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Fair value measurements (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of fair value hierarchy for financial assets and liabilities


December 31, 2019	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Fixed maturity securities
U.S. Governments	$	—	$	13,679	$	—	$	13,679
States, territories, and possessions		—		2,445		—		2,445
Political subdivisions		—		1,942		—		1,942
Special revenue excluding mortgage/asset-backed securities		—		18,436		—		18,436
Industrial and miscellaneous		—		129,013		—		129,013
Mortgage/asset-backed securities		—		50,136		1,500		51,636
Equity securities		—		22,328		—		22,328
Cash, cash equivalents, and restricted cash		28,350		4,999		—		33,349
Total assets	$	28,350	$	242,978	$	1,500	$	272,828


December 31, 2018	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Fixed maturity securities
U.S. Governments	$	—	$	15,269	$	—	$	15,269
States, territories, and possessions		—		1,221		—		1,221
Political subdivisions		—		815		—		815
Special revenue excluding mortgage/asset-backed securities		—		12,453		—		12,453
Industrial and miscellaneous		—		65,126		—		65,126
Mortgage/asset-backed securities		—		27,336		—		27,336
Equity securities		25,171		—		—		25,171
Cash, cash equivalents, and restricted cash		9,924		—		—		9,924
Total assets	$	35,095	$	122,220	$	—	$	157,315
Liabilities:
Long-term notes payable	$	—	$	—	$	20,000	$	20,000
Total liabilities	$	—	$	—	$	20,000	$	20,000

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $211,278 in 2019; $122,949 in 2018)	$ 217,151	$ 122,220
Equity securities, at fair value (cost: $21,336 in 2019; $27,188 in 2018)	22,328	25,171
Total investments	239,479	147,391
Cash and cash equivalents	33,119	9,525
Restricted cash	230	399
Accrued investment income	1,386	734
Premium receivable	36,237	18,633
Deferred policy acquisition costs	25,201	14,052
Reinsurance recoverable on unpaid losses and loss adjustment expenses	12,952	11,896
Reinsurance recoverable on paid losses and loss adjustment expenses	4,303	2,666
Prepaid reinsurance premium	26,105	18,284
Prepaid expenses and other assets	14,861	5,863
Property and equipment, net	845	947
Intangible assets	744	744
Total assets	395,462	231,134
Liabilities:
Accounts payable and other accrued liabilities	13,555	9,245
Reserve for losses and loss adjustment expenses	16,821	16,061
Unearned premiums	130,373	79,130
Ceded premium payable	11,383	10,607
Funds held under reinsurance treaty	1,658	720
Income and excise taxes payable	1,117
Deferred tax liabilities, net	1,999
Long-term notes payable		19,079
Total liabilities	176,906	134,842
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 and 0 shares authorized as of December 31, 2019 and December 31, 2018, respectively, 0 shares issued and outstanding as of December 31, 2019 and December 31, 2018
Common stock, $0.0001 par value, 500,000,000 shares authorized, 23,468,750 and 17,000,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively	2	2
Additional paid-in capital	180,012	68,498
Accumulated other comprehensive income (loss)	4,686	(563)
Retained earnings	33,856	28,355
Total stockholders' equity	218,556	96,292
Total liabilities and stockholders' equity	$ 395,462	$ 231,134

Consolidated Statements of Income and Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Consolidated Statements of Income and Comprehensive Income
Other underwriting expenses including stock-based compensation	$ 24,103	$ 0	$ 0

Significant Accounting Policies (Details) $ in Thousands	12 Months Ended
Significant Accounting Policies (Details) $ in Thousands	Dec. 31, 2019 USD ($) item	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Jan. 01, 2018 USD ($)
Premiums Receivable
Allowance for doubtful accounts	$ 0	$ 0
Property and Equipment
Number of state licenses acquired \| item	7
Allocated amount of acquired state licenses	$ 700
Impairments of intangible assets	0	0	$ 0
Impairments of long lived assets	0	0	0
Stock compensation charge	24,103
Retained earnings	33,856	28,355		$ 3,200
Accumulated other comprehensive (loss) income	4,686	(563)		$ 3,200
Commission and fees income	2,671	2,405	$ 1,188
Insurance agency
Property and Equipment
Commission and fees income	$ 1,400	1,400
Prepaid Expenses and Other Current Assets
Deferred offering costs		$ 1,100
Minimum
Property and Equipment
Useful life	3 years
Maximum
Property and Equipment
Useful life	5 years

Reinsurance- effect of reinsurance (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Premiums Written:
Direct	$ 220,568	$ 144,821	$ 112,974
Assumed	31,393	10,070	7,260
Ceded	(108,332)	(82,949)	(46,951)
Net written premiums	143,629	71,942	73,283
Premiums Earned:
Direct	178,536	129,071	94,799
Assumed	21,985	8,688	6,162
Ceded	(100,314)	(67,862)	(45,416)
Net earned premiums	100,207	69,897	55,545
Losses Incurred:
Direct	20,105	12,153	24,266
Assumed	1,201	46	2
Ceded	(16,564)	(6,580)	(14,651)
Net losses incurred	4,742	5,619	9,617
LAE Incurred:
Direct	2,837	2,113	6,608
Assumed	34	6
Ceded	(2,020)	(1,464)	(4,100)
Total LAE incurred	851	655	2,508
Total losses and LAE incurred:
Direct	22,942	14,266	30,874
Assumed	1,235	52	2
Ceded	(18,584)	(8,044)	(18,751)
Net total	$ 5,593	$ 6,274	$ 12,125

Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Cash and cash equivalents and restricted cash and cash equivalents
Cash and cash equivalents	$ 33,119	$ 9,525
Restricted cash	230	399
Cash and cash equivalents and restricted cash	$ 33,349	$ 9,924	$ 10,932	$ 9,812

Reserve for Losses and Loss Adjustment Expenses - Roll Forward (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Reserve for Losses and Loss Adjustment Expenses
Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period	$ 4,165	$ 4,432	$ 3,336
Add: Incurred losses and loss adjustment expenses, net of reinsurance, related to:
Current year	5,774	8,165	12,257
Prior years	(181)	(1,891)	(132)
Total incurred	5,593	6,274	12,125
Deduct: Loss and loss adjustment expense payments, net of reinsurance, related to:
Current year	2,179	4,409	8,986
Prior years	3,710	2,132	2,043
Total payments	5,889	6,541	11,029
Reserve for losses and loss adjustment expense net of reinsurance recoverables at end of period	3,869	4,165	4,432
Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period	12,952	11,896	13,352
Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period	$ 16,821	$ 16,061	$ 17,784

Income Taxes - Federal income tax expense (benefit) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Income Taxes
Current	$ 6,810	$ (6)	$ 11
Deferred	646		1,134
Income tax expense (benefit)	$ 7,456	$ (6)	$ 1,145

Underwriting Information (Tables)

12 Months Ended

Dec. 31, 2019

Underwriting Information

Schedule of gross written premiums

Gross written premiums (GWP) by product are presented below:


	Year Ended December 31,
	2019				2018				2017
	($ in thousands)
			% of				% of				% of
	Amount		GWP		Amount		GWP		Amount		GWP
Product
Residential Earthquake	$	130,473	51.8	%	$	81,679	52.7	%	$	57,328	47.7	%
Commercial Earthquake		38,741	15.4	%		20,946	13.5	%		23,079	19.2	%
Specialty Homeowners		32,788	13.0	%		27,680	17.9	%		26,516	22.0	%
Commercial All Risk		30,358	12.0	%		14,338	9.3	%		7,321	6.1	%
Hawaii Hurricane		10,764	4.3	%		8,128	5.2	%		5,323	4.4	%
Residential Flood		5,216	2.1	%		2,120	1.4	%		667	0.6	%
Other		3,621	1.4	%		—	—	%		—	—	%
Total Gross Written Premiums	$	251,961	100.0	%	$	154,891	100.0	%	$	120,234	100.0	%

Gross Written premiums by state are as follows:


	Year Ended December 31,
	2019				2018				2017
	($ in thousands)
			% of				% of				% of
	Amount		GWP		Amount		GWP		Amount		GWP
State
California	$	141,743	56.3	%	$	82,119	53.0	%	$	64,231	53.4	%
Texas		44,087	17.5	%		32,568	21.0	%		29,273	24.4	%
Hawaii		11,851	4.7	%		8,128	5.2	%		5,323	4.4	%
Washington		9,607	3.8	%		5,658	3.7	%		2,803	2.3	%
Oregon		7,396	2.9	%		5,286	3.4	%		4,250	3.6	%
South Carolina		6,185	2.5	%		3,208	2.1	%		1,706	1.4	%
Illinois		4,896	1.9	%		4,403	2.8	%		4,854	4.0	%
Mississippi		4,769	1.9	%		2,585	1.7	%		982	0.8	%
Other		21,427	8.5	%		10,936	7.1	%		6,812	5.7	%
Total Gross Written Premiums	$	251,961	100.0	%	$	154,891	100.0	%	$	120,234	100.0	%

Capitalized Software

12 Months Ended

Dec. 31, 2019

Capitalized Software

Capitalized Software

7. Capitalized Software

Capitalized software balances are as follows:


			Accumulated		Net
December 31, 2019	Cost		Amortization		Book Value
	(in thousands)
Capitalized Software	$	4,567	$	(669)	$	3,898


			Accumulated		Net
December 31, 2018	Cost		Amortization		Book Value
	(in thousands)
Capitalized Software	$	1,761	$	(33)	$	1,728

Amortization expense relating to capitalized software the years ended December 31, 2019 and 2018 was $0.6 million and an immaterial amount, respectively.

Property and Equipment (Details) - USD ($) $ in Thousands	12 Months Ended
Property and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment
Cost	$ 1,542	$ 1,441
Accumulated Depreciation	(697)	(494)
Net Book Value	845	947
Depreciation	216	212	$ 160
Leasehold improvements
Property, Plant and Equipment
Cost	879	879
Accumulated Depreciation	(342)	(225)
Net Book Value	537	654
Computer hardware
Property, Plant and Equipment
Cost	144	108
Accumulated Depreciation	(64)	(51)
Net Book Value	80	57
Office equipment and furniture
Property, Plant and Equipment
Cost	519	454
Accumulated Depreciation	(291)	(218)
Net Book Value	$ 228	$ 236

Dividend Restrictions (Details) $ in Millions	12 Months Ended
Dividend Restrictions (Details) $ in Millions	Dec. 31, 2019 USD ($)
Dividend Restrictions
Period over which a dividend or distribution requiring approval is reviewed	12 months
Percentage of combined capital and surplus of insurer	10.00%
Cumulative earned surplus	$ 10.3
Threshold dividend or distribution without the prior approval	10.3
Palomar Specialty Reinsurance Company Bermuda Ltd
Dividend Restrictions
Dividends receivable	$ 5.7

Stock-Based Compensation - Stock based compensation expense (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Stock-based compensation expense
Stock compensation charge		$ 24,103	$ 0	$ 0
Stock-based compensation expense		$ 24,103
2014 Management Incentive Plan
Stock-based compensation expense
Stock compensation charge	$ 23,000

Capital Stock - Shares issued and outstanding (Details) - USD ($) $ / shares in Units, $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Capital Stock
Preferred stock, shares authorized	5,000,000	0
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	23,468,750	17,000,000
Common stock, shares outstanding	23,468,750	17,000,000
Common stock, par value	$ 0.0001	$ 0.0001
Additional paid-in capital	$ 180,012	$ 68,498

Investments - Available for Sale Investments (Details) $ in Thousands	Dec. 31, 2019 USD ($) security	Dec. 31, 2018 USD ($) security
Available for sale investments
Number of unrealized loss positions \| security	51	173
Available for sale investments
Amortized Cost	$ 211,278	$ 122,949
Gross Unrealized Gains	5,990	536
Gross Unrealized Losses	(117)	(1,265)
Fair Value	217,151	122,220
Amortized Cost	21,336	27,188
Equity securities at fair value	22,328	25,171
U.S. Governments
Available for sale investments
Amortized Cost	13,371	15,299
Gross Unrealized Gains	321	96
Gross Unrealized Losses	(13)	(126)
Fair Value	13,679	15,269
States, territories, and possession
Available for sale investments
Amortized Cost	2,298	1,227
Gross Unrealized Gains	147
Gross Unrealized Losses		(6)
Fair Value	2,445	1,221
Political subdivisions
Available for sale investments
Amortized Cost	1,913	825
Gross Unrealized Gains	29
Gross Unrealized Losses		(10)
Fair Value	1,942	815
Special revenue excluding mortgage/asset-backed securities
Available for sale investments
Amortized Cost	18,139	12,429
Gross Unrealized Gains	343	115
Gross Unrealized Losses	(46)	(91)
Fair Value	18,436	12,453
Industrial and miscellaneous
Available for sale investments
Amortized Cost	124,726	65,885
Gross Unrealized Gains	4,326	192
Gross Unrealized Losses	(39)	(951)
Fair Value	129,013	65,126
Mortgage/asset-backed securities
Available for sale investments
Amortized Cost	50,831	27,284
Gross Unrealized Gains	824	133
Gross Unrealized Losses	(19)	(81)
Fair Value	$ 51,636	$ 27,336

Reserve for Losses and Loss Adjustment Expenses - Incurred and Paid Accident Year Claims Development (Details) $ in Thousands	Dec. 31, 2019 USD ($) claim	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Claims Development
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 15,902
Incurred but Not Reported Liabilities	$ 976
Cumulative Number of Claims	1,364
Prior years
Claims Development
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 678	$ 671	$ 671	$ 719	$ 630
Incurred but Not Reported Liabilities	$ 1
Cumulative Number of Claims \| claim	8
2016
Claims Development
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 1,454	1,251	1,249	1,381
Cumulative Number of Claims	71
2017
Claims Development
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 4,014	3,475	3,071
Cumulative Number of Claims	357
2018
Claims Development
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 6,095	5,970
Incurred but Not Reported Liabilities	$ 11
Cumulative Number of Claims	526
2019
Claims Development
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 3,661
Incurred but Not Reported Liabilities	$ 964
Cumulative Number of Claims	402
Homeowners’ Insurance
Claims Development
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 16,830
Incurred but Not Reported Liabilities	$ 379
Cumulative Number of Claims	6,274
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 16,268
Reserve for losses and loss adjustment expense, net of reinsurance	562
Homeowners’ Insurance \| 2015
Claims Development
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	1,642	1,636	1,658	1,785	2,048
Incurred but Not Reported Liabilities	$ 1
Cumulative Number of Claims \| claim	381
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 1,634	1,615	1,523	1,379	860
Homeowners’ Insurance \| 2016
Claims Development
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	5,636	5,721	5,878	6,069
Incurred but Not Reported Liabilities	$ 6
Cumulative Number of Claims	1,081
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 5,607	5,585	5,356	4,120
Homeowners’ Insurance \| 2017
Claims Development
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	6,630	7,418	9,354
Incurred but Not Reported Liabilities	$ 11
Cumulative Number of Claims	2,964
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 6,628	7,375	7,135
Homeowners’ Insurance \| 2018
Claims Development
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	2,008	2,193
Incurred but Not Reported Liabilities	$ 104
Cumulative Number of Claims	788
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 1,853	1,550
Homeowners’ Insurance \| 2019
Claims Development
Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	914
Incurred but Not Reported Liabilities	$ 257
Cumulative Number of Claims	1,060
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 546
Special Property Insurance
Claims Development
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	13,790
Reserve for losses and loss adjustment expense, net of reinsurance	2,112
Special Property Insurance \| Prior years
Claims Development
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	666	626	586	438	$ 265
Special Property Insurance \| 2016
Claims Development
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	1,444	1,216	1,064	$ 703
Special Property Insurance \| 2017
Claims Development
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	4,011	3,344	$ 1,967
Special Property Insurance \| 2018
Claims Development
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	6,036	$ 2,859
Special Property Insurance \| 2019
Claims Development
Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance	$ 1,633

Accumulated Other Comprehensive Income

12 Months Ended

Dec. 31, 2019

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

16. Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income (AOCI) are as follows:


	Year Ended December 31,
	2019		2018		2017
	(in thousands)
Balance as of January 1	$	(563)	$	2,993	$	1,017
Effect of equity accounting guidance adoption		—		(3,215)		—
Beginning Balance		(563)		(222)		1,017
Other comprehensive income (loss) before reclassification		6,555		(740)		2,834
Federal income tax (expense) benefit		(1,344)		76		(772)
Other comprehensive income (loss) before reclassification, net of tax		5,211		(664)		2,062
Amounts reclassified from AOCI		47		399		(608)
Federal income tax expense		(9)		(76)		68
Amounts reclassified from AOCI, net of tax		38		323		(540)
Other comprehensive income (loss)		5,249		(341)		1,522
Effect of new tax rates from Tax Reform		—		—		454
Balance at end of period	$	4,686	$	(563)	$	2,993

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies

Schedule of future minimum rental payments required under operating leases


	Total
	(in thousands)
Years ending December 31:
2020	$	843
2021		879
2022		904
2023		862
2024		478
Thereafter		—
Total	$	3,966

Capitalized Software (Details) - USD ($) $ in Thousands	24 Months Ended
Capitalized Software (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Capitalized Software
Cost	$ 4,567	$ 1,761
Accumulated Amortization	(669)	(33)
Net Book Value	3,898	$ 1,728
Amortization expense	$ 600

Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies

Commitments and Contingencies

15. Commitments and Contingencies

Litigation

The Company is subject to legal proceedings arising from the normal conduct of its business. In the opinion of management, any ultimate liability that may arise from these proceedings will not have a material effect on the Company’s financial position.

Operating Leases

The Company leases office space and office equipment under operating leases expiring at various dates through July 2024. The following is a schedule by year of the future minimum rental payments required under operating leases that have initial or remaining non‑cancelable lease terms exceeding one year as of December 31, 2019:


	Total
	(in thousands)
Years ending December 31:
2020	$	843
2021		879
2022		904
2023		862
2024		478
Thereafter		—
Total	$	3,966

Total rent expense for the years ended December 31, 2019, 2018 and 2017, was $0.6 million, $0.6 million and $0.8 million, respectively.

Letters of Credit

As of December 31, 2019, the Company has three irrevocable standby letters of credit for the benefit of ceding insurance companies to secure the unearned premium assumed by PSIC. The bank letters of credit amount to $1.5 million, $0.4 million and $0.4 million, two of which expire December 31, 2020 with no renewal terms. One of the $0.4 million letters of credit auto renews each year. As of December 31, 2018, the Company has four irrevocable standby letters of credit for the benefit of ceding insurance companies to secure the unearned premium assumed by PSIC. The bank letters of credit amount to $1.3 million, $0.4 million, $0.5 million and $0.4 million, all of which expire December 31, 2018 and all but the $0.5 million letter of credit auto renew for one year. The collateral increases were a result of additional unearned premium assumed from the ceding insurance companies.

The letters of credit were collateralized by $3.2 million and $3.0 million of U.S. Treasury bonds at December 31, 2019 and 2018, respectively. These securities are included in available‑for‑sale investments on the consolidated balance sheets.

