U.S. insurer Palomar Holdings, Inc. recorded an increase in net income for the fourth-quarter of 2019 when compared with the same period in 2018, while premiums grew by a huge 68.4% in the quarter.
Net income of $10.9 million in the fourth-quarter represents growth of almost 164% when compared with the same period in 2018, while adjusted net income jumped from $4.6 million to $11.5 million.
Palomar’s gross written premiums (GWP) witnessed a substantial year-on-year increase in Q4 2019, reaching $73.3 million, versus $43.5 million in Q4 2018. For the full year, GWP spiked by almost 63% to a significant $252 million, and the firm attributes the expansion to solid growth in both earthquake and non-earthquake products.
At $11.4 million, Palomar’s underwriting income improved year-on-year and resulted in a combined ratio of 63.1%, compared with underwriting income of $7.1 million and a combined ratio of 59.9% for the same period in 2018.
The insurer’s losses and loss adjustment expenses in the fourth-quarter of 2019 reached $2.2 million, resulting in a loss ratio of 7.1%. Palomar states that loss activity in the period was mostly driven by a combination of attritional losses in the U.S., modest development from named storms that took place in Q3 2019, and also windstorm exposure in Japan through its assumed reinsurance portfolio.
Also included in the company’s fourth-quarter result is $0.1 million of unfavourable prior year development.
Net investment income also had a greater contribution for the firm in the fourth-quarter, rising by almost 76% to $1.8 million.
Mac Armstrong, the company’s Chief Executive Officer (CEO) and Founder, commented: “Over the course of 2019, Palomar executed on its mission to build a diversified book of specialty property business. We remained acutely focused on developing a suite of distinctive and flexible products delivered via an easy to use and scalable platform that incorporates an analytics-driven underwriting and risk transfer framework.
“Our results over this past quarter and for the full year of 2019 demonstrate that we are making progress on our mission and that our products are well-received by the market. The 64.9% year-over-year growth of our earthquake products for the full year of 2019 speaks to the exciting ongoing opportunity in a market where we continue to gain traction and increasingly play a leadership role. The 58.3% growth of our non-earthquake products in 2019 validates that our strategy is exportable to other segments of the specialty property market.
“Additionally, we were pleased to see 106.1% growth in 2019 for our commercial lines offerings, which now comprise 28.9% of total written premium, as we capitalized on expanded distribution, new products and an attractive rate environment.
“Ultimately, we are most proud of the strong bottom line results we generated in 2019; specifically, the adjusted combined ratio of 63.3% and the adjusted return on equity of 24.1%”
For the full year 2019, the insurer’s net income actually declined by almost 42% to $10.6 million, while its adjusted net income jumped by more than 91% to $37.9 million.
The total loss ratio for 2019 was 5.6% versus 9% a year earlier. For the full year 2019, Palomar has recorded a combined ratio of 91.3%, which is weaker than the 71.6% posted in 2018.
“We are as energized as ever about the prospects of Palomar and we truly believe we are in the early phases of our strategic mission. The growth of our capital base and the refinement and expansion of our underwriting appetite each enhance the value we bring to our distribution and carrier partners. We believe our expanding distribution footprint, coupled with strong premium retention bolstered by a healthy rate environment, will drive continued growth in our existing lines of business.
“At the same time, we remain dedicated to entering new markets and lines of business that have commonalities with our current product suite and have the potential to generate attractive returns. Lastly, we remain laser-focused on understanding and managing our exposure at an individual risk and portfolio level.
“The successful renewal and expansion of our reinsurance program at January 1 is not only an endorsement of our emphasis on risk management but also will allow us to continue to grow the business in a responsible and predictable fashion,” said Armstrong.
The firm announced at the end of last year that it had successfully renewed approximately $300 million of its core reinsurance program, while also purchasing $145 million of incremental limit.
Looking forward, and the company notes that it expects to achieve adjusted net income of between $50.5 million to $53 million for the full year 2020, which amounts to a growth rate of 33% to 40%.
