Palomar Holdings, Inc. Reports Fourth Quarter & Full Year 2022 Results

LA JOLLA, Calif., Feb. 15, 2023 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported net income of $18.8 million, or $0.73 per diluted share, for the fourth quarter of 2022 compared to net income of $16.6 million, or $0.64 per diluted share, for the fourth quarter of 2021. Adjusted net income⁽¹⁾ was $21.1 million, or $0.82 per diluted share, for the fourth quarter of 2022 as compared to $17.6 million, or $0.68 per diluted share, for the fourth quarter of 2021. Effective December 31, 2022, the Company adjusts for net realized and unrealized gains and losses when calculating and presenting adjusted net income, diluted adjusted earnings per share, and adjusted return on equity. All prior year amounts have been adjusted accordingly.

Fourth Quarter 2022 Highlights

• Gross written premiums increased by 59.5% to $239.1 million compared to $149.9 million in the fourth quarter of 2021
• Net income of $18.8 million, compared to $16.6 million in the fourth quarter of 2021
• Adjusted net income⁽¹⁾ of $21.1 million, compared to $17.6 million in the fourth quarter of 2021
• Total loss ratio of 22.4% compared to 15.0% in the fourth quarter of 2021
• Combined ratio of 75.5% compared to 75.0% in the fourth quarter of 2021
• Adjusted combined ratio⁽¹⁾ of 71.4%, compared to 70.7%, in the fourth quarter of 2021
• Annualized return on equity of 19.9%, compared to 17.2% in the fourth quarter of 2021
• Annualized adjusted return on equity⁽¹⁾ of 22.4%, compared to 18.2% in the fourth quarter of 2021

Full Year 2022 Highlights

• Gross written premiums increased by 64.8% to $881.9 million compared to $535.2 million in 2021
• Net income of $52.2 million, compared to $45.8 million in 2021
• Adjusted net income⁽¹⁾ of $71.3 million, compared to $52.4 million in 2021
• Total loss ratio of 24.9%, compared to 17.7% in 2021
• Combined ratio of 80.4%, compared to 80.0% in 2021
• Adjusted combined ratio⁽¹⁾ of 75.6%, compared to 76.1% in 2021
• Return on equity of 13.4%, compared to 12.1% in 2021
• Adjusted return on equity⁽¹⁾ of 18.3%, compared to 13.8% in 2021

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

Mac Armstrong, Chairman and Chief Executive Officer, commented, “Palomar’s strong fourth quarter results are the final illustration of success in a record-setting year. During the quarter we generated nearly 60% top-line growth while also achieving strong profitability with an annualized adjusted return on equity of 22.4%. For the full year 2022, we delivered record premium growth and earnings, generating an adjusted ROE of 18.3%. The fourth quarter and full year results demonstrate further execution of Palomar 2X, our strategy to profitably grow the company, deliver predictable earnings, and achieve an ROE in excess of 20% while maintaining industry leading profit margins.”

Mr. Armstrong continued, “Looking to 2023, we expect to earn adjusted net income of $86 million to $90 million. This guidance implies 23% net income growth and an adjusted ROE of 21% at the midpoint of our expected range – a target that exceeds our PLMR 2X stated objective of 20%. We believe our guidance points to the durability of our business model as we successfully navigate the reinsurance market; execute on diversifying endeavors like PLMR-Front as well as our casualty and inland marine divisions; and invest in underwriting talent, technology and data analytics to support new and existing products.” 

Underwriting Results
Gross written premiums increased 59.5% to $239.1 million compared to $149.9 million in the fourth quarter of 2021, while net earned premiums increased 21.2% compared to the prior year’s fourth quarter.

Losses and loss adjustment expenses for the fourth quarter were $18.4 million including $16.6 million of non-catastrophe attritional losses, and $1.9 million of unfavorable catastrophe development from prior periods. The loss ratio for the quarter was 22.4%, comprised of a catastrophe loss ratio of 2.3%⁽¹⁾ and an attritional loss ratio of 20.1%, compared to a loss ratio of 15.0% during the same period last year comprised of a catastrophe loss ratio of negative 2.5% and attritional loss ratio of 17.5%.

