• Palomar Holdings, Inc. Reports Third Quarter 2022 Results

    المصدر: Nasdaq GlobeNewswire / 02 نوفمبر 2022 15:16:03   America/Chicago

    LA JOLLA, Calif., Nov. 02, 2022 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported net income of $4.3 million, or $0.17 per diluted share, for the third quarter of 2022 compared to $0.2 million, or $0.01 per diluted share, for the third quarter of 2021. Adjusted net income(1) was $7.4 million, or $0.29 per diluted share, for the third quarter of 2022 as compared to $1.7 million, or $0.07 per diluted share, for the third quarter of 2021.

    Third Quarter 2022 Highlights

    • Gross written premiums increased by 66.2% to $253.1 million compared to $152.3 million in the third quarter of 2021
    • Net income of $4.3 million, compared to $0.2 million in the third quarter of 2021
    • Adjusted net income(1) of $7.4 million, compared to $1.7 million in the third quarter of 2021
    • Total loss ratio of 39.6% compared to 44.0% in the third quarter of 2021
    • Combined ratio of 94.8% compared to 102.8% in the third quarter of 2021
    • Adjusted combined ratio(1) of 90.3%, compared to 100.2% in the third quarter of 2021
    • Annualized return on equity of 4.6%, compared to 0.3% in the third quarter of 2021
    • Annualized adjusted return on equity(1) of 7.9%, compared to 1.8% in the third quarter of 2021

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

    Mac Armstrong, Chairman and Chief Executive Officer, commented, “I am very proud of our third quarter results as they are a further testament to our commitment to profitable growth and our execution of Palomar 2X – our intermediate term strategic plan of doubling our adjusted underwriting income while achieving a 20% adjusted return on equity. We grew the gross written premium of the business by 66%, and despite incurring a full retention loss from Hurricane Ian, we generated an adjusted ROE of 10% when adding back realized and unrealized gains and losses from our investment portfolio. The quarter’s results validate the resilience of our model as the business grew adjusted net income by 328% from the prior year.”  

    “Ian will go down as a historic storm and our thoughts and prayers are with all of those impacted by the storm. From a business perspective, we are pleased that our losses should under index the industry due to the underwriting actions we’ve implemented over the last few years that have meaningfully reduced our continental hurricane exposure.”

    “The growing contributions in the quarter of our newer business lines such as inland marine and casualty have further catalyzed Palomar 2X. While our results led to a modestly higher attritional loss ratio than plan, it is worth noting that 29% of these attritional losses were from lines of business that we have exited or restructured. As such, we at Palomar strongly feel that our third quarter performance demonstrates our sustained execution of Palomar 2X and we believe we are well-positioned for further profitable growth over the remainder of 2022 and into 2023,” concluded Mr. Armstrong.

    Underwriting Results
    Gross written premiums increased 66.2% to $253.1 million compared to $152.3 million in the third quarter of 2021, while net earned premiums increased 20.4% compared to the prior year’s third quarter.

    Losses and loss adjustment expenses for the third quarter were $30.9 million including $18.4 million of non-catastrophe attritional losses, and $12.5 million of catastrophe losses from Hurricane Ian. The loss ratio for the quarter was 39.6%, comprised of a catastrophe loss ratio(1) of 16.0% and an attritional loss ratio of 23.6%, compared to a loss ratio of 44.0% during the same period last year comprised of a catastrophe loss ratio(1) of 27.0% and an attritional loss ratio of 17.0%.

    The third quarter catastrophe loss results include a full retention loss from Hurricane Ian. The expected losses from Hurricane Ian also result in additional ceded reinsurance premium of $3.1 million, with $1.3 million recognized in the third quarter of 2022 and the remaining $1.8 million recognized over the remaining term of the June 1, 2022 reinsurance treaty.

