On November 4, 2024, Palomar Holdings Inc (PLMR, Financial) released its 8-K filing detailing its third-quarter 2024 financial results. The company, a U.S.-based provider of specialty property insurance products, reported a significant increase in net income and premiums, despite facing higher catastrophe losses.
Company Overview
Palomar Holdings Inc focuses on providing specialty property insurance, including earthquake, wind, and flood insurance products. The company primarily serves residential and commercial markets in earthquake-prone states such as California, Oregon, and Washington, as well as areas exposed to the New Madrid Seismic Zone. Palomar distributes its products through various channels, including retail agents and wholesale brokers.
Financial Performance and Challenges
For the third quarter of 2024, Palomar Holdings Inc reported a net income of $30.5 million, or $1.15 per diluted share, surpassing the analyst estimate of $0.94 per share. This marks a substantial increase from the $18.4 million, or $0.73 per diluted share, reported in the same quarter of 2023. The company's adjusted net income also rose to $32.4 million, or $1.23 per diluted share, compared to $23.3 million, or $0.92 per diluted share, in the previous year.
Despite these achievements, Palomar faced challenges with an increased total loss ratio of 29.7%, up from 18.8% in the third quarter of 2023. The catastrophe loss ratio also rose to 9.5% from -0.6% in the prior year, primarily due to losses from Hurricanes Beryl, Debby, and Helene.
Key Financial Achievements
Palomar's gross written premiums grew by 32.2% to $415.0 million, driven by strong performance in its Earthquake and Casualty products, as well as growth in its Crop business. Net earned premiums increased by 58.1% year-over-year. The company's adjusted combined ratio, excluding catastrophe losses, improved to 67.6% from 71.5% in the previous year, indicating efficient underwriting practices.
Income Statement and Balance Sheet Highlights
Palomar's total underwriting revenue increased by 58.0% to $136.4 million, while underwriting income rose by 27.5% to $26.4 million. The company's net investment income also saw a significant increase of 56.0% to $9.4 million, attributed to higher yields and a larger average balance of investments.
| Metric | Q3 2024 | Q3 2023 | % Change |
|---|---|---|---|
| Gross Written Premiums | $414.98 million | $314.00 million | 32.2% |
| Net Earned Premiums | $135.65 million | $85.82 million | 58.1% |
| Net Income | $30.50 million | $18.43 million | 65.5% |
| Adjusted Net Income | $32.44 million | $23.29 million | 39.3% |
Analysis and Outlook
Palomar Holdings Inc's strong financial performance in Q3 2024 highlights its ability to grow premiums and income despite increased catastrophe losses. The company's strategic diversification into less correlated lines such as Crop and Surety is expected to support consistent earnings growth. With a robust capital position, evidenced by a stockholders' equity of $703.3 million, Palomar is well-positioned to capitalize on future growth opportunities.
Mac Armstrong, Chairman and CEO, stated, "I am very pleased with our third quarter results as they clearly demonstrate our successful efforts to deliver consistent earnings and returns. Our results further validate the concerted efforts that we have undertaken to diversify the business, reduce the volatility in our earnings base and profitably grow."
Palomar's effective tax rate decreased to 20.8% from 24.9% in the previous year, contributing to the improved net income. The company's annualized return on equity increased to 19.7%, reflecting its strong financial health and operational efficiency.
For the full year 2024, Palomar expects adjusted net income between $124 million and $128 million, accounting for additional catastrophe losses in the fourth quarter. This outlook underscores the company's resilience and strategic focus on growth and diversification.
Explore the complete 8-K earnings release (here) from Palomar Holdings Inc for further details.
