What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-06 compared with 2024-05-03 · 309 added, 211 removed, 983 unchanged (35% of the section changed)

50 unchanged sentences

Borrowings from credit agreements

43,000 52,600

Total liabilities

1 unchanged sentence

Stockholders' equity:

Preferred stock, $ 0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023

Common stock, $ 0.0001 par value, 500,000,000 shares authorized, 24,921,060 and 24,772,987 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Preferred stock, $ 0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2024 and December 31, 2023

Common stock, $ 0.0001 par value, 500,000,000 shares authorized, 24,984,638 and 24,772,987 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

14 unchanged sentences

Three Months Ended

Six Months Ended

Gross written premiums

9 unchanged sentences

Net investment income

7,960 5,541 15,098 10,661

Net realized and unrealized gains on investments

32 1,127 3,034 1,273

Commission and other income

792 621 1,320 1,316

Total revenues

7 unchanged sentences

Interest expense

225 1,064 965 2,084

Total expenses

4 unchanged sentences

7,645 5,458 15,619 10,774

$ 25,729 $ 17,562 $ 52,111 $ 34,874

Other comprehensive income, net:

32 unchanged sentences

— — — — 34,874 34,874

Balance at March 31, 2023

Balance at June 30, 2023

24,794,269 $ 3 $ 341,413 $ ( 34,726 ) $ 107,018 $ 413,708

12 unchanged sentences

— — — — 52,111 52,111

Balance at March 31, 2024

Balance at June 30, 2024

24,984,638 $ 3 $ 363,904 $ ( 28,055 ) $ 196,754 $ 532,606

4 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Operating activities

Net cash provided by operating activities

$ 33,125 $ 17,437

Investing activities

Purchases of property and equipment

Capitalized software costs

( 1,305 ) ( 1,658 )

Purchases of fixed maturity securities

( 176,989 ) ( 54,871 )

Purchases of equity securities

Sales and maturities of fixed maturity securities

154,820 21,679

Sales of equity securities

1 unchanged sentence

Investments in limited partnerships

Acquisitions, net of cash acquired

Net cash used in investing activities

( 16,331 ) ( 33,900 )

Financing activities

Net (payments on) proceeds from line of credit

( 9,600 ) 35,000

Proceeds from common stock issued via employee stock purchase plan

3 unchanged sentences

Net cash (used in) provided by financing activities

( 6,882 ) 28,659

Net increase in cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

51,852 68,164

Cash, cash equivalents and restricted cash at end of period

$ 61,764 $ 80,360

Supplementary cash flow information:

1 unchanged sentence

Cash paid for interest

$ 714 $ 1,017

The following table summarizes our cash and cash equivalents and restricted cash and cash equivalents within the condensed consolidated balance sheets (in thousands):

Cash and cash equivalents

$ 61,387 $ 51,546

Restricted cash

Cash and cash equivalents and restricted cash

$ 61,764 $ 51,852

See accompanying notes.

28 unchanged sentences

Recently adopted accounting pronouncements

The Company has not adopted any new accounting guidance during the three months ended March 31, 2024 .

The Company has not adopted any new accounting guidance during the six months ended June 30, 2024 .

Recently issued accounting pronouncements not yet adopted

15 unchanged sentences

The Company’s available‑for‑sale investments are summarized as follows:

March 31, 2024

June 30, 2024

Credit Losses

1 unchanged sentence

Fixed maturities:

$ 39,729 $ — $ ( 1,387 ) $ — $ 38,342

States, Territories, and Political Subdivisions

10,632 71 ( 819 ) — 9,884

Special revenue excluding mortgage/asset-backed securities

32,424 96 ( 3,415 ) — 29,105

Corporate and other

337,679 1,260 ( 18,280 ) ( 904 ) 319,755

Mortgage/asset-backed securities

277,041 1,570 ( 12,705 ) — 265,906

Total available-for-sale investments

$ 697,505 $ 2,997 $ ( 36,606 ) $ ( 904 ) $ 662,992

December 31, 2023

2 unchanged sentences

Fixed maturities:

$ 40,836 $ — $ ( 1,416 ) $ — $ 39,420

States, Territories, and Political Subdivisions

10,641 100 ( 839 ) — 9,902

Special revenue excluding mortgage/asset-backed securities

32,513 147 ( 3,149 ) — 29,511

Corporate and other

316,590 1,750 ( 17,197 ) ( 904 ) 300,239

Mortgage/asset-backed securities

274,550 1,879 ( 11,702 ) — 264,727

Total available-for-sale investments

$ 675,130 $ 3,876 $ ( 34,303 ) $ ( 904 ) $ 643,799

Security holdings in an unrealized loss position

As of March 31, 2024 , the Company held 528 fixed maturity securities in an unrealized loss position with a total estimated fair value of $ 478.7 million and total gross unrealized losses of $ 36.6 million.

As of June 30, 2024 , the Company held 574 fixed maturity securities in an unrealized loss position with a total estimated fair value of $ 524.7 million and total gross unrealized losses of $ 37.9 million.

As of December 31, 2023 , the Company held 483 fixed maturity securities in an unrealized loss position with a total estimated fair value of $ 451.0 million and total gross unrealized losses of $ 34.3 million.

The aggregate fair value and gross unrealized losses of the Company’s investments aggregated by investment category and the length of time these individual securities have been in a continuous unrealized loss position as of March 31, 2024 and December 31, 2023 , are as follows:

The aggregate fair value and gross unrealized losses of the Company’s investments aggregated by investment category and the length of time these individual securities have been in a continuous unrealized loss position as of June 30, 2024 and December 31, 2023 , are as follows:

Less Than 12 Months

More Than 12 Months

March 31, 2024

June 30, 2024

(in thousands)

Fixed maturity securities:

$ 17,385 $ ( 385 ) $ 20,957 $ ( 1,002 ) $ 38,342 $ ( 1,387 )

States, Territories, and Political Subdivisions

512 ( 5 ) 6,217 ( 814 ) 6,729 ( 819 )

Special revenue excluding mortgage/asset-backed securities

— — 26,380 ( 3,415 ) 26,380 ( 3,415 )

Corporate and other

41,802 ( 402 ) 212,756 ( 17,878 ) 254,558 ( 18,280 )

Mortgage/asset-backed securities

44,727 ( 859 ) 107,914 ( 11,846 ) 152,641 ( 12,705 )

Total available-for-sale investments

$ 104,426 $ ( 1,651 ) $ 374,224 $ ( 34,955 ) $ 478,650 $ ( 36,606 )

Less Than 12 Months

3 unchanged sentences

Fixed maturity securities:

$ 738 $ ( 1 ) $ 38,063 $ ( 1,415 ) $ 38,801 $ ( 1,416 )

States, Territories, and Political Subdivisions

— — 6,196 ( 839 ) 6,196 ( 839 )

Special revenue excluding mortgage/asset-backed securities

— — 26,736 ( 3,149 ) 26,736 ( 3,149 )

Corporate and other

28,872 ( 480 ) 204,034 ( 16,717 ) 232,906 ( 17,197 )

Mortgage/asset-backed securities

29,334 ( 245 ) 117,016 ( 11,457 ) 146,350 ( 11,702 )

Total available-for-sale investments

$ 58,944 $ ( 726 ) $ 392,045 $ ( 33,577 ) $ 450,989 $ ( 34,303 )

The Company reviews all securities with unrealized losses on a quarterly basis to assess whether the decline in the securities fair value necessitates the recognition of an allowance for credit losses.

