PLMR Palomar Holdings Inc

Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported net income of $25.9 million, or $1.02 per diluted share, for the fourth quarter of 2023 compared to net income of $18.8 million, or $0.73 per diluted share, for the fourth quarter of 2022. Adjusted net income(1) was $28.0 million, or $1.11 per diluted share, for the fourth quarter of 2023 as compared to $21.1 million, or $0.82 per diluted share, for the fourth quarter of 2022. 

Fourth Quarter 2023 Highlights

• Gross written premiums increased by 26.8% to $303.2 million compared to $239.1 million in the fourth quarter of 2022
• Net income of $25.9 million compared to $18.8 million in the fourth quarter of 2022
• Adjusted net income(1) of $28.0 million compared to $21.1 million in the fourth quarter of 2022
• Total loss ratio of 19.1% compared to 22.4% in the fourth quarter of 2022
• Combined ratio of 74.2% compared to 75.5% in the fourth quarter of 2022
• Adjusted combined ratio(1) of 68.8% compared to 71.4%, in the fourth quarter of 2022
• Annualized return on equity of 23.2% compared to 19.9% in the fourth quarter of 2022
• Annualized adjusted return on equity(1) of 25.1% compared to 22.4% in the fourth quarter of 2022

Full Year 2023 Highlights

• Gross written premiums increased by 29.4% to $1.1 billion compared to $881.9 million in 2022
• Net income of $79.2 million compared to $52.2 million in 2022
• Adjusted net income(1) of $93.5 million compared to $71.3 million in 2022
• Total loss ratio of 21.0% compared to 24.9% in 2022
• Combined ratio of 76.6% compared to 80.4% in 2022
• Adjusted combined ratio(1) of 71.2% compared to 75.6% in 2022
• Return on equity of 18.5% compared to 13.4% in 2022
• Adjusted return on equity(1) of 21.9% compared to 18.3% in 2022

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

Mac Armstrong, Chairman and Chief Executive Officer, commented, "The fourth quarter provided a strong end to what was a stellar 2023. During the quarter, we generated gross written premium and adjusted net income growth of 27% and 33%, respectively, and, importantly, an adjusted return on equity of 25%. When looking at the full year we are especially proud of record gross written premium and adjusted net income, strong top and bottom-line growth and numerous initiatives that led to diversification and reduced earnings volatility. Additionally, we introduced multiple new lines of business, including Crop, Environmental Liability and Assumed Reinsurance. This robust and disciplined growth translated into an adjusted return on equity well above the 20% benchmark level espoused in our Palomar 2X strategic plan.” 

Mr. Armstrong continued, “Our 'grow where we want to' mantra not only reduces the volatility in our book of business, but also provides numerous growth vectors. The 2023 execution of Palomar 2X in a generationally hard property cat reinsurance market combined with the introduction of new products instills strong conviction and confidence in what we can accomplish across the organization. We exit the year energized by our prospects for profitable growth in 2024 and beyond.”   

Underwriting Results

Gross written premiums increased 26.8% to $303.2 million compared to $239.1 million in the fourth quarter of 2022, while net earned premiums increased 14.0% compared to the prior year’s fourth quarter. 

Losses and loss adjustment expenses for the fourth quarter were $17.9 million, comprised almost entirely of non-catastrophe attritional losses. The loss ratio for the quarter was 19.1%, all attritional, compared to a loss ratio of 22.4% during the same period last year comprised of an attritional loss ratio of 20.1% and a catastrophe loss ratio(1) of 2.3%.

Underwriting income(1) for the fourth quarter was $24.2 million resulting in a combined ratio of 74.2% compared to underwriting income of $20.1 million resulting in a combined ratio of 75.5% during the same period last year. The Company’s adjusted underwriting income(1) was $29.3 million resulting in an adjusted combined ratio(1) of 68.8% in the fourth quarter compared to adjusted underwriting income(1) of $23.5 million and an adjusted combined ratio(1) of 71.4% during the same period last year.

