Palomar Holdings, Inc. · NASDAQ:PLMR
Palomar — Investor Day (June 2022)
83 slides from Palomar's investor day presentation, Jun 15, 2022
Slide 1: Palomar Holdings, Inc. Investor Day June 15, 2022
Palomar Holdings, Inc. Investor Day June 15, 2022
Slide 2: Disclaimer
Disclaimer This presentation contains forward - looking statements about Palomar Holdings, Inc .. (the “Company”) .. These statements involve known and unknown risks that relate to the Company’s future events or future financial performance and the actual results could differ materially from those d
Slide 3: Today's Speakers
Today’s Speakers Mac Armstrong Chief Executive Officer Chris Uchida Chief Financial Officer Jon Christianson President Angela Grant Chief Legal Officer Michelle Johnson Chief Talent & Diversity Officer Robert Beyerle Chief Underwriting Officer Jon Knutzen Chief Risk Officer 3
Slide 4: Today's Agenda
Today’s Agenda TIME SECTION SPEAKER 8:00am – 8:10am Overview Mac Armstrong 8:10am – 8:25am What Makes Palomar A Specialty Insurance Leader? Mac Armstrong 8:25am – 8:30am Long Term Plan: Palomar 2X Mac Armstrong 8:30am – 8:40am Q&A Session Palomar Deep Dive 8:40am – 8:50am Culture And Talent Michelle
Slide 5: Overview
Overview # Palomar
Slide 6: Palomar Investor Day – What We Want to Accomplish
PLMR 5.0 Palomar Investor Day – What We Want to Accomplish 6 Strategic Objectives : • Introduction of Palomar 2X strategic framework • Comprehensive review of business • Near term strategic initiatives • Introduce extended talent and expertise Highlights and Takeaways : • Significant runway for orga
Slide 7: Company Profile
Company Profile TRACK RECORD OF DELIVERING STRONG GROWTH AND CONTINUED PROFITABILITY Specialty insurer using data analytics and underwriting acumen to capitalize on market dislocations and provide disruptive products that resonate with producers, other insurers and reinsurers Leading Earthquake insu
Slide 8: Recognizing How Far We Have Come
Recognizing How Far We Have Come 8 EXPANSION SINCE INCEPTION (GWP) • A small team addressing a single line of business... • ....Adding hurricane exposure and the associated analytics and risk transfer required... • ....Adding attritional loss exposure and the actuarial, claims and legal resources re
Slide 9: Our Strategy
Our Strategy 9 MARKETS • Markets with attractive long term returns but fragmented competition • Straightforward risks, legal environments and claims processes • Willingness to enter dislocated markets • Scalable underwriting approach combining data analysis with human expertise • Lines of business t
Slide 10: 2021 Strategic Initiatives Check-In
2021 Strategic Initiatives Check - In 10 • Complement existing property insurance footprint and enhance economics • Limited incremental investment and new sources of fee income • Hired Casualty veterans that bring industry experience, expertise and relationships • Initial focus on lines with a low c
Slide 11: 2022 Strategic Initiatives
2022 Strategic Initiatives SCALE THE ORGANIZATION 11 SUSTAIN STRONG GROWTH MONETIZE RECENT INVESTMENTS • Generate strong top line growth within both heritage and newer lines of business • Record new business sales for Residential Earthquake in Q1 • Additional product growth within Inland Marine, Com
Slide 12: What Makes Palomar A Specialty Insurance Leader?
What Makes Palomar A Specialty Insurance Leader?
