• Palomar Holdings, Inc. Reports First Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 03 May 2023 15:15:33   America/Chicago

    LA JOLLA, Calif., May 03, 2023 (GLOBE NEWSWIRE) -- Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or “Company”) reported net income of $17.3 million, or $0.68 per diluted share, for the first quarter of 2023 compared to net income of $14.5 million, or $0.56 per diluted share, for the first quarter of 2022. Adjusted net income(1) was $20.4 million, or $0.80 per diluted share, for the first quarter of 2023 as compared to $18.6 million, or $0.72 per diluted share, for the first quarter of 2022. Effective December 31, 2022, the Company adjusts for net realized and unrealized gains and losses when calculating and presenting adjusted net income, diluted adjusted earnings per share, and adjusted return on equity. All prior period amounts have been adjusted accordingly.

    First Quarter 2023 Highlights

    • Gross written premiums increased by 46.3% to $250.1 million compared to $170.9 million in the first quarter of 2022
    • Net income of $17.3 million, compared to $14.5 million in the first quarter of 2022
    • Adjusted net income(1) of $20.4 million, compared to $18.6 million in the first quarter of 2022
    • Total loss ratio of 24.8% compared to 19.7% in the first quarter of 2022
    • Combined ratio of 77.9% compared to 76.5% in the first quarter of 2022
    • Adjusted combined ratio(1) of 73.3%, compared to 72.1%, in the first quarter of 2022
    • Annualized return on equity of 17.5%, compared to 15.0% in the first quarter of 2022
    • Annualized adjusted return on equity(1) of 20.7%, compared to 19.2% in the first quarter of 2022

    (1) See discussion of “Non-GAAP and Key Performance Indicators” below.

    Mac Armstrong, Chairman and Chief Executive Officer, commented, “Following a record year in 2022, I am pleased with the strong start to 2023. Our first quarter results demonstrate continued momentum in our business and further execution of our Palomar 2X strategy. Highlights for the quarter include gross written premium growth of 46%, an adjusted combined ratio of 73.3%, and an adjusted return on equity of 20.7%. Importantly, these results were achieved even with elevated catastrophe activity during the quarter.”

    Mr. Armstrong continued, “Additionally, in March we secured approximately $188 million of incremental excess of loss (“XOL”) limit providing support for further growth in our core earthquake business. Pricing for the recent XOL placement was in line with budgeted expectations and as a result, we remain confident in our ability to deliver our full-year target of $86 million to $90 million of adjusted net income.”

    Underwriting Results
    Gross written premiums increased 46.3% to $250.1 million compared to $170.9 million in the first quarter of 2022, while net earned premiums increased 9.5% compared to the prior year’s first quarter.

    Losses and loss adjustment expenses for the first quarter were $20.7 million including $18.9 million of non-catastrophe attritional losses, and $1.8 million of catastrophe losses from the California flood activity during the first quarter offset slightly by favorable prior period development of catastrophe losses. The loss ratio for the quarter was 24.8%, comprised of a catastrophe loss ratio(1) of 2.2% and an attritional loss ratio of 22.6%, compared to a loss ratio of 19.7% during the same period last year comprised of a catastrophe loss ratio(1) of 0.6% and attritional loss ratio of 19.1%.

    Underwriting income(1) for the first quarter was $18.4 million resulting in a combined ratio of 77.9% compared to underwriting income of $17.9 million resulting in a combined ratio of 76.5% during the same period last year. The Company’s adjusted underwriting income(1) was $22.2 million resulting in an adjusted combined ratio(1) of 73.3% in the first quarter compared to adjusted underwriting income(1) of $21.2 million and an adjusted combined ratio(1) of 72.1% during the same period last year.

    Investment Results
    Net investment income increased by 98.5% to $5.1 million compared to $2.6 million in the prior year’s first quarter. The increase was primarily due to higher yields on invested assets and a higher average balance of investments held during the three months ended March 31, 2023 due to cash generated from operations. The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.93 years at March 31, 2023. Cash and invested assets totaled $674.2 million at March 31, 2023. During the first quarter, the Company recorded net realized and unrealized gains of $0.1 million related to its investment portfolio as compared to realized and unrealized losses of $1.3 million in last year’s first quarter.

