PLMR Palomar Holdings Inc

 Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported net income of $18.4 million, or $0.73 per diluted share, for the third quarter of 2023 compared to net income of $4.3 million, or $0.17 per diluted share, for the third quarter of 2022. Adjusted net income(1) was $23.3 million, or $0.92 per diluted share, for the third quarter of 2023 as compared to $9.2 million, or $0.36 per diluted share, for the third 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.

Third Quarter 2023 Highlights

• Gross written premiums increased by 24.0% to $314.0 million compared to $253.1 million in the third quarter of 2022

• Net income of $18.4 million, compared to $4.3 million in the third quarter of 2022

• Adjusted net income(1) of $23.3 million, compared to $9.2 million in the third quarter of 2022

• Total loss ratio of 18.8% compared to 39.6% in the third quarter of 2022

• Combined ratio of 75.8% compared to 94.8% in the third quarter of 2022

• Adjusted combined ratio(1) of 70.9%, compared to 90.3%, in the third quarter of 2022

• Annualized return on equity of 17.7%, compared to 4.6% in the third quarter of 2022

• Annualized adjusted return on equity(1) of 22.3%, compared to 9.9% in the third quarter of 2022

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

Mac Armstrong, Chairman and Chief Executive Officer, commented, “We are very pleased with our strong third quarter. The results included record quarterly gross written premium, adjusted net income growth of 153%, and an adjusted return on equity of 22.3%. Our concerted effort over the last several years to reduce the volatility in our book of business and earnings base was also on full display in the third quarter as we incurred negligible loss from catastrophes despite elevated activity across the industry. The execution of our Palomar 2X strategic plan during the quarter instills a high level of confidence that Palomar will produce consistent profitable growth in the quarters and years ahead."

Mr. Armstrong continued, “In addition to the strong underwriting results, we also continued to invest in growth across the organization. Beyond growing gross written premium 24% year-over-year, during the quarter we hired an experienced leader to build an Environmental practice, wrote our first Crop premium, and established new fronting partnerships. Overall, we continue to dedicate our capital and resources towards targeted segments of our book of business that maximize our risk-adjusted returns.”

Underwriting Results

Gross written premiums increased 24.0% to $314.0 million compared to $253.1 million in the third quarter of 2022, while net earned premiums increased 10.1% compared to the prior year’s third quarter. Excluding de-emphasized lines of business, gross written premiums increased 30.6% in the third quarter.

Losses and loss adjustment expenses for the third quarter were $16.1 million, comprised of $16.7 million of non-catastrophe attritional losses, offset by $0.5 million of favorable catastrophe development from prior periods. The loss ratio for the quarter was 18.8%, comprised of a catastrophe loss ratio(1) of -0.6% and an attritional loss ratio of 19.4%, compared to a loss ratio of 39.6% during the same period last year comprised of a catastrophe loss ratio(1) of 16.0% and attritional loss ratio of 23.6%.

Underwriting income(1) for the third quarter was $20.7 million resulting in a combined ratio of 75.8% compared to underwriting income of $4.1 million resulting in a combined ratio of 94.8% during the same period last year. The Company’s adjusted underwriting income(1) was $25.0 million resulting in an adjusted combined ratio(1) of 70.9% in the third quarter compared to adjusted underwriting income(1) of $7.5 million and an adjusted combined ratio(1) of 90.3% during the same period last year.

Investment ResultsNet investment income increased by 61.0% to $6.0 million compared to $3.7 million in the prior year’s third 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 September 30, 2023 due to cash generated from operations. The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.61 years at September 30, 2023. Cash and invested assets totaled $688.0 million at September 30, 2023. During the third quarter, the Company recorded net realized and unrealized losses of $1.4 million related to its investment portfolio as compared to net realized and unrealized losses of $2.4 million in last year’s third quarter.

Tax RateThe effective tax rate for the three months ended September 30, 2023 was 24.9% compared to 17.5% for the three months ended September 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 ReturnsStockholders' equity was $421.3 million at September 30, 2023, compared to $367.8 million at September 30, 2022. For the three months ended September 30, 2023, the Company’s annualized return on equity was 17.7% compared to 4.6% for the same period in the prior year while adjusted return on equity(1) was 22.3% compared to 9.9% for the same period in the prior year. During the current quarter, the Company repurchased 117,739 shares for $6.6 million pursuant to the Company’s previously announced $100 million share repurchase authorization. As of September 30, 2023, $43.5 million remains available for future repurchases.