Selected Quarterly Financial Data (unaudited) (Tables)

12 Months Ended

Dec. 31, 2019

Selected Quarterly Financial Data (unaudited)

Summary of unaudited quarterly results of operations


	2019 Quarter								2019
		First		Second		Third		Fourth	Year
	($ in thousands, except per share data)
Gross written premiums	$	54,031	$	58,346	$	66,242	$	73,342	$	251,961
Total revenues		22,307		25,905		30,461		34,623		113,296
Net income (loss)		(14,411)		6,698		7,454		10,880		10,621
Comprehensive income (loss)		(12,224)		9,996		8,428		9,670		15,870
Earnings per share (1):
Basic	$	(0.85)	$	0.30	$	0.32	$	0.46	$	0.49
Diluted	$	(0.85)	$	0.30	$	0.31	$	0.45	$	0.49


	2018 Quarter								2018
		First		Second		Third		Fourth	Year
	($ in thousands, except per share data)
Gross written premiums (2)	$	34,013	$	37,342	$	39,994	$	43,542	$	154,891
Total revenues		18,523		19,892		18,916		15,640		72,971
Net income		5,592		6,934		1,566		4,127		18,219
Comprehensive income		4,693		6,843		1,257		5,085		17,878
Earnings per share (1):
Basic	$	0.33	$	0.41	$	0.09	$	0.24	$	1.07
Diluted	$	0.33	$	0.41	$	0.09	$	0.24	$	1.07

(1)

Due to differences in weighted average common shares outstanding between periods, quarterly earnings per share may not add up to the totals reported for the full year.

(2)

The first quarter 2018 gross written premiums shown above differs by an immaterial amount versus the amount reported in our first quarter 10-Q due to a subsequent reclassification between gross written premiums and policy fees.

Investments - Security Holdings in an Unrealized Loss Position - Tabular Disclosure (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Fair Value
Fair Value - Less Than 12 Months	$ 18,747	$ 41,856
Fair Value - More Than 12 Months	2,197	31,907
Fair Value - Total	20,944	73,763
Unrealized Losses
Unrealized Losses - Less Than 12 Months	(114)	(640)
Unrealized Losses - More Than 12 Months	(3)	(625)
Unrealized Losses - Total	(117)	(1,265)
U.S. Governments
Fair Value
Fair Value - Less Than 12 Months	1,235	1,970
Fair Value - More Than 12 Months	1,827	6,197
Fair Value - Total	3,062	8,167
Unrealized Losses
Unrealized Losses - Less Than 12 Months	(11)	(25)
Unrealized Losses - More Than 12 Months	(2)	(101)
Unrealized Losses - Total	(13)	(126)
States, territories, and possession
Fair Value
Fair Value - Less Than 12 Months		719
Fair Value - More Than 12 Months		501
Fair Value - Total		1,220
Unrealized Losses
Unrealized Losses - Less Than 12 Months		(5)
Unrealized Losses - More Than 12 Months		(1)
Unrealized Losses - Total		(6)
Political subdivisions
Fair Value
Fair Value - Less Than 12 Months		264
Fair Value - More Than 12 Months		550
Fair Value - Total		814
Unrealized Losses
Unrealized Losses - Less Than 12 Months		(1)
Unrealized Losses - More Than 12 Months		(9)
Unrealized Losses - Total		(10)
Special revenue excluding mortgage/asset-backed securities
Fair Value
Fair Value - Less Than 12 Months	3,548	1,706
Fair Value - More Than 12 Months		5,916
Fair Value - Total	3,548	7,622
Unrealized Losses
Unrealized Losses - Less Than 12 Months	(46)	(14)
Unrealized Losses - More Than 12 Months		(77)
Unrealized Losses - Total	(46)	(91)
Industrial and miscellaneous
Fair Value
Fair Value - Less Than 12 Months	6,929	30,544
Fair Value - More Than 12 Months	188	14,913
Fair Value - Total	7,117	45,457
Unrealized Losses
Unrealized Losses - Less Than 12 Months	(38)	(556)
Unrealized Losses - More Than 12 Months	(1)	(395)
Unrealized Losses - Total	(39)	(951)
Mortgage/asset-backed securities
Fair Value
Fair Value - Less Than 12 Months	7,035	6,653
Fair Value - More Than 12 Months	182	3,830
Fair Value - Total	7,217	10,483
Unrealized Losses
Unrealized Losses - Less Than 12 Months	(19)	(39)
Unrealized Losses - More Than 12 Months		(42)
Unrealized Losses - Total	$ (19)	$ (81)

Stock-Based Compensation - Restricted stock units activity (Details) - Restricted Stock Units $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2019 USD ($) $ / shares shares
Number of shares
Restricted stock units granted (in shares) \| shares	6,066
Non vested at end of period \| shares	6,066
Weighted-average grant date fair value
Restricted stock units granted (per share) \| $ / shares	$ 16.49
Non vested outstanding at end of period (per share) \| $ / shares	$ 16.49
Total unrecognized stock-based compensation expense \| $	$ 0.1
Weighted-average period over which unrecognized stock-based compensation expense is expected to be recognized	3 months 22 days

Investments - Other-than-temporarily Impaired (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Investments
Other-than-temporarily impaired	$ 0	$ 0

Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2019

Stock-Based Compensation

Schedule of Company's stock-based compensation expense


	Year ended December 31,
	2019		2018
	(in thousands)
Stock-Based Compensation	$	24,103	$	—

Schedule of stock option transactions


				Weighted average
				remaining	Aggregate
	Number of	Weighted-average		contractual term	intrinsic value
	shares	exercise price		(in years)	(in thousands)
Outstanding at December 31, 2018	—	$	—
Options granted	1,058,966		17.03
Options exercised	—		—
Options canceled	(12,593)		15.00
Outstanding at December 31, 2019	1,046,373	$	17.05	9.33	$	35,039
Vested and Exercisable at December 31, 2019	—	$	—	—	$	—

Schedule of fair value of each option granted was estimated on the grant date using the Black-Scholes option pricing model


Risk free rate of return (1)		1.59% - 2.45%
Expected share price volatility (2)		18.12% - 18.45%
Expected life in years (3)		5.64 - 6.08 years
Dividend yield (4)		0%

(1)

Determined based on the U.S. Treasury yield in effect at the time of the grant for zero-coupon U.S. Treasury notes with remaining terms similar to the expected term of the options.

(2)

Determined based on analysis of the volatility of a peer group of publicly traded companies.

(3)

Determined using the “simplified method” for estimating the expected option life, which is the average of the weighted-average vesting period and contractual term of the option as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its common stock has been publicly traded.

(4)

Determined to be zero as the Company does not currently plan to issue dividends.

Schedule of restricted stock unit transactions


		Weighted-average
	Number of	grant date
	shares	fair value
Non vested outstanding at December 31, 2018	—	$	—
Granted	6,066		16.49
Vested	—		—
Forfeited	—		—
Non vested outstanding at December 31, 2019	6,066	$	16.49

Fair value measurements - Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Assets:
Equity securities at fair value	$ 22,328	$ 25,171
Fair Value, Measurements, Recurring
Assets:
Equity securities at fair value	22,328	25,171
Cash, cash equivalents, and restricted cash	33,349	9,924
Total assets	272,828	157,315
Liabilities:
Long-term notes payable		20,000
Total liabilities		20,000
Fair Value, Measurements, Recurring \| U.S. Governments
Assets:
Fair Value Assets	13,679	15,269
Fair Value, Measurements, Recurring \| States, territories, and possession
Assets:
Fair Value Assets	2,445	1,221
Fair Value, Measurements, Recurring \| Political subdivisions
Assets:
Fair Value Assets	1,942	815
Fair Value, Measurements, Recurring \| Special revenue excluding mortgage/asset-backed securities
Assets:
Fair Value Assets	18,436	12,453
Fair Value, Measurements, Recurring \| Industrial and miscellaneous
Assets:
Fair Value Assets	129,013	65,126
Fair Value, Measurements, Recurring \| Mortgage/asset-backed securities
Assets:
Fair Value Assets	51,636	27,336
Fair Value, Measurements, Recurring \| Fair Value, Inputs, Level 1
Assets:
Equity securities at fair value		25,171
Cash, cash equivalents, and restricted cash	28,350	9,924
Total assets	28,350	35,095
Fair Value, Measurements, Recurring \| Fair Value, Inputs, Level 2
Assets:
Equity securities at fair value	22,328
Cash, cash equivalents, and restricted cash	4,999
Total assets	242,978	122,220
Fair Value, Measurements, Recurring \| Fair Value, Inputs, Level 2 \| U.S. Governments
Assets:
Fair Value Assets	13,679	15,269
Fair Value, Measurements, Recurring \| Fair Value, Inputs, Level 2 \| States, territories, and possession
Assets:
Fair Value Assets	2,445	1,221
Fair Value, Measurements, Recurring \| Fair Value, Inputs, Level 2 \| Political subdivisions
Assets:
Fair Value Assets	1,942	815
Fair Value, Measurements, Recurring \| Fair Value, Inputs, Level 2 \| Special revenue excluding mortgage/asset-backed securities
Assets:
Fair Value Assets	18,436	12,453
Fair Value, Measurements, Recurring \| Fair Value, Inputs, Level 2 \| Industrial and miscellaneous
Assets:
Fair Value Assets	129,013	65,126
Fair Value, Measurements, Recurring \| Fair Value, Inputs, Level 2 \| Mortgage/asset-backed securities
Assets:
Fair Value Assets	50,136	27,336
Fair Value, Measurements, Recurring \| Fair Value, Inputs, Level 3
Assets:
Total assets	1,500
Liabilities:
Long-term notes payable		20,000
Total liabilities		$ 20,000
Fair Value, Measurements, Recurring \| Fair Value, Inputs, Level 3 \| Mortgage/asset-backed securities
Assets:
Fair Value Assets	$ 1,500

Reinsurance (Details) $ in Thousands	1 Months Ended	2 Months Ended	12 Months Ended			58 Months Ended
Reinsurance (Details) $ in Thousands	Jun. 30, 2017 USD ($)	Feb. 28, 2015 USD ($)	Dec. 31, 2019 USD ($) Counterparty	Dec. 31, 2018 USD ($) Counterparty	Dec. 31, 2017 USD ($) Counterparty	Dec. 31, 2019 USD ($)
Reinsurance Retention Policy
Retention amount			$ 1,700	$ 700
Ceded written premiums			108,332	82,949	$ 46,951
Prepaid reinsurance premium			$ 26,105	$ 18,284		$ 26,105
Number of Company’s largest reinsurers \| Counterparty			3	3	3
Reinsurance premiums ceded			$ 100,314	$ 67,862	$ 45,416
Percentage of reinsurance premiums ceded on total premium			31.50%	24.00%	20.80%
Percentage of reinsurance recoverable on paid and unpaid losses on total balance			38.20%	23.00%
Non-earthquake events
Reinsurance Retention Policy
Retention amount		$ 15,000				$ 5,000
Non-earthquake events \| Losses between $230 million and $351 million
Reinsurance Retention Policy
Percentage of losses retains				54.55%
Non-earthquake events \| Losses between $351 million and $501 million
Reinsurance Retention Policy
Percentage of losses retains				30.00%
Non-earthquake events \| Losses between $299 million and $350 million
Reinsurance Retention Policy
Percentage of losses retains			55.00%			55.00%
Non-earthquake events \| Losses between $350 million and $477 million
Reinsurance Retention Policy
Percentage of losses retains			30.00%			30.00%
Non-earthquake events \| Losses between $524 million and $569 million
Reinsurance Retention Policy
Percentage of losses retains			100.00%			100.00%
Non-earthquake events \| Minimum \| Losses between $230 million and $351 million
Reinsurance Retention Policy
Loss contingency, plaintiffs damages				$ 230,000
Non-earthquake events \| Minimum \| Losses between $351 million and $501 million
Reinsurance Retention Policy
Loss contingency, plaintiffs damages				351,000
Non-earthquake events \| Minimum \| Losses between $299 million and $350 million
Reinsurance Retention Policy
Loss contingency, plaintiffs damages			$ 299,000			$ 299,000
Non-earthquake events \| Minimum \| Losses between $350 million and $477 million
Reinsurance Retention Policy
Loss contingency, plaintiffs damages			350,000			350,000
Non-earthquake events \| Minimum \| Losses between $524 million and $569 million
Reinsurance Retention Policy
Loss contingency, plaintiffs damages			524,000			524,000
Non-earthquake events \| Maximum
Reinsurance Retention Policy
XOL coverage			740,000	625,000		740,000
Non-earthquake events \| Maximum \| Losses between $230 million and $351 million
Reinsurance Retention Policy
Loss contingency, plaintiffs damages				351,000
Non-earthquake events \| Maximum \| Losses between $351 million and $501 million
Reinsurance Retention Policy
Loss contingency, plaintiffs damages				501,000
Non-earthquake events \| Maximum \| Losses between $299 million and $350 million
Reinsurance Retention Policy
Loss contingency, plaintiffs damages			350,000			350,000
Non-earthquake events \| Maximum \| Losses between $350 million and $477 million
Reinsurance Retention Policy
Loss contingency, plaintiffs damages			477,000			477,000
Non-earthquake events \| Maximum \| Losses between $524 million and $569 million
Reinsurance Retention Policy
Loss contingency, plaintiffs damages			569,000			569,000
Earthquake events
Reinsurance Retention Policy
Retention amount			5,000		$ 15,000
Earthquake events \| Maximum
Reinsurance Retention Policy
XOL coverage			1,050,000	825,000		1,050,000
Earthquake events \| California \| Maximum
Reinsurance Retention Policy
XOL coverage			1,120,000			1,120,000
Texas Homeowners
Reinsurance Retention Policy
Ceded written premiums			20,400	24,900	2,400
Torrey Pines Re Ltd. (“TPRe”) \| Catastrophe
Reinsurance Retention Policy
Notes issued for reinsurance coverage	$ 166,000
Reinsurance premiums ceded			10,600
Duration of reinsurance coverage	3 years
First largest insurer
Reinsurance Retention Policy
Reinsurance premiums ceded			21,700	7,500	4,000
Reinsurance recoverables on paid and unpaid losses			2,700	1,800		2,700
Second largest insurer
Reinsurance Retention Policy
Reinsurance premiums ceded			7,500	7,200	3,400
Reinsurance recoverables on paid and unpaid losses			1,900	800		1,900
Third largest insurer
Reinsurance Retention Policy
Reinsurance premiums ceded			4,900	5,200	2,400
Reinsurance recoverables on paid and unpaid losses			1,900	800		$ 1,900
Commercial All Risk
Reinsurance Retention Policy
Ceded written premiums			$ 19,000	$ 7,200	$ 2,900

Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions	Jan. 09, 2020	Apr. 22, 2019
Secondary Offering \| Subsequent Event
Subsequent Events
Shares sold	5,750,000
Shares offering price	$ 49.00
Net proceeds	$ 35.4
Underwriter option
Subsequent Events
Shares sold		843,750
Underwriter option \| Subsequent Event
Subsequent Events
Shares sold	750,000
Selling stockholders \| Subsequent Event
Subsequent Events
Shares sold	5,000,000

Long-term Debt	12 Months Ended
Long-term Debt	Dec. 31, 2019
Long-term Debt
Long-term Debt	10. Long‑term Debt Prior to September 2018, the Company had $17.5 million in outstanding surplus notes which had been issued by PSIC on February 3, 2015 for a term of seven years. The surplus notes bore interest at the rate of LIBOR plus 8.00% and had restrictions as to payments of interest and principal and any such payment required the prior approval of the Oregon Insurance Commissioners before such payment could be made. Such payments could only be made from surplus. In September 2018, the Company completed a private placement financing of $20.0 million floating rate senior secured notes (the “Floating Rate Notes”), bearing interest at the three-month treasury rate plus 6.50% per annum. As part of the financing agreement, the Company immediately used surplus funds to pay down the existing $17.5 million in surplus notes. As part of this pre‑payment, the Company incurred a penalty of $0.1 million which, along with unamortized debt issuance costs of $0.4 million, was charged to income in 2018. The Floating Rate Notes were redeemed pursuant to their terms on May 23, 2019, at a redemption price equal to 102% of the principal amount of the Floating Rate Notes, or $20.4 million (plus $0.3 million of accrued and unpaid interest thereon). The Company recognized a charge of $1.3 million upon redemption with $0.4 million due to the redemption premium and $0.9 million due to the write‑off of unamortized debt issuance costs. The $0.4 million redemption premium was recognized as a component of interest expense and the $0.9 million issuance cost write‑off was recognized as a component of other underwriting expenses in the Company’s consolidated statements of income and comprehensive income. The Company incurred $1.1 million in interest expense related to the Floating Rate Notes for the year ended December 31, 2019 (inclusive of the $0.4 million redemption premium) and $0.6 million for the year ended December 31, 2018 and paid $1.2 million and $0.5 million for each period, respectively. The Company incurred $1.2 million and $1.6 million in interest expense related to the surplus notes for the year ended December 31, 2018 and 2017, respectively and paid $1.2 million and $1.6 million in each period, respectively.