    Tax Rate
    The effective tax rate for the three months ended March 31, 2023 was 23.5% compared to 23.8% for the three months ended March 31, 2022. For the current quarter and prior year quarter, the Company’s income tax rate differed from the statutory rate due primarily to the non-deductible executive compensation expense, offset slightly by the tax impact of the permanent component of employee stock option exercises.

    Stockholders’ Equity and Returns
    Stockholders' equity was $404.6 million at March 31, 2023, compared to $380.4 million at March 31, 2022. For the three months ended March 31, 2023, the Company’s annualized return on equity was 17.5% compared to 15.0% for the same period in the prior year while adjusted return on equity(1) was 20.7% compared to 19.2% for the same period in the prior year. During the current quarter, the Company repurchased 134,680 shares for $6.8 million of the Company’s previously announced $100 million share repurchase authorization. As of March 31, 2023, $58.8 million remains available for future repurchases.

    Full Year 2023 Outlook
    For the full year 2023, the Company expects to achieve adjusted net income of $86 million to $90 million. This includes catastrophe losses incurred in the first quarter of approximately $1.8 million. The expected results do not include any additional catastrophe losses.

    Conference Call
    As previously announced, Palomar will host a conference call Thursday May 4, 2023, to discuss its first quarter 2023 results at 12:00 p.m. (Eastern Time). The conference call can be accessed live by dialing 1-877-423-9813 or for international callers, 1-201-689-8573, and requesting to be joined to the Palomar First Quarter 2023 Earnings Conference Call. A replay will be available starting at 4:00 p.m. (Eastern Time) on May 4, 2023, and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the replay is 13737957. The replay will be available until 11:59 p.m. (Eastern Time) on May 11, 2023.

    Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the investor relations section of the Company’s website at http://ir.palomarspecialty.com/. The online replay will remain available for a limited time beginning immediately following the call.

    About Palomar Holdings, Inc.
    Palomar Holdings, Inc. is the holding company of subsidiaries Palomar Specialty Insurance Company (“PSIC”), Palomar Specialty Reinsurance Company Bermuda Ltd., Palomar Insurance Agency, Inc. and Palomar Excess and Surplus Insurance Company (“PESIC”). Palomar is an innovative insurer serving residential and commercial clients in specialty markets including the market for earthquake insurance. Palomar’s insurance subsidiaries, Palomar Specialty Insurance Company, Palomar Specialty Reinsurance Company Bermuda Ltd., and Palomar Excess and Surplus Insurance Company, have a financial strength rating of “A-” (Excellent) from A.M. Best. 
    To learn more, visit PLMR.com.

    Non-GAAP and Key Performance Indicators

    Palomar discusses certain key performance indicators, described below, which provide useful information about the Company’s business and the operational factors underlying the Company’s financial performance.

    Underwriting revenue is a non-GAAP financial measure defined as total revenue, excluding net investment income and net realized and unrealized gains and losses on investments. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of total revenue calculated in accordance with GAAP to underwriting revenue.

    Underwriting income is a non-GAAP financial measure defined as income before income taxes excluding net investment income, net realized and unrealized gains and losses on investments, and interest expense. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of income before income taxes calculated in accordance with GAAP to underwriting income.

    Adjusted net income is a non-GAAP financial measure defined as net income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact. Palomar calculates the tax impact only on adjustments which would be included in calculating the Company’s income tax expense using the estimated tax rate at which the company received a deduction for these adjustments. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of net income calculated in accordance with GAAP to adjusted net income.

    Annualized Return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.

    Annualized adjusted return on equity is a non-GAAP financial measure defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of return on equity calculated using unadjusted GAAP numbers to adjusted return on equity.

    Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses, to net earned premiums.

    Expense ratio, expressed as a percentage, is the ratio of acquisition and other underwriting expenses, net of commission and other income to net earned premiums.

    Combined ratio is defined as the sum of the loss ratio and the expense ratio. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.

    Adjusted combined ratio is a non-GAAP financial measure defined as the sum of the loss ratio and the expense ratio calculated excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of combined ratio calculated using unadjusted GAAP numbers to adjusted combined ratio.

    Diluted adjusted earnings per share is a non-GAAP financial measure defined as adjusted net income divided by the weighted-average common shares outstanding for the period, reflecting the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of diluted earnings per share calculated in accordance with GAAP to diluted adjusted earnings per share.

