ended       
      December 31,         December 31,       
      2021 2020 Change % Change  2021 2020 Change % Change
          
      ($ in thousands)  ($ in thousands)
    Gross earned premiums $122,910 $86,191 $36,719 42.6%  $433,999 $301,457 $132,542 44.0%
    Ceded earned premiums  (55,070)  (47,269)  (7,801) 16.5%   (200,173)  (146,389)  (53,784) 36.7%
    Net earned premiums $67,840 $38,922 $28,918 74.3%  $233,826 $155,068 $78,758 50.8%
                              
    Net earned premium ratio  55.2%  45.2%         53.9%  51.4%      

    Loss detail

      Three Months Ended        Year Ended       
      December 31,         December 31,       
      2021 2020 Change % Change  2021 2020 Change % Change
          
      ($ in thousands)  ($ in thousands)
    Catastrophe losses $(1,704) $14,474 $(16,178) NM   $5,015 $50,986 $(45,971) NM 
    Non-catastrophe losses  11,873  2,740  9,133 333.3%   36,442  13,129  23,313 177.6%
    Total losses and loss adjustment expenses $10,169 $17,214 $(7,045) (40.9)%  $41,457 $64,115 $(22,658) (35.3)%
    NM- not meaningful                         


                 
      Three Months Ended December 31, Year ended December 31,
      2021 2020 2021 2020
           
       (in thousands)  (in thousands)
    Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period $46,643 $39,540 $34,470 $3,869
    Add: Incurred losses and loss adjustment expenses, net of reinsurance, related to:        —  —
    Current year  10,840  17,312  45,042  64,179
    Prior years  (671)  (98)  (3,585)  (64)
    Total incurred  10,169  17,214  41,457  64,115
    Deduct: Loss and loss adjustment expense payments, net of reinsurance, related to:            
    Current year  8,656  22,125  12,063  31,879
    Prior years  2,737  159  18,445  1,635
    Total payments  11,393  22,284  30,508  33,514
    Reserve for losses and loss adjustment expense net of reinsurance recoverables at end of period  45,419  34,470  45,419  34,470
    Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period  127,947  94,566  127,947  94,566
    Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period $173,366 $129,036 $173,366 $129,036
                 

    Reconciliation of Non-GAAP Financial Measures

    For the three months and year ended December 31, 2021 and 2020, the Non-GAAP financial measures discussed above reconcile to their most comparable GAAP measures as follows:

    Underwriting revenue

                  
      Three Months Ended   Year Ended
      December 31,   December 31, 
      2021 2020  2021 2020
          
      (in thousands)  (in thousands)
    Total revenue $73,172 $42,295  $247,791 $168,463
    Net investment income  (2,431)  (2,325)   (9,080)  (8,612)
    Net realized and unrealized gains on investments  (2,029)  (245)   (1,277)  (1,488)
    Underwriting revenue $68,712 $39,725  $237,434 $158,363

    Underwriting income (loss)

      Three Months Ended   Year Ended
      December 31,   December 31, 
      2021 2020  2021 2020
          
      (in thousands)  (in thousands)
    Income (loss) before income taxes $21,394 $(2,406)  $57,138 $6,223
    Net investment income  (2,431)  (2,325)   (9,080)  (8,612)
    Net realized and unrealized gains on investments  (2,029)  (245)   (1,277)  (1,488)
    Interest expense  40  —   40  —
    Underwriting income (loss) $16,974 $(4,976)  $46,821 $(3,877)

    Adjusted net income (loss)

                  
      Three Months Ended   Year Ended
      December 31,   December 31, 
      2021 2020  2021 2020
          
      (in thousands)  (in thousands)
    Net income (loss) $16,632 $(1,849)  $45,847 $6,257
    Adjustments:             
    Expenses associated with transactions and stock offerings  153  —   563  708
    Stock-based compensation expense  2,214  710   5,584  2,167
    Amortization of intangibles  547  —   1,251  —
    Expenses associated with catastrophe bond  5  —   1,704  399
    Tax impact  (350)  (130)   (1,506)  (664)
    Adjusted net income (loss) $19,201 $(1,269)  $53,443 $8,867