Investment ResultsNet investment income increased by 58.9% to $7.0 million compared to $4.4 million in the prior year’s fourth 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 December 31, 2023 due to cash generated from operations. The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.48 years at December 31, 2023. Cash and invested assets totaled $741.4 million at December 31, 2023. During the fourth quarter, the Company recorded net realized and unrealized gains of $3.0 million related to its investment portfolio as compared to net realized and unrealized gains of $0.8 million in last year’s fourth quarter.

Tax RateThe effective tax rate for the three months ended December 31, 2023 was 22.6% compared to 24.9% for the three months ended December 31, 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 $471.3 million at December 31, 2023, compared to $384.8 million at December 31, 2022. For the three months ended December 31, 2023, the Company’s annualized return on equity was 23.2% compared to 19.9% for the same period in the prior year while adjusted return on equity(1) was 25.1% compared to 22.4% for the same period in the prior year. There were no share repurchases in the current quarter and as of December 31, 2023, $43.5 million remains available for future repurchases.

Full Year 2024 OutlookFor the full year 2024, the Company expects to achieve adjusted net income of $110 million to $115 million. This includes an estimate of the losses incurred in the first quarter from the recent catastrophic California flooding of approximately $3.5 million.

Conference CallAs previously announced, Palomar will host a conference call Thursday, February 15, 2024, to discuss its fourth 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 Fourth Quarter 2023 Earnings Conference Call. A replay will be available starting at 4:00 p.m. (Eastern Time) on February 16, 2024, and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the replay is 13743970. The replay will be available until 11:59 p.m. (Eastern Time) on February 22, 2024.

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. ("PSRE"), Palomar Insurance Agency, Inc. ("PIA"), Palomar Excess and Surplus Insurance Company (“PESIC”), and Palomar Underwriters Exchange Organization, Inc ("PUEO"). Palomar's consolidated results also include Laulima Reciprocal Exchange, a variable interest entity for which the Company is the primary beneficiary. Palomar is an innovative insurer serving residential and commercial clients in specialty markets including the market for earthquake insurance. Palomar’s insurance subsidiaries, PSIC, PSRE, and PESIC, 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. The Company calculates the tax impact only on adjustments which would be included in calculating its 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 months ended December 31, 2023 and 2022:

		Three Months Ended
		December 31,
		2023				2022				Change				% Change
		($ in thousands, except per share data)
Gross written premiums		$	303,152			$	239,117			$	64,035				26.8	%
Ceded written premiums			(188,742	)			(150,466	)			(38,276	)			25.4	%
Net written premiums			114,410				88,651				25,759				29.1	%
Net earned premiums			93,748				82,228				11,520				14.0	%
Commission and other income			1,586				1,143				443				38.8	%
Total underwriting revenue(1)			95,334				83,371				11,963				14.3	%
Losses and loss adjustment expenses			17,896				18,421				(525	)			(2.9	)%
Acquisition expenses, net of ceding commissions and fronting fees			29,005				26,843				2,162				8.1	%
Other underwriting expenses			24,210				17,986				6,224				34.6	%
Underwriting income(1)			24,223				20,121				4,102				20.4	%
Interest expense			(824	)			(398	)			(426	)			107.0	%
Net investment income			7,015				4,415				2,600				58.9	%
Net realized and unrealized gains on investments			3,044				841				2,203				262.0	%
Income before income taxes			33,458				24,979				8,479				33.9	%
Income tax expense			7,564				6,219				1,345				21.6	%
Net income		$	25,894			$	18,760			$	7,134				38.0	%
Adjustments:
Net realized and unrealized gains on investments			(3,044	)			(841	)			(2,203	)			262.0	%
Expenses associated with transactions			478				—				478				—	%
Stock-based compensation expense			4,176				3,068				1,108				36.1	%
Amortization of intangibles			389				313				76				24.3	%
Tax impact			103				(214	)			317				(148.1	)%
Adjusted net income (1)		$	27,996			$	21,086			$	6,910				32.8	%
Key Financial and Operating Metrics
Annualized return on equity			23.2	%			19.9	%
Annualized adjusted return on equity (1)			25.1	%			22.4	%
Loss ratio			19.1	%			22.4	%
Expense ratio			55.1	%			53.1	%
Combined ratio			74.2	%			75.5	%
Adjusted combined ratio (1)			68.8	%			71.4	%
Diluted earnings per share		$	1.02			$	0.73
Diluted adjusted earnings per share (1)		$	1.11			$	0.82
Catastrophe losses		$	10			$	1,865
Catastrophe loss ratio (1)			—	%			2.3	%
Adjusted combined ratio excluding catastrophe losses (1)			68.8	%			69.2	%
Adjusted underwriting income (1)		$	29,266			$	23,502			$	5,764				24.5	%