Full Year 2023 OutlookFor the full year 2023, the Company expects to achieve adjusted net income of $90 million to $93 million. This includes $3.4 million of catastrophe losses incurred during the nine months ended September 30, 2023.

Conference CallAs previously announced, Palomar will host a conference call Thursday November 2, 2023, to discuss its third 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 Third Quarter 2023 Earnings Conference Call. A replay will be available starting at 4:00 p.m. (Eastern Time) on November 2, 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 November 9, 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., Palomar Excess and Surplus Insurance Company (“PESIC”), and Palomar Underwriters Exchange Organization, Inc. 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 StatementPalomar 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.

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

Investor RelationsJamie Lillis1-203-428-3223investors@plmr.comSource: Palomar Holdings, Inc.

Summary of Operating Results:

The following tables summarize the Company’s results for the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended
	September 30,
	2023				2022				Change				% Change
	($ in thousands, except per share data)
Gross written premiums	$	313,998			$	253,128			$	60,870				24.0	%
Ceded written premiums		(203,336	)			(161,930	)			(41,406	)			25.6	%
Net written premiums		110,662				91,198				19,464				21.3	%
Net earned premiums		85,817				77,942				7,875				10.1	%
Commission and other income		465				1,362				(897	)			(65.9	)%
Total underwriting revenue(1)		86,282				79,304				6,978				8.8	%
Losses and loss adjustment expenses		16,139				30,900				(14,761	)			(47.8	)%
Acquisition expenses, net of ceding commissions and fronting fees		27,004				27,210				(206	)			(0.8	)%
Other underwriting expenses		22,390				17,114				5,276				30.8	%
Underwriting income(1)		20,749				4,080				16,669				NM
Interest expense		(867	)			(270	)			(597	)			221.1	%
Net investment income		6,029				3,744				2,285				61.0	%
Net realized and unrealized losses on investments		(1,376	)			(2,356	)			980				(41.6	)%
Income before income taxes		24,535				5,198				19,337				NM
Income tax expense		6,103				912				5,191				NM
Net income	$	18,432			$	4,286			$	14,146				NM
Adjustments:
Net realized and unrealized losses on investments(2)		1,376				2,356				(980	)			(41.6	)%
Expenses associated with transactions		229				45				184				NM
Stock-based compensation expense		3,589				3,092				497				16.1	%
Amortization of intangibles		390				313				77				24.6	%
Tax impact		(725	)			(871	)			146				(16.8	)%
Adjusted net income(1)(2)	$	23,291			$	9,221			$	14,070				152.6	%
Key Financial and Operating Metrics
Annualized return on equity		17.7	%			4.6	%
Annualized adjusted return on equity(1)		22.3	%			9.9	%
Loss ratio		18.8	%			39.6	%
Expense ratio		57.0	%			55.1	%
Combined ratio		75.8	%			94.8	%
Adjusted combined ratio(1)		70.9	%			90.3	%
Diluted earnings per share	$	0.73			$	0.17
Diluted adjusted earnings per share(1)	$	0.92			$	0.36
Catastrophe losses	$	(533	)		$	12,500
Catastrophe loss ratio(1)		(0.6	)%			16.0	%
Adjusted combined ratio excluding catastrophe losses(1)		71.5	%			74.3	%
Adjusted underwriting income(1)	$	24,957			$	7,530			$	17,427				231.4	%

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.

(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.

