Palomar Holdings, Inc. Reports Fourth Quarter & Full Year 2020 Results

LA JOLLA, Calif., Feb. 24, 2021 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported a net loss of $1.8 million, or $0.07 per diluted share, for the fourth quarter of 2020 compared to net income of $10.9 million, or $0.45 per diluted share, for the fourth quarter of 2019.

Fourth Quarter 2020 Highlights

• Gross written premiums increased by 31.0% to $96.1 million compared to $73.3 million in the fourth quarter of 2019
• Net loss of $1.8 million, or $0.07 per diluted share, compared to net income of $10.9 million, or $0.45 per diluted share, in the fourth quarter of 2019
• Total loss ratio of 44.2% compared to 7.1% in the fourth quarter of 2019
• Catastrophe loss ratio⁽¹⁾ of 37.2% compared to zero in the fourth quarter of 2019
• Combined ratio of 112.8% compared to 63.1% in the fourth quarter of 2019
• Adjusted combined ratio excluding catastrophe losses⁽¹⁾ of 73.8%, compared to 60.7% in the fourth quarter of 2019
• Annualized return on equity of (2.0)%, compared to 20.4% in the fourth quarter of 2019
  

Full Year 2020 Highlights

• Gross written premiums increased by 40.6% to $354.4 million compared to $252.0 million in 2019
• Net income of $6.3 million, compared to $10.6 million in 2019
• Adjusted net income⁽¹⁾ of $8.9 million, compared to $37.9 million in 2019
• Total loss ratio of 41.3%, compared to 5.6% in 2019
• Catastrophe loss ratio⁽¹⁾ of 32.9% compared to zero in 2019
• Combined ratio of 102.5%, compared to 91.3% in 2019
• Adjusted combined ratio excluding catastrophe losses⁽¹⁾ of 67.5%, compared to 63.3% in 2019
• Return on equity of 2.1%, compared to 6.7% in 2019
• Adjusted return on equity⁽¹⁾ of 3.0%, compared to 24.1% in 2019
  

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

“I am inspired by the efforts of our team to grow and evolve our business during the past year,” commented Mac Armstrong, Chairman and Chief Executive Officer. “We launched new products and a new insurance carrier, entered into new geographies, made key additions to our team, and continued our pursuit of the Company’s strategic vision all while navigating circumstances that few of us could have anticipated. Our newly launched E&S carrier, Palomar Excess and Surplus Insurance Company, or PESIC, represents an exciting progression in our evolution. PESIC enables us to extend the breadth and reach of our product suite and was a key contributor to the 95% year on year growth in our commercial lines gross written premiums for the full year. Overall, we grew gross written premiums by 31.0% in the fourth quarter and 40.6% for the full year while maintaining profitability in the face of an historic wind season.”

Mr. Armstrong shared, “We are committed to applying data and lessons learned to the continuous improvement of our business. During this past year we modified our approach to and participation in specific wind-exposed markets upon review of potential risk-adjusted returns, catastrophe payback and prevailing market conditions. We also made additional refinements to our risk transfer strategy. The combination of these efforts will not only reduce volatility but also further enhance visibility into our financial results. Finally, we continued investing in our technology and our team as we position Palomar for near and long-term success.”

Mr. Armstrong further offered, “Separately, I would like to address the severe weather activity throughout the country this past week, specifically Winter Storm Uri in Texas where Palomar has a considerable market presence. I want to tell our policyholders in Texas that our thoughts are with them, we stand ready to support them and we are here to help them rebound. Palomar has substantial resources in place to support both residential and commercial policyholders in Texas, including comprehensive reinsurance coverage on both an excess of loss and quota share basis. Both our commercial and residential quota shares will apply to this event from the first dollar of loss, and as such we do not expect to incur material losses from the storm.”  