The Company considers numerous factors in its review as described in Footnote 1 of the Notes to the Consolidated Financial Statements in the 2023 Annual Report on Form 10 -K.

The Company has recorded an immaterial allowance for credit losses for two investment securities.

Based on the Company’s review as of March 31, 2024 , for the remainder of securities, the Company determined that the fixed maturity securities’ unrealized losses were primarily the result of the interest rate environment and not the credit quality of the issuers.

The Company has recorded an immaterial allowance for credit losses for three investment securities.

Based on the Company’s review as of June 30, 2024 , for the remainder of securities, the Company determined that the fixed maturity securities’ unrealized losses were primarily the result of the interest rate environment and not the credit quality of the issuers.

The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before the recovery of their amortized cost basis.

Contractual maturities of available ‑ for ‑ sale fixed maturity securities

The amortized cost and fair value of fixed maturity securities at March 31, 2024 , by contractual maturity, are shown below.

The amortized cost and fair value of fixed maturity securities at June 30, 2024 , by contractual maturity, are shown below.

(in thousands)

Due within one year

$ 66,569 $ 64,574

Due after one year through five years

176,356 168,722

Due after five years through ten years

134,209 123,931

Due after ten years

43,330 39,859

Mortgage and asset-backed securities

277,041 265,906

$ 697,505 $ 662,992

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations.

2 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

Interest income

1 unchanged sentence

Dividend income

Investment expense

257 210 455 391

Investment income (expense)

77 ( 125 ) ( 309 ) ( 246 )

Net investment income

3 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

Realized gains:

Gains on sales of fixed maturity securities

$ 18 $ 37 $ 18 $ 65

Total realized gains

1 unchanged sentence

Losses on sales of fixed maturity securities

— ( 29 ) ( 2 ) ( 32 )

Losses on sales of equity securities

— — ( 1,204 ) —

Total realized losses

1 unchanged sentence

Net realized investment (losses) gains

18 8 ( 1,188 ) 33

Change in allowance for credit losses

( 327 ) ( 8 ) ( 327 ) ( 667 )

Net unrealized gains (losses) on equity securities

388 1,127 4,617 1,907

Net unrealized (losses) gains on equity method investment

( 245 ) — ( 266 ) —

Net unrealized (losses) gains on other investments

Net realized and unrealized gains on investments

1 unchanged sentence

Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date.

Proceeds from the sale of fixed maturity securities were $ 2.2 and $ 5.1 million for the three months ended March 31, 2024 and 2023 , respectively.

Proceeds from the sale of fixed maturity securities were insignificant and $ 1.9 million for the three months ended June 30, 2024 and 2023 , respectively.

Proceeds from the sale of fixed maturity securities were $ 2.2 and $ 7.1 million for the six months ended June 30, 2024 and 2023 , respectively.

The Company places securities on statutory deposit with certain state agencies to retain the right to do business in those states.

These securities are included in available‑for‑sale investments on the balance sheet.

As of March 31, 2024 and December 31, 2023 , the carrying value of securities on deposit with state regulatory authorities was $ 7.4 million and $ 8.6 million, respectively.

As of June 30, 2024 and December 31, 2023 , the carrying value of securities on deposit with state regulatory authorities was $ 7.8 million and $ 8.6 million, respectively.

The Company has investments in limited partnerships, recorded in the Other Investments line of the Unaudited Condensed Consolidated Balance Sheets.

These investments are measured at estimated fair value utilizing a net asset value per share (or its equivalent) as a practical expedient.

As of March 31, 2024 , the Company had unfunded commitments to invest an additional $ 22.9 million in these limited partnerships.

As of June 30, 2024 , the Company had unfunded commitments to invest an additional $ 32.6 million in these limited partnerships.

Fair Value Measurements

15 unchanged sentences

Therefore, these investments are classified and disclosed in Level 2 of the hierarchy.

The following tables present the hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 .

March 31, 2024

The following tables present the hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 .

June 30, 2024

(in thousands)

32 unchanged sentences

The carrying amounts of financial assets and liabilities reported in the accompanying condensed consolidated balance sheet including cash and cash equivalents, restricted cash, receivables, reinsurance recoverable, and accounts payable and other accrued liabilities approximate fair value due to their short term‑maturity.

The carrying amount of the Company’s borrowings under the Federal Home Loan Bank (“FHLB”) line of credit and U.S.

Bank credit agreement (the “Credit Agreement”) approximate fair value as the Company is currently borrowing at a variable rate which frequently reprices at market rates.

The carrying amount of any borrowings under the Federal Home Loan Bank (“FHLB”) line of credit and U.S.

Bank credit agreement (the “Credit Agreement”) approximate fair value as the credit agreements have variable rates which frequently reprices at market rates.

Transfers between Level 3 and Level 2 securities result from changes in the availability of observable market inputs and are recorded at the beginning of the reporting period.

As of March 31, 2024 and December 31, 2023 , the Company had no fixed income securities classified as Level 3.

As of June 30, 2024 and December 31, 2023 , the Company had no fixed income securities classified as Level 3.

Reserve for Losses and Loss Adjustment Expenses

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Reserve for losses and LAE net of reinsurance recoverables at beginning of period

$ 97,653 $ 77,520

Incurred losses and LAE, net of reinsurance, related to:

26,333 17,300

Total incurred

26,837 20,652

Loss and LAE payments, net of reinsurance, related to:

Total payments

14,327 16,806

Reserve for losses and LAE net of reinsurance recoverables at end of period

110,163 81,366

Reinsurance recoverables on unpaid losses and LAE at end of period

292,024 183,601

Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE at end of period

$ 402,187 $ 264,967

Considerable variability is inherent in the estimate of the reserve for losses and LAE.

Although management believes the liability recorded for losses and LAE is adequate, the variability inherent in this estimate could result in changes to the ultimate liability, which may be material to stockholders’ equity.

The Company experienced adverse prior year development of $ 0.5 million and $ 3.4 prior year development during the three months ended March 31, 2024 and 2023 , respectively.

Adverse prior year development during the three months ended March 31, 2024 was primarily due to higher than anticipated severity of attritional losses on certain discontinued lines of business.

Adverse prior year development during the three months ended March 31, 2023 was primarily due to higher than anticipated severity of attritional losses, offset by lower than anticipated severity of catastrophe losses.

The Company experienced favorable prior year development of $ 2.9 million and $ 0.6 million during the three months ended June 30, 2024 and 2023 , respectively.

The Company experienced favorable prior year development of $ 2.4 million and adverse prior year development of $ 2.7 million during the six months ended June 30, 2024 and 2023 , respectively.

Favorable prior year development during the three months ended June 30, 2024 was primarily due to lower than anticipated severity of attritional losses.