    Non-catastrophe losses and loss ratio increased mainly due to the growth of lines of business subject to attritional losses, such as Inland Marine, Casualty, and Commercial All Risk. The attritional loss ratio for the quarter was modestly higher than the annualized loss ratio previously targeted. Higher than projected premium from new lines of business central to the success of Palomar 2X contributed to the loss totals. Additionally, approximately $5.3 million or 29% of the of the losses for the quarter were from lines of business in runoff or restructured.

    Underwriting income(1) was $4.1 million resulting in a combined ratio of 94.8% compared to an underwriting loss of $1.8 million and a combined ratio of 102.8% during the same period last year. Excluding expenses related to transactions, stock-based compensation, and amortization of intangibles, the Company’s adjusted underwriting income(1) was $7.5 million resulting in an adjusted combined ratio(1) of 90.3% in the third quarter compared to an adjusted underwriting loss(1) of $0.2 million and an adjusted combined ratio(1) of 100.2% during the same period last year. The adjusted underwriting income(1) increased and the adjusted combined ratio(1) decreased primarily due to the combination of higher underwriting revenue(1) and lower expense ratio and loss ratio compared to the prior year’s third quarter.

    Investment Results
    Net investment income increased by 67.4% to $3.7 million compared to $2.2 million in the prior year’s third quarter. The year over year increase was a result of a higher average balance of investments held during the three months ended September 30, 2022 due to cash generated from operations and higher yields on fixed income investments. 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" with a small portion of our portfolio invested in equity securities. The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 4.03 years at September 30, 2022. Cash and invested assets totaled $541.8 million at September 30, 2022. During the third quarter, the Company recorded realized and unrealized losses of $2.4 million as compared to realized and unrealized losses of $0.3 million in last year’s third quarter due primarily to higher mark-to-market losses on equity securities.

    Tax Rate
    The effective tax rate for the three months ended September 30, 2022 was 17.5% compared to negative 101.6% for the three months ended September 30, 2021. For the current quarter and prior year quarter, the Company’s income tax rate was lower than the statutory rate of 21% due primarily to the tax impact of the permanent component of employee stock option exercises.

    Stockholders’ Equity and Returns
    Stockholders' equity was $367.8 million at September 30, 2022, compared to $377.8 million at September 30, 2021. For the three months ended September 30, 2022, the Company’s annualized return on equity was 4.6% compared to 0.3% for the same period in the prior year while adjusted return on equity(1) was 7.9% compared to 1.8% for the same period in the prior year. During the current quarter, the Company repurchased 52,185 shares for $3.0 million of the Company’s previously announced $100 million share repurchase authorization. As of September 30, 2022, $76.7 million remains available for future repurchases.

    2022 Outlook
    For 2022 the Company expects to achieve full year adjusted net income of $82 million to $85 million. The range includes additional reinsurance expense resulting from Hurricane Ian and excludes catastrophes and realized and unrealized gains and losses.

    Conference Call
    As previously announced, Palomar will host a conference call Thursday November 3, 2022, to discuss its third quarter 2022 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 2022 Earnings Conference Call. A replay will be available starting at 3:00 p.m. (Eastern Time) on November 3, 2022, and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the replay is 13732950. The replay will be available until 11:59 p.m. (Eastern Time) on November 10, 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 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.

    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, 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 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 
    Lindsay Conner 
    1-551-206-6217 
    lconner@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 September 30, 2022 and 2021:

