LA JOLLA, Calif., Nov. 03, 2021 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) ("Palomar" or "Company") reported net income of $0.2 million, or $0.01 per diluted share, for the third quarter of 2021 as compared to a net loss of $15.7 million, or $0.62 per diluted share, for the third quarter of 2020. Adjusted net income⁽¹⁾ was $1.7 million, or $0.07 per diluted share, for the third quarter of 2021 as compared to an adjusted net loss of $15.2 million, or $0.60 per diluted share, for the third quarter of 2020.

The Company reported net income of $29.2 million, or $1.12 per diluted share, for the nine months ended September 30, 2021, as compared to $8.1 million, or $0.32 per diluted share, for the nine months ended September 30, 2020. Adjusted net income⁽¹⁾ was $34.2 million, or $1.31 per diluted share for the nine months ended September 30, 2021, as compared to $10.1 million, or $0.40 per diluted share, for the nine months ended September 30, 2020.

Third Quarter 2021 Highlights

Gross written premiums increased by 47.9% to $152.3 million compared to $103.0 million in the third quarter of 2020
Net income of $0.2 million compared to a net loss of $15.7 million in the third quarter of 2020
Adjusted net income⁽¹⁾ of $1.7 million compared to an adjusted net loss of $15.2 million in the third quarter of 2020
Total loss ratio of 44.0% compared to 97.7% in the third quarter of 2020
Catastrophe loss ratio⁽¹⁾ of 27.0% compared to 86.9% in the third quarter of 2020
Combined ratio of 102.8% compared to 157.1% in the third quarter of 2020
Adjusted combined ratio excluding catastrophe losses⁽¹⁾ of 73.2%, compared to 68.9% in the third quarter of 2020
Annualized return on equity of 0.3%, compared to negative 17.0% in the third quarter of 2020
Annualized adjusted return on equity⁽¹⁾ of 1.8%, compared to negative 16.5% in the third quarter of 2020

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

"Our third quarter results demonstrated continued execution of Palomar's commitment to building a market leading specialty insurer," commented Mac Armstrong, Chairman and Chief Executive Officer. "The quarter's results are highlighted by year-over-year gross written premium increases of 48% most notably in our surplus lines, or E&S operation, which delivered $41.4 million of gross written premium and 22% sequential growth.  Additionally, our core earthquake business grew at a healthy rate of 32% as our innovative products continued to capitalize on attractive market conditions. While our results reflect the impact of catastrophe losses from Hurricanes Ida and Nicholas as well as a single excess liability policy shock loss, we take solace in the fact that approximately 61% of the gross losses from these events came from discontinued lines of business and are non-recurring in nature. It is also worth noting those discontinued operations contributed 34% of our gross attritional losses in the quarter.

Mr. Armstrong added, "Importantly, we embarked upon several initiatives during the quarter that will translate into profitable growth into 2022 and beyond. One such example is our entrance into the fronting sector of the U.S. insurance market, where we are partnering with reinsurers, insurance carriers, and managing general agents to design customized insurance programs. Our PLMR-FRONT initiative provides us access and deeper reach into attractive markets, high leverage of our talent and capital, and generates recurring fee income. Beyond PLMR-FRONT, we launched new products and made several terrific additions to our team who will broaden our product suite and addressable market." 

 

Underwriting Results

Gross written premiums increased 47.9% to $152.3 million compared to $103.0 million in the third quarter of 2020, while net earned premiums increased 54.0% compared to the prior year's third quarter. Losses and loss adjustment expenses for the third quarter were $28.5 million due to attritional losses of $11.0 million and catastrophe losses of $17.5 million. The third quarter catastrophe loss results include Hurricanes Ida and Nicholas, the PG&E excess liability loss, and were partially offset by favorable prior period development.

The loss ratio for the quarter was 44.0%, comprised of a catastrophe loss ratio of 27.0%⁽¹⁾ and an attritional loss ratio of 17.0%, compared to a loss ratio of 97.7% during the same period last year comprised of a catastrophe loss ratio of 86.9%⁽¹⁾ and an attritional loss ratio of 10.8%. Non-catastrophe losses increased mainly due to growth of lines of business subject to attritional losses such as Specialty Homeowners, Flood, and Inland Marine.