Underwriting Results
Gross written premiums increased 31.0% to $96.1 million compared to $73.3 million in the fourth quarter of 2019, while net earned premiums increased 25.6% compared to the prior year’s fourth quarter. Losses and loss adjustment expenses for the fourth quarter were $17.2 million including $14.5 million of catastrophe losses and $2.7 million of non-catastrophe attritional losses. The loss ratio for the quarter was 44.2%, comprised of a catastrophe loss ratio of 37.2%⁽¹⁾ and an attritional loss ratio of 7.0%, compared to a loss ratio of 7.1% during the same period last year comprised entirely of attritional losses. The fourth quarter losses include $0.1 million of favorable prior year development. In addition to catastrophe losses, the Company’s fourth quarter 2020 results were impacted by a reinsurance expense acceleration charge of $4.1 million and reinstatement premium of $0.8 million on backup reinsurance purchased. Underwriting loss⁽¹⁾ was $5.0 million resulting in a combined ratio of 112.8% compared to underwriting income of $11.4 million and a combined ratio of 63.1% during the same period last year. The fourth quarter of 2020 results include certain expenses related to stock-based compensation and catastrophe losses. The fourth quarter of 2019 results include certain expenses related to the Company’s stock offering and stock-based compensation. Without these items, the Company’s adjusted combined ratio excluding catastrophe losses⁽¹⁾ was 73.8% in the fourth quarter compared to 60.7% during the same period last year. This increase was significantly due to the reinsurance acceleration charge and reinstatement premium incurred in the fourth quarter of 2020.

Investment Results
Net investment income increased by 29.0% to $2.3 million compared to $1.8 million in the prior year’s fourth quarter. The year over year increase was primarily due to a higher average balance of investments held during the three months ended December 31, 2020 due to cash generated from operations as well as proceeds from the Company’s January and June 2020 stock offerings, offset by lower yields on invested assets. Funds are generally invested conservatively in high quality securities, including government agency, asset and mortgage-backed securities, municipal and corporate bonds with an average credit quality of "A2/A". The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.96 years at December 31, 2020. Cash and invested assets totaled $456.1 million at December 31, 2020. During the fourth quarter, the Company recognized realized and unrealized gains of $245 thousand related to its investment portfolio as compared to a $1.2 million gain in last year’s fourth quarter.

Tax Rate
The effective tax rate for the three months ended December 31, 2020 was 23.1% compared to 24.6% for the three months ended December 31, 2019. For the current quarter, the Company’s income tax rate differed from the statutory rate due to the tax impact of the permanent component of employee stock option exercises. The 2019 fourth quarter tax rate includes an adjustment from prior periods of $0.4 million, or approximately 3 points of the effective tax rate for the fourth quarter.

Stockholders’ Equity and Returns
Stockholders’ equity was $363.7 million at December 31, 2020, compared to $218.6 million at December 31, 2019. For the three months ended December 31, 2020, the Company’s annualized return on equity was (2.0%) compared to 20.4% for the same period last year.

Full Year 2021 Outlook
For the full year 2021, the Company expects to achieve adjusted net income of $62 million to $67 million. This adjusted net income guidance considers the impact of Winter Storm Uri in Texas.

Conference Call
As previously announced, Palomar will host a conference call February 25, 2021, to discuss its fourth quarter and full year 2020 results at 12:00 p.m. (Eastern Time). The conference call can be accessed by dialing 1-877-423-9813 (domestic) or 1-201-689-8573 (international) and asking for the Palomar Fourth Quarter and Full Year 2020 Earnings Call. A telephonic replay will be available approximately two hours after the call and can be accessed by dialing 1-844-512-2921, or for international callers 1-412-317-6671 and providing the access code 13716031. The telephonic replay will be available until 11:59 pm (Eastern Time) on March 4, 2021.

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, Palomar Specialty Reinsurance Company Bermuda Ltd., Palomar Insurance Agency, Inc. and Palomar Excess and Surplus Insurance Company. Palomar is an innovative insurer that focuses on the provision of specialty insurance for residential and commercial clients. Palomar’s underwriting and analytical expertise allow it to concentrate on certain markets that it believes are underserved by other insurance companies, such as the markets for earthquake, hurricane and flood insurance. Palomar’s principal insurance subsidiary, Palomar Specialty Insurance Company, is an admitted carrier in 32 states and has an A.M. Best financial strength rating of “A-” (Excellent).
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 (loss) 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 (loss).

Adjusted net income (loss) 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 (loss) calculated in accordance with GAAP to adjusted net income (loss).

Return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.

Adjusted return on equity is a non-GAAP financial measure defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of return on equity calculated using unadjusted GAAP numbers to adjusted return on equity.

Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses, to net earned premiums.

Expense ratio, expressed as a percentage, is the ratio of acquisition and other underwriting expenses, net of commission and other income to net earned premiums.

Combined ratio is defined as the sum of the loss ratio and the expense ratio. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.