      Three months ended       
      September 30,      
         2022    2021    Change    % Change
      ($ in thousands, except per share data) 
    Gross written premiums $253,128 $152,332 $100,796 66.2%
    Ceded written premiums  (161,930) (58,073) (103,857)178.8%
    Net written premiums  91,198  94,259  (3,061)(3.2)%
    Net earned premiums  77,942  64,720  13,222 20.4%
    Commission and other income  1,362  1,018  344 33.8%
    Total underwriting revenue (1)  79,304  65,738  13,566 20.6%
    Losses and loss adjustment expenses  30,900  28,475  2,425 8.5%
    Acquisition expenses  27,210  26,412  798 3.0%
    Other underwriting expenses  17,114  12,652  4,462 35.3%
    Underwriting income (loss) (1)  4,080  (1,801) 5,881 NM 
    Interest expense  (270) —  (270)NM 
    Net investment income  3,744  2,236  1,508 67.4%
    Net realized and unrealized losses on investments  (2,356) (313) (2,043)NM 
    Income before income taxes  5,198  122  5,076 NM 
    Income tax expense (benefit)  912  (124) 1,036 NM 
    Net income  $4,286 $246 $4,040 NM 
    Adjustments:              
    Expenses associated with transactions  45  —  45 NM 
    Stock-based compensation expense  3,092  1,525  1,567 102.8%
    Amortization of intangibles  313  115  198 172.4%
    Tax impact  (376) (166) (210)126.5%
    Adjusted net income (1) $7,360 $1,720 $5,640 NM 
    Key Financial and Operating Metrics                
    Annualized return on equity  4.6%   0.3%         
    Annualized adjusted return on equity (1)  7.9%   1.8%         
    Loss ratio  39.6%   44.0%         
    Expense ratio  55.1%   58.8%         
    Combined ratio  94.8%   102.8%         
    Adjusted combined ratio (1)  90.3%   100.2%       
    Diluted earnings per share $0.17 $0.01      
    Diluted adjusted earnings per share (1) $0.29 $0.07      
    Catastrophe losses $12,500 $17,487      
    Catastrophe loss ratio (1)  16.0%   27.0%       
    Adjusted combined ratio excluding catastrophe losses (1)  74.3%   73.2%       
    Adjusted underwriting income (loss) (1) $7,530 $(161)$7,691 NM 
    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 nine months ended September 30, 2022 and 2021:

      Nine months ended       
      September 30,       
      2022 2021 Change % Change 
      ($ in thousands, except per share data) 
    Gross written premiums $642,751 $385,267 $257,484 66.8%
    Ceded written premiums  (374,109) (153,005) (221,104)144.5%
    Net written premiums  268,642  232,262  36,380 15.7%
    Net earned premiums  234,239  165,988  68,251 41.1%
    Commission and other income  3,129  2,735  394 14.4%
    Total underwriting revenue (1)  237,368  168,723  68,645 40.7%
    Losses and loss adjustment expenses  60,251  31,288  28,963 92.6%
    Acquisition expenses  83,928  68,150  15,778 23.2%
    Other underwriting expenses  51,233  39,438  11,795 29.9%
    Underwriting income (1)  41,956  29,847  12,109 40.6%
    Interest expense  (475) —  (475)NM 
    Net investment income  9,462  6,649  2,813 42.3%
    Net realized and unrealized losses on investments  (8,369) (752) (7,617)NM 
    Income before income taxes  42,574  35,744  6,830 19.1%
    Income tax expense  9,163  6,529  2,634 40.3%
    Net income $33,411 $29,215 $4,196 14.4%
    Adjustments:            
    Expenses associated with transactions  130  411  (281)(68.4)%
    Stock-based compensation expense  8,556  3,370  5,186 153.9%
    Amortization of intangibles  942  704  238 33.8%
    Expenses associated with catastrophe bond, net of rebate  1,992  1,698  294 17.3%
    Tax impact  (1,395) (1,156) (239)20.7%
    Adjusted net income (1) $43,636 $34,242 $9,394 27.4%
    Key Financial and Operating Metrics            
    Annualized return on equity  11.7% 10.5%     
    Annualized adjusted return on equity (1)  15.3% 12.3%     
    Loss ratio  25.7% 18.8%     
    Expense ratio  56.4% 63.2%     
    Combined ratio  82.1% 82.0%     
    Adjusted combined ratio (1)  77.1% 78.3%     
    Diluted earnings per share $1.29 $1.12      
    Diluted adjusted earnings per share (1) $1.69 $1.31      
    Catastrophe losses $13,529 $6,719      
    Catastrophe loss ratio (1)  5.8% 4.0%     
    Adjusted combined ratio excluding catastrophe losses (1)  71.4% 74.2%     
    Adjusted underwriting income (1) $53,576 $36,030 $17,546 48.7%
    NM- not meaningful            



