LA JOLLA – Palomar Holdings (Nasdaq: PLMR) has reported a strong second quarter for fiscal year 2024, with a net income of $25.7 million, a 37% increase compared to $17.6 million in the second quarter of 2023.
The company also has announced plans to acquire First Indemnity of America Insurance Co., a subsidiary of ABSCO Ltd. Palomar Holdings is offering up to 1.38 million shares of common stock at $88 each in an underwritten public offering, which could generate about $121.4 million toward the acquisition.
CEO
Palomar Holdings
“I am very pleased with our second quarter results as we achieved record gross written premium and adjusted net income during the quarter and put ourselves in a position to accomplish the inaugural Palomar 2X goal of doubling 2021’s adjusted underwriting income in three years,” Chairman and CEO Mac Armstrong said in the Aug. 5 earnings report. “Our profitable growth remains robust with gross written premium and adjusted net income increasing 40% and 47% respectively, year-over-year.”
In dollars, gross written premiums increased from $274.3 million in the second quarter to $385.2 million in 2023.
Palomar Holdings is the parent and insurance holding company of its operating subsidiaries, Palomar Specialty Insurance Company, Palomar Specialty Reinsurance Company Bermuda Ltd., Palomar Insurance Agency, Inc. and Palomar Excess and Surplus Insurance Company.
Robust Second Quarter
Adjusted net income for the second quarter that ended June 30 was $32 million, or $1.25 per diluted share, compared to $21.8 million, or $0.86 per diluted share, for the second quarter of 2023.
Net investment income increased by 43.7% to $8 million compared to $5.5 million in the 2023 second quarter.
Cash and invested assets totaled $777.9 million at the quarter’s end. Armstrong said the strong financial results were a result of a host of associated accomplishments and the company’s four strategic imperatives: grow where we want, manage dislocation and diversification, provide consistent earnings and scale of the organization.
“Our first imperative is centered on achieving strong premium growth across the portfolio with an emphasis on those segments that generate the s trongest risk-adjusted returns,” he said. “Our top line growth of 40% was driven by solid execution across the book of business, highlighted by our earthquake franchise, which saw an acceleration in its year-over-year growth rate from the first quarter and the continued strong growth in our casualty book.”
The second imperative required navigating and managing the dislocation in the market while further diversifying, and the third was what Armstrong called “a steadfast commitment to the delivery of consistent earnings.”
Having achieved a net income growth of 47% in Q2, Armstrong said the company is able to raise its guidance for the fifth consecutive quarter. For the full year, the previous adjusted net income guidance of $122 million to $128 million is now $124 million to $130 million.
“The fourth imperative is scaling the organization and making the requisite investments to accomplish Palomar 2X,” Armstrong said. “This effort starts with an investment in people, and I’m proud to say that we’ve recruited industry-leading talent to join the Palomar team this quarter.”
Those new hires include Tim Carter from LPL Financial to be the company’s chief people officer and Rudy Herve from Score to be the new chief operating officer.
Acquiring First Indemnity of America
Palomar Holdings has signed an agreement to acquire First Indemnity of America (FIA), a New Jersey-based insurance carrier that specializes in the underwriting of contract surety bonds for small- to medium-sized contractors, primarily in the Northeast United States.
A surety bond is a three-party contract with one party, the surety, guaranteeing the performance or obligation of another party, the principal, to a third party, the obligee.
FIA writes about $10 million in premiums, is licensed in 16 states, is rated A- by the credit rating service AM Best and has an experienced team with a long track record of profitable underwriting, Armstrong said.
“Surety is a very attractive specialty insurance market that we have analyzed for several years,” Armstrong said.” Surety consistently outperforms a broader P&C (property and casualty) market in terms of combined ratios and has an underwriting cycle that does not follow the general P&C cycle.
“In an atypical fashion, we decided it made more sense to enter surety through an acquisition versus building the business from the ground up,” Armstrong continued. “We believe FIA is a great business and one that we can help grow significantly using Palomar’s capital distribution and technology resources.”
Palomar Holdings
FOUNDED: 2014
CEO: Mac Armstrong
HEADQUARTERS: La Jolla
BUSINESS: Specialty insurance
STOCK: PLMR (Nasdaq)
VALUATION: $1.1 billion (FY 2023)
EMPLOYEES: About 240
WEBSITE: https://ir.palomarspecialty.com
NOTABLE: The company has reported net income in each of the past five calendar years and has raised its guidance for the fifth straight quarter.