Capital Stock - Reserved for future issuance (Details) - shares	Dec. 31, 2019	Apr. 16, 2019
Common stock reserved for future issuance
Total	2,640,000
2019 Equity Incentive Plan
Common stock reserved for future issuance
Shares authorized for future issuance	1,347,561	2,400,000
2019 Employee Stock Purchase Plan
Common stock reserved for future issuance
Shares authorized for future issuance	240,000	240,000
Stock Options
Common stock reserved for future issuance
Stock options outstanding	1,046,373
Stock Options \| 2019 Equity Incentive Plan
Common stock reserved for future issuance
Stock options outstanding	1,046,373
Restricted Stock Units \| 2019 Equity Incentive Plan
Common stock reserved for future issuance
Restricted stock units outstanding	6,066

Schedule II - Statements of Cash Flows (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Operating activities
Net income	$ 10,621	$ 18,219	$ 3,783
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized and unrealized losses on investments	(4,443)	2,569	(608)
Amortization of premium on fixed maturity securities	431	481	966
Deferred income tax expense	646		1,134
Net cash provided by operating activities	41,700	22,808	20,248
Investing activities
Purchases of fixed maturity securities	(211,587)	(102,745)	(43,485)
Sales and maturities of fixed maturity securities	124,151	81,215	28,628
Net cash used in investing activities	(80,566)	(25,365)	(19,128)
Financing activities
Proceeds from initial public offering, net of offering costs	87,411
Redemption of Floating Rate Notes	(20,000)
Distribution to stockholder	(5,120)
Net cash provided by financing activities	62,291	1,549
Net increase (decrease) in cash, cash equivalents and restricted cash	23,425	(1,008)	1,120
Cash, cash equivalents and restricted cash at beginning of period	9,924	10,932	9,812
Cash, cash equivalents and restricted cash at end of period	33,349	9,924	10,932
Supplementary cash flow information:
Cash paid for income taxes	5,645	11	9
Palomar Holdings, Inc.
Operating activities
Net income	10,621	18,219	3,783
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries	(16,884)	(18,160)	$ (3,783)
Net realized and unrealized losses on investments	(131)	2
Amortization of premium on fixed maturity securities	114
Deferred income tax expense	646
Other		546
Changes in operating assets and liabilities:	4,202	(67)
Net cash provided by operating activities	(1,432)	540
Investing activities
Purchases of fixed maturity securities	(73,901)
Cash received from subsidiary	226
Sales and maturities of fixed maturity securities	13,930
Net cash used in investing activities	(59,745)
Financing activities
Proceeds from initial public offering, net of offering costs	87,411
Redemption of Floating Rate Notes	(20,000)
Distribution to stockholder	(5,120)
Net cash provided by financing activities	62,291
Net increase (decrease) in cash, cash equivalents and restricted cash	1,114	540
Cash, cash equivalents and restricted cash at beginning of period	540
Cash, cash equivalents and restricted cash at end of period	1,654	$ 540
Supplementary cash flow information:
Cash paid for income taxes	$ 5,645

Net Income Per Share (Tables)

12 Months Ended

Dec. 31, 2019

Net Income Per Share

Schedule of net income per share of common stock


	Year ended December 31,
	2019		2018		2017
	(in thousands, except shares and per share data)
Net income	$	10,621	$	18,219	$	3,783
Weighted average common shares outstanding:
Basic		21,501,541		17,000,000		17,000,000
Common Share equivalents		333,393		—		—
Diluted		21,834,934		17,000,000		17,000,000

Earnings per share:
Basic	$	0.49	$	1.07	$	0.22
Diluted	$	0.49	$	1.07	$	0.22

Commitments and Contingencies - Letters of Credit (Details) $ in Millions	12 Months Ended
	Dec. 31, 2019 USD ($) LetterOfCredit	Dec. 31, 2018 USD ($) LetterOfCredit
Letters of Credit
Number of standby letters of credit \| LetterOfCredit	3	4
Amount outstanding		$ 0.5
Letter of credit renewal term	0 years	1 year
Letters of credit were collateralized	$ 3.2	$ 3.0
First letter of credit
Letters of Credit
Amount outstanding	1.5	1.3
Second letter of credit
Letters of Credit
Amount outstanding	0.4	0.4
Third letter of credit
Letters of Credit
Amount outstanding	$ 0.4	0.5
Fourth letter of credit
Letters of Credit
Amount outstanding		$ 0.4

Stock-Based Compensation - Fair value assumptions (Details)	12 Months Ended
	Dec. 31, 2019
Fair value assumptions
Dividend yield	0.00%
Stock Options
Fair value assumptions
Risk free rate of return, Minimum	1.59%
Risk free rate of return, Maximum	2.45%
Expected share price volatility, Minimum	18.12%
Expected share price volatility, Maximum	18.45%
Stock Options \| Minimum
Fair value assumptions
Expected life in years	5 years 7 months 21 days
Stock Options \| Maximum
Fair value assumptions
Expected life in years	6 years 29 days

Policy Acquisition Costs

12 Months Ended

Dec. 31, 2019

Policy Acquisition Costs

Policy Acquisition Costs

5. Policy Acquisition Costs

The following tables present the policy acquisition costs deferred and amortized:


	December 31,
	2019		2018		2017
	(in thousands)
Deferred Policy Acquisition Costs:
Balance, beginning of year	$	14,052	$	15,161	$	10,654
Additions to deferred balance:
Direct commissions		59,676		36,934		27,976
Ceding commissions		(17,257)		(15,218)		(3,224)
Premium taxes		5,236		3,362		2,625
Total net additions		47,655		25,078		27,377
Amortization of net policy acquisition costs		(36,506)		(26,187)		(22,870)
Balance, end of year	$	25,201	$	14,052	$	15,161
Acquisition expenses:
Amortization of net policy acquisition costs	$	36,506	$	26,187	$	22,870
Period costs		753		2,037		2,652
Total Acquisition expenses	$	37,259	$	28,224	$	25,522

Accumulated Other Comprehensive Income - Roll Forward (Details) - Accumulated Other Comprehensive Income (Loss) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Changes in accumulated other comprehensive income
Beginning balance	$ (563)	$ 2,993	$ 1,017
Effect of equity accounting guidance adoption		(3,215)
Beginning Balance	(563)	(222)	1,017
Other comprehensive income (loss) before reclassification	6,555	(740)	2,834
Federal income tax (expense) benefit	(1,344)	76	(772)
Other comprehensive income (loss) before reclassification, net of tax	5,211	(664)	2,062
Amounts reclassified from AOCI	47	399	(608)
Federal income tax expense	(9)	(76)	68
Amounts reclassified from AOCI, net of tax	38	323	(540)
Other comprehensive income (loss)	5,249	(341)	1,522
Effect of new tax rates from Tax Reform			454
Ending balance	$ 4,686	$ (563)	$ 2,993

Income Taxes - Effective tax rate (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Effective Income Tax Rate Reconciliation, Amount
Expense computed at federal tax rate	$ 3,802	$ 3,825	$ 1,675
Non‑U.S. group member income		(4,409)	(1,632)
Stock-based compensation	4,822
Dividend received deduction and tax‑exempt interest	(36)	(144)	(467)
Impact of tax reform			580
Valuation allowance	(1,677)	678	947
Other	545	44	42
Income tax expense (benefit)	$ 7,456	$ (6)	$ 1,145
Effective Income Tax Rate Reconciliation, Percent
Expense computed at federal tax rate	21.00%	21.00%	34.00%
Non‑U.S. group member income		(24.21%)	(33.12%)
Stock-based compensation	26.63%
Dividend received deduction and tax‑exempt interest	(0.20%)	(0.79%)	(9.47%)
Impact of tax reform			11.76%
Valuation allowance	(9.27%)	3.72%	19.23%
Other	3.01%	0.24%	0.83%
Income tax expense (benefit)	41.17%	0.03%	23.23%
Unrecognized tax benefits	$ 0	$ 0
Maximum
Effective Income Tax Rate Reconciliation, Percent
Expense computed at federal tax rate			35.00%

Statutory financial information

12 Months Ended

Dec. 31, 2019

Statutory financial information

Statutory financial information

13. Statutory financial information

U.S.

U.S. state insurance laws and regulations prescribe accounting practices for determining statutory net income and capital and surplus for insurance companies. In addition, state regulators may permit statutory accounting practices that differ from prescribed practices. Statutory accounting practices (SAP) prescribed or permitted by regulatory authorities for the Company’s insurance subsidiaries differ from U.S. GAAP. The principal differences between SAP and GAAP as they relate to the financial statements of the Company’s insurance subsidiaries are (a) policy acquisition costs are expensed as incurred under SAP, whereas they are deferred and amortized under GAAP, (b) certain assets are not admitted for purposes of determining surplus under SAP, (c) investments in fixed income securities are carried at fair value under GAAP whereas such securities are carried at amortized cost under SAP, and (d) the criteria for recognizing net DTAs and the methodologies used to determine such amounts are different under SAP and GAAP.

Risk‑Based Capital (RBC) requirements promulgated by the NAIC require property/casualty insurers to maintain minimum capitalization levels determined based on formulas incorporating various business risks of the insurance subsidiaries. PSIC’s statutory net income and statutory capital surplus as of December 31, 2019, 2018 and 2017 and for the years then ended are summarized as follows:


	December 31,
	2019		2018		2017
	(in thousands)
Statutory net income (loss)	$	(17,911)	$	9,609	$	(4,128)
Statutory capital and surplus		116,296		63,731		61,338

As of December 31, 2019 and 2018, the company’s capital and surplus exceeds its authorized control level. The authorized control level as determined by the RBC calculation was $34.2 million and $19.7 million at December 31, 2019 and 2018, respectively.

Bermuda

Under the Bermuda Insurance Act, 1978 and related regulations, PSRE is required to maintain certain solvency and liquidity levels. The minimum statutory solvency margin required at December 31, 2019 and 2018 was approximately $1.2 million and $6.9 million, respectively. Actual statutory capital and surplus at December 31, 2019 and 2018 was $38.3 million and $19.6 million, respectively. PSRE had statutory net income of $18.5 million, $17.3 million and $4.8 million for 2019, 2018 and 2017, respectively.

PSRE had stockholder’s equity of $39.7 million and $23.5 million on a GAAP basis at December 31, 2019 and 2018, respectively. The principal difference between statutory capital and surplus and stockholder’s equity presented in accordance with GAAP are prepaid expenses, which are non‑admitted assets for Bermuda statutory purposes.

PSRE maintains a Class 3A license and thus must maintain a minimum liquidity ratio in which the value of its relevant assets is not less than 75.0% of the amount of its relevant liabilities for general business. Relevant assets include cash and cash equivalents, fixed maturity securities, accrued interest income, premiums receivable, losses recoverable from reinsurers, and funds withheld. The relevant liabilities include total general business insurance reserves and total other liabilities, less sundry liabilities. As of December 31, 2019 and 2018, the Company met the minimum liquidity ratio requirement.

Stock-Based Compensation - Management incentive plan prior to IPO (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Mar. 15, 2019
Management Incentive Plan
Stock compensation charge			$ 24,103	$ 0	$ 0
Increase in additional paid in capital			$ 24,103
2014 Management Incentive Plan
Management Incentive Plan
Units outstanding						12,552,825
Stock compensation charge	$ 23,000
Increase in additional paid in capital		$ 23,000

Property and Equipment

12 Months Ended

Dec. 31, 2019

Property and Equipment

Property and Equipment

6. Property and Equipment

Property and Equipment, net consist of the following:


			Accumulated		Net
December 31, 2019	Cost		Depreciation		Book Value
	(in thousands)
Leasehold improvements	$	879	$	(342)	$	537
Computer hardware		144		(64)		80
Office equipment and furniture		519		(291)		228
Total	$	1,542	$	(697)	$	845


			Accumulated		Net
December 31, 2018	Cost		Depreciation		Book Value
	(in thousands)
Leasehold improvements	$	879	$	(225)	$	654
Computer hardware		108		(51)		57
Office equipment and furniture		454		(218)		236
Total	$	1,441	$	(494)	$	947

Depreciation expense for the years ended December 31, 2019, 2018 and 2017 was $0.2 million, $0.2 million, and $0.2 million respectively.

Long-term Debt - Interest (Details) - USD ($) $ in Millions		12 Months Ended
Long-term Debt - Interest (Details) - USD ($) $ in Millions	May 23, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Senior Notes \| 2018 Floating Rate Notes
Long-term debt
Interest expense		$ 1.1	$ 0.6
Redemption Premium	$ 0.4	0.4
Interest paid		$ 1.2	0.5
Notes Payable, Other Payables \| Surplus Notes
Long-term debt
Interest expense			1.2	$ 1.6
Interest paid			$ 1.2	$ 1.6

Investments - Security Holdings in an Unrealized Loss Position - General Information (Details) $ in Thousands	Dec. 31, 2019 USD ($) security	Dec. 31, 2018 USD ($) security
Number of positions:
Number of unrealized loss positions \| security	51	173
Fair Value
Fair Value	$ 20,944	$ 73,763
Unrealized Losses
Unrealized Losses	$ 117	$ 1,265

Reserve for Losses and Loss Adjustment Expenses (Tables)

12 Months Ended

Dec. 31, 2019

Claims Development

Schedule of reconciliation of the beginning and ending reserve balances for losses and LAE on a net of reinsurance basis to the gross amounts


	Year Ended December 31,
	2019		2018		2017
		(in thousands)
Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period	$	4,165	$	4,432	$	3,336
Add: Incurred losses and loss adjustment expenses, net of reinsurance, related to:
Current year		5,774		8,165		12,257
Prior years		(181)		(1,891)		(132)
Total incurred		5,593		6,274		12,125
Deduct: Loss and loss adjustment expense payments, net of reinsurance, related to:
Current year		2,179		4,409		8,986
Prior years		3,710		2,132		2,043
Total payments		5,889		6,541		11,029
Reserve for losses and loss adjustment expense net of reinsurance recoverables at end of period		3,869		4,165		4,432
Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period		12,952		11,896		13,352
Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period	$	16,821	$	16,061	$	17,784

Schedule of reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses


	2019
	(in thousands)
Net outstanding liabilities:
Homeowners’ insurance	$	562
Special property		2,112
Reinsurance- Nonproportional assumed property(1)		1,195
Reserve for losses and loss adjustment expense, net of reinsurance		3,869
Reinsurance recoverable on unpaid claims:
Homeowners’ insurance	$	4,961
Special property		7,983
Other		8
Total reinsurance recoverable on unpaid claims		12,952
Total reserve for losses and loss adjustment expenses	$	16,821

(1)

Reflects the Company’s share of Loss and Loss Adjustment Expense related to non-proportional assumed business. Gross and net reserves related to this treaty are $1.2 million and the ultimate incurred amount reflects IBNR only. The Company does not have direct access to individual claim information underlying the assumed quota arrangement. The Company does not use claim frequency information in the determination of loss reserves or for other internal purposes. Based on these considerations, the Company does not believe providing claims frequency information is practicable as it relates to this line of business.

Homeowners’ Insurance

Claims Development

Schedule of Incurred and Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance

Incurred Losses and Allocated Loss Adjustment Expenses,

Net of Reinsurance Homeowners’ Insurance (in thousands)


											Year Ended December 31,
											Incurred but		Cumulative
			Year Ended December 31,								Not Reported		Number of
Accident Year	2015(1)		2016(1)		2017(1)		2018(1)		2019		Liabilities		Claims
2015	$	2,048	$	1,785	$	1,658	$	1,636	$	1,642	$	1	381
2016				6,069		5,878		5,721		5,636		6	1,081
2017						9,354		7,418		6,630		11	2,964
2018								2,193		2,008		104	788
2019										914		257	1,060
Total									$	16,830	$	379	6,274

Cumulative Paid Losses and Allocated Loss Adjustment Expenses,

Net of Reinsurance Homeowners’ Insurance (in thousands)


			Year Ended December 31,
Accident Year	2015(1)		2016(1)		2017(1)		2018(1)		2019
2015	$	860	$	1,379	$	1,523	$	1,615	$	1,634
2016				4,120		5,356		5,585		5,607
2017						7,135		7,375		6,628
2018								1,550		1,853
2019										546
Total									$	16,268
Reserve for losses and loss adjustment expense, net of reinsurance									$	562

(1)

Data presented for these calendar years is required supplementary information, which is unaudited.

Schedule of Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Homeowners’ Insurance


	Year 1		Year 2		Year 3		Year 4		Year 5
Payout percentage	74.00	%	18.08	%	0.52	%	2.99	%	1.10	%

Special Property Insurance

Claims Development

Schedule of Incurred and Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance

Incurred Losses and Allocated Loss Adjustment Expenses,

Net of Reinsurance Special Property Insurance (in thousands)


											As of December 31, 2019
											Incurred but		Cumulative
			Year Ended December 31,								Not Reported		Number of
Accident Year	2015(1)		2016(1)		2017(1)		2018(1)		2019		Liabilities		Claims
2015	$	630	$	719	$	671	$	671	$	678	$	1	8
2016				1,381		1,249		1,251		1,454		—	71
2017						3,071		3,475		4,014		—	357
2018								5,970		6,095		11	526
2019										3,661		964	402
Total									$	15,902	$	976	1,364

Cumulative Paid Losses and Allocated Loss Adjustment Expenses,

Net of Reinsurance Special Property Insurance (in thousands)


			Year Ended December 31,
Accident Year	2015(1)		2016(1)		2017(1)		2018(1)		2019
2015	$	265	$	438	$	586	$	626	$	666
2016				703		1,064		1,216		1,444
2017						1,967		3,344		4,011
2018								2,859		6,036
2019										1,633
Total										13,790
Reserve for losses and loss adjustment expense, net of reinsurance										2,112

(1)

Data presented for these calendar years is required supplementary information, which is unaudited.

Schedule of Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Homeowners’ Insurance


	Year 1		Year 2		Year 3		Year 4		Year 5
Payout percentage	45.59	%	34.20	%	16.30	%	10.80	%	5.84	%

Selected Quarterly Financial Data (unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Selected Quarterly Financial Data (unaudited)
Gross written premiums	$ 73,342	$ 66,242	$ 58,346	$ 54,031	$ 43,542	$ 39,994	$ 37,342	$ 34,013	$ 251,961	$ 154,891	$ 120,234
Total revenues	34,623	30,461	25,905	22,307	15,640	18,916	19,892	18,523	113,296	72,971	59,466
Net income	10,880	7,454	6,698	(14,411)	4,127	1,566	6,934	5,592	10,621	18,219	3,783
Comprehensive income (loss)	$ 9,670	$ 8,428	$ 9,996	$ (12,224)	$ 5,085	$ 1,257	$ 6,843	$ 4,693	$ 15,870	$ 17,878	$ 5,305
Earnings per share:
Basic	$ 0.46	$ 0.32	$ 0.30	$ (0.85)	$ 0.24	$ 0.09	$ 0.41	$ 0.33	$ 0.49	$ 1.07	$ 0.22
Diluted	$ 0.45	$ 0.31	$ 0.30	$ (0.85)	$ 0.24	$ 0.09	$ 0.41	$ 0.33	$ 0.49	$ 1.07	$ 0.22

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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+ Details

- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

+ References

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+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Investments (Tables)

12 Months Ended

Dec. 31, 2019

Investments

Schedule of available-for-sale investments


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2019	Cost or Cost		Gains		Losses		Value
	(in thousands)
Fixed maturities:
U.S. Governments	$	13,371	$	321	$	(13)	$	13,679
States, territories, and possessions		2,298		147		—		2,445
Political subdivisions		1,913		29		—		1,942
Special revenue excluding mortgage/asset-backed securities		18,139		343		(46)		18,436
Industrial and miscellaneous		124,726		4,326		(39)		129,013
Mortgage/asset-backed securities		50,831		824		(19)		51,636
Total available-for-sale investments	$	211,278	$	5,990	$	(117)	$	217,151


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2018	Cost or Cost		Gains		Losses		Value
	(in thousands)
Fixed maturities:
U.S. Governments	$	15,299	$	96	$	(126)	$	15,269
States, territories, and possessions		1,227		—		(6)		1,221
Political subdivisions		825		—		(10)		815
Special revenue excluding mortgage/asset-backed securities		12,429		115		(91)		12,453
Industrial and miscellaneous		65,885		192		(951)		65,126
Mortgage/asset-backed securities		27,284		133		(81)		27,336
Total available-for-sale investments	$	122,949	$	536	$	(1,265)	$	122,220

Schedule of aggregate fair value and gross unrealized losses


	Less Than 12 Months				More Than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2019	Value		Losses		Value		Losses		Value		Losses
	(in thousands)
Fixed maturity securities:
U.S. Governments		1,235		(11)	$	1,827	$	(2)	$	3,062	$	(13)
States, territories, and possessions		—		—		—		—		—		—
Political subdivisions		—		—		—		—		—		—
Special revenue excluding mortgage/asset-backed securities		3,548		(46)		—		—		3,548		(46)
Industrial and miscellaneous		6,929		(38)		188		(1)		7,117		(39)
Mortgage/asset-backed securities		7,035		(19)		182		—		7,217		(19)
Total	$	18,747	$	(114)	$	2,197	$	(3)	$	20,944	$	(117)


