PLMR - Earnings call transcript Q4 2019

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Operator

Good morning, and welcome to the Palomar Holdings Incorporated Fourth Quarter and Full-Year 2019 Earnings Conference Call.

During today's presentation, all parties will be in a listen-only mode.

Following the presentation the conference lines will be opened for questions with instructions to follow at that time.

As a reminder, this conference call is being recorded.

I would now like turn the conference over to Mr. Officer. Financial Chief Uchida, Chris Please go sir. ahead,

Christopher Uchida

Chief Thank participation in operator, With here Armstrong, and Founder. XXXX good your appreciate me our Mac is We everyone. today Officer our call. and morning earnings you, Executive fourth-quarter full-year and

replay a of available XX, section this call website XXXX. on February through XX:XX As on telephonic will Investor the a of reminder, Time Relations our be P.M. Eastern

factors results that materially the XX, Commission in this forth perspectives and any constitute we of forward-looking call estimates, or contain future statements Before duty cause remind Such to filed variety Such begin, differ to Litigation that Securities within statements. me expectations, such are prospects. certain XXXX. update remarks with such could a report Securities Forward-Looking those Exchange do Private by most of everyone Statements and from of other January These meaning are statements. other that risks let the the our XXXX. undertake recent statements beliefs, Act uncertainties We periodic implied about actual risks, and not subject factors may indicated Reform plans include our set to and management's and

our in in today's considered believe can isolation we measures, should comparable or in of with GAAP presentation be the release. non-GAAP most during a evaluating GAAP. accordance certain our measures earnings The U.S of be which these measures discuss as are for non-GAAP Additionally, call, will we performance. in A information prepared to results useful this found not reconciliation substitute additional

turn will point, Mac. this I call the over At to

Mac Armstrong

morning good and Chris, everyone. Thanks,

products We book property and Palomar to delivered risk its framework. platform XXXX, via mission to developing transfer and flexible an easy of build scalable on driven that business. a on of diversified use analytics Over focused suite and incorporates underwriting a the an distinctive course of specialty remain executed

demonstrate But XXXX the XXXX highlights quarter products drop making on momentous in full-year qualitative into past by in quantitative go progress and that this we quarter over that results it our I market. year. we mission before the on perspective was the of eyes year, received a as want to Our our well for the and are are

reinsurance Securing support geographic The include new largest capital And significant states. investments into human in hiring the XX likely accomplishments of two initial Risk our expanding new drivers and carrier of million reinsurance, of our assumed incremental making to the growth Company $XXX Marine divisions and with Chief footprint limits our Officer prudently the several was history, catalyzed including talent. our multiple of Also public launching in the and notable FTP business. growth. April partnerships offering an in people in the our making lastly,

year-over-year the Turning XXXX. to our of grew premium results. XX% quarter fourth Gross and for for XX% year-over-year written full-year the

Importantly, across our portfolio, generated growth from strong a not few we just standouts. expanding product

the franchise market products traction XX% during we increasingly fourth in leadership a and year-over-year demonstrates Earthquake play that to segment. of our our that gain Earthquake growth quarter role continues the

product Our in market. is non-Earthquake that driven year-over-year to products exportable fourth grew segments property the our development XX% further specialty quarter of the other strategy

product I'm focused needs we report serve lines market on newest from differentiated pleased products contribution acute developing our to remain the continue As Company, to and that a to grow.

grew our its recently program quarter, expand fourth Inland to year-over-year distribution offerings product XXX% Department geographic Marine while Specifically, our continued and in network. launched residential the to flood footprint,

offer larger for our broadening XX% Earthquake written markets of total represented significant the base. of market and addressable than are future for In runway cases, premiums gross our premium non-Earthquake many and quarter. that during in times these premium products Overall products are multiple growth the

of and XX% quarter for XX% personal solid environment fourth growth generated across personalized, the attractive we and in expanding commercial a an commercial offerings. toXXX% network mix both commercial year-over-year distribution exhibiting is led was lines Additionally, growth lines, rate XXXX

commercial quarter Accelerated experience Earthquake of increases in Our average to lines of the of renewal increase fourth in compared a X.X% rate line the at pronounced quarter. rate which third in was X% most form rate versus our composite saw XX.X% during positive commercial XX.X% business, increase renewal QX.

distribution We a there that strong of premium value we XX% ultimately retention the the and to unique partners endorsement there exhibit grew offerings in Personalized end momentum the insurers no offer believe stronger continued year-over-year is fourth our that are rates. and quarter.

from and all XX% sequentially risks quarter monthly Average fourth we during to was Residential XXXX. XX% Hawaiian above quarter business premium of during of business quarter, third rates for XX% Notably, in fourth the lines Hurricane during quarter. saw the compared Earthquake retention up XX% in retention all across the

of any visibility. our our composition minimizes business and of or The attritional to loss provides book exposure considerable

some hurricane in experience will a when measure of quarterly earthquake major or we However, Hawaii. a basis isn't there loss on even

market managing do underwriting defines Fortunately, attritional to selection, transfer to commitment risk exposure our loss. loss and

the have of ratio with losses detail adjustment to out the provide shortly. compared a X% that modest amount loss a the quarter, of for loss ratio loss the full-year of During XXXX and on XXXX. of Chris I million for But full-year $X.X fourth will more was loss even X.X% and loss, of we point our expense will

we ending premiums and adjusted net and Due our ratio able to the we model combined uniqueness ROE capital a X.XX. were were to ratio of equity that XX.X%. profitable as results of reflect underwriting, of adjusted these this ROE the believe achieve to achieve and stockholder's We full-year and able to written predictable efficiency conservative XX.X% of commitment an with

and reinsurance is Risk of reflects renewal growth X pillar dedication balancing completion to conservative model the a of reinsurance our the portfolio of our our our with central management January protection.

approximately basis and limit modestly new disclosed, program reinsurance million purchased adjusted continued we As exposure the rates growth flat our existing of at to previously XXX to million products. of core renewed our upon of and XXX incremental support

significantly earthquake allows event. the Xst, coverage coverage simulated program January loss of Company $X.X for provides California a losses maintain This and from XXX exceed to one zone probable billion above recorded the any historical and our As reinsurance cushion events. peak maximum to year up

Our per million retention XX, XXXX. event May five through remains

we our ahead, growth Looking XXXX ongoing initiatives. entered committed to

mentioned, commercial new personal previously sources A.M. an Size products products. eight and new unlock lines lines our our Best for Financial partners distribution for year, Category reaching last As carrier just

Size the million offering, achieve primary which new Best With on our nine, and further proximity unlock in Category A.M. proceeds in growth XXXX follow are to from January, opportunities. we Financial XXX is now surplus

remains relevant and suite market. product Our to attractive the

our operation are new We of product existing in States broadening and ones. offerings adding

streamlined and improves drive our our distribution products continue ability We scale access to in our technology to to offers invest more business. in that partners

XX% invigorated for by are and can full-year. We net grow XX% we XXXX believe the prospects between income the that of adjusted and

With to the over that, turn for like now I Chris detailed more call results. financial to review our would of

Christopher Uchida

figure, that referring you per as to Mac. stock method. referring the share during I’m you diluted my note Please per share common any portion when Thank to calculated using treasury

was For XXXX. million of million income our to share net in compared per for $X.XX per same income the quarter or quarter $XX.X fourth the share $X.X or XXXX net $X.XX of

or $XX.X compared our $X.XX to For of share million income million income XXXX. per $X.XX was $XX.X of per net net the share in XXXX or full-year

quarter share million and per net net the $X.XX or stock expenses adjusted of quarter adjusted Company's For $X.XX our adjusted or $XX.X tax the impact was related million income of expenses. quarter for per based income XXXX, XXXX. of same share XXXX to to stock of net compensation, compared fourth offerings, Fourth excluding $X.X the income those

IPO the exclude XXXX fourth expenses quarter the Company's with of the and adjustments associated restructuring. In tax

share, For to the income of compared of per was $XX.X adjusted net $X.XX in net income full-year million $X.XX our share or XXXX. million XXXX, or per adjusted $XX.X

compared prior of fourth year's Gross fourth an the the for million, written representing to were premiums $XX.X quarter quarter. increase XX.X%,

grocery growth of million million, compared written in premiums XXXX. XXXX, For to were XX.X%, $XXX.X $XXX

increases combination As Mac was product contributions by and our a driven new indicated, robust strong retention across growth portfolio. of with rate premium this business,

Ceded for quarter. XX.X%, prior fourth premiums were representing to the year's compared increase written quarter fourth an of $XX.X million, the

transfer critical strategy of risk component especially demonstrate we sustained a top-line our remains growth. business, Our as

share XOL excess to attritional on expenses valuable the of income to ceding the loss or to from risk commensurate partners. was attractive share increase and our re-insurance our quota by increase impact our of generate with reinsurance primarily in utilize losses an fee reinsurance growth and quota portfolio reinsurance. We The driven minimize our

The share increased. quota increase the dollar total in partners. ceded-written reinsurance to ceding premium premium part said, due was to increased That the of ceded-written while in amount

quota a for commercial the agreements. in as percentage XXXX earthquake not three gross subject ended gross-written premiums earthquake December months to for due our lines, residential XX, three Ceded-written increase in decreased primarily months XX.X% XX.X% reinsurance premiums to XXXX, December to ended in are and the share the from of which XX, premium

full-year XX% XXXX. as ceded-written XXXX premium the dynamic percentage of was XX.X% also gross to the as evident for This the of XXXX decreased of full-year written full-year of from for premiums a for

business, incur grow expense our As we to reinsurance overall of loss as maintain coverage. of conservative a we level we in additional expect excess

trend may Due overtime our between to same. the earned smooth expect the expense, the a or look reinsurance we there placement timing the be reinsurance and to contracts, and of the terms underlying lag and places premium of out a impact but

$X California a billion remains reinsurance we per events. total earthquake event million Our for wind $X.X purchased or retention coverage earthquake and

premium growth premium an year's were XX.X%, XX.X%, premiums increase of million, prior earned Net Net to the $XXX.X quarter the gross increase premiums of were to XXXX compared due growth premiums. written earned earning XXXX. an of earning offset for by in in higher the the of higher $XX to fourth for compared quarter fourth ceded-written million,

written XX.X%, XXXX. compared XXXX, of gross in quarter fourth quarter the written For were fourth as percentage to premiums a of XX.X% ceded of the

premiums percentage XXXX. For a in XXXX, of to as written premiums XX%, were XX.X% written compared gross ceded

the was $X.X three and for $X.X XXXX. in million ended approximately other and in million was the XX, $X.X and $X.X and other same Commission million period income XXXX in for XXXX Commission December XXXX. income million months

the adjustment million Losses LAE an fourth $X or and quarter. quarter expense incurred million, compared $X.X were in the fourth of year's prior to increase loss

on roughly Our losses attritional attritional quarter ratio million equating a of quarter. included loss losses, X.X% the to the during $X.X for

from losses $X.X from LAE In addition, unfavorable events quarter, the the million we Typhoon and including Tropical third occurred Imelda, Dorian. approximately and that booked development Hurricane in Hagibis Storm Typhoon late Faxai, of

attritional million for loss losses the of prior of prior quarter. was X.X% and current the unfavorable year Losses a quarter $X.X Combined compared quarter fourth X.X% the the included in events, XXXX for of to $X.X ratio year with LAE fourth our year's million major for negative impact and respectively. development

loss in ratio As Matt XXXX compare mentioned to X% our was earlier, X.X% XXXX.

scale XX.X% Our We will expense compared continue long-term. business believe the to quarter in our the quarter fourth the to fourth XX% of XXXX ratio was over of for XXXX.

Our XX.X% fourth XX.X% the quarter. prior combined ratio for and to combined ratio comparison year's in the the quarter was of fourth for

our of was that the fourth assessment Our is XX.X% prior XX.X% fourth ratio. adjusted efforts, year's we ratio, the X.X% combined better loss to negative a which believe a in quarter compared during quarter included

demonstrating Our increase to was XXXX compared of year's XX.X% scale. was for interest The income adjusted quarter IPO fourth proceeds was in the ratio due increased investment XXXX, combine increases income $X.X to generally to Net an quarter. from our in our ability the to to million April. compared in largely prior fourth XX.X% XX.X% my

invested average We generally high quarter asset portfolio, a are weighted municipal maturity maintain X.XX and backed securities a AA. conservative agent and securities, government credit securities, with cash at quality The investment including bonds equivalent years of mortgage fixed strategy corporate end. was an quality including investment average our as and funds our duration of in

of $XXX.X assets and to at quarter XXXX. million as $XXX.X Cash totaled XX, at compared million December end investment

fourth fourth million recognized $X.X value the to the we a unrealized loss consolidated investments Company's loss of was in of The decline gains on the during realized in principally year's of last million securities. quarter. $X.X in the and quarter, year's income quarter fourth For equity prior compared the statement to

X.X% of XX.X% the rate our the prior restructuring Our rate $X.X this rate effective The XXXX the quarter. year. year's fourth periods part for The prior increase quarter in of the includes adjustment million fourth is quarter effective or for an was the due in during tax tax tax our effective fourth points quarter. rate compared approximately from tax to to of three early

of subject operations U.S. the now All the our U.S prior whereas not in taxes. periods, are our operations were in to taxable Bermuda

year. mark Excluding events, center anticipate that XX% tax will the our the we any XXXX rate around for unforeseen

continued year, stockholder's pressure million Our at to XXXX at XX, as in increase long-term. during the the compared million net $XX.X which was the downward return-on-equity our IPO the of XX, due for this December over proceeds, December XXXX on was while $XXX.X capacity a to growth well short-term, equity will earnings providing as put addition

compared the XX.X% compared was Similarly, fourth quarter quarter return-on-equity our was annualized XXXX, the during to XX.X% quarter of of XX.X% of to fourth quarter during fourth the For during XX.X% adjusted fourth XXXX. annualized the return-on-equity XXXX.

capital for for XXXX return-on-equity adjusted was with compared XX.X% to lower Our XXXX days. a XX.X%

net a year-over-year expect to million equates million, ahead we $XX.X to XXXX, of XX% Looking which $XX rate to XX% on growth to a income generate basis. adjusted to between

As million as XX,XX,XXX of method. the treasury diluted had December XX, shares XXXX, calculated we outstanding using stock

shares In as million be offering, of material XX,XXX,XXX taking the XXXX. this issued to share from there ahead. increase account, the XXX,XXX the would year outstanding to primary XXXX anticipate December We do not any secondary diluted number during XX, January

would ask up open the that, to With any Operator. like the to I questions. for operator line

Operator

question. is Hughes, [Operator Our from first question Instruction] with proceed Please your Mark SunTrust.

Mark Hughes

afternoon very thank good much, you or morning. good Yes,

in the expected in more more through in have a written the the anything fourth I of there something quarter. earned the quarters, On business timing near might quarter? premium, that earned little would trend the at just that your flow premium I premium the premium helpful. earned a seated Was Or of influences is that recent of signed if about end look in be

Christopher Uchida

premium I Chris. strong Mark, say there was premium written to excuse earned me, Yes, finish off strong that - would year. to Hey is the it definitely

of lot prospects a help going of So that to is the XXXX.

lag think Along ceded for call have gross ratio. little past than that, a in up depending using premium out I what or it premium deal better premium be a the a written probably premium of bit written ratio is the can during happened of even ratio to we XX% whether that, gross us on large assumed quarter, significant give ceded written with the ceded the growth. earned to That said

better the saw growth even that at earned properly you kind QX in at of in ceded to in when is gross think of out. doesn't and modeling looking we out to earned some you this ratio ratios, a So the necessarily QX looking pick that are play

just the with out with to bit I fourth to written we the XXXX. that are growth, to year facilitate of the But happy a prospects the overall, happy about So talked think probably factors started excess some how we the is gross we those and going play quarter. play know during help to as addition little premium the and into of it in and are you two on loss the needed out come

Mark Hughes

a Earthquake business, earthquake start seen the And and seemed at like How trends then the - catalyst. year on was have as as you the of you California progressed it has clearly the said XXXX? last year

Mac Armstrong

This Hey Mark. Mac. is

bifurcate answer me our Earthquake of question. Let components I business. that two will it into

new residential growth our driver Ridgecrest in then The nice secondly, particularly the was third and our earthquake quarter. First, of business commercial. a in

I in in business In to driver, But I by by California think think a I quarter, new and for business. the is the Ridgecrest middle market the fourth continue continued that itself XX%, the wildfires. see bigger us manifested XX% the of think we north dislocation think growth strong residence of I of homeowners a net driver, earthquake positive quarter in driven this was and the less the is

admitted non-renew is And markets on of consistent you renewed. about, know business you being as I to much a talking fashion, have think book and as you are their not XX% trying

and so jump primary market we dynamics, up grabs compete for on So, into the to that and a kind on comes that. of back get

is a of residential kind growth catalysts so, in I And that think term quake. longer a for

the itself. add - the but quarter. have event fourth is awareness agent Ridgecrest, we by new agents When of I awareness course you agents circumstance have add a don't and what you driven in an know anticipated, because over we new do did the

On a the I less think driver is side, of of it. Ridgecrest commercial

larger what think I getting was driver will is and hopefully in being a a the financial function for to frankly us - size A.M. case that bigger this route. distribution sources Best what category, us, access and come new of

think small point first first eight the months just Size to Financial look our is look and the you if submissions year, monthly just to business, out, nine commercial was month. this approximately submission XXX thing at activity earthquake anecdotal, part, our if and of When at Best A.M. average we I you get one the a but

end so It closer to XXXX the is September of nearly that month. a the submission doubled. August, through year, After activity submissions

for And so, the increased driver that growth on side us. Ridgecrest I bigger think of the than just It us is a commercial submission for earthquake.

Mark Hughes

Thank you.

Operator

Our next with question Motemaden, David proceed question. is Evercore your ISI. Please from

question. Please with from O'Neill. is question next your Our Sandler proceed Paul Newsome,

Paul Newsome

I give basic was just And that net guidance could in the then little of, the year does assumption in include hoping about realized but details, the basic and detail, guides us assumptions, for you terms separately, bit underlying a if assumptions for gains losses? not some general. more the

Mac Armstrong

is Hey Paul. Mac. This

Let about me we or question on losses we answer your overarchingly, I It the think assume are does that the any gains investments. And realized not good providing. second first. feel guidance

We and existing is we key are existing with comfortable emphasize that put and numbers I range, point the on very is products to footprint. geographic based think forth the the

major There consummated. on already assumptions have that leaps market, new There no is that are already not aren't we the no joining major no partnerships new no us, of products teams that in faith. are

levels So retention. we faith therefore furthermore, no on acceleration today, where premium leaps and beyond and of are no pricing

in loss you with the cash And it. what loss products very feel what we a that see is sense also requires consistent assumption you attritional perspective, have our it think that many loss it the have what we And there. and a done to that, I where So, the from good to contributing things good have existing we we of feel we is accomplish about from past provided.

have or the approach taken kind rather have into model. the that overarching, to taken bottoms we up of we that So approach top

is interim no an that, as goal. of would the goal. view it is kind guidance It one this think marker ultimate near-term add thing we way, an I that I is a

it we actively And we that are not are somewhat in not have furthermore, been new not while in actively the assumptions, front. our mean development, distribution we expanding conservative does product

not geographies, partnerships drive new deeper we and nor are to go existing in in trying our are We regard. not trying to footprint expand that

the the really overarching premise that So behind guidance.

Paul Newsome

about bit of is also any makes obviously, how little you a we sense you could late, second the are Do continued when you a that a capital talk adequacy overtime? the assuming that fast. question raised levels, but growth My little change seeing quite bit adequacy are of you sense. of would growing like, capital, recently Well have capital if maybe

Mac Armstrong

X.XX ended we closer around to million from prior that probably was premium to five in call net push was it point the that year, So balance perspective. sheet below times capital surplus times. ratio on the brought $XX January, will us a in the That incremental to

So, of allow which beyond we we are X.X we when a get X.XX of as ratio we for concert kind times on look capitalized, combination X.X the probably think But are state that cash indefinite free can the will in incremental that, us organic flow and below to good. future, we X.XX a is - capital. are think we that to we point is adequately at that of steady ratio, number ahead stay basis think of a kind we with growth anything to that that as plus of long times,

Paul Newsome

year. Thank on you. Congrats the

Mac Armstrong

Thank Paul.

Operator

ISI. proceed David Please question. Evercore question next is Our your with from Motemaden,

David Motemaden

morning. good Thanks

like XXXX. full on a cats assuming loss follow-up a there? is the guys the you retention Are quick what losses or assumption in for around Just catastrophe outlook in there any

Mac Armstrong

Hey Dave.

you many an But type loss. of a there There loss in a it losses you to Imelda, so the retention cats from so not profile retention similar at component seen saw Tropical Storm around it XXXX. Barry, loss. Tropical what look is had full we if kind about that no are Hurricane, of assuming assumption influence and Dorian cats, are think have as we But Storm what cat XXXX, We to mini is full historically.

David Motemaden

guys of a of And sort the any nine, follow-up the upgraded any of other have attraction upgraded? getting or initial on on thoughts that you larger to in Thanks. of And brokers Mac timing just seen around from Financial sort possibility terms A.M. just getting it. Best some sense of that? Got Size

Mac Armstrong

that trigger Yes into our do really your that is work Dave, a then just so in we file would categories it, statements then triggered. statutory financials financial the QX timing, they once group once automatically system we the import queue, in their would mechanical the they is because the and financial it way side process

and and you back earlier Size of then in will about about Financial manifest it itself middle course going And I to the the So category into was quarter the results. the over when on on quarter the half third probably we second talking are really of what you of IPO quarter second heels quarter know, the is that market. of talking call, first eight got our the

didn't really until bear know, September August, broker network and broader it the And to submission you fruit, of increased promulgation start activity a timeframe.

in So of the later the the the Conservatively, third play come to similar category a half Size Financial probably to I really, quarter. think timeframe. benefits nine of again, start would

So quarter, the half year. second of third

David Motemaden

And you submissions a I said Got you similar a type size where got a A.M. got upgraded when in anticipate it. eight? you magnitude to Best doubling you, think do you had do

Mac Armstrong

category and will segments dislocation all anywhere accounts, it be much candidly eight. where I A.M. of in though and least. it which Best commercial kind Financial do pronounced at as property earthquake probably don't will as market particularly help I Size the an there commercial in is think risks as shared in area of layered think certain was it us is

but pronounced that eight. I to it Size it there, as in So as was should think don't again of circumstance the category be Best is be Financial going helpful

David Motemaden

lines a of making one and to the changes result change shred, more a that assumed book into XXXX approach the just typhoons and what losses, the any sort just taking sneak does reinsurance Japanese with losses you new happened And all see at could do Okay. as in I Got it. if to just expanding your on experience? forward. going the And

Christopher Uchida

be really Chief in that come reinsurance - assumed did put our the So we John hired is Officer. we to Risk place Newsome strategy

department, is addition product. perils have we In out there we know, overseeing that is that access to to and really accomplish build our trying are analytics well. a get ultimately certain he know looking what And you to reinsurance to geographies assumed

writing illustratively or what That So assumed were actively are with earthquake. where and Canadian wind was we to reinsurance. business Northeast we trying not licensed do the

So plus we have assembled exposure all that those but a we to perils has book some others, that understand. business

Secondarily it national market way to for kind us into. sense get to the a of go to basis a on we really of segments use as figure a there global a are basis and where potentially out

is tool good So front a for it R&D. kind of end

take I foot think that strategy would don't So pedal I what on. is the are to is I the one we going off say think our

I of we same we recoup incurred gives have of principles access that gives at on us time hope a the where apply, think products but course a we geographies from can't, some to we primary or access same can over those basis. XXXX. to that losses that It the do we that us can't R&D, that tool the

that I we particularly the from remains incurred it and for we Japanese have the storms. continue are impart to and one to solid get think loss that the So going is thesis in hopefully paid -

David Motemaden

Okay great. Thank you.

Operator

from Please question. Schmitt, question your William proceed Jeff Our next is with Blair.

Jeff Schmitt

we that forward? But going you mix I it obviously ratio, up. the from excluding attritional events business on As product you think Question Hi about a could didn’t go there. it good get was a X.X% looking catastrophe morning. had degree around this perspective? said should are at How loss the how of sense changes, we think

Christopher Uchida

the that called not to of Hey correct. Jeff, that carve are some out backing kind those or some of cats, X.X% Yes. activity mini we storm said is We we assumed specifically. going of the out

have the retention everything we a in cat, bit of attrition this view just we to what to of that want on past, that to or we ratio under but that kind the little out loss get exactly - we done recurring expect books We or mini people events more only see the full kind recurring going are make be from what standpoint. to more the but sure a carve

that that So disclosed we why is number.

lines overtime. associated we all think tick you of business up attritional Marine, it a loss do expect into - with be are of other We it risks Like as just ratio them. Inland is whether have grow our said, we naturally business, those losses to lines would

we help to losses to use quota any acquisition also overtime to do the generate those income. shares impact minimize will well. different down expense help They of can types are them, fee fee on going of as help have our with our have that drive That but losses book, income

me. a not but point expect up loss a a wouldn't going those point different ratio to component quarter with jump it use half tick It is strategies and of we call surprise book and help couple overtime. to larger slightly point, five So our those to seven half, over that a but becoming books, would a they do growth the with I the

Jeff Schmitt

that NPW for XXXX? kind higher think should that And GPW close how was say about that business? Okay. and you by that of expect XX%. reinsurance to was And retention, looking we Did assumed new at to bit It then a driven

Christopher Uchida

Yes, we ratio June if one it we whether I'm be driven in so fourth the quarter, or excess looking loss be by a is lot buy January said that I are of say the before, of at that pieces I reinsurance for to would seeing. growth going Like that one.

buy piece stair of for a much depending you how component you it it a step. little So then growth bit is look loss months five more the months kind Where of going we three excess a set look that, of on seeing. or of and to when like is are it six at or

that so loss see in going growth the we little you June's that the on of the makes written top bit higher at look to a ratio it, look But we when bought of that - you are excess then lower. growth saw a seeded growth

and is I a excess our the is which are loss the reinsurance. more truly gross think being the ratio the that it that of of amortized why excess on equivalent from That loss on of term the over earned, and earned risk more ceded of is focus important standpoint to we

around that said or to are is XXXX reinsurance. it well, that expect I doing share, assuming like for lines there the So business ratio right how was would of no our as remain year in true XX%. we of quota any shifts in I major

and reinsurance when stays target, see more jumping books. kind a would lot as on when it linear ceded forward. of at a the written earning it I quota mix our the better to little The the going be for But, gross same, you a you of our around is bit earned to XX% share the expect look for that

Jeff Schmitt

Right, right.

Okay. Thank you.

Operator

Instructions]. [Operator

KBW. question Shields, Please next question. from Our is your with proceed Meyer

Meyer Shields

Great. Thanks. Good morning.

One from with we were that seeing a commission are reinsurers in any going that the the down. you of contracts [indiscernible] the January rates that share you quota X of themes of number purchasing? heard is to Are regard

Mac Armstrong

Hey, question. Mayer. good a is It is Mac. That

shares have way coming Fortunately, have we been [indiscernible] what have in of But, maintain consistent in on we the that more we much we didn't renew expiring. able the put what one the with we had on to and quota was not, the we fourth economics up. quarter, place did into the side

Meyer Shields

protections for share I little tell business? think if quota a writing bit yourself that particular on us of basis the Are that can then reinsurance less. you And a I fantastic. Japan, excess are a that what you little I Okay, more on because understand look or loss and

Mac Armstrong

Sure.

that of we basis, loss partnered way on selectively participants big that reinsurers riding know have and are is that that the we done an have So, on with existing we our we excess program. that are well

confidence. level with is there is a us inherent those have so, familiarity of inherit that an higher brings there that an and that trust And we reinsurers

we what are would. a program, are loss if excess though taking So, percentage of we of doing you their just is

attaching are on high we losses depending So, reinsurance, are and generally up attaching are but up the speaking, in moderate. a result the we the high fairly PML, as pretty

dollar So, is exposure. there no first

pointing can an had tendered. out have Chris think And is chime claims in, that There I losses it been that the as estimate no right is we have it worth now.

concert just are working with we partners So, in there. our

Meyer Shields

of sort is that non-renewals. submission discourage Insurance Commissioner California flow And fantastic. California earthquake? question. residents know final Okay, I Is to in the then impacting trying for

Mac Armstrong

question. is That a Meyer. good Yes,

non-renewals moratorium and think think Commissioner constituted in roughly State. homes put areas, to selected the XXX,XXX in is certainly that discourage the I and place a in has trying I

probably So, are area was and a that small exposed it it to frankly that component wildfire. most of

at of XX% the business, average this is size the can seeing select they be segments, a total of - put has, still probably XX that if the another when of that even their I area it that context can, non-renewed, underwriting of they are non-renew, XX% into point. book book to you meet doesn't they and are criteria You find more think of that insurer dynamic

So, it answer. is not impacting us. Long winded

Meyer Shields

Okay. No. No Thank Perfect. that you helpful. so very much. is

Mac Armstrong

Thank you.

Operator

Please is your proceed question Matt question. next with Carletti, JMP. from Our

Matthew Carletti

growing? progression, you start evolves. actually with generally What Company a Good business ratio should about good that targeting. to the And morning. Thanks. Chris follow-up are that the ratio one ratio we is kind of is Is as commissions rate separately, of to Hi. mix business want target kind and of to question of lines any paid loss expect corresponding kind as just terms Jeff's question ratio of an the smaller the kind achieve? of in whether of on book scale of kind there you get movement can expense expense expense it

Christopher Uchida

business residential is higher earthquake other are our have just - have the sort Yes, the growing will driven of acquisition lower you we lines of look a for business. in, has acquisition market, than expense. When the MGA so at that business. on expense It a naturally those expense acquisition lines by they of which our

are are growing driven just that lines the have naturally markets expense a MGA the by wholesale all other are Inland marine than business. now at, lower risk looking acquisition that that right or These we

we mentioned, the quota those have the quota I commission expense. The As lines shares ceding also netted is shares for commission against on receive that we business. of

drive down So bit acquisition that does the help a little expense to more.

also decrease. become component would expect as So eyes those book, the larger expense a to I our of acquisition overall

expense decrease of not expect five points to drop quarter. up, surprised period have that see to the to wouldn't know be ratio, in time. I drop, a similar slightly But we a a is going don't over loss jump I expect to I don't acquisition You

bit line for expect with but also longer those basis, is The to little that down. is an would so earn develop on the that other it take is going to thing a help to the acquisition I it book, through push just expenses naturally

we residential more expense to to as whether in expect for just as book, the But systems we Similarly, just built general, be our to put, there going at the have the we we the or look expenses, the or lines at we expense other type of we the in look ratio it guidance scale operating provided way as any have not that continue on we would ratio. on grow. things be book growth, the

is to That that process that guidance just we any the expense technology should it growth are just going the we expanses. exceed anything the down like think go not but and we not to to XX are The going top-line exceed about that, think operations on. improvement, prudent in say growth ratio adding I revenue for specific the overtime. going is in be people to people to haven't seeing is for to growth drop provided we going naturally is naturally but and or

Mac Armstrong

Matt color. more just to a add little

company the technology adjusted XX% expenses so think just other starting illustrative Chris's public you quarter, are the and look the expenses, that is on versus XX.X prior, is more scale, the lot point in investments If that to fourth a the the was scale achieve. that in in of to and frankly I we with year operating headcount, same quarter

So is probably it anecdotal support.

Matthew Carletti

kind kind of level Right. different you just lot Mac, of if sneak in And get great high of got you have opportunities ahead in question, a stages a incubation. one and of growth very then of I a more

five to haven't of having over define of R&D or see have you public kind biggest out want and in the one out whatever that you longer you found As the guys you for which is potential that opportunity look yet years, term, do kind business we about Palomar is the as that on?

Mac Armstrong

Yes, good question Matt.

think commercial I of think the - in are side that we and within we all seeing Inland our lines earthquakes just there overarching risk. commercial business. more opportunity have is commercial right Marine, those And now, I in

dead I of catalysts beat that each continue to submission think to larger going was one. a our different increased size horse, but of are for prime the that a not And to earthquake, They category. beneficiary driver Commercial is be financial activity.

that And pricing then selectively you couple that pretty better and increased environment submission a activity leads growth and to margin. attractive with

So pretty I prospects think feel good about there. the we

the market is. side all much the risk market in a earthquake than is larger And that

still good we pretty in that think lot I the growth So of a we of very are are and we is think promise while there, getting so operation, stages early there there.

operation than spanking gotten Marine XX new, filings and he department organization. that some The real licensed, into all now less XXX%. which then third leader the by And increased has Inland has States year quarter of in we have production is one talent over count of that fourth his to from are in his we brand

So he of scale lot infrastructure add continuing to really a organization. to has talent. He put in is place that

of that iceberg. So think tip one the I it really just the is

growth business market, we opportunity are personalized right but and business. residential what more probably doing think seeing about the in are the now and commercial I we feel in So also good we promise

Matthew Carletti

company, And on a Alright, in a thanks XXXX. one. Congrats as luck year a of strong first best Mac. public

Mac Armstrong

I you appreciate Thank support. for Matt. it. Thanks your

Operator

is Mark question. question from Please with SunTrust. with Hughes proceed your next Our

Mark Hughes

commercial Yes, today? see on us what then where But could an thank of on lines? have things you your kind did standing What you say different or the was you. comment pricing, you update residential give to versus

Mac Armstrong

of Yes, cost construction of kind little the a residential and what take like the and rates take of an inflation we guard, don't we you business, most ability the so call have we which commercial us rate allows do our to have in products know our like. the of to bit ahead

have is what renewal a So for them. right have we And that X% on business. our personalized place increase those in typically automatic now

On you the was for commercial rate earthquake. side for risk increase around right the the know our XX.X% commercial side, X.X% and composite X%, then

touched know, third the third the rate the quarter. think fourth So very increases versus accelerated quarter upon from have from quarter I second versus quarter strong. did the and you And certainly the we it,

the through the ability So continued we XXXX the and feel rate from think as to competitors. our of maintain I good of pullback that is about course very some informed much by frankly domain, capacity

think in were fourth in another I are down Lloyd's particular, five wound the that quarter. syndicates there

larger property continue network I their think strong in into larger alignment our to riders is rate schedules. on very there, mindful be our integrity in then there distribution capacity of and particular

that about in we other we that quarter today very dynamic So the we see pushes pricing a saw catalyst and it fourth the and don't near-term good way. feel seeing the that are

Mark Hughes

the How competitive appetite you got lines. or environment outstripped by growth especially homeowners your is there? still the How solid other being the about have the but there,

Mac Armstrong

it quota nice I is of think is what facility. more say I share our into you owners business us for discussing would appetite, home a that know, put and line we

So circumstance our is line it it us, is most for also in probably but a good our driver Texas the of income book of matured it of business. fee is

are we So ourselves going how we of grow. much governed in of have terms kind to

We Texas, are started doing on in will more balance and we horizon states what Alabama to over grow the Carolina that we quarter, to of XXXX. are in the other North geographic on as fourth Mississippi that course bring we extend the there are business footprint. In our and

But that commercial as any line quickly as won't the of as not quake. quick It grow is of grow business as residential won't quickly grow as flood lines. it and

Mark Hughes

you. Thank

Operator

We the Armstrong have call to will over turn reached I question-answer-session. remarks. And the end of back the Mac closing for now

Mac Armstrong

Thank our you our time, feel geographic results. of seven new several always We highly industry We a company. milestone year all the expanded lines business, veterans, support. team of footprint. your XXXX and time earnings entered the was and This you, questions strengthened for addition quarter operator, strong financial for to we the We the We generated full-year and call. this thank that your fourth and concludes morning. Palomar's appreciate talented

accomplishments you, about for see guidance earnings XXXX feel will that certainly that hopefully very XXXX. and you provide prospects And provided motivation the good we the you our both that will Hopefully XXXX, we do. for invigoration

So Have we for time. to quarter. you the thank very your forward speaking And after first a day. much great with look you

Operator

conference. concludes This today's

participation. for this your your at Thank lines you disconnect may time. You

Palomar (PLMR) 19 Feb 202019 Q4 Earnings call transcript