Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 24, 2020 | Jun. 28, 2019 | |
Document and Entity Information | |||
Entity Registrant Name | Palomar Holdings, Inc. | ||
Entity Central Index Key | 0001761312 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | false | ||
Entity Common Stock, Shares Outstanding | 24,218,750 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Entity Shell Company | false | ||
Entity Public Float | $ 175,098,032 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Investments: | ||
Fixed maturity securities available for sale, at fair value (amortized cost: $211,278 in 2019; $122,949 in 2018) | $ 217,151 | $ 122,220 |
Equity securities, at fair value (cost: $21,336 in 2019; $27,188 in 2018) | 22,328 | 25,171 |
Total investments | 239,479 | 147,391 |
Cash and cash equivalents | 33,119 | 9,525 |
Restricted cash | 230 | 399 |
Accrued investment income | 1,386 | 734 |
Premium receivable | 36,237 | 18,633 |
Deferred policy acquisition costs | 25,201 | 14,052 |
Reinsurance recoverable on unpaid losses and loss adjustment expenses | 12,952 | 11,896 |
Reinsurance recoverable on paid losses and loss adjustment expenses | 4,303 | 2,666 |
Prepaid reinsurance premium | 26,105 | 18,284 |
Prepaid expenses and other assets | 14,861 | 5,863 |
Property and equipment, net | 845 | 947 |
Intangible assets | 744 | 744 |
Total assets | 395,462 | 231,134 |
Liabilities: | ||
Accounts payable and other accrued liabilities | 13,555 | 9,245 |
Reserve for losses and loss adjustment expenses | 16,821 | 16,061 |
Unearned premiums | 130,373 | 79,130 |
Ceded premium payable | 11,383 | 10,607 |
Funds held under reinsurance treaty | 1,658 | 720 |
Income and excise taxes payable | 1,117 | |
Deferred tax liabilities, net | 1,999 | |
Long-term notes payable | 19,079 | |
Total liabilities | 176,906 | 134,842 |
Stockholders' equity: | ||
Preferred stock, $0.0001 par value, 5,000,000 and 0 shares authorized as of December 31, 2019 and December 31, 2018, respectively, 0 shares issued and outstanding as of December 31, 2019 and December 31, 2018 | ||
Common stock, $0.0001 par value, 500,000,000 shares authorized, 23,468,750 and 17,000,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively | 2 | 2 |
Additional paid-in capital | 180,012 | 68,498 |
Accumulated other comprehensive income (loss) | 4,686 | (563) |
Retained earnings | 33,856 | 28,355 |
Total stockholders' equity | 218,556 | 96,292 |
Total liabilities and stockholders' equity | $ 395,462 | $ 231,134 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Consolidated Balance Sheets | ||
Fixed maturity securities available for sale, amortized cost | $ 211,278 | $ 122,949 |
Equity securities, cost | $ 21,336 | $ 27,188 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 5,000,000 | 0 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 23,468,750 | 17,000,000 |
Common stock, shares outstanding | 23,468,750 | 17,000,000 |
Consolidated Statements of Inco
Consolidated Statements of Income and Comprehensive Income - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Revenues: | |||
Gross written premiums | $ 251,961 | $ 154,891 | $ 120,234 |
Ceded written premiums | (108,332) | (82,949) | (46,951) |
Net written premiums | 143,629 | 71,942 | 73,283 |
Change in unearned premiums | (43,422) | (2,045) | (17,738) |
Net earned premiums | 100,207 | 69,897 | 55,545 |
Net investment income | 5,975 | 3,238 | 2,125 |
Net realized and unrealized gains (losses) on investments | 4,443 | (2,569) | 608 |
Commission and other income | 2,671 | 2,405 | 1,188 |
Total revenues | 113,296 | 72,971 | 59,466 |
Expenses: | |||
Losses and loss adjustment expenses | 5,593 | 6,274 | 12,125 |
Acquisition expenses | 37,259 | 28,224 | 25,522 |
Other underwriting expenses (includes stock-based compensation of $24,103 and $0 for the years ended December 31, 2019 and 2018, respectively) | 51,299 | 17,957 | 15,146 |
Interest expense | 1,068 | 2,303 | 1,745 |
Total expenses | 95,219 | 54,758 | 54,538 |
Income before income taxes | 18,077 | 18,213 | 4,928 |
Income tax expense (benefit) | 7,456 | (6) | 1,145 |
Net income | 10,621 | 18,219 | 3,783 |
Other comprehensive income, net: | |||
Net unrealized gains (losses) on securities available for sale, net of taxes for year ended December 31, 2019 2018, and 2017, respectively | 5,249 | (341) | 1,522 |
Net comprehensive income | $ 15,870 | $ 17,878 | $ 5,305 |
Per Share Data: | |||
Basic earnings per share | $ 0.49 | $ 1.07 | $ 0.22 |
Diluted earnings per share | $ 0.49 | $ 1.07 | $ 0.22 |
Weighted-average common shares outstanding: | |||
Weighted-average common shares outstanding, basic | 21,501,541 | 17,000,000 | 17,000,000 |
Weighted-average common shares outstanding, diluted | 21,834,934 | 17,000,000 | 17,000,000 |
Consolidated Statements of In_2
Consolidated Statements of Income and Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Consolidated Statements of Income and Comprehensive Income | |||
Other underwriting expenses including stock-based compensation | $ 24,103 | $ 0 | $ 0 |
Consolidated Statements of Shar
Consolidated Statements of Shareholder’s Equity - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total |
Beginning balance at Dec. 31, 2016 | $ 2 | $ 68,498 | $ 1,017 | $ 3,592 | $ 73,109 |
Beginning balance (in shares) at Dec. 31, 2016 | 17,000,000 | ||||
Changes in Stockholders’ Equity | |||||
Impact of equity accounting guidance adoption | 454 | (454) | |||
Change in net unrealized loss (gain) on investments | 1,522 | 1,522 | |||
Net income | 3,783 | 3,783 | |||
Ending balance at Dec. 31, 2017 | $ 2 | 68,498 | 2,993 | 6,921 | 78,414 |
Ending balance (in shares) at Dec. 31, 2017 | 17,000,000 | ||||
Changes in Stockholders’ Equity | |||||
Impact of equity accounting guidance adoption | (3,215) | 3,215 | |||
Change in net unrealized loss (gain) on investments | (341) | (341) | |||
Net income | 18,219 | 18,219 | |||
Ending balance at Dec. 31, 2018 | $ 2 | 68,498 | (563) | 28,355 | $ 96,292 |
Ending balance (in shares) at Dec. 31, 2018 | 17,000,000 | 17,000,000 | |||
Changes in Stockholders’ Equity | |||||
Change in net unrealized loss (gain) on investments | 5,249 | $ 5,249 | |||
Distribution to stockholder | (5,120) | (5,120) | |||
Stock-based compensation expense | 24,103 | 24,103 | |||
Issuance of common stock in initial public offering, net of offering costs | 87,411 | 87,411 | |||
Issuance of common stock in initial public offering, net of offering costs (in shares) | 6,468,750 | ||||
Net income | 10,621 | 10,621 | |||
Ending balance at Dec. 31, 2019 | $ 2 | $ 180,012 | $ 4,686 | $ 33,856 | $ 218,556 |
Ending balance (in shares) at Dec. 31, 2019 | 23,468,750 | 23,468,750 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Operating activities | |||
Net income | $ 10,621 | $ 18,219 | $ 3,783 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Stock-based compensation expense | 24,103 | ||
Depreciation expense | 216 | 212 | 160 |
Amortization and write-off of debt issuance costs | 921 | 443 | 114 |
Loss on asset disposal | 1 | 1 | |
Net realized and unrealized losses (gains) on investments | (4,443) | 2,569 | (608) |
Amortization of premium on fixed maturity securities | 431 | 481 | 966 |
Deferred income tax expense | 646 | 1,134 | |
Changes in operating assets and liabilities: | |||
Accrued investment income | (652) | 54 | (137) |
Premium receivable | (17,604) | (3,546) | (3,845) |
Deferred policy acquisition costs | (11,149) | 1,109 | (4,507) |
Reinsurance recoverables | (2,693) | 70 | (13,089) |
Prepaid reinsurance premium | (7,821) | (15,109) | (1,527) |
Prepaid expenses and other assets | (8,998) | (4,603) | (1) |
Accounts payable and other accrued liabilities | 3,287 | 2,748 | 2,238 |
Reserve for losses and loss adjustment expenses | 760 | (1,723) | 13,006 |
Unearned premiums | 51,243 | 17,154 | 19,266 |
Ceded premiums payable | 776 | 5,538 | 3,487 |
Funds held under reinsurance treaty | 938 | (797) | (204) |
Income taxes payable | 1,117 | (11) | 11 |
Net cash provided by operating activities | 41,700 | 22,808 | 20,248 |
Investing activities | |||
Purchases of property and equipment | (115) | (332) | (68) |
Purchases of fixed maturity securities | (211,587) | (102,745) | (43,485) |
Purchases of equity securities | (58,858) | (33,712) | (10,723) |
Sales and maturities of fixed maturity securities | 124,151 | 81,215 | 28,628 |
Sales of equity securities | 64,820 | 29,959 | 6,770 |
Securities receivable or payable, net | 1,023 | 250 | (250) |
Net cash used in investing activities | (80,566) | (25,365) | (19,128) |
Financing activities | |||
Proceeds from initial public offering, net of offering costs | 87,411 | ||
Repayment of surplus notes | (17,500) | ||
Distribution to stockholder | (5,120) | ||
Proceeds from issuance of Floating Rate Notes, net of issuance costs | 19,049 | ||
Redemption of Floating Rate Notes | (20,000) | ||
Net cash provided by financing activities | 62,291 | 1,549 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 23,425 | (1,008) | 1,120 |
Cash, cash equivalents and restricted cash at beginning of period | 9,924 | 10,932 | 9,812 |
Cash, cash equivalents and restricted cash at end of period | 33,349 | 9,924 | 10,932 |
Supplementary cash flow information: | |||
Cash paid for income taxes | 5,645 | 11 | 9 |
Cash paid for interest | $ 1,162 | $ 1,727 | $ 1,632 |
Consolidated Statements of Ca_2
Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Cash and cash equivalents and restricted cash and cash equivalents | ||||
Cash and cash equivalents | $ 33,119 | $ 9,525 | ||
Restricted cash | 230 | 399 | ||
Cash and cash equivalents and restricted cash | $ 33,349 | $ 9,924 | $ 10,932 | $ 9,812 |
Summary of Operations and Basis
Summary of Operations and Basis of Presentation | 12 Months Ended |
Dec. 31, 2019 | |
Summary of Operations and Basis of Presentation | |
Summary of Operations and Basis of Presentation | 1. Summary of Operations and Basis of Presentation Summary of Operations Palomar Holdings, Inc. (the Company), is an insurance holding company that was incorporated in Delaware in March 2019. Prior to incorporation in Delaware, the Company was known as GC Palomar Holdings (GCPH), which was a Cayman Islands incorporated insurance holding company formed on October 4, 2013 when GC Palomar Investor LP (GCPI) acquired control of GCPH. The Company and its wholly owned subsidiaries include Palomar Insurance Holdings, Inc. (PIH), which wholly owns Palomar Specialty Insurance Company (PSIC), Prospect General Insurance Agency, Inc. (PGIA), and Palomar Specialty Reinsurance Company Bermuda Ltd. (PSRE). On February 12, 2014, GCPH through PIH acquired PSIC from Pacific Indemnity Company in a stock purchase transaction. PSIC is a property and casualty insurance company domiciled in the state of Oregon. The Company’s core focus is on the residential and commercial earthquake markets in earthquake‑exposed states such as California, Oregon, Washington, and states with exposure to the New Madrid Seismic Zone. In 2015, PSIC expanded into broader geographic regions and perils, to include Hawaii residential hurricane and Texas specialty homeowners products. In 2016, PSIC began a commercial all risk insurance program which covers commercial property primarily in southeastern wind‑exposed states. PSIC is licensed to underwrite insurance on an admitted basis in 27 states in the United States, as of December 31, 2019, mainly through managing general insurance agencies, wholesale brokers, and independent agents. PGIA is a property and casualty general insurance agency for PSIC and unaffiliated insurance carriers. As a general insurance agency, PGIA assists in developing insurance products, underwriting insurance policies, and receiving and disbursing funds from premium and loss transactions under contracts on behalf of insurance companies. PGIA earns commissions from the product development, marketing, and servicing of the insurance companies’ programs. PGIA also earns fee income from policyholder transactions. PSRE is a Bermuda captive reinsurance company that reinsures earthquake and Hawaii Hurricane premium on a quota share basis exclusively for PSIC. The Company operates as an insurance holding company system and is subject to the insurance holding company laws of the State of Oregon, the state in which PSIC is domiciled. The Company is also commercially domiciled in California and, as a result, subject to the insurance holding company laws of that state. These statutes require that each insurance company in the system register with the insurance department of its state of domicile and furnish information concerning the operations of companies within the holding company system that may materially affect the operations, management or financial condition of the insurers within the system and domiciled in that state. The Company’s chief operating decision‑maker is the Chief Executive Officer. While the chief decision‑maker monitors the revenue streams of the various products and services, operations are managed, resources are allocated, and financial performance is evaluated on a Company‑wide basis. The Company has a single operating segment, the property and casualty insurance business. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include the accounts of the Company and its wholly‑owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Stock Split On March 15, 2019, the Company effected a 17,000,000 for one forward stock split in conjunction with domestication in the United States. All share and per share information included in the accompanying consolidated financial statements and notes to the consolidated financial statements have been retroactively adjusted to reflect the stock split for the Company’s common stock for all periods presented. Initial Public Offering (IPO) On April 22, 2019, the Company completed its IPO with the sale of 6,468,750 shares of common stock at a price to the public of $15.00 per share, including 843,750 shares sold upon the exercise in full of the underwriter’s option to purchase additional shares. After underwriter discounts and commissions and offering expenses, net proceeds from the IPO were approximately $87.4 million. Use of Estimates The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. All revisions to accounting estimates are recognized in the period in which the estimates are revised. Significant estimates reflected in the Company’s consolidated financial statements include, but are not limited to, reserves for losses and loss adjustment expenses, reinsurance recoverables on unpaid losses, and the fair values of investments. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Significant Accounting Policies | |
Significant Accounting Policies | 2. Significant Accounting Policies Cash and Cash Equivalents Cash and cash equivalents include time deposits and marketable securities with original maturities of three months or less at acquisition and are stated at cost, which approximates fair value. The Company maintains cash balances in federally insured financial institutions. Restricted Cash Restricted cash includes cash on deposit with reinsurance carriers. Restricted cash also includes cash held in a fiduciary capacity for the benefit of third-party insurance carriers. Deferred Offering Costs Deferred offering costs, which consist of direct incremental legal and accounting fees relating to the Company's April 2019 initial public offering (IPO), were capitalized as incurred. The deferred offering costs were offset against the IPO proceeds upon the consummation of the offering. Deferred offering costs were $1.1 million at December 31, 2018 and are classified as Prepaid expenses and other assets on the Company's consolidated balance sheet. Investments All of the Company’s investments in fixed maturity securities are classified as available‑for‑sale and are carried at fair value. Unrealized gains and losses related to fixed maturity securities are included in accumulated other comprehensive income as a separate component of stockholder’s equity. Equity securities are carried at fair value with unrealized gains and losses included as a component of net income on the Company’s consolidated statement of income. Prior to 2018, unrealized gains and losses on equity securities were included in accumulated other comprehensive income as a separate component of stockholders’ equity. Premiums and discounts on mortgage‑backed securities and asset‑backed securities are amortized or accrued using the prospective method which considers anticipated prepayments at the date of purchase. To the extent that the estimated lives of such securities change as a result of changes in estimated prepayment rates, the adjustments are included in net investment income using the prospective method. Investment income consists primarily of interest and dividends. Interest income is recognized on an accrual basis. Dividend income is recognized on the ex‑dividend date. Net investment income represents investment income, net of expenses. Other‑than‑temporary declines in fair value of fixed maturity securities are evaluated for amounts considered credit losses by comparing the expected present value of cash flows to be collected to the amortized cost. Once the amount of other‑than‑temporary impairment (OTTI) related to the credit loss is determined, the unrealized loss is then bifurcated into the credit‑related loss and the loss related to all other factors. The credit‑related OTTI loss is recognized as a realized loss in the statement of income and comprehensive income and the cost basis of the security is reduced. The OTTI related to other factors remain in accumulated other comprehensive income. Before 2018, other‑than‑temporary declines in the fair value of equity securities would have been recorded as realized losses in the consolidated statement of income and comprehensive income and the cost basis of the security would have been reduced (see Note 3). The Company uses the specific‑identification method to determine the cost of fixed maturity securities sold and the first‑in, first‑out method for lots of equity securities sold. Fair Value Fair value is defined as the price that the Company would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. The three‑tier hierarchy of inputs is summarized in the three broad levels listed below: Level 1—Unadjusted quoted prices are available in active markets for identical investments as of the reporting date. Level 2—Pricing inputs are quoted prices for similar investments in active markets; quoted prices for identical or similar investments in inactive markets; or valuations based on models where the significant inputs are observable or can be corroborated by observable market data. Level 3—Pricing inputs into models are unobservable for the investment. The unobservable inputs require significant management judgment or estimation. To measure fair value, the Company obtains quoted market prices for its investment securities from its outside investment managers. If a quoted market price is not available, the Company uses prices of similar securities. The fair values obtained from the outside investment managers are reviewed for reasonableness and any discrepancies are investigated for final valuation. The fair value of the Company’s investments in fixed maturity securities is estimated using relevant inputs, including available market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. An Option Adjusted Spread model is also used to develop prepayment and interest rate scenarios. Industry standard models are used to analyze and value securities with embedded options or prepayment sensitivities. These fair value measurements are estimated based on observable, objectively verifiable market information rather than market quotes; therefore, these investments are classified and disclosed in Level 2 of the hierarchy. The fair value of the Company’s investments in equity securities is based on quoted prices available in active markets and classified and disclosed in Level 1 of the hierarchy. Concentration of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, fixed maturity securities and reinsurance recoverables. The Company places its cash and cash equivalents with high credit quality financial institutions and its fixed maturity securities in securities of the U.S. government, U.S. government agencies, and high credit quality issuers of debt securities. The Company evaluates the financial condition of its reinsurers and reinsures its business with highly rated reinsurers and sometimes requires letters of credit or retains funds from reinsurers (see Note 9). Premiums Receivable Premiums receivable are carried at face value net of any allowance for doubtful accounts which approximates fair value. If necessary, the Company records an allowance for doubtful accounts in an amount approximating anticipated losses. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts is not reasonably assured. No allowance for doubtful accounts was required at December 31, 2019 or 2018. Deferred Policy Acquisition Costs The costs of successfully acquiring new business, principally commission expense and premium taxes, are deferred and amortized over the unexpired terms of the policies in force. Premiums Earned Gross premiums written are recorded at policy inception and are earned as revenue ratably over the term of the respective policies. Premiums written not yet recognized as revenue are reflected as unearned premiums on the balance sheet, or as advanced premiums if received prior to the policy effective date. Premiums written but not yet received are recognized as premiums receivable. Premiums receivable are presented on the consolidated balance sheets net of estimated uncollectible amounts. Based on management’s review no allowance for bad debt was required at December 31, 2019 and 2018. A premium deficiency is recognized if the sum of expected losses and loss adjustment expenses, unamortized acquisition costs, and policy maintenance costs exceeds the remaining unearned premiums. A premium deficiency would first be recognized by charging any unamortized acquisition costs to expense to the extent required to eliminate the deficiency. If the premium deficiency were greater than unamortized acquisition costs, a liability would be accrued for the excess deficiency. The Company does not consider anticipated investment income when determining if a premium deficiency exists. There was no premium deficiency at December 31, 2019 or 2018. Commission and Other Income Commission and other income is comprised of commissions earned on policies where the Company has no exposure to underlying risk and fees earned in conjunction with underwriting policies. Commission and fee income is earned at the time the policy is written. Property and Equipment Property and equipment are capitalized and carried at cost less accumulated depreciation. Depreciation for property and equipment is calculated on a straight‑line basis using useful lives of 3 to 5 years. Leasehold improvements and other fixed assets are capitalized and depreciated over the useful lives of the properties and equipment. Expenditures for maintenance and repairs are charged to operations as incurred. Upon disposition, the asset cost and related depreciation are removed from the accounts and the resulting gain or loss is included in the Company’s results of operations. Capitalized Software Costs associated with the implementation of certain internal systems are capitalized and carried at capitalized cost less accumulated amortization and are included as a component of prepaid expenses and other assets on the Company’s consolidated balance sheet. Costs capitalized include internal personnel costs, external developer costs, and interest. The implementation costs relate to systems built on software which the Company purchases under a cloud computing arrangement and accounts for as a service contract. As such, capitalized costs are amortized over the term of the service contract, which currently ends in December 2024. Intangible Assets Upon acquisition, the entire PSIC purchase price was allocated to separately identifiable indefinite lived intangible assets. The Company acquired seven state licenses in the acquisition to which $0.7 million was allocated. Indefinite lived intangible assets are initially recognized and measured at fair value; intangible assets are subsequently evaluated for impairment annually or more frequently if circumstances warrant it. No impairments of intangible assets were recognized for the years ended December 31, 2019, 2018 or 2017. Impairment of Long‑Lived Assets Long‑lived assets with finite lives are tested for impairment whenever recognized events or changes in circumstances indicate the carrying value of these assets may not be recoverable. If indicators of impairment are present, the fair value is calculated using estimated future cash flows expected to be generated from the use of those assets. An impairment loss is recognized only if the carrying amount of a long‑lived asset or asset group is not recoverable and exceeds its fair value. The carrying amount of a long‑lived asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. This assessment is based on the carrying amount of the asset or asset group at the date it is tested for recoverability. An impairment loss is measured as the amount by which the carrying amount of a long‑lived asset or asset group exceeds its fair value. No impairments of long‑lived assets were recognized for the years ended December 31, 2019, 2018 and 2017. Reserve for Losses and Loss Adjustment Expenses The reserve for unpaid losses and loss adjustment expenses includes estimates for unpaid claims and claim adjustment expenses on reported losses and estimates of losses incurred but not reported (IBNR), net of salvage and subrogation recoveries. The liability is based on individual claims, case reserves and other estimates reported by policyholders, as well as management estimates of ultimate losses and loss adjustment expenses. Inherent in the estimates of ultimate losses and loss adjustment expenses are expected trends in claims severity and frequency and other factors that could vary significantly as claims are settled. The Company’s estimates of ultimate losses and loss adjustment expenses are based in part upon the estimation of claims resulting from natural disasters such as hurricanes and earthquakes. Estimation by management of the ultimate losses and loss adjustment expenses resulting from catastrophic events is inherently difficult because of the potential severity of property catastrophe claims. Therefore, the Company uses both proprietary and commercially available models, as well as historic claims experience, for purposes of providing an estimate of ultimate losses and loss adjustment expenses. For other difficult estimates of ultimate losses and loss adjustment expenses, the Company utilizes historical severity data that may be immature and subject to significant variation, in addition to using loss development methods based on paid and reported losses. For these estimates, industry data may also be utilized. Ultimate losses and loss adjustment expenses may vary materially from the amounts provided in the consolidated financial statements. Estimates of unpaid losses and loss adjustment expenses are reviewed regularly and, as experience develops and new information becomes known, the liabilities are adjusted as necessary. Such adjustments, if any, are reflected in operations in the period in which they become known and are accounted for as changes in estimates. The Company does not discount its liability for unpaid losses and loss adjustment expenses. The Company does not write insurance policies covering toxic clean‑up, asbestos‑related illness or other environmental remediation exposures. Reinsurance The Company purchases excess of loss and quota share reinsurance to protect it against the impact of losses. Reinsurance premiums, commissions, ceded unearned premiums are accounted for on bases consistent with the underlying terms of the reinsurance contracts and in proportion to the amount of insurance protection provided. The Company receives ceding commissions in connection with certain ceded reinsurance. The ceding commissions are capitalized and amortized as a reduction of underwriting, acquisition and insurance expenses. Amounts applicable to prepaid reinsurance premiums are reported as assets in the accompanying consolidated balance sheets. Reinsurance recoverables represent paid losses and loss adjustment expenses and reserves for unpaid losses and loss adjustment expenses ceded to reinsurers that are subject to reimbursement under reinsurance treaties. Premiums earned and losses and loss adjustment expenses incurred are stated in the accompanying consolidated statements of income and comprehensive income net of amounts ceded to reinsurers. Income Taxes The Company is taxed as a property/casualty insurer for federal income tax purposes. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and the tax bases of assets and liabilities, using enacted tax rates expected to be in effect during the year in which the basis differences reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company recognizes the tax benefit of uncertain tax positions where the position is more likely than not to be sustained assuming examination by taxing authorities. Based on its evaluation for the tax years ended December 31, 2019 and 2018, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. The Company recognizes interest and penalties related to uncertain tax positions, if any, as a component of income tax expense. The Company has not been assessed interest or penalties by any major tax jurisdictions for the respective tax years ended December 31, 2019, 2018, and 2017. Earnings Per Share Basic earnings per share is calculated by dividing net income by the weighted‑average common shares outstanding for the period. Diluted earnings per share reflects the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method. When inclusion of additional common share equivalents increases the earnings per share or reduces the loss per share, the effect on earnings per share is anti-dilutive, and the diluted net earnings or net loss per share is computed excluding these common share equivalents. Recent Accounting Pronouncements The Company currently qualifies as an emerging growth company (“EGC”) under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Accordingly, the Company is provided the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non‑emerging growth companies or (ii) within the same time periods as private companies. The Company is currently electing to adopt new or revised accounting guidance within the same time period as private companies, unless, as indicated below, management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance. If the Company ceases to be an EGC, it will no longer have the option to adopt guidance within the same time periods as private companies. Recently adopted accounting pronouncements In January 2016, the FASB issued “ASU 2016‑01, Financial Instruments—Overall (Subtopic 825‑10): Recognition and Measurement of Financial Assets and Financial Liabilities .” Among other things, this new guidance requires the Company’s equity investments to be measured at fair value with changes in fair value recognized in net income. Under the current guidance, equity investments are measured at fair value with changes in fair value recognized in accumulated other comprehensive income as a component of stockholder’s equity. The Company adopted this guidance on January 1, 2018 and began recognizing changes in fair value of equity securities into net income. Upon adoption, the Company made a $3.2 million cumulative‑effect adjustment to increase retained earnings and decrease accumulated other comprehensive income. In the future, this guidance will impact the Company’s results of operations, as changes in fair value of equity investments will impact net income rather than other comprehensive income. The future impact will vary depending on the volatility of the overall equity market and the amount the Company decides to invest in equity securities. In August 2016, the FASB issued “ASU 2016‑15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” , in order to reduce diversity in the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The Company adopted this guidance on January 1, 2018. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements. In May 2014, the FASB issued “ASU 2014-09, Revenue from Contracts with Customers (Topic 606).” This guidance applies to all companies that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards, such as insurance contracts. Under this guidance, a company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Judgments required in adopting this update included identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Nearly all the Company’s consolidated revenue is outside the scope of Topic 606 except for the commission and fee income that the Company's 100% owned insurance agency earns from third-party insurers, which was $1.4 for each of the years ended December 31, 2019 and 2018. Effective January 1, 2019, the Company adopted Topic 606 using the modified retrospective transition method. The application of the key aspects of Topic 606 to the in-scope transactions resulted in recognition of revenues and related expenses consistent with the previous revenue guidance. Adoption had no impact on the Company’s reported fee income or expense and there was no cumulative effect of initially applying the guidance. Recently issued accounting pronouncements not yet adopted In February 2016, the FASB issued new guidance for accounting for leases, “ASU 2016‑02, Leases (Topic 842) .” Under current guidance, leases are only included on the balance sheet if the criteria to classify the agreement as a capital lease are met. This update will require the recognition of a right‑of‑use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. This guidance was subsequently amended multiple times and offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This new guidance requires a modified retrospective adoption, applying the new standard to all leases existing at the date of initial application, with early adoption permitted. An entity may choose to use the standard’s effective date, rather than the beginning of the earliest comparative period presented, as the date of initial application. An entity would record the effects of initially applying the new guidance as a cumulative‑effect adjustment to retained earnings. Consequently, an entity’s reporting for the comparative periods presented in the year of adoption would continue to be in accordance with the current guidance, including the current disclosure requirements. To facilitate transition, the new guidance includes a package of practical expedients that entities may elect to apply on adoption. The package of practical expedients relates to the identification and classification of leases and initial direct costs for leases that commenced before the effective date. The new guidance also includes a practical expedient permitting the use of hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. Under the Company’s current status as an EGC, this update will be effective for annual reporting periods beginning after December 15, 2020, and interim reporting periods within fiscal years beginning after December 31, 2021 with early adoption permitted. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements. In June 2016, the FASB issued “ASU 2016‑13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments .” Current guidance delays the recognition of credit losses until it is probable a loss has been incurred. This updated guidance will require financial assets measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net income. Credit losses relating to available‑for‑sale debt securities will also be recorded through an allowance for credit losses, with the amount of the allowance limited to the amount by which fair value is below amortized cost. In 2019, the FASB issued amendments to this guidance which provide an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost and provide additional clarification and implementation guidance. Under the Company’s current status as an EGC , this update and its amendments will be effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, but not before annual reporting periods beginning on or after December 15, 2018. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements. In August 2018, the FASB issued “ASU 2018‑13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement . Among other things, this new guidance eliminates the need to disclose transfers between Level 1 and Level 2 of the fair value hierarchy, changes the policy for timing of transfers and the valuation processes for Level 3 fair value measurements and includes requirements to disclose quantitative information about Level 3 measurements. This new guidance will be effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted this guidance on January 1, 2020 and adoption did not have an impact on the Company’s consolidated financial statements. The Company will continue to monitor the composition of its investment portfolio and will make appropriate disclosures based on this guidance. |
Investments
Investments | 12 Months Ended |
Dec. 31, 2019 | |
Investments | |
Investments | 3. Investments The Company’s available‑for‑sale investments are summarized as follows: Gross Gross Amortized Unrealized Unrealized Fair December 31, 2019 Cost or Cost Gains Losses Value (in thousands) Fixed maturities: U.S. Governments $ 13,371 $ 321 $ (13) $ 13,679 States, territories, and possessions 2,298 147 — 2,445 Political subdivisions 1,913 29 — 1,942 Special revenue excluding mortgage/asset-backed securities 18,139 343 (46) 18,436 Industrial and miscellaneous 124,726 4,326 (39) 129,013 Mortgage/asset-backed securities 50,831 824 (19) 51,636 Total available-for-sale investments $ 211,278 $ 5,990 $ (117) $ 217,151 Gross Gross Amortized Unrealized Unrealized Fair December 31, 2018 Cost or Cost Gains Losses Value (in thousands) Fixed maturities: U.S. Governments $ 15,299 $ 96 $ (126) $ 15,269 States, territories, and possessions 1,227 — (6) 1,221 Political subdivisions 825 — (10) 815 Special revenue excluding mortgage/asset-backed securities 12,429 115 (91) 12,453 Industrial and miscellaneous 65,885 192 (951) 65,126 Mortgage/asset-backed securities 27,284 133 (81) 27,336 Total available-for-sale investments $ 122,949 $ 536 $ (1,265) $ 122,220 Security holdings in an unrealized loss position As of December 31, 2019, the Company held 51 fixed maturity securities in an unrealized loss position with a total estimated fair value of $20.9 million and total gross unrealized losses of $0.1 million. None of the fixed maturity securities with unrealized losses has ever missed, or been delinquent on, a scheduled principal or interest payment. As of December 31, 2018, the Company held 173 fixed maturity securities in an unrealized loss position with a total estimated fair value of $73.8 million and total gross unrealized losses of $1.3 million. None of the fixed maturity securities with unrealized losses has ever missed, or been delinquent on, a scheduled principal or interest payment. 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 December 31, 2019 and 2018, are as follows: Less Than 12 Months More Than 12 Months Total Fair Unrealized Fair Unrealized Fair Unrealized December 31, 2019 Value Losses Value Losses Value Losses (in thousands) Fixed maturity securities: U.S. Governments 1,235 (11) $ 1,827 $ (2) $ 3,062 $ (13) States, territories, and possessions — — — — — — Political subdivisions — — — — — — Special revenue excluding mortgage/asset-backed securities 3,548 (46) — — 3,548 (46) Industrial and miscellaneous 6,929 (38) 188 (1) 7,117 (39) Mortgage/asset-backed securities 7,035 (19) 182 — 7,217 (19) Total $ 18,747 $ (114) $ 2,197 $ (3) $ 20,944 $ (117) Less Than 12 Months More Than 12 Months Total Fair Unrealized Fair Unrealized Fair Unrealized December 31, 2018 Value Losses Value Losses Value Losses (in thousands) Fixed maturity securities: U.S. Governments $ 1,970 $ (25) $ 6,197 $ (101) $ 8,167 $ (126) States, territories, and possessions 719 (5) 501 (1) 1,220 (6) Political subdivisions 264 (1) 550 (9) 814 (10) Special revenue excluding mortgage/asset-backed securities 1,706 (14) 5,916 (77) 7,622 (91) Industrial and miscellaneous 30,544 (556) 14,913 (395) 45,457 (951) Mortgage/asset-backed securities 6,653 (39) 3,830 (42) 10,483 (81) Total $ 41,856 $ (640) $ 31,907 $ (625) $ 73,763 $ (1,265) The Company considers the following factors in determining whether declines in the fair value of investments are other‑than‑temporary: · The significance of the decline in fair value compared to the cost basis; · The time period during which there has been a significant decline in fair value; · Whether the unrealized loss is credit‑driven or a result of changes in market interest rates; · A fundamental analysis of the business prospects and financial condition of the issuer; · The Company’s intent to sell the securities as of each reporting date; and · If the Company does not expect to recover the entire amortized cost basis or cost of the investment. Based on the Company’s reviews as of December 31, 2019 and 2018, 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. None of the fixed maturity securities were determined to be other‑than‑temporarily impaired. The Company does not intend to sell the investments and it is not more likely than not that that the Company will be required to sell the investments before the recovery of their amortized cost basis. Therefore, none of the fixed maturity securities were written down during the respective years. Based on the Company’s reviews as of December 31, 2017, the Company determined that the unrealized losses of the equity securities lots were temporary due to the severity of the declines. The Company had the ability and intent to hold these investments until a recovery of fair value. Therefore, none of the equity securities were written down at December 31, 2017 and the remaining unrealized losses of equity securities at that time were recognized to retained earnings upon adoption of ASU 2016‑01 on January 1, 2018. See “Recent Accounting Pronouncements.” Contractual maturities of available‑for‑sale fixed maturity securities The amortized cost and fair value of fixed maturity securities at December 31, 2019, by contractual maturity, are shown below. Amortized Fair Cost Value (in thousands) Due within one year $ 9,280 $ 9,299 Due after one year through five years 64,933 66,108 Due after five years through ten years 59,192 62,292 Due after ten years 27,042 27,816 Mortgage and asset-backed securities 50,831 51,636 $ 211,278 $ 217,151 Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations. Change in unrealized gains (losses) of investments The following table presents the change in available‑for‑sale gross unrealized gains or losses by investment type: Year Ended December 31, 2019 2018 2017 (in thousands) Change in net unrealized gains (losses) Fixed maturities $ 6,602 $ (341) $ (6) Equity securities — — 2,232 Net (decrease) increase $ 6,602 $ (341) $ 2,226 Net investment income summary Net investment income is summarized as follows: December 31, 2019 2018 2017 (in thousands) Interest income $ 5,894 $ 3,036 $ 1,916 Dividend income 424 514 514 Less: investment expense (343) (312) (305) Net investment income $ 5,975 $ 3,238 $ 2,125 Net realized and unrealized investment gains and losses The following table presents net realized and unrealized investment gains and losses: Year Ended December 31, 2019 2018 2017 (in thousands) Realized gains: Gains on sales of fixed maturity securities $ 1,405 $ 19 $ 3 Gains on sales of equity securities 177 4,287 802 Total realized gains 1,582 4,306 805 Realized losses: Losses on sales of fixed maturity securities (84) (418) (48) Losses on sales of equity securities (64) (421) (149) Total realized losses (148) (839) (197) Net realized investment gains (losses) 1,434 3,467 608 Net unrealized gains (losses) on equity securities 3,009 (6,036) — Net realized and unrealized gains (losses) on investments $ 4,443 $ (2,569) $ 608 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 consolidated balance sheets. At December 31, 2019 and 2018, the carrying value of securities on deposit with state regulatory authorities was $5.1 million and $5.0 million, respectively. |
Fair value measurements
Fair value measurements | 12 Months Ended |
Dec. 31, 2019 | |
Fair value measurements | |
Fair value measurements | 4. Fair value measurements The following tables present the Company’s fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018: December 31, 2019 Level 1 Level 2 Level 3 Total (in thousands) Assets: Fixed maturity securities U.S. Governments $ — $ 13,679 $ — $ 13,679 States, territories, and possessions — 2,445 — 2,445 Political subdivisions — 1,942 — 1,942 Special revenue excluding mortgage/asset-backed securities — 18,436 — 18,436 Industrial and miscellaneous — 129,013 — 129,013 Mortgage/asset-backed securities — 50,136 1,500 51,636 Equity securities — 22,328 — 22,328 Cash, cash equivalents, and restricted cash 28,350 4,999 — 33,349 Total assets $ 28,350 $ 242,978 $ 1,500 $ 272,828 December 31, 2018 Level 1 Level 2 Level 3 Total (in thousands) Assets: Fixed maturity securities U.S. Governments $ — $ 15,269 $ — $ 15,269 States, territories, and possessions — 1,221 — 1,221 Political subdivisions — 815 — 815 Special revenue excluding mortgage/asset-backed securities — 12,453 — 12,453 Industrial and miscellaneous — 65,126 — 65,126 Mortgage/asset-backed securities — 27,336 — 27,336 Equity securities 25,171 — — 25,171 Cash, cash equivalents, and restricted cash 9,924 — — 9,924 Total assets $ 35,095 $ 122,220 $ — $ 157,315 Liabilities: Long-term notes payable $ — $ — $ 20,000 $ 20,000 Total liabilities $ — $ — $ 20,000 $ 20,000 The carrying amounts of financial assets and liabilities reported in the accompanying consolidated balance sheets 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 fair value of the Company’s long‑term debt was determined by calculating the present value of expected future cash flows under the terms of the note agreements discounted at an estimated market rate of interest at December 31, 2018. This is a level 3 measurement. The Company repaid its long-term notes payable in May 2019 and did not have any long-term debt at December 31, 2019. Transfers between levels result from changes in the availability of market observable inputs and are recorded at the beginning of the reporting period. There were no transfers between Level 1, Level 2 or Level 3 during 2019 or 2018. |
Policy Acquisition Costs
Policy Acquisition Costs | 12 Months Ended |
Dec. 31, 2019 | |
Policy Acquisition Costs | |
Policy Acquisition Costs | 5. Policy Acquisition Costs The following tables present the policy acquisition costs deferred and amortized: December 31, 2019 2018 2017 (in thousands) Deferred Policy Acquisition Costs: Balance, beginning of year $ 14,052 $ 15,161 $ 10,654 Additions to deferred balance: Direct commissions 59,676 36,934 27,976 Ceding commissions (17,257) (15,218) (3,224) Premium taxes 5,236 3,362 2,625 Total net additions 47,655 25,078 27,377 Amortization of net policy acquisition costs (36,506) (26,187) (22,870) Balance, end of year $ 25,201 $ 14,052 $ 15,161 Acquisition expenses: Amortization of net policy acquisition costs $ 36,506 $ 26,187 $ 22,870 Period costs 753 2,037 2,652 Total Acquisition expenses $ 37,259 $ 28,224 $ 25,522 |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2019 | |
Property and Equipment | |
Property and Equipment | 6. Property and Equipment Property and Equipment, net consist of the following: Accumulated Net December 31, 2019 Cost Depreciation Book Value (in thousands) Leasehold improvements $ 879 $ (342) $ 537 Computer hardware 144 (64) 80 Office equipment and furniture 519 (291) 228 Total $ 1,542 $ (697) $ 845 Accumulated Net December 31, 2018 Cost Depreciation Book Value (in thousands) Leasehold improvements $ 879 $ (225) $ 654 Computer hardware 108 (51) 57 Office equipment and furniture 454 (218) 236 Total $ 1,441 $ (494) $ 947 Depreciation expense for the years ended December 31, 2019, 2018 and 2017 was $0.2 million, $0.2 million, and $0.2 million respectively. |
Capitalized Software
Capitalized Software | 12 Months Ended |
Dec. 31, 2019 | |
Capitalized Software | |
Capitalized Software | 7. Capitalized Software Capitalized software balances are as follows: Accumulated Net December 31, 2019 Cost Amortization Book Value (in thousands) Capitalized Software $ 4,567 $ (669) $ 3,898 Accumulated Net December 31, 2018 Cost Amortization Book Value (in thousands) Capitalized Software $ 1,761 $ (33) $ 1,728 Amortization expense relating to capitalized software the years ended December 31, 2019 and 2018 was $0.6 million and an immaterial amount, respectively. |
Reserve for Losses and Loss Adj
Reserve for Losses and Loss Adjustment Expenses | 12 Months Ended |
Dec. 31, 2019 | |
Reserve for Losses and Loss Adjustment Expenses | |