(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.

		Year Ended
		December 31,
		2023				2022				Change				% Change
		($ in thousands, except per share data)
Gross written premiums		$	1,141,558			$	881,868			$	259,690				29.4	%
Ceded written premiums			(731,531	)			(524,575	)			(206,956	)			39.5	%
Net written premiums			410,027				357,293				52,734				14.8	%
Net earned premiums			345,913				316,466				29,447				9.3	%
Commission and other income			3,367				4,272				(905	)			(21.2	)%
Total underwriting revenue(1)			349,280				320,738				28,542				8.9	%
Losses and loss adjustment expenses			72,592				78,672				(6,080	)			(7.7	)%
Acquisition expenses, net of ceding commissions and fronting fees			107,745				110,771				(3,026	)			(2.7	)%
Other underwriting expenses			88,172				69,219				18,953				27.4	%
Underwriting income(1)			80,771				62,076				18,695				30.1	%
Interest expense			(3,775	)			(873	)			(2,902	)			332.4	%
Net investment income			23,705				13,877				9,828				70.8	%
Net realized and unrealized gains (losses) on investments			2,941				(7,529	)			10,470				(139.1	)%
Income before income taxes			103,642				67,551				36,091				53.4	%
Income tax expense			24,441				15,381				9,060				58.9	%
Net income		$	79,201			$	52,170			$	27,031				51.8	%
Adjustments:
Net realized and unrealized gains (losses) on investments			(2,941	)			7,529				(10,470	)			(139.1	)%
Expenses associated with transactions			706				130				576				443.1	%
Stock-based compensation expense			14,913				11,624				3,289				28.3	%
Amortization of intangibles			1,481				1,255				226				18.0	%
Expenses associated with catastrophe bond			1,640				1,992				(352	)			(17.7	)%
Tax impact			(1,480	)			(3,366	)			1,886				(56.0	)%
Adjusted net income(1)		$	93,520			$	71,334			$	22,186				31.1	%
Key Financial and Operating Metrics
Annualized return on equity			18.5	%			13.4	%
Annualized adjusted return on equity(1)			21.9	%			18.3	%
Loss ratio			21.0	%			24.9	%
Expense ratio			55.7	%			55.5	%
Combined ratio			76.6	%			80.4	%
Adjusted combined ratio(1)			71.2	%			75.6	%
Diluted earnings per share		$	3.13			$	2.02
Diluted adjusted earnings per share(1)		$	3.69			$	2.77
Catastrophe losses		$	3,442			$	15,394
Catastrophe loss ratio(1)			1.0	%			4.9	%
Adjusted combined ratio excluding catastrophe losses(1)			70.2	%			70.8	%
Adjusted underwriting income(1)		$	99,511			$	77,077			$	22,434				29.1	%