    Annualized adjusted return on equity

      Three Months Ended   Year Ended  
      December 31,   December 31,  
      2021 2020  2021 2020 
           
           
      ($ in thousands)  ($ in thousands) 
                   
    Annualized adjusted net income (loss) $76,804 $(5,076)  $53,443 $8,867 
    Average stockholders' equity $385,973 $362,804  $378,941 $291,135 
    Annualized adjusted return on equity  19.9% (1.4)%  14.1% 3.0%

    Adjusted combined ratio

      Three Months Ended   Year Ended  
      December 31,   December 31,  
      2021 2020  2021 2020 
           
      ($ in thousands)  ($ in thousands) 
    Numerator: Sum of losses, loss adjustment expenses, underwriting, acquisition and other underwriting expenses, net of commission and other income $50,866 $43,898  $187,005 $158,945 
    Denominator: Net earned premiums $67,840 $38,922  $233,826 $155,068 
    Combined ratio  75.0% 112.8%  80.0% 102.5%  
    Adjustments to numerator:              
    Expenses associated with transactions and stock offerings $(153) $—  $(563) $(708) 
    Stock-based compensation expense  (2,214)  (710)   (5,584)  (2,167) 
    Amortization of intangibles  (547)  —   (1,251)  — 
    Expenses associated with catastrophe bond  (5)  —   (1,704)  (399) 
    Adjusted combined ratio  70.7% 111.0%  76.1% 100.4%

    Diluted adjusted earnings per share

                  
      Three Months Ended   Year Ended
      December 31,   December 31, 
      2021 2020  2021 2020
          
      ( in thousands, except shares and per share data)  ( in thousands, except shares and per share data)
                  
    Adjusted net income (loss) $19,201 $(1,269)  $53,443 $8,867
    Weighted-average common shares outstanding, diluted  26,045,213  25,520,111   26,111,904  25,598,647
    Diluted adjusted earnings per share $0.74 $(0.05)  $2.05 $0.35

    Catastrophe loss ratio

      Three Months Ended  Year Ended  
      December 31,   December 31,  
      2021 2020  2021 2020 
           
      ($ in thousands)  ($ in thousands) 
    Numerator: Losses and loss adjustment expenses $10,169 $17,214  $41,457 $64,115 
    Denominator: Net earned premiums $67,840 $38,922  $233,826 $155,068 
    Loss ratio  15.0% 44.2%  17.7% 41.3%
                   
    Numerator: Catastrophe losses $(1,704) $14,474  $5,015 $50,986 
    Denominator: Net earned premiums $67,840 $38,922  $233,826 $155,068 
    Catastrophe loss ratio  (2.5)% 37.2%  2.1% 32.9%

    Adjusted combined ratio excluding catastrophe losses

      Three Months Ended  Year ended  
      December 31,   December 31,  
      2021 2020  2021 2020 
           
      ($ in thousands)  ($ in thousands) 
    Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $50,866 $43,898  $187,005 $158,945 
    Denominator: Net earned premiums $67,840 $38,922  $233,826 $155,068 
    Combined ratio  75.0% 112.8%  80.0% 102.5%
    Adjustments to numerator:              
    Expenses associated with transactions and stock offerings $(153) $—  $(563) $(708) 
    Stock-based compensation expense  (2,214)  (710)   (5,584)  (2,167) 
    Amortization of intangibles  (547)  —   (1,251)  — 
    Expenses associated with catastrophe bond  (5)  —   (1,704)  (399) 
    Catastrophe losses  1,704  (14,474)   (5,015)  (50,986) 
    Adjusted combined ratio excluding catastrophe losses  73.2% 73.8%  73.9% 67.5%

    Tangible Stockholders’ equity

      December 31,
      2021    2020
       
      (in thousands)
    Stockholders’ equity $394,169 $363,713
    Intangible assets  (9,501)  (11,512)
    Tangible stockholders’ equity $384,668 $352,201
           

     


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