Reserve for Losses and Loss Adjustment Expenses | 8 . Reserve for Losses and Loss Adjustment Expenses Loss and loss adjustment expenses reserves represent management’s best estimate of the ultimate cost of all reported and unreported losses incurred through December 31, 2019 and 2018. The Company does not discount loss and loss adjustment expense reserves. The reserves for unpaid losses and loss adjustment expenses are estimated using individual case‑basis valuations and statistical analyses. Those estimates are subject to the effects of trends in loss severity and frequency. Although considerable variability is inherent in such estimates, management believes the reserves for losses and loss adjustment expenses are adequate. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes known. Any adjustments to estimates are recorded in the current period. The following table provides a reconciliation of the beginning and ending reserve balances for losses and LAE on a net of reinsurance basis to the gross amounts reported in the accompanying consolidated balance sheets: Year Ended December 31, 2019 2018 2017 (in thousands) Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period $ 4,165 $ 4,432 $ 3,336 Add: Incurred losses and loss adjustment expenses, net of reinsurance, related to: Current year 5,774 8,165 12,257 Prior years (181) (1,891) (132) Total incurred 5,593 6,274 12,125 Deduct: Loss and loss adjustment expense payments, net of reinsurance, related to: Current year 2,179 4,409 8,986 Prior years 3,710 2,132 2,043 Total payments 5,889 6,541 11,029 Reserve for losses and loss adjustment expense net of reinsurance recoverables at end of period 3,869 4,165 4,432 Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period 12,952 11,896 13,352 Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period $ 16,821 $ 16,061 $ 17,784 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 stockholder’s equity. The foregoing reconciliation shows loss and loss adjustment expense reserve redundancies of $0.2 million, $1.9 million, and $0.1 million developed in 2019, 2018 and 2017, respectively. This favorable reserve development was primarily in the Texas homeowners segment for all accident years presented. Expectations of ultimate losses from these periods have decreased due to lower than originally anticipated frequency and severity of claims. The Company compiles and aggregates its claims data by grouping the claims according to the year in which the claim occurred (Accident Year) when analyzing claim payment and emergence patterns and trends over time. For the purpose of defining claims frequency, the number of reported claims is by loss occurrence and includes claims that do not result in a liability or payment associated with them. The Company analyzed the usefulness of disaggregation of its results and determined the characteristics associated with the policies and the related unpaid loss reserves, incurred losses, and payment patterns are similar in nature. The Company separates its special property and other claim experience from its homeowner claim experience when analyzing losses and allocated loss adjustment expenses incurred and paid development and claim count triangles, as there are distinct differences in the development and claim count emergence patterns as well as methods of IBNR projection. The Special Property classification includes fire, allied lines, inland marine, and earthquake claims. As such, the following tables show the Company’s historical homeowner and special property incurred and cumulative paid losses and LAE development, net of reinsurance, as well as IBNR loss reserves and the number of reported claims on an aggregate basis as of December 31, 2019 for each of the previous two accident years. The information provided herein about incurred and paid accident year claims development for the years ended December 31, 2017 and prior is presented as unaudited supplementary information. Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Homeowners’ Insurance (in thousands) Year Ended December 31, Incurred but Cumulative Year Ended December 31, Not Reported Number of Accident Year 2015(1) 2016(1) 2017(1) 2018(1) 2019 Liabilities Claims 2015 $ 2,048 $ 1,785 $ 1,658 $ 1,636 $ 1,642 $ 1 381 2016 6,069 5,878 5,721 5,636 6 1,081 2017 9,354 7,418 6,630 11 2,964 2018 2,193 2,008 104 788 2019 914 257 1,060 Total $ 16,830 $ 379 6,274 Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Homeowners’ Insurance (in thousands) Year Ended December 31, Accident Year 2015(1) 2016(1) 2017(1) 2018(1) 2019 2015 $ 860 $ 1,379 $ 1,523 $ 1,615 $ 1,634 2016 4,120 5,356 5,585 5,607 2017 7,135 7,375 6,628 2018 1,550 1,853 2019 546 Total $ 16,268 Reserve for losses and loss adjustment expense, net of reinsurance $ 562 (1) Data presented for these calendar years is required supplementary information, which is unaudited. Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Homeowners’ Insurance (unaudited) Year 1 Year 2 Year 3 Year 4 Year 5 Payout percentage 74.00 % 18.08 % 0.52 % 2.99 % 1.10 % Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Special Property Insurance (in thousands) As of December 31, 2019 Incurred but Cumulative Year Ended December 31, Not Reported Number of Accident Year 2015(1) 2016(1) 2017(1) 2018(1) 2019 Liabilities Claims 2015 $ 630 $ 719 $ 671 $ 671 $ 678 $ 1 8 2016 1,381 1,249 1,251 1,454 — 71 2017 3,071 3,475 4,014 — 357 2018 5,970 6,095 11 526 2019 3,661 964 402 Total $ 15,902 $ 976 1,364 Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Special Property Insurance (in thousands) Year Ended December 31, Accident Year 2015(1) 2016(1) 2017(1) 2018(1) 2019 2015 $ 265 $ 438 $ 586 $ 626 $ 666 2016 703 1,064 1,216 1,444 2017 1,967 3,344 4,011 2018 2,859 6,036 2019 1,633 Total 13,790 Reserve for losses and loss adjustment expense, net of reinsurance 2,112 (1) Data presented for these calendar years is required supplementary information, which is unaudited. Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Special Property Insurance (unaudited) Year 1 Year 2 Year 3 Year 4 Year 5 Payout percentage 45.59 % 34.20 % 16.30 % 10.80 % 5.84 % The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses in the consolidated balance sheets is as follows: 2019 (in thousands) Net outstanding liabilities: Homeowners’ insurance $ 562 Special property 2,112 Reinsurance- Nonproportional assumed property(1) 1,195 Reserve for losses and loss adjustment expense, net of reinsurance 3,869 Reinsurance recoverable on unpaid claims: Homeowners’ insurance $ 4,961 Special property 7,983 Other 8 Total reinsurance recoverable on unpaid claims 12,952 Total reserve for losses and loss adjustment expenses $ 16,821 (1) Reflects the Company’s share of Loss and Loss Adjustment Expense related to non-proportional assumed business. Gross and net reserves related to this treaty are $1.2 million and the ultimate incurred amount reflects IBNR only. The Company does not have direct access to individual claim information underlying the assumed quota arrangement. The Company does not use claim frequency information in the determination of loss reserves or for other internal purposes. Based on these considerations, the Company does not believe providing claims frequency information is practicable as it relates to this line of business . |
Reinsurance
Reinsurance | 12 Months Ended |
Dec. 31, 2019 | |
Reinsurance | |
Reinsurance | 9. Reinsurance The Company utilizes reinsurance in order to limit its exposure to losses and enable it to underwrite policies with sufficient limits to meet policyholder needs. The Company utilizes both excess of loss (XOL) and quota share reinsurance. In an XOL treaty, the Company retains losses for any occurrence up to a specified amount (its “retention”) and reinsurers assume any losses above that amount. Prior to March 1, 2015, the Company had a retention of $15 million on non‑earthquake events. This was reduced to $5 million on March 1, 2015 and remained in place through December 31, 2019. The Company’s retention for earthquake events was $15 million from its inception through December 31, 2017 and was reduced to $5 million on January 1, 2018 and remained in place through December 31, 2019. The Company maintained XOL coverage up to $1.05 billion nationwide ($1.12 billion in California) and $825 million for earthquake events as of December 31, 2019 and 2018, respectively, and $740 million and $625 million for non-earthquake events as of December 31, 2019 and 2018, respectively. As of December 31, 2019 for non-earthquake events the Company retains 55% of losses between $299 million and $350 million, 30% of losses between $350 million and $477 million, and 100% of losses between $524 million and $569 million. As of December 31, 2018, for non‑earthquake events the Company retains 54.55% of losses between $230 million and $351 million and 30% of losses between $351 million and $501 million. In a quota share agreement, the Company transfers, or cedes, part or all of its exposure to a reinsurer who receives a portion of the associated premium in exchange. The reinsurer also must share an agreed upon portion of losses and agreed upon portion of the associated commission expense. The Company has quota share reinsurance agreements on several of its lines with the Commercial All Risk and Specialty Homeowners lines currently accounting for the largest amount of ceded written premiums. For Texas Homeowners, a component of Specialty Homeowners, the Company ceded substantially all exposure between June 2018 and June 2019 and ceded the majority of exposure thereafter. Ceded written premium related to the Texas Homeowners line was $20.4 million, $24.9 million and $2.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. Ceded written premium related to the Commercial All Risk line was $19.0 million, $7.2 million and $2.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. No other quota share program accounted for more than 10% of total ceded written premium for those years. The Company recognizes ceded unearned premiums related to quota share agreements on its consolidated balance sheets as a prepaid reinsurance premium asset. As of December 31, 2019 and 2018, prepaid reinsurance premiums totaled $26.1 million and $18.3 million, respectively. The increase in 2019 was driven primarily by increased ceding on the Commercial All Risk line. As part of its reinsurance program, in June 2017, the Company obtained catastrophe protection through a reinsurance agreement with Torrey Pines Re Ltd. (“TPRe”). In connection with the reinsurance agreement, TPRe issued notes to unrelated investors in an amount equal to the full $166 million of coverage provided under the reinsurance agreement covering a three year period. At the time of the agreement, the Company performed an evaluation of TPRe to determine if it meets the definition of a variable interest entity (“VIE”). The Company concluded that TPRe is a VIE but it does not have a variable interest in the entity, as the variability in results is expected to be absorbed entirely by the investors in TPRe. Accordingly, TPRe is not consolidated in the Company’s financial statements. The premium ceded to TPRe for the year ended December 31, 2019 was approximately $10.6 million. The effect of reinsurance on premiums written and earned and on losses and LAE incurred for the years ended December 31, 2019, 2018 and 2017, is as follows: 2019 2018 2017 Written Earned Written Earned Written Earned (in thousands) Premiums Written and Earned: Direct $ 220,568 $ 178,536 $ 144,821 $ 129,071 $ 112,974 $ 94,799 Assumed 31,393 21,985 10,070 8,688 7,260 6,162 Ceded (108,332) (100,314) (82,949) (67,862) (46,951) (45,416) Net $ 143,629 $ 100,207 $ 71,942 $ 69,897 $ 73,283 $ 55,545 2019 Losses LAE Total (in thousands) Losses and LAE Incurred: Direct $ 20,105 $ 2,837 $ 22,942 Assumed 1,201 34 1,235 Ceded (16,564) (2,020) (18,584) Net $ 4,742 $ 851 $ 5,593 2018 Losses LAE Total (in thousands) Losses and LAE Incurred: Direct $ 12,153 $ 2,113 $ 14,266 Assumed 46 6 52 Ceded (6,580) (1,464) (8,044) Net $ 5,619 $ 655 $ 6,274 2017 Losses LAE Total (in thousands) Losses and LAE Incurred: Direct $ 24,266 $ 6,608 $ 30,874 Assumed 2 — 2 Ceded (14,651) (4,100) (18,751) Net $ 9,617 $ 2,508 $ 12,125 The ceding of insurance does not legally discharge the Company from its primary liability for the full amount of the policy coverage, and therefore the Company will be required to pay the loss and bear collection risk if the reinsurer fails to meet its obligations under the reinsurance agreement. To minimize exposure to significant losses from reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk. To reduce credit exposure to reinsurance recoverable balances, the Company obtains letters of credit from certain reinsurers that are not authorized as reinsurers under U.S. state insurance regulations. In addition, under the terms of its reinsurance contracts, the Company may retain funds due from reinsurers as security for those recoverable balances. As of December 31, 2019 and 2018, the Company had retained $1.7 million and $0.7 million in funds from reinsurers, respectively. The Company is able to use the funds in the ordinary course of its business. The funds are held in cash and cash equivalents and investments with an offsetting liability on the accompanying consolidated balance sheets. For the year ended December 31, 2019, reinsurance premiums ceded to the Company’s three largest reinsurers totaled $21.7 million, $7.5 million, and $4.9 million, representing 31.5% of the total balance. For the year ended December 31, 2018, reinsurance premiums ceded to the Company’s three largest reinsurers totaled $7.5 million, $7.2 million, and $5.2 million, representing 24.0% of the total balance. For the year ended December 31, 2017, reinsurance premiums ceded to the Company’s three largest reinsurers totaled $4.0 million, $3.4 million, and $2.4 million, representing 20.8% of the total balance. At December 31, 2019 reinsurance recoverable on unpaid losses by the Company’s three largest reinsurers were $2.7 million, $1.9 million, and $1.9 million representing 38.2% of the total balance. At December 31, 2018 reinsurance recoverables on paid and unpaid losses by the Company’s three largest reinsurers were $1.8 million, $0.8 million, and $0.8 million representing 23.0% of the total balance. All of the Company’s reinsurers post collateral or have an A.M. best rating of A− (excellent) or better. |
Long-term Debt
Long-term Debt | 12 Months Ended |
Dec. 31, 2019 | |
Long-term Debt | |
Long-term Debt | 10. Long‑term Debt Prior to September 2018, the Company had $17.5 million in outstanding surplus notes which had been issued by PSIC on February 3, 2015 for a term of seven years. The surplus notes bore interest at the rate of LIBOR plus 8.00% and had restrictions as to payments of interest and principal and any such payment required the prior approval of the Oregon Insurance Commissioners before such payment could be made. Such payments could only be made from surplus. In September 2018, the Company completed a private placement financing of $20.0 million floating rate senior secured notes (the “Floating Rate Notes”), bearing interest at the three-month treasury rate plus 6.50% per annum. As part of the financing agreement, the Company immediately used surplus funds to pay down the existing $17.5 million in surplus notes. As part of this pre‑payment, the Company incurred a penalty of $0.1 million which, along with unamortized debt issuance costs of $0.4 million, was charged to income in 2018. The Floating Rate Notes were redeemed pursuant to their terms on May 23, 2019, at a redemption price equal to 102% of the principal amount of the Floating Rate Notes, or $20.4 million (plus $0.3 million of accrued and unpaid interest thereon). The Company recognized a charge of $1.3 million upon redemption with $0.4 million due to the redemption premium and $0.9 million due to the write‑off of unamortized debt issuance costs. The $0.4 million redemption premium was recognized as a component of interest expense and the $0.9 million issuance cost write‑off was recognized as a component of other underwriting expenses in the Company’s consolidated statements of income and comprehensive income. The Company incurred $1.1 million in interest expense related to the Floating Rate Notes for the year ended December 31, 2019 (inclusive of the $0.4 million redemption premium) and $0.6 million for the year ended December 31, 2018 and paid $1.2 million and $0.5 million for each period, respectively. The Company incurred $1.2 million and $1.6 million in interest expense related to the surplus notes for the year ended December 31, 2018 and 2017, respectively and paid $1.2 million and $1.6 million in each period, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Taxes | |
Income Taxes | 11. Income Taxes Prior to March 2019, the Company was a Cayman Islands incorporated holding company with U.K. tax residency. On March 14, 2019, the Company implemented a domestication (the Domestication) pursuant to Section 388 of the Delaware General Corporation Law and Section 206 of the Companies Law (2018 Revision), as amended, of the Cayman Islands pursuant to which it became a Delaware corporation and no longer subject to the laws of the Cayman Islands. Historically, the Company’s Bermuda based subsidiary, PSRE, was not required to pay any taxes on its income or capital gains but was subject to a 1% U.S. federal excise tax on reinsurance premiums assumed. The Company intends to make an irrevocable election for PSRE to be taxed as a U.S. domestic corporation under Section 953(d) of the Code effective January 1, 2019. The components of the Company’s federal income tax expense (benefit) are as follows: December 31, 2019 2018 2017 (in thousands) Current $ 6,810 $ (6) $ 11 Deferred 646 — 1,134 Income tax expense (benefit) $ 7,456 $ (6) $ 1,145 As of December 31, 2019 and 2018, significant components of the Company’s deferred tax assets and liabilities were as follows: December 31, 2019 2018 (in thousands) Deferred tax assets: Losses and LAE reserve discount $ 10 $ 22 Net operating losses 74 702 Investment amortization 85 119 Unearned premiums 3,748 1,914 Capitalized organizational costs 274 304 Unrealized losses on investments — 505 Other 390 306 Total deferred tax assets $ 4,581 $ 3,872 Deferred tax liabilities: Deferred acquisition costs $ (4,468) $ (2,127) Unrealized gains on investments (1,396) — Internally developed software (640) — Other (2) (68) Total deferred tax liabilities (6,506) (2,195) Net deferred tax asset before valuation allowance (1,925) 1,677 Valuation allowance (74) (1,677) Total net deferred tax liabilities $ (1,999) $ — Prior to 2019, the Company maintained a valuation allowance on the U.S. tax attributes due to significant negative evidence, including cumulative U.S. losses in the most recent three-year period and our assessment that the realization of the net deferred tax assets did not meet the "more likely than not" criteria under ASC 740, Income Taxes . Management assessed available positive and negative evidence to estimate whether sufficient future taxable income would be generated to permit use of the existing deferred tax assets. The projected reversal of temporary differences, the Domestication, and projected future operating income in the U.S. represents significant positive evidence, which outweighed the historical negative evidence. Based on this evidence, management determined it was more likely than not that the federal deferred tax assets are recoverable and therefore the associated valuation allowance was released as of March 31, 2019. State NOL carryforwards, due to the limited carryforward period, do not meet the “more likely than not” criteria and the Company will continue to maintain a valuation allowance on the associated deferred tax assets. The Company decreased the valuation allowance on the federal deferred tax assets by $1.7 million as a result of this analysis. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period change or if objective negative evidence in the form of cumulative losses is no longer present. The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the tax years ended December 31, 2019, 2018 and 2017: Years Ended December 31, 2019 2018 2017 ($ in thousands) Expense computed at federal tax rate $ 3,802 21.00 % $ 3,825 21.00 % $ 1,675 34.00 % Non‑U.S. group member income — — % (4,409) (24.21) % (1,632) (33.12) % Stock-based compensation 4,822 26.63 % — — % — — % Dividend received deduction and tax‑exempt interest (36) (0.20) % (144) (0.79) % (467) (9.47) % Impact of tax reform — — % — — % 580 11.76 % Valuation allowance (1,677) (9.27) % 678 3.72 % 947 19.23 % Other 545 3.01 % 44 0.24 % 42 0.83 % Income tax expense (benefit) $ 7,456 41.17 % $ (6) 0.03 % $ 1,145 23.23 % On December 22, 2017, the President of the United States signed into law the Tax Act. The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates from 35% to 21%, effective January 1, 2018. U.S. GAAP requires companies to recognize the effect of tax law changes in the period of enactment. We evaluated all available information and made reasonable estimates of the impact of tax reform to substantially all components of our net deferred tax assets as of December 31, 2017. We finalized our accounting for the Tax Act during 2018 with no significant impact to earnings or deferred taxes. As of December 31, 2019 and 2018, the Company had no uncertain tax positions that required either recognition or disclosure in the consolidated financial statements. This is not expected to change significantly during the next twelve months. The Company classifies interest and penalties, if any, related to the liability for unrecognized tax benefits as a component of the provision for income taxes. The Company’s income tax returns for 2015 through 2019 remain subject to examination by the tax authorities. |
Capital Stock
Capital Stock | 12 Months Ended |
Dec. 31, 2019 | |
Capital Stock | |
Capital Stock | 12. Capital Stock As of December 31, 2019, the Company has 5,000,000 preferred shares authorized with a par value of $0.0001 and no preferred shares issued and outstanding. There were no preferred shares authorized as of December 31, 2018. As of December 31, 2019 and December 31, 2018, the Company has 500,000,000 common shares authorized and 23,468,750 and 17,000,000 common shares issued and outstanding, respectively, with a par value of $0.0001. Additional paid in capital is $180.0 million as of December 31, 2019 and $68.5 million as of December 31, 2018. Common stock reserved for future issuance consists of the following as of December 31, 2019: Stock options outstanding under 2019 Equity Incentive Plan 1,046,373 Restricted stock units outstanding under 2019 Equity Incentive Plan 6,066 Shares authorized for future issuance under 2019 Equity Incentive Plan 1,347,561 Shares authorized for future issuance under 2019 Employee Stock Purchase Plan 240,000 Total 2,640,000 |
Statutory financial information
Statutory financial information | 12 Months Ended |
Dec. 31, 2019 | |
Statutory financial information | |
Statutory financial information | 13. Statutory financial information U.S. U.S. state insurance laws and regulations prescribe accounting practices for determining statutory net income and capital and surplus for insurance companies. In addition, state regulators may permit statutory accounting practices that differ from prescribed practices. Statutory accounting practices (SAP) prescribed or permitted by regulatory authorities for the Company’s insurance subsidiaries differ from U.S. GAAP. The principal differences between SAP and GAAP as they relate to the financial statements of the Company’s insurance subsidiaries are (a) policy acquisition costs are expensed as incurred under SAP, whereas they are deferred and amortized under GAAP, (b) certain assets are not admitted for purposes of determining surplus under SAP, (c) investments in fixed income securities are carried at fair value under GAAP whereas such securities are carried at amortized cost under SAP, and (d) the criteria for recognizing net DTAs and the methodologies used to determine such amounts are different under SAP and GAAP. Risk‑Based Capital (RBC) requirements promulgated by the NAIC require property/casualty insurers to maintain minimum capitalization levels determined based on formulas incorporating various business risks of the insurance subsidiaries. PSIC’s statutory net income and statutory capital surplus as of December 31, 2019, 2018 and 2017 and for the years then ended are summarized as follows: December 31, 2019 2018 2017 (in thousands) Statutory net income (loss) $ (17,911) $ 9,609 $ (4,128) Statutory capital and surplus 116,296 63,731 61,338 As of December 31, 2019 and 2018, the company’s capital and surplus exceeds its authorized control level. The authorized control level as determined by the RBC calculation was $34.2 million and $19.7 million at December 31, 2019 and 2018, respectively. Bermuda Under the Bermuda Insurance Act, 1978 and related regulations, PSRE is required to maintain certain solvency and liquidity levels. The minimum statutory solvency margin required at December 31, 2019 and 2018 was approximately $1.2 million and $6.9 million, respectively. Actual statutory capital and surplus at December 31, 2019 and 2018 was $38.3 million and $19.6 million, respectively. PSRE had statutory net income of $18.5 million, $17.3 million and $4.8 million for 2019, 2018 and 2017, respectively. PSRE had stockholder’s equity of $39.7 million and $23.5 million on a GAAP basis at December 31, 2019 and 2018, respectively. The principal difference between statutory capital and surplus and stockholder’s equity presented in accordance with GAAP are prepaid expenses, which are non‑admitted assets for Bermuda statutory purposes. PSRE maintains a Class 3A license and thus must maintain a minimum liquidity ratio in which the value of its relevant assets is not less than 75.0% of the amount of its relevant liabilities for general business. Relevant assets include cash and cash equivalents, fixed maturity securities, accrued interest income, premiums receivable, losses recoverable from reinsurers, and funds withheld. The relevant liabilities include total general business insurance reserves and total other liabilities, less sundry liabilities. As of December 31, 2019 and 2018, the Company met the minimum liquidity ratio requirement. |
Dividend Restrictions
Dividend Restrictions | 12 Months Ended |
Dec. 31, 2019 | |
Dividend Restrictions | |