	Less Than 12 Months				More Than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2018	Value		Losses		Value		Losses		Value		Losses
	(in thousands)
Fixed maturity securities:
U.S. Governments	$	1,970	$	(25)	$	6,197	$	(101)	$	8,167	$	(126)
States, territories, and possessions		719		(5)		501		(1)		1,220		(6)
Political subdivisions		264		(1)		550		(9)		814		(10)
Special revenue excluding mortgage/asset-backed securities		1,706		(14)		5,916		(77)		7,622		(91)
Industrial and miscellaneous		30,544		(556)		14,913		(395)		45,457		(951)
Mortgage/asset-backed securities		6,653		(39)		3,830		(42)		10,483		(81)
Total	$	41,856	$	(640)	$	31,907	$	(625)	$	73,763	$	(1,265)

Schedule of contractual maturities of available-for-sale securities


	Amortized		Fair
	Cost		Value
	(in thousands)
Due within one year	$	9,280	$	9,299
Due after one year through five years		64,933		66,108
Due after five years through ten years		59,192		62,292
Due after ten years		27,042		27,816
Mortgage and asset-backed securities		50,831		51,636
	$	211,278	$	217,151

Schedule of change in unrealized gains (losses) of investments


	Year Ended December 31,
	2019		2018		2017
	(in thousands)
Change in net unrealized gains (losses)
Fixed maturities	$	6,602	$	(341)	$	(6)
Equity securities		—		—		2,232
Net (decrease) increase	$	6,602	$	(341)	$	2,226

Schedule of net investment income


	December 31,
	2019		2018		2017
	(in thousands)
Interest income	$	5,894	$	3,036	$	1,916
Dividend income		424		514		514
Less: investment expense		(343)		(312)		(305)
Net investment income	$	5,975	$	3,238	$	2,125

Schedule of net realized and unrealized investment gains and losses


	Year Ended
	December 31,
	2019		2018		2017
		(in thousands)
Realized gains:
Gains on sales of fixed maturity securities	$	1,405	$	19	$	3
Gains on sales of equity securities		177		4,287		802
Total realized gains		1,582		4,306		805
Realized losses:
Losses on sales of fixed maturity securities		(84)		(418)		(48)
Losses on sales of equity securities		(64)		(421)		(149)
Total realized losses		(148)		(839)		(197)
Net realized investment gains (losses)		1,434		3,467		608
Net unrealized gains (losses) on equity securities		3,009		(6,036)		—
Net realized and unrealized gains (losses) on investments	$	4,443	$	(2,569)	$	608

Schedule II - Balance Sheets (Details) - USD ($) $ / shares in Units, $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Jan. 01, 2018	Dec. 31, 2017	Dec. 31, 2016
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $211,278 in 2019; $122,949 in 2018)	$ 217,151	$ 122,220
Equity securities at fair value	22,328	25,171
Total investments	239,479	147,391
Cash and cash equivalents	33,119	9,525
Accrued investment income	1,386	734
Prepaid expenses and other assets	14,861	5,863
Total assets	395,462	231,134
Liabilities
Accounts payable and other liabilities	13,555	9,245
Income taxes payable	1,117
Deferred tax liabilities	1,999
Total liabilities	176,906	134,842
Shareholder’s equity
Preferred stock, $0.0001 par value, 5,000,000 and 0 shares authorized as of December 31, 2019 and December 31, 2018, respectively, 0 shares issued and outstanding as of December 31, 2019 and December 31, 2018
Common stock, $0.0001 par value, 500,000,000 shares authorized, 23,468,750 and 17,000,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively	2	2
Additional paid-in capital	180,012	68,498
Accumulated other comprehensive (loss) income	4,686	(563)	$ 3,200
Retained earnings	33,856	28,355	$ 3,200
Total stockholders' equity	218,556	96,292		$ 78,414	$ 73,109
Total liabilities and stockholders' equity	395,462	231,134
Fixed maturity securities available for sale, amortized cost	211,278	122,949
Equity securities, cost	$ 21,336	$ 27,188
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	23,468,750	17,000,000
Common stock, shares outstanding	23,468,750	17,000,000
Palomar Holdings, Inc.
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $211,278 in 2019; $122,949 in 2018)	$ 29,120	$ 11,581
Equity securities at fair value	1,696	1,658
Total investments	30,816	13,239
Cash and cash equivalents	1,654	540
Accrued investment income	126	67
Prepaid expenses and other assets	36
Investment in subsidiaries	189,313	82,446
Total assets	221,945	96,292
Liabilities
Accounts payable and other liabilities	268
Income taxes payable	1,122
Deferred tax liabilities	1,999
Total liabilities	3,389
Shareholder’s equity
Common stock, $0.0001 par value, 500,000,000 shares authorized, 23,468,750 and 17,000,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively	2	2
Additional paid-in capital	180,012	68,498
Accumulated other comprehensive (loss) income	4,686	(563)
Retained earnings	33,856	28,355
Total stockholders' equity	218,556	96,292
Total liabilities and stockholders' equity	221,945	96,292
Fixed maturity securities available for sale, amortized cost	28,413	11,668
Equity securities, cost	$ 1,661	$ 1,656
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	23,468,750	17,000,000
Common stock, shares outstanding	23,468,750	17,000,000

Statutory financial information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statutory Accounting Practices
Statutory net income (loss)	$ (17,911)	$ 9,609	$ (4,128)
Statutory capital and surplus	116,296	63,731	61,338
Shareholder’s equity	218,556	96,292	78,414	$ 73,109
UNITED STATES
Statutory Accounting Practices
Risk Based Capital	34,200	19,700
BERMUDA
Statutory Accounting Practices
Statutory net income (loss)	18,500	17,300	$ 4,800
Statutory capital and surplus	38,300	19,600
Minimum statutory solvency margin	1,200	6,900
Shareholder’s equity	$ 39,700	$ 23,500
BERMUDA \| Minimum
Statutory Accounting Practices
Liquidity ratio	75.00%

Underwriting Information (Details) $ in Thousands	3 Months Ended								12 Months Ended
Underwriting Information (Details) $ in Thousands	Dec. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2019 USD ($) item product	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Disaggregation of Revenue
Number of program administrators \| item									2
Number of products \| product									4
Amount	$ 73,342	$ 66,242	$ 58,346	$ 54,031	$ 43,542	$ 39,994	$ 37,342	$ 34,013	$ 251,961	$ 154,891	$ 120,234
% of GWP									100.00%	100.00%	100.00%
Sales Revenue \| Product Concentration Risk
Disaggregation of Revenue
Amount									$ 148,600	$ 104,900	$ 85,800
% of GWP									59.00%	67.70%	71.30%

Underwriting Information - Gross Written Premiums by Product (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Gross written premiums
Amount	$ 73,342	$ 66,242	$ 58,346	$ 54,031	$ 43,542	$ 39,994	$ 37,342	$ 34,013	$ 251,961	$ 154,891	$ 120,234
% of GWP									100.00%	100.00%	100.00%
Residential Earthquake
Gross written premiums
Amount									$ 130,473	$ 81,679	$ 57,328
% of GWP									51.80%	52.70%	47.70%
Commercial Earthquake
Gross written premiums
Amount									$ 38,741	$ 20,946	$ 23,079
% of GWP									15.40%	13.50%	19.20%
Specialty Homeowners
Gross written premiums
Amount									$ 32,788	$ 27,680	$ 26,516
% of GWP									13.00%	17.90%	22.00%
Commercial All Risk
Gross written premiums
Amount									$ 30,358	$ 14,338	$ 7,321
% of GWP									12.00%	9.30%	6.10%
Hawaii Hurricane
Gross written premiums
Amount									$ 10,764	$ 8,128	$ 5,323
% of GWP									4.30%	5.20%	4.40%
Residential Flood
Gross written premiums
Amount									$ 5,216	$ 2,120	$ 667
% of GWP									2.10%	1.40%	0.60%
Other
Gross written premiums
Amount									$ 3,621
% of GWP									1.40%

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Taxes

Schedule of federal income tax expense (benefit)



	December 31,
	2019		2018		2017
	(in thousands)
Current	$	6,810	$	(6)	$	11
Deferred		646		—		1,134
Income tax expense (benefit)	$	7,456	$	(6)	$	1,145

Schedule of deferred tax assets and liabilities


	December 31,
	2019		2018
	(in thousands)
Deferred tax assets:
Losses and LAE reserve discount	$	10	$	22
Net operating losses		74		702
Investment amortization		85		119
Unearned premiums		3,748		1,914
Capitalized organizational costs		274		304
Unrealized losses on investments		—		505
Other		390		306
Total deferred tax assets	$	4,581	$	3,872
Deferred tax liabilities:
Deferred acquisition costs	$	(4,468)	$	(2,127)
Unrealized gains on investments		(1,396)		—
Internally developed software		(640)		—
Other		(2)		(68)
Total deferred tax liabilities		(6,506)		(2,195)
Net deferred tax asset before valuation allowance		(1,925)		1,677
Valuation allowance		(74)		(1,677)
Total net deferred tax liabilities	$	(1,999)	$	—

Schedule of effective tax rate


	Years Ended December 31,
	2019				2018				2017
	($ in thousands)
Expense computed at federal tax rate	$	3,802	21.00	%	$	3,825	21.00	%	$	1,675	34.00	%
Non‑U.S. group member income		—	—	%		(4,409)	(24.21)	%		(1,632)	(33.12)	%
Stock-based compensation		4,822	26.63	%		—	—	%		—	—	%
Dividend received deduction and tax‑exempt interest		(36)	(0.20)	%		(144)	(0.79)	%		(467)	(9.47)	%
Impact of tax reform		—	—	%		—	—	%		580	11.76	%
Valuation allowance		(1,677)	(9.27)	%		678	3.72	%		947	19.23	%
Other		545	3.01	%		44	0.24	%		42	0.83	%
Income tax expense (benefit)	$	7,456	41.17	%	$	(6)	0.03	%	$	1,145	23.23	%

Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2019	Feb. 24, 2020	Jun. 28, 2019
Document and Entity Information
Entity Registrant Name	Palomar Holdings, Inc.
Entity Central Index Key	0001761312
Document Type	10-K
Document Period End Date	Dec. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		24,218,750
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Entity Shell Company	false
Entity Public Float			$ 175,098,032

Schedule II

12 Months Ended

Dec. 31, 2019

Schedule II

Schedule II

Palomar Holdings, Inc. and Subsidiaries

Balance Sheets (Parent Company)

(In Thousands, except shares and par value data)


	December 31,		December 31,
	2019		2018
Assets
Investments:
Fixed maturity securities available for sale, at fair value (amortized cost: $28,413 in 2019, $11,668 in 2018)	$	29,120	$	11,581
Equity Securities, at fair value: (cost: $1,661 in 2019, $1,656 in 2018)		1,696		1,658
Total investments		30,816		13,239
Cash and cash equivalents		1,654		540
Accrued investment income		126		67
Prepaid expenses and other assets		36		—
Investment in subsidiaries		189,313		82,446
Total assets	$	221,945	$	96,292
Liabilities and Stockholders' equity
Liabilities:
Accounts payable and other liabilities	$	268	$	—
Federal income tax payable		1,122		—
Deferred tax liabilities		1,999		—
Total liabilities		3,389		—
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 and 0 shares authorized as of December 31, 2019 and December 31, 2018, respectively, 0 shares issued and outstanding as of December 31, 2019 and December 31, 2018		—		—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 23,468,750 and 17,000,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively		2		2
Additional paid‑in capital		180,012		68,498
Accumulated other comprehensive (loss) income		4,686		(563)
Retained earnings		33,856		28,355
Total stockholders' equity		218,556		96,292
Total liabilities and stockholders' equity	$	221,945	$	96,292

See accompanying notes.

Schedule II

Palomar Holdings, Inc. and Subsidiaries

Statements of Income (Parent Company)

(In Thousands)


	Year Ended December 31,
	2019		2018		2017
Net investment income	$	1,039	$	61	$	—
Net realized and unrealized losses on investments		131		(2)		—
Operating expenses		8		—		—
Income before income taxes		1,178		59		—
Income tax expense		7,441		—		—
Income (loss) before equity in net income of subsidiaries		(6,263)		59		—
Equity in net income of subsidiaries		16,884		18,160		3,783
Net income		10,621		18,219		3,783
Other comprehensive income:
Net unrealized losses on securities available for sale		708		(87)		—
Equity in other comprehensive income of subsidiaries, net of taxes		4,541		(254)		1,522
Total comprehensive income	$	15,870	$	17,878	$	5,305

See accompanying notes.

Schedule II

Palomar Holdings, Inc. and Subsidiaries

Statements of Cash Flows (Parent Company)

(In Thousands)


	Year Ended December 31,
	2019		2018		2017
Operating activities
Net income	$	10,621	$	18,219	$	3,783
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries		(16,884)		(18,160)		(3,783)
Net realized and unrealized losses on investments		(131)		2		—
Amortization of premium on fixed maturity securities		114		—		—
Deferred income tax expense		646		—		—
Other		—		546		—
Changes in operating assets and liabilities:		4,202		(67)		—
Net cash (used in) provided by operating activities		(1,432)		540		—
Investing activities
Purchases of fixed maturity securities		(73,901)		—		—
Cash received from subsidiary		226		—		—
Sales and maturities of fixed maturity securities		13,930		—		—
Net cash used in investing activities		(59,745)		—		—
Financing activities
Proceeds from initial public offering, net of offering costs		87,411		—		—
Redemption of Floating Rate Notes		(20,000)		—		—
Distribution to stockholder		(5,120)		—		—
Net cash provided by financing activities		62,291		—		—
Net increase in cash and cash equivalents		1,114		540		—
Cash and cash equivalents at beginning of period		540		—		—
Cash and cash equivalents at end of period	$	1,654	$	540	$	—
Supplementary cash flow information:
Cash paid for income taxes	$	5,645	$	—	$	—

See accompanying notes.

Schedule II

1.Accounting Policies

Organization

Palomar Holdings, Inc. (the Company), is an insurance holding company that was incorporated in Delaware in March 2019. Prior to incorporation in Delaware, the Company was known as GC Palomar Holdings (GCPH), which was a Cayman Islands incorporated insurance holding company formed on October 4, 2013 when GC Palomar Investor LP (GCPI) acquired control of GCPH.

Basis of Presentation

The accompanying condensed financial statements have been prepared using the equity method. Under the equity method, the investment in consolidated subsidiaries is stated at cost plus equity in undistributed earnings of consolidated subsidiaries since the date of acquisition. These condensed financial statements should be read in conjunction with the Company’s consolidated financial statements.

Estimates and Assumptions

Preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Those estimates are inherently subject to change, and actual results may ultimately differ from those estimates.

Capital Stock

12 Months Ended

Dec. 31, 2019

Capital Stock

Capital Stock

12. Capital Stock

As of December 31, 2019, the Company has 5,000,000 preferred shares authorized with a par value of $0.0001 and no preferred shares issued and outstanding. There were no preferred shares authorized as of December 31, 2018. As of December 31, 2019 and December 31, 2018, the Company has 500,000,000 common shares authorized and 23,468,750 and 17,000,000 common shares issued and outstanding, respectively, with a par value of $0.0001. Additional paid in capital is $180.0 million as of December 31, 2019 and $68.5 million as of December 31, 2018.

Common stock reserved for future issuance consists of the following as of December 31, 2019:


Stock options outstanding under 2019 Equity Incentive Plan	1,046,373
Restricted stock units outstanding under 2019 Equity Incentive Plan	6,066
Shares authorized for future issuance under 2019 Equity Incentive Plan	1,347,561
Shares authorized for future issuance under 2019 Employee Stock Purchase Plan	240,000
Total	2,640,000

Income Taxes - Excise Tax (Details) $ in Millions	12 Months Ended
Income Taxes - Excise Tax (Details) $ in Millions	Dec. 31, 2019 USD ($)
Income Taxes
Federal excise tax rate (as a percent)	1.00%
Change in valuation allowance	$ 1.7

Underwriting Information - Gross Written Premiums by State (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Gross written premiums
Amount	$ 73,342	$ 66,242	$ 58,346	$ 54,031	$ 43,542	$ 39,994	$ 37,342	$ 34,013	$ 251,961	$ 154,891	$ 120,234
% of GWP									100.00%	100.00%	100.00%
California
Gross written premiums
Amount									$ 141,743	$ 82,119	$ 64,231
% of GWP									56.30%	53.00%	53.40%
Texas
Gross written premiums
Amount									$ 44,087	$ 32,568	$ 29,273
% of GWP									17.50%	21.00%	24.40%
Hawaii
Gross written premiums
Amount									$ 11,851	$ 8,128	$ 5,323
% of GWP									4.70%	5.20%	4.40%
Washington
Gross written premiums
Amount									$ 9,607	$ 5,658	$ 2,803
% of GWP									3.80%	3.70%	2.30%
Oregon
Gross written premiums
Amount									$ 7,396	$ 5,286	$ 4,250
% of GWP									2.90%	3.40%	3.60%
South Carolina
Gross written premiums
Amount									$ 6,185	$ 3,208	$ 1,706
% of GWP									2.50%	2.10%	1.40%
Illinois
Gross written premiums
Amount									$ 4,896	$ 4,403	$ 4,854
% of GWP									1.90%	2.80%	4.00%
Mississippi
Gross written premiums
Amount									$ 4,769	$ 2,585	$ 982
% of GWP									1.90%	1.70%	0.80%
Other
Gross written premiums
Amount									$ 21,427	$ 10,936	$ 6,812
% of GWP									8.50%	7.10%	5.70%

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Consolidated Balance Sheets
Fixed maturity securities available for sale, amortized cost	$ 211,278	$ 122,949
Equity securities, cost	$ 21,336	$ 27,188
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	0
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	23,468,750	17,000,000
Common stock, shares outstanding	23,468,750	17,000,000

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Operating activities
Net income	$ 10,621	$ 18,219	$ 3,783
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	24,103
Depreciation expense	216	212	160
Amortization and write-off of debt issuance costs	921	443	114
Loss on asset disposal	1		1
Net realized and unrealized losses (gains) on investments	(4,443)	2,569	(608)
Amortization of premium on fixed maturity securities	431	481	966
Deferred income tax expense	646		1,134
Changes in operating assets and liabilities:
Accrued investment income	(652)	54	(137)
Premium receivable	(17,604)	(3,546)	(3,845)
Deferred policy acquisition costs	(11,149)	1,109	(4,507)
Reinsurance recoverables	(2,693)	70	(13,089)
Prepaid reinsurance premium	(7,821)	(15,109)	(1,527)
Prepaid expenses and other assets	(8,998)	(4,603)	(1)
Accounts payable and other accrued liabilities	3,287	2,748	2,238
Reserve for losses and loss adjustment expenses	760	(1,723)	13,006
Unearned premiums	51,243	17,154	19,266
Ceded premiums payable	776	5,538	3,487
Funds held under reinsurance treaty	938	(797)	(204)
Income taxes payable	1,117	(11)	11
Net cash provided by operating activities	41,700	22,808	20,248
Investing activities
Purchases of property and equipment	(115)	(332)	(68)
Purchases of fixed maturity securities	(211,587)	(102,745)	(43,485)
Purchases of equity securities	(58,858)	(33,712)	(10,723)
Sales and maturities of fixed maturity securities	124,151	81,215	28,628
Sales of equity securities	64,820	29,959	6,770
Securities receivable or payable, net	1,023	250	(250)
Net cash used in investing activities	(80,566)	(25,365)	(19,128)
Financing activities
Proceeds from initial public offering, net of offering costs	87,411
Repayment of surplus notes		(17,500)
Distribution to stockholder	(5,120)
Proceeds from issuance of Floating Rate Notes, net of issuance costs		19,049
Redemption of Floating Rate Notes	(20,000)
Net cash provided by financing activities	62,291	1,549
Net increase (decrease) in cash, cash equivalents and restricted cash	23,425	(1,008)	1,120
Cash, cash equivalents and restricted cash at beginning of period	9,924	10,932	9,812
Cash, cash equivalents and restricted cash at end of period	33,349	9,924	10,932
Supplementary cash flow information:
Cash paid for income taxes	5,645	11	9
Cash paid for interest	$ 1,162	$ 1,727	$ 1,632

Capitalized Software (Tables)

12 Months Ended

Dec. 31, 2019

Capitalized Software

Schedule of capitalized software


			Accumulated		Net
December 31, 2019	Cost		Amortization		Book Value
	(in thousands)
Capitalized Software	$	4,567	$	(669)	$	3,898


			Accumulated		Net
December 31, 2018	Cost		Amortization		Book Value
	(in thousands)
Capitalized Software	$	1,761	$	(33)	$	1,728

Retirement and Post-Employment Retirement Plans	12 Months Ended
Retirement and Post-Employment Retirement Plans	Dec. 31, 2019
Retirement and Post-Employment Retirement Plans
Retirement and Post-Employment Retirement Plans	17. Retirement and Post‑Employment Retirement Plans For employees meeting certain eligibility requirements, the Company provides a defined contribution retirement plan under IRC Section 401(k). Under a safe‑harbor plan, the Company contributes 3% of each participant’s gross wages regardless of the employee’s contribution. For the years ended December 31, 2019, 2018, and 2017 the Company’s contributions to the plan were $0.3 million, $0.2 million and $0.2 million, respectively.