    Condensed Consolidated Balance sheets

    Palomar Holdings, Inc. and Subsidiaries

    Condensed Consolidated Balance Sheets (unaudited)

    (in thousands, except shares and par value data)

         September 30,     December 31, 
      2022 2021
      (Unaudited)   
    Assets      
    Investments:      
    Fixed maturity securities available for sale, at fair value (amortized cost: $530,992 in 2022; $426,122 in 2021) $476,794 $432,682
    Equity securities, at fair value (cost: $42,111 in 2022; $31,834 in 2021)  35,468  33,261
    Total investments  512,262  465,943
    Cash and cash equivalents  29,471  50,284
    Restricted cash  73  87
    Accrued investment income  3,333  2,725
    Premiums receivable, net  186,850  88,012
    Deferred policy acquisition costs, net of ceding commissions  57,000  55,953
    Reinsurance recoverable on unpaid losses and loss adjustment expenses  131,575  127,947
    Reinsurance recoverable on paid losses and loss adjustment expenses  45,393  29,368
    Ceded unearned premiums  182,657  58,315
    Prepaid expenses and other assets  46,414  37,072
    Deferred tax assets, net  12,200  —
    Property and equipment, net  663  527
    Intangible assets, net  8,575  9,501
    Total assets $1,216,466 $925,734
    Liabilities and stockholders' equity      
    Liabilities:      
    Accounts payable and other accrued liabilities $20,655 $21,284
    Reserve for losses and loss adjustment expenses  205,823  173,366
    Unearned premiums  443,463  284,665
    Ceded premium payable  145,918  37,460
    Funds held under reinsurance treaty  6,362  10,882
    Deferred tax liabilities, net  —  3,908
    Borrowings from credit agreements  26,400  —
    Total liabilities  848,621  531,565
    Stockholders' equity:      
    Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021  —  —
    Common stock, $0.0001 par value, 500,000,000 shares authorized, 25,229,486 and 25,428,929 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively  3  3
    Additional paid-in capital  330,381  318,902
    Accumulated other comprehensive income (loss)  (42,629) 5,312
    Retained earnings  80,090  69,952
    Total stockholders' equity  367,845  394,169
    Total liabilities and stockholders' equity $1,216,466 $925,734



    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   Nine Months Ended  
      September 30,   September 30,  
      2022 2021 2022 2021
    Revenues:                
    Gross written premiums $253,128  $152,332  $642,751  $385,267 
    Ceded written premiums  (161,930)  (58,073)  (374,109)  (153,005)
    Net written premiums  91,198   94,259   268,642   232,262 
    Change in unearned premiums  (13,256)  (29,539)  (34,403)  (66,274)
    Net earned premiums  77,942   64,720   234,239   165,988 
    Net investment income  3,744   2,236   9,462   6,649 
    Net realized and unrealized losses on investments  (2,356)  (313)  (8,369)  (752)
    Commission and other income  1,362   1,018   3,129   2,735 
    Total revenues  80,692   67,661   238,461   174,620 
    Expenses:                
    Losses and loss adjustment expenses  30,900   28,475   60,251   31,288 
    Acquisition expenses  27,210   26,412   83,928   68,150 
    Other underwriting expenses  17,114   12,652   51,233   39,438 
    Interest expense  270   —   475   — 
    Total expenses  75,494   67,539   195,887   138,876 
    Income before income taxes  5,198   122   42,574   35,744 
    Income tax expense (benefit)  912   (124)  9,163   6,529 
    Net income  4,286   246   33,411   29,215 
    Other comprehensive income (loss), net:                
    Net unrealized losses on securities available for sale for the three and nine months ended September 30, 2022 and 2021, respectively  (15,412)  (1,655)  (47,941)  (5,144)
    Net comprehensive income (loss) $(11,126) $(1,409) $(14,530) $24,071 
    Per Share Data:                
    Basic earnings per share $0.17  $0.01  $1.32  $1.15 
    Diluted earnings per share $0.17  $0.01  $1.29  $1.12 
                     