Adjusted combined ratio is a non-GAAP financial measure defined as the sum of the loss ratio and the expense ratio calculated excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of combined ratio calculated using unadjusted GAAP numbers to adjusted combined ratio.

Diluted adjusted earnings per share is a non-GAAP financial measure defined as adjusted net income (loss) divided by the weighted-average common shares outstanding for the period, reflecting the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of diluted earnings per share calculated in accordance with GAAP to diluted adjusted earnings per share.

Catastrophe loss ratio is a non-GAAP financial measure defined as the ratio of catastrophe losses to net earned premiums. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of loss ratio calculated using unadjusted GAAP numbers to catastrophe loss ratio.

Adjusted combined ratio excluding catastrophe losses is a non-GAAP financial measure defined as adjusted combined ratio excluding the impact of catastrophe losses.  See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of combined ratio calculated using unadjusted GAAP numbers to adjusted combined ratio excluding catastrophe losses.

Tangible stockholders’ equity is a non-GAAP financial measure defined as stockholders’ equity less intangible assets. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of stockholders’ equity calculated in accordance with GAAP to tangible stockholders’ equity.

Safe Harbor Statement
Palomar cautions you that statements contained in this press release may regard matters that are not historical facts but are forward-looking statements. These statements are based on the company’s current beliefs and expectations. The inclusion of forward-looking statements should not be regarded as a representation by Palomar that any of its plans will be achieved. Actual results may differ from those set forth in this press release due to the risks and uncertainties inherent in the Company’s business. The forward-looking statements are typically, but not always, identified through use of the words “believe,” “expect,” “enable,” “may,” “will,” “could,” “intends,” “estimate,” “anticipate,” “plan,” “predict,” “probable,” “potential,” “possible,” “should,” “continue,” and other words of similar meaning. Actual results could differ materially from the expectations contained in forward-looking statements as a result of several factors, including unexpected expenditures and costs, unexpected results or delays in development and regulatory review, regulatory approval requirements, the frequency and severity of adverse events and competitive conditions. These and other factors that may result in differences are discussed in greater detail in the Company’s filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Contact
Media Inquiries
Sarah Flocken
1-240-630-0316
sarah@conwaymarketinggroup.com

Investor Relations
Shannon Devine
1-619-771-1743
investors@plmr.com
Source: Palomar Holdings, Inc.

Summary of Operating Results

The following table summarizes the Company’s results for the three months ended December 31, 2020 and 2019:

		Three months ended
		December 31,									Percent
		2020			2019			Change			Change
		($ in thousands, except per share data)
Gross written premiums		$	96,092		$	73,342		$	22,750		31.0	%
Ceded written premiums			(53,839)			(29,535)			(24,304)		82.3	%
Net written premiums			42,253			43,807			(1,554)		(3.5)	%
Net earned premiums			38,922			30,988			7,934		25.6	%
Commission and other income			803			654			149		22.8	%
Total underwriting revenue (1)			39,725			31,642			8,083		25.5	%
Losses and loss adjustment expenses			17,214			2,195			15,019		684.2	%
Acquisition expenses			18,131			11,070			7,061		63.8	%
Other underwriting expenses			9,356			6,943			2,413		34.8	%
Underwriting income (loss) (1)			(4,976)			11,434			(16,410)		(143.5)	%
Net investment income			2,325			1,803			522		29.0	%
Net realized and unrealized gains on investments			245			1,178			(933)		(79.2)	%
Income (loss) before income taxes			(2,406)			14,415			(16,821)		(116.7)	%
Income tax expense (benefit)			(557)			3,535			(4,092)		NM
Net income (loss)		$	(1,849)		$	10,880		$	(12,729)		(117.0)	%
Adjustments:
Expenses associated with secondary offerings			—			307			(307)		NM
Stock-based compensation expense			710			426			284		66.7
Tax impact			(130)			(155)			25		NM
Adjusted net income (loss) (1)		$	(1,269)		$	11,458		$	(12,727)		(111.1)	%
Key Financial and Operating Metrics
Annualized return on equity			(2.0)	%		20.4	%
Annualized adjusted return on equity (1)			(1.4)	%		21.5	%
Loss ratio			44.2	%		7.1	%
Expense ratio			68.6	%		56.0	%
Combined ratio			112.8	%		63.1	%
Adjusted combined ratio (1)			111.0	%		60.7	%
Diluted earnings (loss) per share		$	(0.07)		$	0.45
Diluted adjusted earnings (loss) per share (1)		$	(0.05)		$	0.48
Catastrophe losses		$	14,474		$	—
Catastrophe loss ratio (1)			37.2	%		—	%
Adjusted combined ratio excluding catastrophe losses (1)			73.8	%		60.7	%
NM-Not Meaningful

(1)   Indicates non-GAAP financial measure; see “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures prepared in accordance with GAAP.