Dividend Restrictions | 14. Dividend Restrictions U.S. PSIC must receive the approval of the Oregon and California insurance commissioners prior to paying certain dividends. The maximum dividend or distribution amount that may be declared and paid by PSIC to its shareholder without prior approval is subject to restrictions relating to policyholder surplus and net income. A dividend or distribution that requires approval is any dividend or distribution, together with all other dividends or distributions paid in the preceding 12 months that exceeds the greater of (i) 10% of the combined statutory capital and surplus of the insurer as of the 31 st day of December of the preceding year or (ii) statutory net income (excluding realized investment gains or losses) for the 12‑month period ending the 31 st day of December preceding year. In addition, the Company may only declare a dividend from earned surplus, which does not include surplus arising from unrealized capital gains or revaluation of assets. The Company may declare a dividend from other than earned surplus with prior approval from the Commissioner. Due to cumulative earned surplus of $10.3 million, PSIC may pay a dividend or distribution no greater than $10.3 million to the Company in 2020 without the prior approval of the Oregon and California Insurance Commissioners. Any dividend or distribution greater than $10.3 million will require the prior approval of the Oregon and California Insurance Commissioners. Bermuda Bermuda regulations limit the amount of dividends and return of capital paid by a regulated entity. A Class 3A insurer is prohibited from declaring or paying a dividend if it is in breach of its minimum solvency margin, its enhanced capital requirement, or its minimum liquidity ratio, or if the declaration or payment of such dividend would cause such a breach, or if there are reasonable grounds for believing there has been such a breach. Pursuant to Bermuda regulations, the maximum amount of dividends and return of capital available to be paid by a reinsurer is determined pursuant to a formula. Under this formula, the maximum amount of dividends and return of capital available to the Company from PSRE during 2020 is calculated to be approximately $5.7 million. However, this dividend amount is subject to annual enhanced solvency requirement calculations. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | 15. Commitments and Contingencies Litigation The Company is subject to legal proceedings arising from the normal conduct of its business. In the opinion of management, any ultimate liability that may arise from these proceedings will not have a material effect on the Company’s financial position. Operating Leases The Company leases office space and office equipment under operating leases expiring at various dates through July 2024. The following is a schedule by year of the future minimum rental payments required under operating leases that have initial or remaining non‑cancelable lease terms exceeding one year as of December 31, 2019: Total (in thousands) Years ending December 31: 2020 $ 843 2021 879 2022 904 2023 862 2024 478 Thereafter — Total $ 3,966 Total rent expense for the years ended December 31, 2019, 2018 and 2017, was $0.6 million, $0.6 million and $0.8 million, respectively. Letters of Credit As of December 31, 2019, the Company has three irrevocable standby letters of credit for the benefit of ceding insurance companies to secure the unearned premium assumed by PSIC. The bank letters of credit amount to $1.5 million, $0.4 million and $0.4 million, two of which expire December 31, 2020 with no renewal terms. One of the $0.4 million letters of credit auto renews each year. As of December 31, 2018, the Company has four irrevocable standby letters of credit for the benefit of ceding insurance companies to secure the unearned premium assumed by PSIC. The bank letters of credit amount to $1.3 million, $0.4 million, $0.5 million and $0.4 million, all of which expire December 31, 2018 and all but the $0.5 million letter of credit auto renew for one year. The collateral increases were a result of additional unearned premium assumed from the ceding insurance companies. The letters of credit were collateralized by $3.2 million and $3.0 million of U.S. Treasury bonds at December 31, 2019 and 2018, respectively. These securities are included in available‑for‑sale investments on the consolidated balance sheets. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income | 12 Months Ended |
Dec. 31, 2019 | |
Accumulated Other Comprehensive Income | |
Accumulated Other Comprehensive Income | 16. Accumulated Other Comprehensive Income Changes in accumulated other comprehensive income (AOCI) are as follows: Year Ended December 31, 2019 2018 2017 (in thousands) Balance as of January 1 $ (563) $ 2,993 $ 1,017 Effect of equity accounting guidance adoption — (3,215) — Beginning Balance (563) (222) 1,017 Other comprehensive income (loss) before reclassification 6,555 (740) 2,834 Federal income tax (expense) benefit (1,344) 76 (772) Other comprehensive income (loss) before reclassification, net of tax 5,211 (664) 2,062 Amounts reclassified from AOCI 47 399 (608) Federal income tax expense (9) (76) 68 Amounts reclassified from AOCI, net of tax 38 323 (540) Other comprehensive income (loss) 5,249 (341) 1,522 Effect of new tax rates from Tax Reform — — 454 Balance at end of period $ 4,686 $ (563) $ 2,993 |
Retirement and Post-Employment
Retirement and Post-Employment Retirement Plans | 12 Months Ended |
Dec. 31, 2019 | |
Retirement and Post-Employment Retirement Plans | |
Retirement and Post-Employment Retirement Plans | 17. Retirement and Post‑Employment Retirement Plans For employees meeting certain eligibility requirements, the Company provides a defined contribution retirement plan under IRC Section 401(k). Under a safe‑harbor plan, the Company contributes 3% of each participant’s gross wages regardless of the employee’s contribution. For the years ended December 31, 2019, 2018, and 2017 the Company’s contributions to the plan were $0.3 million, $0.2 million and $0.2 million, respectively. |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Dec. 31, 2019 | |
Stock-Based Compensation | |
Stock-Based Compensation | 18. Stock-Based Compensation The below table summarizes the Company’s stock-based compensation expense for each period presented: Year ended December 31, 2019 2018 (in thousands) Stock-Based Compensation $ 24,103 $ — Stock-based compensation expense is recognized on a straight-line basis over the vesting period of awards. The Company does not apply a forfeiture rate to unvested awards and accounts for forfeitures as they occur. All stock-based compensation is included in other underwriting expenses in the Company’s consolidated statements of income and comprehensive income. The Company recognized approximately $23.0 million of stock-based compensation expense in March 2019 relating to the modification of its 2014 Management Incentive Plan. The Company began recognizing stock-based compensation expense relating to its 2019 Equity Incentive Plan and the 2019 Employee Stock Purchase Plan upon their inception and initial equity grants in April 2019. Aside from the aforementioned $23.0 million charge, all stock-based compensation expense recognized during the year ended December 31, 2019 relates to the 2019 Equity Incentive Plan and 2019 Employee Stock Purchase Plan. Management Incentive Plan prior to IPO The Company’s former parent, GC Palomar Investor LP, adopted a 2014 Management Incentive Plan (in the form of profits interests) on February 12, 2014 under which certain officers and employees of PSIC and its affiliates were entitled to Class P Units in GC Palomar Investor LP. Class P unit holders were expected to realize value only upon the occurrence of liquidity events meeting requisite financial thresholds after the Class A unit holders recovered their investment. The Class P unit holders had no voting rights. The Company did not record stock-based compensation expense related to this plan prior to 2019 because no liquidity events were probable of occurring. On March 15, 2019, the Company modified its 2014 Management Incentive Plan by eliminating the requirement of a liquidity event to occur for the holders of its Class P units to realize value. The 12,552,825 Class P units outstanding were modified such that the vesting of each Class P unit holder’s awards was accelerated and their Class P distribution percentages were determined and distributed based on these percentages. This modification resulted in a stock compensation charge and corresponding increase to additional paid in capital of $23.0 million during the quarter ending March 31, 2019. The stock compensation charge is included in other underwriting expenses in the Company’s consolidated statements of income and comprehensive income. 2019 Equity Incentive Plan On April 16, 2019, the Company’s 2019 Equity Incentive Plan (the 2019 Plan) became effective. The 2019 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs), performance shares and units, and other cash-based or share-based awards. In addition, the 2019 Plan contains a mechanism through which the Company may adopt a deferred compensation arrangement in the future. A total of 2,400,000 shares of common stock are initially authorized and reserved for issuance under the 2019 Plan. This reserve will automatically increase on January 1, 2020 and each subsequent anniversary through 2029, by an amount equal to the smaller of: 3% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or an amount determined by the board of directors. Stock Options Recipients of stock options can purchase shares of the Company’s common stock at a price equal to the stock’s fair market value on the grant date, determined by the closing price of the Company's common stock on the grant date. Stock options vest over a two or four year period with 25% or 50% vesting on the first anniversary of the grant date and the remainder vesting monthly over the remaining period, subject to continued employment. Stock options expire ten years after the grant date. The following table summarizes stock option transactions for the 2019 Plan for the year ended December 31, 2019: Weighted average remaining Aggregate Number of Weighted-average contractual term intrinsic value shares exercise price (in years) (in thousands) Outstanding at December 31, 2018 — $ — Options granted 1,058,966 17.03 Options exercised — — Options canceled (12,593) 15.00 Outstanding at December 31, 2019 1,046,373 $ $ 35,039 Vested and Exercisable at December 31, 2019 — $ — — $ — As of December 31, 2019, the Company had approximately $3.2 million of total unrecognized stock-based compensation expense related to stock options expected to be recognized over a weighted-average period of 2.28 years. The fair value of each option granted was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions: Risk free rate of return (1) 1.59% - 2.45% Expected share price volatility (2) 18.12% - 18.45% Expected life in years (3) 5.64 - 6.08 years Dividend yield (4) (1) Determined based on the U.S. Treasury yield in effect at the time of the grant for zero-coupon U.S. Treasury notes with remaining terms similar to the expected term of the options. (2) Determined based on analysis of the volatility of a peer group of publicly traded companies. (3) Determined using the “simplified method” for estimating the expected option life, which is the average of the weighted-average vesting period and contractual term of the option as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its common stock has been publicly traded. (4) Determined to be zero as the Company does not currently plan to issue dividends. Restricted Stock Units Restricted stock units are valued on their date of grant and will vest on the first anniversary of the grant date. The fair value of RSUs is determined by the closing price of the Company's common stock on the grant date. The following table summarizes RSU transactions for the 2019 Plan for the year ended December 31, 2019: Weighted-average Number of grant date shares fair value Non vested outstanding at December 31, 2018 — $ — Granted 6,066 16.49 Vested — — Forfeited — — Non vested outstanding at December 31, 2019 6,066 $ 16.49 As of December 31, 2019, the Company had approximately $0.1 million of total unrecognized stock-based compensation expense related to RSUs expected to be recognized over a weighted-average period of 0.31 years. 2019 Employee Stock Purchase Plan On April 16, 2019, the Company's 2019 Employee Stock Purchase Plan (the 2019 ESPP) became effective. A total of 240,000 shares of common stock are initially authorized and reserved for issuance under the 2019 ESPP. In addition, the 2019 ESPP provides for annual increases in the number of shares available for issuance on January 1, 2020 and each subsequent anniversary through 2029, equal to the smaller of 240,000 shares of the Company’s common stock or such other amount as may be determined by the board of directors. Under the 2019 ESPP purchases of common stock occur through employee participation in discrete offering periods. In each discrete offering period, employee funds are withheld and stock purchases occur upon the conclusion of the offering period. The first discrete offering period has not concluded as of December 31, 2019 and the Company did not issue any shares of common stock pursuant to the 2019 ESPP during the year ended December 31, 2019. |
Net Income Per Share
Net Income Per Share | 12 Months Ended |
Dec. 31, 2019 | |
Net Income Per Share | |
Net Income Per Share | 19. Net Income Per Share The following table sets forth the computation of net income per share of common stock: Year ended December 31, 2019 2018 2017 (in thousands, except shares and per share data) Net income $ 10,621 $ 18,219 $ 3,783 Weighted average common shares outstanding: Basic 21,501,541 17,000,000 17,000,000 Common Share equivalents 333,393 — — Diluted 21,834,934 17,000,000 17,000,000 Earnings per share: Basic $ 0.49 $ 1.07 $ 0.22 Diluted $ 0.49 $ 1.07 $ 0.22 Common share equivalents relate to outstanding shares under the 2019 Plan and unpurchased shares under the 2019 ESPP. |
Underwriting Information
Underwriting Information | 12 Months Ended |
Dec. 31, 2019 | |
Underwriting Information | |
Underwriting Information | 20. Underwriting Information The Company has a single reportable segment and offers primarily earthquake, wind, and flood insurance products. Gross written premiums (GWP) by product are presented below: Year Ended December 31, 2019 2018 2017 ($ in thousands) % of % of % of Amount GWP Amount GWP Amount GWP Product Residential Earthquake $ 130,473 51.8 % $ 81,679 % $ 57,328 % Commercial Earthquake 38,741 15.4 % 20,946 % 23,079 % Specialty Homeowners 32,788 13.0 % 27,680 % 26,516 % Commercial All Risk 30,358 12.0 % 14,338 % 7,321 % Hawaii Hurricane 10,764 4.3 % 8,128 % 5,323 % Residential Flood 5,216 2.1 % 2,120 % 667 % Other 3,621 1.4 % — — % — — % Total Gross Written Premiums $ 251,961 100.0 % $ 154,891 % $ 120,234 % Gross Written premiums by state are as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) % of % of % of Amount GWP Amount GWP Amount GWP State California $ 141,743 56.3 % $ 82,119 % $ 64,231 % Texas 44,087 17.5 % 32,568 % 29,273 % Hawaii 11,851 4.7 % 8,128 % 5,323 % Washington 9,607 3.8 % 5,658 % 2,803 % Oregon 7,396 2.9 % 5,286 % 4,250 % South Carolina 6,185 2.5 % 3,208 % 1,706 % Illinois 4,896 1.9 % 4,403 % 4,854 % Mississippi 4,769 1.9 % 2,585 % 982 % Other 21,427 8.5 % 10,936 % 6,812 % Total Gross Written Premiums $ 251,961 100.0 % $ 154,891 % $ 120,234 % The Company distributes a significant portion of its Residential Earthquake, Commercial Earthquake, Specialty Homeowners and Hawaii Hurricane products through longstanding relationships with two program administrators. Each of the four products managed by the program administrators operates as a separate program that is governed by an independent, separately negotiated agreement with unique terms and conditions, including geographic scope, key men provisions, economics and exclusivity. These programs also feature separate managerial oversight and leadership, policy administration systems and retail agents originating policies. In total, these four programs accounted for $148.6 million or 59.0% of the Company’s gross written premiums for the year ended December 31, 2019, $104.9 million or 67.7% of the Company’s gross written premiums for the year ended December 31, 2018 and $85.8 million or 71.3% of the Company’s gross written premiums for the year ended December 31, 2017. |
Selected Quarterly Financial Da
Selected Quarterly Financial Data (unaudited) | 12 Months Ended |
Dec. 31, 2019 | |
Selected Quarterly Financial Data (unaudited) | |
Selected Quarterly Financial Data (unaudited) | 21. Selected Quarterly Financial Data (unaudited) The following is a summary of the Company’s unaudited quarterly results of operations: 2019 Quarter 2019 First Second Third Fourth Year ($ in thousands, except per share data) Gross written premiums $ 54,031 $ 58,346 $ 66,242 $ 73,342 $ 251,961 Total revenues 22,307 25,905 30,461 34,623 113,296 Net income (loss) (14,411) 6,698 7,454 10,880 10,621 Comprehensive income (loss) (12,224) 9,996 8,428 9,670 15,870 Earnings per share (1): Basic $ (0.85) $ 0.30 $ 0.32 $ $ 0.49 Diluted $ (0.85) $ 0.30 $ 0.31 $ $ 0.49 2018 Quarter 2018 First Second Third Fourth Year ($ in thousands, except per share data) Gross written premiums (2) $ 34,013 $ 37,342 $ 39,994 $ 43,542 $ 154,891 Total revenues 18,523 19,892 18,916 15,640 72,971 Net income 5,592 6,934 1,566 4,127 18,219 Comprehensive income 4,693 6,843 1,257 5,085 17,878 Earnings per share (1): Basic $ 0.33 $ 0.41 $ 0.09 $ $ Diluted $ 0.33 $ 0.41 $ 0.09 $ $ (1) Due to differences in weighted average common shares outstanding between periods, quarterly earnings per share may not add up to the totals reported for the full year. (2) The first quarter 2018 gross written premiums shown above differs by an immaterial amount versus the amount reported in our first quarter 10-Q due to a subsequent reclassification between gross written premiums and policy fees. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events | |
Subsequent Events | 22. Subsequent Events On January 9, 2020, the Company and certain selling stockholders completed the January 2020 Secondary Offering of 5,750,000 shares of common stock at a public offering price of $49.00 per share. Of the 5,750,000 shares sold, 750,000 represented the underwriters’ exercise of their option to purchase additional shares. The offering was comprised of 5,000,000 shares sold by certain selling stockholders and 750,000 shares sold by the Company. The Company’s net proceeds from the January 2020 Secondary Offering were approximately $35.4 million, after deducting underwriting discounts and commissions and offering costs. |
Schedule II
Schedule II | 12 Months Ended |
Dec. 31, 2019 | |
Schedule II | |
Schedule II | Schedule II Palomar Holdings, Inc. and Subsidiaries Balance Sheets (Parent Company) (In Thousands, except shares and par value data) December 31, December 31, 2019 2018 Assets Investments: Fixed maturity securities available for sale, at fair value (amortized cost: $28,413 in 2019, $11,668 in 2018) $ 29,120 $ 11,581 Equity Securities, at fair value: (cost: $1,661 in 2019, $1,656 in 2018) 1,696 1,658 Total investments 30,816 13,239 Cash and cash equivalents 1,654 540 Accrued investment income 126 67 Prepaid expenses and other assets 36 — Investment in subsidiaries 189,313 82,446 Total assets $ 221,945 $ 96,292 Liabilities and Stockholders' equity Liabilities: Accounts payable and other liabilities $ 268 $ — Federal income tax payable 1,122 — Deferred tax liabilities 1,999 — Total liabilities 3,389 — Stockholders' equity: Preferred stock, $0.0001 par value, 5,000,000 and 0 shares authorized as of December 31, 2019 and December 31, 2018, respectively, 0 shares issued and outstanding as of December 31, 2019 and December 31, 2018 — — Common stock, $0.0001 par value, 500,000,000 shares authorized, 23,468,750 and 17,000,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively 2 2 Additional paid‑in capital 180,012 68,498 Accumulated other comprehensive (loss) income 4,686 (563) Retained earnings 33,856 28,355 Total stockholders' equity 218,556 96,292 Total liabilities and stockholders' equity $ 221,945 $ 96,292 See accompanying notes. Schedule II Palomar Holdings, Inc. and Subsidiaries Statements of Income (Parent Company) (In Thousands) Year Ended December 31, 2019 2018 2017 Net investment income $ 1,039 $ 61 $ — Net realized and unrealized losses on investments 131 (2) — Operating expenses 8 — — Income before income taxes 1,178 59 — Income tax expense 7,441 — — Income (loss) before equity in net income of subsidiaries (6,263) 59 — Equity in net income of subsidiaries 16,884 18,160 3,783 Net income 10,621 18,219 3,783 Other comprehensive income: Net unrealized losses on securities available for sale 708 (87) — Equity in other comprehensive income of subsidiaries, net of taxes 4,541 (254) 1,522 Total comprehensive income $ 15,870 $ 17,878 $ 5,305 See accompanying notes. Schedule II Palomar Holdings, Inc. and Subsidiaries Statements of Cash Flows (Parent Company) (In Thousands) Year Ended December 31, 2019 2018 2017 Operating activities Net income $ 10,621 $ 18,219 $ 3,783 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries (16,884) (18,160) (3,783) Net realized and unrealized losses on investments (131) 2 — Amortization of premium on fixed maturity securities 114 — — Deferred income tax expense 646 — — Other — 546 — Changes in operating assets and liabilities: 4,202 (67) — Net cash (used in) provided by operating activities (1,432) 540 — Investing activities Purchases of fixed maturity securities (73,901) — — Cash received from subsidiary 226 — — Sales and maturities of fixed maturity securities 13,930 — — Net cash used in investing activities (59,745) — — Financing activities Proceeds from initial public offering, net of offering costs 87,411 — — Redemption of Floating Rate Notes (20,000) — — Distribution to stockholder (5,120) — — Net cash provided by financing activities 62,291 — — Net increase in cash and cash equivalents 1,114 540 — Cash and cash equivalents at beginning of period 540 — — Cash and cash equivalents at end of period $ 1,654 $ 540 $ — Supplementary cash flow information: Cash paid for income taxes $ 5,645 $ — $ — See accompanying notes. Schedule II 1. Organization Palomar Holdings, Inc. (the Company), is an insurance holding company that was incorporated in Delaware in March 2019. Prior to incorporation in Delaware, the Company was known as GC Palomar Holdings (GCPH), which was a Cayman Islands incorporated insurance holding company formed on October 4, 2013 when GC Palomar Investor LP (GCPI) acquired control of GCPH. Basis of Presentation The accompanying condensed financial statements have been prepared using the equity method. Under the equity method, the investment in consolidated subsidiaries is stated at cost plus equity in undistributed earnings of consolidated subsidiaries since the date of acquisition. These condensed financial statements should be read in conjunction with the Company’s consolidated financial statements. Estimates and Assumptions Preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Those estimates are inherently subject to change, and actual results may ultimately differ from those estimates. |
Schedule V - Valuation and Qual
Schedule V - Valuation and Qualifying Accounts | 12 Months Ended |
Dec. 31, 2019 | |
Valuation and Qualifying Accounts | |
Valuation and Qualifying Accounts | Schedule V Palomar Holdings, Inc. and Subsidiaries Valuation and Qualifying Accounts Additions Deductions Balance at Amounts Amounts Balance at Beginning Charged to Written End of (in thousands) of Period Expense Off Period Year Ended December 31, 2019 Valuation Allowance for deferred tax assets $ 1,677 $ — $ (1,603) $ 74 Year Ended December 31, 2018 Valuation Allowance for deferred tax assets $ 947 $ 730 $ — $ 1,677 |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Significant Accounting Policies | |
Summary of Operations | Summary of Operations Palomar Holdings, Inc. (the Company), is an insurance holding company that was incorporated in Delaware in March 2019. Prior to incorporation in Delaware, the Company was known as GC Palomar Holdings (GCPH), which was a Cayman Islands incorporated insurance holding company formed on October 4, 2013 when GC Palomar Investor LP (GCPI) acquired control of GCPH. The Company and its wholly owned subsidiaries include Palomar Insurance Holdings, Inc. (PIH), which wholly owns Palomar Specialty Insurance Company (PSIC), Prospect General Insurance Agency, Inc. (PGIA), and Palomar Specialty Reinsurance Company Bermuda Ltd. (PSRE). On February 12, 2014, GCPH through PIH acquired PSIC from Pacific Indemnity Company in a stock purchase transaction. PSIC is a property and casualty insurance company domiciled in the state of Oregon. The Company’s core focus is on the residential and commercial earthquake markets in earthquake‑exposed states such as California, Oregon, Washington, and states with exposure to the New Madrid Seismic Zone. In 2015, PSIC expanded into broader geographic regions and perils, to include Hawaii residential hurricane and Texas specialty homeowners products. In 2016, PSIC began a commercial all risk insurance program which covers commercial property primarily in southeastern wind‑exposed states. PSIC is licensed to underwrite insurance on an admitted basis in 27 states in the United States, as of December 31, 2019, mainly through managing general insurance agencies, wholesale brokers, and independent agents. PGIA is a property and casualty general insurance agency for PSIC and unaffiliated insurance carriers. As a general insurance agency, PGIA assists in developing insurance products, underwriting insurance policies, and receiving and disbursing funds from premium and loss transactions under contracts on behalf of insurance companies. PGIA earns commissions from the product development, marketing, and servicing of the insurance companies’ programs. PGIA also earns fee income from policyholder transactions. PSRE is a Bermuda captive reinsurance company that reinsures earthquake and Hawaii Hurricane premium on a quota share basis exclusively for PSIC. The Company operates as an insurance holding company system and is subject to the insurance holding company laws of the State of Oregon, the state in which PSIC is domiciled. The Company is also commercially domiciled in California and, as a result, subject to the insurance holding company laws of that state. These statutes require that each insurance company in the system register with the insurance department of its state of domicile and furnish information concerning the operations of companies within the holding company system that may materially affect the operations, management or financial condition of the insurers within the system and domiciled in that state. The Company’s chief operating decision‑maker is the Chief Executive Officer. While the chief decision‑maker monitors the revenue streams of the various products and services, operations are managed, resources are allocated, and financial performance is evaluated on a Company‑wide basis. The Company has a single operating segment, the property and casualty insurance business. |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include the accounts of the Company and its wholly‑owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
