LA JOLLA, Calif., Feb. 18, 2020 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or the “Company”) reported net income of $10.9 million, or $0.45 per diluted share, for the fourth quarter of 2019 compared to net income of $4.1 million, or $0.24 per diluted share, for the fourth quarter of 2018. Adjusted net income(1) was $11.5 million, or $0.48 per diluted share, for the fourth quarter of 2019 as compared to $4.6 million, or $0.27 per diluted share, for the fourth quarter of 2018.
Fourth Quarter 2019 Highlights
- Gross written premiums increased by 68.4% to $73.3 million compared to $43.5 million in the fourth quarter of 2018
- Net income increased by 163.6% to $10.9 million compared to $4.1 million in the fourth quarter of 2018
- Adjusted net income(1) increased by 149.9% to $11.5 million compared to $4.6 million in the fourth quarter of 2018
- Total loss ratio of 7.1% compared to (4.4)% in the fourth quarter of 2018
- Combined ratio of 63.1% compared to 59.9% in the fourth quarter of 2018
- Adjusted combined ratio(1) of 60.7%, compared to 57.3% in the fourth quarter of 2018
- Annualized return on equity of 20.4%
- Annualized adjusted return on equity(1) of 21.5%
Full Year 2019 Highlights
- Gross written premiums increased by 62.7% to $252.0 million compared to $154.9 million in 2018
- Net income decreased by 41.7% to $10.6 million compared to $18.2 million in 2018
- Adjusted net income(1) increased by 91.1% to $37.9 million compared to $19.8 million in 2018
- Total loss ratio of 5.6% compared to 9.0% in 2018
- Combined ratio of 91.3% compared to 71.6% in 2018
- Adjusted combined ratio(1) of 63.3%, compared to 69.5% in 2018
- Return on equity of 6.7%
- Adjusted return on equity(1) of 24.1%
(1) See discussion of “Non-GAAP and Key Performance Indicators” below.
“Over the course of 2019, Palomar executed on its mission to build a diversified book of specialty property business. We remained acutely focused on developing a suite of distinctive and flexible products delivered via an easy to use and scalable platform that incorporates an analytics-driven underwriting and risk transfer framework” commented Mac Armstrong, Chief Executive Officer and Founder. “Our results over this past quarter and for the full year of 2019 demonstrate that we are making progress on our mission and that our products are well-received by the market. The 64.9% year-over-year growth of our earthquake products for the full year of 2019 speaks to the exciting ongoing opportunity in a market where we continue to gain traction and increasingly play a leadership role. The 58.3% growth of our non-earthquake products in 2019 validates that our strategy is exportable to other segments of the specialty property market. Additionally, we were pleased to see 106.1% growth in 2019 for our commercial lines offerings, which now comprise 28.9% of total written premium, as we capitalized on expanded distribution, new products and an attractive rate environment. Ultimately, we are most proud of the strong bottom line results we generated in 2019; specifically, the adjusted combined ratio of 63.3% and the adjusted return on equity of 24.1%.”
Mr. Armstrong continued, “We are as energized as ever about the prospects of Palomar and we truly believe we are in the early phases of our strategic mission. The growth of our capital base and the refinement and expansion of our underwriting appetite each enhance the value we bring to our distribution and carrier partners. We believe our expanding distribution footprint, coupled with strong premium retention bolstered by a healthy rate environment, will drive continued growth in our existing lines of business. At the same time, we remain dedicated to entering new markets and lines of business that have commonalities with our current product suite and have the potential to generate attractive returns. Lastly, we remain laser-focused on understanding and managing our exposure at an individual risk and portfolio level. The successful renewal and expansion of our reinsurance program at January 1 is not only an endorsement of our emphasis on risk management but also will allow us to continue to grow the business in a responsible and predictable fashion.”
Underwriting Results
Gross written premiums increased 68.4% to $73.3 million compared to $43.5 million in the fourth quarter of 2018, while net earned premiums increased 75.9% compared to the prior year’s fourth quarter. Underwriting income(1) was $11.4 million resulting in a combined ratio of 63.1% compared to underwriting income of $7.1 and a combined ratio of 59.9% during the same period last year. The fourth quarter combined ratio includes certain expenses related to the Company’s stock offerings and stock-based compensation. Excluding those items, the Company’s adjusted combined ratio(1) was 60.7% in the fourth quarter compared to 57.3% in the same period in 2018.