Condensed Consolidated Balance sheets

Palomar Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(in thousands, except shares and par value data)
​		December 31, 2023				December 31, 2022
Assets		​				​
Investments:		​				​
Fixed maturity securities available for sale, at fair value (amortized cost: $675,130 in 2023; $561,580 in 2022)		$	643,799			$	515,064
Equity securities, at fair value (cost: $43,003 in 2023; $42,352 in 2022)			43,160				38,576
Equity method investment			2,617				—
Total investments			689,576				553,640
Cash and cash equivalents			51,546				68,108
Restricted cash			306				56
Accrued investment income			5,282				3,777
Premium receivable			261,972				162,858
Deferred policy acquisition costs, net of ceding commissions and fronting fees			60,990				56,740
Reinsurance recoverable on paid losses and loss adjustment expenses			32,172				39,718
Reinsurance recoverable on unpaid losses and loss adjustment expenses			244,622				153,895
Ceded unearned premiums			265,808				204,084
Prepaid expenses and other assets			72,941				44,088
Deferred tax assets, net			10,119				10,622
Property and equipment, net			373				603
Goodwill and intangible assets, net			12,315				8,261
Total assets		$	1,708,022			$	1,306,450
Liabilities and stockholders' equity
Liabilities:
Accounts payable and other accrued liabilities		$	42,376			$	25,760
Reserve for losses and loss adjustment expenses			342,275				231,415
Unearned premiums			597,103				471,314
Ceded premium payable			181,742				146,127
Funds held under reinsurance treaty			13,419				10,680
Income taxes payable			7,255				—
Borrowings from credit agreements			52,600				36,400
Total liabilities			1,236,770				921,696
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized as of December 31, 2023 and December 31, 2022, 0 shares issued and outstanding as of December 31, 2023 and December 31, 2022			—				—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 24,772,987 and 25,027,467 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively			3				3
Additional paid-in capital			350,597				333,558
Accumulated other comprehensive loss			(23,991	)			(36,515	)
Retained earnings			144,643				87,708
Total stockholders' equity			471,252				384,754
Total liabilities and stockholders' equity		$	1,708,022			$	1,306,450

Condensed Consolidated Income Statement

Palomar Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Comprehensive Income (loss) (Unaudited)
(in thousands, except shares and per share data)
		Three Months Ended								Year Ended
		December 31,								December 31,
		2023				2022				2023				2022
Revenues:
Gross written premiums		$	303,152			$	239,117			$	1,141,558			$	881,868
Ceded written premiums			(188,742	)			(150,466	)			(731,531	)			(524,575	)
Net written premiums			114,410				88,651				410,027				357,293
Change in unearned premiums			(20,662	)			(6,423	)			(64,114	)			(40,827	)
Net earned premiums			93,748				82,228				345,913				316,466
Net investment income			7,015				4,415				23,705				13,877
Net realized and unrealized gains (losses) on investments			3,044				841				2,941				(7,529	)
Commission and other income			1,586				1,143				3,367				4,272
Total revenues			105,393				88,627				375,926				327,086
Expenses:
Losses and loss adjustment expenses			17,896				18,421				72,592				78,672
Acquisition expenses, net of ceding commissions and fronting fees			29,005				26,843				107,745				110,771
Other underwriting expenses			24,210				17,986				88,172				69,219
Interest expense			824				398				3,775				873
Total expenses			71,935				63,648				272,284				259,535
Income before income taxes			33,458				24,979				103,642				67,551
Income tax expense			7,564				6,219				24,441				15,381
Net income		$	25,894			$	18,760			$	79,201			$	52,170
Other comprehensive income, net:
Net unrealized gains (losses) on securities available for sale			19,229				6,114				12,524				(41,827	)
Net comprehensive income		$	45,123			$	24,874			$	91,725			$	10,343
Per Share Data:
Basic earnings per share		$	1.05			$	0.74			$	3.19			$	2.07
Diluted earnings per share		$	1.02			$	0.73			$	3.13			$	2.02
Weighted-average common shares outstanding:
Basic			24,747,347				25,199,074				24,822,004				25,243,397
Diluted			25,272,149				25,729,681				25,327,091				25,796,008