Stock Split | Stock Split On March 15, 2019, the Company effected a 17,000,000 for one forward stock split in conjunction with domestication in the United States. All share and per share information included in the accompanying consolidated financial statements and notes to the consolidated financial statements have been retroactively adjusted to reflect the stock split for the Company’s common stock for all periods presented. Initial Public Offering (IPO) On April 22, 2019, the Company completed its IPO with the sale of 6,468,750 shares of common stock at a price to the public of $15.00 per share, including 843,750 shares sold upon the exercise in full of the underwriter’s option to purchase additional shares. After underwriter discounts and commissions and offering expenses, net proceeds from the IPO were approximately $87.4 million. |
Initial Public Offering (IPO) | Initial Public Offering (IPO) On April 22, 2019, the Company completed its IPO with the sale of 6,468,750 shares of common stock at a price to the public of $15.00 per share, including 843,750 shares sold upon the exercise in full of the underwriter’s option to purchase additional shares. After underwriter discounts and commissions and offering expenses, net proceeds from the IPO were approximately $87.4 million. |
Use of Estimates | Use of Estimates The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. All revisions to accounting estimates are recognized in the period in which the estimates are revised. Significant estimates reflected in the Company’s consolidated financial statements include, but are not limited to, reserves for losses and loss adjustment expenses, reinsurance recoverables on unpaid losses, and the fair values of investments. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include time deposits and marketable securities with original maturities of three months or less at acquisition and are stated at cost, which approximates fair value. The Company maintains cash balances in federally insured financial institutions. |
Restricted Cash | Restricted Cash Restricted cash includes cash on deposit with reinsurance carriers. Restricted cash also includes cash held in a fiduciary capacity for the benefit of third-party insurance carriers. |
Deferred Offering Costs | Deferred Offering Costs Deferred offering costs, which consist of direct incremental legal and accounting fees relating to the Company's April 2019 initial public offering (IPO), were capitalized as incurred. The deferred offering costs were offset against the IPO proceeds upon the consummation of the offering. Deferred offering costs were $1.1 million at December 31, 2018 and are classified as Prepaid expenses and other assets on the Company's consolidated balance sheet. |
Investments | Investments All of the Company’s investments in fixed maturity securities are classified as available‑for‑sale and are carried at fair value. Unrealized gains and losses related to fixed maturity securities are included in accumulated other comprehensive income as a separate component of stockholder’s equity. Equity securities are carried at fair value with unrealized gains and losses included as a component of net income on the Company’s consolidated statement of income. Prior to 2018, unrealized gains and losses on equity securities were included in accumulated other comprehensive income as a separate component of stockholders’ equity. Premiums and discounts on mortgage‑backed securities and asset‑backed securities are amortized or accrued using the prospective method which considers anticipated prepayments at the date of purchase. To the extent that the estimated lives of such securities change as a result of changes in estimated prepayment rates, the adjustments are included in net investment income using the prospective method. Investment income consists primarily of interest and dividends. Interest income is recognized on an accrual basis. Dividend income is recognized on the ex‑dividend date. Net investment income represents investment income, net of expenses. Other‑than‑temporary declines in fair value of fixed maturity securities are evaluated for amounts considered credit losses by comparing the expected present value of cash flows to be collected to the amortized cost. Once the amount of other‑than‑temporary impairment (OTTI) related to the credit loss is determined, the unrealized loss is then bifurcated into the credit‑related loss and the loss related to all other factors. The credit‑related OTTI loss is recognized as a realized loss in the statement of income and comprehensive income and the cost basis of the security is reduced. The OTTI related to other factors remain in accumulated other comprehensive income. Before 2018, other‑than‑temporary declines in the fair value of equity securities would have been recorded as realized losses in the consolidated statement of income and comprehensive income and the cost basis of the security would have been reduced (see Note 3). The Company uses the specific‑identification method to determine the cost of fixed maturity securities sold and the first‑in, first‑out method for lots of equity securities sold. |
Fair Value | Fair Value Fair value is defined as the price that the Company would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. The three‑tier hierarchy of inputs is summarized in the three broad levels listed below: Level 1—Unadjusted quoted prices are available in active markets for identical investments as of the reporting date. Level 2—Pricing inputs are quoted prices for similar investments in active markets; quoted prices for identical or similar investments in inactive markets; or valuations based on models where the significant inputs are observable or can be corroborated by observable market data. Level 3—Pricing inputs into models are unobservable for the investment. The unobservable inputs require significant management judgment or estimation. To measure fair value, the Company obtains quoted market prices for its investment securities from its outside investment managers. If a quoted market price is not available, the Company uses prices of similar securities. The fair values obtained from the outside investment managers are reviewed for reasonableness and any discrepancies are investigated for final valuation. The fair value of the Company’s investments in fixed maturity securities is estimated using relevant inputs, including available market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. An Option Adjusted Spread model is also used to develop prepayment and interest rate scenarios. Industry standard models are used to analyze and value securities with embedded options or prepayment sensitivities. These fair value measurements are estimated based on observable, objectively verifiable market information rather than market quotes; therefore, these investments are classified and disclosed in Level 2 of the hierarchy. The fair value of the Company’s investments in equity securities is based on quoted prices available in active markets and classified and disclosed in Level 1 of the hierarchy. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, fixed maturity securities and reinsurance recoverables. The Company places its cash and cash equivalents with high credit quality financial institutions and its fixed maturity securities in securities of the U.S. government, U.S. government agencies, and high credit quality issuers of debt securities. The Company evaluates the financial condition of its reinsurers and reinsures its business with highly rated reinsurers and sometimes requires letters of credit or retains funds from reinsurers (see Note 9). |
Premiums Receivable | Premiums Receivable Premiums receivable are carried at face value net of any allowance for doubtful accounts which approximates fair value. If necessary, the Company records an allowance for doubtful accounts in an amount approximating anticipated losses. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts is not reasonably assured. No allowance for doubtful accounts was required at December 31, 2019 or 2018. |
Deferred Policy Acquisition Costs | Deferred Policy Acquisition Costs The costs of successfully acquiring new business, principally commission expense and premium taxes, are deferred and amortized over the unexpired terms of the policies in force. |
Premiums Earned | Premiums Earned Gross premiums written are recorded at policy inception and are earned as revenue ratably over the term of the respective policies. Premiums written not yet recognized as revenue are reflected as unearned premiums on the balance sheet, or as advanced premiums if received prior to the policy effective date. Premiums written but not yet received are recognized as premiums receivable. Premiums receivable are presented on the consolidated balance sheets net of estimated uncollectible amounts. Based on management’s review no allowance for bad debt was required at December 31, 2019 and 2018. A premium deficiency is recognized if the sum of expected losses and loss adjustment expenses, unamortized acquisition costs, and policy maintenance costs exceeds the remaining unearned premiums. A premium deficiency would first be recognized by charging any unamortized acquisition costs to expense to the extent required to eliminate the deficiency. If the premium deficiency were greater than unamortized acquisition costs, a liability would be accrued for the excess deficiency. The Company does not consider anticipated investment income when determining if a premium deficiency exists. There was no premium deficiency at December 31, 2019 or 2018. |
Commission and Other Income | Commission and Other Income Commission and other income is comprised of commissions earned on policies where the Company has no exposure to underlying risk and fees earned in conjunction with underwriting policies. Commission and fee income is earned at the time the policy is written. |
Property and Equipment | Property and Equipment Property and equipment are capitalized and carried at cost less accumulated depreciation. Depreciation for property and equipment is calculated on a straight‑line basis using useful lives of 3 to 5 years. Leasehold improvements and other fixed assets are capitalized and depreciated over the useful lives of the properties and equipment. Expenditures for maintenance and repairs are charged to operations as incurred. Upon disposition, the asset cost and related depreciation are removed from the accounts and the resulting gain or loss is included in the Company’s results of operations. |
Capitalized Software | Capitalized Software Costs associated with the implementation of certain internal systems are capitalized and carried at capitalized cost less accumulated amortization and are included as a component of prepaid expenses and other assets on the Company’s consolidated balance sheet. Costs capitalized include internal personnel costs, external developer costs, and interest. The implementation costs relate to systems built on software which the Company purchases under a cloud computing arrangement and accounts for as a service contract. As such, capitalized costs are amortized over the term of the service contract, which currently ends in December 2024. |
Intangible Assets | Intangible Assets Upon acquisition, the entire PSIC purchase price was allocated to separately identifiable indefinite lived intangible assets. The Company acquired seven state licenses in the acquisition to which $0.7 million was allocated. Indefinite lived intangible assets are initially recognized and measured at fair value; intangible assets are subsequently evaluated for impairment annually or more frequently if circumstances warrant it. No impairments of intangible assets were recognized for the years ended December 31, 2019, 2018 or 2017. |
Impairment of Long-Lived Assets | Impairment of Long‑Lived Assets Long‑lived assets with finite lives are tested for impairment whenever recognized events or changes in circumstances indicate the carrying value of these assets may not be recoverable. If indicators of impairment are present, the fair value is calculated using estimated future cash flows expected to be generated from the use of those assets. An impairment loss is recognized only if the carrying amount of a long‑lived asset or asset group is not recoverable and exceeds its fair value. The carrying amount of a long‑lived asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. This assessment is based on the carrying amount of the asset or asset group at the date it is tested for recoverability. An impairment loss is measured as the amount by which the carrying amount of a long‑lived asset or asset group exceeds its fair value. No impairments of long‑lived assets were recognized for the years ended December 31, 2019, 2018 and 2017. |
Reserve for Losses and Loss Adjustment Expenses | Reserve for Losses and Loss Adjustment Expenses The reserve for unpaid losses and loss adjustment expenses includes estimates for unpaid claims and claim adjustment expenses on reported losses and estimates of losses incurred but not reported (IBNR), net of salvage and subrogation recoveries. The liability is based on individual claims, case reserves and other estimates reported by policyholders, as well as management estimates of ultimate losses and loss adjustment expenses. Inherent in the estimates of ultimate losses and loss adjustment expenses are expected trends in claims severity and frequency and other factors that could vary significantly as claims are settled. The Company’s estimates of ultimate losses and loss adjustment expenses are based in part upon the estimation of claims resulting from natural disasters such as hurricanes and earthquakes. Estimation by management of the ultimate losses and loss adjustment expenses resulting from catastrophic events is inherently difficult because of the potential severity of property catastrophe claims. Therefore, the Company uses both proprietary and commercially available models, as well as historic claims experience, for purposes of providing an estimate of ultimate losses and loss adjustment expenses. For other difficult estimates of ultimate losses and loss adjustment expenses, the Company utilizes historical severity data that may be immature and subject to significant variation, in addition to using loss development methods based on paid and reported losses. For these estimates, industry data may also be utilized. Ultimate losses and loss adjustment expenses may vary materially from the amounts provided in the consolidated financial statements. Estimates of unpaid losses and loss adjustment expenses are reviewed regularly and, as experience develops and new information becomes known, the liabilities are adjusted as necessary. Such adjustments, if any, are reflected in operations in the period in which they become known and are accounted for as changes in estimates. The Company does not discount its liability for unpaid losses and loss adjustment expenses. The Company does not write insurance policies covering toxic clean‑up, asbestos‑related illness or other environmental remediation exposures. |
Reinsurance | Reinsurance The Company purchases excess of loss and quota share reinsurance to protect it against the impact of losses. Reinsurance premiums, commissions, ceded unearned premiums are accounted for on bases consistent with the underlying terms of the reinsurance contracts and in proportion to the amount of insurance protection provided. The Company receives ceding commissions in connection with certain ceded reinsurance. The ceding commissions are capitalized and amortized as a reduction of underwriting, acquisition and insurance expenses. Amounts applicable to prepaid reinsurance premiums are reported as assets in the accompanying consolidated balance sheets. Reinsurance recoverables represent paid losses and loss adjustment expenses and reserves for unpaid losses and loss adjustment expenses ceded to reinsurers that are subject to reimbursement under reinsurance treaties. Premiums earned and losses and loss adjustment expenses incurred are stated in the accompanying consolidated statements of income and comprehensive income net of amounts ceded to reinsurers. |
Income Taxes | Income Taxes The Company is taxed as a property/casualty insurer for federal income tax purposes. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and the tax bases of assets and liabilities, using enacted tax rates expected to be in effect during the year in which the basis differences reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company recognizes the tax benefit of uncertain tax positions where the position is more likely than not to be sustained assuming examination by taxing authorities. Based on its evaluation for the tax years ended December 31, 2019 and 2018, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. The Company recognizes interest and penalties related to uncertain tax positions, if any, as a component of income tax expense. The Company has not been assessed interest or penalties by any major tax jurisdictions for the respective tax years ended December 31, 2019, 2018, and 2017. |
Earnings Per Share | Earnings Per Share Basic earnings per share is calculated by dividing net income by the weighted‑average common shares outstanding for the period. Diluted earnings per share reflects the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method. When inclusion of additional common share equivalents increases the earnings per share or reduces the loss per share, the effect on earnings per share is anti-dilutive, and the diluted net earnings or net loss per share is computed excluding these common share equivalents. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company currently qualifies as an emerging growth company (“EGC”) under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Accordingly, the Company is provided the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non‑emerging growth companies or (ii) within the same time periods as private companies. The Company is currently electing to adopt new or revised accounting guidance within the same time period as private companies, unless, as indicated below, management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance. If the Company ceases to be an EGC, it will no longer have the option to adopt guidance within the same time periods as private companies. Recently adopted accounting pronouncements In January 2016, the FASB issued “ASU 2016‑01, Financial Instruments—Overall (Subtopic 825‑10): Recognition and Measurement of Financial Assets and Financial Liabilities .” Among other things, this new guidance requires the Company’s equity investments to be measured at fair value with changes in fair value recognized in net income. Under the current guidance, equity investments are measured at fair value with changes in fair value recognized in accumulated other comprehensive income as a component of stockholder’s equity. The Company adopted this guidance on January 1, 2018 and began recognizing changes in fair value of equity securities into net income. Upon adoption, the Company made a $3.2 million cumulative‑effect adjustment to increase retained earnings and decrease accumulated other comprehensive income. In the future, this guidance will impact the Company’s results of operations, as changes in fair value of equity investments will impact net income rather than other comprehensive income. The future impact will vary depending on the volatility of the overall equity market and the amount the Company decides to invest in equity securities. In August 2016, the FASB issued “ASU 2016‑15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” , in order to reduce diversity in the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The Company adopted this guidance on January 1, 2018. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements. In May 2014, the FASB issued “ASU 2014-09, Revenue from Contracts with Customers (Topic 606).” This guidance applies to all companies that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards, such as insurance contracts. Under this guidance, a company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Judgments required in adopting this update included identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Nearly all the Company’s consolidated revenue is outside the scope of Topic 606 except for the commission and fee income that the Company's 100% owned insurance agency earns from third-party insurers, which was $1.4 for each of the years ended December 31, 2019 and 2018. Effective January 1, 2019, the Company adopted Topic 606 using the modified retrospective transition method. The application of the key aspects of Topic 606 to the in-scope transactions resulted in recognition of revenues and related expenses consistent with the previous revenue guidance. Adoption had no impact on the Company’s reported fee income or expense and there was no cumulative effect of initially applying the guidance. Recently issued accounting pronouncements not yet adopted In February 2016, the FASB issued new guidance for accounting for leases, “ASU 2016‑02, Leases (Topic 842) .” Under current guidance, leases are only included on the balance sheet if the criteria to classify the agreement as a capital lease are met. This update will require the recognition of a right‑of‑use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. This guidance was subsequently amended multiple times and offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This new guidance requires a modified retrospective adoption, applying the new standard to all leases existing at the date of initial application, with early adoption permitted. An entity may choose to use the standard’s effective date, rather than the beginning of the earliest comparative period presented, as the date of initial application. An entity would record the effects of initially applying the new guidance as a cumulative‑effect adjustment to retained earnings. Consequently, an entity’s reporting for the comparative periods presented in the year of adoption would continue to be in accordance with the current guidance, including the current disclosure requirements. To facilitate transition, the new guidance includes a package of practical expedients that entities may elect to apply on adoption. The package of practical expedients relates to the identification and classification of leases and initial direct costs for leases that commenced before the effective date. The new guidance also includes a practical expedient permitting the use of hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. Under the Company’s current status as an EGC, this update will be effective for annual reporting periods beginning after December 15, 2020, and interim reporting periods within fiscal years beginning after December 31, 2021 with early adoption permitted. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements. In June 2016, the FASB issued “ASU 2016‑13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments .” Current guidance delays the recognition of credit losses until it is probable a loss has been incurred. This updated guidance will require financial assets measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net income. Credit losses relating to available‑for‑sale debt securities will also be recorded through an allowance for credit losses, with the amount of the allowance limited to the amount by which fair value is below amortized cost. In 2019, the FASB issued amendments to this guidance which provide an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost and provide additional clarification and implementation guidance. Under the Company’s current status as an EGC , this update and its amendments will be effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, but not before annual reporting periods beginning on or after December 15, 2018. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements. In August 2018, the FASB issued “ASU 2018‑13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement . Among other things, this new guidance eliminates the need to disclose transfers between Level 1 and Level 2 of the fair value hierarchy, changes the policy for timing of transfers and the valuation processes for Level 3 fair value measurements and includes requirements to disclose quantitative information about Level 3 measurements. This new guidance will be effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted this guidance on January 1, 2020 and adoption did not have an impact on the Company’s consolidated financial statements. The Company will continue to monitor the composition of its investment portfolio and will make appropriate disclosures based on this guidance. |
Investments (Tables)
Investments (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Investments | |
Schedule of available-for-sale investments | Gross Gross Amortized Unrealized Unrealized Fair December 31, 2019 Cost or Cost Gains Losses Value (in thousands) Fixed maturities: U.S. Governments $ 13,371 $ 321 $ (13) $ 13,679 States, territories, and possessions 2,298 147 — 2,445 Political subdivisions 1,913 29 — 1,942 Special revenue excluding mortgage/asset-backed securities 18,139 343 (46) 18,436 Industrial and miscellaneous 124,726 4,326 (39) 129,013 Mortgage/asset-backed securities 50,831 824 (19) 51,636 Total available-for-sale investments $ 211,278 $ 5,990 $ (117) $ 217,151 Gross Gross Amortized Unrealized Unrealized Fair December 31, 2018 Cost or Cost Gains Losses Value (in thousands) Fixed maturities: U.S. Governments $ 15,299 $ 96 $ (126) $ 15,269 States, territories, and possessions 1,227 — (6) 1,221 Political subdivisions 825 — (10) 815 Special revenue excluding mortgage/asset-backed securities 12,429 115 (91) 12,453 Industrial and miscellaneous 65,885 192 (951) 65,126 Mortgage/asset-backed securities 27,284 133 (81) 27,336 Total available-for-sale investments $ 122,949 $ 536 $ (1,265) $ 122,220 |