    Catastrophe loss ratio is a non-GAAP financial measure defined as the ratio of catastrophe losses to net earned premiums. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of loss ratio calculated using unadjusted GAAP numbers to catastrophe loss ratio.

    Adjusted combined ratio excluding catastrophe losses is a non-GAAP financial measure defined as adjusted combined ratio excluding the impact of catastrophe losses.  See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of combined ratio calculated using unadjusted GAAP numbers to adjusted combined ratio excluding catastrophe losses.

    Adjusted underwriting income is a non-GAAP financial measure defined as underwriting income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of income before income taxes calculated in accordance with GAAP to adjusted underwriting income.

    Tangible stockholders’ equity is a non-GAAP financial measure defined as stockholders’ equity less intangible assets. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of stockholders’ equity calculated in accordance with GAAP to tangible stockholders’ equity.

    Safe Harbor Statement
    Palomar cautions you that statements contained in this press release may regard matters that are not historical facts but are forward-looking statements. These statements are based on the company’s current beliefs and expectations. The inclusion of forward-looking statements should not be regarded as a representation by Palomar that any of its plans will be achieved. Actual results may differ from those set forth in this press release due to the risks and uncertainties inherent in the Company’s business. The forward-looking statements are typically, but not always, identified through use of the words "believe," "expect," "enable," "may," "will," "could," "intends," "estimate," "anticipate," "plan," "predict," "probable," "potential," "possible," "should," "continue," and other words of similar meaning. Actual results could differ materially from the expectations contained in forward-looking statements as a result of several factors, including unexpected expenditures and costs, unexpected results or delays in development and regulatory review, regulatory approval requirements, the frequency and severity of adverse events and competitive conditions. These and other factors that may result in differences are discussed in greater detail in the Company's filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

    Contact
    Media Inquiries 
    Lindsay Conner 
    1-551-206-6217 
    lconner@plmr.com 

    Investor Relations
    Jamie Lillis
    1-203-428-3223
    investors@plmr.com
    Source: Palomar Holdings, Inc.

    Summary of Operating Results:

    The following table summarizes the Company’s results for the three months ended March 31, 2023 and 2022:

                 
      Three months ended      
      March 31,     
      2023 2022 Change % Change
        
      ($ in thousands, except per share data) 
    Gross written premiums $250,112 $170,934 $79,178 46.3%
    Ceded written premiums  (170,344)  (89,552)  (80,792) 90.2%
    Net written premiums  79,768  81,382  (1,614) (2.0)%
    Net earned premiums  83,241  76,032  7,209 9.5%
    Commission and other income  695  777  (82) (10.6)%
    Total underwriting revenue(1)  83,936  76,809  7,127 9.3%
    Losses and loss adjustment expenses  20,652  14,954  5,698 38.1%
    Acquisition expenses, net of ceding commissions and fronting fees  25,679  28,054  (2,375) (8.5)%
    Other underwriting expenses  19,222  15,925  3,297 20.7%
    Underwriting income(1)  18,383  17,876  507 2.8%
    Interest expense  (1,020)  (93)  (927) NM 
    Net investment income  5,120  2,579  2,541 98.5%
    Net realized and unrealized gains (losses) on investments  146  (1,278)  1,424 (111.4)%
    Income before income taxes  22,629  19,084  3,545 18.6%
    Income tax expense  5,316  4,547  769 16.9%
    Net income $17,313 $14,537 $2,776 19.1%
    Adjustments:            
    Net realized and unrealized (gains) losses on investments(2)  (146)  1,278  (1,424) (111.4)%
    Expenses associated with transactions  —  86  (86) (100.0)%
    Stock-based compensation expense  3,450  2,760  690 25.0%
    Amortization of intangibles  313  315  (2) (0.6)%
    Expenses associated with catastrophe bond  50  200  (150) (75.0)%
    Tax impact  (540)  (592)  52 (8.8)%
    Adjusted net income(1)(2) $20,440 $18,584 $1,856 10.0%
    Key Financial and Operating Metrics            
    Annualized return on equity  17.5% 15.0%     
    Annualized adjusted return on equity(1)  20.7% 19.2%     
    Loss ratio  24.8% 19.7%     
    Expense ratio  53.1% 56.8%     
    Combined ratio  77.9% 76.5%     
    Adjusted combined ratio(1)  73.3% 72.1%     
    Diluted earnings per share $0.68 $0.56      
    Diluted adjusted earnings per share(1) $0.80 $0.72      
    Catastrophe losses $1,806 $481      
    Catastrophe loss ratio(1)  2.2% 0.6%     
    Adjusted combined ratio excluding catastrophe losses(1)  71.2% 71.4%     
    Adjusted underwriting income(1) $22,196 $21,237 $959 4.5%
    NM - not meaningful            

    (1)- Indicates Non-GAAP financial measure- see above for definition of Non-GAAP financial measures and see below for reconciliation of Non-GAAP financial measures to their most directly comparable measures prepared in accordance with GAAP.