Favorable prior year development during the three months ended June 30, 2023 was primarily due to lower than anticipated severity of catastrophe losses, offset by higher than anticipated severity of attritional losses.

Favorable prior year development during the six months ended June 30, 2024 was primarily due to lower than anticipated severity of attritional losses.

Adverse prior year development during the six months ended June 30, 2023 was primarily due to higher than anticipated severity of attritional losses, offset by lower than anticipated severity of catastrophe losses.

Stockholders ’ Equity

Common stock reserved for future issuance

Common stock reserved for future issuance consists of the following as of March 31, 2024 :

Common stock reserved for future issuance consists of the following as of June 30, 2024 :

Stock options outstanding under 2019 Equity Incentive Plan

5 unchanged sentences

The below table summarizes the Company’s stock-based compensation expense for each period presented:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Stock-Based Compensation

$ 3,820 $ 3,450

Stock-based compensation expense is recognized on a straight-line basis over the vesting period of equity-based awards.

13 unchanged sentences

Stock options expire ten years after the grant date.

The following table summarizes stock option transactions for the three months ended March 31, 2024 :

The following table summarizes stock option transactions for the six months ended June 30, 2024 :

Number of shares

3 unchanged sentences

Outstanding at January 1, 2024

807,685 $ 34.31 — $ —

Options granted

Options exercised

( 52,722 ) 35.22

Options canceled

( 5,724 ) 67.05

Outstanding at March 31, 2024

749,239 $ 33.99 5.7 $ 38,564

Vested and Exercisable at March 31, 2024

709,725 $ 32.56 5.6 $ 37,551

As of March 31, 2024 , the Company had approximately $ 0.9 million of total unrecognized stock-based compensation expense related to stock options expected to be recognized over a weighted-average period of 0.8 years.

Options cancelled

Outstanding at June 30, 2024

Vested and Exercisable at June 30, 2024

As of June 30, 2024 , the Company had approximately $ 0.6 million of total unrecognized stock-based compensation expense related to stock options expected to be recognized over a weighted-average period of 0.6 years.

Restricted Stock Units

2 unchanged sentences

All vesting is subject to continued service.

The following table summarizes RSU transactions for the three months ended March 31, 2024 :

The following table summarizes RSU transactions for the six months ended June 30, 2024 :

Number of shares

1 unchanged sentence

Outstanding at January 1, 2024

333,716 $ 61.01

105,370 62.60

( 72,900 ) 56.05

( 8,184 ) 52.15

Non-vested outstanding at March 31, 2024

358,002 $ 62.69

As of March 31, 2024 , the Company had approximately $ 19.1 million of total unrecognized stock-based compensation expense related to RSUs expected to be recognized over a weighted-average period of 2.2 years.

Non-vested outstanding at June 30, 2024

As of June 30, 2024 , the Company had approximately $ 18.0 million of total unrecognized stock-based compensation expense related to RSUs expected to be recognized over a weighted-average period of 2.1 years.

Performance Stock Units

3 unchanged sentences

If the Company’s stock price reaches and remains at certain milestones for 30 days, the PSUs shall become earned units and will vest upon completion of a requisite service period of approximately five years from the date of grant.

As of March 31, 2024 , none of the stock price milestones have been achieved.

As of June 30, 2024 , none of the stock price milestones have been achieved.

For other PSUs outstanding, vesting of PSUs requires a period of future service and the number of shares that vest depends on performance relative to predetermined targets of the Company’s Gross Written Premiums and Adjusted Return on Equity as set by the Compensation Committee.

3 unchanged sentences

The earned PSUs are also subject to a required service period of approximately three years from the grant date before vesting and being issued as common stock.

The following table summarizes PSU transactions for the three months ended March 31, 2024 :

The following table summarizes PSU transactions for the six months ended June 30, 2024 :

Number of shares

1 unchanged sentence

Outstanding at January 1, 2024

423,621 $ 38.90

( 12,645 ) 96.74

( 4,944 ) 50.19

Non-vested outstanding at March 31, 2024

461,037 $ 40.33

Non-vested outstanding at June 30, 2024

The PSU grants above represent the number of shares that would vest based on achievement of all stock price milestones in the 2021 executive stock grants and the 100 % achievement of the predetermined performance conditions for the other PSU grants.

The actual number of PSUs which will vest is subject to adjustment based on the Company’s actual stock price performance and financial performance relative to the predetermined targets.

As of March 31, 2024 , the Company had approximately $ 11.8 million of total unrecognized stock-based compensation expense related to PSUs expected to be recognized over a weighted-average period of 2.4 years.

As of June 30, 2024 , the Company had approximately $ 10.5 million of total unrecognized stock-based compensation expense related to PSUs expected to be recognized over a weighted-average period of 2.1 years.

2019 Employee Stock Purchase Plan

5 unchanged sentences

During each discrete offering period employee funds are withheld, and the stock purchase occurs upon the conclusion of the offering period.

The Company issued 9,806 shares pursuant to the ESPP during the three months ended March 31, 2024 .

The Company issued 9,806 shares pursuant to the ESPP during the six months ended June 30, 2024 .

Share repurchases

In January 2022, Company's the Board of Directors approved a share repurchase program which replaced the existing program and authorized the repurchase of up to $ 100 million of outstanding shares of common stock.

There were no share repurchases under this program during the three months ended March 31, 2024 .

The program ended on March 31, 2024 and no additional shares may be repurchased under this plan.

The program ended on March 31, 2024 and no shares have been repurchased in 2024.

The Company accounts for share repurchases by charging the excess of repurchase price over the common stock’s par value entirely to retained earnings.

2 unchanged sentences

Changes in accumulated other comprehensive income (loss) (“AOCI”) are as follows:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

Beginning Balance

$ ( 23,991 ) $ ( 36,515 )

Other comprehensive (loss) income before reclassification

( 3,185 ) 6,956

Federal income tax expense (benefit)

669 ( 1,460 )

Other comprehensive (loss) income before reclassification, net of tax

( 2,516 ) 5,496

Amounts reclassified from AOCI

2 unchanged sentences

Other comprehensive (loss) income

( 2,514 ) 5,474

Balance at end of period

$ ( 26,505 ) $ ( 31,041 )

Underwriting Information

1 unchanged sentence

Gross written premiums (“GWP”) by product are presented below:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

$ 105,729 28.7 % $ 93,495 37.4 %

94,831 25.8 % 91,755 36.7 %

($ in thousands)

Inland Marine and Other Property

76,876 20.9 % 52,705 21.1 %

51,935 14.1 % 12,157 4.9 %

38,707 10.5 % — — %

Total Gross Written Premiums

$ 368,078 100.0 % $ 250,112 100.0 %

( 1 ) - Beginning in 2024, the Company has updated the categorization of its products to align with management's current strategy and view of the business.