Schedule of aggregate fair value and gross unrealized losses | Less Than 12 Months More Than 12 Months Total Fair Unrealized Fair Unrealized Fair Unrealized December 31, 2019 Value Losses Value Losses Value Losses (in thousands) Fixed maturity securities: U.S. Governments 1,235 (11) $ 1,827 $ (2) $ 3,062 $ (13) States, territories, and possessions — — — — — — Political subdivisions — — — — — — Special revenue excluding mortgage/asset-backed securities 3,548 (46) — — 3,548 (46) Industrial and miscellaneous 6,929 (38) 188 (1) 7,117 (39) Mortgage/asset-backed securities 7,035 (19) 182 — 7,217 (19) Total $ 18,747 $ (114) $ 2,197 $ (3) $ 20,944 $ (117) Less Than 12 Months More Than 12 Months Total Fair Unrealized Fair Unrealized Fair Unrealized December 31, 2018 Value Losses Value Losses Value Losses (in thousands) Fixed maturity securities: U.S. Governments $ 1,970 $ (25) $ 6,197 $ (101) $ 8,167 $ (126) States, territories, and possessions 719 (5) 501 (1) 1,220 (6) Political subdivisions 264 (1) 550 (9) 814 (10) Special revenue excluding mortgage/asset-backed securities 1,706 (14) 5,916 (77) 7,622 (91) Industrial and miscellaneous 30,544 (556) 14,913 (395) 45,457 (951) Mortgage/asset-backed securities 6,653 (39) 3,830 (42) 10,483 (81) Total $ 41,856 $ (640) $ 31,907 $ (625) $ 73,763 $ (1,265) |
Schedule of contractual maturities of available-for-sale securities | Amortized Fair Cost Value (in thousands) Due within one year $ 9,280 $ 9,299 Due after one year through five years 64,933 66,108 Due after five years through ten years 59,192 62,292 Due after ten years 27,042 27,816 Mortgage and asset-backed securities 50,831 51,636 $ 211,278 $ 217,151 |
Schedule of change in unrealized gains (losses) of investments | Year Ended December 31, 2019 2018 2017 (in thousands) Change in net unrealized gains (losses) Fixed maturities $ 6,602 $ (341) $ (6) Equity securities — — 2,232 Net (decrease) increase $ 6,602 $ (341) $ 2,226 |
Schedule of net investment income | December 31, 2019 2018 2017 (in thousands) Interest income $ 5,894 $ 3,036 $ 1,916 Dividend income 424 514 514 Less: investment expense (343) (312) (305) Net investment income $ 5,975 $ 3,238 $ 2,125 |
Schedule of net realized and unrealized investment gains and losses | Year Ended December 31, 2019 2018 2017 (in thousands) Realized gains: Gains on sales of fixed maturity securities $ 1,405 $ 19 $ 3 Gains on sales of equity securities 177 4,287 802 Total realized gains 1,582 4,306 805 Realized losses: Losses on sales of fixed maturity securities (84) (418) (48) Losses on sales of equity securities (64) (421) (149) Total realized losses (148) (839) (197) Net realized investment gains (losses) 1,434 3,467 608 Net unrealized gains (losses) on equity securities 3,009 (6,036) — Net realized and unrealized gains (losses) on investments $ 4,443 $ (2,569) $ 608 |
Fair value measurements (Tables
Fair value measurements (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Fair value measurements | |
Schedule of fair value hierarchy for financial assets and liabilities | December 31, 2019 Level 1 Level 2 Level 3 Total (in thousands) Assets: Fixed maturity securities U.S. Governments $ — $ 13,679 $ — $ 13,679 States, territories, and possessions — 2,445 — 2,445 Political subdivisions — 1,942 — 1,942 Special revenue excluding mortgage/asset-backed securities — 18,436 — 18,436 Industrial and miscellaneous — 129,013 — 129,013 Mortgage/asset-backed securities — 50,136 1,500 51,636 Equity securities — 22,328 — 22,328 Cash, cash equivalents, and restricted cash 28,350 4,999 — 33,349 Total assets $ 28,350 $ 242,978 $ 1,500 $ 272,828 December 31, 2018 Level 1 Level 2 Level 3 Total (in thousands) Assets: Fixed maturity securities U.S. Governments $ — $ 15,269 $ — $ 15,269 States, territories, and possessions — 1,221 — 1,221 Political subdivisions — 815 — 815 Special revenue excluding mortgage/asset-backed securities — 12,453 — 12,453 Industrial and miscellaneous — 65,126 — 65,126 Mortgage/asset-backed securities — 27,336 — 27,336 Equity securities 25,171 — — 25,171 Cash, cash equivalents, and restricted cash 9,924 — — 9,924 Total assets $ 35,095 $ 122,220 $ — $ 157,315 Liabilities: Long-term notes payable $ — $ — $ 20,000 $ 20,000 Total liabilities $ — $ — $ 20,000 $ 20,000 |
Policy Acquisition Costs (Table
Policy Acquisition Costs (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Policy Acquisition Costs | |
Schedule of policy acquisition costs deferred and amortized | December 31, 2019 2018 2017 (in thousands) Deferred Policy Acquisition Costs: Balance, beginning of year $ 14,052 $ 15,161 $ 10,654 Additions to deferred balance: Direct commissions 59,676 36,934 27,976 Ceding commissions (17,257) (15,218) (3,224) Premium taxes 5,236 3,362 2,625 Total net additions 47,655 25,078 27,377 Amortization of net policy acquisition costs (36,506) (26,187) (22,870) Balance, end of year $ 25,201 $ 14,052 $ 15,161 Acquisition expenses: Amortization of net policy acquisition costs $ 36,506 $ 26,187 $ 22,870 Period costs 753 2,037 2,652 Total Acquisition expenses $ 37,259 $ 28,224 $ 25,522 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property and Equipment | |
Schedule of Property and Equipment | Accumulated Net December 31, 2019 Cost Depreciation Book Value (in thousands) Leasehold improvements $ 879 $ (342) $ 537 Computer hardware 144 (64) 80 Office equipment and furniture 519 (291) 228 Total $ 1,542 $ (697) $ 845 Accumulated Net December 31, 2018 Cost Depreciation Book Value (in thousands) Leasehold improvements $ 879 $ (225) $ 654 Computer hardware 108 (51) 57 Office equipment and furniture 454 (218) 236 Total $ 1,441 $ (494) $ 947 |
Capitalized Software (Tables)
Capitalized Software (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Capitalized Software | |
Schedule of capitalized software | Accumulated Net December 31, 2019 Cost Amortization Book Value (in thousands) Capitalized Software $ 4,567 $ (669) $ 3,898 Accumulated Net December 31, 2018 Cost Amortization Book Value (in thousands) Capitalized Software $ 1,761 $ (33) $ 1,728 |
Reserve for Losses and Loss A_2
Reserve for Losses and Loss Adjustment Expenses (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Claims Development | |
Schedule of reconciliation of the beginning and ending reserve balances for losses and LAE on a net of reinsurance basis to the gross amounts | Year Ended December 31, 2019 2018 2017 (in thousands) Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period $ 4,165 $ 4,432 $ 3,336 Add: Incurred losses and loss adjustment expenses, net of reinsurance, related to: Current year 5,774 8,165 12,257 Prior years (181) (1,891) (132) Total incurred 5,593 6,274 12,125 Deduct: Loss and loss adjustment expense payments, net of reinsurance, related to: Current year 2,179 4,409 8,986 Prior years 3,710 2,132 2,043 Total payments 5,889 6,541 11,029 Reserve for losses and loss adjustment expense net of reinsurance recoverables at end of period 3,869 4,165 4,432 Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period 12,952 11,896 13,352 Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period $ 16,821 $ 16,061 $ 17,784 |
Schedule of reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses | 2019 (in thousands) Net outstanding liabilities: Homeowners’ insurance $ 562 Special property 2,112 Reinsurance- Nonproportional assumed property(1) 1,195 Reserve for losses and loss adjustment expense, net of reinsurance 3,869 Reinsurance recoverable on unpaid claims: Homeowners’ insurance $ 4,961 Special property 7,983 Other 8 Total reinsurance recoverable on unpaid claims 12,952 Total reserve for losses and loss adjustment expenses $ 16,821 (1) Reflects the Company’s share of Loss and Loss Adjustment Expense related to non-proportional assumed business. Gross and net reserves related to this treaty are $1.2 million and the ultimate incurred amount reflects IBNR only. The Company does not have direct access to individual claim information underlying the assumed quota arrangement. The Company does not use claim frequency information in the determination of loss reserves or for other internal purposes. Based on these considerations, the Company does not believe providing claims frequency information is practicable as it relates to this line of business . |
Homeowners’ Insurance | |
Claims Development | |
Schedule of Incurred and Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Homeowners’ Insurance (in thousands) Year Ended December 31, Incurred but Cumulative Year Ended December 31, Not Reported Number of Accident Year 2015(1) 2016(1) 2017(1) 2018(1) 2019 Liabilities Claims 2015 $ 2,048 $ 1,785 $ 1,658 $ 1,636 $ 1,642 $ 1 381 2016 6,069 5,878 5,721 5,636 6 1,081 2017 9,354 7,418 6,630 11 2,964 2018 2,193 2,008 104 788 2019 914 257 1,060 Total $ 16,830 $ 379 6,274 Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Homeowners’ Insurance (in thousands) Year Ended December 31, Accident Year 2015(1) 2016(1) 2017(1) 2018(1) 2019 2015 $ 860 $ 1,379 $ 1,523 $ 1,615 $ 1,634 2016 4,120 5,356 5,585 5,607 2017 7,135 7,375 6,628 2018 1,550 1,853 2019 546 Total $ 16,268 Reserve for losses and loss adjustment expense, net of reinsurance $ 562 (1) Data presented for these calendar years is required supplementary information, which is unaudited. |
Schedule of Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Homeowners’ Insurance | Year 1 Year 2 Year 3 Year 4 Year 5 Payout percentage 74.00 % 18.08 % 0.52 % 2.99 % 1.10 % |
Special Property Insurance | |
Claims Development | |
Schedule of Incurred and Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Special Property Insurance (in thousands) As of December 31, 2019 Incurred but Cumulative Year Ended December 31, Not Reported Number of Accident Year 2015(1) 2016(1) 2017(1) 2018(1) 2019 Liabilities Claims 2015 $ 630 $ 719 $ 671 $ 671 $ 678 $ 1 8 2016 1,381 1,249 1,251 1,454 — 71 2017 3,071 3,475 4,014 — 357 2018 5,970 6,095 11 526 2019 3,661 964 402 Total $ 15,902 $ 976 1,364 Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance Special Property Insurance (in thousands) Year Ended December 31, Accident Year 2015(1) 2016(1) 2017(1) 2018(1) 2019 2015 $ 265 $ 438 $ 586 $ 626 $ 666 2016 703 1,064 1,216 1,444 2017 1,967 3,344 4,011 2018 2,859 6,036 2019 1,633 Total 13,790 Reserve for losses and loss adjustment expense, net of reinsurance 2,112 (1) Data presented for these calendar years is required supplementary information, which is unaudited. |
Schedule of Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Homeowners’ Insurance | Year 1 Year 2 Year 3 Year 4 Year 5 Payout percentage 45.59 % 34.20 % 16.30 % 10.80 % 5.84 % |
Reinsurance (Tables)
Reinsurance (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Reinsurance | |
Schedule of effect of reinsurance on premiums written and earned and on losses and LAE incurred | 2019 2018 2017 Written Earned Written Earned Written Earned (in thousands) Premiums Written and Earned: Direct $ 220,568 $ 178,536 $ 144,821 $ 129,071 $ 112,974 $ 94,799 Assumed 31,393 21,985 10,070 8,688 7,260 6,162 Ceded (108,332) (100,314) (82,949) (67,862) (46,951) (45,416) Net $ 143,629 $ 100,207 $ 71,942 $ 69,897 $ 73,283 $ 55,545 2019 Losses LAE Total (in thousands) Losses and LAE Incurred: Direct $ 20,105 $ 2,837 $ 22,942 Assumed 1,201 34 1,235 Ceded (16,564) (2,020) (18,584) Net $ 4,742 $ 851 $ 5,593 2018 Losses LAE Total (in thousands) Losses and LAE Incurred: Direct $ 12,153 $ 2,113 $ 14,266 Assumed 46 6 52 Ceded (6,580) (1,464) (8,044) Net $ 5,619 $ 655 $ 6,274 2017 Losses LAE Total (in thousands) Losses and LAE Incurred: Direct $ 24,266 $ 6,608 $ 30,874 Assumed 2 — 2 Ceded (14,651) (4,100) (18,751) Net $ 9,617 $ 2,508 $ 12,125 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Taxes | |
Schedule of federal income tax expense (benefit) | December 31, 2019 2018 2017 (in thousands) Current $ 6,810 $ (6) $ 11 Deferred 646 — 1,134 Income tax expense (benefit) $ 7,456 $ (6) $ 1,145 |
Schedule of deferred tax assets and liabilities | December 31, 2019 2018 (in thousands) Deferred tax assets: Losses and LAE reserve discount $ 10 $ 22 Net operating losses 74 702 Investment amortization 85 119 Unearned premiums 3,748 1,914 Capitalized organizational costs 274 304 Unrealized losses on investments — 505 Other 390 306 Total deferred tax assets $ 4,581 $ 3,872 Deferred tax liabilities: Deferred acquisition costs $ (4,468) $ (2,127) Unrealized gains on investments (1,396) — Internally developed software (640) — Other (2) (68) Total deferred tax liabilities (6,506) (2,195) Net deferred tax asset before valuation allowance (1,925) 1,677 Valuation allowance (74) (1,677) Total net deferred tax liabilities $ (1,999) $ — |
Schedule of effective tax rate | Years Ended December 31, 2019 2018 2017 ($ in thousands) Expense computed at federal tax rate $ 3,802 21.00 % $ 3,825 21.00 % $ 1,675 34.00 % Non‑U.S. group member income — — % (4,409) (24.21) % (1,632) (33.12) % Stock-based compensation 4,822 26.63 % — — % — — % Dividend received deduction and tax‑exempt interest (36) (0.20) % (144) (0.79) % (467) (9.47) % Impact of tax reform — — % — — % 580 11.76 % Valuation allowance (1,677) (9.27) % 678 3.72 % 947 19.23 % Other 545 3.01 % 44 0.24 % 42 0.83 % Income tax expense (benefit) $ 7,456 41.17 % $ (6) 0.03 % $ 1,145 23.23 % |
Capital Stock (Tables)
Capital Stock (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Capital Stock | |
Schedule of common stock reserved for future issuance | Stock options outstanding under 2019 Equity Incentive Plan 1,046,373 Restricted stock units outstanding under 2019 Equity Incentive Plan 6,066 Shares authorized for future issuance under 2019 Equity Incentive Plan 1,347,561 Shares authorized for future issuance under 2019 Employee Stock Purchase Plan 240,000 Total 2,640,000 |
Statutory financial informati_2
Statutory financial information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Statutory financial information | |
Summary of statutory net income and statutory capital surplus | December 31, 2019 2018 2017 (in thousands) Statutory net income (loss) $ (17,911) $ 9,609 $ (4,128) Statutory capital and surplus 116,296 63,731 61,338 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies | |
Schedule of future minimum rental payments required under operating leases | Total (in thousands) Years ending December 31: 2020 $ 843 2021 879 2022 904 2023 862 2024 478 Thereafter — Total $ 3,966 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accumulated Other Comprehensive Income | |
Schedule of changes in accumulated other comprehensive income (AOCI) | Year Ended December 31, 2019 2018 2017 (in thousands) Balance as of January 1 $ (563) $ 2,993 $ 1,017 Effect of equity accounting guidance adoption — (3,215) — Beginning Balance (563) (222) 1,017 Other comprehensive income (loss) before reclassification 6,555 (740) 2,834 Federal income tax (expense) benefit (1,344) 76 (772) Other comprehensive income (loss) before reclassification, net of tax 5,211 (664) 2,062 Amounts reclassified from AOCI 47 399 (608) Federal income tax expense (9) (76) 68 Amounts reclassified from AOCI, net of tax 38 323 (540) Other comprehensive income (loss) 5,249 (341) 1,522 Effect of new tax rates from Tax Reform — — 454 Balance at end of period $ 4,686 $ (563) $ 2,993 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Stock-Based Compensation | |
Schedule of Company's stock-based compensation expense | Year ended December 31, 2019 2018 (in thousands) Stock-Based Compensation $ 24,103 $ — |
Schedule of stock option transactions | Weighted average remaining Aggregate Number of Weighted-average contractual term intrinsic value shares exercise price (in years) (in thousands) Outstanding at December 31, 2018 — $ — Options granted 1,058,966 17.03 Options exercised — — Options canceled (12,593) 15.00 Outstanding at December 31, 2019 1,046,373 $ $ 35,039 Vested and Exercisable at December 31, 2019 — $ — — $ — |
Schedule of fair value of each option granted was estimated on the grant date using the Black-Scholes option pricing model | Risk free rate of return (1) 1.59% - 2.45% Expected share price volatility (2) 18.12% - 18.45% Expected life in years (3) 5.64 - 6.08 years Dividend yield (4) (1) Determined based on the U.S. Treasury yield in effect at the time of the grant for zero-coupon U.S. Treasury notes with remaining terms similar to the expected term of the options. (2) Determined based on analysis of the volatility of a peer group of publicly traded companies. (3) Determined using the “simplified method” for estimating the expected option life, which is the average of the weighted-average vesting period and contractual term of the option as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its common stock has been publicly traded. (4) Determined to be zero as the Company does not currently plan to issue dividends. |
Schedule of restricted stock unit transactions | Weighted-average Number of grant date shares fair value Non vested outstanding at December 31, 2018 — $ — Granted 6,066 16.49 Vested — — Forfeited — — Non vested outstanding at December 31, 2019 6,066 $ 16.49 |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Net Income Per Share | |
Schedule of net income per share of common stock | Year ended December 31, 2019 2018 2017 (in thousands, except shares and per share data) Net income $ 10,621 $ 18,219 $ 3,783 Weighted average common shares outstanding: Basic 21,501,541 17,000,000 17,000,000 Common Share equivalents 333,393 — — Diluted 21,834,934 17,000,000 17,000,000 Earnings per share: Basic $ 0.49 $ 1.07 $ 0.22 Diluted $ 0.49 $ 1.07 $ 0.22 |
Underwriting Information (Table
Underwriting Information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Underwriting Information | |
Schedule of gross written premiums | Gross written premiums (GWP) by product are presented below: Year Ended December 31, 2019 2018 2017 ($ in thousands) % of % of % of Amount GWP Amount GWP Amount GWP Product Residential Earthquake $ 130,473 51.8 % $ 81,679 % $ 57,328 % Commercial Earthquake 38,741 15.4 % 20,946 % 23,079 % Specialty Homeowners 32,788 13.0 % 27,680 % 26,516 % Commercial All Risk 30,358 12.0 % 14,338 % 7,321 % Hawaii Hurricane 10,764 4.3 % 8,128 % 5,323 % Residential Flood 5,216 2.1 % 2,120 % 667 % Other 3,621 1.4 % — — % — — % Total Gross Written Premiums $ 251,961 100.0 % $ 154,891 % $ 120,234 % Gross Written premiums by state are as follows: Year Ended December 31, 2019 2018 2017 ($ in thousands) % of % of % of Amount GWP Amount GWP Amount GWP State California $ 141,743 56.3 % $ 82,119 % $ 64,231 % Texas 44,087 17.5 % 32,568 % 29,273 % Hawaii 11,851 4.7 % 8,128 % 5,323 % Washington 9,607 3.8 % 5,658 % 2,803 % Oregon 7,396 2.9 % 5,286 % 4,250 % South Carolina 6,185 2.5 % 3,208 % 1,706 % Illinois 4,896 1.9 % 4,403 % 4,854 % Mississippi 4,769 1.9 % 2,585 % 982 % Other 21,427 8.5 % 10,936 % 6,812 % Total Gross Written Premiums $ 251,961 100.0 % $ 154,891 % $ 120,234 % |
Selected Quarterly Financial _2
Selected Quarterly Financial Data (unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Selected Quarterly Financial Data (unaudited) | |
Summary of unaudited quarterly results of operations | 2019 Quarter 2019 First Second Third Fourth Year ($ in thousands, except per share data) Gross written premiums $ 54,031 $ 58,346 $ 66,242 $ 73,342 $ 251,961 Total revenues 22,307 25,905 30,461 34,623 113,296 Net income (loss) (14,411) 6,698 7,454 10,880 10,621 Comprehensive income (loss) (12,224) 9,996 8,428 9,670 15,870 Earnings per share (1): Basic $ (0.85) $ 0.30 $ 0.32 $ $ 0.49 Diluted $ (0.85) $ 0.30 $ 0.31 $ $ 0.49 2018 Quarter 2018 First Second Third Fourth Year ($ in thousands, except per share data) Gross written premiums (2) $ 34,013 $ 37,342 $ 39,994 $ 43,542 $ 154,891 Total revenues 18,523 19,892 18,916 15,640 72,971 Net income 5,592 6,934 1,566 4,127 18,219 Comprehensive income 4,693 6,843 1,257 5,085 17,878 Earnings per share (1): Basic $ 0.33 $ 0.41 $ 0.09 $ $ Diluted $ 0.33 $ 0.41 $ 0.09 $ $ (1) Due to differences in weighted average common shares outstanding between periods, quarterly earnings per share may not add up to the totals reported for the full year. (2) The first quarter 2018 gross written premiums shown above differs by an immaterial amount versus the amount reported in our first quarter 10-Q due to a subsequent reclassification between gross written premiums and policy fees. |
Summary of Operations and Bas_2
Summary of Operations and Basis of Presentation (Details) $ / shares in Units, $ in Millions | Jan. 09, 2020shares | Apr. 22, 2019USD ($)$ / sharesshares | Mar. 15, 2019 | Dec. 31, 2019state |
Number states Company underwrites catastrophe insurance on an admitted basis | state | 27 | |||
Forward stock split | 17,000,000 | |||
IPO | ||||
Issuance of common stock in initial public offering, net of offering costs (in shares) | 6,468,750 | |||
Share price (in dollars per share) | $ / shares | $ 15 | |||
Proceeds from Issuance Initial Public Offering | $ | $ 87.4 | |||
Underwriter option | ||||
Issuance of common stock in initial public offering, net of offering costs (in shares) | 843,750 | |||
Underwriter option | Subsequent Event | ||||
Issuance of common stock in initial public offering, net of offering costs (in shares) | 750,000 |
Significant Accounting Polici_3
Significant Accounting Policies (Details) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($)item | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Jan. 01, 2018USD ($) | |
Premiums Receivable | ||||
Allowance for doubtful accounts | $ 0 | $ 0 | ||
Property and Equipment | ||||
Number of state licenses acquired | item | 7 | |||
Allocated amount of acquired state licenses | $ 700 | |||
Impairments of intangible assets | 0 | 0 | $ 0 | |
Impairments of long lived assets | 0 | 0 | 0 | |
Stock compensation charge | 24,103 | |||
Retained earnings | 33,856 | 28,355 | $ 3,200 | |
Accumulated other comprehensive (loss) income | 4,686 | (563) | $ 3,200 | |
Commission and fees income | 2,671 | 2,405 | $ 1,188 | |
Insurance agency | ||||
Property and Equipment | ||||
Commission and fees income | $ 1,400 | 1,400 | ||
Prepaid Expenses and Other Current Assets | ||||
Deferred offering costs | $ 1,100 | |||
Minimum | ||||
Property and Equipment | ||||
Useful life | 3 years | |||
Maximum | ||||
Property and Equipment | ||||
Useful life | 5 years |
Investments - Available for Sal
Investments - Available for Sale Investments (Details) $ in Thousands | Dec. 31, 2019USD ($)security | Dec. 31, 2018USD ($)security |
Available for sale investments | ||
Number of unrealized loss positions | security | 51 | 173 |
Available for sale investments | ||
Amortized Cost | $ 211,278 | $ 122,949 |
Gross Unrealized Gains | 5,990 | 536 |
Gross Unrealized Losses | (117) | (1,265) |
Fair Value | 217,151 | 122,220 |
Amortized Cost | 21,336 | 27,188 |
Equity securities at fair value | 22,328 | 25,171 |
U.S. Governments | ||
Available for sale investments | ||
Amortized Cost | 13,371 | 15,299 |
Gross Unrealized Gains | 321 | 96 |
Gross Unrealized Losses | (13) | (126) |
Fair Value | 13,679 | 15,269 |
States, territories, and possession | ||
Available for sale investments | ||
Amortized Cost | 2,298 | 1,227 |
Gross Unrealized Gains | 147 | |
Gross Unrealized Losses | (6) | |
Fair Value | 2,445 | 1,221 |
Political subdivisions | ||
Available for sale investments | ||
Amortized Cost | 1,913 | 825 |
Gross Unrealized Gains | 29 | |
Gross Unrealized Losses | (10) | |
Fair Value | 1,942 | 815 |
Special revenue excluding mortgage/asset-backed securities | ||
Available for sale investments | ||
Amortized Cost | 18,139 | 12,429 |
Gross Unrealized Gains | 343 | 115 |
Gross Unrealized Losses | (46) | (91) |
Fair Value | 18,436 | 12,453 |
Industrial and miscellaneous | ||
Available for sale investments | ||
Amortized Cost | 124,726 | 65,885 |
Gross Unrealized Gains | 4,326 | 192 |
Gross Unrealized Losses | (39) | (951) |
Fair Value | 129,013 | 65,126 |
Mortgage/asset-backed securities | ||
Available for sale investments | ||
Amortized Cost | 50,831 | 27,284 |
Gross Unrealized Gains | 824 | 133 |
Gross Unrealized Losses | (19) | (81) |
Fair Value | $ 51,636 | $ 27,336 |
Investments - Security Holdings
Investments - Security Holdings in an Unrealized Loss Position - General Information (Details) $ in Thousands | Dec. 31, 2019USD ($)security | Dec. 31, 2018USD ($)security |
Number of positions: | ||
Number of unrealized loss positions | security | 51 | 173 |
Fair Value | ||
Fair Value | $ 20,944 | $ 73,763 |
Unrealized Losses | ||
Unrealized Losses | $ 117 | $ 1,265 |
Investments - Security Holdin_2
Investments - Security Holdings in an Unrealized Loss Position - Tabular Disclosure (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Fair Value | ||
Fair Value - Less Than 12 Months | $ 18,747 | $ 41,856 |
Fair Value - More Than 12 Months | 2,197 | 31,907 |
Fair Value - Total | 20,944 | 73,763 |
Unrealized Losses | ||
Unrealized Losses - Less Than 12 Months | (114) | (640) |
Unrealized Losses - More Than 12 Months | (3) | (625) |
Unrealized Losses - Total | (117) | (1,265) |
U.S. Governments | ||
Fair Value | ||
Fair Value - Less Than 12 Months | 1,235 | 1,970 |
Fair Value - More Than 12 Months | 1,827 | 6,197 |
Fair Value - Total | 3,062 | 8,167 |
Unrealized Losses | ||
Unrealized Losses - Less Than 12 Months | (11) | (25) |
Unrealized Losses - More Than 12 Months | (2) | (101) |
Unrealized Losses - Total | (13) | (126) |
States, territories, and possession | ||
Fair Value | ||
Fair Value - Less Than 12 Months | 719 | |
Fair Value - More Than 12 Months | 501 | |
Fair Value - Total | 1,220 | |
Unrealized Losses | ||
Unrealized Losses - Less Than 12 Months | (5) | |
Unrealized Losses - More Than 12 Months | (1) | |
Unrealized Losses - Total | (6) | |
Political subdivisions | ||
Fair Value | ||
Fair Value - Less Than 12 Months | 264 | |
Fair Value - More Than 12 Months | 550 | |
Fair Value - Total | 814 | |
Unrealized Losses | ||