    (2)- We now include the impact of net realized and unrealized losses and gains on investments as an adjustment to our net income. As this line is primarily driven by equity market fluctuations rather than our underlying business performance, we believe adding this adjustment provides a more meaningful comparison of our performance. We have also changed the prior year adjusted net income to conform to this presentation.

    Condensed Consolidated Balance sheets

    Palomar Holdings, Inc. and Subsidiaries
     
    Condensed Consolidated Balance Sheets (unaudited)
     
    (in thousands, except shares and par value data)
           
      March 31, December 31,
      2023 2022
      (Unaudited)   
    Assets      
    Investments:      
    Fixed maturity securities available for sale, at fair value (amortized cost: $594,736 in 2023; $561,580 in 2022) $554,489 $515,064
    Equity securities, at fair value (cost: $42,352 in 2023; $42,352 in 2022)  39,356  38,576
    Total investments  593,845  553,640
    Cash and cash equivalents  80,295  68,108
    Restricted cash  65  56
    Accrued investment income  4,077  3,777
    Premiums receivable  187,910  162,858
    Deferred policy acquisition costs, net of ceding commissions and fronting fees  54,187  56,740
    Reinsurance recoverable on paid losses and loss adjustment expenses  45,801  39,718
    Reinsurance recoverable on unpaid losses and loss adjustment expenses  183,601  153,895
    Ceded unearned premiums  232,425  204,084
    Prepaid expenses and other assets  41,291  44,088
    Deferred tax assets, net  9,005  10,622
    Property and equipment, net  540  603
    Intangible assets, net  7,948  8,261
    Total assets $1,440,990 $1,306,450
    Liabilities and stockholders' equity      
    Liabilities:      
    Accounts payable and other accrued liabilities $19,401 $25,760
    Reserve for losses and loss adjustment expenses  264,967  231,415
    Unearned premiums  496,182  471,314
    Ceded premium payable  173,035  146,127
    Funds held under reinsurance treaty  11,356  10,680
    Borrowings from credit agreements  71,400  36,400
    Total liabilities  1,036,341  921,696
    Stockholders' equity:      
    Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2023 and December 31, 2022  —  —
    Common stock, $0.0001 par value, 500,000,000 shares authorized, 24,942,196 and 25,027,467 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively  3  3
    Additional paid-in capital  337,492  333,558
    Accumulated other comprehensive loss  (31,041)  (36,515)
    Retained earnings  98,195  87,708
    Total stockholders' equity  404,649  384,754
    Total liabilities and stockholders' equity $1,440,990 $1,306,450

    Condensed Consolidated Income Statement

    Palomar Holdings, Inc. and Subsidiaries
     
    Condensed Consolidated Statements of Income and Comprehensive Income (loss) (Unaudited)
     
    (in thousands, except shares and per share data)
           
      Three Months Ended
      March 31,
      2023 2022
    Revenues:      
    Gross written premiums $250,112 $170,934
    Ceded written premiums  (170,344)  (89,552)
    Net written premiums  79,768  81,382
    Change in unearned premiums  3,473  (5,350)
    Net earned premiums  83,241  76,032
    Net investment income  5,120  2,579
    Net realized and unrealized gains (losses) on investments  146  (1,278)
    Commission and other income  695  777
    Total revenues  89,202  78,110
    Expenses:      
    Losses and loss adjustment expenses  20,652  14,954
    Acquisition expenses, net of ceding commissions and fronting fees  25,679  28,054
    Other underwriting expenses  19,222  15,925
    Interest expense  1,020  93
    Total expenses  66,573  59,026
    Income before income taxes  22,629  19,084
    Income tax expense  5,316  4,547
    Net income  17,313  14,537
    Other comprehensive income (loss), net:      
    Net unrealized gains (losses) on securities available for sale  5,474  (18,463)
    Net comprehensive income (loss) $22,787 $(3,926)
    Per Share Data:      
    Basic earnings per share $0.69 $0.57
    Diluted earnings per share $0.68 $0.56
           