Slide 13: Entrepreneurial and Experienced Management Team
Entrepreneurial and Experienced Management Team 13 NAME EXPERIENCE (YRS) PRIOR PROFESSIONAL EXPERIENCE Mac Armstrong | Chairman & Chief Executive Officer 25+ Arrowhead General Insurance Agency | Spectrum Equity | Alex. Brown & Sons Jon Christianson | President 20+ Holborn Corporation | John B. Colli
Slide 14: Analytically Driven, Disciplined Underwriting
Analytically Driven, Disciplined Underwriting Scale with Technology Regulatory Considerations Third Party Utilization Avoid Complex Exposures Transferrable Model Adherence to Guidelines Financial Modeling Catastrophe/Loss Analytics Data - Driven Pricing Identify Market Need Risk Transfer Distributio
Slide 15: Comprehensive Risk Transfer Program
Comprehensive Risk Transfer Program 15 • XOL reinsurance coverage up to $2.08 billion for earthquake events and $900 million for hurricane events • Panel includes over 100 highly rated reinsurers and cat bond investors • Event retention of $12.5 million represents 3% of stockholders’ equity as of 3/
Slide 16: Flexible Distribution Network
Flexible Distribution Network 16 • Predominant channel for commercial property and casualty insurance • Much higher average premium than retail business • Rapid scale via utilization of existing distribution infrastructures • Products ultimately sold by retailers and wholesalers • Companion offers •
Slide 17: Innovative Technology Platform
Innovative Technology Platform 17 • Technology systems built for automation and efficiency • Integration between pricing models, policy administration and analytics • Ability to rapidly quote and bind policies for producers • API development for partners with Palomar Automated Submission System (PAS
Slide 18: Numerous Growth Vectors
Numerous Growth Vectors • AVENUES • CONTINUED OPPORTUNITY NEW PRODUCTS • Monetize investments in new lines including General Casualty, Excess Property and Professional Liability • Scale Fronting business to $80 - $100M of GWP during 2022 NEW GEOGRAPHIC MARKETS • Scale nationwide via E&S vehicle • Ex
Slide 19: The Palomar Approach
LEARNING IDENTIFY MARKETS LEVERAGE TALENT SYSTEMS & ANALYTICS RISK TRANSFER DISTRIBUTION DIVERSIFY The Palomar Approach 19 PREDICTABLE EARNINGS GROWTH CASUALTY EXCESS PROPERTY FRONTING TX SPECIALTY HOMEOWNERS RESIDENTIAL FLOOD E&S COMMERCIAL ALL RISK RESIDENTIAL EARTHQUAKE ADMITTED COMMERCIAL ALL RI
Slide 20: Long Term Plan: Palomar 2X
Long Term Plan: Palomar 2X # Palomar
Slide 21: Introducing PLMR 2X
Introducing PLMR 2X FUNDAMENTAL PRINCIPLES KEY COMPONENTS • Organic growth • A nchored by non - attritional loss business ( Earthquake and Hawaii Hurricane ) • Entry into new markets driven by replicable, analytics - driven process • Continued reduction in non - earthquake catastrophic exposure • Co
Slide 22: Q&A
Q&A @ Palomar
Slide 23: Palomar Deep Dive
Palomar Deep Dive # Palomar
Slide 24: Culture And Talent
Culture And Talent # Palomar
Slide 25: Culture And Talent
Culture And Talent AUTHENTIC & AGILE ENVIRONMENT PROMOTABLE & ENGAGED WORKFORCE ENTREPRENEURIAL & PASSIONATE SPIRIT DIVERSITY, INCLUSION, COMMUNITY ENGAGEMENT & EQUALITY ( DICE) HYBRID & ACCOUNTABLE STRATEGIC RECRUITING • Underwriting, Tech, Analytics • Internship Program LEADERSHIP & TEAM MEMBER DE
Slide 26: Workforce Overview
Workforce Overview 26 49 60 59 3+ Years 1-3 Years Less than 1 Year CURRENT TEAM TENURE (1) 2019 77 2020 122 2021 151 YTD (1) 168 HEADCOUNT 61% TOTAL WORKFORCE 2021 46% 34% 16% 4% Milennials Generation X Generation Z Baby Boomers 38% 62% Female Male 39% Non - white / One or more races White 61% 1. As
Slide 27: Team Member Experience
• 1:1’s • Goal Setting • Coaching & Feedback Compensation Work Life Benefits Career Development Performance & Recognition • Base Salary • Annual Bonus • L ong - term Incentive P lans for Everyone • Paid Time Off • Diverse Work Environment • Hybrid Work Environment • Health & Welfare • Retirement Pla