The following table summarizes the Company’s results for the years ended December 31, 2020 and 2019:

		Year ended
		December 31,									Percent
		2020			2019			Change			Change
		($ in thousands, except per share data)
Gross written premiums		$	354,360		$	251,961		$	102,399		40.6	%
Ceded written premiums			(155,102)			(108,332)			(46,770)		43.2	%
Net written premiums			199,258			143,629			55,629		38.7	%
Net earned premiums			155,068			100,207			54,861		54.7	%
Commission and other income			3,295			2,671			624		23.4	%
Total underwriting revenue (1)			158,363			102,878			55,485		53.9	%
Losses and loss adjustment expenses			64,115			5,593			58,522		1,046.3	%
Acquisition expenses			64,041			37,259			26,782		71.9	%
Other underwriting expenses			34,084			51,299			(17,215)		(33.6)	%
Underwriting income (loss) (1)			(3,877)			8,727			(12,604)		(144.4)	%
Interest expense			—			(1,068)			1,068		(100.0)	%
Net investment income			8,612			5,975			2,637		44.1	%
Net realized and unrealized gains on investments			1,488			4,443			(2,955)		(66.5)	%
Income before income taxes			6,223			18,077			(11,854)		(65.6)	%
Income tax expense (benefit)			(34)			7,456			(7,490)		NM
Net income		$	6,257		$	10,621		$	(4,364)		(41.1)	%
Adjustments:
Expenses associated with IPO, tax restructuring, secondary offerings, and one time incentive cash bonuses			708			3,007			(2,299)		NM
Stock-based compensation expense			2,167			24,103			(21,936)		NM
Expenses associated with retirement of debt			—			1,297			(1,297)		NM
Expenses associated with catastrophe bond			399			—			399		NM
Tax impact			(664)			(1,149)			485		NM
Adjusted net income (1)		$	8,867		$	37,879		$	(29,012)		(76.6)	%
Key Financial and Operating Metrics
Return on equity			2.1	%		6.7	%
Adjusted return on equity (1)			3.0	%		24.1	%
Loss ratio			41.3	%		5.6	%
Expense ratio			61.2	%		85.7	%
Combined ratio			102.5	%		91.3	%
Adjusted combined ratio (1)			100.4	%		63.3	%
Diluted earnings per share		$	0.24		$	0.49
Diluted adjusted earnings per share (1)		$	0.35		$	1.73
Catastrophe losses		$	50,986		$	—
Catastrophe loss ratio (1)			32.9	%		—	%
Adjusted combined ratio excluding catastrophe losses (1)			67.5	%		63.3	%
NM-Not Meaningful

(1)   Indicates non-GAAP financial measure; see “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures prepared in accordance with GAAP.

Condensed Consolidated Balance sheets

Palomar Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

(in thousands, except shares and par value data)

		December 31,			December 31,
		2020			2019
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $381,279 in 2020; $211,278 in 2019)		$	397,987		$	217,151
Equity securities, at fair value (cost: $22,291 in 2020; $21,336 in 2019)			24,322			22,328
Total investments			422,309			239,479
Cash and cash equivalents			33,538			33,119
Restricted cash			248			230
Accrued investment income			2,545			1,386
Premium receivable			48,842			36,237
Deferred policy acquisition costs			35,481			25,201
Reinsurance recoverable on unpaid losses and loss adjustment expenses			94,566			12,952
Reinsurance recoverable on paid losses and loss adjustment expenses			10,162			4,303
Ceded unearned premiums			35,031			26,105
Prepaid expenses and other assets			34,119			14,861
Property and equipment, net			739			845
Intangible assets			11,512			744
Total assets		$	729,092		$	395,462
Liabilities and stockholders’ equity
Liabilities:
Accounts payable and other accrued liabilities		$	20,730		$	13,555
Reserve for losses and loss adjustment expenses			129,036			16,821
Unearned premiums			183,489			130,373
Ceded premium payable			22,233			11,383
Funds held under reinsurance treaty			4,515			1,658
Income and excise taxes payable			—			1,117
Deferred tax liabilities, net			5,376			1,999
Total liabilities			365,379			176,906
Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized as of December 31, 2020 and December 31, 2019, 0 shares issued and outstanding as of December 31, 2020 and December 31, 2019			—			—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 25,525,796 and 23,468,750 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively			3			2
Additional paid-in capital			310,507			180,012
Accumulated other comprehensive income			13,246			4,686
Retained earnings			39,957			33,856
Total stockholders’ equity			363,713			218,556
Total liabilities and stockholders’ equity		$	729,092		$	395,462