Losses and loss adjustment expenses for the fourth quarter were $2.2 million, resulting in a 7.1% loss ratio. Loss activity during the fourth quarter was primarily due to a combination of attritional loss in the US, modest development from named storms that occurred in the third quarter, and windstorm exposure in Japan through our assumed reinsurance portfolio. The fourth quarter results include $0.1 million of unfavorable prior year development. Additionally, the Company’s adjusted net income(1) during the fourth quarter increased by 149.9% to $11.5 million compared to $4.6 million in last year’s fourth quarter. Adjusted net income for the fourth quarter of 2019 excludes certain expenses related to the Company’s stock offerings and stock-based compensation, including the tax impact of those expenses.
Investment Results
Net investment income increased by 75.6% to $1.8 million compared to $1.0 million in the prior year’s fourth quarter. The year over year increase was primarily due to interest income generated by the net proceeds received from the Company’s IPO. 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 "AA." The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.49 years at December 31, 2019. Cash and invested assets totaled $272.8 million at December 31, 2019. During the fourth quarter, the Company recognized realized and unrealized gains of $1.2 million related to its investment portfolio as compared to a $3.5 million loss in last year’s fourth quarter. The loss during last year's fourth quarter was principally due to a decline in the value of the Company's equity investments.
Tax Rate
The effective tax rate for the three months ended December 31, 2019 was 24.5% compared to 0.1% for the three months ended December 31, 2018. The 2019 fourth quarter tax rate includes an adjustment from prior periods of $0.4 million, or approximately 3 points of the effective tax rate for the fourth quarter. The change in the effective tax rate for the three months ended December 31, 2019 compared to the prior-year period was due to the tax restructuring of the Company prior to the IPO, resulting in all operations of the Company being taxable in the U.S. Prior to the tax restructuring the Company’s Bermuda operations were not subject to U.S. tax, thus the overall effective tax rate was lower in 2018.
Stockholders’ Equity and Returns
Stockholders' equity was $218.6 million at December 31, 2019, compared to $96.3 million at December 31, 2018. For the three months ended December 31, 2019, the Company’s annualized return on equity was 20.4% compared to 17.6% for the same period last year. Over the same period, annualized adjusted return on equity(1) increased to 21.5% from 19.6%. The increase in adjusted return on equity was due primarily to an improvement in underwriting income compared to the same period last year.
Full Year 2020 Outlook
For the full year 2020, the Company expects to achieve adjusted net income of $50.5-53.0 million, equating to a growth rate of 33-40%.
Conference Call
As previously announced, Palomar will host a conference call February 19, 2020, to discuss its fourth quarter and full year 2019 results at 12:00 p.m. (Eastern Time). The conference call can be accessed by dialing 1-877-423-9813 (domestic) or 1-201-689-8573 (international) and asking for the Palomar Fourth Quarter and full year 2019 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 13697896. The telephonic replay will be available until 11:59 pm (Eastern Time) on February 26, 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 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 to underwriting revenue in accordance with GAAP.
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 to underwriting income in accordance with GAAP.
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 related income 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 to adjusted net income in accordance with GAAP.
Return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the periods.
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 periods. See “Reconciliation of Non‑GAAP Financial Measures” for a reconciliation of return on equity to adjusted return on equity in accordance with GAAP.
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 underwriting, 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 to adjusted combined ratio in accordance with GAAP.
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 adjusted earnings per share to earnings per share in accordance with GAAP.
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 to tangible stockholders’ equity in accordance with GAAP.
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.
Investor Relations
1-619-771-1743
investors@palomarspecialty.com
Source: Palomar Holdings, Inc.
