California-based Palomar Holdings, Inc., has reported an increase in its gross written premiums (GWP) of 66.2% to $253.1 million for the third quarter of 2022, compared to $152.3 million reported in the same period last year.
Palomar’s net income also saw a rise this quarter, to $4.3 million compared to $0.2 million in the third quarter of 2021. Additionally, the firm’s underwriting income was $4.1 million resulting in an improved combined ratio saw of 94.8%, compared to 102.8% in Q3 2021.
According to the firm, losses and loss adjustment expenses for the third quarter were $30.9 million including $18.4 million of non-catastrophe attritional losses, and $12.5 million of catastrophe losses from Hurricane Ian.
This year’s third quarter catastrophe loss results also include a full retention loss from Hurricane Ian, Palomar added. The expected losses from Ian also result in additional ceded reinsurance premium of $3.1 million, with $1.3 million recognized in the third quarter of 2022 and the remaining $1.8 million recognized over the remaining term of the June 1, 2022 reinsurance treaty, said the firm.
Palomar’s non-catastrophe losses and loss ratio increased mainly due to the growth of lines of business subject to attritional losses, such as Inland Marine, Casualty, and Commercial All Risk.
The attritional loss ratio for the quarter was modestly higher than the annualised loss ratio the firm previously targeted. Higher than projected premium from new lines of business central to the success of Palomar 2X contributed to the loss totals.
Additionally, approximately $5.3 million or 29% of the losses for the quarter were from lines of business in runoff or restructured.
Mac Armstrong, Chairman and Chief Executive Officer, commented, “I am very proud of our third quarter results as they are a further testament to our commitment to profitable growth and our execution of Palomar 2X – our intermediate term strategic plan of doubling our adjusted underwriting income while achieving a 20% adjusted return on equity.
“We grew the gross written premium of the business by 66%, and despite incurring a full retention loss from Hurricane Ian, we generated an adjusted ROE of 10% when adding back realised and unrealized gains and losses from our investment portfolio. The quarter’s results validate the resilience of our model as the business grew adjusted net income by 328% from the prior year.”
“Ian will go down as a historic storm and our thoughts and prayers are with all of those impacted by the storm. From a business perspective, we are pleased that our losses should under index the industry due to the underwriting actions we’ve implemented over the last few years that have meaningfully reduced our continental hurricane exposure.”
He added: “The growing contributions in the quarter of our newer business lines such as inland marine and casualty have further catalysed Palomar 2X. While our results led to a modestly higher attritional loss ratio than plan, it is worth noting that 29% of these attritional losses were from lines of business that we have exited or restructured. As such, we at Palomar strongly feel that our third quarter performance demonstrates our sustained execution of Palomar 2X and we believe we are well-positioned for further profitable growth over the remainder of 2022 and into 2023.”