Slide 28: Specialty Product Expertise
Specialty Product Expertise
Slide 29: Product Development
Product Development PROVEN ROADMAP OF SUCCESSFUL SPECIALTY PRODUCT DEVELOPMENT AND DEPLOYMENT 29 LAUNCH UNDERSERVED MARKET BUSINESS CASE FINANCIAL AND STATISTICAL MODELING ENGAGE WITH PARTNERS POLICY FORMS AND PRODUCT FILINGS REGULATORY APPROVAL MARKETING OUTREACH CAMPAIGN TECHNOLOGY AND EXPERTISE
Slide 30: Analytical Underwriting
Analytical Underwriting 30 • Technology - enabled platform • Experienced entrepreneurial underwriters • Optimized balance of in - house and delegated authority IDENTIFY COMMON ATTRIBUTES TO REPLICATE ACROSS PRODUCTS AND MARKETS RESIDENTIAL EARTHQUAKE HAWAII HURRICANE RESIDENTIAL FLOOD COMMERCIAL EAR
Slide 31: Deep Dive: Earthquake
Deep Dive: Earthquake 31 • Jon Christianson – President and Founding Member, 20+ Years • Evan Kuhn – Vice President of Underwriting, 15+ Years LEADERSHIP • Retail Agents, Wholesale Brokers • Program Administrators • Strategic Partners DISTRIBUTION • $2.08 billion of total earthquake limit, including
Slide 32: Residential Earthquake Market Opportunity
Residential Earthquake Market Opportunity 32 • On December 15 , 2021 , the CEA released a circular (OPS - 21 - 04 ) to all participating insurers addressing the CEA’s willingness to permit – and to an extent encourage – CEA participating insurers to offer non - CEA residential earthquake insurance o
Slide 33: Business Development: Inside Sales Team
Business Development: Inside Sales Team 33 WHY HOW CURRENT STATUS • 20%+ of contacted agents become producers • Impactful LTV:CAC generation • Proactive outreach to insurance agents • Develop and nurture relationships • Demo PASS and encourage quoting • Pursue concrete written premium targets • Acce
Slide 34: Development of Business Mix
Development of Business Mix 34 Residential Earthquake Fronting Commercial Earthquake Inland Marine Specialty Homeowners Commercial All Risk Hawaii Hurricane Residential Flood Other AS OUR BUSINESS EVOLVES , LINES WITH NO NET ATTRITIONAL LOSS ARE A FOCUS FOR PALOMAR $46 $25 $7 $30 $18 $16 $11 $3 $14
Slide 35: Differentiated Products for Underserved Markets
Differentiated Products for Underserved Markets 1. Percentages are as of Q1 2022 GWP for each product 35 • Many insurers avoid coastal regions due to windstorm exposure • Coverage is required for homeowners that carry a mortgage for their homes in the state of Hawaii • The layered and shared commerc
Slide 36: Deep Dive: Inland Marine
Deep Dive: Inland Marine 36 • Robert Beyerle – Chief Underwriting Officer, 20+ Years • Paul Kim – Vice President of Underwriting, 15+ Years • Cecil Wilson – Vice President of Underwriting, 30+ Years LEADERSHIP • Retail Agents, Wholesale Brokers and Program Administrators • Long - term relationships
Slide 37: Deep Dive: Casualty
Deep Dive: Casualty 37 • Ty Robben – Senior Vice President of Underwriting, 14+ Years • Gerrit VandeKemp – Vice President of Underwriting, 12+ Years LEADERSHIP • Wholesale Brokers • Program Administrators DISTRIBUTION • Quota Share coverage with a max net line of $2 million • Quota Share generates f
Slide 38: Deep Dive: PLMR-FRONT
Deep Dive: PLMR - FRONT 38 • Jason Sears – Executive Vice President and Head of Programs, 20+ Years • Brandon Loyd – Assistant Vice President of Programs, 15+ Years • Kent Watson – Assistant Vice President of Programs, 14+ Years LEADERSHIP • Insurance carriers with inadequate licensing (state or E&S
Slide 39: PLMR-FRONT Model
PLMR - FRONT Model 39 Quota Share Attributes PLMR - FRONT Current PLMR Retention 0% PLMR Gross Limit Exposed N/A PLMR Net Limit Exposed N/A PLMR Fee Income 1 5 - 8% • Fully reinsured and collateralized model to satisfy claims payment obligations • Risk is transferred to reinsurer(s) • Target 5 - 8%
Slide 40: Product Case Studies