Summary of Operating Results
The following table summarizes our results for the three months ended December 31, 2019 and 2018:
| Three months ended | |||||||||||
| December 31, | Percent | ||||||||||
| 2019 | 2018 | Change | Change | ||||||||
| ($ in thousands, except per share data) | |||||||||||
| Revenue: | |||||||||||
| Gross written premiums | $ | 73,342 | $ | 43,542 | $ | 29,800 | 68.4 | % | |||
| Ceded written premiums | (29,535) | (21,749) | (7,786) | 35.8 | % | ||||||
| Net written premiums | 43,807 | 21,793 | 22,014 | 101.0 | % | ||||||
| Net earned premiums | 30,988 | 17,615 | 13,373 | 75.9 | % | ||||||
| Commission and other income | 654 | 536 | 118 | 22.0 | % | ||||||
| Total underwriting revenue (1) | 31,642 | 18,151 | 13,491 | 74.3 | % | ||||||
| Losses and loss adjustment expenses | 2,195 | (769) | 2,964 | (385.4) | % | ||||||
| Acquisition expenses | 11,070 | 6,592 | 4,478 | 67.9 | % | ||||||
| Other underwriting expenses | 6,943 | 5,270 | 1,673 | 31.7 | % | ||||||
| Underwriting income (1) | 11,434 | 7,058 | 4,376 | 62.0 | % | ||||||
| Interest expense | — | (416) | 416 | (100.0) | % | ||||||
| Net investment income | 1,803 | 1,027 | 776 | 75.6 | % | ||||||
| Net realized and unrealized gains (losses) on investments | 1,178 | (3,538) | 4,716 | (133.3) | % | ||||||
| Income before income taxes | 14,415 | 4,131 | 10,284 | 248.9 | % | ||||||
| Income tax expense | 3,535 | 4 | 3,531 | NM | |||||||
| Net income | $ | 10,880 | $ | 4,127 | $ | 6,753 | 163.6 | % | |||
| Adjustments: | |||||||||||
| Expenses associated with IPO, tax restructuring, and secondary offerings | 307 | 458 | (151) | NM | |||||||
| Stock-based compensation expense | 426 | — | 426 | NM | |||||||
| Tax impact | (155) | — | (155) | NM | |||||||
| Adjusted net income (1) | $ | 11,458 | $ | 4,585 | $ | 6,873 | 149.9 | % | |||
| Key Financial and Operating Metrics | |||||||||||
| Annualized return on equity | 20.4 | % | 17.6 | % | |||||||
| Annualized adjusted return on equity (1) | 21.5 | % | 19.6 | % | |||||||
| Loss ratio | 7.1 | % | (4.4) | % | |||||||
| Expense ratio | 56.0 | % | 64.3 | % | |||||||
| Combined ratio | 63.1 | % | 59.9 | % | |||||||
| Adjusted combined ratio (1) | 60.7 | % | 57.3 | % | |||||||
| Diluted earnings per share | $ | 0.45 | $ | 0.24 | |||||||
| Diluted adjusted earnings per share (1) | $ | 0.48 | $ | 0.27 | |||||||
| 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 GAAP equivalents.
The following table summarizes our results for the years ended December 31, 2019 and 2018:
| Year ended | |||||||||||
| December 31, | Percent | ||||||||||
| 2019 | 2018 | Change | Change | ||||||||
| ($ in thousands, except per share data) | |||||||||||
| Revenue: | |||||||||||
| Gross written premiums | $ | 251,961 | $ | 154,891 | $ | 97,070 | 62.7 | % | |||
| Ceded written premiums | (108,332) | (82,949) | (25,383) | 30.6 | % | ||||||
| Net written premiums | 143,629 | 71,942 | 71,687 | 99.6 | % | ||||||
| Net earned premiums | 100,207 | 69,897 | 30,310 | 43.4 | % | ||||||
| Commission and other income | 2,671 | 2,405 | 266 | 11.1 | % | ||||||
| Total underwriting revenue(1) | 102,878 | 72,302 | 30,576 | 42.3 | % | ||||||
| Losses and loss adjustment expenses | 5,593 | 6,274 | (681) | (10.9) | % | ||||||
| Acquisition expenses | 37,259 | 28,224 | 9,035 | 32.0 | % | ||||||