Significant Accounting Policies (Policies)	12 Months Ended
Significant Accounting Policies (Policies)	Dec. 31, 2019
Significant Accounting Policies
Summary of Operations	Summary of Operations Palomar Holdings, Inc. (the Company), is an insurance holding company that was incorporated in Delaware in March 2019. Prior to incorporation in Delaware, the Company was known as GC Palomar Holdings (GCPH), which was a Cayman Islands incorporated insurance holding company formed on October 4, 2013 when GC Palomar Investor LP (GCPI) acquired control of GCPH. The Company and its wholly owned subsidiaries include Palomar Insurance Holdings, Inc. (PIH), which wholly owns Palomar Specialty Insurance Company (PSIC), Prospect General Insurance Agency, Inc. (PGIA), and Palomar Specialty Reinsurance Company Bermuda Ltd. (PSRE). On February 12, 2014, GCPH through PIH acquired PSIC from Pacific Indemnity Company in a stock purchase transaction. PSIC is a property and casualty insurance company domiciled in the state of Oregon. The Company’s core focus is on the residential and commercial earthquake markets in earthquake‑exposed states such as California, Oregon, Washington, and states with exposure to the New Madrid Seismic Zone. In 2015, PSIC expanded into broader geographic regions and perils, to include Hawaii residential hurricane and Texas specialty homeowners products. In 2016, PSIC began a commercial all risk insurance program which covers commercial property primarily in southeastern wind‑exposed states. PSIC is licensed to underwrite insurance on an admitted basis in 27 states in the United States, as of December 31, 2019, mainly through managing general insurance agencies, wholesale brokers, and independent agents. PGIA is a property and casualty general insurance agency for PSIC and unaffiliated insurance carriers. As a general insurance agency, PGIA assists in developing insurance products, underwriting insurance policies, and receiving and disbursing funds from premium and loss transactions under contracts on behalf of insurance companies. PGIA earns commissions from the product development, marketing, and servicing of the insurance companies’ programs. PGIA also earns fee income from policyholder transactions. PSRE is a Bermuda captive reinsurance company that reinsures earthquake and Hawaii Hurricane premium on a quota share basis exclusively for PSIC. The Company operates as an insurance holding company system and is subject to the insurance holding company laws of the State of Oregon, the state in which PSIC is domiciled. The Company is also commercially domiciled in California and, as a result, subject to the insurance holding company laws of that state. These statutes require that each insurance company in the system register with the insurance department of its state of domicile and furnish information concerning the operations of companies within the holding company system that may materially affect the operations, management or financial condition of the insurers within the system and domiciled in that state. The Company’s chief operating decision‑maker is the Chief Executive Officer. While the chief decision‑maker monitors the revenue streams of the various products and services, operations are managed, resources are allocated, and financial performance is evaluated on a Company‑wide basis. The Company has a single operating segment, the property and casualty insurance business.
Basis of Presentation	Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include the accounts of the Company and its wholly‑owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Stock Split	Stock Split On March 15, 2019, the Company effected a 17,000,000 for one forward stock split in conjunction with domestication in the United States. All share and per share information included in the accompanying consolidated financial statements and notes to the consolidated financial statements have been retroactively adjusted to reflect the stock split for the Company’s common stock for all periods presented. Initial Public Offering (IPO) On April 22, 2019, the Company completed its IPO with the sale of 6,468,750 shares of common stock at a price to the public of $15.00 per share, including 843,750 shares sold upon the exercise in full of the underwriter’s option to purchase additional shares. After underwriter discounts and commissions and offering expenses, net proceeds from the IPO were approximately $87.4 million.
Initial Public Offering (IPO)	Initial Public Offering (IPO) On April 22, 2019, the Company completed its IPO with the sale of 6,468,750 shares of common stock at a price to the public of $15.00 per share, including 843,750 shares sold upon the exercise in full of the underwriter’s option to purchase additional shares. After underwriter discounts and commissions and offering expenses, net proceeds from the IPO were approximately $87.4 million.
Use of Estimates	Use of Estimates The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. All revisions to accounting estimates are recognized in the period in which the estimates are revised. Significant estimates reflected in the Company’s consolidated financial statements include, but are not limited to, reserves for losses and loss adjustment expenses, reinsurance recoverables on unpaid losses, and the fair values of investments.
Cash and Cash Equivalents	Cash and Cash Equivalents Cash and cash equivalents include time deposits and marketable securities with original maturities of three months or less at acquisition and are stated at cost, which approximates fair value. The Company maintains cash balances in federally insured financial institutions.
Restricted Cash	Restricted Cash Restricted cash includes cash on deposit with reinsurance carriers. Restricted cash also includes cash held in a fiduciary capacity for the benefit of third-party insurance carriers.
Deferred Offering Costs	Deferred Offering Costs Deferred offering costs, which consist of direct incremental legal and accounting fees relating to the Company's April 2019 initial public offering (IPO), were capitalized as incurred. The deferred offering costs were offset against the IPO proceeds upon the consummation of the offering. Deferred offering costs were $1.1 million at December 31, 2018 and are classified as Prepaid expenses and other assets on the Company's consolidated balance sheet.
Investments	Investments All of the Company’s investments in fixed maturity securities are classified as available‑for‑sale and are carried at fair value. Unrealized gains and losses related to fixed maturity securities are included in accumulated other comprehensive income as a separate component of stockholder’s equity. Equity securities are carried at fair value with unrealized gains and losses included as a component of net income on the Company’s consolidated statement of income. Prior to 2018, unrealized gains and losses on equity securities were included in accumulated other comprehensive income as a separate component of stockholders’ equity. Premiums and discounts on mortgage‑backed securities and asset‑backed securities are amortized or accrued using the prospective method which considers anticipated prepayments at the date of purchase. To the extent that the estimated lives of such securities change as a result of changes in estimated prepayment rates, the adjustments are included in net investment income using the prospective method. Investment income consists primarily of interest and dividends. Interest income is recognized on an accrual basis. Dividend income is recognized on the ex‑dividend date. Net investment income represents investment income, net of expenses. Other‑than‑temporary declines in fair value of fixed maturity securities are evaluated for amounts considered credit losses by comparing the expected present value of cash flows to be collected to the amortized cost. Once the amount of other‑than‑temporary impairment (OTTI) related to the credit loss is determined, the unrealized loss is then bifurcated into the credit‑related loss and the loss related to all other factors. The credit‑related OTTI loss is recognized as a realized loss in the statement of income and comprehensive income and the cost basis of the security is reduced. The OTTI related to other factors remain in accumulated other comprehensive income. Before 2018, other‑than‑temporary declines in the fair value of equity securities would have been recorded as realized losses in the consolidated statement of income and comprehensive income and the cost basis of the security would have been reduced (see Note 3). The Company uses the specific‑identification method to determine the cost of fixed maturity securities sold and the first‑in, first‑out method for lots of equity securities sold.
Fair Value	Fair Value Fair value is defined as the price that the Company would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. The three‑tier hierarchy of inputs is summarized in the three broad levels listed below: Level 1—Unadjusted quoted prices are available in active markets for identical investments as of the reporting date. Level 2—Pricing inputs are quoted prices for similar investments in active markets; quoted prices for identical or similar investments in inactive markets; or valuations based on models where the significant inputs are observable or can be corroborated by observable market data. Level 3—Pricing inputs into models are unobservable for the investment. The unobservable inputs require significant management judgment or estimation. To measure fair value, the Company obtains quoted market prices for its investment securities from its outside investment managers. If a quoted market price is not available, the Company uses prices of similar securities. The fair values obtained from the outside investment managers are reviewed for reasonableness and any discrepancies are investigated for final valuation. The fair value of the Company’s investments in fixed maturity securities is estimated using relevant inputs, including available market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. An Option Adjusted Spread model is also used to develop prepayment and interest rate scenarios. Industry standard models are used to analyze and value securities with embedded options or prepayment sensitivities. These fair value measurements are estimated based on observable, objectively verifiable market information rather than market quotes; therefore, these investments are classified and disclosed in Level 2 of the hierarchy. The fair value of the Company’s investments in equity securities is based on quoted prices available in active markets and classified and disclosed in Level 1 of the hierarchy.
Concentration of Credit Risk	Concentration of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, fixed maturity securities and reinsurance recoverables. The Company places its cash and cash equivalents with high credit quality financial institutions and its fixed maturity securities in securities of the U.S. government, U.S. government agencies, and high credit quality issuers of debt securities. The Company evaluates the financial condition of its reinsurers and reinsures its business with highly rated reinsurers and sometimes requires letters of credit or retains funds from reinsurers (see Note 9).
Premiums Receivable	Premiums Receivable Premiums receivable are carried at face value net of any allowance for doubtful accounts which approximates fair value. If necessary, the Company records an allowance for doubtful accounts in an amount approximating anticipated losses. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts is not reasonably assured. No allowance for doubtful accounts was required at December 31, 2019 or 2018.
Deferred Policy Acquisition Costs	Deferred Policy Acquisition Costs The costs of successfully acquiring new business, principally commission expense and premium taxes, are deferred and amortized over the unexpired terms of the policies in force.
Premiums Earned	Premiums Earned Gross premiums written are recorded at policy inception and are earned as revenue ratably over the term of the respective policies. Premiums written not yet recognized as revenue are reflected as unearned premiums on the balance sheet, or as advanced premiums if received prior to the policy effective date. Premiums written but not yet received are recognized as premiums receivable. Premiums receivable are presented on the consolidated balance sheets net of estimated uncollectible amounts. Based on management’s review no allowance for bad debt was required at December 31, 2019 and 2018. A premium deficiency is recognized if the sum of expected losses and loss adjustment expenses, unamortized acquisition costs, and policy maintenance costs exceeds the remaining unearned premiums. A premium deficiency would first be recognized by charging any unamortized acquisition costs to expense to the extent required to eliminate the deficiency. If the premium deficiency were greater than unamortized acquisition costs, a liability would be accrued for the excess deficiency. The Company does not consider anticipated investment income when determining if a premium deficiency exists. There was no premium deficiency at December 31, 2019 or 2018.
Commission and Other Income	Commission and Other Income Commission and other income is comprised of commissions earned on policies where the Company has no exposure to underlying risk and fees earned in conjunction with underwriting policies. Commission and fee income is earned at the time the policy is written.
Property and Equipment	Property and Equipment Property and equipment are capitalized and carried at cost less accumulated depreciation. Depreciation for property and equipment is calculated on a straight‑line basis using useful lives of 3 to 5 years. Leasehold improvements and other fixed assets are capitalized and depreciated over the useful lives of the properties and equipment. Expenditures for maintenance and repairs are charged to operations as incurred. Upon disposition, the asset cost and related depreciation are removed from the accounts and the resulting gain or loss is included in the Company’s results of operations.
Capitalized Software	Capitalized Software Costs associated with the implementation of certain internal systems are capitalized and carried at capitalized cost less accumulated amortization and are included as a component of prepaid expenses and other assets on the Company’s consolidated balance sheet. Costs capitalized include internal personnel costs, external developer costs, and interest. The implementation costs relate to systems built on software which the Company purchases under a cloud computing arrangement and accounts for as a service contract. As such, capitalized costs are amortized over the term of the service contract, which currently ends in December 2024.
Intangible Assets	Intangible Assets Upon acquisition, the entire PSIC purchase price was allocated to separately identifiable indefinite lived intangible assets. The Company acquired seven state licenses in the acquisition to which $0.7 million was allocated. Indefinite lived intangible assets are initially recognized and measured at fair value; intangible assets are subsequently evaluated for impairment annually or more frequently if circumstances warrant it. No impairments of intangible assets were recognized for the years ended December 31, 2019, 2018 or 2017.
Impairment of Long-Lived Assets	Impairment of Long‑Lived Assets Long‑lived assets with finite lives are tested for impairment whenever recognized events or changes in circumstances indicate the carrying value of these assets may not be recoverable. If indicators of impairment are present, the fair value is calculated using estimated future cash flows expected to be generated from the use of those assets. An impairment loss is recognized only if the carrying amount of a long‑lived asset or asset group is not recoverable and exceeds its fair value. The carrying amount of a long‑lived asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. This assessment is based on the carrying amount of the asset or asset group at the date it is tested for recoverability. An impairment loss is measured as the amount by which the carrying amount of a long‑lived asset or asset group exceeds its fair value. No impairments of long‑lived assets were recognized for the years ended December 31, 2019, 2018 and 2017.
Reserve for Losses and Loss Adjustment Expenses	Reserve for Losses and Loss Adjustment Expenses The reserve for unpaid losses and loss adjustment expenses includes estimates for unpaid claims and claim adjustment expenses on reported losses and estimates of losses incurred but not reported (IBNR), net of salvage and subrogation recoveries. The liability is based on individual claims, case reserves and other estimates reported by policyholders, as well as management estimates of ultimate losses and loss adjustment expenses. Inherent in the estimates of ultimate losses and loss adjustment expenses are expected trends in claims severity and frequency and other factors that could vary significantly as claims are settled. The Company’s estimates of ultimate losses and loss adjustment expenses are based in part upon the estimation of claims resulting from natural disasters such as hurricanes and earthquakes. Estimation by management of the ultimate losses and loss adjustment expenses resulting from catastrophic events is inherently difficult because of the potential severity of property catastrophe claims. Therefore, the Company uses both proprietary and commercially available models, as well as historic claims experience, for purposes of providing an estimate of ultimate losses and loss adjustment expenses. For other difficult estimates of ultimate losses and loss adjustment expenses, the Company utilizes historical severity data that may be immature and subject to significant variation, in addition to using loss development methods based on paid and reported losses. For these estimates, industry data may also be utilized. Ultimate losses and loss adjustment expenses may vary materially from the amounts provided in the consolidated financial statements. Estimates of unpaid losses and loss adjustment expenses are reviewed regularly and, as experience develops and new information becomes known, the liabilities are adjusted as necessary. Such adjustments, if any, are reflected in operations in the period in which they become known and are accounted for as changes in estimates. The Company does not discount its liability for unpaid losses and loss adjustment expenses. The Company does not write insurance policies covering toxic clean‑up, asbestos‑related illness or other environmental remediation exposures.
Reinsurance	Reinsurance The Company purchases excess of loss and quota share reinsurance to protect it against the impact of losses. Reinsurance premiums, commissions, ceded unearned premiums are accounted for on bases consistent with the underlying terms of the reinsurance contracts and in proportion to the amount of insurance protection provided. The Company receives ceding commissions in connection with certain ceded reinsurance. The ceding commissions are capitalized and amortized as a reduction of underwriting, acquisition and insurance expenses. Amounts applicable to prepaid reinsurance premiums are reported as assets in the accompanying consolidated balance sheets. Reinsurance recoverables represent paid losses and loss adjustment expenses and reserves for unpaid losses and loss adjustment expenses ceded to reinsurers that are subject to reimbursement under reinsurance treaties. Premiums earned and losses and loss adjustment expenses incurred are stated in the accompanying consolidated statements of income and comprehensive income net of amounts ceded to reinsurers.
Income Taxes	Income Taxes The Company is taxed as a property/casualty insurer for federal income tax purposes. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and the tax bases of assets and liabilities, using enacted tax rates expected to be in effect during the year in which the basis differences reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company recognizes the tax benefit of uncertain tax positions where the position is more likely than not to be sustained assuming examination by taxing authorities. Based on its evaluation for the tax years ended December 31, 2019 and 2018, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. The Company recognizes interest and penalties related to uncertain tax positions, if any, as a component of income tax expense. The Company has not been assessed interest or penalties by any major tax jurisdictions for the respective tax years ended December 31, 2019, 2018, and 2017.
Earnings Per Share	Earnings Per Share Basic earnings per share is calculated by dividing net income by the weighted‑average common shares outstanding for the period. Diluted earnings per share reflects the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method. When inclusion of additional common share equivalents increases the earnings per share or reduces the loss per share, the effect on earnings per share is anti-dilutive, and the diluted net earnings or net loss per share is computed excluding these common share equivalents.
Recent Accounting Pronouncements	Recent Accounting Pronouncements The Company currently qualifies as an emerging growth company (“EGC”) under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Accordingly, the Company is provided the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non‑emerging growth companies or (ii) within the same time periods as private companies. The Company is currently electing to adopt new or revised accounting guidance within the same time period as private companies, unless, as indicated below, management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance. If the Company ceases to be an EGC, it will no longer have the option to adopt guidance within the same time periods as private companies. Recently adopted accounting pronouncements In January 2016, the FASB issued “ASU 2016‑01, Financial Instruments—Overall (Subtopic 825‑10): Recognition and Measurement of Financial Assets and Financial Liabilities.” Among other things, this new guidance requires the Company’s equity investments to be measured at fair value with changes in fair value recognized in net income. Under the current guidance, equity investments are measured at fair value with changes in fair value recognized in accumulated other comprehensive income as a component of stockholder’s equity. The Company adopted this guidance on January 1, 2018 and began recognizing changes in fair value of equity securities into net income. Upon adoption, the Company made a $3.2 million cumulative‑effect adjustment to increase retained earnings and decrease accumulated other comprehensive income. In the future, this guidance will impact the Company’s results of operations, as changes in fair value of equity investments will impact net income rather than other comprehensive income. The future impact will vary depending on the volatility of the overall equity market and the amount the Company decides to invest in equity securities. In August 2016, the FASB issued “ASU 2016‑15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, in order to reduce diversity in the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The Company adopted this guidance on January 1, 2018. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements. In May 2014, the FASB issued “ASU 2014-09, Revenue from Contracts with Customers (Topic 606).” This guidance applies to all companies that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards, such as insurance contracts. Under this guidance, a company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Judgments required in adopting this update included identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Nearly all the Company’s consolidated revenue is outside the scope of Topic 606 except for the commission and fee income that the Company's 100% owned insurance agency earns from third-party insurers, which was $1.4 for each of the years ended December 31, 2019 and 2018. Effective January 1, 2019, the Company adopted Topic 606 using the modified retrospective transition method. The application of the key aspects of Topic 606 to the in-scope transactions resulted in recognition of revenues and related expenses consistent with the previous revenue guidance. Adoption had no impact on the Company’s reported fee income or expense and there was no cumulative effect of initially applying the guidance. Recently issued accounting pronouncements not yet adopted In February 2016, the FASB issued new guidance for accounting for leases, “ASU 2016‑02, Leases (Topic 842).” Under current guidance, leases are only included on the balance sheet if the criteria to classify the agreement as a capital lease are met. This update will require the recognition of a right‑of‑use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. This guidance was subsequently amended multiple times and offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This new guidance requires a modified retrospective adoption, applying the new standard to all leases existing at the date of initial application, with early adoption permitted. An entity may choose to use the standard’s effective date, rather than the beginning of the earliest comparative period presented, as the date of initial application. An entity would record the effects of initially applying the new guidance as a cumulative‑effect adjustment to retained earnings. Consequently, an entity’s reporting for the comparative periods presented in the year of adoption would continue to be in accordance with the current guidance, including the current disclosure requirements. To facilitate transition, the new guidance includes a package of practical expedients that entities may elect to apply on adoption. The package of practical expedients relates to the identification and classification of leases and initial direct costs for leases that commenced before the effective date. The new guidance also includes a practical expedient permitting the use of hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. Under the Company’s current status as an EGC, this update will be effective for annual reporting periods beginning after December 15, 2020, and interim reporting periods within fiscal years beginning after December 31, 2021 with early adoption permitted. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements. In June 2016, the FASB issued “ASU 2016‑13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” Current guidance delays the recognition of credit losses until it is probable a loss has been incurred. This updated guidance will require financial assets measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net income. Credit losses relating to available‑for‑sale debt securities will also be recorded through an allowance for credit losses, with the amount of the allowance limited to the amount by which fair value is below amortized cost. In 2019, the FASB issued amendments to this guidance which provide an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost and provide additional clarification and implementation guidance. Under the Company’s current status as an EGC, this update and its amendments will be effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, but not before annual reporting periods beginning on or after December 15, 2018. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements. In August 2018, the FASB issued “ASU 2018‑13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. Among other things, this new guidance eliminates the need to disclose transfers between Level 1 and Level 2 of the fair value hierarchy, changes the policy for timing of transfers and the valuation processes for Level 3 fair value measurements and includes requirements to disclose quantitative information about Level 3 measurements. This new guidance will be effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted this guidance on January 1, 2020 and adoption did not have an impact on the Company’s consolidated financial statements. The Company will continue to monitor the composition of its investment portfolio and will make appropriate disclosures based on this guidance.