    Weighted-average common shares outstanding:                
    Basic  25,209,368   25,388,630   25,258,333   25,473,006 
    Diluted  25,787,625   26,043,680   25,808,387   26,133,664 



    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,   Nine Months Ended September 30, 
      2022 2021  2022 2021 
      ($ in thousands)  ($ in thousands) 
         % of    % of     % of    % of 
      Amount GWP Amount GWP  Amount GWP Amount GWP 
    Product                                                      
    Fronting Premiums $82,232 32.5%  $— 0.0% $154,232 24.0%  $— 0.0%
    Residential Earthquake  59,569 23.5%   50,075 32.9%  159,995 24.9%   128,165 33.3%
    Commercial Earthquake  32,647 12.9%   27,433 18.0%  90,894 14.1%   66,052 17.1%
    Inland Marine  30,842 12.2% 19,532 12.8%  72,214 11.2%   39,047 10.1%
    Casualty  12,888 5.1%   2,868 1.9%  25,697 4.0%   5,504 1.4%
    Hawaii Hurricane  9,425 3.7%   8,996 5.9%  24,579 3.8%   22,921 6.0%
    Commercial All Risk  9,224 3.6%   6,867 4.5%  41,647 6.5%   30,032 7.8%
    Residential Flood  3,871 1.5%   3,228 2.1%  10,448 1.6%   8,377 2.2%
    Specialty Homeowners  (94) (0.0)%   19,881 13.1%  30,082 4.7%   53,018 13.8%
    Other  12,524 5.0%   13,452 8.8%  32,963 5.1%   32,151 8.4%
    Total Gross Written Premiums $253,128 100.0%  $152,332 100.0% $642,751 100.0%  $385,267 100.0%


      Three Months Ended September 30,   Nine Months Ended September 30, 
      2022 2021  2022 2021 
      ($ in thousands)  ($ in thousands) 
         % of    % of     % of    % of 
      Amount GWP Amount GWP  Amount GWP Amount GWP 
    State                                                      
    California $131,016 51.8%  $72,505 47.6% $292,865 45.6%  $180,142 46.8%
    Texas  26,234 10.4%   19,715 13.0%  71,499 11.1%   48,142 12.5%
    Washington  13,573 5.4%   7,180 4.7%  29,391 4.6%   15,931 4.1%
    Hawaii  10,998 4.3%   10,342 6.8%  29,729 4.6%   26,312 6.8%
    Oregon  7,738 3.1%   3,964 2.6%  16,483 2.6%   9,686 2.5%
    Florida  7,445 2.9%   7,203 4.7%  27,216 4.2%   24,958 6.5%
    Illinois  4,204 1.7%   2,893 1.9%  13,153 2.1%   8,668 2.3%
    New York  3,738 1.5%   618 0.4%  8,401 1.3%   1,273 0.3%
    Other  48,182 19.0%   27,912 18.3%  154,014 24.0%   70,155 18.2%
    Total Gross Written Premiums $253,128 100.0%  $152,332 100.0% $642,751 100.0%  $385,267 100.0%


      Three Months Ended September 30,   Nine Months Ended September 30, 
      2022 2021  2022 2021 
      ($ in thousands)  ($ in thousands) 
         % of    % of     % of    % of 
      Amount GWP Amount GWP  Amount GWP Amount GWP 
    Subsidiary                      
    PSIC $136,814 54.0%  $110,875 72.8% $357,156 55.6%  $285,991 74.2%
    PESIC  116,314 46.0%   41,457 27.2%  285,595 44.4%   99,276 25.8%
    Total Gross Written Premiums $253,128 100.0%  $152,332 100.0% $642,751 100.0%  $385,267 100.0%

