8-K
Palomar Holdings, Inc. (PLMR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 5, 2020
Palomar Holdings, Inc.
(Exact name of registrant as specified in its charter)
Commission File Number: 001-38873
| Delaware | 83-3972551 |
| --- | --- | | (State or other jurisdiction<br> <br>of incorporation) | (I.R.S. Employer<br> <br>Identification No.) |
7979 Ivanhoe Avenue, Suite 500
La Jolla, California 92037
(Address of principal executive offices, including zip code)
(619) 567-5290
(Registrant’s telephone number, including area code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ Written communications pursuant to Rule 425 under the Securities Act \(17 CFR 230.425\) |
| --- | | ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging Growth Company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Selection 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.0001 per share | PLMR | Nasdaq Global Select Market |
Item 2.02. Results of Operations and Financial Condition.
On May 5, 2020, Palomar Holdings, Inc. (the "Company") issued a press release announcing its financial results for the fiscal quarter ended March 31, 2020. A copy of the press release is attached hereto as Exhibit 99.1.
The information contained under this Item 2.02, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or under the Exchange Act, regardless of any general incorporation language in any such filing, unless the Company expressly sets forth in such filing that such information is to be considered “filed” or incorporated by reference therein.
Item 9.01. Financial Statements and Exhibits.
| \(d\) | Exhibits |
| --- | --- | | Exhibit No. | Description | | 99.1 | Press release, dated May 5, 2020 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
| PALOMAR HOLDINGS, INC. | ||
|---|---|---|
| Date: | May 5, 2020 | /s/ T. Christopher Uchida |
| T. Christopher Uchida | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
PLMR\_Exhibit99.1
Exhibit 99.1
Palomar Holdings, Inc. Reports First Quarter 2020 Results
La Jolla, CA, May 5, 2020 – Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or the “Company”) reported net income of $11.8 million, or $0.48 per diluted share, for the first quarter of 2020 compared to a net loss of $14.4 million, or $(0.85) per diluted share, for the first quarter of 2019. Adjusted net income(1) was $12.3 million, or $0.50 per diluted share, for the first quarter of 2020 as compared to $8.8 million, or $0.52 per diluted share, for the first quarter of 2019.
First Quarter 2020 Highlights | · | Gross written premiums increased by 32.3% to $71.5 million compared to $54.0 million in the first quarter of 2019 | | --- | --- | | · | Net income increased to $11.8 million compared to a net loss of $14.4 million in the first quarter of 2019 | | --- | --- | | · | Adjusted net income(1) increased by 39.5% to $12.3 million compared to $8.8 million in the first quarter of 2019 | | --- | --- | | · | Total loss ratio of 5.4% compared to 1.7% in the first quarter of 2019 | | --- | --- | | · | Combined ratio of 63.6% compared to 193.8% in the first quarter of 2019 | | --- | --- | | · | Adjusted combined ratio(1) of 61.6%, compared to 66.7% in the first quarter of 2019 | | --- | --- | | · | Annualized return on equity of 19.7%, compared to (58.2)% in the first quarter of 2019 | | --- | --- | | · | Annualized adjusted return on equity(1) of 20.6%, compared to 35.7% in the first quarter of 2019 | | --- | --- |
| \(1\) | See discussion of “Non-GAAP and Key Performance Indicators” below. |
| --- | --- |
Mac Armstrong, Chief Executive Officer and Founder, commented, “We currently find ourselves amid extraordinary times produced by the COVID-19 pandemic, our thoughts are with those impacted by the virus and our thanks go to those working in earnest to stem its impact. Since the onset of the pandemic, our first priority has been and remains, the health and safety of our employees and the constituents within the Palomar network. I am proud of our team who seamlessly adapted to a remote work environment providing uninterrupted continuity of service and support to our policyholders and partners. In an effort to further support the challenges potentially facing our insureds, we rapidly implemented a premium grace period to accommodate late payments across all lines of business in all states where we operate. While the risks in our portfolio of specialty property insurance products have not seen a diminution in exposure or hazard, we continue to assess additional methods to potentially help our policyholders and the communities in which they live.”
