On August 5, 2024, Palomar Holdings Inc (PLMR, Financial) released its 8-K filing reporting impressive financial results for the second quarter of 2024. The company, which specializes in providing specialty property insurance products such as earthquake, wind, and flood insurance, demonstrated significant growth in both revenue and net income, surpassing analyst estimates.
Company Overview
Palomar Holdings Inc is a United States-based company focused on the provision of specialty property insurance products. The company's core focus is on the residential and commercial earthquake markets in earthquake-exposed states such as California, Oregon, Washington, and states with exposure to the New Madrid Seismic Zone. It offers specialty property insurance products to both individuals and businesses through multiple channels, including retail agents, program administrators, wholesale brokers, and in partnership with other insurance companies. Its products include Residential Earthquake, Commercial Earthquake, Specialty Homeowners, Inland Marine, Commercial All Risk, Hawaii Hurricane, Residential Flood, and others.
Performance Highlights
Palomar Holdings Inc reported net income of $25.7 million, or $1.00 per diluted share, for the second quarter of 2024, compared to $17.6 million, or $0.69 per diluted share, for the same period in 2023. Adjusted net income was $32.0 million, or $1.25 per diluted share, compared to $21.8 million, or $0.86 per diluted share, for the second quarter of 2023. These results exceeded analyst estimates of $0.99 earnings per share and $122.3 million in revenue.
Underwriting and Investment Results
Gross written premiums increased by 40.4% to $385.2 million compared to $274.3 million in the second quarter of 2023. Net earned premiums rose by 47.1% year-over-year. The company reported losses and loss adjustment expenses of $30.4 million, with a loss ratio of 24.9%, up from 21.5% in the same period last year. Underwriting income for the second quarter was $25.6 million, resulting in a combined ratio of 79.1%.
Net investment income increased by 43.7% to $8.0 million, primarily due to higher yields on invested assets and a higher average balance of investments held during the quarter.
Financial Achievements
Palomar Holdings Inc's stockholders' equity was $532.6 million at June 30, 2024, compared to $413.7 million at June 30, 2023. The company's annualized return on equity was 19.9%, while the adjusted return on equity was 24.7%. These metrics highlight the company's strong financial position and its ability to generate significant returns for its shareholders.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 | Change | % Change |
|---|---|---|---|---|
| Gross Written Premiums | $385.2 million | $274.3 million | $110.9 million | 40.4% |
| Net Earned Premiums | $122.3 million | $83.1 million | $39.2 million | 47.1% |
| Net Income | $25.7 million | $17.6 million | $8.1 million | 46.5% |
| Adjusted Net Income | $32.0 million | $21.8 million | $10.2 million | 46.7% |
| Net Investment Income | $8.0 million | $5.5 million | $2.5 million | 43.7% |
Commentary
"I am very pleased with our second quarter results as we achieved record gross written premium and adjusted net income during the quarter. Additionally, our profitable growth remained robust with gross written premium and adjusted net income increasing 40% and 47%, respectively, year-over-year," said Mac Armstrong, Chairman and Chief Executive Officer.
Analysis
Palomar Holdings Inc's strong performance in the second quarter of 2024 is a testament to its effective business strategy and robust market position. The significant increase in gross written premiums and net income indicates the company's ability to capture market share and generate substantial revenue growth. The improvement in investment income further strengthens its financial stability.
However, the increase in the loss ratio suggests that the company faces challenges related to higher claims expenses, which could impact profitability if not managed effectively. Nonetheless, the company's strong underwriting income and combined ratio below 100% indicate a profitable underwriting business.
Overall, Palomar Holdings Inc's Q2 2024 results demonstrate its strong financial health and growth potential, making it an attractive option for value investors seeking exposure to the specialty property insurance market.
Explore the complete 8-K earnings release (here) from Palomar Holdings Inc for further details.