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 December 31,
		2023								2022
		($ in thousands)
						% of								% of								%
		Amount				GWP				Amount				GWP				Change				Change
Product
Fronting Premiums		$	85,703				28.3	%		$	69,003				28.9	%		$	16,700				24.2	%
Residential Earthquake			63,482				20.9	%			53,808				22.5	%			9,674				18.0	%
Commercial Earthquake			58,606				19.3	%			40,782				17.1	%			17,824				43.7	%
Inland Marine			36,226				11.9	%			32,855				13.7	%			3,371				10.3	%
Casualty			26,719				8.8	%			10,078				4.2	%			16,641				165.1	%
Hawaii Hurricane			9,471				3.1	%			8,388				3.5	%			1,083				12.9	%
Commercial All Risk			8,746				2.9	%			10,025				4.2	%			(1,279	)			(12.8	)%
Residential Flood			5,122				1.7	%			4,089				1.7	%			1,033				25.3	%
Other			9,078				3.0	%			10,089				4.2	%			(1,011	)			(10.0	)%
Total Gross Written Premiums		$	303,153				100.0	%		$	239,117				100.0	%		$	64,036				26.8	%

		Year Ended December 31,
		2023								2022
		($ in thousands)
						% of								% of								%
		Amount				GWP				Amount				GWP				Change				Change
Product
Fronting		$	364,250				31.9	%		$	223,249				25.3	%		$	141,001				63.2	%
Residential Earthquake			253,530				22.2	%			213,803				24.2	%			39,727				18.6	%
Commercial Earthquake			183,368				16.1	%			131,677				14.9	%			51,691				39.3	%
Inland Marine			140,067				12.3	%			105,068				11.9	%			34,999				33.3	%
Casualty			76,864				6.7	%			35,791				4.1	%			41,073				114.8	%
Hawaii Hurricane			38,188				3.3	%			32,967				3.7	%			5,221				15.8	%
Commercial All Risk			35,515				3.1	%			51,671				5.9	%			(16,156	)			(31.3	)%
Residential Flood			20,087				1.8	%			14,539				1.7	%			5,548				38.2	%
Specialty Homeowners			(101	)			(0.0	)%			29,959				3.4	%			(30,060	)			(100.3	)%
Other			29,790				2.6	%			43,144				4.9	%			(13,354	)			(31.0	)%
Total Gross Written Premiums		$	1,141,558				100.0	%		$	881,868				100.0	%		$	259,690				29.4	%

		Three Months Ended December 31,																Year Ended December 31,
		2023								2022								2023								2022
		($ in thousands)																($ in thousands)
						% of								% of								% of								% of
		Amount				GWP				Amount				GWP				Amount				GWP				Amount				GWP
State
California		$	165,342				54.5	%		$	128,490				53.7	%		$	600,791				52.6	%		$	418,809				47.5	%
Texas			22,740				7.5	%			18,960				7.9	%			95,517				8.4	%			90,459				10.3	%
Washington			14,124				4.7	%			12,436				5.2	%			49,494				4.3	%			41,827				4.7	%
Hawaii			11,562				3.8	%			10,428				4.4	%			47,388				4.2	%			40,157				4.6	%
Florida			11,286				3.7	%			11,499				4.8	%			47,595				4.2	%			38,715				4.4	%
New York			6,775				2.2	%			4,109				1.7	%			18,424				1.6	%			12,510				1.4	%
Illinois			6,697				2.2	%			4,215				1.8	%			22,340				2.0	%			17,368				2.0	%
Oregon			6,307				2.1	%			7,625				3.2	%			23,220				2.0	%			24,108				2.7	%
Other			58,320				19.2	%			41,355				17.3	%			236,789				20.7	%			197,915				22.4	%
Total Gross Written Premiums		$	303,153				100.0	%		$	239,117				100.0	%		$	1,141,558				100.0	%		$	881,868				100.0	%

		Three Months Ended December 31,																Year Ended December 31,
		2023								2022								2023								2022
		($ in thousands)																($ in thousands)
						% of								% of								% of								% of
		Amount				GWP				Amount				GWP				Amount				GWP				Amount				GWP
Subsidiary
PSIC		$	156,591				51.7	%		$	132,562				55.4	%		$	653,809				57.3	%		$	489,720				55.5	%
PESIC			146,562				48.3	%			106,555				44.6	%			487,749				42.7	%			392,148				44.5	%
Total Gross Written Premiums		$	303,153				100.0	%		$	239,117				100.0	%		$	1,141,558				100.0	%		$	881,868				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																Year Ended
		December 31,																December 31,
		2023				2022				Change				% Change				2023				2022				Change				% Change
		($ in thousands)																($ in thousands)
Gross earned premiums		$	276,502			$	211,267			$	65,235				30.9	%		$	1,015,722			$	695,272			$	320,450				46.1	%
Ceded earned premiums			(182,754	)			(129,039	)			(53,715	)			41.6	%			(669,809	)			(378,806	)			(291,003	)			76.8	%
Net earned premiums		$	93,748			$	82,228			$	11,520				14.0	%		$	345,913			$	316,466			$	29,447				9.3	%
Net earned premium ratio			33.9	%			38.9	%											34.1	%			45.5	%