Underwriting income⁽¹⁾ for the fourth quarter was $20.1 million resulting in a combined ratio of 75.5% compared to underwriting income of $17.0 million and a combined ratio of 75.0% during the same period last year. The Company’s adjusted underwriting income⁽¹⁾ was $23.5 million resulting in an adjusted combined ratio⁽¹⁾ of 71.4% in the fourth quarter compared to adjusted underwriting income⁽¹⁾ of $19.9 million and an adjusted combined ratio⁽¹⁾ of 70.7% during the same period last year.

Investment Results
Net investment income increased by 81.6% to $4.4 million compared to $2.4 million in the prior year’s fourth quarter. The increase was primarily due to higher yields on invested assets and a higher average balance of investments held during the three months ended December 31, 2022 due to cash generated from operations. The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.81 years at December 31, 2022. Cash and invested assets totaled $621.8 million at December 31, 2022. During the fourth quarter, the Company recorded net realized and unrealized gains of $0.8 million related to its investment portfolio as compared to realized and unrealized gains of $2.0 million in last year’s fourth quarter.

Tax Rate
The effective tax rate for the three months ended December 31, 2022 was 24.9% compared to 22.3% for the three months ended December 31, 2021. For the current quarter and prior year quarter, the Company’s income tax rate differed from the statutory rate due primarily to non-deductible executive compensation expense.

Stockholders’ Equity and Returns
Stockholders' equity was $384.8 million at December 31, 2022, compared to $394.2 million at December 31, 2021. For the three months ended December 31, 2022, the Company’s annualized return on equity was 19.9% compared to 17.2% for the same period in the prior year while adjusted return on equity⁽¹⁾ was 22.4% compared to 18.2% for the same period in the prior year. During the current quarter, the Company repurchased 222,217 shares for $11.1 million of the Company’s previously announced $100 million share repurchase authorization. As of December 31, 2022, $65.6 million remains available for future repurchases.

Full Year 2023 Outlook
For the full year 2023, the Company expects to achieve adjusted net income of $86 million to $90 million. This includes catastrophe flood losses incurred in the first quarter of approximately $2.5 million. The expected results do not include any additional catastrophe losses.

Conference Call
As previously announced, Palomar will host a conference call Thursday February 16, 2023, to discuss its fourth quarter and full year 2022 results at 12:00 p.m. (Eastern Time). The conference call can be accessed live by dialing 1-877-423-9813 or for international callers, 1-201-689-8573, and requesting to be joined to the Palomar Fourth Quarter 2022 Earnings Conference Call. A replay will be available starting at 4:00 p.m. (Eastern Time) on February 16, 2023, and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the replay is 13735679. The replay will be available until 11:59 p.m. (Eastern Time) on February 23, 2023.

Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the investor relations section of the Company’s website at http://ir.palomarspecialty.com/. The online replay will remain available for a limited time beginning immediately following the call.

About Palomar Holdings, Inc.
Palomar Holdings, Inc. is the holding company of subsidiaries Palomar Specialty Insurance Company (“PSIC”), Palomar Specialty Reinsurance Company Bermuda Ltd., Palomar Insurance Agency, Inc. and Palomar Excess and Surplus Insurance Company (“PESIC”). Palomar is an innovative insurer serving residential and commercial clients in specialty markets including the market for earthquake insurance. Palomar’s insurance subsidiaries, Palomar Specialty Insurance Company, Palomar Specialty Reinsurance Company Bermuda Ltd., and Palomar Excess and Surplus Insurance Company, have a financial strength rating of “A-” (Excellent) from A.M. Best. 
To learn more, visit PLMR.com.

Non-GAAP and Key Performance Indicators

Palomar discusses certain key performance indicators, described below, which provide useful information about the Company’s business and the operational factors underlying the Company’s financial performance.

Underwriting revenue is a non-GAAP financial measure defined as total revenue, excluding net investment income and net realized and unrealized gains and losses on investments. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of total revenue calculated in accordance with GAAP to underwriting revenue.

Underwriting income is a non-GAAP financial measure defined as income before income taxes excluding net investment income, net realized and unrealized gains and losses on investments, and interest expense. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of income before income taxes calculated in accordance with GAAP to underwriting income.

