Specialty property insurer Palomar Holdings has returned to profit in the third quarter of 2021 with net income of $0.2 million compared with a loss of $15.7 million a year earlier, as the firm’s underwriting loss narrowed in the quarter.
During the period, Palomar has announced gross written premium (GWP) growth of almost 48%, year-on-year, to $152.3 million.
At the same time, net earned premiums spiked by 54% to $64.7 million, as ceded written premiums increased to $58.1 million.
In the third quarter, Palomar’s loss and loss adjustment expenses (LAE) hit $28.5 million owing to attritional losses of $11 million and catastrophe losses of $17.5 million, which includes the impacts of Hurricane Ida and Nicholas, the PG&E excess liability loss, partially offset by favourable prior year development.
The company’s loss ratio for the quarter was 44% and is comprised of a catastrophe loss ratio of 27% and an attritional loss ratio of 17%, compared to a loss ratio of 97.7% a year earlier.
Palomar says that non-catastrophe losses increased mostly owing to growth of lines of business subject to attritional losses such as Specialty Homeowners, Flood, and Inland Marine.
Across the firm, the underwriting result was negative at -$1.8 million for the third quarter, resulting in a combined ratio of 102.8%. This marks an improvement on the $24 million underwriting loss posted for the prior year Q3, when the combined ratio reached 157.1%.
For Palomar, net investment income increased by 4.6% to $2.2 million in the third quarter of 2021, driven primarily by a higher average balance of investments held during the period, somewhat offset by lower yields on invested assets.
Mac Armstrong, Chairman and Chief Executive Officer (CEO) of Palomar, commented: “Our third quarter results demonstrated continued execution of Palomar’s commitment to building a market leading specialty insurer.
“The quarter’s results are highlighted by year-over-year gross written premium increases of 48% most notably in our surplus lines, or E&S operation, which delivered $41.4 million of gross written premium and 22% sequential growth. Additionally, our core earthquake business grew at a healthy rate of 32% as our innovative products continued to capitalize on attractive market conditions.
“While our results reflect the impact of catastrophe losses from Hurricanes Ida and Nicholas as well as a single excess liability policy shock loss, we take solace in the fact that approximately 61% of the gross losses from these events came from discontinued lines of business and are non-recurring in nature. It is also worth noting those discontinued operations contributed 34% of our gross attritional losses in the quarter.
“Importantly, we embarked upon several initiatives during the quarter that will translate into profitable growth into 2022 and beyond. One such example is our entrance into the fronting sector of the U.S. insurance market, where we are partnering with reinsurers, insurance carriers, and managing general agents to design customized insurance programs.
“Our PLMR-FRONT initiative provides us access and deeper reach into attractive markets, high leverage of our talent and capital, and generates recurring fee income. Beyond PLMR-FRONT, we launched new products and made several terrific additions to our team who will broaden our product suite and addressable market.”