Unrealized Losses - Less Than 12 Months | (1) | |
Unrealized Losses - More Than 12 Months | (9) | |
Unrealized Losses - Total | (10) | |
Special revenue excluding mortgage/asset-backed securities | ||
Fair Value | ||
Fair Value - Less Than 12 Months | 3,548 | 1,706 |
Fair Value - More Than 12 Months | 5,916 | |
Fair Value - Total | 3,548 | 7,622 |
Unrealized Losses | ||
Unrealized Losses - Less Than 12 Months | (46) | (14) |
Unrealized Losses - More Than 12 Months | (77) | |
Unrealized Losses - Total | (46) | (91) |
Industrial and miscellaneous | ||
Fair Value | ||
Fair Value - Less Than 12 Months | 6,929 | 30,544 |
Fair Value - More Than 12 Months | 188 | 14,913 |
Fair Value - Total | 7,117 | 45,457 |
Unrealized Losses | ||
Unrealized Losses - Less Than 12 Months | (38) | (556) |
Unrealized Losses - More Than 12 Months | (1) | (395) |
Unrealized Losses - Total | (39) | (951) |
Mortgage/asset-backed securities | ||
Fair Value | ||
Fair Value - Less Than 12 Months | 7,035 | 6,653 |
Fair Value - More Than 12 Months | 182 | 3,830 |
Fair Value - Total | 7,217 | 10,483 |
Unrealized Losses | ||
Unrealized Losses - Less Than 12 Months | (19) | (39) |
Unrealized Losses - More Than 12 Months | (42) | |
Unrealized Losses - Total | $ (19) | $ (81) |
Investments - Other-than-tempor
Investments - Other-than-temporarily Impaired (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Investments | ||
Other-than-temporarily impaired | $ 0 | $ 0 |
Investments - Contractual Matur
Investments - Contractual Maturities of Available for Sale Fixed Maturity Securities (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Amortized Cost | ||
Due within one year | $ 9,280 | |
Due after one year through five years | 64,933 | |
Due after five years through ten years | 59,192 | |
Due after ten years | 27,042 | |
Mortgage and asset-backed securities | 50,831 | |
Amortized Cost | 211,278 | $ 122,949 |
Fair Value | ||
Due within one year | 9,299 | |
Due after one year through five years | 66,108 | |
Due after five years through ten years | 62,292 | |
Due after ten years | 27,816 | |
Mortgage and asset-backed securities | 51,636 | |
Total | $ 217,151 | $ 122,220 |
Investments - Change in Unreali
Investments - Change in Unrealized Gains (Losses) of Investments (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Available for sale investments | |||
Equity securities | $ 3,009 | $ (6,036) | |
Net (decrease) increase | 6,602 | (341) | $ 2,226 |
Fixed maturity securities | |||
Available for sale investments | |||
Fixed maturities | $ 6,602 | $ (341) | (6) |
Equity securities | |||
Available for sale investments | |||
Equity securities | $ 2,232 |
Investments - Net Investment In
Investments - Net Investment Income (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Net investment income | |||
Interest income | $ 5,894 | $ 3,036 | $ 1,916 |
Dividend income | 424 | 514 | 514 |
Less: investment expense | (343) | (312) | (305) |
Net investment income | $ 5,975 | $ 3,238 | $ 2,125 |
Investments - Net Realized and
Investments - Net Realized and Unrealized Investment Gains and Losses (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Net realized and unrealized investment gains and losses | |||
Gains on sales of fixed maturity securities | $ 1,405 | $ 19 | $ 3 |
Gains on sales of equity securities | 177 | 4,287 | 802 |
Total realized gains | 1,582 | 4,306 | 805 |
Losses on sales of fixed maturity securities | (84) | (418) | (48) |
Losses on sales of equity securities | (64) | (421) | (149) |
Total realized losses | (148) | (839) | (197) |
Net realized investment gains (losses) | 1,434 | 3,467 | 608 |
Net unrealized gains (losses) on equity securities | 3,009 | (6,036) | |
Net realized and unrealized gains (losses) on investments | 4,443 | (2,569) | 608 |
Proceeds from sales of fixed maturity securities | |||
Proceeds from the sale of fixed maturity securities | $ 124,151 | $ 81,215 | $ 28,628 |
Investments - Securities on Dep
Investments - Securities on Deposit (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Investments | ||
Fair Value | $ 217,151 | $ 122,220 |
Securities on deposit with state regulatory authorities | ||
Investments | ||
Fair Value | $ 5,100 | $ 5,000 |
Fair value measurements - Finan
Fair value measurements - Financial Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Assets: | ||
Equity securities at fair value | $ 22,328 | $ 25,171 |
Fair Value, Measurements, Recurring | ||
Assets: | ||
Equity securities at fair value | 22,328 | 25,171 |
Cash, cash equivalents, and restricted cash | 33,349 | 9,924 |
Total assets | 272,828 | 157,315 |
Liabilities: | ||
Long-term notes payable | 20,000 | |
Total liabilities | 20,000 | |
Fair Value, Measurements, Recurring | U.S. Governments | ||
Assets: | ||
Fair Value Assets | 13,679 | 15,269 |
Fair Value, Measurements, Recurring | States, territories, and possession | ||
Assets: | ||
Fair Value Assets | 2,445 | 1,221 |
Fair Value, Measurements, Recurring | Political subdivisions | ||
Assets: | ||
Fair Value Assets | 1,942 | 815 |
Fair Value, Measurements, Recurring | Special revenue excluding mortgage/asset-backed securities | ||
Assets: | ||
Fair Value Assets | 18,436 | 12,453 |
Fair Value, Measurements, Recurring | Industrial and miscellaneous | ||
Assets: | ||
Fair Value Assets | 129,013 | 65,126 |
Fair Value, Measurements, Recurring | Mortgage/asset-backed securities | ||
Assets: | ||
Fair Value Assets | 51,636 | 27,336 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1 | ||
Assets: | ||
Equity securities at fair value | 25,171 | |
Cash, cash equivalents, and restricted cash | 28,350 | 9,924 |
Total assets | 28,350 | 35,095 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | ||
Assets: | ||
Equity securities at fair value | 22,328 | |
Cash, cash equivalents, and restricted cash | 4,999 | |
Total assets | 242,978 | 122,220 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | U.S. Governments | ||
Assets: | ||
Fair Value Assets | 13,679 | 15,269 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | States, territories, and possession | ||
Assets: | ||
Fair Value Assets | 2,445 | 1,221 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | Political subdivisions | ||
Assets: | ||
Fair Value Assets | 1,942 | 815 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | Special revenue excluding mortgage/asset-backed securities | ||
Assets: | ||
Fair Value Assets | 18,436 | 12,453 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | Industrial and miscellaneous | ||
Assets: | ||
Fair Value Assets | 129,013 | 65,126 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | Mortgage/asset-backed securities | ||
Assets: | ||
Fair Value Assets | 50,136 | 27,336 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | ||
Assets: | ||
Total assets | 1,500 | |
Liabilities: | ||
Long-term notes payable | 20,000 | |
Total liabilities | $ 20,000 | |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | Mortgage/asset-backed securities | ||
Assets: | ||
Fair Value Assets | $ 1,500 |
Fair value measurements - Trans
Fair value measurements - Transfers (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Fair value measurements | ||
Fair value, assets, Level 1 to Level 2 | $ 0 | $ 0 |
Fair value, assets, Level 2 to Level 1 | 0 | 0 |
Fair value, liabilities, Level 1 to Level 2 | 0 | 0 |
Fair value, liabilities, Level 2 to Level 1 | 0 | 0 |
Fair value, assets, transfers into Level 3 | 0 | 0 |
Fair value, assets, transfers out of Level 3 | 0 | 0 |
Fair value, liabilities, transfers into Level 3 | 0 | 0 |
Fair value, liabilities, transfers out of Level 3 | $ 0 | $ 0 |
Policy Acquisition Costs (Detai
Policy Acquisition Costs (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Deferred Policy Acquisition Costs: | |||
Balance, beginning of year | $ 14,052 | $ 15,161 | $ 10,654 |
Direct commissions | 59,676 | 36,934 | 27,976 |
Ceding commissions | (17,257) | (15,218) | (3,224) |
Premium taxes | 5,236 | 3,362 | 2,625 |
Total net additions | 47,655 | 25,078 | 27,377 |
Amortization of net policy acquisition costs | (36,506) | (26,187) | (22,870) |
Balance, end of year | 25,201 | 14,052 | 15,161 |
Acquisition expenses: | |||
Amortization of net policy acquisition costs | 36,506 | 26,187 | 22,870 |
Period costs | 753 | 2,037 | 2,652 |
Total Acquisition expenses | $ 37,259 | $ 28,224 | $ 25,522 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment | |||
Cost | $ 1,542 | $ 1,441 | |
Accumulated Depreciation | (697) | (494) | |
Net Book Value | 845 | 947 | |
Depreciation | 216 | 212 | $ 160 |
Leasehold improvements | |||
Property, Plant and Equipment | |||
Cost | 879 | 879 | |
Accumulated Depreciation | (342) | (225) | |
Net Book Value | 537 | 654 | |
Computer hardware | |||
Property, Plant and Equipment | |||
Cost | 144 | 108 | |
Accumulated Depreciation | (64) | (51) | |
Net Book Value | 80 | 57 | |
Office equipment and furniture | |||
Property, Plant and Equipment | |||
Cost | 519 | 454 | |
Accumulated Depreciation | (291) | (218) | |
Net Book Value | $ 228 | $ 236 |
Capitalized Software (Details)
Capitalized Software (Details) - USD ($) $ in Thousands | 24 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Capitalized Software | ||
Cost | $ 4,567 | $ 1,761 |
Accumulated Amortization | (669) | (33) |
Net Book Value | 3,898 | $ 1,728 |
Amortization expense | $ 600 |
Reserve for Losses and Loss A_3
Reserve for Losses and Loss Adjustment Expenses - Roll Forward (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Reserve for Losses and Loss Adjustment Expenses | |||
Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period | $ 4,165 | $ 4,432 | $ 3,336 |
Add: Incurred losses and loss adjustment expenses, net of reinsurance, related to: | |||
Current year | 5,774 | 8,165 | 12,257 |
Prior years | (181) | (1,891) | (132) |
Total incurred | 5,593 | 6,274 | 12,125 |
Deduct: Loss and loss adjustment expense payments, net of reinsurance, related to: | |||
Current year | 2,179 | 4,409 | 8,986 |
Prior years | 3,710 | 2,132 | 2,043 |
Total payments | 5,889 | 6,541 | 11,029 |
Reserve for losses and loss adjustment expense net of reinsurance recoverables at end of period | 3,869 | 4,165 | 4,432 |
Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period | 12,952 | 11,896 | 13,352 |
Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period | $ 16,821 | $ 16,061 | $ 17,784 |
Reserve for Losses and Loss A_4
Reserve for Losses and Loss Adjustment Expenses - Additional Information (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Reserve for Losses and Loss Adjustment Expenses | |||
Loss and loss adjustment expense reserve redundancy | $ 0.2 | $ 1.9 | $ 0.1 |
Reserve for Losses and Loss A_5
Reserve for Losses and Loss Adjustment Expenses - Incurred and Paid Accident Year Claims Development (Details) $ in Thousands | Dec. 31, 2019USD ($)claim | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) |
Claims Development | |||||
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 15,902 | ||||
Incurred but Not Reported Liabilities | $ 976 | ||||
Cumulative Number of Claims | 1,364 | ||||
Prior years | |||||
Claims Development | |||||
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 678 | $ 671 | $ 671 | $ 719 | $ 630 |
Incurred but Not Reported Liabilities | $ 1 | ||||
Cumulative Number of Claims | claim | 8 | ||||
2016 | |||||
Claims Development | |||||
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 1,454 | 1,251 | 1,249 | 1,381 | |
Cumulative Number of Claims | 71 | ||||
2017 | |||||
Claims Development | |||||
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 4,014 | 3,475 | 3,071 | ||
Cumulative Number of Claims | 357 | ||||
2018 | |||||
Claims Development | |||||
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 6,095 | 5,970 | |||
Incurred but Not Reported Liabilities | $ 11 | ||||
Cumulative Number of Claims | 526 | ||||
2019 | |||||
Claims Development | |||||
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 3,661 | ||||
Incurred but Not Reported Liabilities | $ 964 | ||||
Cumulative Number of Claims | 402 | ||||
Homeowners’ Insurance | |||||
Claims Development | |||||
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 16,830 | ||||
Incurred but Not Reported Liabilities | $ 379 | ||||
Cumulative Number of Claims | 6,274 | ||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 16,268 | ||||
Reserve for losses and loss adjustment expense, net of reinsurance | 562 | ||||
Homeowners’ Insurance | 2015 | |||||
Claims Development | |||||
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | 1,642 | 1,636 | 1,658 | 1,785 | 2,048 |
Incurred but Not Reported Liabilities | $ 1 | ||||
Cumulative Number of Claims | claim | 381 | ||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 1,634 | 1,615 | 1,523 | 1,379 | 860 |
Homeowners’ Insurance | 2016 | |||||
Claims Development | |||||
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | 5,636 | 5,721 | 5,878 | 6,069 | |
Incurred but Not Reported Liabilities | $ 6 | ||||
Cumulative Number of Claims | 1,081 | ||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 5,607 | 5,585 | 5,356 | 4,120 | |
Homeowners’ Insurance | 2017 | |||||
Claims Development | |||||
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | 6,630 | 7,418 | 9,354 | ||
Incurred but Not Reported Liabilities | $ 11 | ||||
Cumulative Number of Claims | 2,964 | ||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 6,628 | 7,375 | 7,135 | ||
Homeowners’ Insurance | 2018 | |||||
Claims Development | |||||
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | 2,008 | 2,193 | |||
Incurred but Not Reported Liabilities | $ 104 | ||||
Cumulative Number of Claims | 788 | ||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 1,853 | 1,550 | |||
Homeowners’ Insurance | 2019 | |||||
Claims Development | |||||
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | 914 | ||||
Incurred but Not Reported Liabilities | $ 257 | ||||
Cumulative Number of Claims | 1,060 | ||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 546 | ||||
Special Property Insurance | |||||
Claims Development | |||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | 13,790 | ||||
Reserve for losses and loss adjustment expense, net of reinsurance | 2,112 | ||||
Special Property Insurance | Prior years | |||||
Claims Development | |||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | 666 | 626 | 586 | 438 | $ 265 |
Special Property Insurance | 2016 | |||||
Claims Development | |||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | 1,444 | 1,216 | 1,064 | $ 703 | |
Special Property Insurance | 2017 | |||||
Claims Development | |||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | 4,011 | 3,344 | $ 1,967 | ||
Special Property Insurance | 2018 | |||||
Claims Development | |||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | 6,036 | $ 2,859 | |||
Special Property Insurance | 2019 | |||||
Claims Development | |||||
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance | $ 1,633 |
Reserve for Losses and Loss A_6
Reserve for Losses and Loss Adjustment Expenses - Average Annual Percentage Payout of Incurred Claims by Age (Details) | Dec. 31, 2019 |
Homeowners’ Insurance | |
Short-duration Insurance Contracts, Historical Claims Duration | |
Year 1 | 74.00% |
Year 2 | 18.08% |
Year 3 | 0.52% |
Year 4 | 2.99% |
Year 5 | 1.10% |
Special Property Insurance | |
Short-duration Insurance Contracts, Historical Claims Duration | |
Year 1 | 45.59% |
Year 2 | 34.20% |
Year 3 | 16.30% |
Year 4 | 10.80% |
Year 5 | 5.84% |
Reserve for Losses and Loss A_7
Reserve for Losses and Loss Adjustment Expenses - Reconciliation of Liability for Claims and Claim Adjustment Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Short-duration Insurance Contracts, Historical Claims Duration | ||||
Reserve for losses and loss adjustment expense net of reinsurance | $ 3,869 | $ 4,165 | $ 4,432 | $ 3,336 |
Total reinsurance recoverable on unpaid claims | 12,952 | |||
Reserve for losses and loss adjustment expenses | 16,821 | $ 16,061 | $ 17,784 | |
Homeowners’ Insurance | ||||
Short-duration Insurance Contracts, Historical Claims Duration | ||||
Reserve for losses and loss adjustment expense net of reinsurance | 562 | |||
Total reinsurance recoverable on unpaid claims | 4,961 | |||
Special Property Insurance | ||||
Short-duration Insurance Contracts, Historical Claims Duration | ||||
Reserve for losses and loss adjustment expense net of reinsurance | 2,112 | |||
Total reinsurance recoverable on unpaid claims | 7,983 | |||
Reinsurance- Nonproportional assumed property | ||||
Short-duration Insurance Contracts, Historical Claims Duration | ||||
Reserve for losses and loss adjustment expense net of reinsurance | 1,195 | |||
Other | ||||
Short-duration Insurance Contracts, Historical Claims Duration | ||||
Total reinsurance recoverable on unpaid claims | $ 8 |
Reinsurance (Details)
Reinsurance (Details) $ in Thousands | 1 Months Ended | 2 Months Ended | 12 Months Ended | 58 Months Ended | ||
Jun. 30, 2017USD ($) | Feb. 28, 2015USD ($) | Dec. 31, 2019USD ($)Counterparty | Dec. 31, 2018USD ($)Counterparty | Dec. 31, 2017USD ($)Counterparty | Dec. 31, 2019USD ($) | |
Reinsurance Retention Policy | ||||||
Retention amount | $ 1,700 | $ 700 | ||||
Ceded written premiums | 108,332 | 82,949 | $ 46,951 | |||
Prepaid reinsurance premium | $ 26,105 | $ 18,284 | $ 26,105 | |||
Number of Company’s largest reinsurers | Counterparty | 3 | 3 | 3 | |||
Reinsurance premiums ceded | $ 100,314 | $ 67,862 | $ 45,416 | |||
Percentage of reinsurance premiums ceded on total premium | 31.50% | 24.00% | 20.80% | |||
Percentage of reinsurance recoverable on paid and unpaid losses on total balance | 38.20% | 23.00% | ||||
Non-earthquake events | ||||||
Reinsurance Retention Policy | ||||||
Retention amount | $ 15,000 | $ 5,000 | ||||
Non-earthquake events | Losses between $230 million and $351 million | ||||||
Reinsurance Retention Policy | ||||||
Percentage of losses retains | 54.55% | |||||
Non-earthquake events | Losses between $351 million and $501 million | ||||||
Reinsurance Retention Policy | ||||||
Percentage of losses retains | 30.00% | |||||
Non-earthquake events | Losses between $299 million and $350 million | ||||||
Reinsurance Retention Policy | ||||||
Percentage of losses retains | 55.00% | 55.00% | ||||
Non-earthquake events | Losses between $350 million and $477 million | ||||||
Reinsurance Retention Policy | ||||||
Percentage of losses retains | 30.00% | 30.00% | ||||
Non-earthquake events | Losses between $524 million and $569 million | ||||||
Reinsurance Retention Policy | ||||||
Percentage of losses retains | 100.00% | 100.00% | ||||
Non-earthquake events | Minimum | Losses between $230 million and $351 million | ||||||
Reinsurance Retention Policy | ||||||
Loss contingency, plaintiffs damages | $ 230,000 | |||||
Non-earthquake events | Minimum | Losses between $351 million and $501 million | ||||||
Reinsurance Retention Policy | ||||||
Loss contingency, plaintiffs damages | 351,000 | |||||
Non-earthquake events | Minimum | Losses between $299 million and $350 million | ||||||
Reinsurance Retention Policy | ||||||
Loss contingency, plaintiffs damages | $ 299,000 | $ 299,000 | ||||
Non-earthquake events | Minimum | Losses between $350 million and $477 million | ||||||
Reinsurance Retention Policy | ||||||
Loss contingency, plaintiffs damages | 350,000 | 350,000 | ||||
Non-earthquake events | Minimum | Losses between $524 million and $569 million | ||||||
Reinsurance Retention Policy | ||||||
Loss contingency, plaintiffs damages | 524,000 | 524,000 | ||||
Non-earthquake events | Maximum | ||||||
Reinsurance Retention Policy | ||||||
XOL coverage | 740,000 | 625,000 | 740,000 | |||
Non-earthquake events | Maximum | Losses between $230 million and $351 million | ||||||
Reinsurance Retention Policy | ||||||
Loss contingency, plaintiffs damages | 351,000 | |||||
Non-earthquake events | Maximum | Losses between $351 million and $501 million | ||||||
Reinsurance Retention Policy | ||||||
Loss contingency, plaintiffs damages | 501,000 | |||||
Non-earthquake events | Maximum | Losses between $299 million and $350 million | ||||||
Reinsurance Retention Policy | ||||||
Loss contingency, plaintiffs damages | 350,000 | 350,000 | ||||
Non-earthquake events | Maximum | Losses between $350 million and $477 million | ||||||
Reinsurance Retention Policy | ||||||
Loss contingency, plaintiffs damages | 477,000 | 477,000 | ||||
Non-earthquake events | Maximum | Losses between $524 million and $569 million | ||||||
Reinsurance Retention Policy | ||||||
Loss contingency, plaintiffs damages | 569,000 | 569,000 | ||||
Earthquake events | ||||||
Reinsurance Retention Policy | ||||||
Retention amount | 5,000 | $ 15,000 | ||||
Earthquake events | Maximum | ||||||
Reinsurance Retention Policy | ||||||
XOL coverage | 1,050,000 | 825,000 | 1,050,000 | |||
Earthquake events | California | Maximum | ||||||
Reinsurance Retention Policy | ||||||
XOL coverage | 1,120,000 | 1,120,000 | ||||
Texas Homeowners | ||||||
Reinsurance Retention Policy | ||||||
Ceded written premiums | 20,400 | 24,900 | 2,400 | |||
Torrey Pines Re Ltd. (“TPRe”) | Catastrophe | ||||||
Reinsurance Retention Policy | ||||||
Notes issued for reinsurance coverage | $ 166,000 | |||||
Reinsurance premiums ceded | 10,600 | |||||
Duration of reinsurance coverage | 3 years | |||||
First largest insurer | ||||||
Reinsurance Retention Policy | ||||||
Reinsurance premiums ceded | 21,700 | 7,500 | 4,000 | |||
Reinsurance recoverables on paid and unpaid losses | 2,700 | 1,800 | 2,700 | |||
Second largest insurer | ||||||
Reinsurance Retention Policy | ||||||
Reinsurance premiums ceded | 7,500 | 7,200 | 3,400 | |||
Reinsurance recoverables on paid and unpaid losses | 1,900 | 800 | 1,900 | |||
Third largest insurer | ||||||
Reinsurance Retention Policy | ||||||
Reinsurance premiums ceded | 4,900 | 5,200 | 2,400 | |||
Reinsurance recoverables on paid and unpaid losses | 1,900 | 800 | $ 1,900 | |||
Commercial All Risk | ||||||
Reinsurance Retention Policy | ||||||
Ceded written premiums | $ 19,000 | $ 7,200 | $ 2,900 |
Reinsurance- effect of reinsura
Reinsurance- effect of reinsurance (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Premiums Written: | |||
Direct | $ 220,568 | $ 144,821 | $ 112,974 |
Assumed | 31,393 | 10,070 | 7,260 |
Ceded | (108,332) | (82,949) | (46,951) |
Net written premiums | 143,629 | 71,942 | 73,283 |
Premiums Earned: | |||
Direct | 178,536 | 129,071 | 94,799 |
Assumed | 21,985 | 8,688 | 6,162 |
Ceded | (100,314) | (67,862) | (45,416) |
Net earned premiums | 100,207 | 69,897 | 55,545 |
Losses Incurred: | |||
Direct | 20,105 | 12,153 | 24,266 |
Assumed | 1,201 | 46 | 2 |
Ceded | (16,564) | (6,580) | (14,651) |
Net losses incurred | 4,742 | 5,619 | 9,617 |
LAE Incurred: | |||
Direct | 2,837 | 2,113 | 6,608 |
Assumed | 34 | 6 | |
Ceded | (2,020) | (1,464) | (4,100) |
Total LAE incurred | 851 | 655 | 2,508 |
Total losses and LAE incurred: | |||
Direct | 22,942 | 14,266 | 30,874 |
Assumed | 1,235 | 52 | 2 |
Ceded | (18,584) | (8,044) | (18,751) |
Net total | $ 5,593 | $ 6,274 | $ 12,125 |
Long-term Debt - Surplus Notes
Long-term Debt - Surplus Notes (Details) - USD ($) $ in Millions | Feb. 03, 2015 | Sep. 30, 2018 | Aug. 31, 2018 |
Notes Payable, Other Payables | Surplus Notes | |||
Long-term debt | |||
Outstanding surplus notes | $ 17.5 | ||
Term | 7 years | ||
Pay down of surplus notes | $ 17.5 | ||
Pre-payment, penalty | 0.1 | ||
Unamortized debt issuance costs | 0.4 | ||
Notes Payable, Other Payables | Surplus Notes | London Interbank Offered Rate (LIBOR) | |||
Long-term debt | |||
Interest rate spread (as a percent) | 8.00% | ||
Senior Notes | 2018 Floating Rate Notes | |||
Long-term debt | |||
Debt instrument, face amount | $ 20 |
Long-term Debt - Floating Rate
Long-term Debt - Floating Rate Notes (Details) - USD ($) $ in Millions | May 23, 2019 | Sep. 30, 2018 | Dec. 31, 2019 |
Three-month Treasury Rate | |||
Long-term debt | |||
Interest rate spread (as a percent) | 6.50% | ||
Senior Notes | 2018 Floating Rate Notes | |||
Long-term debt | |||
Debt instrument, redemption price, percentage (as a percent) | 102.00% | ||
Redemption price | $ 20.4 | ||
Accrued interest and unpaid interest | 0.3 | ||
Redemption charge | 1.3 | ||
Redemption Premium | 0.4 | $ 0.4 | |
Write-off of unamortized debt issuance costs | 0.9 | ||
Senior Notes | 2018 Floating Rate Notes | Interest Expense. | |||
Long-term debt | |||
Redemption Premium | 0.4 | ||
Senior Notes | 2018 Floating Rate Notes | Other Underwriting Expense | |||
Long-term debt | |||
Redemption Premium | $ 0.9 |
Long-term Debt - Interest (Deta
Long-term Debt - Interest (Details) - USD ($) $ in Millions | May 23, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Senior Notes | 2018 Floating Rate Notes | ||||
Long-term debt | ||||
Interest expense | $ 1.1 | $ 0.6 | ||
Redemption Premium | $ 0.4 | 0.4 | ||
Interest paid | $ 1.2 | 0.5 | ||
Notes Payable, Other Payables | Surplus Notes | ||||
Long-term debt | ||||
Interest expense | 1.2 | $ 1.6 | ||
Interest paid | $ 1.2 | $ 1.6 |
Income Taxes - Excise Tax (Deta
Income Taxes - Excise Tax (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Income Taxes | |
Federal excise tax rate (as a percent) | 1.00% |
Change in valuation allowance | $ 1.7 |
Income Taxes - Federal income t
Income Taxes - Federal income tax expense (benefit) (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes | |||
Current | $ 6,810 | $ (6) | $ 11 |
Deferred | 646 | 1,134 | |
Income tax expense (benefit) | $ 7,456 | $ (6) | $ 1,145 |
Income Taxes - Deferred Tax Ass
Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets: | ||
Losses and LAE reserve discount | $ 10 | $ 22 |
Net operating losses | 74 | 702 |
Investment amortization | 85 | 119 |
Unearned premiums | 3,748 | 1,914 |
Capitalized organizational costs | 274 | 304 |
Unrealized losses on investments | 505 | |
Other | 390 | 306 |
Total deferred tax assets | 4,581 | 3,872 |
Deferred tax liabilities: | ||
Deferred acquisition costs | (4,468) | (2,127) |
Unrealized gains on investments | (1,396) | |
Internally developed software | (640) | |
Other | (2) | (68) |
Total deferred tax liabilities | (6,506) | (2,195) |
Net deferred tax asset before valuation allowance | (1,925) | 1,677 |
Valuation allowance | (74) | $ (1,677) |
Total net deferred tax liabilities | $ (1,999) |
Income Taxes - Effective tax ra
Income Taxes - Effective tax rate (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Effective Income Tax Rate Reconciliation, Amount | |||
Expense computed at federal tax rate | $ 3,802 | $ 3,825 | $ 1,675 |
Non‑U.S. group member income | (4,409) | (1,632) | |
Stock-based compensation | 4,822 | ||
Dividend received deduction and tax‑exempt interest | (36) | (144) | (467) |
Impact of tax reform | 580 | ||
Valuation allowance | (1,677) | 678 | 947 |
Other | 545 | 44 | 42 |
Income tax expense (benefit) | $ 7,456 | $ (6) | $ 1,145 |
Effective Income Tax Rate Reconciliation, Percent | |||
Expense computed at federal tax rate | 21.00% | 21.00% | 34.00% |
Non‑U.S. group member income | (24.21%) | (33.12%) | |
Stock-based compensation | 26.63% | ||
Dividend received deduction and tax‑exempt interest | (0.20%) | (0.79%) | (9.47%) |
Impact of tax reform | 11.76% | ||
Valuation allowance | (9.27%) | 3.72% | 19.23% |
Other | 3.01% | 0.24% | 0.83% |
Income tax expense (benefit) | 41.17% | 0.03% | 23.23% |
Unrecognized tax benefits | $ 0 | $ 0 | |
Maximum | |||
Effective Income Tax Rate Reconciliation, Percent | |||
Expense computed at federal tax rate | 35.00% |
Capital Stock - Shares issued a
Capital Stock - Shares issued and outstanding (Details) - USD ($) $ / shares in Units, $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Capital Stock | ||
Preferred stock, shares authorized | 5,000,000 | 0 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 23,468,750 | 17,000,000 |
Common stock, shares outstanding | 23,468,750 | 17,000,000 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Additional paid-in capital | $ 180,012 | $ 68,498 |
Capital Stock - Reserved for fu
Capital Stock - Reserved for future issuance (Details) - shares | Dec. 31, 2019 | Apr. 16, 2019 |
Common stock reserved for future issuance | ||
Total | 2,640,000 | |
2019 Equity Incentive Plan | ||
Common stock reserved for future issuance | ||
Shares authorized for future issuance | 1,347,561 | 2,400,000 |
2019 Employee Stock Purchase Plan | ||
Common stock reserved for future issuance | ||
Shares authorized for future issuance | 240,000 | 240,000 |
Stock Options | ||
Common stock reserved for future issuance | ||
Stock options outstanding | 1,046,373 | |
Stock Options | 2019 Equity Incentive Plan | ||
Common stock reserved for future issuance | ||
Stock options outstanding | 1,046,373 | |
Restricted Stock Units | 2019 Equity Incentive Plan | ||
Common stock reserved for future issuance | ||
Restricted stock units outstanding | 6,066 |
Statutory financial informati_3
Statutory financial information (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Statutory Accounting Practices | ||||
Statutory net income (loss) | $ (17,911) | $ 9,609 | $ (4,128) | |
Statutory capital and surplus | 116,296 | 63,731 | 61,338 | |
Shareholder’s equity | 218,556 | 96,292 | 78,414 | $ 73,109 |
UNITED STATES | ||||
Statutory Accounting Practices | ||||
Risk Based Capital | 34,200 | 19,700 | ||
BERMUDA | ||||
Statutory Accounting Practices | ||||
Statutory net income (loss) | 18,500 | 17,300 | $ 4,800 | |
Statutory capital and surplus | 38,300 | 19,600 | ||
Minimum statutory solvency margin | 1,200 | 6,900 | ||
Shareholder’s equity | $ 39,700 | $ 23,500 | ||
BERMUDA | Minimum | ||||
Statutory Accounting Practices | ||||
Liquidity ratio | 75.00% |
Dividend Restrictions (Details)
Dividend Restrictions (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Dividend Restrictions | |
Period over which a dividend or distribution requiring approval is reviewed | 12 months |
Percentage of combined capital and surplus of insurer | 10.00% |
Cumulative earned surplus | $ 10.3 |
Threshold dividend or distribution without the prior approval | 10.3 |
Palomar Specialty Reinsurance Company Bermuda Ltd | |
Dividend Restrictions | |
Dividends receivable | $ 5.7 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Years ending December 31: | |||
2020 | $ 843 | ||
2021 | 879 | ||
2022 | 904 | ||
2023 | 862 | ||
2024 | 478 | ||
Total | 3,966 | ||
Total rent expense | $ 600 | $ 800 | |
Total rent expense | $ 600 |
Commitments and Contingencies -
Commitments and Contingencies - Letters of Credit (Details) $ in Millions | 12 Months Ended | |
Dec. 31, 2019USD ($)LetterOfCredit | Dec. 31, 2018USD ($)LetterOfCredit | |
Letters of Credit | ||
Number of standby letters of credit | LetterOfCredit | 3 | 4 |
Amount outstanding | $ 0.5 | |
Letter of credit renewal term | 0 years | 1 year |
Letters of credit were collateralized | $ 3.2 | $ 3 |
First letter of credit | ||
Letters of Credit | ||
Amount outstanding | 1.5 | 1.3 |
Second letter of credit | ||
Letters of Credit | ||
Amount outstanding | 0.4 | 0.4 |
Third letter of credit | ||
Letters of Credit | ||
Amount outstanding | $ 0.4 | 0.5 |
Fourth letter of credit | ||
Letters of Credit | ||
Amount outstanding | $ 0.4 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income - Roll Forward (Details) - Accumulated Other Comprehensive Income (Loss) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Changes in accumulated other comprehensive income | |||
Beginning balance | $ (563) | $ 2,993 | $ 1,017 |
Effect of equity accounting guidance adoption | (3,215) | ||
Beginning Balance | (563) | (222) | 1,017 |
Other comprehensive income (loss) before reclassification | 6,555 | (740) | 2,834 |
Federal income tax (expense) benefit | (1,344) | 76 | (772) |
Other comprehensive income (loss) before reclassification, net of tax | 5,211 | (664) | 2,062 |
Amounts reclassified from AOCI | 47 | 399 | (608) |
Federal income tax expense | (9) | (76) | 68 |
Amounts reclassified from AOCI, net of tax | 38 | 323 | (540) |
Other comprehensive income (loss) | 5,249 | (341) | 1,522 |
Effect of new tax rates from Tax Reform | 454 | ||
Ending balance | $ 4,686 | $ (563) | $ 2,993 |
Retirement and Post-Employmen_2
Retirement and Post-Employment Retirement Plans (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Retirement and Post-Employment Retirement Plans | |||
Employer matching participants gross wages (as a percent) | 3.00% | ||
Contributions to plan | $ 0.3 | $ 0.2 | $ 0.2 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock based compensation expense (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Stock-based compensation expense | ||||
Stock compensation charge | $ 24,103 | $ 0 | $ 0 | |
Stock-based compensation expense | $ 24,103 | |||
2014 Management Incentive Plan | ||||
Stock-based compensation expense | ||||
Stock compensation charge | $ 23,000 |
Stock-Based Compensation - Mana
Stock-Based Compensation - Management incentive plan prior to IPO (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Mar. 15, 2019 | |
Management Incentive Plan | ||||||
Stock compensation charge | $ 24,103 | $ 0 | $ 0 | |||
Increase in additional paid in capital | $ 24,103 | |||||
2014 Management Incentive Plan | ||||||
Management Incentive Plan | ||||||
Units outstanding | 12,552,825 | |||||
Stock compensation charge | $ 23,000 | |||||
Increase in additional paid in capital | $ 23,000 |
Stock-Based Compensation - 2019
Stock-Based Compensation - 2019 Equity Incentive Plan (Details) - 2019 Equity Incentive Plan - shares | Dec. 31, 2019 | Apr. 16, 2019 |
Management Incentive Plan | ||
Shares authorized (in shares) | 1,347,561 | 2,400,000 |
Annual automatic increase to the number of shares of common stock reserved for issuance, as a percentage of common stock issued and outstanding as at the immediately preceding fiscal year end | 3.00% |
Stock-Based Compensation - St_2
Stock-Based Compensation - Stock options activity (Details) - Stock Options - USD ($) $ / shares in Units, $ in Thousands | Apr. 16, 2019 | Dec. 31, 2019 |
Common stock reserved for future issuance | ||
Expiry period | 10 years | |
Number of shares | ||
Options granted (in shares) | 1,058,966 | |
Options canceled (in shares) | (12,593) | |
Outstanding at end of period (in shares) | 1,046,373 | |
Weighted-average exercise price | ||
Options granted (per share) | $ 17.03 | |
Options canceled (per share) | 15 | |
Outstanding price at ending (per share) | $ 17.05 | |
Additional disclosures | ||
Weighted average remaining contractual term for outstanding options (in years) | 9 years 3 months 29 days | |
Aggregate intrinsic value | $ 35,039 | |
Total unrecognized stock-based compensation expense | $ 3,200 | |
Weighted-average period over which unrecognized stock-based compensation expense is expected to be recognized | 2 years 3 months 11 days | |
Minimum | ||
Common stock reserved for future issuance | ||
Vesting period | 2 years | |
Vesting percentage on the first anniversary of the grant date | 25.00% | |
Maximum | ||
Common stock reserved for future issuance | ||
Vesting period | 4 years | |
Vesting percentage on the first anniversary of the grant date | 50.00% | |
2019 Equity Incentive Plan | ||
Number of shares | ||
Outstanding at end of period (in shares) | 1,046,373 |
Stock-Based Compensation - Fair
Stock-Based Compensation - Fair value assumptions (Details) | 12 Months Ended |
Dec. 31, 2019 | |
Fair value assumptions | |
Dividend yield | 0.00% |
Stock Options | |
Fair value assumptions | |
Risk free rate of return, Minimum | 1.59% |
Risk free rate of return, Maximum | 2.45% |
Expected share price volatility, Minimum | 18.12% |
Expected share price volatility, Maximum | 18.45% |
Stock Options | Minimum | |
Fair value assumptions | |
Expected life in years | 5 years 7 months 21 days |
Stock Options | Maximum | |
Fair value assumptions | |
Expected life in years | 6 years 29 days |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted stock units activity (Details) - Restricted Stock Units $ / shares in Units, $ in Millions | 12 Months Ended |
Dec. 31, 2019USD ($)$ / sharesshares | |
Number of shares | |
Restricted stock units granted (in shares) | shares | 6,066 |
Non vested at end of period | shares | 6,066 |
Weighted-average grant date fair value | |
Restricted stock units granted (per share) | $ / shares | $ 16.49 |
Non vested outstanding at end of period (per share) | $ / shares | $ 16.49 |
Total unrecognized stock-based compensation expense | $ | $ 0.1 |
Weighted-average period over which unrecognized stock-based compensation expense is expected to be recognized | 3 months 22 days |
Stock-Based Compensation - 20_2
Stock-Based Compensation - 2019 Employee Stock Purchase Plan (Details) - 2019 Employee Stock Purchase Plan - shares | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Apr. 16, 2019 | |
Management Incentive Plan | |||
Shares authorized (in shares) | 240,000 | 240,000 | |
Scenario, Forecast | Maximum | |||
Management Incentive Plan | |||
Annual increase (in shares) | 240,000 |
Net Income Per Share (Details)
Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Net Income Per Share | |||||||||||
Net income | $ 10,880 | $ 7,454 | $ 6,698 | $ (14,411) | $ 4,127 | $ 1,566 | $ 6,934 | $ 5,592 | $ 10,621 | $ 18,219 | $ 3,783 |
Weighted-average common shares outstanding, basic | 21,501,541 | 17,000,000 | 17,000,000 | ||||||||
Common Share equivalents | 333,393 | ||||||||||
Diluted | 21,834,934 | 17,000,000 | 17,000,000 | ||||||||
Basic | $ 0.46 | $ 0.32 | $ 0.30 | $ (0.85) | $ 0.24 | $ 0.09 | $ 0.41 | $ 0.33 | $ 0.49 | $ 1.07 | $ 0.22 |
Diluted earnings per share | $ 0.45 | $ 0.31 | $ 0.30 | $ (0.85) | $ 0.24 | $ 0.09 | $ 0.41 | $ 0.33 | $ 0.49 | $ 1.07 | $ 0.22 |
Underwriting Information - Repo
Underwriting Information - Reportable Segments (Details) | 12 Months Ended |
Dec. 31, 2019segment | |
Reportable segment | |
Number of reportable segments | 1 |
Underwriting Information - Gros
Underwriting Information - Gross Written Premiums by Product (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Gross written premiums | |||||||||||
Amount | $ 73,342 | $ 66,242 | $ 58,346 | $ 54,031 | $ 43,542 | $ 39,994 | $ 37,342 | $ 34,013 | $ 251,961 | $ 154,891 | $ 120,234 |
% of GWP | 100.00% | 100.00% | 100.00% | ||||||||
Residential Earthquake | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 130,473 | $ 81,679 | $ 57,328 | ||||||||
% of GWP | 51.80% | 52.70% | 47.70% | ||||||||
Commercial Earthquake | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 38,741 | $ 20,946 | $ 23,079 | ||||||||
% of GWP | 15.40% | 13.50% | 19.20% | ||||||||
Specialty Homeowners | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 32,788 | $ 27,680 | $ 26,516 | ||||||||
% of GWP | 13.00% | 17.90% | 22.00% | ||||||||
Commercial All Risk | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 30,358 | $ 14,338 | $ 7,321 | ||||||||
% of GWP | 12.00% | 9.30% | 6.10% | ||||||||
Hawaii Hurricane | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 10,764 | $ 8,128 | $ 5,323 | ||||||||
% of GWP | 4.30% | 5.20% | 4.40% | ||||||||
Residential Flood | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 5,216 | $ 2,120 | $ 667 | ||||||||
% of GWP | 2.10% | 1.40% | 0.60% | ||||||||
Other | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 3,621 | ||||||||||
% of GWP | 1.40% |
Underwriting Information - Gr_2
Underwriting Information - Gross Written Premiums by State (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Gross written premiums | |||||||||||
Amount | $ 73,342 | $ 66,242 | $ 58,346 | $ 54,031 | $ 43,542 | $ 39,994 | $ 37,342 | $ 34,013 | $ 251,961 | $ 154,891 | $ 120,234 |
% of GWP | 100.00% | 100.00% | 100.00% | ||||||||
California | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 141,743 | $ 82,119 | $ 64,231 | ||||||||
% of GWP | 56.30% | 53.00% | 53.40% | ||||||||
Texas | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 44,087 | $ 32,568 | $ 29,273 | ||||||||
% of GWP | 17.50% | 21.00% | 24.40% | ||||||||
Hawaii | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 11,851 | $ 8,128 | $ 5,323 | ||||||||
% of GWP | 4.70% | 5.20% | 4.40% | ||||||||
Washington | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 9,607 | $ 5,658 | $ 2,803 | ||||||||
% of GWP | 3.80% | 3.70% | 2.30% | ||||||||
Oregon | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 7,396 | $ 5,286 | $ 4,250 | ||||||||
% of GWP | 2.90% | 3.40% | 3.60% | ||||||||
South Carolina | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 6,185 | $ 3,208 | $ 1,706 | ||||||||
% of GWP | 2.50% | 2.10% | 1.40% | ||||||||
Illinois | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 4,896 | $ 4,403 | $ 4,854 | ||||||||
% of GWP | 1.90% | 2.80% | 4.00% | ||||||||
Mississippi | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 4,769 | $ 2,585 | $ 982 | ||||||||
% of GWP | 1.90% | 1.70% | 0.80% | ||||||||
Other | |||||||||||
Gross written premiums | |||||||||||
Amount | $ 21,427 | $ 10,936 | $ 6,812 | ||||||||
% of GWP | 8.50% | 7.10% | 5.70% |
Underwriting Information (Detai
Underwriting Information (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2019USD ($)itemproduct | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | |
Disaggregation of Revenue | |||||||||||
Number of program administrators | item | 2 | ||||||||||
Number of products | product | 4 | ||||||||||
Amount | $ 73,342 | $ 66,242 | $ 58,346 | $ 54,031 | $ 43,542 | $ 39,994 | $ 37,342 | $ 34,013 | $ 251,961 | $ 154,891 | $ 120,234 |
% of GWP | 100.00% | 100.00% | 100.00% | ||||||||
Sales Revenue | Product Concentration Risk | |||||||||||
Disaggregation of Revenue | |||||||||||
Amount | $ 148,600 | $ 104,900 | $ 85,800 | ||||||||
% of GWP | 59.00% | 67.70% | 71.30% |
Selected Quarterly Financial _3
Selected Quarterly Financial Data (unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Selected Quarterly Financial Data (unaudited) | |||||||||||
Gross written premiums | $ 73,342 | $ 66,242 | $ 58,346 | $ 54,031 | $ 43,542 | $ 39,994 | $ 37,342 | $ 34,013 | $ 251,961 | $ 154,891 | $ 120,234 |
Total revenues | 34,623 | 30,461 | 25,905 | 22,307 | 15,640 | 18,916 | 19,892 | 18,523 | 113,296 | 72,971 | 59,466 |
Net income | 10,880 | 7,454 | 6,698 | (14,411) | 4,127 | 1,566 | 6,934 | 5,592 | 10,621 | 18,219 | 3,783 |
Comprehensive income (loss) | $ 9,670 | $ 8,428 | $ 9,996 | $ (12,224) | $ 5,085 | $ 1,257 | $ 6,843 | $ 4,693 | $ 15,870 | $ 17,878 | $ 5,305 |
Earnings per share: | |||||||||||
Basic | $ 0.46 | $ 0.32 | $ 0.30 | $ (0.85) | $ 0.24 | $ 0.09 | $ 0.41 | $ 0.33 | $ 0.49 | $ 1.07 | $ 0.22 |
Diluted | $ 0.45 | $ 0.31 | $ 0.30 | $ (0.85) | $ 0.24 | $ 0.09 | $ 0.41 | $ 0.33 | $ 0.49 | $ 1.07 | $ 0.22 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions | Jan. 09, 2020 | Apr. 22, 2019 |
Secondary Offering | Subsequent Event | ||
Subsequent Events | ||
Shares sold | 5,750,000 | |
Shares offering price | $ 49 | |
Net proceeds | $ 35.4 | |
Underwriter option | ||
Subsequent Events | ||
Shares sold | 843,750 | |
Underwriter option | Subsequent Event | ||
Subsequent Events | ||
Shares sold | 750,000 | |
Selling stockholders | Subsequent Event | ||
Subsequent Events | ||
Shares sold | 5,000,000 |
Schedule II - Balance Sheets (D
Schedule II - Balance Sheets (Details) - USD ($) $ / shares in Units, $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Investments: | |||||
Fixed maturity securities available for sale, at fair value (amortized cost: $211,278 in 2019; $122,949 in 2018) | $ 217,151 | $ 122,220 | |||
Equity securities at fair value | 22,328 | 25,171 | |||
Total investments | 239,479 | 147,391 | |||
Cash and cash equivalents | 33,119 | 9,525 | |||
Accrued investment income | 1,386 | 734 | |||
Prepaid expenses and other assets | 14,861 | 5,863 | |||
Total assets | 395,462 | 231,134 | |||
Liabilities | |||||
Accounts payable and other liabilities | 13,555 | 9,245 | |||
Income taxes payable | 1,117 | ||||
Deferred tax liabilities | 1,999 | ||||
Total liabilities | 176,906 | 134,842 | |||
Shareholder’s equity | |||||
Preferred stock, $0.0001 par value, 5,000,000 and 0 shares authorized as of December 31, 2019 and December 31, 2018, respectively, 0 shares issued and outstanding as of December 31, 2019 and December 31, 2018 | |||||
Common stock, $0.0001 par value, 500,000,000 shares authorized, 23,468,750 and 17,000,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively | 2 | 2 | |||
Additional paid-in capital | 180,012 | 68,498 | |||
Accumulated other comprehensive (loss) income | 4,686 | (563) | $ 3,200 | ||
Retained earnings | 33,856 | 28,355 | $ 3,200 | ||
Total stockholders' equity | 218,556 | 96,292 | $ 78,414 | $ 73,109 | |
Total liabilities and stockholders' equity | 395,462 | 231,134 | |||
Fixed maturity securities available for sale, amortized cost | 211,278 | 122,949 | |||
Equity securities, cost | $ 21,336 | $ 27,188 | |||
Common stock, par value | $ 0.0001 | $ 0.0001 | |||
Common stock, shares authorized | 500,000,000 | 500,000,000 | |||
Common stock, shares issued | 23,468,750 | 17,000,000 | |||
Common stock, shares outstanding | 23,468,750 | 17,000,000 | |||
Palomar Holdings, Inc. | |||||
Investments: | |||||
Fixed maturity securities available for sale, at fair value (amortized cost: $211,278 in 2019; $122,949 in 2018) | $ 29,120 | $ 11,581 | |||
Equity securities at fair value | 1,696 | 1,658 | |||
Total investments | 30,816 | 13,239 | |||
Cash and cash equivalents | 1,654 | 540 | |||
Accrued investment income | 126 | 67 | |||
Prepaid expenses and other assets | 36 | ||||
Investment in subsidiaries | 189,313 | 82,446 | |||
Total assets | 221,945 | 96,292 | |||
Liabilities | |||||
Accounts payable and other liabilities | 268 | ||||
Income taxes payable | 1,122 | ||||
Deferred tax liabilities | 1,999 | ||||
Total liabilities | 3,389 | ||||
Shareholder’s equity | |||||
Common stock, $0.0001 par value, 500,000,000 shares authorized, 23,468,750 and 17,000,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively | 2 | 2 | |||
Additional paid-in capital | 180,012 | 68,498 | |||
Accumulated other comprehensive (loss) income | 4,686 | (563) | |||
Retained earnings | 33,856 | 28,355 | |||
Total stockholders' equity | 218,556 | 96,292 | |||
Total liabilities and stockholders' equity | 221,945 | 96,292 | |||
Fixed maturity securities available for sale, amortized cost | 28,413 | 11,668 | |||
Equity securities, cost | $ 1,661 | $ 1,656 | |||
Common stock, par value | $ 0.0001 | $ 0.0001 | |||
Common stock, shares authorized | 500,000,000 | 500,000,000 | |||
Common stock, shares issued | 23,468,750 | 17,000,000 | |||
Common stock, shares outstanding | 23,468,750 | 17,000,000 |
Schedule II - Balance Sheets -
Schedule II - Balance Sheets - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Fixed maturity securities available for sale, amortized cost | $ 211,278 | $ 122,949 |
Equity securities, cost | $ 21,336 | $ 27,188 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 5,000,000 | 0 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 23,468,750 | 17,000,000 |
Common stock, shares outstanding | 23,468,750 | 17,000,000 |
Palomar Holdings, Inc. | ||
Fixed maturity securities available for sale, amortized cost | $ 28,413 | $ 11,668 |
Equity securities, cost | $ 1,661 | $ 1,656 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 5,000,000 | 0 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 23,468,750 | 17,000,000 |
Common stock, shares outstanding | 23,468,750 | 17,000,000 |
Schedule II - Statements of Inc
Schedule II - Statements of Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Net investment income | $ 5,975 | $ 3,238 | $ 2,125 | ||||||||
Net realized and unrealized losses on investments | 4,443 | (2,569) | 608 | ||||||||
Operating expenses | 95,219 | 54,758 | 54,538 | ||||||||
Income before income taxes | 18,077 | 18,213 | 4,928 | ||||||||
Income tax expense (benefit) | 7,456 | (6) | 1,145 | ||||||||
Net income | $ 10,880 | $ 7,454 | $ 6,698 | $ (14,411) | $ 4,127 | $ 1,566 | $ 6,934 | $ 5,592 | 10,621 | 18,219 | 3,783 |
Change in net unrealized loss (gain) on investments | 5,249 | (341) | 1,522 | ||||||||
Net comprehensive income | $ 9,670 | $ 8,428 | $ 9,996 | $ (12,224) | $ 5,085 | $ 1,257 | $ 6,843 | $ 4,693 | 15,870 | 17,878 | 5,305 |
Palomar Holdings, Inc. | |||||||||||
Net investment income | 1,039 | 61 | |||||||||
Net realized and unrealized losses on investments | 131 | (2) | |||||||||
Operating expenses | 8 | ||||||||||
Income before income taxes | 1,178 | 59 | |||||||||
Income tax expense (benefit) | 7,441 | ||||||||||
Income (loss) before equity in net income of subsidiaries | (6,263) | 59 | |||||||||
Equity in net income of subsidiaries | 16,884 | 18,160 | 3,783 | ||||||||
Net income | 10,621 | 18,219 | 3,783 | ||||||||
Change in net unrealized loss (gain) on investments | 708 | (87) | |||||||||
Equity in other comprehensive income of subsidiaries, net of taxes | 4,541 | (254) | 1,522 | ||||||||
Net comprehensive income | $ 15,870 | $ 17,878 | $ 5,305 |
Schedule II - Statements of Cas
Schedule II - Statements of Cash Flows (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Operating activities | |||
Net income | $ 10,621 | $ 18,219 | $ 3,783 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Net realized and unrealized losses on investments | (4,443) | 2,569 | (608) |
Amortization of premium on fixed maturity securities | 431 | 481 | 966 |
Deferred income tax expense | 646 | 1,134 | |
Net cash provided by operating activities | 41,700 | 22,808 | 20,248 |
Investing activities | |||
Purchases of fixed maturity securities | (211,587) | (102,745) | (43,485) |
Sales and maturities of fixed maturity securities | 124,151 | 81,215 | 28,628 |
Net cash used in investing activities | (80,566) | (25,365) | (19,128) |
Financing activities | |||
Proceeds from initial public offering, net of offering costs | 87,411 | ||
Redemption of Floating Rate Notes | (20,000) | ||
Distribution to stockholder | (5,120) | ||
Net cash provided by financing activities | 62,291 | 1,549 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 23,425 | (1,008) | 1,120 |
Cash, cash equivalents and restricted cash at beginning of period | 9,924 | 10,932 | 9,812 |
Cash, cash equivalents and restricted cash at end of period | 33,349 | 9,924 | 10,932 |
Supplementary cash flow information: | |||
Cash paid for income taxes | 5,645 | 11 | 9 |
Palomar Holdings, Inc. | |||
Operating activities | |||
Net income | 10,621 | 18,219 | 3,783 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Equity in undistributed earnings of subsidiaries | (16,884) | (18,160) | $ (3,783) |
Net realized and unrealized losses on investments | (131) | 2 | |
Amortization of premium on fixed maturity securities | 114 | ||
Deferred income tax expense | 646 | ||
Other | 546 | ||
Changes in operating assets and liabilities: | 4,202 | (67) | |
Net cash provided by operating activities | (1,432) | 540 | |
Investing activities | |||
Purchases of fixed maturity securities | (73,901) | ||
Cash received from subsidiary | 226 | ||
Sales and maturities of fixed maturity securities | 13,930 | ||
Net cash used in investing activities | (59,745) | ||
Financing activities | |||
Proceeds from initial public offering, net of offering costs | 87,411 | ||
Redemption of Floating Rate Notes | (20,000) | ||
Distribution to stockholder | (5,120) | ||
Net cash provided by financing activities | 62,291 | ||
Net increase (decrease) in cash, cash equivalents and restricted cash | 1,114 | 540 | |
Cash, cash equivalents and restricted cash at beginning of period | 540 | ||
Cash, cash equivalents and restricted cash at end of period | 1,654 | $ 540 | |
Supplementary cash flow information: | |||
Cash paid for income taxes | $ 5,645 |
Valuation and Qualifying Accoun
Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Valuation and Qualifying Accounts | ||
Balance at Beginning of Period | $ 1,677 | $ 947 |
Amount Charged to Expense | 730 | |
Amount Written Off | (1,603) | |
Balance at End of Period | $ 74 | $ 1,677 |