Adjusted net income is a non-GAAP financial measure defined as net income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact. Palomar calculates the tax impact only on adjustments which would be included in calculating the Company’s income tax expense using the estimated tax rate at which the company received a deduction for these adjustments. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of net income calculated in accordance with GAAP to adjusted net income.

Annualized Return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.

Annualized adjusted return on equity is a non-GAAP financial measure defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of return on equity calculated using unadjusted GAAP numbers to adjusted return on equity.

Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses, to net earned premiums.

Expense ratio, expressed as a percentage, is the ratio of acquisition and other underwriting expenses, net of commission and other income to net earned premiums.

Combined ratio is defined as the sum of the loss ratio and the expense ratio. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.

Adjusted combined ratio is a non-GAAP financial measure defined as the sum of the loss ratio and the expense ratio calculated excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of combined ratio calculated using unadjusted GAAP numbers to adjusted combined ratio.

Diluted adjusted earnings per share is a non-GAAP financial measure defined as adjusted net income divided by the weighted-average common shares outstanding for the period, reflecting the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of diluted earnings per share calculated in accordance with GAAP to diluted adjusted earnings per share.

Catastrophe loss ratio is a non-GAAP financial measure defined as the ratio of catastrophe losses to net earned premiums. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of loss ratio calculated using unadjusted GAAP numbers to catastrophe loss ratio.

Adjusted combined ratio excluding catastrophe losses is a non-GAAP financial measure defined as adjusted combined ratio excluding the impact of catastrophe losses.  See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of combined ratio calculated using unadjusted GAAP numbers to adjusted combined ratio excluding catastrophe losses.

Adjusted underwriting income is a non-GAAP financial measure defined as underwriting income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of income before income taxes calculated in accordance with GAAP to adjusted underwriting income.

Tangible stockholders’ equity is a non-GAAP financial measure defined as stockholders’ equity less intangible assets. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of stockholders’ equity calculated in accordance with GAAP to tangible stockholders’ equity.

Safe Harbor Statement
Palomar cautions you that statements contained in this press release may regard matters that are not historical facts but are forward-looking statements. These statements are based on the company’s current beliefs and expectations. The inclusion of forward-looking statements should not be regarded as a representation by Palomar that any of its plans will be achieved. Actual results may differ from those set forth in this press release due to the risks and uncertainties inherent in the Company’s business. The forward-looking statements are typically, but not always, identified through use of the words "believe," "expect," "enable," "may," "will," "could," "intends," "estimate," "anticipate," "plan," "predict," "probable," "potential," "possible," "should," "continue," and other words of similar meaning. Actual results could differ materially from the expectations contained in forward-looking statements as a result of several factors, including unexpected expenditures and costs, unexpected results or delays in development and regulatory review, regulatory approval requirements, the frequency and severity of adverse events and competitive conditions. These and other factors that may result in differences are discussed in greater detail in the Company's filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Contact
Media Inquiries 
Lindsay Conner 
1-551-206-6217 
lconner@plmr.com 

Investor Relations
Jamie Lillis
1-203-428-3223
investors@plmr.com
Source: Palomar Holdings, Inc.

Summary of Operating Results:

The following table summarizes the Company’s results for the three months ended December 31, 2022 and 2021:

		Three months ended
		December 31,												Percent
		2022				2021				Change				Change
		($ in thousands, except per share data)
Gross written premiums		$	239,117			$	149,908			$	89,209			59.5		%
Ceded written premiums			(150,466	)			(70,437	)			(80,029	)		113.6		%
Net written premiums			88,651				79,471				9,180			11.6		%
Net earned premiums			82,228				67,840				14,388			21.2		%
Commission and other income			1,143				872				271			31.1		%
Total underwriting revenue(1)			83,371				68,712				14,659			21.3		%
Losses and loss adjustment expenses			18,421				10,169				8,252			81.1		%
Acquisition expenses			26,843				27,284				(441	)		(1.6	)	%
Other underwriting expenses			17,986				14,285				3,701			25.9		%
Underwriting income(1)			20,121				16,974				3,147			18.5		%
Interest expense			(398	)			(40	)			(358	)		NM
Net investment income			4,415				2,431				1,984			81.6		%
Net realized and unrealized (losses) gains on investments			841				2,029				(1,188	)		(58.6	)	%
Income before income taxes			24,979				21,394				3,585			16.8		%
Income tax expense			6,219				4,762				1,457			30.6		%
Net income		$	18,760			$	16,632			$	2,128			12.8		%
Adjustments:
Net realized and unrealized losses (gains) on investments(2)			(841	)			(2,029	)			1,188			(58.6	)	%
Expenses associated with transactions			—				153				(153	)		(100.0	)	%
Stock-based compensation expense			3,068				2,214				854			38.6		%
Amortization of intangibles			313				547				(234	)		(42.8	)	%
Expenses associated with catastrophe bond, net of rebate			—				5				(5	)		(100.0	)	%
Tax impact			(214	)			76				(290	)		(381.6	)	%
Adjusted net income(1) (2)		$	21,086			$	17,598			$	3,488			19.8		%
Key Financial and Operating Metrics
Annualized return on equity			19.9		%		17.2		%
Annualized adjusted return on equity(1)			22.4		%		18.2		%
Loss ratio			22.4		%		15.0		%
Expense ratio			53.1		%		60.0		%
Combined ratio			75.5		%		75.0		%
Adjusted combined ratio(1)			71.4		%		70.7		%
Diluted earnings per share		$	0.73			$	0.64
Diluted adjusted earnings per share(1)		$	0.82			$	0.68
Catastrophe losses		$	1,865			$	(1,704	)
Catastrophe loss ratio(1)			2.3		%		(2.5	)	%
Adjusted combined ratio excluding catastrophe losses(1)			69.2		%		73.2		%
Adjusted underwriting income(1)		$	23,502			$	19,893			$	3,609			18.1		%
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.

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

The following table summarizes the Company’s results for the year ended December 31, 2022 and 2021:

		Year ended
		December 31,												Percent
		2022				2021				Change				Change
		($ in thousands, except per share data)
Gross written premiums		$	881,868			$	535,175			$	346,693			64.8		%
Ceded written premiums			(524,575	)			(223,443	)			(301,132	)		134.8		%
Net written premiums			357,293				311,732				45,561			14.6		%
Net earned premiums			316,466				233,826				82,640			35.3		%
Commission and other income			4,272				3,608				664			18.4		%
Total underwriting revenue(1)			320,738				237,434				83,304			35.1		%
Losses and loss adjustment expenses			78,672				41,457				37,215			89.8		%
Acquisition expenses			110,771				95,433				15,338			16.1		%
Other underwriting expenses			69,219				53,723				15,496			28.8		%
Underwriting income(1)			62,076				46,821				15,255			32.6		%
Interest expense			(873	)			(40	)			(833	)		NM
Net investment income			13,877				9,080				4,797			52.8		%
Net realized and unrealized (losses) gains on investments			(7,529	)			1,277				(8,806	)		NM
Income before income taxes			67,551				57,138				10,413			18.2		%
Income tax expense			15,381				11,291				4,090			36.2		%
Net income		$	52,170			$	45,847			$	6,323			13.8		%
Adjustments:
Net realized and unrealized losses (gains) on investments(2)			7,529				(1,277	)			8,806			NM
Expenses associated with transactions			130				563				(433	)		(76.9	)	%
Stock-based compensation expense			11,624				5,584				6,040			108.2		%
Amortization of intangibles			1,255				1,251				4			0.3		%
Expenses associated with catastrophe bond, net of rebate			1,992				1,704				288			16.9		%
Tax impact			(3,366	)			(1,238	)			(2,128	)		171.9		%
Adjusted net income(1) (2)		$	71,334			$	52,434			$	18,900			36.0		%
Key Financial and Operating Metrics
Return on equity			13.4		%		12.1		%
Adjusted return on equity(1)			18.3		%		13.8		%
Loss ratio			24.9		%		17.7		%
Expense ratio			55.5		%		62.2		%
Combined ratio			80.4		%		80.0		%
Adjusted combined ratio(1)			75.6		%		76.1		%
Diluted earnings per share		$	2.02			$	1.76
Diluted adjusted earnings per share(1)		$	2.77			$	2.01
Catastrophe losses		$	15,394			$	5,015
Catastrophe loss ratio(1)			4.9		%		2.1		%
Adjusted combined ratio excluding catastrophe losses(1)			70.8		%		73.9		%
Adjusted underwriting income(1)		$	77,077			$	55,923			$	21,154			37.8		%
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)