Mr. Armstrong continued, “When we founded Palomar in 2014, we architected the entire business to withstand severe catastrophe events, and the COVID-19 pandemic may prove to be the greatest catastrophic event in our lifetime. Our deliberate planning encompassed detailed work from home contingency plans, a cloud-based technology infrastructure, an emphasis on holding high quality, liquid fixed income investment securities, and maintaining a debt-free balance sheet that was bolstered by $35.5 million of incremental equity in January. We also architected a comprehensive risk transfer program that would enable us to endure multiple natural catastrophes. These efforts have permitted us to operate effectively from both a market facing and back office standpoint during the current COVID-19 pandemic.
With respect to the first quarter of 2020, we are pleased with the results we generated from both a top and bottom-line perspective. We continued to see strong top line growth driven by an attractive rate environment for our commercial lines offerings and sustained demand and heightened awareness of our personal lines products. The 40% year-over-year growth in adjusted net income resulted in annualized adjusted ROE of 20.6%.
Looking ahead, we are fortunate that our products serve an important and enduring need to consumers and businesses in a way that is generally independent of economic conditions. That said we are by no means impervious to the impact of COVID-19 on the insurance industry, in particular business interruption (“BI”) insurance coverage, claims and legislation. BI is a very modest contributor to our
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overall exposure and our policies either feature a virus exclusion and require physical damage to the property or require physical damage to the property caused by an earthquake or flood. We are very focused on this evolving dynamic. Our steadfast effort to address COVID-19 will neither reduce our long-term opportunities, nor our intention to expand our product portfolio in a disciplined and profitable fashion.”
Underwriting Results
Gross written premiums increased 32.3% to $71.5 million compared to $54.0 million in the first quarter of 2019, while net earned premiums increased 89.7% compared to the prior year’s first quarter. The Company’s gross written premiums in the first quarter of 2019 included the impact of a new Residential Earthquake partnership in which the Company assumed $6.6 million of in-force premium. Excluding the impact of this 2019 premium assumption, the period over period increase in gross written premiums was 50.8%. Losses and loss adjustment expenses for the first quarter were $1.9 million, which resulted in a 5.4% loss ratio. Loss activity during the first quarter was primarily attributable to attritional loss from applicable products, as well as modest losses from the March 18th Salt Lake City earthquake. The first quarter results include $0.3 million of favorable prior year development. Underwriting income(1) was $12.7 million resulting in a combined ratio of 63.6% compared to an underwriting loss of $17.2 million and a combined ratio of 193.8% during the same period last year. The first quarter of 2020 and 2019 included certain expenses related to the Company’s stock offerings and stock-based compensation. Excluding those items, the Company’s adjusted combined ratio(1) was 61.6% in the first quarter compared to 66.7% in the same period in 2019, and the Company’s adjusted net income(1) during the first quarter increased by 39.5% to $12.3 million compared to $8.8 million in last year’s first quarter.
Investment Results
Net investment income increased by 112% to $2.0 million compared to $1.0 million in the prior year’s first quarter. The year-over-year increase was primarily due to interest income generated from a higher average balance of investments compared to the year prior, with the increase in investments primarily due to the combination of net proceeds received from the Company’s stock offerings and positive cash flows from operations. 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+." The fixed income investment portfolio had a book yield of 2.85% as of March 31, 2020. Cash and invested assets totaled $320.4 million at March 31, 2020. During the first quarter, the Company recognized realized and unrealized gains of $0.4 million related to its investment portfolio as compared to $2.4 million in last year’s first quarter.
Tax Rate
The effective tax rate for the three months ended March 31, 2020 was 22.3% compared to (1.0)% for the three months ended March 31, 2019. The 2019 first quarter tax rate was significantly impacted by the reduction of the valuation allowance on the Company’s federal deferred tax assets, and addback related to the nondeductible stock compensation charge.