Reinsurance

12 Months Ended

Dec. 31, 2019

Reinsurance

Reinsurance

9. Reinsurance

The Company utilizes reinsurance in order to limit its exposure to losses and enable it to underwrite policies with sufficient limits to meet policyholder needs. The Company utilizes both excess of loss (XOL) and quota share reinsurance.

In an XOL treaty, the Company retains losses for any occurrence up to a specified amount (its “retention”) and reinsurers assume any losses above that amount. Prior to March 1, 2015, the Company had a retention of $15 million on non‑earthquake events. This was reduced to $5 million on March 1, 2015 and remained in place through December 31, 2019. The Company’s retention for earthquake events was $15 million from its inception through December 31, 2017 and was reduced to $5 million on January 1, 2018 and remained in place through December 31, 2019.

The Company maintained XOL coverage up to $1.05 billion nationwide ($1.12 billion in California) and $825 million for earthquake events as of December 31, 2019 and 2018, respectively, and $740 million and $625 million for non-earthquake events as of December 31, 2019 and 2018, respectively. As of December 31, 2019 for non-earthquake events the Company retains 55% of losses between $299 million and $350 million, 30% of losses between $350 million and $477 million, and 100% of losses between $524 million and $569 million. As of December 31, 2018, for non‑earthquake events the Company retains 54.55% of losses between $230 million and $351 million and 30% of losses between $351 million and $501 million.

In a quota share agreement, the Company transfers, or cedes, part or all of its exposure to a reinsurer who receives a portion of the associated premium in exchange. The reinsurer also must share an agreed upon portion of losses and agreed upon portion of the associated commission expense. The Company has quota share reinsurance agreements on several of its lines with the Commercial All Risk and Specialty Homeowners lines currently accounting for the largest amount of ceded written premiums. For Texas Homeowners, a component of Specialty Homeowners, the Company ceded substantially all exposure between June 2018 and June 2019 and ceded the majority of exposure thereafter. Ceded written premium related to the Texas Homeowners line was $20.4 million, $24.9 million and $2.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. Ceded written premium related to the Commercial All Risk line was $19.0 million, $7.2 million and $2.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. No other quota share program accounted for more than 10% of total ceded written premium for those years.

The Company recognizes ceded unearned premiums related to quota share agreements on its consolidated balance sheets as a prepaid reinsurance premium asset. As of December 31, 2019 and 2018, prepaid reinsurance premiums totaled $26.1 million and $18.3 million, respectively. The increase in 2019 was driven primarily by increased ceding on the Commercial All Risk line.

As part of its reinsurance program, in June 2017, the Company obtained catastrophe protection through a reinsurance agreement with Torrey Pines Re Ltd. (“TPRe”). In connection with the reinsurance agreement, TPRe issued notes to unrelated investors in an amount equal to the full $166 million of coverage provided under the reinsurance agreement covering a three year period. At the time of the agreement, the Company performed an evaluation of TPRe to determine if it meets the definition of a variable interest entity (“VIE”). The Company concluded that TPRe is a VIE but it does not have a variable interest in the entity, as the variability in results is expected to be absorbed entirely by the investors in TPRe. Accordingly, TPRe is not consolidated in the Company’s financial statements. The premium ceded to TPRe for the year ended December 31, 2019 was approximately $10.6 million.

The effect of reinsurance on premiums written and earned and on losses and LAE incurred for the years ended December 31, 2019, 2018 and 2017, is as follows:


	2019				2018				2017
	Written		Earned		Written		Earned		Written		Earned
	(in thousands)
Premiums Written and Earned:
Direct	$	220,568	$	178,536	$	144,821	$	129,071	$	112,974	$	94,799
Assumed		31,393		21,985		10,070		8,688		7,260		6,162
Ceded		(108,332)		(100,314)		(82,949)		(67,862)		(46,951)		(45,416)
Net	$	143,629	$	100,207	$	71,942	$	69,897	$	73,283	$	55,545


	2019
	Losses		LAE		Total
	(in thousands)
Losses and LAE Incurred:
Direct	$	20,105	$	2,837	$	22,942
Assumed		1,201		34		1,235
Ceded		(16,564)		(2,020)		(18,584)
Net	$	4,742	$	851	$	5,593


	2018
	Losses		LAE		Total
	(in thousands)
Losses and LAE Incurred:
Direct	$	12,153	$	2,113	$	14,266
Assumed		46		6		52
Ceded		(6,580)		(1,464)		(8,044)
Net	$	5,619	$	655	$	6,274


	2017
	Losses		LAE		Total
	(in thousands)
Losses and LAE Incurred:
Direct	$	24,266	$	6,608	$	30,874
Assumed		2		—		2
Ceded		(14,651)		(4,100)		(18,751)
Net	$	9,617	$	2,508	$	12,125

The ceding of insurance does not legally discharge the Company from its primary liability for the full amount of the policy coverage, and therefore the Company will be required to pay the loss and bear collection risk if the reinsurer fails to meet its obligations under the reinsurance agreement. To minimize exposure to significant losses from reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk.

To reduce credit exposure to reinsurance recoverable balances, the Company obtains letters of credit from certain reinsurers that are not authorized as reinsurers under U.S. state insurance regulations. In addition, under the terms of its reinsurance contracts, the Company may retain funds due from reinsurers as security for those recoverable balances. As of December 31, 2019 and 2018, the Company had retained $1.7 million and $0.7 million in funds from reinsurers, respectively. The Company is able to use the funds in the ordinary course of its business. The funds are held in cash and cash equivalents and investments with an offsetting liability on the accompanying consolidated balance sheets.

For the year ended December 31, 2019, reinsurance premiums ceded to the Company’s three largest reinsurers totaled $21.7 million, $7.5 million, and $4.9 million, representing 31.5% of the total balance. For the year ended December 31, 2018, reinsurance premiums ceded to the Company’s three largest reinsurers totaled $7.5 million, $7.2 million, and $5.2 million, representing 24.0% of the total balance. For the year ended December 31, 2017, reinsurance premiums ceded to the Company’s three largest reinsurers totaled $4.0 million, $3.4 million, and $2.4 million, representing 20.8% of the total balance.

At December 31, 2019 reinsurance recoverable on unpaid losses by the Company’s three largest reinsurers were $2.7 million, $1.9 million, and $1.9 million representing 38.2% of the total balance. At December 31, 2018 reinsurance recoverables on paid and unpaid losses by the Company’s three largest reinsurers were $1.8 million, $0.8 million, and $0.8 million representing 23.0% of the total balance. All of the Company’s reinsurers post collateral or have an A.M. best rating of A− (excellent) or better.

Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Stock-Based Compensation

Stock-Based Compensation

18. Stock-Based Compensation

The below table summarizes the Company’s stock-based compensation expense for each period presented:


	Year ended December 31,
	2019		2018
	(in thousands)
Stock-Based Compensation	$	24,103	$	—

Stock-based compensation expense is recognized on a straight-line basis over the vesting period of awards. The Company does not apply a forfeiture rate to unvested awards and accounts for forfeitures as they occur. All stock-based compensation is included in other underwriting expenses in the Company’s consolidated statements of income and comprehensive income.

The Company recognized approximately $23.0 million of stock-based compensation expense in March 2019 relating to the modification of its 2014 Management Incentive Plan. The Company began recognizing stock-based compensation expense relating to its 2019 Equity Incentive Plan and the 2019 Employee Stock Purchase Plan upon their inception and initial equity grants in April 2019. Aside from the aforementioned $23.0 million charge, all stock-based compensation expense recognized during the year ended December 31, 2019 relates to the 2019 Equity Incentive Plan and 2019 Employee Stock Purchase Plan.

Management Incentive Plan prior to IPO

The Company’s former parent, GC Palomar Investor LP, adopted a 2014 Management Incentive Plan (in the form of profits interests) on February 12, 2014 under which certain officers and employees of PSIC and its affiliates were entitled to Class P Units in GC Palomar Investor LP. Class P unit holders were expected to realize value only upon the occurrence of liquidity events meeting requisite financial thresholds after the Class A unit holders recovered their investment. The Class P unit holders had no voting rights. The Company did not record stock-based compensation expense related to this plan prior to 2019 because no liquidity events were probable of occurring.

On March 15, 2019, the Company modified its 2014 Management Incentive Plan by eliminating the requirement of a liquidity event to occur for the holders of its Class P units to realize value. The 12,552,825 Class P units outstanding were modified such that the vesting of each Class P unit holder’s awards was accelerated and their Class P distribution percentages were determined and distributed based on these percentages. This modification resulted in a stock compensation charge and corresponding increase to additional paid in capital of $23.0 million during the quarter ending March 31, 2019. The stock compensation charge is included in other underwriting expenses in the Company’s consolidated statements of income and comprehensive income.

2019 Equity Incentive Plan

On April 16, 2019, the Company’s 2019 Equity Incentive Plan (the 2019 Plan) became effective. The 2019 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs), performance shares and units, and other cash-based or share-based awards. In addition, the 2019 Plan contains a mechanism through which the Company may adopt a deferred compensation arrangement in the future.

A total of 2,400,000 shares of common stock are initially authorized and reserved for issuance under the 2019 Plan. This reserve will automatically increase on January 1, 2020 and each subsequent anniversary through 2029, by an amount equal to the smaller of: 3% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or an amount determined by the board of directors.

Stock Options

Recipients of stock options can purchase shares of the Company’s common stock at a price equal to the stock’s fair market value on the grant date, determined by the closing price of the Company's common stock on the grant date. Stock options vest over a two or four year period with 25% or 50% vesting on the first anniversary of the grant date and the remainder vesting monthly over the remaining period, subject to continued employment. Stock options expire ten years after the grant date.

The following table summarizes stock option transactions for the 2019 Plan for the year ended December 31, 2019:


				Weighted average
				remaining	Aggregate
	Number of	Weighted-average		contractual term	intrinsic value
	shares	exercise price		(in years)	(in thousands)
Outstanding at December 31, 2018	—	$	—
Options granted	1,058,966		17.03
Options exercised	—		—
Options canceled	(12,593)		15.00
Outstanding at December 31, 2019	1,046,373	$	17.05	9.33	$	35,039
Vested and Exercisable at December 31, 2019	—	$	—	—	$	—

As of December 31, 2019, the Company had approximately $3.2 million of total unrecognized stock-based compensation expense related to stock options expected to be recognized over a weighted-average period of 2.28 years.

The fair value of each option granted was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:


Risk free rate of return (1)		1.59% - 2.45%
Expected share price volatility (2)		18.12% - 18.45%
Expected life in years (3)		5.64 - 6.08 years
Dividend yield (4)		0%

(1)

Determined based on the U.S. Treasury yield in effect at the time of the grant for zero-coupon U.S. Treasury notes with remaining terms similar to the expected term of the options.

(2)

Determined based on analysis of the volatility of a peer group of publicly traded companies.

(3)

(4)

Determined to be zero as the Company does not currently plan to issue dividends.

Restricted Stock Units

Restricted stock units are valued on their date of grant and will vest on the first anniversary of the grant date. The fair value of RSUs is determined by the closing price of the Company's common stock on the grant date.

The following table summarizes RSU transactions for the 2019 Plan for the year ended December 31, 2019:


		Weighted-average
	Number of	grant date
	shares	fair value
Non vested outstanding at December 31, 2018	—	$	—
Granted	6,066		16.49
Vested	—		—
Forfeited	—		—
Non vested outstanding at December 31, 2019	6,066	$	16.49

As of December 31, 2019, the Company had approximately $0.1 million of total unrecognized stock-based compensation expense related to RSUs expected to be recognized over a weighted-average period of 0.31 years.

2019 Employee Stock Purchase Plan

On April 16, 2019, the Company's 2019 Employee Stock Purchase Plan (the 2019 ESPP) became effective. A total of 240,000 shares of common stock are initially authorized and reserved for issuance under the 2019 ESPP. In addition, the 2019 ESPP provides for annual increases in the number of shares available for issuance on January 1, 2020 and each subsequent anniversary through 2029, equal to the smaller of 240,000 shares of the Company’s common stock or such other amount as may be determined by the board of directors.

Under the 2019 ESPP purchases of common stock occur through employee participation in discrete offering periods. In each discrete offering period, employee funds are withheld and stock purchases occur upon the conclusion of the offering period. The first discrete offering period has not concluded as of December 31, 2019 and the Company did not issue any shares of common stock pursuant to the 2019 ESPP during the year ended December 31, 2019.

Reserve for Losses and Loss Adjustment Expenses

12 Months Ended

Dec. 31, 2019

Reserve for Losses and Loss Adjustment Expenses

Reserve for Losses and Loss Adjustment Expenses

8. Reserve for Losses and Loss Adjustment Expenses

Loss and loss adjustment expenses reserves represent management’s best estimate of the ultimate cost of all reported and unreported losses incurred through December 31, 2019 and 2018. The Company does not discount loss and loss adjustment expense reserves. The reserves for unpaid losses and loss adjustment expenses are estimated using individual case‑basis valuations and statistical analyses. Those estimates are subject to the effects of trends in loss severity and frequency. Although considerable variability is inherent in such estimates, management believes the reserves for losses and loss adjustment expenses are adequate. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes known. Any adjustments to estimates are recorded in the current period.

The following table provides a reconciliation of the beginning and ending reserve balances for losses and LAE on a net of reinsurance basis to the gross amounts reported in the accompanying consolidated balance sheets:


	Year Ended December 31,
	2019		2018		2017
		(in thousands)
Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period	$	4,165	$	4,432	$	3,336
Add: Incurred losses and loss adjustment expenses, net of reinsurance, related to:
Current year		5,774		8,165		12,257
Prior years		(181)		(1,891)		(132)
Total incurred		5,593		6,274		12,125
Deduct: Loss and loss adjustment expense payments, net of reinsurance, related to:
Current year		2,179		4,409		8,986
Prior years		3,710		2,132		2,043
Total payments		5,889		6,541		11,029
Reserve for losses and loss adjustment expense net of reinsurance recoverables at end of period		3,869		4,165		4,432
Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period		12,952		11,896		13,352
Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period	$	16,821	$	16,061	$	17,784

Considerable variability is inherent in the estimate of the reserve for losses and LAE. Although management believes the liability recorded for losses and LAE is adequate, the variability inherent in this estimate could result in changes to the ultimate liability, which may be material to stockholder’s equity. The foregoing reconciliation shows loss and loss adjustment expense reserve redundancies of $0.2 million, $1.9 million, and $0.1 million developed in 2019, 2018 and 2017, respectively. This favorable reserve development was primarily in the Texas homeowners segment for all accident years presented. Expectations of ultimate losses from these periods have decreased due to lower than originally anticipated frequency and severity of claims.

The Company compiles and aggregates its claims data by grouping the claims according to the year in which the claim occurred (Accident Year) when analyzing claim payment and emergence patterns and trends over time. For the purpose of defining claims frequency, the number of reported claims is by loss occurrence and includes claims that do not result in a liability or payment associated with them.

The Company analyzed the usefulness of disaggregation of its results and determined the characteristics associated with the policies and the related unpaid loss reserves, incurred losses, and payment patterns are similar in nature. The Company separates its special property and other claim experience from its homeowner claim experience when analyzing losses and allocated loss adjustment expenses incurred and paid development and claim count triangles, as there are distinct differences in the development and claim count emergence patterns as well as methods of IBNR projection. The Special Property classification includes fire, allied lines, inland marine, and earthquake claims.

As such, the following tables show the Company’s historical homeowner and special property incurred and cumulative paid losses and LAE development, net of reinsurance, as well as IBNR loss reserves and the number of reported claims on an aggregate basis as of December 31, 2019 for each of the previous two accident years.

The information provided herein about incurred and paid accident year claims development for the years ended December 31, 2017 and prior is presented as unaudited supplementary information.