Loss detail

		Three Months Ended																Year Ended
		December 31,																December 31,
		2023				2022				Change				% Change				2023				2022				Change				% Change
		($ in thousands)																($ in thousands)
Catastrophe losses		$	10			$	1,865			$	(1,855	)			(99.5	)%		$	3,442			$	15,394			$	(11,952	)			(77.6	)%
Non-catastrophe losses			17,886				16,556				1,330				8.0	%			69,150				63,278				5,872				9.3	%
Total losses and loss adjustment expenses		$	17,896			$	18,421			$	(525	)			(2.9	)%		$	72,592			$	78,672			$	(6,080	)			(7.7	)%

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

		Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
		(in thousands)								(in thousands)
Reserve for losses and LAE net of reinsurance recoverables at beginning of period		$	92,178			$	74,248			$	77,520			$	45,419
Add: Incurred losses and LAE, net of reinsurance, related to:
Current year			19,409				16,384				70,363				76,289
Prior years			(1,513	)			2,037				2,229				2,383
Total incurred			17,896				18,421				72,592				78,672
Deduct: Loss and LAE payments, net of reinsurance, related to:
Current year			5,417				7,896				19,631				21,802
Prior years			7,004				7,253				32,828				24,769
Total payments			12,421				15,149				52,459				46,571
Reserve for losses and LAE net of reinsurance recoverables at end of period			97,653				77,520				97,653				77,520
Add: Reinsurance recoverables on unpaid losses and LAE at end of period			244,622				153,895				244,622				153,895
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period		$	342,275			$	231,415			$	342,275			$	231,415

Reconciliation of Non-GAAP Financial Measures

For the three months and year ended December 31, 2023 and 2022, 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,
		2023				2022				2023				2022
		(in thousands)								(in thousands)
Total revenue		$	105,393			$	88,627			$	375,926			$	327,086
Net investment income			(7,015	)			(4,415	)			(23,705	)			(13,877	)
Net realized and unrealized (gains) losses on investments			(3,044	)			(841	)			(2,941	)			7,529
Underwriting revenue		$	95,334			$	83,371			$	349,280			$	320,738

Underwriting income and adjusted underwriting income

		Three Months Ended								Year Ended
		December 31,								December 31,
			2023				2022				2023				2022
		(in thousands)								(in thousands)
Income before income taxes		$	33,458			$	24,979			$	103,642			$	67,551
Net investment income			(7,015	)			(4,415	)			(23,705	)			(13,877	)
Net realized and unrealized (gains) losses on investments			(3,044	)			(841	)			(2,941	)			7,529
Interest expense			824				398				3,775				873
Underwriting income		$	24,223			$	20,121			$	80,771			$	62,076
Expenses associated with transactions			478				—				706				130
Stock-based compensation expense			4,176				3,068				14,913				11,624
Amortization of intangibles			389				313				1,481				1,255
Expenses associated with catastrophe bond			—				—				1,640				1,992
Adjusted underwriting income		$	29,266			$	23,502			$	99,511			$	77,077