| Other underwriting expenses | 51,299 | 17,957 | 33,342 | 185.7 | % | ||||||
| Underwriting income(1) | 8,727 | 19,847 | (11,120) | (56.0) | % | ||||||
| Interest expense | (1,068) | (2,303) | 1,235 | (53.6) | % | ||||||
| Net investment income | 5,975 | 3,238 | 2,737 | 84.5 | % | ||||||
| Net realized and unrealized gains (losses) on investments | 4,443 | (2,569) | 7,012 | (272.9) | % | ||||||
| Income before income taxes | 18,077 | 18,213 | (136) | (0.7) | % | ||||||
| Income tax expense (benefit) | 7,456 | (6) | 7,462 | NM | |||||||
| Net income | $ | 10,621 | $ | 18,219 | $ | (7,598) | (41.7) | % | |||
| Adjustments: | |||||||||||
| Expenses associated with IPO, tax restructuring, secondary offerings, and one time incentive cash bonuses | 3,007 | 1,110 | 1,897 | NM | |||||||
| Stock-based compensation expense | 24,103 | — | 24,103 | NM | |||||||
| Expenses associated with retirement of debt | 1,297 | 495 | 802 | NM | |||||||
| Tax impact | (1,149) | — | (1,149) | NM | |||||||
| Adjusted net income(1) | $ | 37,879 | $ | 19,824 | $ | 18,055 | 91.1 | % | |||
| Key Financial and Operating Metrics | |||||||||||
| Return on equity | 6.7 | % | 20.9 | % | |||||||
| Adjusted return on equity(1) | 24.1 | % | 22.7 | % | |||||||
| Loss ratio | 5.6 | % | 9.0 | % | |||||||
| Expense ratio | 85.7 | % | 62.6 | % | |||||||
| Combined ratio | 91.3 | % | 71.6 | % | |||||||
| Adjusted combined ratio(1) | 63.3 | % | 69.5 | % | |||||||
| Diluted earnings per share | $ | 0.49 | $ | 1.07 | |||||||
| Diluted adjusted earnings per share (1) | $ | 1.73 | $ | 1.17 | |||||||
| 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 GAAP equivalents.
Condensed Consolidated Balance sheets
| Palomar Holdings, Inc. and Subsidiaries | |||||
| Condensed Consolidated Balance Sheets | |||||
| (in thousands, except shares and par value data) | |||||
| December 31, | December 31, | ||||
| 2019 | 2018 | ||||
| (Unaudited) | |||||
| Assets | |||||
| Investments: | |||||
| Fixed maturity securities available for sale, at fair value (amortized cost: $211,278 in 2019; $122,949 in 2018) | $ | 217,151 | $ | 122,220 | |
| Equity securities, at fair value (cost: $21,336 in 2019; $27,188 in 2018) | 22,328 | 25,171 | |||
| Total investments | 239,479 | 147,391 | |||
| Cash and cash equivalents | 33,119 | 9,525 | |||
| Restricted cash | 230 | 399 | |||
| Accrued investment income | 1,386 | 734 | |||
| Premium receivable | 36,237 | 18,633 | |||
| Deferred policy acquisition costs | 25,201 | 14,052 | |||
| Reinsurance recoverable on unpaid losses and loss adjustment expenses | 12,952 | 11,896 | |||
| Reinsurance recoverable on paid losses and loss adjustment expenses | 4,303 | 2,666 | |||
| Prepaid reinsurance premium | 26,105 | 18,284 | |||
| Prepaid expenses and other assets | 14,861 | 5,863 | |||
| Property and equipment, net | 845 | 947 | |||
| Intangible assets | 744 | 744 | |||
| Total assets | $ | 395,462 | $ | 231,134 | |
| Liabilities and stockholders' equity | |||||
| Liabilities: | |||||
| Accounts payable and other accrued liabilities | $ | 13,555 | $ | 9,245 | |
| Reserve for losses and loss adjustment expenses | 16,821 | 16,061 | |||
| Unearned premiums | 130,373 | 79,130 | |||
| Ceded premium payable | 11,383 | 10,607 | |||
| Funds held under reinsurance treaty | 1,658 | 720 | |||
| Income and excise taxes payable | 1,117 | — | |||
