Palomar(PLMR) - 2024 Q1 - Quarterly Results

Financial Highlights and CEO Commentary Palomar Holdings reported strong Q1 2024 results, with net income up 52.4% to $26.4 million and gross written premiums growing 47.2% Financial Highlights | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Income | $26.4 million | $17.3 million | +52.6% | | Diluted EPS | $1.04 | $0.68 | +52.9% | | Adjusted Net Income | $27.8 million | $20.4 million | +36.0% | | Adjusted Diluted EPS | $1.09 | $0.80 | +36.3% | | Gross Written Premiums | $368.1 million | $250.1 million | +47.2% | | Annualized Adjusted ROE | 22.9% | 20.7% | +2.2 pts | - The CEO attributed strong results to a focus on profitable growth and predictable earnings, with key contributions from newer product lines and the core franchise[4] - Strong Growth Drivers: Crop and Casualty products significantly contributed to the 47.2% growth in gross written premiums[4] - Core Franchise Performance: The market-leading Earthquake franchise demonstrated solid growth of 18% on a same-store basis[4] - Strategic Confidence: The positive start supports the company's 'Palomar 2X' strategic plan and led to an increased full-year financial outlook[4] Financial Performance Analysis Q1 2024 financial performance showed robust premium growth, stable underwriting profitability with a 76.9% combined ratio, 39.4% investment income growth, and increased stockholders' equity to $501.7 million Underwriting Results Q1 2024 underwriting performance remained strong with gross written premiums up 47.2% to $368.1 million and an improved combined ratio of 76.9% Underwriting Performance Metrics | Underwriting Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Gross Written Premiums | $368.1 M | $250.1 M | | Net Earned Premiums | $107.9 M | $83.2 M | | Underwriting Income | $25.0 M | $18.4 M | | Adjusted Underwriting Income | $29.2 M | $22.2 M | | Loss Ratio | 24.9% | 24.8% | | Combined Ratio | 76.9% | 77.9% | | Adjusted Combined Ratio | 73.0% | 73.3% | - Losses for the quarter totaled $26.8 million, including $3.4 million in catastrophe losses from flood activity and $23.5 million in non-catastrophe attritional losses[6] Investment Results Q1 2024 net investment income increased 39.4% to $7.1 million, driven by higher yields and a larger average investment balance, with $3.0 million in net realized/unrealized gains - The increase in net investment income was attributed to higher yields and a larger average balance of investments[8] - Cash and invested assets totaled $766.4 million at the end of the quarter[8] - The weighted average duration of the fixed-maturity investment portfolio was 3.62 years as of March 31, 2024[8] Stockholders' Equity and Returns Stockholders' equity grew to $501.7 million by March 31, 2024, supporting improved annualized return on equity of 21.7% and adjusted return on equity of 22.9% Stockholders' Equity and Return Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Stockholders' Equity | $501.7 M | $404.6 M | | Annualized Return on Equity | 21.7% | 17.5% | | Annualized Adjusted ROE | 22.9% | 20.7% | Full Year 2024 Outlook Palomar Holdings raised its full-year 2024 adjusted net income guidance to $113 million to $118 million, incorporating Q1 catastrophe losses - The company increased its full-year 2024 guidance for adjusted net income to a range of $113 million to $118 million[11] Detailed Financial Statements Detailed financial statements reveal significant year-over-year growth in premiums, underwriting income, and net income, with total assets reaching $1.88 billion Summary of Operating Results Q1 2024 operating results show a 47.2% increase in gross written premiums and a 52.4% rise in net income, with net earned premiums up 29.6% Summary of Operating Results (Thousands) | ($ in thousands) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Gross written premiums | $368,078 | $250,112 | 47.2% | | Net earned premiums | $107,866 | $83,241 | 29.6% | | Underwriting income (Non-GAAP) | $24,955 | $18,383 | 35.8% | | Net investment income | $7,139 | $5,120 | 39.4% | | Income before income taxes | $34,356 | $22,629 | 51.8% | | Net income | $26,382 | $17,313 | 52.4% | Condensed Consolidated Balance Sheets As of March 31, 2024, total assets reached $1.88 billion, with total liabilities at $1.38 billion and stockholders' equity at $501.7 million Condensed Consolidated Balance Sheets (Thousands) | ($ in thousands) | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total investments | $704,631 | $689,576 | | Cash and cash equivalents | $61,387 | $51,546 | | Total assets | $1,884,684 | $1,708,022 | | Reserve for losses and LAE | $402,187 | $342,275 | | Total liabilities | $1,383,026 | $1,236,770 | | Total stockholders' equity | $501,658 | $471,252 | Condensed Consolidated Income Statement Q1 2024 income statement shows total revenues grew to $118.5 million, with net income reaching $26.4 million and diluted EPS at $1.04 Condensed Consolidated Income Statement (Thousands) | ($ in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total revenues | $118,535 | $89,202 | | Total expenses | $84,179 | $66,573 | | Income before income taxes | $34,356 | $22,629 | | Net income | $26,382 | $17,313 | | Diluted EPS | $1.04 | $0.68 | Underwriting Segment Data GWP breakdown shows diversified growth, with Casualty up 327.2% and Crop adding $38.7 million, while California's GWP share decreased to 42.7%, indicating geographic diversification Gross Written Premiums by Product Q1 2024 GWP growth was driven by Casualty (up 327.2% to $51.9 million) and the new Crop line ($38.7 million), with Earthquake growing 13.1% to $105.7 million Gross Written Premiums by Product (Millions) | Product Line | Q1 2024 GWP ($M) | Q1 2023 GWP ($M) | % Change | | :--- | :--- | :--- | :--- | | Earthquake | $105.7 | $93.5 | 13.1% | | Fronting | $94.8 | $91.8 | 3.4% | | Inland Marine & Other | $76.9 | $52.7 | 45.9% | | Casualty | $51.9 | $12.2 | 327.2% | | Crop | $38.7 | $0.0 | N/A | | Total | $368.1 | $250.1 | 47.2% | Gross Written Premiums by State California remains the largest GWP market at 42.7%, but its concentration decreased, while Texas, Colorado, and New Mexico showed significant growth, indicating geographic diversification - Top 5 states by GWP in Q1 2024 were[41] - California: $157.2 million (42.7% of total)[41] - Texas: $40.8 million (11.1% of total)[41] - Florida: $13.9 million (3.8% of total)[41] - Hawaii: $12.5 million (3.4% of total)[41] - Washington: $12.0 million (3.3% of total)[41] Detailed Underwriting and Loss Analysis Underwriting analysis reveals a 29.6% increase in net earned premiums to $107.9 million, with total losses and LAE up 29.9% to $26.8 million, and reserves increasing to $110.2 million Gross and Net Earned Premiums Q1 2024 gross earned premiums increased 34.5% to $302.9 million, with net earned premiums growing 29.6% to $107.9 million, while the net earned premium ratio slightly decreased to 35.6% Gross and Net Earned Premiums (Thousands) | ($ in thousands) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Gross earned premiums | $302,872 | $225,243 | 34.5% | | Ceded earned premiums | $(195,006) | $(142,002) | 37.3% | | Net earned premiums | $107,866 | $83,241 | 29.6% | Loss Detail and Reserve Reconciliation Total losses and LAE increased to $26.8 million in Q1 2024, with catastrophe losses at $3.4 million and non-catastrophe losses at $23.5 million, and gross loss reserves at $402.2 million Loss Detail (Thousands) | ($ in thousands) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Catastrophe losses | $3,359 | $1,806 | 86.0% | | Non-catastrophe losses | $23,478 | $18,846 | 24.6% | | Total losses and LAE | $26,837 | $20,652 | 29.9% | - The reserve for losses and LAE, gross of reinsurance, ended the period at $402.2 million, compared to $265.0 million at the end of Q1 2023[43] Reconciliation of Non-GAAP Financial Measures This section reconciles non-GAAP financial measures, adjusting Q1 2024 GAAP net income of $26.4 million to an adjusted net income of $27.8 million Reconciliation to Adjusted Net Income (Thousands) | Reconciliation to Adjusted Net Income ($ in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income (GAAP) | $26,382 | $17,313 | | Net realized/unrealized gains on investments | $(3,002) | $(146) | | Stock-based compensation expense | $3,820 | $3,450 | | Amortization of intangibles | $390 | $313 | | Expenses associated with catastrophe bond | $— | $50 | | Tax impact | $204 | $(540) | | Adjusted net income (Non-GAAP) | $27,794 | $20,440 | Reconciliation to Adjusted Combined Ratio | Reconciliation to Adjusted Combined Ratio | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Combined ratio (GAAP) | 76.9% | 77.9% | | Stock-based compensation expense | (3.5)% | (4.1)% | | Amortization of intangibles | (0.4)% | (0.4)% | | Expenses associated with catastrophe bond | 0.0% | (0.1)% | | Adjusted combined ratio (Non-GAAP) | 73.0% | 73.3% |