		December 31,				December 31,
		2022				2021
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $561,580 in 2022; $426,122 in 2021)		$	515,064			$	432,682
Equity securities, at fair value (cost: $42,352 in 2022; $31,834 in 2021)			38,576				33,261
Total investments			553,640				465,943
Cash and cash equivalents			68,108				50,284
Restricted cash			56				87
Accrued investment income			3,777				2,725
Premium receivable			159,025				88,012
Deferred policy acquisition costs			56,740				55,953
Reinsurance recoverable on paid losses and loss adjustment expenses			35,425				29,368
Reinsurance recoverable on unpaid losses and loss adjustment expenses			153,895				127,947
Ceded unearned premiums			204,084				58,315
Prepaid expenses and other assets			44,582				37,072
Deferred tax assets, net			10,622				—
Property and equipment, net			603				527
Intangible assets, net			8,261				9,501
Total assets		$	1,298,818			$	925,734
Liabilities and stockholders' equity
Liabilities:
Accounts payable and other accrued liabilities		$	25,760			$	21,284
Reserve for losses and loss adjustment expenses			231,415				173,366
Unearned premiums			471,314				284,665
Ceded premium payable			138,495				37,460
Funds held under reinsurance treaty			10,680				10,882
Deferred tax liabilities, net			—				3,908
Borrowings from credit agreements			36,400				—
Total liabilities			914,064				531,565
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized as of December 31, 2022 and December 31, 2021, 0 shares issued and outstanding as of December 31, 2022 and December 31, 2021			—				—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 25,027,467 and 25,428,929 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively			3				3
Additional paid-in capital			333,557				318,902
Accumulated other comprehensive income			(36,514	)			5,312
Retained earnings			87,708				69,952
Total stockholders' equity			384,754				394,169
Total liabilities and stockholders' equity		$	1,298,818			$	925,734

Condensed Consolidated Income Statement

Palomar Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)

(in thousands, except shares and per share data)

		Three Months Ended								Year Ended
		December 31,								December 31,
		2022				2021				2022				2021
Revenues:
Gross written premiums		$	239,117			$	149,908			$	881,868			$	535,175
Ceded written premiums			(150,466	)			(70,437	)			(524,575	)			(223,443	)
Net written premiums			88,651				79,471				357,293				311,732
Change in unearned premiums			(6,423	)			(11,631	)			(40,827	)			(77,906	)
Net earned premiums			82,228				67,840				316,466				233,826
Net investment income			4,415				2,431				13,877				9,080
Net realized and unrealized (losses) gains on investments			841				2,029				(7,529	)			1,277
Commission and other income			1,143				872				4,272				3,608
Total revenues			88,627				73,172				327,086				247,791
Expenses:
Losses and loss adjustment expenses			18,421				10,169				78,672				41,457
Acquisition expenses			26,843				27,284				110,771				95,433
Other underwriting expenses			17,986				14,285				69,219				53,723
Interest expense			398				40				873				40
Total expenses			63,648				51,778				259,535				190,653
Income before income taxes			24,979				21,394				67,551				57,138
Income tax expense			6,219				4,762				15,381				11,291
Net income			18,760				16,632				52,170				45,847
Other comprehensive income, net:
Net unrealized (losses) gains on securities available for sale for the three months and years ended December 31, 2022 and 2021, respectively			6,114				(2,790	)			(41,827	)			(7,934	)
Net comprehensive income		$	24,874			$	13,842			$	10,343			$	37,913
Per Share Data:
Basic earnings per share		$	0.74			$	0.65			$	2.07			$	1.80
Diluted earnings per share		$	0.73			$	0.64			$	2.02			$	1.76
Weighted-average common shares outstanding:
Basic			25,199,074				25,419,477				25,243,397				25,459,514
Diluted			25,729,681				26,045,213				25,796,008				26,111,904