Underwriting loss⁽¹⁾ was approximately $1.8 million resulting in a combined ratio of 102.8% compared to underwriting loss of $24.0 million and a combined ratio of 157.1% during the same period last year. The Company's adjusted combined ratio excluding catastrophe losses⁽¹⁾ was 73.2% in the third quarter compared to 68.9% during the same period last year.

Investment Results

Net investment income increased by 4.6% to $2.2 million compared to $2.1 million in the prior year's third quarter. The year-over-year increase was primarily due to a higher average balance of investments held during the three months ended September 30, 2021, offset by lower yields on invested assets. Funds are generally invested 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 4.04 years at September 30, 2021. Cash and invested assets totaled $467.0 million at September 30, 2021. During the current year third quarter, the Company recognized realized and unrealized losses of $0.3 million due to unrealized losses on equity securities as compared to realized and unrealized gains of $0.02 million in last year's third quarter.

Tax Rate

The effective tax rate for the three months ended September 30, 2021 was negative 101.6% compared to 28.2% for the three months ended September 30, 2020. For both periods, the effective tax rate differed from the statutory rate primarily due to the tax impact of the permanent component of employee stock option exercises.

Stockholders' Equity and Returns

Stockholders' equity was $377.8 million at September 30, 2021, compared to $363.7 million at December 31, 2020. For the three months ended September 30, 2021, the Company's annualized return on equity was 0.3% compared to negative 17.0% for the same period last year while annualized adjusted return on equity was 1.8% compared to negative 16.5% for the same period last year.

The Company did not repurchase any of its shares during the current quarter relating to its previously announced $40 million share purchase authorization. For the current year to date, the Company has repurchased approximately $15.8 million or 239,000 shares of its common stock.

Fourth quarter 2021 Outlook

For the fourth quarter of 2021, the Company expects to achieve adjusted net income of $17.0 million to $18.5 million, excluding any losses from a catastrophe.

Conference Call

As previously announced, Palomar will host a conference call November 4, 2021, to discuss its third quarter 2021 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 Third Quarter 2021 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 13723673. The telephonic replay will be available until 11:59 pm (Eastern Time) on November 11, 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.plmr.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. 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 and net realized and unrealized gains and losses on investments. 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.

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 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

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 September 30, 2021 and 2020:


	Three months ended
	September 30,
	2021			2020			Change			% Change
	($ in thousands, except per share data)
Gross written premiums	$	152,332		$	102,967		$	49,365		47.9	%
Ceded written premiums		(58,073	)		(41,570	)		(16,503	)	39.7	%
Net written premiums		94,259			61,397			32,862		53.5	%
Net earned premiums		64,720			42,020			22,700		54.0	%
Commission and other income		1,018			816			202		24.8	%
Total underwriting revenue (1)		65,738			42,836			22,902		53.5	%
Losses and loss adjustment expenses		28,475			41,060			(12,585	)	(30.7)	%
Acquisition expenses		26,412			17,976			8,436		46.9	%
Other underwriting expenses		12,652			7,805			4,847		62.1	%
Underwriting income (loss) (1)		(1,801	)		(24,005	)		22,204		(92.5)	%
Net investment income		2,236			2,138			98		4.6	%
Net realized and unrealized gains (losses) on investments		(313	)		24			(337	)	(1,404.2)	%
Income (loss) before income taxes		122			(21,843	)		21,965		(100.6)	%
Income tax expense		(124	)		(6,158	)		6,034		(98.0)	%
Net income (loss)	$	246		$	(15,685	)	$	15,931		(101.6)	%
Adjustments:
Stock-based compensation expense		1,525			551			974		176.8	%
Amortization of intangibles		115			—			115		NM
Tax impact		(166	)		(101	)		(65	)	NM
Adjusted net income (loss) (1)	$	1,720		$	(15,235	)	$	16,955		(111.3)	%
Key Financial and Operating Metrics
Annualized return on equity		0.3	%		(17.0	)%
Annualized adjusted return on equity (1)		1.8	%		(16.5)	%
Loss ratio		44.0	%		97.7	%
Expense ratio		58.8	%		59.4	%
Combined ratio		102.8	%		157.1	%
Adjusted combined ratio (1)		100.2	%		155.8	%
Diluted earnings per share	$	0.01		$	(0.62	)
Diluted adjusted earnings per share (1)	$	0.07		$	(0.60	)
Catastrophe losses	$	17,487		$	36,512
Catastrophe loss ratio (1)		27.0	%		86.9	%
Adjusted combined ratio excluding catastrophe losses (1)		73.2	%		68.9	%
NM- not meaningful

(1) - Indicates Non-GAAP financial measure- see above for definition of Non-GAAP financial measures and see below for reconciliation of Non-GAAP financial measures to their most directly comparable measures prepared in accordance with GAAP.

The following table summarizes the Company's results for the nine months ended September 30, 2021 and 2020:


	Nine months ended
	September 30,
	2021			2020			Change			% Change
	($ in thousands, except per share data)
Gross written premiums	$	385,267		$	258,268		$	126,999		49.2	%
Ceded written premiums		(153,005	)		(101,264	)		(51,741	)	51.1	%
Net written premiums		232,262			157,004			75,258		47.9	%
Net earned premiums		165,988			116,145			49,843		42.9	%
Commission and other income		2,735			2,492			243		9.8	%
Total underwriting revenue (1)		168,723			118,637			50,086		42.2	%
Losses and loss adjustment expenses		31,288			46,901			(15,613	)	(33.3)	%
Acquisition expenses		68,150			45,909			22,241		48.4	%
Other underwriting expenses		39,438			24,732			14,706		59.5	%
Underwriting income (1)		29,847			1,095			28,752		2,625.8	%
Net investment income		6,649			6,287			362		5.8	%
Net realized and unrealized gains (losses) on investments		(752	)		1,243			(1,995	)	(160.5)	%
Income before income taxes		35,744			8,625			27,119		314.4	%
Income tax expense		6,529			523			6,006		1,148.4	%
Net income	$	29,215		$	8,102		$	21,113		260.6	%
Adjustments:
Expenses associated with transactions and stock offerings		411			708			(297	)	NM
Stock-based compensation expense		3,370			1,457			1,913		131.3	%
Amortization of intangibles		704			—			704		NM
Expenses associated with catastrophe bond, net of rebate		1,698			399			1,299		NM
Tax impact		(1,156	)		(534	)		(622	)	NM
Adjusted net income (1)	$	34,242		$	10,132		$	24,110		238.0	%
Key Financial and Operating Metrics
Annualized return on equity		10.5	%		3.7	%
Annualized adjusted return on equity (1)		12.3	%		4.7	%
Loss ratio		18.8	%		40.4	%
Expense ratio		63.2	%		58.7	%
Combined ratio		82.0	%		99.1	%
Adjusted combined ratio (1)		78.3	%		96.8	%
Diluted earnings per share	$	1.12		$	0.32
Diluted adjusted earnings per share (1)	$	1.31		$	0.40
Catastrophe losses	$	6,719		$	36,512
Catastrophe loss ratio (1)		4.0	%		31.4	%
Adjusted combined ratio excluding catastrophe losses (1)		74.2	%		65.4	%
NM- not meaningful

Condensed Consolidated Balance sheets

Palomar Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

(in thousands, except shares and par value data)


	September 30,		December 31,
	2021		2020
	(Unaudited)
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $397,955 in 2021; $381,279 in 2020)	$	408,046	$	397,987
Equity securities, at fair value (cost: $17,829 in 2021; $22,291 in 2020)		17,358		24,322
Total investments		425,404		422,309
Cash and cash equivalents		41,405		33,538
Restricted cash		229		248
Accrued investment income		2,506		2,545
Premium receivable		75,543		48,842
Deferred policy acquisition costs		53,995		35,481
Reinsurance recoverable on unpaid losses and loss adjustment expenses		129,044		94,566
Reinsurance recoverable on paid losses and loss adjustment expenses		54,431		10,162
Ceded unearned premiums		42,949		35,031
Prepaid expenses and other assets		40,212		34,119
Property and equipment, net		578		739
Intangible assets, net		10,512		11,512
Total assets	$	876,808	$	729,092
Liabilities and stockholders' equity
Liabilities:
Accounts payable and other accrued liabilities	$	21,551	$	20,730
Reserve for losses and loss adjustment expenses		175,687		129,036
Unearned premiums		257,667		183,489
Ceded premium payable		32,426		22,233
Funds held under reinsurance treaty		7,282		4,515
Deferred tax liabilities, net		4,418		5,376
Total liabilities		499,031		365,379
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020		—		—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 25,415,299 and 25,525,796 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		3		3
Additional paid-in capital		316,352		310,507
Accumulated other comprehensive income		8,102		13,246
Retained earnings		53,320		39,957
Total stockholders' equity		377,777		363,713
Total liabilities and stockholders' equity	$	876,808	$	729,092

Condensed Consolidated Income Statement

Palomar Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)

(in thousands, except shares and per share data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Revenues:
Gross written premiums	$	152,332		$	102,967		$	385,267		$	258,268
Ceded written premiums		(58,073	)		(41,570	)		(153,005	)		(101,264	)
Net written premiums		94,259			61,397			232,262			157,004
Change in unearned premiums		(29,539	)		(19,377	)		(66,274	)		(40,859	)
Net earned premiums		64,720			42,020			165,988			116,145
Net investment income		2,236			2,138			6,649			6,287
Net realized and unrealized gains (losses) on investments		(313	)		24			(752	)		1,243
Commission and other income		1,018			816			2,735			2,492
Total revenues		67,661			44,998			174,620			126,167
Expenses:
Losses and loss adjustment expenses		28,475			41,060			31,288			46,901
Acquisition expenses		26,412			17,976			68,150			45,909
Other underwriting expenses		12,652			7,805			39,438			24,732
Total expenses		67,539			66,841			138,876			117,542
Income (loss) before income taxes		122			(21,843	)		35,744			8,625
Income tax expense		(124	)		(6,158	)		6,529			523
Net income (loss)		246			(15,685	)		29,215			8,102
Other comprehensive income, net:
Net unrealized gains (losses) on securities available for sale for the three and nine months ended September 30, 2021 and 2020, respectively		(1,655	)		909			(5,144	)		5,752
Net comprehensive income (loss)	$	(1,409	)	$	(14,776	)	$	24,071		$	13,854
Per Share Data:
Basic earnings per share	$	0.01		$	(0.62)		$	1.15		$	0.33
Diluted earnings per share	$	0.01		$	(0.62)		$	1.12		$	0.32

Weighted-average common shares outstanding:
Basic		25,388,630			25,492,274			25,473,006			24,654,722
Diluted		26,043,680			25,492,274			26,133,664			25,384,518

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 and location are presented below:


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
	($ in thousands)								($ in thousands)
			% of				% of				% of				% of
	Amount		GWP		Amount		GWP		Amount		GWP		Amount		GWP
Product
Residential Earthquake	$	50,075	32.9	%	$	40,507	39.3	%	$	128,165	33.3	%	$	103,503	40.1	%
Commercial Earthquake		27,433	18.0	%		18,061	17.5	%		66,052	17.1	%		40,727	15.8	%
Specialty Homeowners		19,881	13.1	%		17,048	16.6	%		53,018	13.8	%		38,461	14.9	%
Inland Marine		19,532	12.8	%		4,406	4.3	%		39,047	10.1	%		9,747	3.8	%
Hawaii Hurricane		8,996	5.9	%		4,360	4.2	%		22,921	5.9	%		10,296	4.0	%
Commercial All Risk		6,867	4.5	%		12,467	12.1	%		30,032	7.8	%		39,765	15.4	%
Residential Flood		3,228	2.1	%		2,170	2.1	%		8,377	2.2	%		5,728	2.2	%
Other		16,320	10.7	%		3,948	3.9	%		37,655	9.8	%		10,041	3.8	%
Total Gross Written Premiums	$	152,332	100.0	%	$	102,967	100.0	%	$	385,267	100.0	%	$	258,268	100.0	%