    Weighted-average common shares outstanding:      
    Basic  24,969,703  25,362,179
    Diluted  25,442,902  25,899,290

    Underwriting Segment Data

    The Company has a single reportable segment and offers primarily property and casualty insurance products. Gross written premiums (GWP) by product, location and company are presented below:

                
      Three Months Ended March 31,
      2023 2022 
        
      ($ in thousands) 
         % of    % of 
      Amount GWP Amount GWP 
    Product           
    Fronting Premiums $91,755 36.7%$29,845 17.5%
    Residential Earthquake  55,725 22.3% 46,336 27.1%
    Commercial Earthquake  37,770 15.1% 25,144 14.7%
    Inland Marine  31,049 12.4% 18,237 10.7%
    Casualty  11,733 4.7% 5,007 2.9%
    Commercial All Risk  8,376 3.3% 11,210 6.6%
    Hawaii Hurricane  8,073 3.2% 6,914 4.0%
    Residential Flood  4,235 1.7% 2,993 1.8%
    Specialty Homeowners  (59) —% 16,284 9.5%
    Other  1,455 0.6% 8,964 5.2%
    Total Gross Written Premiums $250,112 100.0%$170,934 100.0%


                
      Three Months Ended March 31,
      2023 2022 
        
      ($ in thousands) 
         % of    % of 
      Amount GWP Amount GWP 
    State           
    California $131,889 52.7%$68,718 40.2%
    Texas  23,210 9.3% 18,979 11.1%
    Florida  12,096 4.8% 4,962 2.9%
    Washington  11,972 4.8% 6,881 4.0%
    Hawaii  10,105 4.0% 8,540 5.0%
    Oregon  6,780 2.7% 4,373 2.6%
    Illinois  4,702 1.9% 4,273 2.5%
    New York  3,871 1.5% 2,380 1.4%
    Other  45,487 18.3% 51,828 30.3%
    Total Gross Written Premiums $250,112 100.0%$170,934 100.0%


                
      Three Months Ended March 31,
      2023 2022 
        
      ($ in thousands) 
         % of    % of 
      Amount GWP Amount GWP 
    Subsidiary           
    PSIC $150,704 60.3%$104,004 60.8%
    PESIC  99,408 39.7% 66,930 39.2%
    Total Gross Written Premiums $250,112 100.0%$170,934 100.0%

    Gross and net earned premiums

    The table below shows the amount of premiums the Company earned on a gross and net basis and the Company’s net earned premiums as a percentage of gross earned premiums for each period presented:

                 
      Three Months Ended      
      March 31,      
      2023 2022 Change % Change
       
      ($ in thousands)
    Gross earned premiums $225,243 $138,924 $86,319 62.1%
    Ceded earned premiums  (142,002)  (62,892)  (79,110) 125.8%
    Net earned premiums $83,241 $76,032 $7,209 9.5%
                 
    Net earned premium ratio  37.0%  54.7%      

    Loss detail

                 
      Three Months Ended      
      March 31,      
      2023 2022 Change % Change
       
      ($ in thousands)
    Catastrophe losses $1,806 $481 $1,325 275.5%
    Non-catastrophe losses  18,846  14,473  4,373 30.2%
    Total losses and loss adjustment expenses $20,652 $14,954 $5,698 38.1%
                 

    The following table represents a reconciliation of changes in the ending reserve balances for losses and loss adjustment expenses:

           
      Three Months Ended March 31,
      2023 2022
        
       (in thousands)
    Reserve for losses and LAE net of reinsurance recoverables at beginning of period $77,520 $45,419
    Add: Incurred losses and LAE, net of reinsurance, related to:      
    Current year  17,300  13,449
    Prior years  3,352  1,505
    Total incurred  20,652  14,954
    Deduct: Loss and LAE payments, net of reinsurance, related to:      
    Current year  1,393  1,490
    Prior years  15,413  7,497
    Total payments  16,806  8,987
    Reserve for losses and LAE net of reinsurance recoverables at end of period  81,366  51,386
    Add: Reinsurance recoverables on unpaid losses and LAE at end of period  183,601  113,726
    Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period $264,967 $165,112