| Deferred tax liabilities, net | 1,999 | — | |||
| Long-term notes payable | — | 19,079 | |||
| Total liabilities | 176,906 | 134,842 | |||
| Stockholders' equity: | |||||
| Preferred stock, $0.0001 par value, 5,000,000 and 0 shares authorized as of December 31, 2019 and December 31, 2018, respectively, 0 shares issued and outstanding as of December 31, 2019 and December 31, 2018 | — | — | |||
| Common stock, $0.0001 par value, 500,000,000 shares authorized, 23,468,750 and 17,000,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively | 2 | 2 | |||
| Additional paid-in capital | 180,012 | 68,498 | |||
| Accumulated other comprehensive income (loss) | 4,686 | (563) | |||
| Retained earnings | 33,856 | 28,355 | |||
| Total stockholders' equity | 218,556 | 96,292 | |||
| Total liabilities and stockholders' equity | $ | 395,462 | $ | 231,134 | |
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 | Year Ended | ||||||||||
| December 31, | December 31, | ||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||
| Revenues: | |||||||||||
| Gross written premiums | $ | 73,342 | $ | 43,542 | $ | 251,961 | $ | 154,891 | |||
| Ceded written premiums | (29,535) | (21,749) | (108,332) | (82,949) | |||||||
| Net written premiums | 43,807 | 21,793 | 143,629 | 71,942 | |||||||
| Change in unearned premiums | (12,819) | (4,178) | (43,422) | (2,045) | |||||||
| Net earned premiums | 30,988 | 17,615 | 100,207 | 69,897 | |||||||
| Net investment income | 1,803 | 1,027 | 5,975 | 3,238 | |||||||
| Net realized and unrealized gains (losses) on investments | 1,178 | (3,538) | 4,443 | (2,569) | |||||||
| Commission and other income | 654 | 536 | 2,671 | 2,405 | |||||||
| Total revenues | 34,623 | 15,640 | 113,296 | 72,971 | |||||||
| Expenses: | |||||||||||
| Losses and loss adjustment expenses | 2,195 | (769) | 5,593 | 6,274 | |||||||
| Acquisition expenses | 11,070 | 6,592 | 37,259 | 28,224 | |||||||
| Other underwriting expenses (includes stock-based compensation of $426 and $0 for the three months ended December 31, 2019 and 2018, respectively and $24,103 and $0 for the year ended December 31, 2019 and 2018, respectively) | 6,943 | 5,270 | 51,299 | 17,957 | |||||||
| Interest expense | — | 416 | 1,068 | 2,303 | |||||||
| Total expenses | 20,208 | 11,509 | 95,219 | 54,758 | |||||||
| Income before income taxes | 14,415 | 4,131 | 18,077 | 18,213 | |||||||
| Income tax expense (benefit) | 3,535 | 4 | 7,456 | (6) | |||||||
| Net income | 10,880 | 4,127 | 10,621 | 18,219 | |||||||
| Other comprehensive income, net: | |||||||||||
| Net unrealized (losses) gains on securities available for sale for the three months and years ended December 31, 2019 and 2018, respectively | (1,210) | 958 | 5,249 | (341) | |||||||
| Net comprehensive income | $ | 9,670 | $ | 5,085 | $ | 15,870 | $ | 17,878 | |||
| Per Share Data: | |||||||||||
| Basic earnings per share | $ | 0.46 | $ | 0.24 | $ | 0.49 | $ | 1.07 | |||
| Diluted earnings per share | $ | 0.45 | $ | 0.24 | $ | 0.49 | $ | 1.07 | |||
| Weighted-average common shares outstanding: | |||||||||||
| Basic | 23,468,750 | 17,000,000 | 21,501,541 | 17,000,000 | |||||||
| Diluted | 24,092,325 | 17,000,000 | 21,834,934 | 17,000,000 | |||||||
Underwriting Segment Data
The Company has a single reportable segment and offers primarily earthquake, wind, and flood insurance products. Gross written premiums (GWP) by product and location are presented below:
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||
| ($ in thousands) | ($ in thousands) | ||||||||||||||||||||
| % of | % of | % of | % of | ||||||||||||||||||
| Amount | GWP | Amount | GWP | Amount | GWP | Amount | GWP | ||||||||||||||
| Product | |||||||||||||||||||||
| Residential Earthquake | $ | 35,468 | 48.4 | % | $ | 23,573 | 54.1 | % | $ | 130,473 | 51.8 | % | $ | 81,679 | 52.7 | % | |||||
| Commercial Earthquake | 15,721 | 21.4 | % | 6,008 | 13.8 | % | 38,741 | 15.4 | % | 20,946 | 13.5 | % | |||||||||
| Commercial All Risk | 8,429 | 11.5 | % | 4,895 | 11.2 | % | 30,358 | 12.0 | % | 14,338 | 9.3 | % | |||||||||
| Specialty Homeowners | 7,796 | 10.6 | % | 6,335 | 14.6 | % | 32,788 | 13.0 | % | 27,680 | 17.9 | % | |||||||||
| Hawaii Hurricane | 2,714 | 3.7 | % | 2,013 | 4.6 | % | 10,764 | 4.3 | % | 8,128 | 5.2 | % | |||||||||
| Flood | 1,722 | 2.4 | % | 718 | 1.7 | % | 5,216 | 2.1 | % | 2,120 | 1.4 | % | |||||||||
| Other | 1,492 | 2.0 | % | — | — | % | 3,621 | 1.4 | % | — | — | % | |||||||||
| Total Gross Written Premiums | $ | 73,342 | 100.0 | % | $ | 43,542 | 100.0 | % | $ | 251,961 | 100.0 | % | $ | 154,891 | 100.0 | % | |||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||
| ($ in thousands) | ($ in thousands) | ||||||||||||||||||||
| % of | % of | % of | % of | ||||||||||||||||||
| Amount | GWP | Amount | GWP | Amount | GWP | Amount | GWP | ||||||||||||||
| State | |||||||||||||||||||||
| California | $ | 42,198 | 57.5 | % | $ | 24,043 | 55.2 | % | $ | 141,743 | 56.3 | % | $ | 82,119 | 53.0 | % | |||||
| Texas | 11,409 | 15.6 | % | 8,404 | 19.3 | % | 44,087 | 17.5 | % | 32,568 | 21.0 | % | |||||||||
| Washington | 3,177 | 4.3 | % | 1,860 | 4.3 | % | 9,607 | 3.8 | % | 5,658 | 3.7 | % | |||||||||
| Hawaii | 3,164 | 4.3 | % | 1,998 | 4.6 | % | 11,851 | 4.7 | % | 8,128 | 5.2 | % | |||||||||
| Oregon | 2,117 | 2.9 | % | 1,385 | 3.2 | % | 7,396 | 2.9 | % | 5,286 | 3.4 | % | |||||||||
| Utah | 1,889 | 2.6 | % | 368 | 0.8 | % | 3,250 | 1.3 | % | 1,263 | 0.8 | % | |||||||||
| South Carolina | 1,547 | 2.1 | % | 872 | 2.0 | % | 6,185 | 2.5 | % | 3,208 | 2.1 | % | |||||||||
| Mississippi | 1,385 | 1.9 | % | 819 | 1.9 | % | 4,769 | 1.9 | % | 2,585 | 1.7 | % | |||||||||
| Other | 6,456 | 8.8 | % | 3,793 | 8.7 | % | 23,073 | 9.1 | % | 14,076 | 9.1 | % | |||||||||
| Total Gross Written Premiums | $ | 73,342 | 100.0 | % | $ | 43,542 | 100.0 | % | $ | 251,961 | 100.0 | % | $ | 154,891 | 100.0 | % | |||||
Reconciliation of Non‑GAAP Financial Measures
For the three months and years ended December 31, 2019 and 2018, the Non-GAAP financial measures discussed above reconcile to their respective GAAP measures as follows:
Underwriting revenue
| Three Months Ended | Year Ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||
| (in thousands) | (in thousands) | |||||||||||
| Total revenue | $ | 34,623 | $ | 15,640 | $ | 113,296 | $ | 72,971 | ||||
| Net investment income | (1,803) | (1,027) | (5,975) | (3,238) | ||||||||
| Net realized and unrealized (gains) losses on investments | (1,178) | 3,538 | (4,443) | 2,569 | ||||||||
| Underwriting revenue | $ | 31,642 | $ | 18,151 | $ | 102,878 | $ | 72,302 | ||||
Underwriting income
| Three Months Ended | Year Ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| (in thousands) | (in thousands) | ||||||||||||