2 unchanged sentences

Gross written premiums by state are as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

$ 157,217 42.7 % $ 131,889 52.7 %

40,795 11.1 % 23,210 9.3 %

13,924 3.8 % 12,096 4.8 %

12,516 3.4 % 10,105 4.0 %

12,002 3.3 % 11,972 4.8 %

9,605 2.6 % 1,848 0.7 %

8,030 2.2 % 3,871 1.5 %

7,469 2.0 % 194 0.1 %

106,520 28.9 % 54,927 22.0 %

($ in thousands)

Total Gross Written Premiums

$ 368,078 100.0 % $ 250,112 100.0 %

Gross written premiums by insurance subsidiary are as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

$ 222,657 60.5 % $ 150,704 60.3 %

136,493 37.1 % 99,408 39.7 %

8,928 2.4 % — — %

($ in thousands)

Total Gross Written Premiums

$ 368,078 100.0 % $ 250,112 100.0 %

The Company calculates its tax provision in interim periods using its best estimate of the effective tax rate expected for the full year.

During the three months ended March 31, 2024 , the Company’s income tax rate of 23.2 % was higher than the statutory rate of 21 % due primarily to non-deductible executive compensation expense.

During the three months ended March 31, 2023 , the Company’s income tax rate of 23.5 % was higher than the statutory rate of 21 % also due primarily to non-deductible executive compensation expense.

During the three months ended June 30, 2024 , the Company’s income tax rate of 22.9 % was higher than the statutory rate of 21 % due primarily to non-deductible executive compensation expense.

During the three months ended June 30, 2023 , the Company’s income tax rate of 23.7 % was higher than the statutory rate of 21 % also due primarily to non-deductible executive compensation expense.

For the six months ended June 30, 2024 , the Company’s tax rate of 23.1 % was higher than the statutory rate due primarily to non-deductible executive compensation expense.

For the six months ended June 30, 2023 , the Company’s tax rate of 23.6 % was higher than the statutory rate also due primarily to non-deductible executive compensation expense.

Earnings Per Share

The following table sets out earnings per share of common stock:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except shares and per share data)

$ 25,729 $ 17,562 $ 52,111 $ 34,874

10 unchanged sentences

The Company utilizes both excess of loss (XOL) and quota share reinsurance.

As of March 31, 2024 , the Company’s catastrophe event retention is $ 17.5 million for all perils and the Company’s XOL reinsurance structure provides protection up to $ 2.71 billion for earthquake events, $ 800 million for Hawaii hurricane events, and $ 100 million for continental U.S.

As of June 30, 2024 , the Company’s catastrophe event retention is $ 20 million for earthquake events and $ 15.5 million for hurricane events and all other perils, and the Company’s XOL reinsurance structure provides protection up to $ 3.06 billion for earthquake events, $ 735 million for Hawaii hurricane events, and $ 117.5 million for continental U.S.

hurricane events.

9 unchanged sentences

This catastrophe bond was also completed through Torrey Pines Re Ltd and provides indemnity-based reinsurance covering earthquake events through June 1, 2026.

During the second quarter of 2024, the Company also closed a $ 420 million 144A catastrophe bond which became effective June 1, 2024.

This catastrophe bond was also completed through Torrey Pines Re Ltd and provides indemnity-based reinsurance covering earthquake events through June 1, 2027.

Credit Agreements

11 unchanged sentences

If an event of default occurs, any debt may be declared immediately due and payable.

As of March 31, 2024 , the Company was in compliance with all debt covenants.

As of March 31, 2024 and December 31, 2023 , the Company had no borrowings outstanding on the Credit Agreement.

Interest expense on the Credit Agreement was $ 0.1 million and $ 0.6 million for the three months ended March 31, 2024 and March 31, 2023 , respectively.

As of June 30, 2024 , the Company was in compliance with all debt covenants.

As of June 30, 2024 and December 31, 2023 , the Company had no borrowings outstanding on the Credit Agreement.

Interest expense on the Credit Agreement was $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2024 , respectively.

Interest expense on the Credit Agreement was $ 0.2 million and $ 0.8 million for the three and six months ended June 30, 2023 , respectively.

FHLB Line of Credit

3 unchanged sentences

All advances have a predetermined term and the interest rate varies based on the term of the advance.

As of March 31, 2024 , the Company had $ 43.0 million of borrowings outstanding through the FHLB at the overnight rate of 5.60 %.

Interest expense on the FHLB line of credit was $ 0.7 million for the three months ended March 31, 2024 .

As of June 30, 2024 , the Company had no borrowings outstanding through the FHLB.

Interest expense on the FHLB line of credit was $ 0.1 million and $ 0.8 million for the three and six months ended June 30, 2024 , respectively.

As of December 31, 2023 , the Company had $ 52.6 million of borrowings outstanding through the FHLB at the overnight rate of 5.62 %.

Interest expense on the FHLB Line of Credit was $ 0.4 million for the three months ended March 31, 2023 .

Interest expense on the FHLB line of credit was $ 0.8 million and $ 1.3 million for the three and six months ended June 30, 2023 , respectively.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

1 unchanged sentence

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2024, or for any other future period.

The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2024, or for any other future period.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report, and in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K as filed with the SEC on February 23, 2024.

2 unchanged sentences

We are a specialty insurance company that provides property and casualty insurance products to individuals and businesses.

We use our underwriting and analytical expertise to provide products for select markets that we believe are underserved by other insurance companies, including the market for earthquake insurance.

We use our underwriting and analytical expertise to provide innovative solutions in five product categories:

Earthquake, Inland Marine and Other Property, Casualty, Fronting, and Crop.

We use proprietary data analytics and a modern technology platform to offer our customers flexible products with customized and granular pricing for both the admitted and excess and surplus lines (“E&S”) markets.

We provide admitted insurance products through our Oregon domiciled insurance company, Palomar Specialty Insurance Company (“PSIC”), and E&S insurance products through our Arizona domiciled surplus lines insurance company, Palomar Excess and Surplus Insurance Company (“PESIC”).

Each of our insurance company subsidiaries as carries an “A-“ rating from A.M.

Each of our insurance company subsidiaries carries an “A“ rating from A.M.

Best Company (“A.M.

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We believe that our market opportunity, distinctive products, and differentiated business model position us to grow our business profitably.

Recent Developments

In June 2024, the Company executed a definitive purchase agreement to acquire First Indemnity of America Insurance Company (“FIA”), a New Jersey domiciled insurance carrier that specializes in the underwriting of surety bonds for small to medium sized contractors primarily in the Northeast United States.

FIA is licensed in 16 states and is rated "A-" by A.M.

The transaction has been approved by the respective board of directors of both companies and is expected to close in late 2024 or early 2025 subject to the satisfaction of customary closing conditions and regulatory approval by the New Jersey Department of Banking and Insurance.

Components of Our Results of Operations

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In periods where we modify a quota share agreement, ceded written premiums may increase or decrease significantly compared to prior periods and these fluctuations may not be indicative of future trends.

Our XOL costs as a percentage of gross earned premiums also may vary each period due to changes in cost of XOL between contract periods, changes of premium in-force during the XOL contract period, or due to acceleration of XOL charges or the need to purchase additional reinsurance due to losses.

In addition, the volume of premiums ceded in fronting agreements each period may vary due to the timing of entering new fronting partnerships and terminations of fronting partnerships.