Condensed Consolidated Income Statement

Palomar Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (Unaudited)

(in thousands, except shares and per share data)

		Three Months Ended						Year Ended
		December 31,						December 31,
		2020			2019			2020			2019
Revenues:
Gross written premiums		$	96,092		$	73,342		$	354,360		$	251,961
Ceded written premiums			(53,839)			(29,535)			(155,102)			(108,332)
Net written premiums			42,253			43,807			199,258			143,629
Change in unearned premiums			(3,331)			(12,819)			(44,190)			(43,422)
Net earned premiums			38,922			30,988			155,068			100,207
Net investment income			2,325			1,803			8,612			5,975
Net realized and unrealized gains on investments			245			1,178			1,488			4,443
Commission and other income			803			654			3,295			2,671
Total revenues			42,295			34,623			168,463			113,296
Expenses:
Losses and loss adjustment expenses			17,214			2,195			64,115			5,593
Acquisition expenses			18,131			11,070			64,041			37,259
Other underwriting expenses (includes stock-based compensation of $710 and $426 for the three months ended December 31, 2020 and 2019, respectively and $2,167 and $24,103 for the year ended December 31, 2020 and 2019, respectively)			9,356			6,943			34,084			51,299
Interest expense			—			—			—			1,068
Total expenses			44,701			20,208			162,240			95,219
Income (loss) before income taxes			(2,406)			14,415			6,223			18,077
Income tax expense (benefit)			(557)			3,535			(34)			7,456
Net income (loss)			(1,849)			10,880			6,257			10,621
Other comprehensive income, net:
Net unrealized (losses) gains on securities available for sale for the three months and years ended December 31, 2020 and 2019, respectively			2,808			(1,210)			8,560			5,249
Net comprehensive income		$	959		$	9,670		$	14,817		$	15,870
Per Share Data:
Basic earnings (loss) per share		$	(0.07)		$	0.46		$	0.25		$	0.49
Diluted earnings (loss) per share		$	(0.07)		$	0.45		$	0.24		$	0.49
Weighted-average common shares outstanding:
Basic			25,520,111			23,468,750			24,872,251			21,501,541
Diluted			25,520,111			24,092,325			25,598,647			21,834,934

Underwriting Segment Data

The Company has a single reportable segment and offers primarily earthquake, wind, and flood insurance products. Gross written premiums (GWP) by product and location are presented below:

		Three Months Ended December 31,											Year Ended December 31,
		2020					2019						2020					2019
		($ in thousands)											($ in thousands)
					% of					% of						% of					% of
		Amount			GWP		Amount			GWP			Amount			GWP		Amount			GWP
Product
Residential Earthquake		$	37,432		39.0	%	$	35,468		48.4	%		$	140,934		39.8	%	$	130,473		51.8	%
Commercial Earthquake			18,163		18.9	%		15,721		21.4	%			58,890		16.6	%		38,741		15.4	%
Commercial All Risk			14,185		14.8	%		8,429		11.5	%			53,933		15.2	%		30,358		12.0	%
Specialty Homeowners			11,388		11.9	%		7,796		10.6	%			49,849		14.1	%		32,788		13.0	%
Inland Marine			5,676		5.9	%		1,177		1.6	%			15,423		4.3	%		2,465		1.0	%
Hawaii Hurricane			3,528		3.7	%		2,714		3.7	%			13,824		3.9	%		10,764		4.3	%
Flood			2,448		2.5	%		1,722		2.4	%			8,176		2.3	%		5,216		2.1	%
Other			3,272		3.3	%		315		0.4	%			13,331		3.8	%		1,156		0.4	%
Total Gross Written Premiums		$	96,092		100.0	%	$	73,342		100.0	%		$	354,360		100.0	%	$	251,961		100.0	%