Underwriting Segment Data

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

		Three Months Ended December 31,												Year Ended December 31,
		2022						2021						2022					2021
		($ in thousands)												($ in thousands)
						% of					% of						% of					% of
		Amount				GWP		Amount			GWP			Amount			GWP		Amount			GWP
Product
Fronting		$	69,003			28.9	%	$	11,459		7.7	%		$	223,249		25.3	%	$	11,459		2.2	%
Residential Earthquake			53,808			22.5	%		42,883		28.6	%			213,803		24.2	%		171,048		32.0	%
Commercial Earthquake			40,782			17.1	%		24,500		16.3	%			131,677		14.9	%		90,552		16.9	%
Inland Marine			32,855			13.7	%		18,077		12.1	%			105,068		11.9	%		57,124		10.7	%
Commercial All Risk			10,025			4.2	%		8,609		5.7	%			51,671		5.9	%		38,640		7.2	%
Casualty			10,078			4.2	%		4,080		2.7	%			35,791		4.1	%		9,584		1.9	%
Hawaii Hurricane			8,388			3.5	%		7,377		4.9	%			32,967		3.7	%		30,298		5.6	%
Residential Flood			4,089			1.7	%		3,218		2.2	%			14,539		1.7	%		11,652		2.2	%
Specialty Homeowners			(108	)		—	%		14,875		9.9	%			29,959		3.4	%		67,894		12.7	%
Other			10,197			4.2	%		14,830		9.9	%			43,144		4.9	%		46,924		8.6	%
Total Gross Written Premiums		$	239,117			100.0	%	$	149,908		100.0	%		$	881,868		100.0	%	$	535,175		100.0	%

		Three Months Ended December 31,												Year Ended December 31,
		2022						2021						2022					2021
		($ in thousands)												($ in thousands)
						% of					% of						% of					% of
		Amount				GWP		Amount			GWP			Amount			GWP		Amount			GWP
State
California		$	128,490			53.7	%	$	63,956		42.7	%		$	418,809		47.5	%	$	244,416		45.6	%
Texas			18,960			7.9	%		14,729		9.8	%			90,459		10.3	%		62,893		11.8	%
Washington			12,436			5.2	%		7,671		5.1	%			41,827		4.7	%		23,608		4.4	%
Florida			11,499			4.8	%		8,407		5.6	%			38,715		4.4	%		27,386		5.1	%
Hawaii			10,428			4.4	%		8,680		5.8	%			40,157		4.5	%		34,993		6.5	%
Oregon			7,625			3.2	%		3,991		2.7	%			24,108		2.7	%		13,677		2.6	%
Illinois			4,215			1.8	%		3,465		2.3	%			17,368		2.0	%		12,133		2.3	%
New York			4,109			1.7	%		1,790		1.2	%			12,510		1.4	%		3,077		0.6	%
Other			41,355			17.3	%		37,219		24.8	%			197,915		22.5	%		112,992		21.1	%
Total Gross Written Premiums		$	239,117			100.0	%	$	149,908		100.0	%		$	881,868		100.0	%	$	535,175		100.0	%

		Three Months Ended December 31,												Year Ended December 31,
		2022						2021						2022					2021
		($ in thousands)												($ in thousands)
						% of					% of						% of					% of
		Amount				GWP		Amount			GWP			Amount			GWP		Amount			GWP
Subsidiary
PSIC		$	132,562			55.4	%	$	97,074		64.8	%		$	489,720		55.5	%	$	383,064		71.6	%
PESIC			106,555			44.6	%		52,834		35.2	%			392,148		44.5	%		152,111		28.4	%
Total Gross Written Premiums		$	239,117			100.0	%	$	149,908		100.0	%		$	881,868		100.0	%	$	535,175		100.0	%