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Results of Operations

Three months ended March 31, 2024 compared to three months ended March 31, 2023

The following table summarizes our results for the three months ended March 31, 2024 and 2023:

Three months ended June 30, 2024 compared to three months ended June 30, 2023

The following table summarizes our results for the three months ended June 30, 2024 and 2023:

Three Months Ended

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Net realized and unrealized gains on investments

Expenses associated with transactions

Stock-based compensation expense

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Gross Written Premiums

Gross written premiums increased $118.0 million, or 47.2% to $368.1 million for the three months ended March 31, 2024 compared to $250.1 million for the three months ended March 31, 2023.

Gross written premiums increased $110.9 million, or 40.4% to $385.2 million for the three months ended June 30, 2024 compared to $274.3 million for the three months ended June 30, 2023.

Premium growth was primarily due to an increased volume of policies written across our lines of business which was driven by new business generated with existing partners, strong premium retention rates for existing business, expansion of our distribution footprint, and new partnerships.

The following table summarizes our gross written premiums by line of business and shows each line’s percentage of total gross written premiums for each period:

Three Months Ended March 31,

Three Months Ended June 30,

($ in thousands)

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Total Gross Written Premiums

NM - not meaningful

(1) - Beginning in 2024, the Company has updated the categorization of its products to align with management's current strategy and view of the business.

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The following table summarizes our gross written premiums by insurance subsidiary:

Three Months Ended March 31,

Three Months Ended June 30,

($ in thousands)

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Ceded Written Premiums

Ceded written premiums increased $57.8 million, or 33.9%, to $228.2 million for the three months ended March 31, 2024 from $170.3 million for the three months ended March 31, 2023.

Ceded written premiums increased $40.1 million, or 23.7%, to $209.2 million for the three months ended June 30, 2024 from $169.1 million for the three months ended June 30, 2023.

The increase was primarily due to increased premiums ceded under quota share and fronting agreements due to growth in the volume of written premiums subject to quota share or fronting agreements.

In addition, we incurred increased XOL reinsurance expense due to growth in exposure and higher rates on XOL reinsurance.

Ceded written premiums as a percentage of gross written premiums decreased to 62.0% for the three months ended March 31, 2024 from 68.1% for the three months ended March 31, 2023.

This decrease was primarily due to gross written premiums growing at a higher percentage than ceded written premiums during the current quarter.

Although our volume of ceded written premiums increased, ceded written premiums as a percentage of gross written premiums decreased to 54.3% for the three months ended June 30, 2024 from 61.7% for the three months ended June 30, 2023.

This percentage decrease was driven by changes in our composition of business whereby premiums written in the current period were subject to lower quota share or XOL cession percentages compared to premiums written in the prior period.

Net Written Premiums

Net written premiums increased $60.1 million, or 75.4%, to $139.9 million for the three months ended March 31, 2024 from $79.8 million for the three months ended March 31, 2023.

The increase was primarily due to an increase in gross written premiums, primarily in our Casualty and Inland Marine and Other Property lines, partially offset by increased ceded written premiums.

Net written premiums increased $70.8 million, or 67.3%, to $176.0 million for the three months ended June 30, 2024 from $105.2 million for the three months ended June 30, 2023.

The increase was primarily due to an increase in gross written premiums, primarily in our Casualty and Earthquake lines, partially offset by increased ceded written premiums.

Net Earned Premiums

Net earned premiums increased $24.6 million, or 29.6%, to $107.9 million for the three months ended March 31, 2024 from $83.2 million for the three months ended March 31, 2023 due primarily to the earning of increased gross written premiums offset by the earning of ceded written premiums under reinsurance agreements.

Net earned premiums increased $39.2 million, or 47.1%, to $122.3 million for the three months ended June 30, 2024 from $83.1 million for the three months ended June 30, 2023 due primarily to the earning of increased gross written premiums offset by the earning of ceded written premiums under reinsurance agreements.

The table below shows the amount of premiums we earned on a gross and net basis and net earned premiums as a percentage of gross earned premiums in each period presented:

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Net earned premium ratio

The decline in net earned premium ratio shown above was primarily caused by an increase to ceded earned premium on quota share and fronting arrangements driven by growth in lines of business subject to a quota share or fronting arrangement during the past 12 months.

Our net earned premium ratio increased due to changes in our composition of business whereby premiums earned in the current period were subject to lower quota share or XOL cession percentages compared to premiums earned in the prior period.

Commission and Other Income

Commission and other income decreased $0.2 million to $0.5 million for the three months ended March 31, 2024 from $0.7 million for the three months ended March 31, 2023.

The balance decreased due to a decrease in commissions and policy related fees caused by changes in our business mix.

Commission and other income increased $0.2 million to $0.8 million for the three months ended June 30, 2024 from $0.6 million for the three months ended June 30, 2023.

The balance increased due to an increase in commissions and policy related fees driven by increased premiums written.

Losses and Loss Adjustment Expenses

Losses and loss adjustment expenses increased $6.2 million, or 29.9% to $26.8 million for the three months ended March 31, 2024 from $20.7 million for the three months ended March 31, 2023.

Losses and loss adjustment expenses increased $12.5 million, or 70.0% to $30.4 million for the three months ended June 30, 2024 from $17.9 million for the three months ended June 30, 2023.

Losses and loss adjustment expenses consisted of the following elements during the respective periods:

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Total losses and loss adjustment expenses

Our catastrophe loss ratio was 3.1% during the three months ended March 31, 2024.

Catastrophe losses were primarily related to flood losses.

Our catastrophe loss ratio was 2.2% during the three months ended March 31, 2023.

Catastrophe losses were also primarily related to flood losses, offset by favorable development on prior period events.

Our non-catastrophe loss ratio was 21.8% for the three months ended March 31, 2024 compared to 22.6% during the three months ended March 31, 2023.

Non-catastrophe loss ratio decreased due to lower attritional losses on lines of business subject to attritional losses such as Casualty and Inland Marine and other Property.

Our catastrophe loss ratio was 2.8% and 2.6% for the three months ended June 30, 2024 and June 30, 2023, respectively.

Catastrophe losses were primarily related to severe convective storms for both periods.

Our non-catastrophe loss ratio was 22.1% for the three months ended June 30, 2024 compared to 18.9% during the three months ended June 30, 2023.

Non-catastrophe losses increased due mainly to higher attritional losses on lines of business subject to attritional losses such as Casualty and Inland Marine and Other Property due to premium growth in these lines of business.

Acquisition Expenses

Acquisition expenses increased $6.1 million, or 23.8%, to $31.8 million for the three months ended March 31, 2024 from $25.7 million for the three months ended March 31, 2023.

Acquisition expenses increased $9.7 million, or 37.4%, to $35.8 million for the three months ended June 30, 2024 from $26.1 million for the three months ended June 30, 2023.

The increase was primarily due to higher commissions and premium-related taxes resulting from higher gross earned premiums.

This was partially offset by higher earned ceding commissions and fronting fees due to an increase in premiums subject to a quota share or fronting agreement.

Acquisition expenses as a percentage of gross earned premiums were 10.5% for the three months ended March 31, 2024 compared to 11.4% for the three months ended March 31, 2023.