		Three Months Ended December 31,											Year Ended December 31,
		2020					2019						2020					2019
		($ in thousands)											($ in thousands)
					% of					% of						% of					% of
		Amount			GWP		Amount			GWP			Amount			GWP		Amount			GWP
State
California		$	48,857		50.8	%	$	42,198		57.5	%		$	172,765		48.8	%	$	141,743		56.3	%
Texas			12,927		13.5	%		11,409		15.6	%			67,974		19.2	%		44,087		17.5	%
Florida			5,110		5.3	%		—		—	%			5,795		1.6	%		—		—	%
Washington			4,326		4.5	%		3,177		4.3	%			14,328		4.0	%		9,607		3.8	%
Hawaii			4,285		4.5	%		3,164		4.3	%			16,398		4.6	%		11,851		4.7	%
North Carolina			4,011		4.2	%		1,240		1.7	%			11,143		3.1	%		3,894		1.5	%
Oregon			2,740		2.9	%		2,117		2.9	%			10,038		2.8	%		7,396		2.9	%
South Carolina			1,993		2.1	%		1,547		2.1	%			9,196		2.6	%		6,185		2.5	%
Other			11,843		12.2	%		8,490		11.6	%			46,723		13.3	%		27,198		10.8	%
Total Gross Written Premiums		$	96,092		100.0	%	$	73,342		100.0	%		$	354,360		100.0	%	$	251,961		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,
		2020			2019			Change			% Change			2020			2019			Change			% Change
		($ in thousands)												($ in thousands)
Gross earned premiums		$	86,191		$	58,967		$	27,224		46.2	%		$	301,457		$	200,521		$	100,936		50.3	%
Ceded earned premiums			(47,269)			(27,979)			(19,290)		68.9	%			(146,389)			(100,314)			(46,075)		45.9	%
Net earned premiums		$	38,922		$	30,988		$	7,934		25.6	%		$	155,068		$	100,207		$	54,861		54.7	%
Net earned premium ratio			45.2%			52.6%									51.4%			50.0%

Loss detail

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,
		2020			2019			2020			2019
			(in thousands)						(in thousands)
Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period		$	39,540		$	2,914		$	3,869		$	4,165
Add: Incurred losses and loss adjustment expenses, net of reinsurance, related to:									—			—
Current year			17,312			2,114			64,179			5,774
Prior years			(98)			81			(64)			(181)
Total incurred			17,214			2,195			64,115			5,593
Deduct: Loss and loss adjustment expense payments, net of reinsurance, related to:
Current year			22,125			1,135			31,879			2,179
Prior years			159			105			1,635			3,710
Total payments			22,284			1,240			33,514			5,889
Reserve for losses and loss adjustment expense net of reinsurance recoverables at end of period			34,470			3,869			34,470			3,869
Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period			94,566			12,952			94,566			12,952
Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period		$	129,036		$	16,821		$	129,036		$	16,821

Reconciliation of Non-GAAP Financial Measures

For the three months and years ended December 31, 2020 and 2019, 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,
		2020			2019			2020			2019
		(in thousands)						(in thousands)
Total revenue		$	42,295		$	34,623		$	168,463		$	113,296
Net investment income			(2,325)			(1,803)			(8,612)			(5,975)
Net realized and unrealized gains on investments			(245)			(1,178)			(1,488)			(4,443)
Underwriting revenue		$	39,725		$	31,642		$	158,363		$	102,878

Underwriting income (loss)

		Three Months Ended							Year Ended
		December 31,							December 31,
		2020			2019				2020			2019
		(in thousands)							(in thousands)
Income (loss) before income taxes		$	(2,406)		$	14,415			$	6,223		$	18,077
Net investment income			(2,325)			(1,803)				(8,612)			(5,975)
Net realized and unrealized gains on investments			(245)			(1,178)				(1,488)			(4,443)
Interest expense			—			—				—			1,068
Underwriting income (loss)		$	(4,976)		$	11,434			$	(3,877)		$	8,727

Adjusted net income (loss)