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
	($ in thousands)								($ in thousands)
			% of				% of				% of				% of
	Amount		GWP		Amount		GWP		Amount		GWP		Amount		GWP
State
California	$	72,505	47.6	%	$	52,960	51.4	%	$	180,142	46.8	%	$	124,131	48.1	%
Texas		19,715	13.0	%		20,460	19.9	%		48,142	12.5	%		55,047	21.3	%
Hawaii		10,342	6.8	%		5,097	5.0	%		26,312	6.8	%		11,990	4.6	%
Florida		7,203	4.7	%		685	0.7	%		24,958	6.5	%		685	0.3	%
Washington		7,180	4.7	%		4,340	4.2	%		15,931	4.1	%		10,002	3.9	%
Oregon		3,964	2.6	%		2,912	2.8	%		9,686	2.5	%		7,298	2.8	%
North Carolina		3,719	2.4	%		2,839	2.8	%		11,871	3.1	%		7,131	2.8	%
Illinois		2,893	1.9	%		1,575	1.5	%		8,668	2.2	%		4,416	1.7	%
Other		24,811	16.3	%		12,099	11.7	%		59,557	15.5	%		37,568	14.5	%
Total Gross Written Premiums	$	152,332	100.0	%	$	102,967	100.0	%	$	385,267	100.0	%	$	258,268	100.0	%

During the three months ended September 30, 2021, PSIC accounted for $110.9 million or approximately 72.8% of our gross written premiums and PESIC accounted for $41.4 million or approximately 27.2% of our gross written premiums.

During the nine months ended September 30, 2021, PSIC accounted for $286.0 million or approximately 74.2% of our gross written premiums and PESIC accounted for $99.3 million or approximately 25.8% of our gross written premiums.

Gross and net earned premiums

The table below shows the amount of premiums the Company earned on a gross and net basis and the Company's net earned premiums as a percentage of gross earned premiums for each period presented:


	Three Months Ended											Nine Months Ended
	September 30,											September 30,
	2021			2020			Change			% Change		2021			2020			Change			% Change
	($ in thousands)											($ in thousands)
Gross earned premiums	$	117,276		$	79,428		$	37,848		47.7	%	$	311,088		$	215,266		$	95,822		44.5	%
Ceded earned premiums		(52,556	)		(37,408	)		(15,148	)	40.5	%		(145,100	)		(99,120	)		(45,980	)	46.4	%
Net earned premiums	$	64,720		$	42,020		$	22,700		54.0	%	$	165,988		$	116,146		$	49,842		42.9	%

Net earned premium ratio		55.2%			52.9%								53.4%			54.0%

Loss detail


	Three Months Ended									Nine Months Ended
	September 30,									September 30,
	2021		2020		Change			% Change		2021		2020		Change			% Change
	($ in thousands)									($ in thousands)
Catastrophe losses	$	17,487	$	36,512	$	(19,025	)	(52.1)		$	6,719	$	36,512	$	(29,793	)	(81.6)
Non-catastrophe losses		10,988		4,548		6,440		141.6	%		24,569		10,389		14,180		136.5	%
Total losses and loss adjustment expenses	$	28,475	$	41,060	$	(12,585	)	(30.7)	%	$	31,288	$	46,901	$	(15,613	)	(33.3)	%


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021			2020
		(in thousands)				(in thousands)
Reserve for losses and LAE net of reinsurance recoverables at beginning of period	$	23,633	$	7,087	$	34,470		$	3,869
Add: Incurred losses and LAE, net of reinsurance, related to:
Current year		28,286		40,803		34,202			46,867
Prior years		189		257		(2,914	)		34
Total incurred		28,475		41,060		31,288			46,901
Deduct: Loss and LAE payments, net of reinsurance, related to:
Current year		2,787		8,232		3,407			9,754
Prior years		2,678		375		15,708			1,476
Total payments		5,465		8,607		19,115			11,230
Reserve for losses and LAE net of reinsurance recoverables at end of period		46,643		39,540		46,643			39,540
Add: Reinsurance recoverables on unpaid losses and LAE at end of period		129,044		92,537		129,044			92,537
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period	$	175,687	$	132,077	$	175,687		$	132,077

Reconciliation of Non-GAAP Financial Measures

For the three and nine months ended September 30, 2021 and 2020, the Non-GAAP financial measures discussed above reconcile to their most comparable GAAP measures as follows:

Underwriting revenue


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
	(in thousands)						(in thousands)
Total revenue	$	67,661		$	44,998		$	174,620		$	126,167
Net investment income		(2,236	)		(2,138	)		(6,649	)		(6,287	)
Net realized and unrealized (gains) losses on investments		313			(24	)		752			(1,243	)
Underwriting revenue	$	65,738		$	42,836		$	168,723		$	118,637