Acquisition expenses as a percentage of gross earned premiums decreased due to the recognition of higher ceding commission and fronting fee income as a percentage of gross earned premiums resulting from growth in lines of business subject to a quota share and fronting premiums during the past 12 months.

Acquisition expenses as a percentage of gross earned premiums were 11.0% for the three months ended June 30, 2024 compared to 10.8% for the three months ended June 30, 2023.

Acquisition expenses as a percentage of gross earned premiums increased due to higher commissions and premium-related taxes as a percentage of gross earned premiums and lower ceded commissions and fronting fees as a percentage of gross earned premiums due to changes in the composition of our business.

Other Underwriting Expenses

Other underwriting expenses increased $5.6 million, or 29.0%, to $24.8 million for the three months ended March 31, 2024 from $19.2 million for the three months ended March 31, 2023.

Other underwriting expenses increased $8.9 million, or 39.7%, to $31.2 million for the three months ended June 30, 2024 from $22.4 million for the three months ended June 30, 2023.

The increase was primarily due to the Company incurring higher payroll, technology, and stock-based compensation expenses associated with growth of the Company.

Other underwriting expenses as a percentage of gross earned premiums were 8.2% for the three months ended March 31, 2024 compared to 8.5% for the three months ended March 31, 2023.

Excluding the impact of expenses relating to stock-based compensation, catastrophe bonds, and amortization of intangibles, other underwriting expenses as a percentage of gross earned premiums were 6.8% for the three months ended March 31, 2024 compared to 6.8% for the three months ended March 31, 2023.

Other underwriting expenses as a percentage of gross earned premiums were 9.6% for the three months ended June 30, 2024 compared to 9.2% for the three months ended June 30, 2023.

Excluding the impact of expenses relating to transactions, stock-based compensation, catastrophe bonds, and amortization of intangibles, other underwriting expenses as a percentage of gross earned premiums were 7.3% for the three months ended June 30, 2024 compared to 6.9% for the three months ended June 30, 2023.

Other underwriting expenses as a percentage of gross earned premiums may fluctuate period over period based on timing of certain expenses relative to premium growth.

Net Investment Income and Net Realized and Unrealized Gains (Losses) on Investments

Net investment income increased $2.0 million, or 39.4%, to $7.1 million for the three months ended March 31, 2024 from $5.1 million for the three months ended March 31, 2023.

The increase was primarily due to a higher average balance of investments during the three months ended March 31, 2024 and higher yields on invested assets.

The Company incurred $3.0 million of net realized and unrealized gains on investments for the three months ended March 31, 2024 compared to $0.1 million of net realized and unrealized gains for the three months ended March 31, 2023 In both periods, the balance was primarily driven by unrealized gains on our equity securities.

Net investment income increased $2.4 million, or 43.7%, to $8.0 million for the three months ended June 30, 2024 from $5.5 million for the three months ended June 30, 2023.

The increase was primarily due to a higher average balance of investments during the three months ended June 30, 2024 and higher yields on invested assets.

The Company incurred insignificant net realized and unrealized gains on investments for the three months ended June 30, 2024 compared to $1.1 million of net realized and unrealized gains for the three months ended June 30, 2023 In both periods, the balance was primarily driven by unrealized gains on our equity securities.

Unrealized gains and losses on fixed maturity securities are recognized as a component of other comprehensive income and do not impact our net income.

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Income Tax Expense

Income tax expense increased $2.7 million to $8.0 million for the three months ended March 31, 2024 from $5.3 million for the three months ended March 31, 2023 due to higher pre-tax income for the period ended March 31, 2024.

During the three months ended March 31, 2024, our income tax rate of 23.2% was higher than the statutory rate of 21% due primarily to non-deductible executive compensation expense.

During the three months ended March 31, 2023, our income tax rate of 23.5% was higher than the statutory rate of 21% also due primarily to non-deductible executive compensation expense.

Income tax expense increased $2.2 million to $7.6 million for the three months ended June 30, 2024 from $5.5 million for the three months ended June 30, 2023 due to higher pre-tax income for the period ended June 30, 2024.

During the three months ended June 30, 2024, our income tax rate of 22.9% was higher than the statutory rate of 21% due primarily to non-deductible executive compensation expense.

During the three months ended June 30, 2023, our income tax rate of 23.7% was higher than the statutory rate of 21% also due primarily to non-deductible executive compensation expense.

Results of Operations

Six months ended June 30, 2024 compared to six months ended June 30, 2023

The following table summarizes our results for the six months ended June 30, 2024 and 2023:

Six Months Ended

($ in thousands, except per share data)

Gross written premiums

Ceded written premiums

Net written premiums

Net earned premiums

Commission and other income

Total underwriting revenue (1)

Losses and loss adjustment expenses

Acquisition expenses, net of ceding commissions and fronting fees

Other underwriting expenses

Underwriting income (1)

Interest expense

Net investment income

Net realized and unrealized gains on investments

Income before income taxes

Income tax expense

Net realized and unrealized gains on investments

Expenses associated with transactions

Stock-based compensation expense

Amortization of intangibles

Expenses associated with catastrophe bond

Adjusted net income (1)

Key Financial and Operating Metrics

Annualized return on equity

Annualized adjusted return on equity (1)

Expense ratio

Combined ratio

Adjusted combined ratio (1)

Diluted earnings per share

Diluted adjusted earnings per share (1)

Catastrophe losses

Catastrophe loss ratio (1)

Adjusted combined ratio excluding catastrophe losses (1)

Adjusted underwriting income (1)

Indicates non-GAAP financial measure;

see “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures prepared in accordance with GAAP.

Gross Written Premiums

Gross written premiums increased $228.9 million, or 43.6% to $753.3 million for the six months ended June 30, 2024 compared to $524.4 million for the six months ended June 30, 2023.

The following table summarizes our gross written premiums by line of business and shows each line’s percentage of total gross written premiums for each period:

Six Months Ended June 30,

($ in thousands)

Inland Marine and Other Property

Total Gross Written Premiums

NM - not meaningful

(1) - Beginning in 2024, the Company has updated the categorization of its products to align with management's current strategy and view of the business.

Prior year amounts have been reclassified for comparability purposes.

The recategorization is for presentation purposes only and does not impact overall gross written premiums.

Fronting premiums represent premium where we subsequently cede the majority of the premium and risk in exchange for a fronting fee, which is our primary source of profit in the arrangement.

The volume of fronting premiums written each period may vary due to the timing of entering new fronting partnerships and terminations of existing fronting partnerships.

The following table summarizes our gross written premiums by insurance subsidiary:

Six Months Ended June 30,

($ in thousands)

Total Gross Written Premiums

Ceded Written Premiums

Ceded written premiums increased $97.9 million, or 28.8%, to $437.4 million for the six months ended June 30, 2024 from $339.5 million for the six months ended June 30, 2023.

The increase was primarily due to increased premium ceded under quota share and fronting agreements due to growth in fronting premiums written and growth in the volume of written premiums subject to quota shares.

In addition, we incurred increased XOL reinsurance expense due to growth in exposure, in addition to higher rates on XOL reinsurance.

