PLMR Shareholder/Stockholder Letter Transcript:
Milestones and Momentum:
A Year of Record Results
2023 Annual Report
Palomar 2023 Annual Report
Driving Profitable Growth
Palomar is a specialty insurance company focused on serving residential and commercial customers. Our
underwriting and analytical expertise enable us to concentrate on markets that we believe are underserved,
such as the market for earthquake insurance. We are a publicly traded company on the Nasdaq Stock
Exchange (NASDAQ: PLMR) with a financial strength rating of A- (Excellent) from A.M. Best Company.
Full Year 2023 Financial Results
$1.1 billion
$79.2 million
$93.5 million
77%
71%
19%
22%
Gross Written
Premium
Net Income
Adjusted Net
Income
Combined
Ratio
Adjusted
Combined Ratio
Return
on Equity
Adjusted Return
on Equity
Q Gross Written Premium Q Adjusted Net Income(1)
$1,200
$1.1B
1,000
$100
$881.9M
800
80
$535.2M
600
60
400
40
$250.0M $354.4M
$154.9M
200
$16.6M
$53.3M
$79.5M
20
$120.2M
0
0
($4.4M) ($0.6M)
$6.2M
$3.3M
$21.5M
$34.4M
$7.7M
$52.4M
$71.3M
$93.5M
(20)
2014
(1)
2015
2016
2017
2018
2019
2020
2021
2022
2023
Beginning in 2022, we modified our definition of adjusted net income to adjust for net realized and unrealized gains and losses. We believe adding this
adjustment provides a more meaningful comparison of our performance. We have modified the prior period figures accordingly.
2023 Annual Report Palomar
Palomar 2X:
A Proven Strategy
Palomar 2X is an organic business strategy designed to double underwriting income and generate an
adjusted return on equity in excess of 20% in a predictable manner over an intermediate time frame. There
are five key categories of business that will drive value and help execute the Palomar 2X strategy.
Earthquake
Casualty
2nd largest writer in California and 3rd largest writer
Compete in niche and specialized segments
in the United States
Sector expert with a specialized product offering
Highly profitable business generating attractive
Leverage internal and external underwriting expertise
Diversifies existing property portfolio while obtaining
target risk-adjusted returns
risk-adjusted returns
Fronting
Inland Marine
& Other Property
Grow where we want mantra, prioritizing markets
with attractive risk-adjusted returns
Diligent and deliberate exposure management
Implemented reciprocal structure to shift Hawaii
Deliver fee-generating services to a select group of
MGAs, carriers, and reinsurers
Target specific industry segments identified through
internal market research
Selectively maintain risk participation with a current
maximum participation of 8%
Hurricane business to fee-only
Crop
One of only 13 federally approved insurance providers
Participate in the hard-to-access $20 billion annual
Crop insurance market
Specialized and diversifying line of business offering
fee and underwriting income
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Palomar 2023 Annual Report
Executing on
Our Palomar 2X
Strategic Plan
Dear Shareholders,
I am pleased to announce that 2023 marked another year of
strong performance for Palomar, characterized by profitable
growth and consistent earnings. We achieved record gross
written premium and adjusted net income, experienced
robust growth in both top and bottom-line results, and
implemented a variety of strategic initiatives that will further
enhance the trajectory and predictability of our earnings.
While we are proud of our record results, we are equally
proud of the continued execution of our Palomar 2X
strategy. We remain steadfast in the pursuit of doubling
our underwriting income over an intermediate time period
on a perpetual basis. Importantly, in 2023 we invested in
our growth without sacrificing near-term returns, as we
delivered an adjusted return on equity well above the 20%
benchmark level espoused in our Palomar 2X strategic plan.
Mac Armstrong
Chairman and Chief Executive Officer
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2023 Annual Report Palomar
Since our founding a decade ago, we have identified,
33%, spearheaded by our Builders Risk products. Finally,
capitalized on, and overcome various industry challenges.
our Fronting business grew 63% while delivering fee-
Most recently we successfully maneuvered through a hard
generating services to a well-credentialed and select group
property catastrophe reinsurance market, characterized
of MGAs, carriers, and reinsurers.
by significant cost pressure and restricted terms and
conditions. We sharpened our focus and allocated our
capital towards lines of business with the most attractive
risk adjusted returns while deemphasizing others. We aim to
continuously evaluate market conditions and believe that our
grow where we want philosophy is a vital component of
our overall strategy.
As we finish the year, it is an appropriate moment to pause
and acknowledge our team s many achievements, while
also looking forward with confidence, determination,
and enthusiasm. Central to our success in 2023, was the
We also wrote our first premium in the Crop insurance
market and consummated a strategic investment in
Advanced AgProtection. Palomar is now one of only thirteen
Approved Insurance Providers (AIP) by the United States
Department of Agriculture, providing us access to the $20
billion insured crop marketplace. Crop insurance further
diversifies our product mix and bolsters our fee income, a
key tenet to Palomar 2X.
We expect that these product offerings, along with several
new products, will enhance our specialty insurance
franchise and ultimately increase shareholder value.
execution of the four strategic objectives we laid out at
the outset of the year: sustain strong growth, manage
dislocation, enhance earnings predictability, and scale
the organization.
Objective 1: Sustain Strong Growth
Objective 2: Manage Dislocation
We successfully navigated a generationally hard property
catastrophe reinsurance market and renewed our
catastrophe excess of loss reinsurance program in line
with expectations shared with investors. Recognizing the
In 2023, we coined the mantra of grow where we want .
This approach highlights the deliberate selection of growth
areas within our business and translated into focused efforts
and resource allocations to the following five key product
categories: Earthquake, Inland Marine & Other Property,
opportunity to take share and support the growth of our
earthquake franchise, we purchased over $400 million of
incremental earthquake excess of loss limit protection,
highlighted by $200 million secured through the issuance of
a new catastrophe bond.
Casualty, Fronting, and Crop.
Separately, we formed Laulima Exchange, a fully licensed
Driven by this mantra, we achieved record premiums of over
$1.1 billion in 2023. Our Earthquake franchise experienced
significant growth of 26%, driven by investments in our
Commercial Earthquake product, increased utilization of our
reciprocal insurer, to manage our Hawaii Hurricane line of
business. The creation of Laulima will allow us to shift our
business model for this volatile line from primarily riskbearing to fee-generating over the course of 2024.
E&S company for our Residential Earthquake product, and
overall favorable market conditions. Our Casualty business
grew by 115%, with a strategic focus on niche segments
that offer adequate risk-adjusted returns and diversify the
Objective 3: Enhance Earnings Predictability
Our focus on consistent performance is integral to our
long-term success and value creation. During the year, we
underwriting portfolio. Our Inland Marine business grew by
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4/11/2024 Letter Continued (Full PDF)