| Income before income taxes | $ | 14,415 | $ | 4,131 | $ | 18,077 | $ | 18,213 | |||||
| Net investment income | (1,803) | (1,027) | (5,975) | (3,238) | |||||||||
| Net realized and unrealized (gains) losses on investments | (1,178) | 3,538 | (4,443) | 2,569 | |||||||||
| Interest expense | — | 416 | 1,068 | 2,303 | |||||||||
| Underwriting income | $ | 11,434 | $ | 7,058 | $ | 8,727 | $ | 19,847 | |||||
Adjusted net income
| Three Months Ended | Year Ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||
| (in thousands) | (in thousands) | |||||||||||
| Net income | $ | 10,880 | $ | 4,127 | $ | 10,621 | $ | 18,219 | ||||
| Adjustments: | ||||||||||||
| Expenses associated with IPO, tax restructuring, secondary offerings, and one-time incentive cash bonuses | 307 | 458 | 3,007 | 1,110 | ||||||||
| Stock-based compensation expense | 426 | — | 24,103 | — | ||||||||
| Expenses associated with retirement of debt | — | — | 1,297 | 495 | ||||||||
| Tax impact | (155) | — | (1,149) | — | ||||||||
| Adjusted net income | $ | 11,458 | $ | 4,585 | $ | 37,879 | $ | 19,824 | ||||
Annualized adjusted return on equity
| Three Months Ended | Year Ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| ($ in thousands) | ($ in thousands) | ||||||||||||
| Annualized adjusted net income | $ | 45,832 | $ | 18,340 | $ | 37,879 | $ | 19,824 | |||||
| Average stockholders' equity | $ | 213,509 | $ | 93,749 | $ | 157,424 | $ | 87,353 | |||||
| Annualized adjusted return on equity | 21.5 | % | 19.6 | % | 24.1 | % | 22.7 | % | |||||
Adjusted combined ratio
| Three Months Ended | Year Ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| ($ in thousands) | ($ in thousands) | ||||||||||||
| Numerator: Sum of losses, loss adjustment expenses, underwriting, acquisition and other underwriting expenses, net of commission and other income | $ | 19,554 | $ | 10,557 | $ | 91,480 | $ | 50,050 | |||||
| Denominator: Net earned premiums | $ | 30,988 | $ | 17,615 | $ | 100,207 | $ | 69,897 | |||||
| Combined ratio | 63.1 | % | 59.9 | % | 91.3 | % | 71.6 | % | |||||
| Adjustments to numerator: | |||||||||||||
| Expenses associated with IPO, tax restructuring, secondary offerings, and one-time incentive cash bonuses | $ | (307) | $ | (458) | $ | (3,007) | $ | (1,110) | |||||
| Stock-based compensation expense | (426) | — | (24,103) | — | |||||||||
| Portion of expenses associated with retirement of debt classified as other underwriting expenses | — | — | (897) | (345) | |||||||||
| Adjusted combined ratio | 60.7 | % | 57.3 | % | 63.3 | % | 69.5 | % | |||||
Diluted adjusted earnings per share
| Three Months Ended | Year Ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||
| ( in thousands, except shares and per share data) | ( in thousands, except shares and per share data) | |||||||||||
| Adjusted net income | $ | 11,458 | $ | 4,585 | $ | 37,879 | $ | 19,824 | ||||
| Weighted-average common shares outstanding, diluted | 24,092,325 | 17,000,000 | 21,834,934 | 17,000,000 | ||||||||
| Diluted adjusted earnings per share | $ | 0.48 | $ | 0.27 | $ | 1.73 | $ | 1.17 | ||||
Tangible stockholders’ equity
| December 31, | |||||
| 2019 | 2018 | ||||
| Stockholders’ equity | (in thousands) | ||||
| Intangible assets | $ | 218,556 | $ | 96,292 | |
| Tangible stockholders’ equity | (744) | (744) | |||
| $ | 217,812 | $ | 95,548 | ||