	Nine Months Ended
	September 30,
	2023				2022				Change				% Change
	($ in thousands, except per share data)
Gross written premiums	$	838,406			$	642,751			$	195,655				30.4	%
Ceded written premiums		(542,789	)			(374,109	)			(168,680	)			45.1	%
Net written premiums		295,617				268,642				26,975				10.0	%
Net earned premiums		252,164				234,239				17,925				7.7	%
Commission and other income		1,781				3,129				(1,348	)			(43.1	)%
Total underwriting revenue(1)		253,945				237,368				16,577				7.0	%
Losses and loss adjustment expenses		54,696				60,251				(5,555	)			(9.2	)%
Acquisition expenses, net of ceding commissions and fronting fees		78,740				83,928				(5,188	)			(6.2	)%
Other underwriting expenses		63,962				51,233				12,729				24.8	%
Underwriting income(1)		56,547				41,956				14,591				34.8	%
Interest expense		(2,952	)			(475	)			(2,477	)			NM
Net investment income		16,690				9,462				7,228				76.4	%
Net realized and unrealized losses on investments		(103	)			(8,369	)			8,266				(98.8	)%
Income before income taxes		70,182				42,574				27,608				64.8	%
Income tax expense		16,877				9,163				7,714				84.2	%
Net income	$	53,305			$	33,411			$	19,894				59.5	%
Adjustments:
Net realized and unrealized losses on investments(2)		103				8,369				(8,266	)			(98.8	)%
Expenses associated with transactions		229				130				99				76.2	%
Stock-based compensation expense		10,737				8,556				2,181				25.5	%
Amortization of intangibles		1,092				942				150				15.9	%
Expenses associated with catastrophe bond		1,640				1,992				(352	)			(17.7	)%
Tax impact		(1,582	)			(3,153	)			1,571				(49.8	)%
Adjusted net income(1)(2)	$	65,524			$	50,247			$	15,277				30.4	%
Key Financial and Operating Metrics
Annualized return on equity		17.6	%			11.7	%
Annualized adjusted return on equity(1)		21.7	%			17.6	%
Loss ratio		21.7	%			25.7	%
Expense ratio		55.9	%			56.4	%
Combined ratio		77.6	%			82.1	%
Adjusted combined ratio(1)		72.1	%			77.1	%
Diluted earnings per share	$	2.10			$	1.29
Diluted adjusted earnings per share(1)	$	2.59			$	1.95
Catastrophe losses	$	3,432			$	13,529
Catastrophe loss ratio(1)		1.4	%			5.8	%
Adjusted combined ratio excluding catastrophe losses(1)		70.8	%			71.4	%
Adjusted underwriting income(1)	$	70,245			$	53,576			$	16,670				31.1	%

Condensed Consolidated Balance sheets

Palomar Holdings,Inc. and SubsidiariesCondensed Consolidated Balance Sheets (unaudited)(in thousands, except shares and par value data)
	September 30,				December 31,
	2023				2022
	(Unaudited)
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $647,579 in 2023; $561,580 in 2022)	$	591,907			$	515,064
Equity securities, at fair value (cost: $43,002 in 2023; $42,352 in 2022)		39,835				38,576
Equity method investment		2,923				—
Total investments		634,665				553,640
Cash and cash equivalents		53,026				68,108
Restricted cash		262				56
Accrued investment income		4,864				3,777
Premiums receivable		242,082				162,858
Deferred policy acquisition costs, net of ceding commissions and fronting fees		58,967				56,740
Reinsurance recoverable on paid losses and loss adjustment expenses		48,004				39,718
Reinsurance recoverable on unpaid losses and loss adjustment expenses		232,170				153,895
Ceded unearned premiums		259,760				204,084
Prepaid expenses and other assets		65,753				44,088
Deferred tax assets, net		13,643				10,622
Property and equipment, net		433				603
Goodwill and intangible assets, net		12,705				8,261
Total assets	$	1,626,334			$	1,306,450
Liabilities and stockholders' equity
Liabilities:
Accounts payable and other accrued liabilities	$	32,532			$	25,760
Reserve for losses and loss adjustment expenses		324,348				231,415
Unearned premiums		570,453				471,314
Ceded premium payable		211,025				146,127
Funds held under reinsurance treaty		14,042				10,680
Borrowings from credit agreements		52,600				36,400
Total liabilities		1,205,000				921,696
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022		—				—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 24,730,885 and 25,027,467 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		3				3
Additional paid-in capital		345,673				333,558
Accumulated other comprehensive loss		(43,221	)			(36,515	)
Retained earnings		118,879				87,708
Total stockholders' equity		421,334				384,754
Total liabilities and stockholders' equity	$	1,626,334			$	1,306,450

Condensed Consolidated Income Statement

Palomar Holdings,Inc. and SubsidiariesCondensed Consolidated Statements ofIncome and Comprehensive Income (loss) (Unaudited)(in thousands, except shares and per share data)
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2023				2022				2023				2022
Revenues:
Gross written premiums	$	313,998			$	253,128			$	838,406			$	642,751
Ceded written premiums		(203,336	)			(161,930	)			(542,789	)			(374,109	)
Net written premiums		110,662				91,198				295,617				268,642
Change in unearned premiums		(24,845	)			(13,256	)			(43,453	)			(34,403	)
Net earned premiums		85,817				77,942				252,164				234,239
Net investment income		6,029				3,744				16,690				9,462
Net realized and unrealized losses on investments		(1,376	)			(2,356	)			(103	)			(8,369	)
Commission and other income		465				1,362				1,781				3,129
Total revenues		90,935				80,692				270,532				238,461
Expenses:
Losses and loss adjustment expenses		16,139				30,900				54,696				60,251
Acquisition expenses, net of ceding commissions and fronting fees		27,004				27,210				78,740				83,928
Other underwriting expenses		22,390				17,114				63,962				51,233
Interest expense		867				270				2,952				475
Total expenses		66,400				75,494				200,350				195,887
Income before income taxes		24,535				5,198				70,182				42,574
Income tax expense		6,103				912				16,877				9,163
Net income		18,432				4,286				53,305				33,411
Other comprehensive income (loss), net:
Net unrealized losses on securities available for sale		(8,494	)			(15,412	)			(6,706	)			(47,941	)
Net comprehensive income (loss)	$	9,938			$	(11,126	)		$	46,599			$	(14,530	)
Per Share Data:
Basic earnings per share	$	0.75			$	0.17			$	2.15			$	1.32
Diluted earnings per share	$	0.73			$	0.17			$	2.10			$	1.29
Weighted-average common shares outstanding:
Basic		24,740,455				25,209,368				24,847,164				25,258,333
Diluted		25,244,828				25,787,625				25,340,602				25,808,387

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 September 30,
	2023								2022
	($ in thousands)
					% of								% of								%
	Amount				GWP				Amount				GWP				Change				Change
Product
Fronting Premiums	$	106,581				33.9	%		$	82,232				32.5	%		$	24,349				29.6	%
Residential Earthquake		69,220				22.0	%			59,569				23.5	%			9,651				16.2	%
Commercial Earthquake		44,166				14.1	%			32,647				12.9	%			11,519				35.3	%
Inland Marine		37,252				11.9	%			30,842				12.2	%			6,410				20.8	%
Casualty		20,165				6.4	%			12,888				5.1	%			7,277				56.5	%
Hawaii Hurricane		11,051				3.5	%			9,425				3.7	%			1,626				17.3	%
Commercial All Risk		6,624				2.1	%			9,224				3.6	%			(2,600	)			(28.2	)%
Residential Flood		5,259				1.7	%			3,871				1.5	%			1,388				35.9	%
Other		13,680				4.4	%			12,430				5.0	%			1,250				10.1	%
Total Gross Written Premiums	$	313,998				100.0	%		$	253,128				100.0	%		$	60,870				24.0	%

	Nine Months Ended September 30,
	2023								2022
	($ in thousands)
					% of								% of
	Amount				GWP				Amount				GWP				Change				Change
Product
Fronting Premiums	$	278,548				33.2	%		$	154,232				24.0	%		$	124,316				80.6	%
Residential Earthquake		190,048				22.7	%			159,995				24.9	%			30,053				18.8	%
Commercial Earthquake		124,763				14.9	%			90,894				14.1	%			33,869				37.3	%
Inland Marine		103,841				12.4	%			72,214				11.2	%			31,627				43.8	%
Casualty		50,144				6.0	%			25,697				4.0	%			24,447				95.1	%
Hawaii Hurricane		28,718				3.4	%			24,579				3.8	%			4,139				16.8	%
Commercial All Risk		26,769				3.2	%			41,647				6.5	%			(14,878	)			(35.7	)%
Residential Flood		14,964				1.8	%			10,448				1.6	%			4,516				43.2	%
Specialty Homeowners		(99	)			(0.0	)%			30,082				4.7	%			(30,181	)			(100.3	)%
Other		20,710				2.4	%			32,963				5.2	%			(12,253	)			(37.2	)%
Total Gross Written Premiums	$	838,406				100.0	%		$	642,751				100.0	%		$	195,655				30.4	%

	Three Months Ended September 30,																Nine Months Ended September 30,
	2023								2022								2023								2022
	($ in thousands)																($ in thousands)
					% of								% of								% of								% of
	Amount				GWP				Amount				GWP				Amount				GWP				Amount				GWP
State
California	$	163,806				52.2	%		$	131,016				51.8	%		$	450,752				53.8	%		$	292,865				45.6	%
Texas		24,336				7.7	%			26,234				10.4	%			72,777				8.7	%			71,499				11.1	%
Washington		17,792				5.7	%			13,573				5.4	%			43,409				5.2	%			29,391				4.6	%
Hawaii		13,490				4.3	%			10,998				4.3	%			35,824				4.3	%			29,729				4.6	%
Florida		11,549				3.7	%			7,445				2.9	%			36,309				4.3	%			27,216				4.2	%
Oregon		8,536				2.7	%			7,738				3.1	%			21,223				2.5	%			16,483				2.6	%
Illinois		6,502				2.1	%			4,204				1.7	%			15,675				1.9	%			13,153				2.0	%
Tennessee		5,562				1.8	%			1,810				0.7	%			9,233				1.1	%			4,247				0.7	%
Other		62,425				19.8	%			50,110				19.8	%			153,204				18.2	%			158,168				24.6	%
Total Gross Written Premiums	$	313,998				100.0	%		$	253,128				100.0	%		$	838,406				100.0	%		$	642,751				100.0	%

	Three Months Ended September 30,																Nine Months Ended September 30,
	2023								2022								2023								2022
	($ in thousands)																($ in thousands)
					% of								% of								% of								% of
	Amount				GWP				Amount				GWP				Amount				GWP				Amount				GWP
Subsidiary
PSIC	$	186,693				59.5	%		$	136,814				54.0	%		$	497,216				59.3	%		$	357,156				55.6	%
PESIC		127,305				40.5	%			116,314				46.0	%			341,190				40.7	%			285,595				44.4	%
Total Gross Written Premiums	$	313,998				100.0	%		$	253,128				100.0	%		$	838,406				100.0	%		$	642,751				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																Nine Months Ended
	September 30,																September 30,
	2023				2022				Change				% Change				2023				2022				Change				% Change
	($ in thousands)																($ in thousands)
Gross earned premiums	$	271,786			$	186,938			$	84,848				45.4	%		$	739,219			$	484,005			$	255,214				52.7	%
Ceded earned premiums		(185,969	)			(108,996	)			(76,973	)			70.6	%			(487,055	)			(249,766	)			(237,289	)			95.0	%
Net earned premiums	$	85,817			$	77,942			$	7,875				10.1	%		$	252,164			$	234,239			$	17,925				7.7	%
Net earned premium ratio		31.6	%			41.7	%											34.1	%			48.4	%

Loss detail

	Three Months Ended																Nine Months Ended
	September 30,																September 30,
	2023				2022				Change				% Change				2023				2022				Change				% Change
	($ in thousands)																($ in thousands)
Catastrophe losses	$	(533	)		$	12,500			$	(13,033	)			(104.3	)%		$	3,432			$	13,529			$	(10,097	)			(74.6	)%
Non-catastrophe losses		16,672				18,400				(1,728	)			(9.4	)%			51,264				46,722				4,542				9.7	%
Total losses and loss adjustment expenses	$	16,139			$	30,900			$	(14,761	)			(47.8	)%		$	54,696			$	60,251			$	(5,555	)			(9.2	)%

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

	Three Months Ended September 30,								Nine Months Ended September 30,
	2023				2022				2023				2022
	(in thousands)								(in thousands)
Reserve for losses and LAE net of reinsurance recoverables at beginning of period	$	81,300			$	55,769			$	77,520			$	45,419
Add: Incurred losses and LAE, net of reinsurance, related to:
Current year		15,116				30,904				50,954				58,703
Prior years		1,023				(4	)			3,742				1,548
Total incurred		16,139				30,900				54,696				60,251
Deduct: Loss and LAE payments, net of reinsurance, related to:
Current year		6,646				7,873				14,215				13,762
Prior years		(1,385	)			4,548				25,823				17,660
Total payments		5,261				12,421				40,038				31,422
Reserve for losses and LAE net of reinsurance recoverables at end of period		92,178				74,248				92,178				74,248
Add: Reinsurance recoverables on unpaid losses and LAE at end of period		232,170				131,575				232,170				131,575
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period	$	324,348			$	205,823			$	324,348			$	205,823

Reconciliation of Non-GAAP Financial Measures

For the three and nine months ended September 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								Nine Months Ended
	September 30,								September 30,
	2023				2022				2023				2022
	(in thousands)								(in thousands)
Total revenue	$	90,935			$	80,692			$	270,532			$	238,461
Net investment income		(6,029	)			(3,744	)			(16,690	)			(9,462	)
Net realized and unrealized losses on investments		1,376				2,356				103				8,369
Underwriting revenue	$	86,282			$	79,304			$	253,945			$	237,368

Underwriting income and adjusted underwriting income

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2023				2022				2023				2022
	(in thousands)								(in thousands)
Income before income taxes	$	24,535			$	5,198			$	70,182			$	42,574
Net investment income		(6,029	)			(3,744	)			(16,690	)			(9,462	)
Net realized and unrealized losses on investments		1,376				2,356				103				8,369
Interest expense		867				270				2,952				475
Underwriting income	$	20,749			$	4,080			$	56,547			$	41,956
Expenses associated with transactions		229				45				229				130
Stock-based compensation expense		3,589				3,092				10,737				8,556
Amortization of intangibles		390				313				1,092				942
Expenses associated with catastrophe bond		—				—				1,640				1,992
Adjusted underwriting income	$	24,957			$	7,530			$	70,245			$	53,576