    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,       
         2022    2021    Change    % Change  2022    2021    Change    % Change
      ($ in thousands)  ($ in thousands)
    Gross earned premiums $186,938 $117,276 $69,662 59.4%  $484,005 $311,088 $172,917 55.6%
    Ceded earned premiums  (108,996)  (52,556)  (56,440) 107.4%   (249,766)  (145,100)  (104,666) 72.1%
    Net earned premiums $77,942 $64,720 $13,222 20.4%  $234,239 $165,988 $68,251 41.1%
                              
    Net earned premium ratio  41.7%  55.2%         48.4%  53.4%      

    Loss detail

      Three Months Ended         Nine Months Ended       
      September 30,         September 30,       
         2022    2021    Change    % Change  2022    2021    Change    % Change
      ($ in thousands)  ($ in thousands)
    Catastrophe losses $12,500 $17,487 $(4,987) (28.5)%  $13,529 $6,719 $6,810 101.4%
    Non-catastrophe losses  18,400  10,988  7,412 67.5%   46,722  24,569  22,153 90.2%
    Total losses and loss adjustment expenses $30,900 $28,475 $2,425 8.5%  $60,251 $31,288 $28,963 92.6%

    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, 
         2022    2021 2022    2021
       (in thousands)  (in thousands)
    Reserve for losses and LAE net of reinsurance recoverables at beginning of period $55,769 $23,633 $45,419 $34,470
    Add: Incurred losses and LAE, net of reinsurance, related to:            
    Current year  30,904  28,286  58,703  34,202
    Prior years  (4)  189  1,548  (2,914)
    Total incurred  30,900  28,475  60,251  31,288
    Deduct: Loss and LAE payments, net of reinsurance, related to:                
    Current year  7,873  2,787  13,762  3,407
    Prior years  4,548  2,678  17,660  15,708
    Total payments  12,421  5,465  31,422  19,115
    Reserve for losses and LAE net of reinsurance recoverables at end of period  74,248  46,643  74,248  46,643
    Add: Reinsurance recoverables on unpaid losses and LAE at end of period  131,575  129,044  131,575  129,044
    Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period $205,823 $175,687 $205,823 $175,687

    Reconciliation of Non-GAAP Financial Measures

    For the three and nine months ended September 30, 2022 and 2021, 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, 
         2022    2021     2022    2021
      (in thousands)  (in thousands)
    Total revenue $80,692 $67,661  $238,461 $174,620
    Net investment income  (3,744)  (2,236)   (9,462)  (6,649)
    Net realized and unrealized (gains) losses on investments  2,356  313   8,369  752
    Underwriting revenue $79,304 $65,738  $237,368 $168,723

    Underwriting income and adjusted underwriting income

      Three Months Ended   Nine Months Ended
      September 30,   September 30, 
         2022    2021     2022    2021
      (in thousands)  (in thousands)
    Income before income taxes $5,198    $122  $42,574    $35,744
    Net investment income  (3,744)  (2,236)   (9,462)  (6,649)
    Net realized and unrealized (gains) losses on investments  2,356  313   8,369  752
    Interest expense  270  —   475  —
    Underwriting income $4,080 $(1,801)  $41,956 $29,847
    Expenses associated with transactions  45  —   130  411
    Stock-based compensation expense  3,092  1,525   8,556  3,370
    Amortization of intangibles  313  115   942  704
    Expenses associated with catastrophe bond, net of rebate  —  —   1,992  1,698
    Adjusted underwriting income $7,530 $(161)  $53,576 $36,030

    Adjusted net income

      Three Months Ended   Nine Months Ended
      September 30,   September 30, 
         2022    2021     2022    2021
      (in thousands)  (in thousands)
    Net income $4,286    $246  $33,411    $29,215
    Adjustments:                 
    Expenses associated with transactions  45  —   130  411
    Stock-based compensation expense  3,092  1,525   8,556  3,370
    Amortization of intangibles  313  115   942  704
    Expenses associated with catastrophe bond, net of rebate  —  —   1,992  1,698
    Tax impact  (376)  (166)   (1,395)  (1,156)
    Adjusted net income $7,360 $1,720  $43,636 $34,242