Adjusted net income

		Three Months Ended								Year Ended
		December 31,								December 31,
		2023				2022				2023				2022
		(in thousands)								(in thousands)
Net income		$	25,894			$	18,760			$	79,201			$	52,170
Adjustments:
Net realized and unrealized (gains) losses on investments			(3,044	)			(841	)			(2,941	)			7,529
Expenses associated with transactions			478				—				706				130
Stock-based compensation expense			4,176				3,068				14,913				11,624
Amortization of intangibles			389				313				1,481				1,255
Expenses associated with catastrophe bond			—				—				1,640				1,992
Tax impact			103				(214	)			(1,480	)			(3,366	)
Adjusted net income		$	27,996			$	21,086			$	93,520			$	71,334

Annualized adjusted return on equity

		Three Months Ended								Year Ended
		December 31,								December 31,
		2023				2022				2023				2022
		(in thousands)								(in thousands)
Annualized adjusted net income		$	111,984			$	84,344			$	93,520			$	71,334
Average stockholders' equity		$	446,293			$	376,299			$	428,002			$	389,461
Annualized adjusted return on equity			25.1	%			22.4	%			21.9	%			18.3	%

Adjusted combined ratio

		Three Months Ended								Year Ended
		December 31,								December 31,
		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		$	69,525			$	62,107			$	265,142			$	254,390
Denominator: Net earned premiums		$	93,748			$	82,228			$	345,913			$	316,466
Combined ratio			74.2	%			75.5	%			76.6	%			80.4	%
Adjustments to numerator:
Expenses associated with transactions		$	(478	)		$	—			$	(706	)		$	(130	)
Stock-based compensation expense			(4,176	)			(3,068	)			(14,913	)			(11,624	)
Amortization of intangibles			(389	)			(313	)			(1,481	)			(1,255	)
Expenses associated with catastrophe bond			—				—				(1,640	)			(1,992	)
Adjusted combined ratio			68.8	%			71.4	%			71.2	%			75.6	%

Diluted adjusted earnings per share

		Three Months Ended								Year Ended
		December 31,								December 31,
		2023				2022				2023				2022
		(in thousands, except per share data)								(in thousands, except per share data)
Adjusted net income		$	27,996			$	21,086			$	93,520			$	71,334
Weighted-average common shares outstanding, diluted			25,272,149				25,729,681				25,327,091				25,796,008
Diluted adjusted earnings per share		$	1.11			$	0.82			$	3.69			$	2.77

Catastrophe loss ratio

		Three Months Ended								Year Ended
		December 31,								December 31,
		2023				2022				2023				2022
		(in thousands)								(in thousands)
Numerator: Losses and loss adjustment expenses		$	17,896			$	18,421			$	72,592			$	78,672
Denominator: Net earned premiums		$	93,748			$	82,228			$	345,913			$	316,466
Loss ratio			19.1	%			22.4	%			21.0	%			24.9	%
Numerator: Catastrophe losses		$	10			$	1,865			$	3,442			$	15,394
Denominator: Net earned premiums		$	93,748			$	82,228			$	345,913			$	316,466
Catastrophe loss ratio			0.0	%			2.3	%			1.0	%			4.9	%

Adjusted combined ratio excluding catastrophe losses

		Three Months Ended								Year Ended
		December 31,								December 31,
		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		$	69,525			$	62,107			$	265,142			$	254,390
Denominator: Net earned premiums		$	93,748			$	82,228			$	345,913			$	316,466
Combined ratio			74.2	%			75.5	%			76.6	%			80.4	%
Adjustments to numerator:
Expenses associated with transactions		$	(478	)		$	—			$	(706	)		$	(130	)
Stock-based compensation expense			(4,176	)			(3,068	)			(14,913	)			(11,624	)
Amortization of intangibles			(389	)			(313	)			(1,481	)			(1,255	)
Expenses associated with catastrophe bond			—				—				(1,640	)			(1,992	)
Catastrophe losses			(10	)			(1,865	)			(3,442	)			(15,394	)
Adjusted combined ratio excluding catastrophe losses			68.8	%			69.2	%			70.2	%			70.8	%

Tangible Stockholders’ equity

		December 31,				December 31,
		2023				2022
		(in thousands)
Stockholders' equity		$	471,252			$	384,754
Goodwill and intangible assets			(12,315	)			(8,261	)
Tangible stockholders' equity		$	458,937			$	376,493