Underwriting income (loss)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
	(in thousands)						(in thousands)
Income before income taxes	$	122		$	(21,843	)	$	35,744		$	8,625
Net investment income		(2,236	)		(2,138	)		(6,649	)		(6,287	)
Net realized and unrealized gains (losses) on investments		313			(24	)		752			(1,243	)
Underwriting income (loss)	$	(1,801	)	$	(24,005	)	$	29,847		$	1,095

Adjusted net income (loss)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
	(in thousands)						(in thousands)
Net income (loss)	$	246		$	(15,685	)	$	29,215		$	8,102
Adjustments:
Expenses associated with transactions and stock offerings		—			—			411			708
Stock-based compensation expense		1,525			551			3,370			1,457
Amortization of intangibles		115			—			704			—
Expenses associated with catastrophe bond, net of rebate		—			—			1,698			399
Tax impact		(166	)		(101	)		(1,156	)		(534	)
Adjusted net income (loss)	$	1,720		$	(15,235	)	$	34,242		$	10,132

Annualized adjusted return on equity


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
	($ in thousands)						($ in thousands)

Annualized adjusted net income	$	6,880		$	(60,940)		$	45,656		$	13,509
Average stockholders' equity	$	377,260		$	368,568		$	370,745		$	290,225
Annualized adjusted return on equity		1.8	%		(16.5)	%		12.3	%		4.7	%

Adjusted combined ratio


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
	($ in thousands)						($ in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income	$	66,521		$	66,025		$	136,141		$	115,050
Denominator: Net earned premiums	$	64,720		$	42,020		$	165,988		$	116,145
Combined ratio		102.8	%		157.1	%		82.0	%		99.1	%
Adjustments to numerator:
Expenses associated with transactions and stock offerings	$	—		$	—		$	(411	)	$	(708	)
Stock-based compensation expense		(1,525	)		(551	)		(3,370	)		(1,457	)
Amortization of intangibles		(115	)		—			(704	)		—
Expenses associated with catastrophe bond, net of rebate		—			—			(1,698	)		(399	)
Adjusted combined ratio		100.2	%		155.8	%		78.3	%		96.8	%

Diluted adjusted earnings per share


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2021		2020			2021		2020
	(in thousands, except per share data)					(in thousands, except per share data)

Adjusted net income (loss)	$	1,720	$	(15,235	)	$	34,242	$	10,132
Weighted-average common shares outstanding, diluted	$	26,043,680		25,492,274			26,133,664		25,384,518
Diluted adjusted earnings per share	$	0.07	$	(0.60	)	$	1.31	$	0.40

Catastrophe loss ratio


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
	($ in thousands)						($ in thousands)
Numerator: Losses and loss adjustment expenses	$	28,475		$	41,060		$	31,288		$	46,901
Denominator: Net earned premiums	$	64,720		$	42,020		$	165,988		$	116,145
Loss ratio		44.0	%		97.7	%		18.8	%		40.4	%

Numerator: Catastrophe losses	$	17,487		$	36,512		$	6,719		$	36,512
Denominator: Net earned premiums	$	64,720		$	42,020		$	165,988		$	116,145
Catastrophe loss ratio		27.0	%		86.9	%		4.0	%		31.4	%

Adjusted combined ratio excluding catastrophe losses


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
	($ in thousands)						($ in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income	$	66,521		$	66,025		$	136,141		$	115,050
Denominator: Net earned premiums	$	64,720		$	42,020		$	165,988		$	116,145
Combined ratio		102.8	%		157.1	%		82.0	%		99.1	%
Adjustments to numerator:
Expenses associated with transactions and stock offerings	$	—		$	—		$	(411	)	$	(708	)
Stock-based compensation expense		(1,525	)		(551	)		(3,370	)		(1,457	)
Amortization of intangibles		(115	)		—			(704	)		—
Expenses associated with catastrophe bond, net of rebate		—			—			(1,698	)		(399	)
Catastrophe losses		(17,487	)		(36,512	)		(6,719	)		(36,512	)
Adjusted combined ratio excluding catastrophe losses		73.2	%		68.9	%		74.2	%		65.4	%

Tangible Stockholders' equity


	September 30,			December 31,
	2021			2020
	(in thousands)
Stockholders' equity	$	377,777		$	363,713
Intangible assets		(10,512	)		(11,512	)
Tangible stockholders' equity	$	367,265		$	352,201

Palomar Holdings, Inc. Reports Third Quarter 2021 Results