Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to Palomar Holdings First Quarter 2023 Earnings Conference Call.

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

Following the presentation, the conference line 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 to turn the call over to your host, Mr. Officer. Financial Chief Uchida, Chris Please go sir. ahead,

Chris Uchida

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

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

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

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

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

Mac Armstrong

everyone. Thank you, Chris, and morning, good

in start XXXX, year pleased I'm a strong with to XXXX. Following Palomar's record

of XX momentum results business in quarter and strategy. further demonstrate our execution our Our continued Palomar first

return XX% include equity and written on and quarter of adjusted an adjusted combined the growth XX.X%. ratio of XX.X% for premium Highlights gross

loss of Selected and purchase were omissions, real excess even operational in the services, and an casualty earthquake, additional of elevated the quarter. reinsurance growth strategic the million key department. were acquisition errors Importantly, in several $XXX catastrophe analytics of activity the these estate results our quarter for insurance with and actuarial of in data during and achieved XCO hires our MGA, underwriting, accomplishments

XXXX, One, our those strategic to four end strong The two, key four, profitable trajectory; I sustain goals. global three, earnings; on detailed this dislocation manage our in for scale ability XXXX. deliver organization. of and growth initiatives exemplify quarter each the the At insurance market; of results of predictable the execute the

our Turning to first quarter results.

market commercial earthquake residential a core Palomar line earthquake Our grew earthquake The first the our XX%. its earthquake Palomar in to of chance this while is grew example persisted The residential in franchise Excess of grew the and affording earthquake of XX%, quarter, E&S book XX%. market hard both line, earthquake grow and business. the our Company, induced prime into carrier dislocation a dynamic. utilization Insurance Surplus optimize Increased

E&S capacity wrote the approximately residential paper lever of book quarter us written our The also E&S an residential we to E&S new the and on have quake on the business Specifically, margins. now of and XX% the earthquake XX% enables maintain approximately basis. optimizes use our in reinsurance of our

as Inland compared distribution to two growth expand footprint. geographic to as of our prior XX% we Excess reach were with top-line Also to grew the Marine Marine property catastrophe limited quarter continue and Inland lines our business contributing Property. exposure. the in year, and

it Our property business. XXX% Excess as non-cat Property attractive year-over-year line an of book grew exposed builds

margins. attractive ratios loss generating Importantly, and both are products

approaching quarter, XX% March All to increases with our increases benefit rate from renewals XX%. risk-adjusted property continue approximately in earthquakes terms and enhanced and Commercial saw products conditions. the of

book and exposure year-over-year. an XX% rate decreasing of Our approximately saw XX% average E&S north commercial all-risk increases

projects new in pricing variance seeing year. inflation-adjusted Inland XX% the book above regional Our to saw builders accounts priced Marine X% with prior risk

to Casualty business. Turning our

production We imperative remains attained grew diversification. also of performance strategic segment year-over-year, Professional sound. than and casualty further in a new XXX this best business. quota across Casualty share. business our the key Liability/General lines market It casualty underwriting growth product is for the This From continue XXX% improved loss lower traction property provide to economics as renewal by an Liability Liability. with book's business. highlighted Overall, ceding growth by strong standpoint, profile a loss are Casualty Professional Excess remains volatility evidenced see of commission generating at attractive

is in business, not have in casualty Casualty we range actions property first increases rate the lines X% rate environment stable. saw seen XX% quarter. of that the the like market or While on the to

a California predictable casualty quarter, well in as the earnings enhances the margin. and Palomar, and XCO we in bolster our focusing specialty lines brings and as estate in growth on stream. Western It both an real professional is other the franchise. estate professional to MGA to acquired brokerages During XCO products real mid-sized E&O provides Palomar states. XCO Services space, our Insurance liability

growth, Palomar Front prior-year $XX.X rapid in deliver continue to the million $XX.X versus premium million of quarter. generating

business to pleased MGAs, growth on select is of allows additive example line collateral upon of group prime and of A Fronting us approach and we crop partnership less service, we fronting avoid This partners. management are a carriers a AgProtection, the to fronting, oversight and Advanced with our premised surprises. provide prudently in leading with comprehensive are XX strategy than compliance, cemented While focused MGA. newly of a providing learn importantly, value-added our the reinsurers. remain fronting acutely and services strategies

Advanced AIP known established also crop year in XX to of other $XX Palomar the billion base, In the marketplace. specialized the our for to arrangements, potential lines adding significant. growth fronting mix, insured tenants income while but fee business. Premium diversifies be one our Like approved AgProtection the modest, quarter, this the providers The will XX. is only became key partnership an product our Palomar a to vector growth new insurance with access as of

reinsurance program. Turning to our

our The waters book first quality choppy ability to quarter of business our and the the market. reinsurance this navigate hard was of a of of demonstration

growth loss incremental limit to During reinsurance successfully support place we residential quarter, of million the commercial pleased the of business. were and $XXX our earthquake to excess of

the are assumptions risk-adjusted we to XX% the by up in the income approximately are basis We line in on with as that our adjusted secured terms encouraged formulate pricing, used a they guidance. net

after elected Additionally, renewed our maximum as hurricane on the and casualty losses from aggregate only reduction previously considerable over share that if in aggregate we quota expiring of exposure last the the improved transpire loss. to one the made in our storms our PML from changes today main of protection $XX context more the April the vintage recovery mentioned, stores treaty for was of will would diminished of several impact renew Xst, not incurred to our On materially provide cover economics utility continental season qualify terms. and XXXX underwriting probable by determining were at in reduction we material aggregate. under million the the $XX years, the XXXX net the numerous be and wind less million XXXX, than expired To

frequency Therefore, sense not reinsurance coverages cover, provide economic alternative capacity it available did make there While support from the will to severe we explore higher renew. protection to to aggregate events. was

order out placement our with We the reinsurance are firm market currently of the in X/X terms midst week. this of

we once always, As to intend share comprehensive complete. details

to Torrey line catastrophe provide such issuance our in our limit Pines multiyear REIT marketing are the a Additionally, earthquake. fourth that will incremental bond, from growth of support earthquake-only we bellwether

solutions We the of to comprehensive ILS corporation in continue reinsurance value see multiyear into program. our

the and secure confident capacity to are with strategic core that we our encouraged the can XXXX program We on are the objectives in progress beyond. to-date achieve and

exit our assumptions XXXX will to used the with risk reinsurance reinsurance optimistic to transfer our We years X/X with be of in will the and that provide we the are that programs of that similar line full-year guidance. placement past cost

a surplus with remain management we From to earned one premium conservatively ratio net capital times. below standpoint, a capitalized

initiatives quarter shares quarter. continue of repurchase. will to first opportunistic share the another both capital a and XX,XXX a $X.X at towards at thus of we total such, allocate million million far growth shares in in second XXX,XXX the $X.X repurchased total cost We As cost and

expectation and We renewal, incorporates of current increase risk-adjusted million of losses a expectations adjusted XX%. reiterate remains approximately catastrophe which XXXX reinsurance net our generate for Turning to $XX to to moreover, guidance guidance. reflects at our incurred quarter our the million. This $XX income in

I that, more over call the turn will Chris With to detail. results in to our discuss

Chris Uchida

during common such and method. share them note Please that figure, during to incur a Matt. diluted net any portion, requires per stock to options in the as share exclude my when periods per-share periods us treasury I'm you, we where calculated as loss. Difficulty] common Thank include This methodology [Technical referring profitable referring to outstanding using stock

adjusted and and modified and adjusted adjusted fourth ROE a quarter net As for net of income, adjust beginning our definition unrealized of have diluted EPS reminder, the we to gains losses. in realized XXXX,

the modified prior and current period accordingly. We figures have

the of million XXXX, income of share $X.XX last per for For $X.XX $XX.X the quarter per or first compared or $XX.X net quarter was same our share year. to income million net

adjusted for income per same net of per $XX.X million compared $X.XX adjusted income Our the million net XXXX. $XX.X or to of was share $X.XX share or quarter

to XX, underwriting adjusted $XX.X quarter compared the $XX.X is million best million year. financial first for evaluating indicator last Our which was Palomar income, we believe

the Our XXXX. to first ratio the quarter for adjusted first was in compared of quarter combined XX.X% XX.X%

for For was our on return XX.X% to annualized the last adjusted period quarter equity year. XXXX, of compared first XX.X% same the

prior earned of on X.X% first of the sustaining of of equity first rate were compared further XX.X% line an million, were increase instills return adjusted quarter to $XXX.X quarter Gross to Net the first strategy top first quarter quarter. growth with premiums premiums performance an return. first prior predictable for our $XX.X confidence written in year's for increase million, quarter. the a compared year's The the

as first in ratio the compared fourth compared the use growth gross lines reflecting of and from quarter in sequentially to to of expected of fronting decrease earned XX.X% the was quarter of quarter of XX% For a overall XX.X% quota net share XXXX, that reinsurance. business the XXXX, of the premiums first percentage earned XXXX of premiums our and

for ratio attritional unfavorable storm, losses quarter for were previously X.X%. development ratio the of from offset prior-year include loss for development and by losses catastrophe. including first slightly million $XX.X loss disclosed favorable flood winter of quarter an California The million, quarter ratio $X.X Losses a comprised of of adjustment the the Attritional activity, loss catastrophe from the of XX.X%, expenses and Elliott. was catastrophe loss XX.X%

catastrophe this we While the past. would include with a our mini stands results catastrophe, definition our other and continue consistent attritional meet the quarter loss this event to in Elliott in of events of development

catastrophe we As exclude expectations event. have our large but done include mini guidance catastrophe, historically,

to XX%. continue attritional to loss an the expect year of XX% ratio We for

XXXX. of premium of to Our first for quarter in fourth the XX.X% to a compared last XX.X% the expense XX.X%, compared percentage acquisition in gross the of as quarter sequentially first and earned quarter year

from the sequentially in ceding quarter drive fees premiums last of including adjustments first underwriting and year first was compared quarter, of other Additional the fronting to XXXX. continue gross The commission to expenses, the to to in X.X% ratio fourth X.X% the quarter earned improvement. X% for compared

an the prior net to was Our for of year's first first investment quarter compared $X.X increase income the XX.X%, million, quarter.

higher quality. and a assets shift during The was primarily investment due a yielding year-over-year XXst, with assets into investments three March ended yielding generated assets increase similar XXXX, to of average investment invested credit the held lower balance operations to cash from months -- of investment higher due from

in in the to quarter X.XX% last X.X% first compared year. yield quarter Our was first the

first yield average investments on X%. remains quarter above in The the

of portfolio. bank of credit we an reserve. the million senior $XXX,XXX to CECL failures We expected immaterial exposure our overall loss March hold Valley debt $X.X our through which Our was to recorded of Silicon in Bank

exposure direct Additionally, does less we note not and and minimal X% is estate our any investment loan. our in than commercial of real the include portfolio portfolio

that We risk-adjusted to conservatively asset our positions continue to allocate return. classes generate attractive

program. we repurchased million XXX,XXX million total $XXX the under $X.X our of for repurchase our stock During quarter, of two-year a shares share

We $XX.X of as remaining authorized of million under the the the program have quarter. end approximately

On guidance net any gross includes basis, first earned are expense As but catastrophe in net ratio premium a our approximately at $X.X million. does XXXX catastrophe range and range Mac net mentioned, in million continue XXXX. the include the incurred additional to we the of the $XX quarter, losses earned during of from decrease $XX adjusted quarter for This reiterating our level ratio to income first losses we acquisition expect to year. not reflected million premium

effective rate Additionally, our remain XX% year based market, tax may XX%. the on between for elevated current and the

like call. would Palomar, Before President opening Jon the joining that will call I questions, Christianson, be for the to session question-and-answer of note of this

Operator? With ask line that, the open I'd like operator the for to questions.

Operator

question-and-answer a Thank conducting be you. At we'll this session. time,

proceed Please with Benguigui first Our question. from with your is Tracy question Barclays.

Tracy Benguigui

Thank you.

floor right wanted you're I I about reinsurance the aggregate not to an ROE thinking way? Just to discuss you the thinking Am removed So, guidance? this essentialy, renew Should decision the -- about treaty. when

Mac Armstrong

it's Mac. non-renew assuming of multitude -- that severe the the did aggregate putting the book, to of it's a ROE frequent floor Tracy, We Hi, opt events. utilities good was there The of question. an Yes, on a was the essentially aggregate. One

I important really and is I go PML. the lack from up and to we've more remarks wind of heels the the that think little on brought the utility that it's reduction in depth a prepared aggregate significant really the and made my what underwriting on of into in the changes all earthquake

is year. X% season from hurricane premium the around to wind $XXX than a to premium more than be our -- So that, for continental going X.X% PML. less the come hurricane of of quarter. down this risk will at wind total little million of put color less million just has to $XXX our The be was PML peak Continental the

cause you $X.X ultimately, only XXXX, recovery. would if XXXX, -- for qualified as look only million Ida again In So Hurricane get potential loss. would for at a the aggregate Sally have

solves function the purpose -- the or three just that similar and potentially use So, ROE covers alternative relative We the would risk-adjusted more a sense. losses explore to from can put not two returns like rather. potentially than make a event frankly third the the But retained need is there really on a after aggregate a cost and didn't or great floor that. that

with can floor tool. construct some we a other So,

Tracy Benguigui

Would you a have prepared have wins, provide -- exposure but longer be would a less to you ROE outcomes, of range to recognize I you you that lot no floor? be prepared a potential given

Mac Armstrong

$XX have have retained if again, season for would mean, wind I would on from run in totality, analysis have been we our just the the losses losses. record, the -- Yes, seven six million been you XXXX, storms worst was as-if or which that

changed loss put ROE what our have So, the which that well to have the range. total $XX million, $XX would XX% in would put million was would have ROE a -- in

Tracy Benguigui

Got it.

Mac Armstrong

floor the three after premised retained is So, -- events. was

be we protection put to but XX of is So, solves going that it, something we some after we'll the can type renewal. that complete that third-event ascertain

Tracy Benguigui

is Got do you didn't wait layers rising that? that sticking it. growth? reinsurance, iterative renewal your added with PMLs are all of And the because all then just given you've to the until top to your Like, on earthquake, season want

Mac Armstrong

Yes.

So, good as that's well. a question

X.X So, bought the we total the and The the a quarter, prospectively. XX%, currently earthquake seeing XX%. -- we little are that the and market XX%, residential buying incremental we're bought, intercepting growth X.X commercial first at limit $XXX to accommodate million Obviously, at bit grew in we that some earthquake is in that

growth we the reinsurance We that are making of sure requisite being mindful support have to it. and the

California we XXX-year which have is quake. has PML above, the zone, sure as line, not that if or make the so, want And protection grown, peak we to in

that's what so, And we've bought to.

Tracy Benguigui

Okay.

right? didn't one Speakers] pierce through prospective, more sounds in XXX it the [Multiple So, You

Mac Armstrong

in not of time. it's ahead adjusted It's staying of more no, a it. no, No,

Tracy Benguigui

it. you. Thank Got

Operator

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

Matt Carletti

paint of us what want it's language. Hey, of on, a both, kind with business, good of or just a like, one ask publicly, with particularly bit picture had issues of Can a just a to just morning. your few questions peers then cyber how a other sounds you months reinsurance of mismatch management the on a you on that on Mac. guys it'd some ago, that some kind it I book today whether whether little lines couple business; kind there? from maybe sort you that you stuff. And quick kind of like kind of it have the about of refresher language in just mix side, terms risk year experienced of the go look for be of the expect to Ag, major contract collaterality, fronting

Mac Armstrong

thanks Matt, for question. the Yes,

so or have insurance to subject think or two that I on insurance I rated is that concentrated handfuls matter than unrated strategy a, reinsurers. reiterating it's working less of companies MGAs specs, partners worth looking where behalf to are companies we they whether fronting be experts, of our or speak, guess, are with one

allows comp and programs if the way it on we effectively how the placement and co-par. X% associated strategy concentrated only of think now, cyber, to surprises. on workers' Right exposure that risk us a avoid manage as allows is, that them. participate. a in are we potentially reinsurance risk two really and where of a it's are the ultimately, we So, us participating profile, the with feel The then to we we're take strategy And confident in again, couple the the programs, I we the manage and, concentrated

we of of And in Sarbanes-Oxley a a an instrumentally audits, what the then a and a placement range are underwriting involved the doing reinsurance. is so audit we're audit, audit, performing claims compliance audit,

programs panel. has these eight over reinsurance reinsurers on The of All there. have a diverse cyber program

the of that. the Security All Committee them large brokers help that requirements passed of arrange

it let nature, Additionally, or collateral collateralizing in, Chris but I'll Chris side, typically, on I'll that on we let chime either amount, the are depends but unearned explain premium certain a the the further. that

Chris Uchida

Obviously, a then reinsurer, collateral. we're smaller name Yes. are with the depends If not dealing risk overall dealing the captive-type offer a then evaluating requirements But involved. collateral if brand counterparty their collecting we reinsurer, we we're on exposure. with

factors the the type to of evaluate We to then have fallout, amount on collateral we collateral capital determine of then licensing, authorization depending and an then and those internal want structure, they size, use will model that history, the where collect.

expected premium the parties. to in we're As captive reinsurance collecting XXX% XXX% and those for range usually losses Mac indicated, unearned

Mac Armstrong

are have property we underwriters I involved they'd programs in-house two is these casualty the only I that leadership are add matter think, involved one, property casualty the that subject would programs. with or that whether the our that or cyber with experts arrangements, is, Matt, overseeing things be other

a there's good So, collaboration organizational cross there.

not I And then about going with buy and we good that them of to we which in all means your grow them having partnerships. don't, a see it. We relationships place range ones on new find grow think can we're we book, point because meaningfully, of to we I reinsurance existing the reinsurance in mean, we're have with lean as feel especially to we bear are lot to can where others and because bring a prospects, helping their of reinsurance don't growth, growth embedded only

Matt Carletti

that's can capital and if I think, then on leverage. very I follow-up, one, And quick just Great, one, helpful.

think, of commented conservatively look now kind what you Mac, very earned basis. capital one of does Capital you Goldilocks like I our on on feeling is have I one capitalized guess below -- premium think to being What excess you where to not sort should but stock it feeling What se. per you're leverage like? not back about comfortable, or we grow you maybe so you're like have continue buying

Mac Armstrong

guess, Matt, kind surplus was to target one-to-one is historically some. a of the of potential one. the that book looking evolving, I we pushing one is what leverage is ratio which up, at, We had premium to net a fortunately said are

has best and and like marine at to business, As we longer-tail rating range. with of some in something pushes less to X.X probably and that X.X when the that's book discuss ratios. looking or property, the cat our our up and And do casualty grown lines that the that excess

probably I today, say I that's level. a I X.X -- So, where had probably think it's say would we to If good are

Matt Carletti

you. helpful, thank Very Perfect.

Mac Armstrong

Matt. Thanks,

Operator

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

David Motemaden

Hi, thanks. Good morning.

the storm the that? looks it else like, that, was So, that winter there -- the anything adverse on some Chris, to It was contributing adverse that from there adverse, question development Is $X.X a million. or had all was Elliott. was like Elliott Just in sounded

Chris Uchida

to increase full the was that for the good did That's there severity a unexpected. was kind driven of prior of at one the or a loss was end really period that commercial it. have We And late-quarter limit obviously side by was on Most quarter Dave. the indicate, in development year. the related in have did yes, That the did of late. question. all which the came loss Elliott, I event Hi, most little of some

with When quarter, we -- ratio loss I'd attritional XX% pick year think too loss It about what everything for for the Elliott the year. for that nothing comfortable loss line feel thing ratio was one that overall of very business overall other that call something surprising. was the and our and would is us. is in we on of So, pick XX% last I contemplate. our to the is to re-underwritten note that, type And this

talked loss about so you that next definitely the our this it, year, that And fact and to would loss when or this lot call some improve, not our a I end that I think by about of next to of Elliott and loss there ratio of start year, ratio expect year. let's time the -- be

trends. very that feel we So, the good about and

something feel loss the Elliot, our ratio talked plan for something expectations. But is and mind, we with cat a that something about line in something overall, we've in loss budget contemplated in pick. mini still and for, was our that we we that attritional our is definitely is right before,

David Motemaden

that Yes, experienced? adjustments also made made as you those that thanks. higher Yes, have that any little Were adjustments helpful. like you it on policies underwriting of severity caused specific the there that a other loss. the great, guys you result that Okay, sounds was

Mac Armstrong

line exited put little from Elliott post this a point, just to was discontinued in. big Well, Mac. the Chris's more from you on pop, specificity a is And would, Dave, if we

You just were that have enforced. policies

we sense in So, down. heightened that confidence ticking that's that of why have ratio loss

development discontinued a was from it's so, Elliott majority the of the really And line.

David Motemaden

it. Got

loss, drop. helpful. just on all wind Does XX% PML like hold, of this in happens has XX I more your seen range? assuming has continues to one PML year. that's wondering it -- XX.X% risk even down was And come also, good in to look detail that then -- still Southeast than even that fallen event relatedly, Okay, it premium commercial or or -- written the XXXX-type curious, a I'm I'm think more? also gross sort does And the the I've some the premium

Mac Armstrong

will where on wind still the X/X. And -- informing to excuse that's think me, retention kind holding. X/X side, that's at of we go Yes, Dave,

declined commercial XX declined the XX%, So, the but though no than exposure or XX. to think decreased close it's book, it all-risk I year-over-year, -- more has close to has

we're So, gives that's -- million XX $XXX with us confidence return we're therefore it a shows did than ago. increase the a book and nice PML to getting and what to business going get a we're with months of that much XX risk-adjusted maintaining, -- also good stay better it

David Motemaden

Okay, you. great. Thank

Operator

Our question. next question with with is Please Newsome Paul Sandler. Piper from proceed your

Paul Newsome

Hello, Any how way thank additional or color about Palomar thoughts follow-up the thinking or for into call. how on you do? are thoughts the just and the financial on acquisition maybe its will may some to work you And may statements? want M&A

Chris Uchida

we That to wouldn't material be going change of Paul. at when help overall to XXXX. Thanks, with I for for margins expect and we a it's gigantic acquisition. going not business that did something look productive But very announce great acquisition, we're on that's Obviously, was our a Yes. and us it. happy the It's because it it's question. book

book little I But and to going million going some that think expansion then more you're going get into margin on a line. the business to slight be we're say when upside for looking you expansion that in pushing be be -- a looking going year especially next $X.X that year, range for at or the with in improvement and for there's growth there's to would -- But XXXX. I be of And to XXXX. the

Mac Armstrong

what was section. to participating does but expertise, bring segment it’s particularly that incremental space real the a subject that said, immaterial, afford rationale it not in and where a on for think strategic E&O pretty and small, like of already is chance estate acquisition in the us deeper the in E&O and the matter go were we I is

have the now profile. of business beyond not targeted of we a U.S., line but specialize in we the risk Western a can grow underwriters changing So, group that going that

gives see So, really, and super-charged, just to in ability want I but us it casualty. to the extend franchise don't

story. Paul, -- organic I growth think, growth strategy really M&A, fancy organic an ourselves do we simply as or On put,

We this purchase a book almost have for we of organically grown deal. entirely business and say this business

continue up. That's at not we to roll So, not look we're won't a to say going that's going plan. to our but be things, opportunistically become to

to growth identifiable front us. going organic are be We vectors growth with of a story in several

Paul Newsome

all Appreciate source. guys. help Thanks,

Mac Armstrong

Paul. Thanks,

Operator

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

Mark Hughes

Yes, thank a premium programs exposure? you. have business. proportion that couple mentioned potential you fronting co-participation fronting total of have we do What of Mac, the you on the

Mac Armstrong

we -- little So -- well, compensation and the -- X% we of the two more X% risk. two workers' on the X%, premium, a The is And the constitute one on that, XX%. Mark, cyber that those X% maybe take, one half approximately is X% program. the On the bit than probably

those two are of larger programs. So, our

Mark Hughes

marketing, earthquake you on don't of I that know have The things? Yes. earlier new different authority. the but in you touched noticed in call, business, in anything if this their behavior sort terms of competition,

Mac Armstrong

earthquake is our CEA, but in because Jon right commercial now, on side, President, What competition a let the capacity changes of pullbacks. I say to whether I'm that there Mark. limited and the broadly in speak going that that, is, would Christianson, be the Sure, also market then to in

confident very we our that grow ability why line. in that's to are So,

to growth, very where we We to buy our arrived at incremental today let market. pleased are prospectively. but limit support earthquake thoughts the John just and But not on the offer CEA I'll his

Jon Christianson

Yes, Jon Good Mark, with Mac. Christianson. speak thanks, this to is

the disclosed last limit by since over months its December. So, approximately that has the it total few publicly reinsurance reduced CEA $X.X billion has

their first Palomar of up during some of So, what has capacity, security of a freed -- for beneficiary producers reinsurance AM also in the it's the which below been quarter, been is the it's couple a but Best supply level earthquake that's rating market. One, prompted a committees things require. downgrade by

for that earthquake of category looking options rated stronger participant into they're fits options market. in as stronger a and So, the Palomar

book, optimize that Mac able our good So, business that earlier, well risk-adjusted as to grow and that us, fits seek out like on. that's our and mode allowing getting being about both returns feel talked to we we're

and plays based decisions market, they they've what the earthquake most That with the said, market what preview, recent opportunities. the CEA on California an important made Palomar provides really greater role CEA to but continue and in still made by

Mark Hughes

there. of then noticing maybe the getting in Are sensitive? the terms Marine, Inland either Understood. And you growth good economically audit business? margin any you're opportunities changes Is new for or around that premium

Mac Armstrong

It we growth XX% Inland builders over with By in Mark, a definition, pleased risk book. So, year. it's are year yes, heavy Marine. was the

exposure a we projects. is commercial changes there and macroeconomic be commercial So, and But to and slowdown then heavy been And opportunity. handful in construction a in kind to cyclicality. some of there projects very writing of large multifamily or not mid-sized has tend

where that's Some mid-sized in for California, in need construction or we overall the are ample construction. activity commercial a in write is a write we just function or we commercial where product there Carolinas, of write We of housing and Texas, writing.

do now, we we're there. it, but slowdown not any So, seeing watch right

Mark Hughes

Very good. you. Thank

Mac Armstrong

Thanks, Mark.

Operator

Please with Our is Jefferies. Andrew next from Anderson question question. with proceed your

Andrew Anderson

Hey, a good me mid the educate And E&S, that? the attritional single-digit business. Is a improvement to for year-over-year zero given could like here bit initial that that just shift changed rate the picks morning. Was has thinking, hoping perhaps on ratio? at booked and you those loss I'm

Chris Uchida

Yes, Andrew. Great question. Yes.

as where smaller Hawaii, at to was especially because that's book, we'd any to booking in we call binary a even looking that those counties that for is the about, the attritional is larger, So in warning well-defined loss true even quarter but are watch at happened islands you have maybe for we're events. really are stage, Hawaii or that, let's probably book was easy in hurricane when define events, it Hawaii to triggered. Generally or ratio. the before there our we or trigger coverage, it, that these pick this put speaking, relatively at zero us and coverage a that earthquake think If because something are zero. have And usually a for around pretty or named for X%

we business. So, pick going generally those not be of either booking lines loss for are any to type of

Andrew Anderson

Hawaii. quarter. just and exposures? bit helpful. looking there? over growing rate be for It Got Can just maybe we not opportunity it. seems That's Is to slowing And quarter talk it about of down a kind on the

Mac Armstrong

Yes.

So, what that's we're Andrew. doing exactly there,

inflation through and grow to guard. looking just are rate We

with satisfied a perspective. we're a we -- So, market risk where perspective from we are have share and been from

And kind reinsurance that wind hit is the higher state. that of reached renewal, earthquake. X than for think through exposure has of -- cost we June steady So, as line for

So, like we in cost transfer want best it be where our risk a not is sure quite Hawaii, preserve economics as we state as the of earthquake. in to mindful of can is elegant we making as

Andrew Anderson

Got it. Thank you.

Operator

Jing next with Please KBW. Li question from your with is question. Our proceed

Jing Li

Hi, thank my for you questions. taking

Palomar demand paid fronting. on question for has trends some funded Do Can a for changes on much these to the involved? premium? how color funded add any Just imply how gets the premiums you

Mac Armstrong

So, we for see I is, question. our to partners. with continue What the would yes, growth thanks say sound fronting

of performance demand with fronting find As concentrated we relationship have books whether year that rolling business. partners earlier, capacity in have because the this of reinsurance very market business I they and due because help it's and them, that them healthy to over book to have these embedded more mentioned drive the or a of nice growth we'd growth are

will been casualty relates to it are risk balance we property a and them whatever if cat perspective, cases, could maintain not nor fees economics mean, it's line a sheet some allow putting for a have to. our our at come tail fronting we line. beyond the or from As our under I pressure, we, renegotiated have to in loss economics, able be

them, we're are have and hold our seen to and going sacrosanct them So, we me. them economics for excuse pressure -- pressure any not on

Jing Li

if Got can. more it, thanks. question I One

to other relationship a with earthquake So, strong policies. I residential know Palomar has distribute established carriers

So, these affiliated what opportunities lines? carriers for are versus the other

Mac Armstrong

very a good question. that's Yes,

ourselves us. state, like for growth been California frankly, established where the it's or exposure. And nice for a a earthquake state any channel there's specialists We earthquake have in as

coming we over partnerships, and XX, think that XX are others are there have maybe online. I

We have and Hawaiian been flood, hurricane. also able areas too. to we've In to extended certain exported Hawaii, -- both that Earthquake the We've for partnerships like

our to of trying Hawaiian So, we team to of And for something most that strategy at. look ability it's be to it's really are in going cross-sell. more export But that's residential the book the side does part, that to an earthquake going have been it's the flood. the potentially

Jing Li

Got color. it. Thank you for the

Mac Armstrong

thank for No, questions. the you

Operator

your Our next Please Singzon J.P. with Morgan. proceed Pablo question. question from is with

Pablo Singzon

Hi, you. thank

I XX% it premium negative think, 'XX, in XX% is, you from, question net was So I down and written growth had at if that's 'XX. quarter look the this first in growth, growth

off quota is also and reinsurance increasing. that lines of running from shares some think I

backdrop, I question being as sort development of the growth index And how the here? that So do guess given growth slower is, grocery that see you for from question well. you're same fronting, seeing where

Chris Uchida

Yes.

been the driven there book mix our net fronting. start has on the our of overall the written -- I'll change of by in a overall off business, primarily earned. and net Obviously, So,

and and had book about growth, an have it, fronting at it that So, it look we at that it the overall look impact excluding you the when hasn't on think excluding homeowners we the that. currently Texas a quarter. moved front off. growth then into the portion portion The has of about was are XX% primary other those for without been the running and

growth premium primarily fronting. Ceded driven very also in still the up, strong written by So, overall has premium. gone

moved look then comparing when But have is at one quarter-over-quarter happen where quarters. off were able front beginning the about the what has overall, a we over when it going at good specialty of also year. first book cut very the look at comparison. you to that it, a been quarter we And feel it's that to we you deal This the homeowners the you're and from

So, premium. an that there was of unwinding

but impact on does think little and moving standpoint. that So, something the bit that of it that from a we growth, it's about just we're

book way the with the happy very we're overall, So looks.

earned I of trending XXs, we'd It and premium towards mid the moving especially ratio XX.X% think the year kind the with what XX% quarter. our from of about down is last standpoint was from of kind guidance. net we on expected, everything as QX projected for

a has mix our to part have and lines fee reinsurance and drive business So help like a been Casualty of income overall, Marine, portfolio. concerns, business use now shift that in share grown a in are of no fronting Inland of our large there quota also but heavy amount to

Mac Armstrong

Yes.

investing a exposures, grew to the an in Hawaii, earlier from grew are people bringing a are down Marine perspective, Earthquake, point, pruning All rapidly. on million the expand largest The we the that call, from we are from $XXX we perspective to growing XX%. areas infrastructure mentioned systems Casualty the PML and Just upon where heavily grew risk, back relative we our like to Chris's exposure that XX%. are line, Inland standpoint. reinsurance perspective, a We XXX%. from

So, fronting have we're only going to grow then through the rate And side. or inflation we guards.

is the that is our ability which respective time, more. increase frankly to, But the So, retain gives the to topline and book participation mix the relative we the have. and us over there, really changing participations

the pleased -- growth and book on we're whole, the very franchise. So of core embedded with how in the the complexion the

Pablo Singzon

Okay. you, And then second question. Maybe for Mac.

less conditions can receptivity you business the standpoint, and E&S and of about new cartridge clients a earthquake be from where standpoint? client a through retail talk from brokers may So terms generous

that, of are that, And if follow-up that book, a as then puts to Thank is most retail you earthquake Inforce migrate takes as think in E&S? there the of you. sort what into intent And yes, about that to outcome? achieving and

Mac Armstrong

Sure.

there back roughly first from it our And in ability has for The think, quake a, a TIV I been as new relates used to XX% well, E&S. that there. the quarter XX% it we use markets quake, not in residential our So push way from and been the a residential -- -- has standpoint. have to of the business was E&S on

based it on then whether to producers, it they we've more used an tend geographically specific size specifically. So, of criteria the high limit on the for eligibility used value. also procured. And We've concentrate

concentration continue like, been does and worth zones the certain has in high enhanced of, something of terms there are and conditions based us to get cost It to based the channel. and not a rates there. we net use reinsurance, ability that going on push as well. on afford to back So, It's aggregations based on

a I great anytime that don't and So, that relenting we're soon. see tool using it's

Pablo Singzon

right. you, All Mac. Thank

Mac Armstrong

Thanks, it's a that something and It's very mindful Pablo. we're of. good question

Operator

We to would question-and-answer Armstrong back turn comments. the have Mac end reached session. call for the the closing over I of now like to

Mac Armstrong

you evident joined our appreciation in support. participation, and us this most results I'd quarter. operator, to of my Great. Thank for morning. your We well to express appreciate, work, is thank and sincere foremost, like much, employees the as your all dedicated you to the of also questions first which their as hard who very your strong continued and all

the time we is build it earn ultimately and XXXX the leadership, reinsurance optimistic and attractive beyond. specialty our as into exciting program maintaining strong it our business, of placing and be for Palomar, our We the This can an where we remain -- extend our out initiatives, franchise of whether casualty around areas into to risk-adjusted all prospects build and it continue earthquake for guidance full-year or delivering returns. market

speaking forward and So, much very to thank your today. quarter next we for look time your with you

Operator

conference. today's concludes This

You time, may participation. disconnect your and this lines you we at thank your for

Palomar (PLMR) 4 May 232023 Q1 Earnings call transcript