Although our volume of ceded written premiums increased, ceded written premiums as a percentage of gross written premiums decreased to 58.1% for the six months ended June 30, 2024 from 64.7% for the six months ended June 30, 2023.

Net Written Premiums

Net written premiums increased $131.0 million, or 70.8%, to $315.9 million for the six months ended June 30, 2024 from $185.0 million for the six months ended June 30, 2023.

The increase was primarily due to an increase in gross written premiums, primarily in our Casualty and Inland Marine and Other Property lines, partially offset by increased ceded written premiums.

Net Earned Premiums

Net earned premiums increased $63.8 million, or 38.4%, to $230.2 million for the six months ended June 30, 2024 from $166.3 million for the six months ended June 30, 2023 due primarily to the earning of increased gross written premiums offset by the earning of ceded written premiums under reinsurance agreements.

The table below shows the amount of premiums we earned on a gross and net basis and net earned premiums as a percentage of gross earned premiums in each period presented.

Six Months Ended

($ in thousands)

Gross earned premiums

Ceded earned premiums

Net earned premiums

Net earned premium ratio

Commission and Other Income

Commission and other income was $1.3 million both for the six months ended June 30, 2024 and the six months ended June 30, 2023.

While increased premiums drove higher commissions and policy related fees, this was offset by changes in mix of business to lines with lower commissions and policy related fees.

Losses and Loss Adjustment Expenses

Losses and loss adjustment expenses increased $18.7 million to $57.3 million for the six months ended June 30, 2024 from $38.6 million for the six months ended June 30, 2023.

Losses and loss adjustment expenses consisted of the following elements during the respective periods:

Six Months Ended

($ in thousands)

Catastrophe losses

Non-catastrophe losses

Total losses and loss adjustment expenses

Our catastrophe loss ratio was 3.0% and 2.4% for the six months ended June 30, 2024 and June 30, 2023, respectively.

Catastrophe losses were related to floods occurring during the first quarter and severe convective storms occurring during the second quarter for both years.

Our non-catastrophe loss ratio was 21.9% for the six months ended June 30, 2024 compared to 20.8% during the six months ended June 30, 2023.

Acquisition Expenses

Acquisition expenses increased $15.9 million, or 30.7%, to $67.6 million for the six months ended June 30, 2024 from $51.7 million for the six months ended June 30, 2023.

The increase was primarily due to higher commissions and premium-related taxes resulting from higher gross earned premiums.

This was partially offset by higher earned ceding commissions and fronting fees due to an increase in premiums subject to a quota share or fronting agreement.

Acquisition expenses as a percentage of gross earned premiums were 10.7% for the six months ended June 30, 2024 compared to 11.1% for the six months ended June 30, 2023.

Other Underwriting Expenses

Other underwriting expenses increased $14.5 million, or 34.8%, to $56.0 million for the six months ended June 30, 2024 from $41.6 million for the six months ended June 30, 2023.

The increase was primarily due to the Company incurring higher payroll, technology, stock-based compensation, and professional fees expenses associated with growth of the Company.

Other underwriting expenses as a percentage of gross earned premiums were 8.9% for the six months ended June 30, 2024 compared to 8.9% for the six months ended June 30, 2023.

Excluding the impact of expenses relating to transactions, stock-based compensation, amortization of intangibles, and catastrophe bonds, other underwriting expenses as a percentage of gross earned premiums were 7.1% for the six months ended June 30, 2024 compared to 6.9% for the six months ended June 30, 2023.

Other underwriting expenses as a percentage of gross earned premiums may fluctuate period over period based on timing of certain expenses relative to premium growth.

Net Investment Income and Net Realized and Unrealized Gains (Losses) on Investments

Net investment income increased $4.4 million, or 41.6%, to $15.1 million for the six months ended June 30, 2024 from $10.7 million for the six months ended June 30, 2023.

The increase was primarily due to a higher average balance of investments during the six months ended June 30, 2024 and higher yields on invested assets.

The Company incurred $3.0 million of net realized and unrealized gains on investments for the six months ended June 30, 2024 compared to $1.3 million of net realized and unrealized gains for the six months ended June 30, 2023 due primarily to higher gains on our equity securities during the period ended June 30, 2024 compared to the period ended June 30, 2023.

Unrealized gains and losses on fixed maturity securities are recognized as a component of other comprehensive income and do not impact our net income.

The following table summarizes the components of our investment income for each period presented:

Six Months Ended

($ in thousands)

Interest income

Dividend income

Investment management fees and expenses

Net investment income

Net realized and unrealized gains on investments

Income Tax Expense

Income tax expense increased $4.8 million or 45.0% to $15.6 million for the six months ended June 30, 2024 from $10.8 million for the six months ended June 30, 2023 due to higher pre-tax income and a higher effective tax rate during the six months ended June 30, 2024.

During the six months ended June 30, 2024, our income tax rate of 23.1% was higher than the statutory rate of 21% due primarily to non-deductible executive compensation expense.

For the six months ended June 30, 2023 our income tax rate of 23.6% was higher than the statutory rate also due primarily to non-deductible executive compensation expense.

Reconciliation of Non ‑ GAAP Financial Measures

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Three Months Ended

Six Months Ended

(in thousands)

Total revenue

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Three Months Ended

Six Months Ended

(in thousands)

Income before income taxes

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Underwriting income

Expenses associated with transactions

Stock-based compensation expense

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Three Months Ended

Six Months Ended

(in thousands)

Net realized and unrealized gains on investments

Expenses associated with transactions

Stock-based compensation expense

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Three Months Ended

Six Months Ended

(in thousands)

Annualized adjusted net income

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Three Months Ended

Six Months Ended

(in thousands)

Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income

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Adjustments to numerator:

Expenses associated with transactions

Stock-based compensation expense

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Three Months Ended

Six Months Ended

(in thousands, except per share data)

Adjusted net income

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Three Months Ended

Six Months Ended

(in thousands)

Losses and loss adjustment expenses

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Three Months Ended

Six Months Ended

(in thousands)

Sum of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses, net of commission and other income

2 unchanged sentences

Adjustments to numerator:

Expenses associated with transactions

Stock-based compensation expense

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Management believes that our current liquidity and cash receipts from written premiums, investment income, proceeds from investment sales and redemptions, and reinsurance recoveries, if necessary, are sufficient to cover cash outflows for each of the Company’s insurance subsidiaries in the foreseeable future.

The following table summarizes our cash flows for the three months ended March 31, 2024 and 2023:

Three Months Ended

The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023:

Six Months Ended

($ in thousands)

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Change in cash, cash equivalents, and restricted cash

Our cash flow from operating activities was positive during the three months ended March 31, 2024 and 2023 due to net income and a decrease in net operating assets in each period.

Our cash flow from operating activities was positive during the six months ended June 30, 2024 and 2023 due to net income and a decrease in net operating assets in each period.

Variations in operating cash flow between periods are primarily driven by variations in our gross and ceded written premiums and the volume and timing of premium receipts, claim payments, reinsurance payments, and reinsurance recoveries on paid losses.

In addition, fluctuations in losses and loss adjustment expenses and other insurance operating expenses impact operating cash flows.

