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

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Palomar Holdings, Inc
Palomar Holdings, Inc

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