Gross and net earned premiums

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

		Three Months Ended															Year Ended
		December 31,															December 31,
		2022				2021				Change				% Change			2022				2021				Change				% Change
		($ in thousands)															($ in thousands)
Gross earned premiums		$	211,267			$	122,910			$	88,357			71.9	%		$	695,272			$	433,999			$	261,273			60.2	%
Ceded earned premiums			(129,039	)			(55,070	)			(73,969	)		134.3	%			(378,806	)			(200,173	)			(178,633	)		89.2	%
Net earned premiums		$	82,228			$	67,840			$	14,388			21.2	%		$	316,466			$	233,826			$	82,640			35.3	%
Net earned premium ratio			38.9%				55.2%											45.5%				53.9%

Loss detail

		Three Months Ended														Year Ended
		December 31,														December 31,
		2022			2021				Change			% Change				2022			2021			Change			% Change
		($ in thousands)														($ in thousands)
Catastrophe losses		$	1,865		$	(1,704	)		$	3,569		(209.4	)	%		$	15,394		$	5,015		$	10,379		207.0	%
Non-catastrophe losses			16,556			11,873				4,683		39.4		%			63,278			36,442			26,836		73.6	%
Total losses and loss adjustment expenses		$	18,421		$	10,169			$	8,252		81.1		%		$	78,672		$	41,457		$	37,215		89.8	%

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

		Three Months Ended December 31,								Year ended December 31,
		2022				2021				2022				2021
		(in thousands)								(in thousands)
Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period		$	74,248			$	46,643			$	45,419			$	34,470
Add: Incurred losses and loss adjustment expenses, net of reinsurance, related to:
Current year			16,384				10,840				75,087				45,042
Prior years			2,037				(671	)			3,585				(3,585	)
Total incurred			18,421				10,169				78,672				41,457
Deduct: Loss and loss adjustment expense payments, net of reinsurance, related to:
Current year			7,896				8,656				21,658				12,063
Prior years			7,253				2,737				24,913				18,445
Total payments			15,149				11,393				46,571				30,508
Reserve for losses and loss adjustment expense net of reinsurance recoverables at end of period			77,520				45,419				77,520				45,419
Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period			153,895				127,947				153,895				127,947
Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period		$	231,415			$	173,366			$	231,415			$	173,366

Reconciliation of Non-GAAP Financial Measures

For the three months and year ended December 31, 2022 and 2021, the Non-GAAP financial measures discussed above reconcile to their most comparable GAAP measures as follows:

Underwriting revenue

		Three Months Ended								Year Ended
		December 31,								December 31,
		2022				2021				2022				2021
		(in thousands)								(in thousands)
Total revenue		$	88,627			$	73,172			$	327,086			$	247,791
Net investment income			(4,415	)			(2,431	)			(13,877	)			(9,080	)
Net realized and unrealized losses (gains) on investments			(841	)			(2,029	)			7,529				(1,277	)
Underwriting revenue		$	83,371			$	68,712			$	320,738			$	237,434

Underwriting income and adjusted underwriting income

		Three Months Ended								Year Ended
		December 31,								December 31,
		2022				2021				2022				2021
		(in thousands)								(in thousands)
Income before income taxes		$	24,979			$	21,394			$	67,551			$	57,138
Net investment income			(4,415	)			(2,431	)			(13,877	)			(9,080	)
Net realized and unrealized losses (gains) on investments			(841	)			(2,029	)			7,529				(1,277	)
Interest expense			398				40				873				40
Underwriting income		$	20,121			$	16,974			$	62,076			$	46,821
Expenses associated with transactions			—				153				130				563
Stock-based compensation expense			3,068				2,214				11,624				5,584
Amortization of intangibles			313				547				1,255				1,251
Expenses associated with catastrophe bond, net of rebate			—				5				1,992				1,704
Adjusted underwriting income		$	23,502			$	19,893			$	77,077			$	55,923

Adjusted net income

		Three Months Ended								Year Ended
		December 31,								December 31,
		2022				2021				2022				2021
		(in thousands)								(in thousands)
Net income		$	18,760			$	16,632			$	52,170			$	45,847
Adjustments:
Net realized and unrealized losses (gains) on investments			(841	)			(2,029	)			7,529				(1,277	)
Expenses associated with transactions			—				153				130				563
Stock-based compensation expense			3,068				2,214				11,624				5,584
Amortization of intangibles			313				547				1,255				1,251
Expenses associated with catastrophe bond			—				5				1,992				1,704
Tax impact			(214	)			76				(3,366	)			(1,238	)
Adjusted net income		$	21,086			$	17,598			$	71,334			$	52,434