Product Case Studies 40 PRODUCT OVERVIEW TARGET STRATEGY PARTNERSHIP OVERVIEW PERFORMANCE BUILDER’S RISK REAL ESTATE E&O COWBELL • Launched in January 2019 • Targeting the mid market Builder’s Risk segment • Accessing business via in - house underwriting and industry leading partners • Residential a
Slide 41: Break
Break # Palomar
Slide 42: Reinsurance And Analytics
Reinsurance And Analytics # Palomar
Slide 43: Palomar Reinsurance Overview
Palomar Reinsurance Overview 43 • Catastrophe per occurrence XOL reinsurance protects against severity of an event loss • Hold an event loss to less than one quarter of earnings and less than 5% of stockholders’ equity • Reinsurance coverage in excess of the 1:250 - year Peak Zone Probable Maximum L
Slide 44: 6/1 Market Update
6/1 Market Update • Secured $430 million of incremental limit to support growth; maintained per event retention at $12.5 million • Successfully issued $275 million of collateralized capacity through Torrey Pines Re 144A Catastrophe Bond, increasing the total Catastrophe Bond capacity to $675 million
Slide 45: Current Cat Program
Current Cat Program Core Catastrophe Tower • Coverage to a conservative level based on projected PMLs • $2.08 billion ground up coverage for Earthquake • $900 million ground up coverage for Hawaii Hurricane • Layer 1 ($17.5 million xs $12.5 million) includes four limits • Two each for earthquake and
Slide 46: Reinsurance Program Designed to Minimize Earnings Volatility
• In - depth portfolio analytics conducted on a monthly basis utilizing multiple catastrophe models, deterministic loss scenarios an d exposure profiles to assess risk to catastrophe losses and evaluate reinsurance coverage needs • The current program, effective June 1, 2022, provides ground up cove
Slide 47: Highly-Rated Reinsurance Partners
Highly - Rated Reinsurance Partners Reinsurance Panel as of June 1, 2022 Catastrophe XOL Limit Top 10 Reinsurance Partners ($M) % of Total A.M. Best Rating Torrey Pines Re Pte 1 400 19.9 Collateralized Torrey Pines Re 2 275 13.7 Collateralized Houston Casualty Company 103 5.1 A++ Ariel Re Bda Limite
Slide 48: Catastrophe Aggregate Recovery Example
Catastrophe Aggregate Recovery Example 48 • $25 million of ‘sideways’ reinsurance protection once cumulative net retained losses exceed $30 million • Treaty subject to $12.5 million per event limit, aligned with occurrence tower retention | attaches on a 3rd+ event basis Reinsurance Limit Cat Agg Re
Slide 49: Earthquake Loss Example
Earthquake Loss Example 49 • $100 million Gross Loss • $87.5 million ceded to Core XOL Tower • $12.5 million retained • Reinstatement Premium Due: $1.4 million 1 • Pre - tax loss = $13.9 million • Post - tax loss = $10.8 million • ROE drops from 19% to 17% 1. Maximum $1.4 million reinstatement premi
Slide 50: Convective Storm Loss Example
Convective Storm Loss Example 50 • $10 million Gross Loss fully retained • Pre - tax loss = $10 million • Post - tax loss = $7.8 million • ROE drops from 19% to 18% 1 1. Considers impact to ROE from CS event in isolation (i.e., not including EQ event on previous page) Event #2 – Convective Storm(“CS
Slide 51: Hawaii Hurricane Loss Example
Hawaii Hurricane Loss Example 51 • $30 million Gross Loss • $17.5 million ceded to Core XOL Tower • $12.5 million retained • Reinstatement Premium Due: $3.1 million 1 • Pre - tax loss = $15.6 million • Post - tax loss = $12.2 million • ROE drops from 19% to 17% 2 1. Maximum $3.1 million reinstatemen
Slide 52: Earthquake, CS and HI Hurricane Loss Example
Earthquake, CS and HI Hurricane Loss Example 52 • Catastrophe aggregate protection activates once cumulative subject losses exceed $30 million 1 • $5 million Cat Agg recovery supplements XOL recoveries to limit an accumulation of retained losses • Pre - tax financial impact of $34.5 million • Post -
Slide 53: Quota Share Reinsurance
Quota Share Reinsurance 53 • Quota share reinsurance utilized to mitigate volatility from unexpected attritional losses • Reduce the net limit exposed to any given risk • Augment underwriting income with fee income generated through ceding commissions 1. Applies to the majority of our direct busines