		Three Months Ended							Year Ended
		December 31,							December 31,
		2020			2019				2020			2019
		(in thousands)							(in thousands)
Net income (loss)		$	(1,849)		$	10,880			$	6,257		$	10,621
Adjustments:
Expenses associated with IPO, tax restructuring, secondary offerings, and one-time incentive cash bonuses			—			307				708			3,007
Stock-based compensation expense			710			426				2,167			24,103
Expenses associated with retirement of debt			—			—				—			1,297
Expenses associated with catastrophe bond			—			—				399			—
Tax impact			(130)			(155)				(664)			(1,149)
Adjusted net income (loss)		$	(1,269)		$	11,458			$	8,867		$	37,879

Annualized adjusted return on equity

		Three Months Ended							Year Ended
		December 31,							December 31,
		2020			2019				2020			2019
		($ in thousands)							($ in thousands)
Annualized adjusted net income (loss)		$	(5,076)		$	45,832			$	8,867		$	37,879
Average stockholders’ equity		$	362,804		$	213,509			$	291,135		$	157,424
Annualized adjusted return on equity			(1.4)	%		21.5	%			3.0	%		24.1	%

Adjusted combined ratio

		Three Months Ended							Year Ended
		December 31,							December 31,
		2020			2019				2020			2019
		($ in thousands)							($ in thousands)
Numerator: Sum of losses, loss adjustment expenses, underwriting, acquisition and other underwriting expenses, net of commission and other income		$	43,898		$	19,554			$	158,945		$	91,480
Denominator: Net earned premiums		$	38,922		$	30,988			$	155,068		$	100,207
Combined ratio			112.8	%		63.1	%			102.5	%		91.3	%
Adjustments to numerator:
Expenses associated with IPO, tax restructuring, secondary offerings, and one-time incentive cash bonuses		$	—		$	(307)			$	(708)		$	(3,007)
Stock-based compensation expense			(710)			(426)				(2,167)			(24,103)
Portion of expenses associated with retirement of debt classified as other underwriting expenses			—			—				—			(897)
Expenses associated with catastrophe bond			—			—				(399)			—
Adjusted combined ratio			111.0	%		60.7	%			100.4	%		63.3	%

Diluted adjusted earnings per share

		Three Months Ended							Year Ended
		December 31,							December 31,
		2020			2019				2020			2019
		( in thousands, except shares and per share data)							( in thousands, except shares and per share data)
Adjusted net income (loss)		$	(1,269)		$	11,458			$	8,867		$	37,879
Weighted-average common shares outstanding, diluted			25,520,111			24,092,325				25,598,647			21,834,934
Diluted adjusted earnings per share		$	(0.05)		$	0.48			$	0.35		$	1.73

Catastrophe loss ratio

		Three Months Ended							Year Ended
		December 31,							December 31,
		2020			2019				2020			2019
		($ in thousands)							($ in thousands)
Numerator: Losses and loss adjustment expenses		$	17,214		$	2,195			$	64,115		$	5,593
Denominator: Net earned premiums		$	38,922		$	30,988			$	155,068		$	100,207
Loss ratio			44.2	%		7.1	%			41.3	%		5.6	%
Numerator: Catastrophe losses		$	14,474		$	—			$	50,986		$	—
Denominator: Net earned premiums		$	38,922		$	30,988			$	155,068		$	100,207
Catastrophe loss ratio			37.2	%		0.0	%			32.9	%		0.0	%

Adjusted combined ratio excluding catastrophe losses

		Three Months Ended							Year ended
		December 31,							December 31,
		2020			2019				2020			2019
		($ in thousands)							($ in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income		$	43,898		$	19,554			$	158,945		$	91,480
Denominator: Net earned premiums		$	38,922		$	30,988			$	155,068		$	100,207
Combined ratio			112.8	%		63.1	%			102.5	%		91.3	%
Adjustments to numerator:
Expenses associated with IPO, tax restructuring, secondary offerings, and one-time incentive cash bonuses		$	—		$	(307)			$	(708)		$	(3,007)
Stock-based compensation expense			(710)			(426)				(2,167)			(24,103)
Portion of expenses associated with retirement of debt classified as other underwriting expenses			—			—				—			(897)
Expenses associated with catastrophe bond			—			—				(399)			—
Catastrophe losses			(14,474)			—				(50,986)			—
Adjusted combined ratio excluding catastrophe losses			73.8	%		60.7	%			67.5	%		63.3	%

Tangible Stockholders’ equity

		December 31,
		2020			2019
		(in thousands)
Stockholders’ equity		$	363,713		$	218,556
Intangible assets			(11,512)			(744)
Tangible stockholders’ equity		$	352,201		$	217,812