Annualized adjusted return on equity

		Three Months Ended							Year Ended
		December 31,							December 31,
		2022			2021				2022			2021
		($ in thousands)							($ in thousands)
Annualized adjusted net income		$	84,344		$	70,392			$	71,334		$	52,434
Average stockholders' equity		$	376,299		$	385,973			$	389,461		$	378,941
Annualized adjusted return on equity			22.4	%		18.2	%			18.3	%		13.8	%

Adjusted combined ratio

		Three Months Ended									Year Ended
		December 31,									December 31,
		2022				2021					2022				2021
		($ in thousands)									($ in thousands)
Numerator: Sum of losses, loss adjustment expenses, underwriting, acquisition and other underwriting expenses, net of commission and other income		$	62,107			$	50,866				$	254,390			$	187,005
Denominator: Net earned premiums		$	82,228			$	67,840				$	316,466			$	233,826
Combined ratio			75.5		%		75.0		%			80.4		%		80.0		%
Adjustments to numerator:
Expenses associated with transactions		$	—			$	(153	)			$	(130	)		$	(563	)
Stock-based compensation expense			(3,068	)			(2,214	)				(11,624	)			(5,584	)
Amortization of intangibles			(313	)			(547	)				(1,255	)			(1,251	)
Expenses associated with catastrophe bond			—				(5	)				(1,992	)			(1,704	)
Adjusted combined ratio			71.4		%		70.7		%			75.6		%		76.1		%

Diluted adjusted earnings per share

		Three Months Ended							Year Ended
		December 31,							December 31,
		2022			2021				2022			2021
		( in thousands, except shares and per share data)							( in thousands, except shares and per share data)
Adjusted net income		$	21,086		$	17,598			$	71,334		$	52,434
Weighted-average common shares outstanding, diluted			25,729,681			26,045,213				25,796,008			26,111,904
Diluted adjusted earnings per share		$	0.82		$	0.68			$	2.77		$	2.01

Catastrophe loss ratio

		Three Months Ended								Year Ended
		December 31,								December 31,
		2022			2021					2022			2021
		($ in thousands)								($ in thousands)
Numerator: Losses and loss adjustment expenses		$	18,421		$	10,169				$	78,672		$	41,457
Denominator: Net earned premiums		$	82,228		$	67,840				$	316,466		$	233,826
Loss ratio			22.4	%		15.0		%			24.9	%		17.7	%
Numerator: Catastrophe losses		$	1,865		$	(1,704	)			$	15,394		$	5,015
Denominator: Net earned premiums		$	82,228		$	67,840				$	316,466		$	233,826
Catastrophe loss ratio			2.3	%		(2.5	)	%			4.9	%		2.1	%

Adjusted combined ratio excluding catastrophe losses

		Three Months Ended									Year ended
		December 31,									December 31,
		2022				2021					2022				2021
		($ in thousands)									($ in thousands)
Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income		$	62,107			$	50,866				$	254,390			$	187,005
Denominator: Net earned premiums		$	82,228			$	67,840				$	316,466			$	233,826
Combined ratio			75.5		%		75.0		%			80.4		%		80.0		%
Adjustments to numerator:
Expenses associated with transactions		$	—			$	(153	)			$	(130	)		$	(563	)
Stock-based compensation expense			(3,068	)			(2,214	)				(11,624	)			(5,584	)
Amortization of intangibles			(313	)			(547	)				(1,255	)			(1,251	)
Expenses associated with catastrophe bond			—				(5	)				(1,992	)			(1,704	)
Catastrophe losses			(1,865	)			1,704					(15,394	)			(5,015	)
Adjusted combined ratio excluding catastrophe losses			69.2		%		73.2		%			70.8		%		73.9		%

Tangible Stockholders’ equity

		December 31,
		2022				2021
		(in thousands)
Stockholders’ equity		$	384,754			$	394,169
Intangible assets			(8,261	)			(9,501	)
Tangible stockholders’ equity		$	376,493			$	384,668