Slide 54: Actuarial Overview
Actuarial Overview 54 EXPERTISE • Incorporate feedback from in - house experts ranging from claims, underwriting and senior management • Streamline and implement liability analysis via models that implement actuarial standards of practice • Analyze different loss types to fully recognize company spe
Slide 55: Exposure and Catastrophe Analytics
Exposure and Catastrophe Analytics 55 • Jon Knutzen – Chief Risk Officer, 25+ Years • Eric Hennen – Senior Vice President of Analytics, 15+ Years • George Dobrev – Senior Vice President of Analytics, 15+ Years EXPERTISE • Employ internally developed applications for the evaluation of portfolio KPIs
Slide 56: Case Study: Wind Exposure Management
Case Study: Wind Exposure Management • Exited Admitted Commercial All Risk and Specialty Homeowners in Louisiana during 2020; run - off completed in December 2021 • Announced the exit of Specialty Homeowners business outside of the state of Texas in Q1 2022 and the conversion of Texas Homeowners to
Slide 57: Operations And Technology
Operations And Technology # Palomar
Slide 58: Technology Operations
Technology Operations 58 • Mark Brose – Chief Technology Officer, 25+ Years • Greg Tupper – Chief Information Security Officer, 25+ Years EXPERTISE • Scalable platform reduces operating costs and improves efficiency • Ability to rapidly quote and bind policies • Technology systems built for automati
Slide 59: Technology at the Point of Sale
Technology at the Point of Sale • PASS, the policy administration system integrates submission gathering, policy issuance, underwriting, billing and portfolio analytics • Enables the effective use of predefined underwriting guidelines • Provides efficient real - time transparency to production partn
Slide 60: Case Study: Underwriting & Product
Case Study: Underwriting & Product 60 Residential Earthquake • Advanced modeling on the RMS platform to develop admitted rates for Residential Earthquake, a driver of market - leading margin for the business • E&S Residential Earthquake uses a proprietary algorithm that contemplates catastrophe mode
Slide 61: Case Study: Disaster Response
Case Study: Disaster Response • Rigorous, analytical focus on real - time dissemination of Event Reports to internal and external constituents • Real - time event reports shape the posture of the organization’s response in the critical early moments in and around an event • Reporting is shared with
Slide 62: Claims Operations
Claims Operations 62 EXTERNAL CLAIMS HANDLING • Angela Grant – Chief Legal Officer, 30 + Years • Teresa Urban – Vice President of Claims , 25+ Years • Jeff Lim – Associate General Counsel , 25+ Years EXPERTISE INTERNAL CLAIMS MANAGEMENT REPORTING PROCESS MANAGING CATASTROPHE EVENTS • Claims handling
Slide 63: Q&A
Q&A @ Palomar
Slide 64: Break
Break # Palomar
Slide 65: Commitment To ESG
Commitment To ESG # Palomar
Slide 66: Commitment To ESG
Commitment To ESG 66 • Commitment to Environmental, Social and Governance (“ESG”) matters are fundamental to the business strategy and mission • Values - driven workplace that integrates ESG considerations into strategy, operations, capital allocation and investment decisions • Continue to take step
Slide 67: Environmental Priorities
TOPIC APPROACH SELECT HIGHLIGHTS • Assess climate change - related risks, opportunities and potential impacts on business • Pledged to conduct first third - party assessment of the business’ carbon footprint in 2022 • Assessed climate - related risks and opportunities by aligning with the recommenda
Slide 68: Social Priorities
TOPIC APPROACH SELECT HIGHLIGHTS • Striving to create a diverse, inclusive and supportive workplace with opportunities for each team member to develop in their careers helps to attract and retain talent • Offering fair, competitive compensation and benefits to support our team members overall well -
