LA JOLLA, Calif., Aug. 02, 2023 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) ("Palomar" or "Company") reported net income of $17.6 million, or $0.69 per diluted share, for the second quarter of 2023 compared to net income of $14.6 million, or $0.57 per diluted share, for the second quarter of 2022. Adjusted net income(1) was $21.8 million, or $0.86 per diluted share, for the second quarter of 2023 as compared to $22.4 million, or $0.87 per diluted share, for the second quarter of 2022. Effective December 31, 2022, the Company adjusts for net realized and unrealized gains and losses when calculating and presenting adjusted net income, diluted adjusted earnings per share, and adjusted return on equity. All prior period amounts have been adjusted accordingly.

Second Quarter 2023 Highlights

Gross written premiums increased by 25.4% to $274.3 million compared to $218.7 million in the second quarter of 2022
Net income of $17.6 million, compared to $14.6 million in the second quarter of 2022
Adjusted net income(1) of $21.8 million, compared to $22.4 million in the second quarter of 2022
Total loss ratio of 21.5% compared to 17.9% in the second quarter of 2022
Combined ratio of 79.0% compared to 75.1% in the second quarter of 2022
Adjusted combined ratio(1) of 72.2%, compared to 69.1%, in the second quarter of 2022
Annualized return on equity of 17.2%, compared to 15.4% in the second quarter of 2022
Annualized adjusted return on equity(1) of 21.3%, compared to 23.7% in the second quarter of 2022

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

Mac Armstrong, Chairman and Chief Executive Officer, commented, "I am very pleased with our strong second quarter results. Our team successfully executed our Palomar 2X strategy of profitable growth despite the elevated catastrophe activity and the historically hard reinsurance market that has significantly impacted the insurance industry. In the quarter, we focused our capital and resources towards targeted segments of our book of business, such as earthquake, inland marine, and casualty to maximize our risk-adjusted returns while we continued to reduce exposure to segments of our book that add volatility to our results. This prudent approach resulted in gross written premium growth of 25% and, importantly, an adjusted return on equity of 21.3%."

Mr. Armstrong continued, "Beyond the strong financial results, the quarter featured several noteworthy accomplishments that position us well for near and long-term success. We effectively placed our June 1 reinsurance program in line with our expectations and subsequently raised our adjusted net income guidance for the full year. We also hired a team of professional liability underwriters to expand the expertise within our casualty franchise, and, in July, we received a "positive outlook" from A.M Best. On the heels of this quarter, we are further raising our adjusted net income guidance range to $89 million to $93 million for 2023."

Underwriting Results

Gross written premiums increased 25.4% to $274.3 million compared to $218.7 million in the second quarter of 2022, while net earned premiums increased 3.5% compared to the prior year's second quarter.

Losses and loss adjustment expenses for the second quarter were $17.9 million including $15.7 million of non-catastrophe attritional losses, and $2.2 million of catastrophe losses from severe convective storms during the second quarter offset slightly by favorable prior period development of catastrophe losses. The loss ratio for the quarter was 21.5%, comprised of a catastrophe loss ratio(1) of 2.6% and an attritional loss ratio of 18.9%, compared to a loss ratio of 17.9% during the same period last year comprised of a catastrophe loss ratio(1) of 0.7% and attritional loss ratio of 17.2%.

Underwriting income(1) for the second quarter was $17.4 million resulting in a combined ratio of 79.0% compared to underwriting income of $20.0 million resulting in a combined ratio of 75.1% during the same period last year. The Company's adjusted underwriting income(1) was $23.1 million resulting in an adjusted combined ratio(1) of 72.2% in the second quarter compared to adjusted underwriting income(1) of $24.8 million and an adjusted combined ratio(1) of 69.1% during the same period last year.

Investment Results

Net investment income increased by 76.5% to $5.5 million compared to $3.1 million in the prior year's second quarter. The increase was primarily due to higher yields on invested assets and a higher average balance of investments held during the three months ended June 30, 2023 due to cash generated from operations. The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.86 years at June 30, 2023. Cash and invested assets totaled $660.2 million at June 30, 2023. During the second quarter, the Company recorded net realized and unrealized gains of $1.1 million related to its investment portfolio as compared to net realized and unrealized losses of $4.7 million in last year's second quarter.

Tax Rate

The effective tax rate for the three months ended June 30, 2023 was 23.7% compared to 20.2% for the three months ended June 30, 2022. For the current quarter, the Company's income tax rate differed from the statutory rate due primarily to the non-deductible executive compensation expense.

Stockholders' Equity and Returns

Stockholders' equity was $413.7 million at June 30, 2023, compared to $378.1 million at June 30, 2022. For the three months ended June 30, 2023, the Company's annualized return on equity was 17.2% compared to 15.4% for the same period in the prior year while adjusted return on equity(1) was 21.3% compared to 23.7% for the same period in the prior year. During the current quarter, the Company repurchased 166,482 shares for $8.7 million pursuant to the Company's previously announced $100 million share repurchase authorization. As of June 30, 2023, $50.0 million remains available for future repurchases.

Full Year 2023 Outlook

For the full year 2023, the Company expects to achieve adjusted net income of $89 million to $93 million. This includes catastrophe losses incurred in the first and second quarters of approximately $4.0 million. The expected results do not include any additional catastrophe losses for the remainder of the year.

Conference Call

As previously announced, Palomar will host a conference call Thursday August 3, 2023, to discuss its second quarter 2023 results at 12:00 p.m. (Eastern Time). The conference call can be accessed live by dialing 1-877-423-9813 or for international callers, 1-201-689-8573, and requesting to be joined to the Palomar Second Quarter 2023 Earnings Conference Call. A replay will be available starting at 4:00 p.m. (Eastern Time) on August 3, 2023, and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the replay is 13737957. The replay will be available until 11:59 p.m. (Eastern Time) on August 10, 2023.

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.

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 goodwill and intangible assets. See "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of stockholders' equity calculated in accordance with GAAP to tangible stockholders' equity.

Safe Harbor 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 and six months ended June 30, 2023 and 2022:

	Three Months Ended
	June 30,
	2023			2022			Change			% Change
	($ in thousands, except per share data)
Gross written premiums	$	274,296		$	218,689		$	55,607			25.4	%
Ceded written premiums		(169,109	)		(122,627	)		(46,482	)		37.9	%
Net written premiums		105,187			96,062			9,125			9.5	%
Net earned premiums		83,107			80,265			2,842			3.5	%
Commission and other income		621			990			(369	)		(37.3	)%
Total underwriting revenue (1)		83,728			81,255			2,473			3.0	%
Losses and loss adjustment expenses		17,905			14,398			3,507			24.4	%
Acquisition expenses, net of ceding commissions and fronting fees		26,057			28,663			(2,606	)		(9.1	)%
Other underwriting expenses		22,350			18,195			4,155			22.8	%
Underwriting income (1)		17,416			19,999			(2,583	)		(12.9	)%
Interest expense		(1,064	)		(111	)		(953	)		NM
Net investment income		5,541			3,140			2,401			76.5	%
Net realized and unrealized gains (losses) on investments		1,127			(4,735	)		5,862			(123.8	)%
Income before income taxes		23,020			18,293			4,727			25.8	%
Income tax expense		5,458			3,704			1,754			47.4	%
Net income	$	17,562		$	14,589		$	2,973			20.4	%
Adjustments:
Net realized and unrealized (gains) losses on investments(2)		(1,127	)		4,735			(5,862	)		(123.8	)%
Stock-based compensation expense		3,697			2,704			993			36.7	%
Amortization of intangibles		389			313			76			24.3	%
Expenses associated with catastrophe bond		1,590			1,792			(202	)		(11.3	)%
Tax impact		(317	)		(1,689	)		1,372			(81.2	)%
Adjusted net income (1)(2)	$	21,794		$	22,444		$	(650	)		(2.9	)%
Key Financial and Operating Metrics
Annualized return on equity		17.2	%		15.4	%
Annualized adjusted return on equity (1)		21.3	%		23.7	%
Loss ratio		21.5	%		17.9	%
Expense ratio		57.5	%		57.1	%
Combined ratio		79.0	%		75.1	%
Adjusted combined ratio (1)		72.2	%		69.1	%
Diluted earnings per share	$	0.69		$	0.57
Diluted adjusted earnings per share (1)	$	0.86		$	0.87
Catastrophe losses	$	2,159		$	548
Catastrophe loss ratio (1)		2.6	%		0.7	%
Adjusted combined ratio excluding catastrophe losses (1)		69.6	%		68.4	%
Adjusted underwriting income (1)	$	23,092		$	24,808		$	(1,716	)		(6.9	)%

(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.

(2)- We now include the impact of net realized and unrealized losses and gains on investments as an adjustment to our net income. As this line is primarily driven by equity market fluctuations rather than our underlying business performance, we believe adding this adjustment provides a more meaningful comparison of our performance. We have also changed the prior year adjusted net income to conform to this presentation.

	Six Months Ended
	June 30,
	2023			2022			Change			% Change
	($ in thousands, except per share data)
Gross written premiums	$	524,407		$	389,623		$	134,784			34.6	%
Ceded written premiums		(339,453	)		(212,179	)		(127,274	)		60.0	%
Net written premiums		184,954			177,444			7,510			4.2	%
Net earned premiums		166,347			156,297			10,050			6.4	%
Commission and other income		1,316			1,767			(451	)		(25.5	)%
Total underwriting revenue (1)		167,663			158,064			9,599			6.1	%
Losses and loss adjustment expenses		38,557			29,351			9,206			31.4	%
Acquisition expenses, net of ceding commissions and fronting fees		51,736			56,718			(4,982	)		(8.8	)%
Other underwriting expenses		41,572			34,119			7,453			21.8	%
Underwriting income (1)		35,798			37,876			(2,078	)		(5.5	)%
Interest expense		(2,084	)		(204	)		(1,880	)		NM
Net investment income		10,661			5,719			4,942			86.4	%
Net realized and unrealized gains (losses) on investments		1,273			(6,014	)		7,287			(121.2	)%
Income before income taxes		45,648			37,377			8,271			22.1	%
Income tax expense		10,774			8,251			2,523			30.6	%
Net income	$	34,874		$	29,126		$	5,748			19.7	%
Adjustments:
Net realized and unrealized (gains) losses on investments(2)		(1,273	)		6,014			(7,287	)		(121.2	)%
Expenses associated with transactions		—			85			(85	)		(100.0	)%
Stock-based compensation expense		7,147			5,463			1,684			30.8	%
Amortization of intangibles		703			628			75			11.9	%
Expenses associated with catastrophe bond		1,640			1,992			(352	)		(17.7	)%
Tax impact		(857	)		(2,282	)		1,425			(62.4	)%
Adjusted net income (1)(2)	$	42,234		$	41,026		$	1,208			2.9	%
Key Financial and Operating Metrics
Annualized return on equity		17.5	%		15.1	%
Annualized adjusted return on equity (1)		21.2	%		21.3	%
Loss ratio		23.2	%		18.8	%
Expense ratio		55.3	%		57.0	%
Combined ratio		78.5	%		75.8	%
Adjusted combined ratio (1)		72.8	%		70.5	%
Diluted earnings per share	$	1.37		$	1.13
Diluted adjusted earnings per share (1)	$	1.66		$	1.59
Catastrophe losses	$	3,965		$	1,029
Catastrophe loss ratio (1)		2.4	%		0.7	%
Adjusted combined ratio excluding catastrophe losses (1)		70.4	%		69.9	%
Adjusted underwriting income (1)	$	45,288		$	46,044		$	(756	)		(1.6	)%

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,
	2023			2022
	(Unaudited)
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $605,040 in 2023; $561,580 in 2022)	$	560,121		$	515,064
Equity securities, at fair value (cost: $43,297 in 2023; $42,352 in 2022)		41,428			38,576
Total investments		601,549			553,640
Cash and cash equivalents		58,310			68,108
Restricted cash		294			56
Accrued investment income		4,568			3,777
Premiums receivable		243,002			162,858
Deferred policy acquisition costs, net of ceding commissions and fronting fees		55,913			56,740
Reinsurance recoverable on paid losses and loss adjustment expenses		39,101			39,718
Reinsurance recoverable on unpaid losses and loss adjustment expenses		216,783			153,895
Ceded unearned premiums		242,452			204,084
Prepaid expenses and other assets		60,125			44,088
Deferred tax assets, net		10,617			10,622
Property and equipment, net		498			603
Goodwill and intangible assets, net		13,095			8,261
Total assets	$	1,546,307		$	1,306,450
Liabilities and stockholders' equity
Liabilities:
Accounts payable and other accrued liabilities	$	24,838		$	25,760
Reserve for losses and loss adjustment expenses		298,083			231,415
Unearned premiums		528,289			471,314
Ceded premium payable		199,611			146,127
Funds held under reinsurance treaty		10,378			10,680
Borrowings from credit agreements		71,400			36,400
Total liabilities		1,132,599			921,696
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2023 and December 31, 2022		—			—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 24,794,269 and 25,027,467 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		3			3
Additional paid-in capital		341,413			333,558
Accumulated other comprehensive loss		(34,726	)		(36,515	)
Retained earnings		107,018			87,708
Total stockholders' equity		413,708			384,754
Total liabilities and stockholders' equity	$	1,546,307		$	1,306,450

Condensed Consolidated Income Statement
Palomar Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Income and Comprehensive Income (loss) (Unaudited) (in thousands, except shares and per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Revenues:
Gross written premiums	$	274,296		$	218,689		$	524,407		$	389,623
Ceded written premiums		(169,109	)		(122,627	)		(339,453	)		(212,179	)
Net written premiums		105,187			96,062			184,954			177,444
Change in unearned premiums		(22,080	)		(15,797	)		(18,607	)		(21,147	)
Net earned premiums		83,107			80,265			166,347			156,297
Net investment income		5,541			3,140			10,661			5,719
Net realized and unrealized gains (losses) on investments		1,127			(4,735	)		1,273			(6,014	)
Commission and other income		621			990			1,316			1,767
Total revenues		90,396			79,660			179,597			157,769
Expenses:
Losses and loss adjustment expenses		17,905			14,398			38,557			29,351
Acquisition expenses, net of ceding commissions and fronting fees		26,057			28,663			51,736			56,718
Other underwriting expenses		22,350			18,195			41,572			34,119
Interest expense		1,064			111			2,084			204
Total expenses		67,376			61,367			133,949			120,392
Income before income taxes		23,020			18,293			45,648			37,377
Income tax expense		5,458			3,704			10,774			8,251
Net income		17,562			14,589			34,874			29,126
Other comprehensive income (loss), net:
Net unrealized gains (losses) on securities available for sale		(3,685	)		(14,065	)		1,789			(32,528	)
Net comprehensive income (loss)	$	13,877		$	524		$	36,663		$	(3,402	)
Per Share Data:
Basic earnings per share	$	0.71		$	0.58		$	1.40		$	1.15
Diluted earnings per share	$	0.69		$	0.57		$	1.37		$	1.13

Weighted-average common shares outstanding:
Basic		24,833,852			25,211,924			24,901,403			25,283,222
Diluted		25,309,526			25,746,780			25,384,409			25,817,442

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 June 30,
	2023						2022
	($ in thousands)
				% of					% of						%
	Amount			GWP			Amount		GWP			Change			Change
Product
Fronting Premiums	$	80,211			29.2	%	$	42,154		19.3	%	$	38,057			90.3	%
Residential Earthquake		65,102			23.7	%		54,090		24.7	%		11,012			20.4	%
Commercial Earthquake		42,826			15.6	%		33,103		15.1	%		9,723			29.4	%
Inland Marine		35,539			13.0	%		23,134		10.6	%		12,405			53.6	%
Casualty		14,988			5.5	%		7,804		3.6	%		7,184			92.1	%
Commercial All Risk		11,770			4.3	%		21,213		9.7	%		(9,443	)		(44.5	)%
Hawaii Hurricane		9,595			3.5	%		8,240		3.8	%		1,355			16.4	%
Residential Flood		5,469			2.0	%		3,583		1.6	%		1,886			52.6	%
Specialty Homeowners		(38	)		(0.0	)%		13,891		6.4	%		(13,929	)		(100.3	)%
Other		8,834			3.2	%		11,477		5.2	%		(2,643	)		(23.0	)%
Total Gross Written Premiums	$	274,296			100.0	%	$	218,689		100.0	%	$	55,607			25.4	%

	Six Months Ended June 30,
	2023						2022
	($ in thousands)
				% of					% of
	Amount			GWP			Amount		GWP			Change			Change
Product
Fronting Premiums	$	171,967			32.8	%	$	71,999		18.5	%	$	99,968			138.8	%
Residential Earthquake		120,827			23.0	%		100,426		25.8	%		20,401			20.3	%
Commercial Earthquake		80,597			15.4	%		58,247		14.9	%		22,350			38.4	%
Inland Marine		66,588			12.7	%		41,371		10.6	%		25,217			61.0	%
Casualty		26,722			5.1	%		12,804		3.3	%		13,918			108.7	%
Commercial All Risk		20,146			3.8	%		31,791		8.2	%		(11,645	)		(36.6	)%
Hawaii Hurricane		17,667			3.4	%		15,154		3.9	%		2,513			16.6	%
Residential Flood		9,705			1.9	%		6,577		1.7	%		3,128			47.6	%
Specialty Homeowners		(97	)		(0.0	)%		30,176		7.7	%		(30,273	)		(100.3	)%
Other		10,285			1.9	%		21,078		5.4	%		(10,793	)		(51.2	)%
Total Gross Written Premiums	$	524,407			100.0	%	$	389,623		100.0	%	$	134,784			34.6	%

	Three Months Ended June 30,										Six Months Ended June 30,
	2023					2022					2023					2022
	($ in thousands)										($ in thousands)
			% of					% of					% of					% of
	Amount		GWP			Amount		GWP			Amount		GWP			Amount		GWP
State
California	$	157,057		57.3	%	$	93,130		42.6	%	$	288,946		55.1	%	$	161,848		41.5	%
Texas		25,231		9.2	%		26,286		12.0	%		48,441		9.2	%		45,265		11.6	%
Washington		13,645		5.0	%		8,937		4.1	%		25,617		4.9	%		15,818		4.1	%
Florida		12,664		4.6	%		14,809		6.8	%		24,760		4.7	%		19,771		5.1	%
Hawaii		12,228		4.5	%		10,191		4.7	%		22,333		4.3	%		18,731		4.8	%
Oregon		5,907		2.2	%		4,371		2.0	%		12,687		2.4	%		8,745		2.2	%
Illinois		4,471		1.6	%		4,676		2.1	%		9,173		1.7	%		8,949		2.3	%
Utah		3,938		1.4	%		2,316		1.1	%		7,053		1.3	%		4,191		1.1	%
Other		39,155		14.3	%		53,973		24.7	%		85,397		16.4	%		106,305		27.3	%
Total Gross Written Premiums	$	274,296		100.0	%	$	218,689		100.0	%	$	524,407		100.0	%	$	389,623		100.0	%

	Three Months Ended June 30,										Six Months Ended June 30,
	2023					2022					2023					2022
	($ in thousands)										($ in thousands)
			% of					% of					% of					% of
	Amount		GWP			Amount		GWP			Amount		GWP			Amount		GWP
Subsidiary
PSIC	$	159,846		58.3	%	$	116,338		53.2	%	$	310,550		59.2	%	$	220,342		56.6	%
PESIC		114,450		41.7	%		102,351		46.8	%		213,857		40.8	%		169,281		43.4	%
Total Gross Written Premiums	$	274,296		100.0	%	$	218,689		100.0	%	$	524,407		100.0	%	$	389,623		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,
	2023			2022			Change			% Change			2023			2022			Change			% Change
	($ in thousands)												($ in thousands)
Gross earned premiums	$	242,189		$	158,142		$	84,047			53.1	%	$	467,432		$	297,067		$	170,365			57.3	%
Ceded earned premiums		(159,082	)		(77,877	)		(81,205	)		104.3	%		(301,085	)		(140,770	)		(160,315	)		113.9	%
Net earned premiums	$	83,107		$	80,265		$	2,842			3.5	%	$	166,347		$	156,297		$	10,050			6.4	%

Net earned premium ratio		34.3	%		50.8	%								35.6	%		52.6	%

Loss detail

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2023		2022		Change		% Change			2023		2022		Change		% Change
	($ in thousands)									($ in thousands)
Catastrophe losses	$	2,159	$	548	$	1,611		294.0	%	$	3,965	$	1,029	$	2,936		285.3	%
Non-catastrophe losses		15,746		13,850		1,896		13.7	%		34,592		28,322		6,270		22.1	%
Total losses and loss adjustment expenses	$	17,905	$	14,398	$	3,507		24.4	%	$	38,557	$	29,351	$	9,206		31.4	%

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,
	2023			2022		2023		2022
	(in thousands)					(in thousands)
Reserve for losses and LAE net of reinsurance recoverables at beginning of period	$	81,366		$	51,386	$	77,520	$	45,419
Add: Incurred losses and LAE, net of reinsurance, related to:
Current year		18,539			14,350		35,839		27,799
Prior years		(634	)		48		2,718		1,552
Total incurred		17,905			14,398		38,557		29,351
Deduct: Loss and LAE payments, net of reinsurance, related to:
Current year		6,176			4,399		7,569		5,889
Prior years		11,795			5,615		27,208		13,112
Total payments		17,971			10,014		34,777		19,001
Reserve for losses and LAE net of reinsurance recoverables at end of period		81,300			55,769		81,300		55,769
Add: Reinsurance recoverables on unpaid losses and LAE at end of period		216,783			107,898		216,783		107,898
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period	$	298,083		$	163,667	$	298,083	$	163,667

Reconciliation of Non-GAAP Financial Measures

For the three and six months ended June 30, 2023 and 2022, 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,
	2023			2022			2023			2022
	(in thousands)						(in thousands)
Total revenue	$	90,396		$	79,660		$	179,597		$	157,769
Net investment income		(5,541	)		(3,140	)		(10,661	)		(5,719	)
Net realized and unrealized (gains) losses on investments		(1,127	)		4,735			(1,273	)		6,014
Underwriting revenue	$	83,728		$	81,255		$	167,663		$	158,064

Underwriting income and adjusted underwriting income

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
	(in thousands)						(in thousands)
Income before income taxes	$	23,020		$	18,293		$	45,648		$	37,377
Net investment income		(5,541	)		(3,140	)		(10,661	)		(5,719	)
Net realized and unrealized (gains) losses on investments		(1,127	)		4,735			(1,273	)		6,014
Interest expense		1,064			111			2,084			204
Underwriting income	$	17,416		$	19,999		$	35,798		$	37,876
Expenses associated with transactions		—			—			—			85
Stock-based compensation expense		3,697			2,704			7,147			5,463
Amortization of intangibles		389			313			703			628
Expenses associated with catastrophe bond		1,590			1,792			1,640			1,992
Adjusted underwriting income	$	23,092		$	24,808		$	45,288		$	46,044

Adjusted net income

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
	(in thousands)						(in thousands)
Net income	$	17,562		$	14,589		$	34,874		$	29,126
Adjustments:
Net realized and unrealized (gains) losses on investments		(1,127	)		4,735			(1,273	)		6,014
Expenses associated with transactions		—			—			—			85
Stock-based compensation expense		3,697			2,704			7,147			5,463
Amortization of intangibles		389			313			703			628
Expenses associated with catastrophe bond		1,590			1,792			1,640			1,992
Tax impact		(317	)		(1,689	)		(857	)		(2,282	)
Adjusted net income	$	21,794		$	22,444		$	42,234		$	41,026

Annualized adjusted return on equity

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
	(in thousands)						(in thousands)

Annualized adjusted net income	$	87,176		$	89,776		$	84,468		$	82,052
Average stockholders' equity	$	409,178		$	379,232		$	399,230		$	386,117
Annualized adjusted return on equity		21.3	%		23.7	%		21.2	%		21.3	%

Adjusted combined ratio

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
	(in thousands)						(in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income	$	65,691		$	60,266		$	130,549		$	118,421
Denominator: Net earned premiums	$	83,107		$	80,265		$	166,347		$	156,297
Combined ratio		79.0	%		75.1	%		78.5	%		75.8	%
Adjustments to numerator:
Expenses associated with transactions	$	—		$	—		$	—		$	(85	)
Stock-based compensation expense		(3,697	)		(2,704	)		(7,147	)		(5,463	)
Amortization of intangibles		(389	)		(313	)		(703	)		(628	)
Expenses associated with catastrophe bond		(1,590	)		(1,792	)		(1,640	)		(1,992	)
Adjusted combined ratio		72.2	%		69.1	%		72.8	%		70.5	%

Diluted adjusted earnings per share

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	(in thousands, except per share data)				(in thousands, except per share data)

Adjusted net income	$	21,794	$	22,444	$	42,234	$	41,026
Weighted-average common shares outstanding, diluted		25,309,526		25,746,780		25,384,409		25,817,442
Diluted adjusted earnings per share	$	0.86	$	0.87	$	1.66	$	1.59

Catastrophe loss ratio

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
	(in thousands)						(in thousands)
Numerator: Losses and loss adjustment expenses	$	17,905		$	14,398		$	38,557		$	29,351
Denominator: Net earned premiums	$	83,107		$	80,265		$	166,347		$	156,297
Loss ratio		21.5	%		17.9	%		23.2	%		18.8	%

Numerator: Catastrophe losses	$	2,159		$	548		$	3,965		$	1,029
Denominator: Net earned premiums	$	83,107		$	80,265		$	166,347		$	156,297
Catastrophe loss ratio		2.6	%		0.7	%		2.4	%		0.7	%

Adjusted combined ratio excluding catastrophe losses

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
	(in thousands)						(in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income	$	65,691		$	60,266		$	130,549		$	118,421
Denominator: Net earned premiums	$	83,107		$	80,265		$	166,347		$	156,297
Combined ratio		79.0	%		75.1	%		78.5	%		75.8	%
Adjustments to numerator:
Expenses associated with transactions	$	—		$	—		$	—		$	(85	)
Stock-based compensation expense		(3,697	)		(2,704	)		(7,147	)		(5,463	)
Amortization of intangibles		(389	)		(313	)		(703	)		(628	)
Expenses associated with catastrophe bond		(1,590	)		(1,792	)		(1,640	)		(1,992	)
Catastrophe losses		(2,159	)		(548	)		(3,965	)		(1,029	)
Adjusted combined ratio excluding catastrophe losses		69.6	%		68.4	%		70.4	%		69.9	%

Tangible Stockholders' equity

	June 30,			December 31,
	2023			2022
	(in thousands)
Stockholders' equity	$	413,708		$	384,754
Goodwill and intangible assets		(13,095	)		(8,261	)
Tangible stockholders' equity	$	400,613		$	376,493

Palomar Holdings, Inc. Reports Second Quarter 2023 Results