Adjusted net income

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2023				2022				2023				2022
	(in thousands)								(in thousands)
Net income	$	18,432			$	4,286			$	53,305			$	33,411
Adjustments:
Net realized and unrealized losses on investments		1,376				2,356				103				8,369
Expenses associated with transactions		229				45				229				130
Stock-based compensation expense		3,589				3,092				10,737				8,556
Amortization of intangibles		390				313				1,092				942
Expenses associated with catastrophe bond		—				—				1,640				1,992
Tax impact		(725	)			(871	)			(1,582	)			(3,153	)
Adjusted net income	$	23,291			$	9,221			$	65,524			$	50,247

Annualized adjusted return on equity

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2023				2022				2023				2022
	(in thousands)								(in thousands)
Annualized adjusted net income	$	93,164			$	36,884			$	87,365			$	66,996
Average stockholders' equity	$	417,521			$	372,955			$	403,044			$	381,007
Annualized adjusted return on equity		22.3	%			9.9	%			21.7	%			17.6	%

Adjusted combined ratio

	Three Months Ended								Nine Months Ended
	September 30,								September 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	$	65,068			$	73,862			$	195,617			$	192,283
Denominator: Net earned premiums	$	85,817			$	77,942			$	252,164			$	234,239
Combined ratio		75.8	%			94.8	%			77.6	%			82.1	%
Adjustments to numerator:
Expenses associated with transactions	$	(229	)		$	(45	)		$	(229	)		$	(130	)
Stock-based compensation expense		(3,589	)			(3,092	)			(10,737	)			(8,556	)
Amortization of intangibles		(390	)			(313	)			(1,092	)			(942	)
Expenses associated with catastrophe bond		—				—				(1,640	)			(1,992	)
Adjusted combined ratio		70.9	%			90.3	%			72.1	%			77.1	%

Diluted adjusted earnings per share

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2023				2022				2023				2022
	(in thousands, except per share data)								(in thousands, except per share data)
Adjusted net income	$	23,291			$	9,221			$	65,524			$	50,247
Weighted-average common shares outstanding, diluted		25,244,828				25,787,625				25,340,602				25,808,387
Diluted adjusted earnings per share	$	0.92			$	0.36			$	2.59			$	1.95

Catastrophe loss ratio

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2023				2022				2023				2022
	(in thousands)								(in thousands)
Numerator: Losses and loss adjustment expenses	$	16,139			$	30,900			$	54,696			$	60,251
Denominator: Net earned premiums	$	85,817			$	77,942			$	252,164			$	234,239
Loss ratio		18.8	%			39.6	%			21.7	%			25.7	%
Numerator: Catastrophe losses	$	(533	)		$	12,500			$	3,432			$	13,529
Denominator: Net earned premiums	$	85,817			$	77,942			$	252,164			$	234,239
Catastrophe loss ratio		(0.6	)%			16.0	%			1.4	%			5.8	%

Adjusted combined ratio excluding catastrophe losses

	Three Months Ended								Nine Months Ended
	September 30,								September 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	$	65,068			$	73,862			$	195,617			$	192,283
Denominator: Net earned premiums	$	85,817			$	77,942			$	252,164			$	234,239
Combined ratio		75.8	%			94.8	%			77.6	%			82.1	%
Adjustments to numerator:
Expenses associated with transactions	$	(229	)		$	(45	)		$	(229	)		$	(130	)
Stock-based compensation expense		(3,589	)			(3,092	)			(10,737	)			(8,556	)
Amortization of intangibles		(390	)			(313	)			(1,092	)			(942	)
Expenses associated with catastrophe bond		—				—				(1,640	)			(1,992	)
Catastrophe losses		533				(12,500	)			(3,432	)			(13,529	)
Adjusted combined ratio excluding catastrophe losses		71.5	%			74.3	%			70.8	%			71.4	%

Tangible Stockholders’ equity

	September 30,				December 31,
	2023				2022
	(in thousands)
Stockholders' equity	$	421,334			$	384,754
Goodwill and intangible assets		(12,705	)			(8,261	)
Tangible stockholders' equity	$	408,629			$	376,493