Palomar Holdings, Inc. Reports Second Quarter 2022 Results

LA JOLLA, Calif., Aug. 03, 2022 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported net income of $14.6 million, or $0.57 per diluted share, for the second quarter of 2022 compared to $12.3 million, or $0.47 per diluted share, for the second quarter of 2021. Adjusted net income⁽¹⁾ was $18.7 million, or $0.73 per diluted share, for the second quarter of 2022 as compared to $13.2 million, or $0.51 per diluted share, for the second quarter of 2021.

Second Quarter 2022 Highlights

• Gross written premiums increased by 69.1% to $218.7 million compared to $129.4 million in the second quarter of 2021
• Net income of $14.6 million, compared to $12.3 million in the second quarter of 2021
• Adjusted net income⁽¹⁾ of $18.7 million, compared to $13.2 million in the second quarter of 2021
• Total loss ratio of 17.9% compared to 13.3% in the second quarter of 2021
• Combined ratio of 75.1% compared to 76.0% in the second quarter of 2021
• Adjusted combined ratio⁽¹⁾ of 69.1%, compared to 73.8% in the second quarter of 2021
• Annualized return on equity of 15.4%, compared to 13.1% in the second quarter of 2021
• Annualized adjusted return on equity⁽¹⁾ of 19.7%, compared to 14.1% in the second quarter of 2021

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

Mac Armstrong, Chairman and Chief Executive Officer, commented, “Simply put, Palomar had a very strong second quarter. Our results clearly demonstrate further execution of our 2022 strategic objectives and “Palomar 2X”, our intermediate term strategic plan of doubling our adjusted underwriting income and delivering an adjusted return on equity of 20%. Highlights of the quarter included 69% year-over-year gross written premium growth, the successful placement of our excess of loss reinsurance program, the conversion of our Texas Specialty Homeowner’s product to a fronting program and incremental traction in our new products including professional liability and PLMR-FRONT.”

“Predictable, profitable growth is a key tenant of Palomar 2X and the second quarter results embodied this tenant. During the quarter, we achieved an adjusted combined ratio of approximately 69.1%, an annualized adjusted ROE of 19.7%, and year-over-year adjusted net income growth of 41.3%, even with $4.6 million of unrealized losses in our equity portfolio," concluded Mr. Armstrong.

Underwriting Results
Gross written premiums increased 69.1% to $218.7 million compared to $129.4 million in the second quarter of 2021, while net earned premiums increased 48.0% compared to the prior year’s second quarter.

Losses and loss adjustment expenses for the second quarter were $14.4 million including $13.9 million of non-catastrophe attritional losses, and $0.5 million of catastrophe losses from unfavorable prior period development. The loss ratio for the quarter of 17.9% was comprised of a catastrophe loss ratio of 0.7% and an attritional loss ratio of 17.2%, compared to a loss ratio of 13.3% during the same period last year comprised of a catastrophe loss ratio of negative 2.1% and an attritional loss ratio of 15.4%. Non-catastrophe losses and loss ratio increased mainly due to the growth of lines of business subject to attritional losses, such as Inland Marine, Flood, and Commercial All Risk.

Underwriting income⁽¹⁾ was $20.0 million resulting in a combined ratio of 75.1% compared to underwriting income of $13.0 million and a combined ratio of 76.0% during the same period last year. Excluding expenses related to stock-based compensation, amortization of intangibles, and catastrophe bonds, the Company’s adjusted combined ratio⁽¹⁾ was 69.1% in the second quarter compared to 73.8% during the same period last year. The adjusted combined ratio⁽¹⁾ decreased primarily due to a lower expense ratio offset by a higher loss ratio during the quarter.

Investment Results
Net investment income increased by 43.1% to $3.1 million compared to $2.2 million in the prior year’s second quarter. The year over year increase was a result of a higher average balance of investments held during the three months ended June 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 4.18 years at June 30, 2022. Cash and invested assets totaled $552.5 million at June 30, 2022. During the second quarter, the Company recorded realized and unrealized losses of $4.7 million related to its equity investment portfolio as compared to realized and unrealized gains of $0.3 million in last year’s second quarter.

Tax Rate
The effective tax rate for the three months ended June 30, 2022 was 20.2% compared to 20.5% for the three months ended June 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 $378.1 million at June 30, 2022, compared to $376.7 million at June 30, 2021. For the three months ended June 30, 2022, the Company’s annualized return on equity was 15.4% compared to 13.1% for the same period in the prior year while adjusted return on equity⁽¹⁾ was 19.7% compared to 14.1% for the same period in the prior year. During the current quarter, the Company repurchased 127,952 shares, or $7.3 million, of the Company’s previously announced $100 million share repurchase authorization. As of June 30 2022, $79.7 million remains available for future repurchases.

Full Year 2022 Outlook
For the full year 2022, the Company maintains its outlook to achieve adjusted net income of $80 million to $85 million, including $5.9 million of pre-tax unrealized losses on equity security holdings. This range is equivalent to adjusted net income of $85 million to $90 million excluding unrealized gains and losses for the year.

Conference Call
As previously announced, Palomar will host a conference call Thursday August 4, 2022, to discuss its second 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 Second Quarter 2022 Earnings Conference Call. A replay will be available starting at 3:00 p.m. (Eastern Time) on August 4, 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 13730139. The replay will be available until 11:59 p.m. (Eastern Time) on August 11, 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 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 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
Bill Bold
1-619-890-5972
bbold@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 June 30, 2022 and 2021:

		Three months ended
		June 30,
		2022				2021				Change				% Change
		($ in thousands, except per share data)
Gross written premiums		$	218,689			$	129,359			$	89,330			69.1	%
Ceded written premiums			(122,627	)			(51,568	)			(71,059	)		137.8	%
Net written premiums			96,062				77,791				18,271			23.5	%
Net earned premiums			80,265				54,215				26,050			48.0	%
Commission and other income			990				1,006				(16	)		(1.6	%
Total underwriting revenue (1)			81,255				55,221				26,034			47.1	%
Losses and loss adjustment expenses			14,398				7,235				7,163			99.0	%
Acquisition expenses			28,663				22,424				6,239			27.8	%
Other underwriting expenses			18,195				12,539				5,656			45.1	%
Underwriting income (1)			19,999				13,023				6,976			53.6	%
Interest expense			(111	)			—				(111	)		NM
Net investment income			3,140				2,194				946			43.1	%
Net realized and unrealized gains (losses) on investments			(4,735	)			300				(5,035	)		NM
Income before income taxes			18,293				15,517				2,776			17.9	%
Income tax expense			3,704				3,177				527			16.6	%
Net income		$	14,589			$	12,340			$	2,249			18.2	%
Adjustments:
Stock-based compensation expense			2,704				907				1,797			198.1	%
Amortization of intangibles			313				252				61			24.2	%
Expenses associated with catastrophe bond, net of rebate			1,792				16				1,776			NM
Tax impact			(695	)			(278	)			(417	)		150.0	%
Adjusted net income (1)		$	18,703			$	13,237			$	5,466			41.3	%
Key Financial and Operating Metrics
Annualized return on equity			15.4	%			13.1	%
Annualized adjusted return on equity (1)			19.7	%			14.1	%
Loss ratio			17.9	%			13.3	%
Expense ratio			57.1	%			62.6	%
Combined ratio			75.1	%			76.0	%
Adjusted combined ratio (1)			69.1	%			73.8	%
Diluted earnings per share		$	0.57			$	0.47
Diluted adjusted earnings per share (1)		$	0.73			$	0.51
Catastrophe losses		$	548			$	(1,137	)
Catastrophe loss ratio (1)			0.7	%			(2.1	)%
Adjusted combined ratio excluding catastrophe losses (1)			68.4	%			75.9	%
Adjusted underwriting income (1)		$	24,808			$	14,198				10,610			74.7	%
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 six months ended June 30, 2022 and 2021:

		Six months ended
		June 30,
		2022				2021				Change				% Change
		($ in thousands, except per share data)
Gross written premiums		$	389,623			$	232,936			$	156,687			67.3	%
Ceded written premiums			(212,179	)			(94,932	)			(117,247	)		123.5	%
Net written premiums			177,444				138,004				39,440			28.6	%
Net earned premiums			156,297				101,268				55,029			54.3	%
Commission and other income			1,767				1,717				50			2.9	%
Total underwriting revenue (1)			158,064				102,985				55,079			53.5	%
Losses and loss adjustment expenses			29,351				2,813				26,538			NM
Acquisition expenses			56,718				41,737				14,981			35.9	%
Other underwriting expenses			34,119				26,786				7,333			27.4	%
Underwriting income (1)			37,876				31,649				6,227			19.7	%
Interest expense			(204	)			—				(204	)		NM
Net investment income			5,719				4,413				1,306			29.6	%
Net realized and unrealized losses on investments			(6,014	)			(439	)			(5,575	)		NM
Income before income taxes			37,377				35,623				1,754			4.9	%
Income tax expense			8,251				6,653				1,598			24.0	%
Net income		$	29,126			$	28,970			$	156			0.5	%
Adjustments:
Expenses associated with transactions			85				411				(326	)		(79.3	)%
Stock-based compensation expense			5,463				1,845				3,618			196.1	%
Amortization of intangibles			628				589				39			6.6	%
Expenses associated with catastrophe bond, net of rebate			1,992				1,698				294			17.3	%
Tax impact			(1,019	)			(990	)			(29	)		2.9	%
Adjusted net income (1)		$	36,275			$	32,523			$	3,752			11.5	%
Key Financial and Operating Metrics
Annualized return on equity			15.1	%			15.6	%
Annualized adjusted return on equity (1)			18.8	%			17.6	%
Loss ratio			18.8	%			2.8	%
Expense ratio			57.0	%			66.0	%
Combined ratio			75.8	%			68.7	%
Adjusted combined ratio (1)			70.5	%			64.3	%
Diluted earnings per share		$	1.13			$	1.11
Diluted adjusted earnings per share (1)		$	1.41			$	1.24
Catastrophe losses		$	1,029			$	(10,768	)
Catastrophe loss ratio (1)			0.7	%			(10.6	)%
Adjusted combined ratio excluding catastrophe losses (1)			69.9	%			74.9	%
Adjusted underwriting income (1)		$	46,044			$	36,192				9,852			27.2	%
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)

		June 30,			December 31,
		2022			2021
		(Unaudited)
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $513,166 in 2022; $426,122 in 2021)		$	478,477		$	432,682
Equity securities, at fair value (cost: $41,990 in 2022; $31,834 in 2021)			37,509			33,261
Total investments			515,986			465,943
Cash and cash equivalents			36,471			50,284
Restricted cash			37			87
Accrued investment income			3,221			2,725
Premium receivable			119,698			88,012
Deferred policy acquisition costs			55,731			55,953
Reinsurance recoverable on unpaid losses and loss adjustment expenses			107,898			127,947
Reinsurance recoverable on paid losses and loss adjustment expenses			24,748			29,368
Ceded unearned premiums			129,724			58,315
Prepaid expenses and other assets			40,519			37,072
Deferred tax assets, net			7,533			—
Property and equipment, net			687			527
Intangible assets, net			8,888			9,501
Total assets		$	1,051,141		$	925,734
Liabilities and stockholders' equity
Liabilities:
Accounts payable and other accrued liabilities		$	17,646		$	21,284
Reserve for losses and loss adjustment expenses			163,667			173,366
Unearned premiums			376,809			284,665
Ceded premium payable			85,592			37,460
Funds held under reinsurance treaty			6,362			10,882
Deferred tax liabilities, net			—			3,908
Borrowings from credit agreements			23,000			—
Total liabilities			673,076			531,565
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021			—			—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 25,220,131 and 25,428,929 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively			3			3
Additional paid-in capital			326,473			318,902
Accumulated other comprehensive income (loss)			(27,216)			5,312
Retained earnings			78,805			69,952
Total stockholders' equity			378,065			394,169
Total liabilities and stockholders' equity		$	1,051,141		$	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								Six Months Ended
		June 30,								June 30,
		2022				2021				2022				2021
Revenues:
Gross written premiums		$	218,689			$	129,359			$	389,623			$	232,936
Ceded written premiums			(122,627	)			(51,568	)			(212,179	)			(94,932	)
Net written premiums			96,062				77,791				177,444				138,004
Change in unearned premiums			(15,797	)			(23,576	)			(21,147	)			(36,736	)
Net earned premiums			80,265				54,215				156,297				101,268
Net investment income			3,140				2,194				5,719				4,413
Net realized and unrealized gains (losses) on investments			(4,735	)			300				(6,014	)			(439	)
Commission and other income			990				1,006				1,767				1,717
Total revenues			79,660				57,715				157,769				106,959
Expenses:
Losses and loss adjustment expenses			14,398				7,235				29,351				2,813
Acquisition expenses			28,663				22,424				56,718				41,737
Other underwriting expenses			18,195				12,539				34,119				26,786
Interest expense			111				—				204				—
Total expenses			61,367				42,198				120,392				71,336
Income before income taxes			18,293				15,517				37,377				35,623
Income tax expense			3,704				3,177				8,251				6,653
Net income			14,589				12,340				29,126				28,970
Other comprehensive income (loss), net:
Net unrealized gains (losses) on securities available for sale for the three and six months ended June 30, 2022 and 2021, respectively			(14,065	)			2,710				(32,528	)			(3,489	)
Net comprehensive income (loss)		$	524			$	15,050			$	(3,402	)		$	25,481
Per Share Data:
Basic earnings per share		$	0.58			$	0.48			$	1.15			$	1.14
Diluted earnings per share		$	0.57			$	0.47			$	1.13			$	1.11
Weighted-average common shares outstanding:
Basic			25,211,924				25,479,561				25,283,222				25,515,893
Diluted			25,746,780				26,104,880				25,817,442				26,181,206

Underwriting Segment Data

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

		Three Months Ended June 30,											Six Months Ended June 30,
		2022					2021						2022					2021
		($ in thousands)											($ in thousands)
					% of					% of						% of					% of
		Amount			GWP		Amount			GWP			Amount			GWP		Amount			GWP
Product
Residential Earthquake		$	54,090		24.7	%	$	42,192		32.6	%		$	100,426		25.8	%	$	78,090		33.5	%
Fronting Premiums			42,154		19.3	%		—		0.0	%			71,999		18.5	%		—		0.0	%
Commercial Earthquake			33,103		15.1	%		17,343		13.4	%			58,247		14.9	%		38,619		16.6	%
Inland Marine			23,134		10.6	%		11,681		9.0	%			41,371		10.6	%		19,515		8.4	%
Commercial All Risk			21,213		9.7	%		14,976		11.6	%			31,791		8.2	%		23,165		9.9	%
Specialty Homeowners			13,891		6.4	%		19,135		14.8	%			30,176		7.7	%		33,138		14.2	%
Hawaii Hurricane			8,240		3.8	%		7,788		6.0	%			15,154		3.9	%		13,925		6.0	%
Residential Flood			3,583		1.6	%		2,865		2.2	%			6,577		1.7	%		5,149		2.2	%
Other			19,281		8.8	%		13,379		10.4	%			33,882		8.7	%		21,335		9.2	%
Total Gross Written Premiums		$	218,689		100.0	%	$	129,359		100.0	%		$	389,623		100.0	%	$	232,936		100.0	%

		Three Months Ended June 30,											Six Months Ended June 30,
		2022					2021						2022					2021
		($ in thousands)											($ in thousands)
					% of					% of						% of					% of
		Amount			GWP		Amount			GWP			Amount			GWP		Amount			GWP
State
California		$	93,130		42.6	%	$	54,223		41.9	%		$	161,848		41.5	%	$	104,725		45.0	%
Texas			26,286		12.0	%		17,373		13.4	%			45,265		11.6	%		28,427		12.2	%
Florida			14,809		6.8	%		11,697		9.0	%			19,771		5.1	%		17,755		7.6	%
Hawaii			10,191		4.7	%		9,041		7.0	%			18,731		4.8	%		15,970		6.9	%
Washington			8,937		4.1	%		4,663		3.6	%			15,818		4.1	%		8,751		3.8	%
Illinois			4,676		2.1	%		3,173		2.5	%			8,949		2.3	%		5,775		2.4	%
Oregon			4,371		2.0	%		2,818		2.2	%			8,745		2.2	%		5,723		2.4	%
North Carolina			3,700		1.7	%		4,264		3.3	%			7,778		2.0	%		8,152		3.5	%
Other			52,589		24.0	%		22,107		17.1	%			102,718		26.4	%		37,658		16.2	%
Total Gross Written Premiums		$	218,689		100.0	%	$	129,359		100.0	%		$	389,623		100.0	%	$	232,936		100.0	%

		Three Months Ended June 30,											Six Months Ended June 30,
		2022					2021						2022					2021
		($ in thousands)											($ in thousands)
					% of					% of						% of					% of
		Amount			GWP		Amount			GWP			Amount			GWP		Amount			GWP
Subsidiary
PSIC		$	116,338		53.2	%	$	95,271		73.6	%		$	220,342		56.6	%	$	175,117		75.2	%
PESIC			102,351		46.8	%		34,088		26.4	%			169,281		43.4	%		57,819		24.8	%
Total Gross Written Premiums		$	218,689		100.0	%	$	129,359		100.0	%		$	389,623		100.0	%	$	232,936		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																Six Months Ended
		June 30,																June 30,
		2022				2021				Change				% Change				2022				2021				Change				% Change
		($ in thousands)														($ in thousands)
Gross earned premiums		$	158,142			$	102,520			$	55,622			54.3	%			$	297,067			$	193,812			$	103,255			53.3	%
Ceded earned premiums			(77,877	)			(48,305	)			(29,572	)		61.2	%				(140,770	)			(92,544	)			(48,226	)		52.1	%
Net earned premiums		$	80,265			$	54,215			$	26,050			48.0	%			$	156,297			$	101,268			$	55,029			54.3	%
Net earned premium ratio			50.8	%			52.9	%											52.6	%			52.3	%

Loss detail

		Three Months Ended														Six Months Ended
		June 30,														June 30,
		2022			2021				Change			% Change				2022			2021				Change			% Change
		($ in thousands)														($ in thousands)
Catastrophe losses		$	548		$	(1,137	)		$	1,685		NM				$	1,029		$	(10,768	)		$	11,797		NM
Non-catastrophe losses			13,850			8,372				5,478		65.4	%				28,322			13,581				14,741		108.5	%
Total losses and loss adjustment expenses		$	14,398		$	7,235			$	7,163		99.0	%			$	29,351		$	2,813			$	26,538		NM

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

		Three Months Ended June 30,							Six Months Ended June 30,
		2022			2021				2022			2021
			(in thousands)							(in thousands)
Reserve for losses and LAE net of reinsurance recoverables at beginning of period		$	51,386		$	19,016			$	45,419		$	34,470
Add: Incurred losses and LAE, net of reinsurance, related to:
Current year			14,350			7,612				27,799			5,916
Prior years			48			(377	)			1,552			(3,103	)
Total incurred			14,398			7,235				29,351			2,813
Deduct: Loss and LAE payments, net of reinsurance, related to:
Current year			4,399			(1,060	)			5,889			620
Prior years			5,615			3,678				13,112			13,030
Total payments			10,014			2,618				19,001			13,650
Reserve for losses and LAE net of reinsurance recoverables at end of period			55,769			23,633				55,769			23,633
Add: Reinsurance recoverables on unpaid losses and LAE at end of period			107,898			145,459				107,898			145,459
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period		$	163,667		$	169,092			$	163,667		$	169,092

Reconciliation of Non-GAAP Financial Measures

For the three and six months ended June 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									Six Months Ended
		June 30,									June 30,
		2022				2021					2022				2021
		(in thousands)									(in thousands)
Total revenue		$	79,660			$	57,715				$	157,769			$	106,959
Net investment income			(3,140	)			(2,194	)				(5,719	)			(4,413	)
Net realized and unrealized (gains) losses on investments			4,735				(300	)				6,014				439
Underwriting revenue		$	81,255			$	55,221				$	158,064			$	102,985

Underwriting income and adjusted underwriting income

		Three Months Ended									Six Months Ended
		June 30,									June 30,
		2022				2021					2022				2021
		(in thousands)									(in thousands)
Income before income taxes		$	18,293			$	15,517				$	37,377			$	35,623
Net investment income			(3,140	)			(2,194	)				(5,719	)			(4,413	)
Net realized and unrealized (gains) losses on investments			4,735				(300	)				6,014				439
Interest expense			111				—					204				—
Underwriting income		$	19,999			$	13,023				$	37,876			$	31,649
Expenses associated with transactions			—				—					85				411
Stock-based compensation expense			2,704				907					5,463				1,845
Amortization of intangibles			313				252					628				589
Expenses associated with catastrophe bond, net of rebate			1,792				16					1,992				1,698
Adjusted underwriting income		$	24,808			$	14,198				$	46,044			$	36,192

Adjusted net income

		Three Months Ended									Six Months Ended
		June 30,									June 30,
		2022				2021					2022				2021
		(in thousands)									(in thousands)
Net income		$	14,589			$	12,340				$	29,126			$	28,970
Adjustments:
Expenses associated with transactions			—				—					85				411
Stock-based compensation expense			2,704				907					5,463				1,845
Amortization of intangibles			313				252					628				589
Expenses associated with catastrophe bond, net of rebate			1,792				16					1,992				1,698
Tax impact			(695	)			(278	)				(1,019	)			(990	)
Adjusted net income		$	18,703			$	13,237				$	36,275			$	32,523

Annualized adjusted return on equity

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2022				2021				2022				2021
		($ in thousands)								($ in thousands)
Annualized adjusted net income		$	74,812			$	52,948			$	72,550			$	65,046
Average stockholders' equity		$	379,232			$	376,563			$	386,117			$	370,229
Annualized adjusted return on equity			19.7	%			14.1	%			18.8	%			17.6	%

Adjusted combined ratio

		Three Months Ended									Six Months Ended
		June 30,									June 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		$	60,266			$	41,192				$	118,421			$	69,619
Denominator: Net earned premiums		$	80,265			$	54,215				$	156,297			$	101,268
Combined ratio			75.1	%			76.0	%				75.8	%			68.7
Adjustments to numerator:
Expenses associated with transactions		$	—			$	—				$	(85	)		$	(411	)
Stock-based compensation expense			(2,704	)			(907	)				(5,463	)			(1,845	)
Amortization of intangibles			(313	)			(252	)				(628	)			(589	)
Expenses associated with catastrophe bond, net of rebate			(1,792	)			(16	)				(1,992	)			(1,698	)
Adjusted combined ratio			69.1	%			73.8	%				70.5	%			64.3

Diluted adjusted earnings per share

		Three Months Ended							Six Months Ended
		June 30,							June 30,
		2022			2021				2022			2021
		(in thousands, except per share data)							(in thousands, except per share data)
Adjusted net income		$	18,703		$	13,237			$	36,275		$	32,523
Weighted-average common shares outstanding, diluted			25,746,780			26,104,880				25,817,442			26,181,206
Diluted adjusted earnings per share		$	0.73		$	0.51			$	1.41		$	1.24

Catastrophe loss ratio

		Three Months Ended							Six Months Ended
		June 30,							June 30,
		2022			2021				2022			2021
		($ in thousands)							($ in thousands)
Numerator: Losses and loss adjustment expenses		$	14,398		$	7,235			$	29,351		$	2,813
Denominator: Net earned premiums		$	80,265		$	54,215			$	156,297		$	101,268
Loss ratio			17.9	%		13.3	%			18.8	%		2.8	%
Numerator: Catastrophe losses		$	548		$	(1,137	)		$	1,029		$	(10,768	)
Denominator: Net earned premiums		$	80,265		$	54,215	)		$	156,297		$	101,268
Catastrophe loss ratio			0.7	%		(2.1	%			0.7	%		(10.6	)%

Adjusted combined ratio excluding catastrophe losses

		Three Months Ended									Six Months Ended
		June 30,									June 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		$	60,266			$	41,192				$	118,421			$	69,619
Denominator: Net earned premiums		$	80,265			$	54,215				$	156,297			$	101,268
Combined ratio			75.1	%			76.0	%				75.8	%			68.7	%
Adjustments to numerator:
Expenses associated with transactions		$	—			$	—				$	(85	)		$	(411	)
Stock-based compensation expense			(2,704	)			(907	)				(5,463	)			(1,845	)
Amortization of intangibles			(313	)			(252	)				(628	)			(589	)
Expenses associated with catastrophe bond, net of rebate			(1,792	)			(16	)				(1,992	)			(1,698	)
Catastrophe losses			(548	)			1,137					(1,029	)			10,768
Adjusted combined ratio excluding catastrophe losses			68.4	%			75.9	%				69.9	%			74.9	%

Tangible Stockholders’ equity

		June 30,				December 31,
		2022				2021
		(in thousands)
Stockholders' equity		$	378,065			$	394,169
Intangible assets			(8,888	)			(9,501	)
Tangible stockholders' equity		$	369,177			$	384,668