Slide 69: Governance Priorities
TOPIC APPROACH SELECT HIGHLIGHT • Standalone ESG committee oversees environmental, health and safety, corporate social responsibility, corporate governance, sustainability and other public policy matters relevant to the Company • President and Chief Risk Officer oversee enterprise risk management po
Slide 70: Palomar Protects
Palomar Protects ™ 70 • Entered a new partnership with Team Rubicon during 2021, a veteran - led nonprofit organization devoted to international disaster response • Team Rubicon deploys in the immediate aftermath of an event, before government aid reaches the affected community • Palomar team member
Slide 71: Path To 2X - Financials
Path To 2X - Financials # Palomar
Slide 72: Palomar Financials – The Path To 2X
PLMR 5.0 Palomar Financials – The Path To 2X 72 Strategic Objectives : • Illustrative view of how our premium contributes to the bottom line • What is Palomar 2X? • What Palomar may look like at 2X, an illustrative “what if” – with our current products • Capital adequacy to facilitate Palomar 2X • R
Slide 73: Financials – Illustration Definitions
Financials – Illustration Definitions Underlying concepts presented in the financial statements 1. Ceded Premium • Made up of quota share and XOL reinsurance • Generally, quota share reinsurance is used as protection on attritional lines and generates a ceding commission that covers acquisition cost
Slide 74: Financials – 2021 Illustrative Example
Financials – 2021 Illustrative Example • This is an illustrative reconstitution of 2021 written premium showing some internal concepts used when looking at existing and new lines of business • The rows highlighted in light blue and the Total column represent the information disclosed in typical fina
Slide 75: Palomar 2X Illustrative Example
Palomar 2X Illustrative Example 75 • PALOMAR 2X Aims to: • Double Underwriting Income, starting with Underwriting Income Before Overhead • Operating scale from Other Underwriting Expenses will further enhance Underwriting Income growth • This target is achievable organically with current products an
Slide 76: 2022 Guidance
2022 Guidance 76 FULL YEAR 2022 CURRENT OUTLOOK Adjusted net income $80 to $85 million • Revised guidance assumption, guidance excludes unrealized gains and losses from mark - to - market fluctuations • Guidance reflects the conversion of the Texas Specialty Homeowners book to a front, reducing over
Slide 77: Closing Remarks
Closing Remarks # Palomar
Slide 78: Closing Remarks
Closing Remarks Highlights and Takeaways : • Significant runway for organic growth • A proven, flexible operational model that applies to new market segments and products • Continuous innovation in underwriting helps us identify new opportunities and products • A conservative approach to risk transf
Slide 79: Q&A
Q&A @ Palomar
Slide 80: Appendix
Appendix # Palomar
Slide 81: Distribution: Strategic Partnerships
Distribution: Strategic Partnerships 81 EIGHT YEARS OF PARTNERSHIPS CONTINUE WITH THE MOST DIVERSE PIPELINE IN THE COMPANY’S HISTORY 2022 2021 2020 2019 2018 2017 2016 2015 2014
Slide 82: Reconciliation Of Non-GAAP Metrics Used In This Presentation
Reconciliation Of Non - GAAP Metrics Used In This Presentation 82 In Thousands Year Ended December 31 2016 2017 2018 2019 2020 2021 Net Income $ 6,614 $ 3,783 $ 18,219 $ 10,621 $ 6,257 $ 45,847 Adjustments Expenses Associated with IPO, tax restructuring, secondary offerings and one - time incentive
Slide 83: Non-GAAP Metric Definitions Used In This Presentation
Non - GAAP Metric Definitions Used In This Presentation 83 Adjusted Net Income is a non - GAAP financial measure defined as net income excluding the impact of certain items that may not be indicative of underl ying business trends, operating results, or future outlook, net of tax impact. We calculat