    Annualized adjusted return on equity

      Three Months Ended   Nine Months Ended
      September 30,   September 30, 
      2022 2021  2022 2021 
      ($ in thousands)  ($ in thousands) 
                   
    Annualized adjusted net income $29,441 $6,880  $58,181 $45,656 
    Average stockholders' equity $372,955 $377,260  $381,007 $370,745 
    Annualized adjusted return on equity  7.9% 1.8%  15.3% 12.3%

    Adjusted combined ratio

      Three Months Ended   Nine Months Ended
      September 30,   September 30, 
      2022 2021  2022 2021 
      ($ in thousands)  ($ in thousands) 
    Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $73,862 $66,521  $192,283 $136,141 
    Denominator: Net earned premiums $77,942 $64,720  $234,239 $165,988 
    Combined ratio  94.8% 102.8%  82.1% 82.0%
    Adjustments to numerator:              
    Expenses associated with transactions $(45) $—  $(130) $(411) 
    Stock-based compensation expense  (3,092)  (1,525)   (8,556)  (3,370) 
    Amortization of intangibles  (313)  (115)   (942)  (704) 
    Expenses associated with catastrophe bond, net of rebate  —  —   (1,992)  (1,698) 
    Adjusted combined ratio  90.3% 100.2%  77.1% 78.3%

    Diluted adjusted earnings per share

      Three Months Ended   Nine Months Ended
      September 30,   September 30, 
      2022 2021  2022 2021
      (in thousands, except per share data)  (in thousands, except per share data)
                  
    Adjusted net income $7,360 $1,720  $43,636 $34,242
    Weighted-average common shares outstanding, diluted  25,787,625  26,043,680   25,808,387  26,133,664
    Diluted adjusted earnings per share $0.29 $0.07  $1.69 $1.31

    Catastrophe loss ratio

      Three Months Ended   Nine Months Ended  
      September 30,   September 30,  
      2022 2021  2022 2021 
      ($ in thousands)  ($ in thousands) 
    Numerator: Losses and loss adjustment expenses $30,900 $28,475  $60,251 $31,288 
    Denominator: Net earned premiums $77,942 $64,720  $234,239 $165,988 
    Loss ratio  39.6% 44.0%  25.7% 18.8%
                   
    Numerator: Catastrophe losses $12,500 $17,487  $13,529 $6,719 
    Denominator: Net earned premiums $77,942 $64,720  $234,239 $165,988 
    Catastrophe loss ratio  16.0% 27.0%  5.8% 4.0%

    Adjusted combined ratio excluding catastrophe losses

      Three Months Ended   Nine Months Ended  
      September 30,   September 30,  
      2022    2021  2022    2021 
      ($ in thousands)  ($ in thousands) 
    Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $73,862 $66,521  $192,283 $136,141 
    Denominator: Net earned premiums $77,942 $64,720  $234,239 $165,988 
    Combined ratio  94.8%   102.8%    82.1%   82.0%  
    Adjustments to numerator:              
    Expenses associated with transactions $(45) $—  $(130) $(411) 
    Stock-based compensation expense  (3,092)  (1,525)   (8,556)  (3,370) 
    Amortization of intangibles  (313)  (115)   (942)  (704) 
    Expenses associated with catastrophe bond, net of rebate  —  —   (1,992)  (1,698) 
    Catastrophe losses  (12,500)  (17,487)   (13,529)  (6,719) 
    Adjusted combined ratio excluding catastrophe losses  74.3%   73.2%    71.4%   74.2%  

    Tangible Stockholders’ equity

      September 30,  December 31,
      2022 2021
      (in thousands)
    Stockholders' equity $367,845 $394,169
    Intangible assets  (8,575)  (9,501)
    Tangible stockholders' equity $359,270 $384,668


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