Cash used in investing activities for the three months ended March 31, 2024 and 2023 related primarily to purchases of fixed maturity securities in excess of sales and maturities in each period.

Cash used in financing activities for three months ended March 31, 2024 was related to $9.6 million in payments on our lines of credit, offset by the receipt of $1.9 million in proceeds from stock option exercises and the receipt of $0.4 million in proceeds from our employee stock purchase plan.

Cash provided by financing activities for three months ended March 31, 2023 was related to $35.0 million in borrowings from our FHLB line of credit, the receipt of $0.1 million in proceeds from stock option exercises and the receipt of $0.4 million in proceeds from our employee stock purchase plan, offset by the repurchase of $6.8 million of our common stock.

Cash used in investing activities for the six months ended June 30, 2024 and 2023 related primarily to purchases of fixed maturity securities in excess of sales and maturities in each period.

Cash used in financing activities for six months ended June 30, 2024 was related to $52.6 million in payments on our lines of credit, offset by the receipt of $4.0 million in proceeds from stock option exercises, the receipt of $0.4 million in proceeds from our employee stock purchase plan and the receipt of $1.1 million in proceeds from policy holder contributions of surplus.

Cash provided by financing activities for six months ended June 30, 2023 was related to $35.0 million in borrowings from our FHLB line of credit, the receipt of $0.3 million in proceeds from stock option exercises and the receipt of $0.4 million in proceeds from our employee stock purchase plan, offset by the repurchase of $15.6 million of our common stock.

We do not have any current plans for material capital expenditures other than current operating requirements.

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The key factor that will affect our future operating cash flows is the frequency and severity of catastrophe losses.

To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $766.4 million in cash and investment securities available at March 31, 2024.

To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $777.9 million in cash and investment securities available at June 30, 2024.

We also have the ability to access additional capital through pursuing third‑party borrowings, sales of our equity or debt securities or entrance into a reinsurance arrangement.

Share Repurchases

We also have implemented a share repurchase plan and have used and may use our cash in the future to purchase outstanding shares of our common stock.

Under our current share repurchase program, shares may be repurchased from time to time in the open market or negotiated transactions at prevailing market rates, or by other means in accordance with federal securities laws.

There were no share repurchases during the three months ended March 31, 2024.

The program ended on March 31, 2024 and no additional shares may be repurchased under this plan.

We have previously implemented a share repurchase plan and have used and may use our cash in the future to purchase outstanding shares of our common stock.

Under our previous share repurchase program, shares were repurchased from time to time in the open market or negotiated transactions at prevailing market rates, or by other means in accordance with federal securities laws.

The program ended on March 31, 2024 and no shares have been repurchased in 2024.

The Company accounts for share repurchases by charging the excess of repurchase price over the common stock’s par value entirely to retained earnings.

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Currently, $15 million of the borrowing capacity of the Credit Agreement is pledged as collateral and not able to be utilized.

As of March 31, 2024, we had no borrowings outstanding through the Credit Agreement.

As of June 30, 2024, we had no borrowings outstanding through the Credit Agreement.

Our PSIC subsidiary is a member of the Federal Home Loan Bank of San Francisco (“FHLB”).

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All advances have predetermined term and the interest rate varies based on the term of the advance.

As of March 31, 2024, we had $43.0 million of borrowings outstanding through the FHLB line of credit.

As of June 30, 2024, we had no borrowings outstanding through the FHLB line of credit.

Stockholders ’ Equity

At March 31, 2024 total stockholders’ equity was $501.7 million and tangible stockholders’ equity was $489.7 million, compared to total stockholders’ equity of $471.3 million and tangible stockholders’ equity of $458.9 million as of December 31, 2023.

At June 30, 2024 total stockholders’ equity was $532.6 million and tangible stockholders’ equity was $521.1 million, compared to total stockholders’ equity of $471.3 million and tangible stockholders’ equity of $458.9 million as of December 31, 2023.

Stockholder’s equity increased primarily due to net income earned for the period, activity related to stock-based compensation, and unrealized gains on fixed maturity securities.

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Our cash and invested assets consist of cash and cash equivalents, fixed maturity securities, and equity securities.

As of March 31, 2024, the majority of our investment portfolio, or $663.0 million, was comprised of fixed maturity securities that are classified as available‑for‑sale and carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income.

As of June 30, 2024, the majority of our investment portfolio, or $687.1 million, was comprised of fixed maturity securities that are classified as available‑for‑sale and carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income.

Also included in our investment portfolio were $37.8 million of equity securities, $2.4 million of equity method investments and $2.6 million of investments in limited partnerships.

In addition, we maintained a non‑restricted cash and cash equivalent balance of $61.4 million at March 31, 2024.

Our fixed maturity securities, including cash equivalents, had a weighted average effective duration of 3.62 and 3.48 years and an average rating of “A1/A+” and “Aa3/A+” at March 31, 2024 and December 31, 2023, respectively.

Our fixed income investment portfolio had a book yield of 4.19% as of March 31, 2024, compared to 4.07% as of December 31, 2023.

At March 31, 2024 and December 31, 2023 the amortized cost and fair value on available‑for‑sale securities were as follows:

March 31, 2024

In addition, we maintained a non‑restricted cash and cash equivalent balance of $47.8 million at June 30, 2024.

Our fixed maturity securities, including cash equivalents, had a weighted average effective duration of 3.73 and 3.48 years and an average rating of “A1/A+” and “Aa3/A+” at June 30, 2024 and December 31, 2023, respectively.

Our fixed income investment portfolio had a book yield of 4.30% as of June 30, 2024, compared to 4.07% as of December 31, 2023.

At June 30, 2024 and December 31, 2023 the amortized cost and fair value on available‑for‑sale securities were as follows:

June 30, 2024

($ in thousands)

13 unchanged sentences

Total available-for-sale investments

The following tables provide the credit quality of investment securities as of March 31, 2024 and December 31, 2023:

March 31, 2024

The following tables provide the credit quality of investment securities as of June 30, 2024 and December 31, 2023:

June 30, 2024

($ in thousands)

1 unchanged sentence

($ in thousands)

The amortized cost and fair value of our available‑for‑sale investments in fixed maturity securities summarized by contractual maturity as of March 31, 2024 were as follows:

March 31, 2024

The amortized cost and fair value of our available‑for‑sale investments in fixed maturity securities summarized by contractual maturity as of June 30, 2024 were as follows:

June 30, 2024

($ in thousands)

32 unchanged sentences

This catastrophe bond was also completed through Torrey Pines Re Ltd and provides indemnity-based reinsurance covering earthquake events through June 1, 2026.

Our catastrophe event retention is currently $17.5 million for all perils.

During the second quarter of 2024, the Company also closed a $420 million 144A catastrophe bond which became effective June 1, 2024.

This catastrophe bond was also completed through Torrey Pines Re Ltd and provides indemnity-based reinsurance covering earthquake events through June 1, 2027.

Our catastrophe event retention is $20 million for earthquake events and $15.5 million for hurricane events and all other perils.

Our reinsurance coverage exhausts at $3.06 billion for earthquake events, $735 million for Hawaii hurricane events, and $117.5 million for continental U.S.

14 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements