Release Date: May 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Palomar Holdings Inc (PLMR, Financial) reported a significant increase in gross written premiums by 47.2%, driven by strong contributions from crop and casualty products.
- Net earned premium growth was robust at 30%, with adjusted net income growth of 36% and an adjusted return on equity of 22.9%.
- The company's stockholders' equity surpassed $500 million, moving Palomar Holdings Inc (PLMR) into a new financial size category, which could open new market segments and distribution channels.
- Palomar Holdings Inc (PLMR) is on track to achieve its 'two X goal' of doubling adjusted net income over a three to five-year period, indicating strong future growth prospects.
- The company has made strategic partnerships and product expansions, such as the residential earthquake partnership with Cincinnati Financial and new commercial partnerships expected to increase production.
Negative Points
- The growth in the Frontier business was modest at 3% year-over-year, impacted by heightened competition and soft pricing, particularly in the cyber funding program.
- Certain lines within the casualty products are experiencing softer pricing, particularly in private company D&O, which could affect profitability if not managed carefully.
- The company faces potential increases in reinsurance costs, which could impact profitability despite current favorable conditions.
- While Palomar Holdings Inc (PLMR) has a diversified product portfolio, some products like crop insurance are highly seasonal, which could lead to fluctuations in quarterly performance.
- The attritional loss ratio is expected to continue rising, which could pressure the overall profitability if not offset by adequate rate increases and effective loss control measures.
Q & A Highlights
Q: Congrats on the quarter. Is it fair to say that the attritional loss ratios should continue to rise as we look past '24?
A: (T. Christophe Uchida, CFO) Yes, we expect the attritional loss ratio to continue to tick up throughout 2024 and into 2025 as the overall mix of business changes, particularly as we grow in lines like property, inland marine, and specialty property casualty.
Q: Could you give us your most recent thoughts on the competitive environment for specialty commercial and E&S?
A: (Mac Armstrong, CEO) The market currently shows broad-based rate integrity and discipline in pricing. While rate increases in property may not be at the same level as last year, casualty lines are seeing consistent rate increases, except in cyber and private company D&O.
Q: On the midyear renewals, could you expand on the updated views and how that's shaping up?
A: (Mac Armstrong, CEO) We are encouraged by the prospects of beating our initial assumption of a 5% increase in the cost of reinsurance. Early renewals and placements indicate potential for better than expected outcomes.
Q: Can you discuss the strong acceleration in casualty growth and the current market in those lines?
A: (Mac Armstrong, CEO) We expect strong growth in casualty throughout the year, supported by investments in talent and leadership. We are entering the market conservatively, focusing on risk selection and limit management to maintain profitability.
Q: What have you seen in terms of retention in the residential quake book, particularly in California where homeowners' rates have increased significantly?
A: (Mac Armstrong, CEO) Retention has been consistent at mid to high 80s levels. Despite headwinds from new home sales and rising homeowners' premiums, our strong partnerships and franchise strength have helped sustain growth.
Q: On the frontier business, you mentioned lower growth this quarter. Is that expected to continue, and how does it compare to overall company growth?
A: (Mac Armstrong, CEO) Frontier growth is expected to under-index compared to the overall company growth due to slower ramp-up of new partnerships and some rate headwinds. However, we have a strong pipeline and expect to add new fronting partnerships.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