Stockholders’ Equity and Returns
Stockholders' equity was $260.8 million at March 31, 2020, compared to $101.9 million at March 31, 2019. For the three months ended March 31, 2020, the Company’s annualized return on equity was 19.7% compared to (58.2)% for the same period last year. Over the same period, annualized adjusted return on equity(1) decreased to 20.6% from 35.7%. The change in the annualized adjusted return on equity reflects the significant increase in the Company’s stockholders’ equity as a result of raising $122.9 million from stock offerings and earning net income of $36.8 million.
Full Year 2020 Outlook
For the full year 2020, the Company affirms prior guidance of adjusted net income of $50.5 to $53.0 million, equating to a growth rate of 33% to 40% compared to the full year 2019.
Conference Call
As previously announced, Palomar will host a conference call May 6, 2020, to discuss its first quarter 2020 results at 12:00 p.m. (Eastern Time). The conference call can be accessed by dialing 1-877-423-9813 (domestic) or 1-201-689-8573 (international) and asking for the Palomar First Quarter 2020 Earnings Call. A telephonic replay will be available approximately two hours after the call and can be accessed by dialing 1-844-512-2921, or for international callers 1-412-317-6671 and providing the access code 13701399. The
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telephonic replay will be available until 11:59 pm (Eastern Time) on May 13, 2020.
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 ultimate parent and insurance holding company of its operating subsidiaries, Palomar Specialty Insurance Company and Palomar Specialty Reinsurance Company Bermuda Ltd. Palomar is an innovative insurer that focuses on the provision of specialty property insurance for residential and commercial clients. Palomar’s underwriting and analytical acumen allow it to concentrate on certain markets that it believes are underserved by other insurance companies, such as the markets for earthquake, wind and flood insurance. Based in La Jolla, California, the Company is an admitted carrier in 27 states. Palomar Specialty Insurance Company has an A.M. Best financial strength rating of “A-” (Excellent) FSC VIII. To learn more about us, visit www.palomarspecialty.com.
Non-GAAP and Key Performance Indicators
Palomar discusses certain key financial and operating metrics, 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 effective tax rate at the end of each period. 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.
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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. competitive conditions, and the impact of COVID-19 and related economic conditions, including the Company's assessment of the vulnerability of certain categories of investments to the economic disruptions associated with COVID-19 and legislative or regulatory developments affecting the insurance industry. 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.
Investor Relations
1-619-771-1743
investors@palomarspecialty.com
Source: Palomar Holdings, Inc.
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Summary of Operating Results
The following table summarizes the Company’s results for the three months ended March 31, 2020 and 2019:
| Three months ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, | Percent | ||||||||
| 2020 | 2019 | Change | Change | ||||||
| ( in thousands, except per share data) | |||||||||
| Revenue: | |||||||||
| Gross written premiums | 54,031 | $ | 17,463 | 32.3 | % | ||||
| Ceded written premiums | (26,106) | (3,389) | 13.0 | % | |||||
| Net written premiums | 27,925 | 14,074 | 50.4 | % | |||||
| Net earned premiums | 18,350 | 16,456 | 89.7 | % | |||||
| Commission and other income | 586 | 152 | 25.9 | % | |||||
| Total underwriting revenue (1) | 18,936 | 16,608 | 87.7 | % | |||||
| Losses and loss adjustment expenses | 316 | 1,547 | 489.6 | % | |||||
| Acquisition expenses | 6,975 | 6,071 | 87.0 | % | |||||
| Other underwriting expenses | 28,853 | (20,902) | (72.4) | % | |||||
| Underwriting income (loss) (1) | (17,208) | 29,892 | (173.7) | % | |||||
| Interest expense | (429) | 429 | (100.0) | % | |||||
| Net investment income | 960 | 1,075 | 112.0 | % | |||||
| Net realized and unrealized gains on investments | 2,411 | (1,971) | (81.8) | % | |||||
| Income (loss) before income taxes | (14,266) | 29,425 | (206.3) | % | |||||
| Income tax expense | 145 | 3,239 | NM | ||||||
| Net income (loss) | $ | (14,411) | $ | 26,186 | (181.7) | % | |||
| Adjustments: | |||||||||
| Expenses associated with stock offerings and tax restructuring | 358 | (105) | NM | ||||||
| Stock-based compensation expense | 22,961 | (22,519) | NM | ||||||
| Tax impact | (75) | (74) | NM | ||||||
| Adjusted net income (1) | $ | 8,833 | $ | 3,488 | 39.5 | % | |||
| Key Financial and Operating Metrics | |||||||||
| Annualized return on equity | % | (58.2) | % | ||||||
| Annualized adjusted return on equity | % | 35.7 | % | ||||||
| Loss ratio | % | 1.7 | % | ||||||
| Expense ratio | % | 192.1 | % | ||||||
| Combined ratio | % | 193.8 | % | ||||||
| Adjusted combined ratio (1) | % | 66.7 | % | ||||||
| Diluted earnings per share | $ | (0.85) | |||||||
| Diluted adjusted earnings per share (1) | $ | 0.52 | |||||||
| NM- not meaningful |
All values are in US Dollars.