    Reconciliation of Non-GAAP Financial Measures

    For the three months and year ended March 31, 2023 and 2022, the Non-GAAP financial measures discussed above reconcile to their most comparable GAAP measures as follows:

    Underwriting revenue

           
      Three Months Ended
      March 31,
      2023 2022
       
      (in thousands)
    Total revenue $89,202 $78,110
    Net investment income  (5,120)  (2,579)
    Net realized and unrealized (gains) losses on investments  (146)  1,278
    Underwriting revenue $83,936 $76,809

    Underwriting income and adjusted underwriting income

           
      Three Months Ended
      March 31,
      2023 2022
       
      (in thousands)
    Income before income taxes $22,629 $19,084
    Net investment income  (5,120)  (2,579)
    Net realized and unrealized (gains) losses on investments  (146)  1,278
    Interest expense  1,020  93
    Underwriting income $18,383 $17,876
    Expenses associated with transactions  —  86
    Stock-based compensation expense  3,450  2,760
    Amortization of intangibles  313  315
    Expenses associated with catastrophe bond  50  200
    Adjusted underwriting income $22,196 $21,237

    Adjusted net income

           
      Three Months Ended
      March 31,
      2023 2022
       
      (in thousands)
    Net income $17,313 $14,537
    Adjustments:      
    Net realized and unrealized (gains) losses on investments  (146)  1,278
    Expenses associated with transactions  —  86
    Stock-based compensation expense  3,450  2,760
    Amortization of intangibles  313  315
    Expenses associated with catastrophe bond  50  200
    Tax impact  (540)  (592)
    Adjusted net income $20,440 $18,584

    Annualized adjusted return on equity

            
      Three Months Ended
      March 31,
      2023 2022 
        
      ($ in thousands) 
            
    Annualized adjusted net income $81,761 $74,336 
    Average stockholders' equity $394,701 $387,284 
    Annualized adjusted return on equity  20.7% 19.2%

    Adjusted combined ratio

            
      Three Months Ended
      March 31,
      2023 2022 
        
      ($ in thousands) 
    Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $64,858 $58,156 
    Denominator: Net earned premiums $83,241 $76,032 
    Combined ratio  77.9% 76.5%
    Adjustments to numerator:       
    Expenses associated with transactions $— $(86) 
    Stock-based compensation expense  (3,450)  (2,760) 
    Amortization of intangibles  (313)  (315) 
    Expenses associated with catastrophe bond  (50)  (200) 
    Adjusted combined ratio  73.3% 72.1%

    Diluted adjusted earnings per share

           
      Three Months Ended
      March 31,
      2023 2022
       
      (in thousands, except per share data)
           
    Adjusted net income $20,440 $18,584
    Weighted-average common shares outstanding, diluted  25,442,902  25,899,290
    Diluted adjusted earnings per share $0.80 $0.72

    Catastrophe loss ratio

            
      Three Months Ended 
      March 31, 
      2023 2022 
        
      ($ in thousands) 
    Numerator: Losses and loss adjustment expenses $20,652 $14,954 
    Denominator: Net earned premiums $83,241 $76,032 
    Loss ratio  24.8% 19.7%
            
    Numerator: Catastrophe losses $1,806 $481 
    Denominator: Net earned premiums $83,241 $76,032 
    Catastrophe loss ratio  2.2% 0.6%

    Adjusted combined ratio excluding catastrophe losses

            
      Three Months Ended 
      March 31, 
      2023 2022 
        
      ($ in thousands) 
    Numerator: Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income $64,858 $58,156 
    Denominator: Net earned premiums $83,241 $76,032 
    Combined ratio  77.9% 76.5%
    Adjustments to numerator:       
    Expenses associated with transactions $— $(86) 
    Stock-based compensation expense  (3,450)  (2,760) 
    Amortization of intangibles  (313)  (315) 
    Expenses associated with catastrophe bond  (50)  (200) 
    Catastrophe losses  (1,806)  (481) 
    Adjusted combined ratio excluding catastrophe losses  71.2% 71.4%

    Tangible Stockholders’ equity

           
      March 31, December 31,
      2023 2022
       
      (in thousands)
    Stockholders' equity $404,649 $384,754
    Intangible assets  (7,948)  (8,261)
    Tangible stockholders' equity $396,701 $376,493

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