(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.
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Condensed Consolidated Balance sheets
Palomar Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(in thousands, except shares and par value data)
| December 31, | |||
|---|---|---|---|
| 2019 | |||
| Assets | |||
| Investments: | |||
| Fixed maturity securities available for sale, at fair value (amortized cost: 274,864 in 2020; 211,278 in 2019) | 273,358 | $ | 217,151 |
| Equity securities, at fair value (cost: 21,459 in 2020; 21,336 in 2019) | 22,876 | 22,328 | |
| Total investments | 296,234 | 239,479 | |
| Cash and cash equivalents | 23,845 | 33,119 | |
| Restricted cash | 314 | 230 | |
| Accrued investment income | 1,774 | 1,386 | |
| Premium receivable | 34,938 | 36,237 | |
| Deferred policy acquisition costs | 26,714 | 25,201 | |
| Reinsurance recoverable on unpaid losses and loss adjustment expenses | 13,854 | 12,952 | |
| Reinsurance recoverable on paid losses and loss adjustment expenses | 5,168 | 4,303 | |
| Prepaid reinsurance premium | 25,644 | 26,105 | |
| Prepaid expenses and other assets | 13,603 | 14,861 | |
| Property and equipment, net | 811 | 845 | |
| Intangible assets | 744 | 744 | |
| Total assets | 443,643 | $ | 395,462 |
| Liabilities and stockholders' equity | |||
| Liabilities: | |||
| Accounts payable and other accrued liabilities | 10,320 | $ | 13,555 |
| Reserve for losses and loss adjustment expenses | 18,352 | 16,821 | |
| Unearned premiums | 137,105 | 130,373 | |
| Ceded premium payable | 10,027 | 11,383 | |
| Funds held under reinsurance treaty | 2,069 | 1,658 | |
| Income and excise taxes payable | 3,917 | 1,117 | |
| Deferred tax liabilities, net | 1,033 | 1,999 | |
| Total liabilities | 182,823 | 176,906 | |
| Stockholders' equity: | |||
| Preferred stock, 0.0001 par value, 5,000,000 shares authorized as of March 31, 2020 and December 31, 2019, respectively, 0 shares issued and outstanding as of March 31, 2020 and December 31, 2019 | — | — | |
| Common stock, 0.0001 par value, 500,000,000 shares authorized, 24,239,861 and 23,468,750 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively | 2 | 2 | |
| Additional paid-in capital | 216,334 | 180,012 | |
| Accumulated other comprehensive (loss) income | (1,147) | 4,686 | |
| Retained earnings | 45,631 | 33,856 | |
| Total stockholders' equity | 260,820 | 218,556 | |
| Total liabilities and stockholders' equity | 443,643 | $ | 395,462 |
All values are in US Dollars.
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Condensed Consolidated Income Statement
Palomar Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (Unaudited)
(in thousands, except shares and per share data)
| 2019 | |||
| Revenues: | |||
| Gross written premiums | 71,494 | $ | 54,031 |
| Ceded written premiums | (29,495) | (26,106) | |
| Net written premiums | 41,999 | 27,925 | |
| Change in unearned premiums | (7,193) | (9,575) | |
| Net earned premiums | 34,806 | 18,350 | |
| Net investment income | 2,035 | 960 | |
| Net realized and unrealized gains on investments | 440 | 2,411 | |
| Commission and other income | 738 | 586 | |
| Total revenues | 38,019 | 22,307 | |
| Expenses: | |||
| Losses and loss adjustment expenses | 1,863 | 316 | |
| Acquisition expenses | 13,046 | 6,975 | |
| Other underwriting expenses (includes stock-based compensation of 442 and 22,961 for the three months ended March 31, 2020 and 2019, respectively) | 7,951 | 28,853 | |
| Interest expense | — | 429 | |
| Total expenses | 22,860 | 36,573 | |
| Income (loss) before income taxes | 15,159 | (14,266) | |
| Income tax expense | 3,384 | 145 | |
| Net income (loss) | 11,775 | (14,411) | |
| Other comprehensive income, net: | |||
| Net unrealized gains (losses) on securities available for sale for the three months ended March 31, 2020 and 2019, respectively | (5,833) | 2,187 | |
| Net comprehensive income (loss) | 5,942 | $ | (12,224) |
| Per Share Data: | |||
| Basic earnings per share | 0.49 | $ | (0.85) |
| Diluted earnings per share | 0.48 | $ | (0.85) |
| Weighted-average common shares outstanding: | |||
| Basic | 24,119,263 | 17,000,000 | |
| Diluted | 24,778,608 | 17,000,000 |
All values are in US Dollars.
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Underwriting Segment Data
The Company has a single reportable segment and offers primarily earthquake, wind, and flood insurance products. Gross written premiums (GWP) by product and location are presented below:
| Three Months Ended March 31, | |||||||
|---|---|---|---|---|---|---|---|
| 2020 | 2019 | ||||||
| ( in thousands) | |||||||
| % of | % of | ||||||
| Amount | GWP | Amount | GWP | ||||
| Product | |||||||
| Residential Earthquake | 40.2 | % | $ | 29,308 | 54.3 | % | |
| Commercial All Risk | 17.4 | % | 7,565 | 14.0 | % | ||
| Commercial Earthquake | 15.2 | % | 6,532 | 12.1 | % | ||
| Specialty Homeowners | 13.8 | % | 7,780 | 14.4 | % | ||
| Hawaii Hurricane | 3.8 | % | 2,074 | 3.8 | % | ||
| Residential Flood | 2.1 | % | 772 | 1.4 | % | ||
| Other | 7.5 | % | — | — | % | ||
| Total Gross Written Premiums | 100.0 | % | $ | 54,031 | 100.0 | % |
All values are in US Dollars.
| Three Months Ended March 31, | |||||||
|---|---|---|---|---|---|---|---|
| 2020 | 2019 | ||||||
| ( in thousands) | |||||||
| % of | % of | ||||||
| Amount | GWP | Amount | GWP | ||||
| State | |||||||
| California | 45.8 | % | $ | 30,449 | 56.4 | % | |
| Texas | 22.1 | % | 10,439 | 19.3 | % | ||
| Hawaii | 4.3 | % | 2,091 | 3.9 | % | ||
| Washington | 3.6 | % | 1,594 | 3.0 | % | ||
| South Carolina | 3.4 | % | 1,669 | 3.1 | % | ||
| Oregon | 2.9 | % | 1,456 | 2.7 | % | ||
| North Carolina | 2.4 | % | 740 | 1.4 | % | ||
| Alabama | 2.1 | % | 1,010 | 1.9 | % | ||
| Other | 13.4 | % | 4,583 | 8.3 | % | ||
| Total Gross Written Premiums | 100.0 | % | $ | 54,031 | 100.0 | % |
All values are in US Dollars.
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 | |||||||
|---|---|---|---|---|---|---|---|
| March 31, | |||||||
| 2020 | 2019 | Change | % Change | ||||
| ( in thousands) | |||||||
| Gross earned premiums | $ | 40,892 | $ | 24,082 | 58.9 | % | |
| Ceded earned premiums | (22,542) | (7,626) | 33.8 | % | |||
| Net earned premiums | $ | 18,350 | $ | 16,456 | 89.7 | % | |
| Net earned premium ratio | 44.9% |
All values are in US Dollars.
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Reconciliation of Non‑GAAP Financial Measures
For the three months ended March 31, 2020 and 2019, the Non-GAAP financial measures discussed above reconcile to their most comparable GAAP measures as follows:
Underwriting revenue
| Three Months Ended | ||||
|---|---|---|---|---|
| March 31, | ||||
| 2020 | 2019 | |||
| (in thousands) | ||||
| Total revenue | $ | 38,019 | $ | 22,307 |
| Net investment income | (2,035) | (960) | ||
| Net realized and unrealized gains on investments | (440) | (2,411) | ||
| Underwriting revenue | $ | 35,544 | $ | 18,936 |
Underwriting income (loss)
| Three Months Ended | ||||
|---|---|---|---|---|
| March 31, | ||||
| 2020 | 2019 | |||
| (in thousands) | ||||
| Income (loss) before income taxes | $ | 15,159 | $ | (14,266) |
| Net investment income | (2,035) | (960) | ||
| Net realized and unrealized gains on investments | (440) | (2,411) | ||
| Interest expense | — | 429 | ||
| Underwriting income (loss) | $ | 12,684 | $ | (17,208) |
Adjusted net income
| Three Months Ended | ||||
|---|---|---|---|---|
| March 31, | ||||
| 2020 | 2019 | |||
| (in thousands) | ||||
| Net income (loss) | $ | 11,775 | $ | (14,411) |
| Adjustments: | ||||
| Expenses associated with stock offerings and tax restructuring | 253 | 358 | ||
| Stock-based compensation expense | 442 | 22,961 | ||
| Tax impact | (149) | (75) | ||
| Adjusted net income | $ | 12,321 | $ | 8,833 |
Annualized adjusted return on equity
| Three Months Ended | |||||
|---|---|---|---|---|---|
| March 31, | |||||
| 2020 | 2019 | ||||
| ( in thousands) | |||||
| Annualized adjusted net income | $ | 35,332 | |||
| Average stockholders' equity | $ | 99,101 | |||
| Annualized adjusted return on equity | % | 35.7 | % |
All values are in US Dollars.
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Adjusted combined ratio
| Three Months Ended | |||||
|---|---|---|---|---|---|
| March 31, | |||||
| 2020 | 2019 | ||||
| ( in thousands) | |||||
| Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income | $ | 35,558 | |||
| Denominator: Net earned premiums | $ | 18,350 | |||
| Combined ratio | % | 193.8 | % | ||
| Adjustments to numerator: | |||||
| Expenses associated with stock offerings and tax restructuring | $ | (358) | |||
| Stock-based compensation expense | (22,961) | ||||
| Adjusted combined ratio | % | 66.7 | % |
All values are in US Dollars.
Diluted adjusted earnings per share
| Three Months Ended | |||
|---|---|---|---|
| March 31, | |||
| 2020 | 2019 | ||
| ( in thousands, except per share data) | |||
| Adjusted net income | $ | 8,833 | |
| Weighted-average common shares outstanding, diluted | 17,000,000 | ||
| Diluted adjusted earnings per share | $ | 0.52 |
All values are in US Dollars.
Tangible Stockholders’ equity
| March 31, | December 31, | |||
|---|---|---|---|---|
| 2020 | 2019 | |||
| (in thousands) | ||||
| Stockholders' equity | $ | 260,820 | $ | 218,556 |
| Intangible assets | (744) | (744) | ||
| Tangible stockholders' equity | $ | 260,076 | $ | 217,812 |
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