Incurred Losses and Allocated Loss Adjustment Expenses,

Net of Reinsurance Homeowners’ Insurance (in thousands)


											Year Ended December 31,
											Incurred but		Cumulative
			Year Ended December 31,								Not Reported		Number of
Accident Year	2015(1)		2016(1)		2017(1)		2018(1)		2019		Liabilities		Claims
2015	$	2,048	$	1,785	$	1,658	$	1,636	$	1,642	$	1	381
2016				6,069		5,878		5,721		5,636		6	1,081
2017						9,354		7,418		6,630		11	2,964
2018								2,193		2,008		104	788
2019										914		257	1,060
Total									$	16,830	$	379	6,274

Cumulative Paid Losses and Allocated Loss Adjustment Expenses,

Net of Reinsurance Homeowners’ Insurance (in thousands)


			Year Ended December 31,
Accident Year	2015(1)		2016(1)		2017(1)		2018(1)		2019
2015	$	860	$	1,379	$	1,523	$	1,615	$	1,634
2016				4,120		5,356		5,585		5,607
2017						7,135		7,375		6,628
2018								1,550		1,853
2019										546
Total									$	16,268
Reserve for losses and loss adjustment expense, net of reinsurance									$	562

(1)

Data presented for these calendar years is required supplementary information, which is unaudited.

Average Annual Percentage Payout of Incurred Claims by Age,

Net of Reinsurance Homeowners’ Insurance (unaudited)


	Year 1		Year 2		Year 3		Year 4		Year 5
Payout percentage	74.00	%	18.08	%	0.52	%	2.99	%	1.10	%

Incurred Losses and Allocated Loss Adjustment Expenses,

Net of Reinsurance Special Property Insurance (in thousands)


											As of December 31, 2019
											Incurred but		Cumulative
			Year Ended December 31,								Not Reported		Number of
Accident Year	2015(1)		2016(1)		2017(1)		2018(1)		2019		Liabilities		Claims
2015	$	630	$	719	$	671	$	671	$	678	$	1	8
2016				1,381		1,249		1,251		1,454		—	71
2017						3,071		3,475		4,014		—	357
2018								5,970		6,095		11	526
2019										3,661		964	402
Total									$	15,902	$	976	1,364

Cumulative Paid Losses and Allocated Loss Adjustment Expenses,

Net of Reinsurance Special Property Insurance (in thousands)


			Year Ended December 31,
Accident Year	2015(1)		2016(1)		2017(1)		2018(1)		2019
2015	$	265	$	438	$	586	$	626	$	666
2016				703		1,064		1,216		1,444
2017						1,967		3,344		4,011
2018								2,859		6,036
2019										1,633
Total										13,790
Reserve for losses and loss adjustment expense, net of reinsurance										2,112

(1)

Data presented for these calendar years is required supplementary information, which is unaudited.

Average Annual Percentage Payout of Incurred Claims by Age,

Net of Reinsurance Special Property Insurance (unaudited)


	Year 1		Year 2		Year 3		Year 4		Year 5
Payout percentage	45.59	%	34.20	%	16.30	%	10.80	%	5.84	%

The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses in the consolidated balance sheets is as follows:


	2019
	(in thousands)
Net outstanding liabilities:
Homeowners’ insurance	$	562
Special property		2,112
Reinsurance- Nonproportional assumed property(1)		1,195
Reserve for losses and loss adjustment expense, net of reinsurance		3,869
Reinsurance recoverable on unpaid claims:
Homeowners’ insurance	$	4,961
Special property		7,983
Other		8
Total reinsurance recoverable on unpaid claims		12,952
Total reserve for losses and loss adjustment expenses	$	16,821

(1)

Dividend Restrictions	12 Months Ended
Dividend Restrictions	Dec. 31, 2019
Dividend Restrictions
Dividend Restrictions	14. Dividend Restrictions U.S. PSIC must receive the approval of the Oregon and California insurance commissioners prior to paying certain dividends. The maximum dividend or distribution amount that may be declared and paid by PSIC to its shareholder without prior approval is subject to restrictions relating to policyholder surplus and net income. A dividend or distribution that requires approval is any dividend or distribution, together with all other dividends or distributions paid in the preceding 12 months that exceeds the greater of (i) 10% of the combined statutory capital and surplus of the insurer as of the 31st day of December of the preceding year or (ii) statutory net income (excluding realized investment gains or losses) for the 12‑month period ending the 31st day of December preceding year. In addition, the Company may only declare a dividend from earned surplus, which does not include surplus arising from unrealized capital gains or revaluation of assets. The Company may declare a dividend from other than earned surplus with prior approval from the Commissioner. Due to cumulative earned surplus of $10.3 million, PSIC may pay a dividend or distribution no greater than $10.3 million to the Company in 2020 without the prior approval of the Oregon and California Insurance Commissioners. Any dividend or distribution greater than $10.3 million will require the prior approval of the Oregon and California Insurance Commissioners. Bermuda Bermuda regulations limit the amount of dividends and return of capital paid by a regulated entity. A Class 3A insurer is prohibited from declaring or paying a dividend if it is in breach of its minimum solvency margin, its enhanced capital requirement, or its minimum liquidity ratio, or if the declaration or payment of such dividend would cause such a breach, or if there are reasonable grounds for believing there has been such a breach. Pursuant to Bermuda regulations, the maximum amount of dividends and return of capital available to be paid by a reinsurer is determined pursuant to a formula. Under this formula, the maximum amount of dividends and return of capital available to the Company from PSRE during 2020 is calculated to be approximately $5.7 million. However, this dividend amount is subject to annual enhanced solvency requirement calculations.

Consolidated Statements of Income and Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Revenues:
Gross written premiums	$ 251,961	$ 154,891	$ 120,234
Ceded written premiums	(108,332)	(82,949)	(46,951)
Net written premiums	143,629	71,942	73,283
Change in unearned premiums	(43,422)	(2,045)	(17,738)
Net earned premiums	100,207	69,897	55,545
Net investment income	5,975	3,238	2,125
Net realized and unrealized gains (losses) on investments	4,443	(2,569)	608
Commission and other income	2,671	2,405	1,188
Total revenues	113,296	72,971	59,466
Expenses:
Losses and loss adjustment expenses	5,593	6,274	12,125
Acquisition expenses	37,259	28,224	25,522
Other underwriting expenses (includes stock-based compensation of $24,103 and $0 for the years ended December 31, 2019 and 2018, respectively)	51,299	17,957	15,146
Interest expense	1,068	2,303	1,745
Total expenses	95,219	54,758	54,538
Income before income taxes	18,077	18,213	4,928
Income tax expense (benefit)	7,456	(6)	1,145
Net income	10,621	18,219	3,783
Other comprehensive income, net:
Net unrealized gains (losses) on securities available for sale, net of taxes for year ended December 31, 2019 2018, and 2017, respectively	5,249	(341)	1,522
Net comprehensive income	$ 15,870	$ 17,878	$ 5,305
Per Share Data:
Basic earnings per share	$ 0.49	$ 1.07	$ 0.22
Diluted earnings per share	$ 0.49	$ 1.07	$ 0.22
Weighted-average common shares outstanding:
Weighted-average common shares outstanding, basic	21,501,541	17,000,000	17,000,000
Weighted-average common shares outstanding, diluted	21,834,934	17,000,000	17,000,000

Investments - Change in Unrealized Gains (Losses) of Investments (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Available for sale investments
Equity securities	$ 3,009	$ (6,036)
Net (decrease) increase	6,602	(341)	$ 2,226
Fixed maturity securities
Available for sale investments
Fixed maturities	$ 6,602	$ (341)	(6)
Equity securities
Available for sale investments
Equity securities			$ 2,232

Long-term Debt - Floating Rate Notes (Details) - USD ($) $ in Millions		1 Months Ended	12 Months Ended
	May 23, 2019	Sep. 30, 2018	Dec. 31, 2019
Three-month Treasury Rate
Long-term debt
Interest rate spread (as a percent)		6.50%
Senior Notes \| 2018 Floating Rate Notes
Long-term debt
Debt instrument, redemption price, percentage (as a percent)	102.00%
Redemption price	$ 20.4
Accrued interest and unpaid interest	0.3
Redemption charge	1.3
Redemption Premium	0.4		$ 0.4
Write-off of unamortized debt issuance costs	0.9
Senior Notes \| 2018 Floating Rate Notes \| Interest Expense.
Long-term debt
Redemption Premium	0.4
Senior Notes \| 2018 Floating Rate Notes \| Other Underwriting Expense
Long-term debt
Redemption Premium	$ 0.9

Reserve for Losses and Loss Adjustment Expenses - Average Annual Percentage Payout of Incurred Claims by Age (Details)	Dec. 31, 2019
Homeowners’ Insurance
Short-duration Insurance Contracts, Historical Claims Duration
Year 1	74.00%
Year 2	18.08%
Year 3	0.52%
Year 4	2.99%
Year 5	1.10%
Special Property Insurance
Short-duration Insurance Contracts, Historical Claims Duration
Year 1	45.59%
Year 2	34.20%
Year 3	16.30%
Year 4	10.80%
Year 5	5.84%

Income Taxes

12 Months Ended

Dec. 31, 2019

Income Taxes

Income Taxes

11. Income Taxes

Prior to March 2019, the Company was a Cayman Islands incorporated holding company with U.K. tax residency. On March 14, 2019, the Company implemented a domestication (the Domestication) pursuant to Section 388 of the Delaware General Corporation Law and Section 206 of the Companies Law (2018 Revision), as amended, of the Cayman Islands pursuant to which it became a Delaware corporation and no longer subject to the laws of the Cayman Islands.

Historically, the Company’s Bermuda based subsidiary, PSRE, was not required to pay any taxes on its income or capital gains but was subject to a 1% U.S. federal excise tax on reinsurance premiums assumed. The Company intends to make an irrevocable election for PSRE to be taxed as a U.S. domestic corporation under Section 953(d) of the Code effective January 1, 2019.

The components of the Company’s federal income tax expense (benefit) are as follows:



	December 31,
	2019		2018		2017
	(in thousands)
Current	$	6,810	$	(6)	$	11
Deferred		646		—		1,134
Income tax expense (benefit)	$	7,456	$	(6)	$	1,145

As of December 31, 2019 and 2018, significant components of the Company’s deferred tax assets and liabilities were as follows:


	December 31,
	2019		2018
	(in thousands)
Deferred tax assets:
Losses and LAE reserve discount	$	10	$	22
Net operating losses		74		702
Investment amortization		85		119
Unearned premiums		3,748		1,914
Capitalized organizational costs		274		304
Unrealized losses on investments		—		505
Other		390		306
Total deferred tax assets	$	4,581	$	3,872
Deferred tax liabilities:
Deferred acquisition costs	$	(4,468)	$	(2,127)
Unrealized gains on investments		(1,396)		—
Internally developed software		(640)		—
Other		(2)		(68)
Total deferred tax liabilities		(6,506)		(2,195)
Net deferred tax asset before valuation allowance		(1,925)		1,677
Valuation allowance		(74)		(1,677)
Total net deferred tax liabilities	$	(1,999)	$	—

Prior to 2019, the Company maintained a valuation allowance on the U.S. tax attributes due to significant negative evidence, including cumulative U.S. losses in the most recent three-year period and our assessment that the realization of the net deferred tax assets did not meet the "more likely than not" criteria under ASC 740, Income Taxes. Management assessed available positive and negative evidence to estimate whether sufficient future taxable income would be generated to permit use of the existing deferred tax assets. The projected reversal of temporary differences, the Domestication, and projected future operating income in the U.S. represents significant positive evidence, which outweighed the historical negative evidence.

Based on this evidence, management determined it was more likely than not that the federal deferred tax assets are recoverable and therefore the associated valuation allowance was released as of March 31, 2019. State NOL carryforwards, due to the limited carryforward period, do not meet the “more likely than not” criteria and the Company will continue to maintain a valuation allowance on the associated deferred tax assets. The Company decreased the valuation allowance on the federal deferred tax assets by $1.7 million as a result of this analysis. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period change or if objective negative evidence in the form of cumulative losses is no longer present.

The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the tax years ended December 31, 2019, 2018 and 2017:


	Years Ended December 31,
	2019				2018				2017
	($ in thousands)
Expense computed at federal tax rate	$	3,802	21.00	%	$	3,825	21.00	%	$	1,675	34.00	%
Non‑U.S. group member income		—	—	%		(4,409)	(24.21)	%		(1,632)	(33.12)	%
Stock-based compensation		4,822	26.63	%		—	—	%		—	—	%
Dividend received deduction and tax‑exempt interest		(36)	(0.20)	%		(144)	(0.79)	%		(467)	(9.47)	%
Impact of tax reform		—	—	%		—	—	%		580	11.76	%
Valuation allowance		(1,677)	(9.27)	%		678	3.72	%		947	19.23	%
Other		545	3.01	%		44	0.24	%		42	0.83	%
Income tax expense (benefit)	$	7,456	41.17	%	$	(6)	0.03	%	$	1,145	23.23	%

On December 22, 2017, the President of the United States signed into law the Tax Act. The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates from 35% to 21%, effective January 1, 2018. U.S. GAAP requires companies to recognize the effect of tax law changes in the period of enactment. We evaluated all available information and made reasonable estimates of the impact of tax reform to substantially all components of our net deferred tax assets as of December 31, 2017. We finalized our accounting for the Tax Act during 2018 with no significant impact to earnings or deferred taxes.

As of December 31, 2019 and 2018, the Company had no uncertain tax positions that required either recognition or disclosure in the consolidated financial statements. This is not expected to change significantly during the next twelve months. The Company classifies interest and penalties, if any, related to the liability for unrecognized tax benefits as a component of the provision for income taxes. The Company’s income tax returns for 2015 through 2019 remain subject to examination by the tax authorities.

Investments - Net Realized and Unrealized Investment Gains and Losses (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Net realized and unrealized investment gains and losses
Gains on sales of fixed maturity securities	$ 1,405	$ 19	$ 3
Gains on sales of equity securities	177	4,287	802
Total realized gains	1,582	4,306	805
Losses on sales of fixed maturity securities	(84)	(418)	(48)
Losses on sales of equity securities	(64)	(421)	(149)
Total realized losses	(148)	(839)	(197)
Net realized investment gains (losses)	1,434	3,467	608
Net unrealized gains (losses) on equity securities	3,009	(6,036)
Net realized and unrealized gains (losses) on investments	4,443	(2,569)	608
Proceeds from sales of fixed maturity securities
Proceeds from the sale of fixed maturity securities	$ 124,151	$ 81,215	$ 28,628

Underwriting Information

12 Months Ended

Dec. 31, 2019

Underwriting Information

Underwriting Information

20. Underwriting Information

The Company has a single reportable segment and offers primarily earthquake, wind, and flood insurance products. Gross written premiums (GWP) by product are presented below:


	Year Ended December 31,
	2019				2018				2017
	($ in thousands)
			% of				% of				% of
	Amount		GWP		Amount		GWP		Amount		GWP
Product
Residential Earthquake	$	130,473	51.8	%	$	81,679	52.7	%	$	57,328	47.7	%
Commercial Earthquake		38,741	15.4	%		20,946	13.5	%		23,079	19.2	%
Specialty Homeowners		32,788	13.0	%		27,680	17.9	%		26,516	22.0	%
Commercial All Risk		30,358	12.0	%		14,338	9.3	%		7,321	6.1	%
Hawaii Hurricane		10,764	4.3	%		8,128	5.2	%		5,323	4.4	%
Residential Flood		5,216	2.1	%		2,120	1.4	%		667	0.6	%
Other		3,621	1.4	%		—	—	%		—	—	%
Total Gross Written Premiums	$	251,961	100.0	%	$	154,891	100.0	%	$	120,234	100.0	%

Gross Written premiums by state are as follows:


	Year Ended December 31,
	2019				2018				2017
	($ in thousands)
			% of				% of				% of
	Amount		GWP		Amount		GWP		Amount		GWP
State
California	$	141,743	56.3	%	$	82,119	53.0	%	$	64,231	53.4	%
Texas		44,087	17.5	%		32,568	21.0	%		29,273	24.4	%
Hawaii		11,851	4.7	%		8,128	5.2	%		5,323	4.4	%
Washington		9,607	3.8	%		5,658	3.7	%		2,803	2.3	%
Oregon		7,396	2.9	%		5,286	3.4	%		4,250	3.6	%
South Carolina		6,185	2.5	%		3,208	2.1	%		1,706	1.4	%
Illinois		4,896	1.9	%		4,403	2.8	%		4,854	4.0	%
Mississippi		4,769	1.9	%		2,585	1.7	%		982	0.8	%
Other		21,427	8.5	%		10,936	7.1	%		6,812	5.7	%
Total Gross Written Premiums	$	251,961	100.0	%	$	154,891	100.0	%	$	120,234	100.0	%

The Company distributes a significant portion of its Residential Earthquake, Commercial Earthquake, Specialty Homeowners and Hawaii Hurricane products through longstanding relationships with two program administrators. Each of the four products managed by the program administrators operates as a separate program that is governed by an independent, separately negotiated agreement with unique terms and conditions, including geographic scope, key men provisions, economics and exclusivity. These programs also feature separate managerial oversight and leadership, policy administration systems and retail agents originating policies. In total, these four programs accounted for $148.6 million or 59.0% of the Company’s gross written premiums for the year ended December 31, 2019, $104.9 million or 67.7% of the Company’s gross written premiums for the year ended December 31, 2018 and $85.8 million or 71.3% of the Company’s gross written premiums for the year ended December 31, 2017.

Summary of Operations and Basis of Presentation	12 Months Ended
Summary of Operations and Basis of Presentation	Dec. 31, 2019
Summary of Operations and Basis of Presentation
Summary of Operations and Basis of Presentation	1. Summary of Operations and Basis of Presentation Summary of Operations Palomar Holdings, Inc. (the Company), is an insurance holding company that was incorporated in Delaware in March 2019. Prior to incorporation in Delaware, the Company was known as GC Palomar Holdings (GCPH), which was a Cayman Islands incorporated insurance holding company formed on October 4, 2013 when GC Palomar Investor LP (GCPI) acquired control of GCPH. The Company and its wholly owned subsidiaries include Palomar Insurance Holdings, Inc. (PIH), which wholly owns Palomar Specialty Insurance Company (PSIC), Prospect General Insurance Agency, Inc. (PGIA), and Palomar Specialty Reinsurance Company Bermuda Ltd. (PSRE). On February 12, 2014, GCPH through PIH acquired PSIC from Pacific Indemnity Company in a stock purchase transaction. PSIC is a property and casualty insurance company domiciled in the state of Oregon. The Company’s core focus is on the residential and commercial earthquake markets in earthquake‑exposed states such as California, Oregon, Washington, and states with exposure to the New Madrid Seismic Zone. In 2015, PSIC expanded into broader geographic regions and perils, to include Hawaii residential hurricane and Texas specialty homeowners products. In 2016, PSIC began a commercial all risk insurance program which covers commercial property primarily in southeastern wind‑exposed states. PSIC is licensed to underwrite insurance on an admitted basis in 27 states in the United States, as of December 31, 2019, mainly through managing general insurance agencies, wholesale brokers, and independent agents. PGIA is a property and casualty general insurance agency for PSIC and unaffiliated insurance carriers. As a general insurance agency, PGIA assists in developing insurance products, underwriting insurance policies, and receiving and disbursing funds from premium and loss transactions under contracts on behalf of insurance companies. PGIA earns commissions from the product development, marketing, and servicing of the insurance companies’ programs. PGIA also earns fee income from policyholder transactions. PSRE is a Bermuda captive reinsurance company that reinsures earthquake and Hawaii Hurricane premium on a quota share basis exclusively for PSIC. The Company operates as an insurance holding company system and is subject to the insurance holding company laws of the State of Oregon, the state in which PSIC is domiciled. The Company is also commercially domiciled in California and, as a result, subject to the insurance holding company laws of that state. These statutes require that each insurance company in the system register with the insurance department of its state of domicile and furnish information concerning the operations of companies within the holding company system that may materially affect the operations, management or financial condition of the insurers within the system and domiciled in that state. The Company’s chief operating decision‑maker is the Chief Executive Officer. While the chief decision‑maker monitors the revenue streams of the various products and services, operations are managed, resources are allocated, and financial performance is evaluated on a Company‑wide basis. The Company has a single operating segment, the property and casualty insurance business. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include the accounts of the Company and its wholly‑owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Stock Split On March 15, 2019, the Company effected a 17,000,000 for one forward stock split in conjunction with domestication in the United States. All share and per share information included in the accompanying consolidated financial statements and notes to the consolidated financial statements have been retroactively adjusted to reflect the stock split for the Company’s common stock for all periods presented. Initial Public Offering (IPO) On April 22, 2019, the Company completed its IPO with the sale of 6,468,750 shares of common stock at a price to the public of $15.00 per share, including 843,750 shares sold upon the exercise in full of the underwriter’s option to purchase additional shares. After underwriter discounts and commissions and offering expenses, net proceeds from the IPO were approximately $87.4 million. Use of Estimates The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. All revisions to accounting estimates are recognized in the period in which the estimates are revised. Significant estimates reflected in the Company’s consolidated financial statements include, but are not limited to, reserves for losses and loss adjustment expenses, reinsurance recoverables on unpaid losses, and the fair values of investments.

Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Valuation and Qualifying Accounts
Balance at Beginning of Period	$ 1,677	$ 947
Amount Charged to Expense		730
Amount Written Off	(1,603)
Balance at End of Period	$ 74	$ 1,677

Investments

12 Months Ended

Dec. 31, 2019

Investments

Investments

3. Investments

The Company’s available‑for‑sale investments are summarized as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2019	Cost or Cost		Gains		Losses		Value
	(in thousands)
Fixed maturities:
U.S. Governments	$	13,371	$	321	$	(13)	$	13,679
States, territories, and possessions		2,298		147		—		2,445
Political subdivisions		1,913		29		—		1,942
Special revenue excluding mortgage/asset-backed securities		18,139		343		(46)		18,436
Industrial and miscellaneous		124,726		4,326		(39)		129,013
Mortgage/asset-backed securities		50,831		824		(19)		51,636
Total available-for-sale investments	$	211,278	$	5,990	$	(117)	$	217,151


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2018	Cost or Cost		Gains		Losses		Value
	(in thousands)
Fixed maturities:
U.S. Governments	$	15,299	$	96	$	(126)	$	15,269
States, territories, and possessions		1,227		—		(6)		1,221
Political subdivisions		825		—		(10)		815
Special revenue excluding mortgage/asset-backed securities		12,429		115		(91)		12,453
Industrial and miscellaneous		65,885		192		(951)		65,126
Mortgage/asset-backed securities		27,284		133		(81)		27,336
Total available-for-sale investments	$	122,949	$	536	$	(1,265)	$	122,220

Security holdings in an unrealized loss position

As of December 31, 2019, the Company held 51 fixed maturity securities in an unrealized loss position with a total estimated fair value of $20.9 million and total gross unrealized losses of $0.1 million. None of the fixed maturity securities with unrealized losses has ever missed, or been delinquent on, a scheduled principal or interest payment. As of December 31, 2018, the Company held 173 fixed maturity securities in an unrealized loss position with a total estimated fair value of $73.8 million and total gross unrealized losses of $1.3 million. None of the fixed maturity securities with unrealized losses has ever missed, or been delinquent on, a scheduled principal or interest payment.

The aggregate fair value and gross unrealized losses of the Company’s investments aggregated by investment category and the length of time these individual securities have been in a continuous unrealized loss position as of December 31, 2019 and 2018, are as follows:


	Less Than 12 Months				More Than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2019	Value		Losses		Value		Losses		Value		Losses
	(in thousands)
Fixed maturity securities:
U.S. Governments		1,235		(11)	$	1,827	$	(2)	$	3,062	$	(13)
States, territories, and possessions		—		—		—		—		—		—
Political subdivisions		—		—		—		—		—		—
Special revenue excluding mortgage/asset-backed securities		3,548		(46)		—		—		3,548		(46)
Industrial and miscellaneous		6,929		(38)		188		(1)		7,117		(39)
Mortgage/asset-backed securities		7,035		(19)		182		—		7,217		(19)
Total	$	18,747	$	(114)	$	2,197	$	(3)	$	20,944	$	(117)


	Less Than 12 Months				More Than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2018	Value		Losses		Value		Losses		Value		Losses
	(in thousands)
Fixed maturity securities:
U.S. Governments	$	1,970	$	(25)	$	6,197	$	(101)	$	8,167	$	(126)
States, territories, and possessions		719		(5)		501		(1)		1,220		(6)
Political subdivisions		264		(1)		550		(9)		814		(10)
Special revenue excluding mortgage/asset-backed securities		1,706		(14)		5,916		(77)		7,622		(91)
Industrial and miscellaneous		30,544		(556)		14,913		(395)		45,457		(951)
Mortgage/asset-backed securities		6,653		(39)		3,830		(42)		10,483		(81)
Total	$	41,856	$	(640)	$	31,907	$	(625)	$	73,763	$	(1,265)

The Company considers the following factors in determining whether declines in the fair value of investments are other‑than‑temporary:

The significance of the decline in fair value compared to the cost basis;

The time period during which there has been a significant decline in fair value;

Whether the unrealized loss is credit‑driven or a result of changes in market interest rates;

A fundamental analysis of the business prospects and financial condition of the issuer;

The Company’s intent to sell the securities as of each reporting date; and

If the Company does not expect to recover the entire amortized cost basis or cost of the investment.

Based on the Company’s reviews as of December 31, 2019 and 2018, the Company determined that the fixed maturity securities’ unrealized losses were primarily the result of the interest rate environment and not the credit quality of the issuers. None of the fixed maturity securities were determined to be other‑than‑temporarily impaired. The Company does not intend to sell the investments and it is not more likely than not that that the Company will be required to sell the investments before the recovery of their amortized cost basis. Therefore, none of the fixed maturity securities were written down during the respective years.

Based on the Company’s reviews as of December 31, 2017, the Company determined that the unrealized losses of the equity securities lots were temporary due to the severity of the declines. The Company had the ability and intent to hold these investments until a recovery of fair value. Therefore, none of the equity securities were written down at December 31, 2017 and the remaining unrealized losses of equity securities at that time were recognized to retained earnings upon adoption of ASU 2016‑01 on January 1, 2018. See “Recent Accounting Pronouncements.”

Contractual maturities of available‑for‑sale fixed maturity securities

The amortized cost and fair value of fixed maturity securities at December 31, 2019, by contractual maturity, are shown below.


	Amortized		Fair
	Cost		Value
	(in thousands)
Due within one year	$	9,280	$	9,299
Due after one year through five years		64,933		66,108
Due after five years through ten years		59,192		62,292
Due after ten years		27,042		27,816
Mortgage and asset-backed securities		50,831		51,636
	$	211,278	$	217,151

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations.

Change in unrealized gains (losses) of investments

The following table presents the change in available‑for‑sale gross unrealized gains or losses by investment type:


	Year Ended December 31,
	2019		2018		2017
	(in thousands)
Change in net unrealized gains (losses)
Fixed maturities	$	6,602	$	(341)	$	(6)
Equity securities		—		—		2,232
Net (decrease) increase	$	6,602	$	(341)	$	2,226

Net investment income summary

Net investment income is summarized as follows:


	December 31,
	2019		2018		2017
	(in thousands)
Interest income	$	5,894	$	3,036	$	1,916
Dividend income		424		514		514
Less: investment expense		(343)		(312)		(305)
Net investment income	$	5,975	$	3,238	$	2,125

Net realized and unrealized investment gains and losses

The following table presents net realized and unrealized investment gains and losses:


	Year Ended
	December 31,
	2019		2018		2017
		(in thousands)
Realized gains:
Gains on sales of fixed maturity securities	$	1,405	$	19	$	3
Gains on sales of equity securities		177		4,287		802
Total realized gains		1,582		4,306		805
Realized losses:
Losses on sales of fixed maturity securities		(84)		(418)		(48)
Losses on sales of equity securities		(64)		(421)		(149)
Total realized losses		(148)		(839)		(197)
Net realized investment gains (losses)		1,434		3,467		608
Net unrealized gains (losses) on equity securities		3,009		(6,036)		—
Net realized and unrealized gains (losses) on investments	$	4,443	$	(2,569)	$	608

The Company places securities on statutory deposit with certain state agencies to retain the right to do business in those states. These securities are included in available‑for‑sale investments on the consolidated balance sheets. At December 31, 2019 and 2018, the carrying value of securities on deposit with state regulatory authorities was $5.1 million and $5.0 million, respectively.

Investments - Net Investment Income (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Net investment income
Interest income	$ 5,894	$ 3,036	$ 1,916
Dividend income	424	514	514
Less: investment expense	(343)	(312)	(305)
Net investment income	$ 5,975	$ 3,238	$ 2,125

Stock-Based Compensation - Stock options activity (Details) - Stock Options - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
	Apr. 16, 2019	Dec. 31, 2019
Common stock reserved for future issuance
Expiry period	10 years
Number of shares
Options granted (in shares)		1,058,966
Options canceled (in shares)		(12,593)
Outstanding at end of period (in shares)		1,046,373
Weighted-average exercise price
Options granted (per share)		$ 17.03
Options canceled (per share)		15.00
Outstanding price at ending (per share)		$ 17.05
Additional disclosures
Weighted average remaining contractual term for outstanding options (in years)		9 years 3 months 29 days
Aggregate intrinsic value		$ 35,039
Total unrecognized stock-based compensation expense		$ 3,200
Weighted-average period over which unrecognized stock-based compensation expense is expected to be recognized		2 years 3 months 11 days
Minimum
Common stock reserved for future issuance
Vesting period	2 years
Vesting percentage on the first anniversary of the grant date	25.00%
Maximum
Common stock reserved for future issuance
Vesting period	4 years
Vesting percentage on the first anniversary of the grant date	50.00%
2019 Equity Incentive Plan
Number of shares
Outstanding at end of period (in shares)		1,046,373

Accumulated Other Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2019

Accumulated Other Comprehensive Income

Schedule of changes in accumulated other comprehensive income (AOCI)


	Year Ended December 31,
	2019		2018		2017
	(in thousands)
Balance as of January 1	$	(563)	$	2,993	$	1,017
Effect of equity accounting guidance adoption		—		(3,215)		—
Beginning Balance		(563)		(222)		1,017
Other comprehensive income (loss) before reclassification		6,555		(740)		2,834
Federal income tax (expense) benefit		(1,344)		76		(772)
Other comprehensive income (loss) before reclassification, net of tax		5,211		(664)		2,062
Amounts reclassified from AOCI		47		399		(608)
Federal income tax expense		(9)		(76)		68
Amounts reclassified from AOCI, net of tax		38		323		(540)
Other comprehensive income (loss)		5,249		(341)		1,522
Effect of new tax rates from Tax Reform		—		—		454
Balance at end of period	$	4,686	$	(563)	$	2,993

Selected Quarterly Financial Data (unaudited)

12 Months Ended

Dec. 31, 2019

Selected Quarterly Financial Data (unaudited)

Selected Quarterly Financial Data (unaudited)

21. Selected Quarterly Financial Data (unaudited)

The following is a summary of the Company’s unaudited quarterly results of operations:


	2019 Quarter								2019
		First		Second		Third		Fourth	Year
	($ in thousands, except per share data)
Gross written premiums	$	54,031	$	58,346	$	66,242	$	73,342	$	251,961
Total revenues		22,307		25,905		30,461		34,623		113,296
Net income (loss)		(14,411)		6,698		7,454		10,880		10,621
Comprehensive income (loss)		(12,224)		9,996		8,428		9,670		15,870
Earnings per share (1):
Basic	$	(0.85)	$	0.30	$	0.32	$	0.46	$	0.49
Diluted	$	(0.85)	$	0.30	$	0.31	$	0.45	$	0.49


	2018 Quarter								2018
		First		Second		Third		Fourth	Year
	($ in thousands, except per share data)
Gross written premiums (2)	$	34,013	$	37,342	$	39,994	$	43,542	$	154,891
Total revenues		18,523		19,892		18,916		15,640		72,971
Net income		5,592		6,934		1,566		4,127		18,219
Comprehensive income		4,693		6,843		1,257		5,085		17,878
Earnings per share (1):
Basic	$	0.33	$	0.41	$	0.09	$	0.24	$	1.07
Diluted	$	0.33	$	0.41	$	0.09	$	0.24	$	1.07

(1)

Due to differences in weighted average common shares outstanding between periods, quarterly earnings per share may not add up to the totals reported for the full year.

(2)

Schedule II - Statements of Income (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Net investment income									$ 5,975	$ 3,238	$ 2,125
Net realized and unrealized losses on investments									4,443	(2,569)	608
Operating expenses									95,219	54,758	54,538
Income before income taxes									18,077	18,213	4,928
Income tax expense (benefit)									7,456	(6)	1,145
Net income	$ 10,880	$ 7,454	$ 6,698	$ (14,411)	$ 4,127	$ 1,566	$ 6,934	$ 5,592	10,621	18,219	3,783
Change in net unrealized loss (gain) on investments									5,249	(341)	1,522
Net comprehensive income	$ 9,670	$ 8,428	$ 9,996	$ (12,224)	$ 5,085	$ 1,257	$ 6,843	$ 4,693	15,870	17,878	5,305
Palomar Holdings, Inc.
Net investment income									1,039	61
Net realized and unrealized losses on investments									131	(2)
Operating expenses									8
Income before income taxes									1,178	59
Income tax expense (benefit)									7,441
Income (loss) before equity in net income of subsidiaries									(6,263)	59
Equity in net income of subsidiaries									16,884	18,160	3,783
Net income									10,621	18,219	3,783
Change in net unrealized loss (gain) on investments									708	(87)
Equity in other comprehensive income of subsidiaries, net of taxes									4,541	(254)	1,522
Net comprehensive income									$ 15,870	$ 17,878	$ 5,305

Investments - Contractual Maturities of Available for Sale Fixed Maturity Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Amortized Cost
Due within one year	$ 9,280
Due after one year through five years	64,933
Due after five years through ten years	59,192
Due after ten years	27,042
Mortgage and asset-backed securities	50,831
Amortized Cost	211,278	$ 122,949
Fair Value
Due within one year	9,299
Due after one year through five years	66,108
Due after five years through ten years	62,292
Due after ten years	27,816
Mortgage and asset-backed securities	51,636
Total	$ 217,151	$ 122,220

Net Income Per Share

12 Months Ended

Dec. 31, 2019

Net Income Per Share

Net Income Per Share

19. Net Income Per Share

The following table sets forth the computation of net income per share of common stock:


	Year ended December 31,
	2019		2018		2017
	(in thousands, except shares and per share data)
Net income	$	10,621	$	18,219	$	3,783
Weighted average common shares outstanding:
Basic		21,501,541		17,000,000		17,000,000
Common Share equivalents		333,393		—		—
Diluted		21,834,934		17,000,000		17,000,000

Earnings per share:
Basic	$	0.49	$	1.07	$	0.22
Diluted	$	0.49	$	1.07	$	0.22

Common share equivalents relate to outstanding shares under the 2019 Plan and unpurchased shares under the 2019 ESPP.

Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Net Income Per Share
Net income	$ 10,880	$ 7,454	$ 6,698	$ (14,411)	$ 4,127	$ 1,566	$ 6,934	$ 5,592	$ 10,621	$ 18,219	$ 3,783
Weighted-average common shares outstanding, basic									21,501,541	17,000,000	17,000,000
Common Share equivalents									333,393
Diluted									21,834,934	17,000,000	17,000,000
Basic	$ 0.46	$ 0.32	$ 0.30	$ (0.85)	$ 0.24	$ 0.09	$ 0.41	$ 0.33	$ 0.49	$ 1.07	$ 0.22
Diluted earnings per share	$ 0.45	$ 0.31	$ 0.30	$ (0.85)	$ 0.24	$ 0.09	$ 0.41	$ 0.33	$ 0.49	$ 1.07	$ 0.22

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Consolidated Statements of Shareholder’s Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Total
Beginning balance at Dec. 31, 2016	$ 2	$ 68,498	$ 1,017	$ 3,592	$ 73,109
Beginning balance (in shares) at Dec. 31, 2016	17,000,000
Changes in Stockholders’ Equity
Impact of equity accounting guidance adoption			454	(454)
Change in net unrealized loss (gain) on investments			1,522		1,522
Net income				3,783	3,783
Ending balance at Dec. 31, 2017	$ 2	68,498	2,993	6,921	78,414
Ending balance (in shares) at Dec. 31, 2017	17,000,000
Changes in Stockholders’ Equity
Impact of equity accounting guidance adoption			(3,215)	3,215
Change in net unrealized loss (gain) on investments			(341)		(341)
Net income				18,219	18,219
Ending balance at Dec. 31, 2018	$ 2	68,498	(563)	28,355	$ 96,292
Ending balance (in shares) at Dec. 31, 2018	17,000,000				17,000,000
Changes in Stockholders’ Equity
Change in net unrealized loss (gain) on investments			5,249		$ 5,249
Distribution to stockholder				(5,120)	(5,120)
Stock-based compensation expense		24,103			24,103
Issuance of common stock in initial public offering, net of offering costs		87,411			87,411
Issuance of common stock in initial public offering, net of offering costs (in shares)	6,468,750
Net income				10,621	10,621
Ending balance at Dec. 31, 2019	$ 2	$ 180,012	$ 4,686	$ 33,856	$ 218,556
Ending balance (in shares) at Dec. 31, 2019	23,468,750				23,468,750

Reinsurance (Tables)

12 Months Ended

Dec. 31, 2019

Reinsurance

Schedule of effect of reinsurance on premiums written and earned and on losses and LAE incurred


	2019				2018				2017
	Written		Earned		Written		Earned		Written		Earned
	(in thousands)
Premiums Written and Earned:
Direct	$	220,568	$	178,536	$	144,821	$	129,071	$	112,974	$	94,799
Assumed		31,393		21,985		10,070		8,688		7,260		6,162
Ceded		(108,332)		(100,314)		(82,949)		(67,862)		(46,951)		(45,416)
Net	$	143,629	$	100,207	$	71,942	$	69,897	$	73,283	$	55,545


	2019
	Losses		LAE		Total
	(in thousands)
Losses and LAE Incurred:
Direct	$	20,105	$	2,837	$	22,942
Assumed		1,201		34		1,235
Ceded		(16,564)		(2,020)		(18,584)
Net	$	4,742	$	851	$	5,593


	2018
	Losses		LAE		Total
	(in thousands)
Losses and LAE Incurred:
Direct	$	12,153	$	2,113	$	14,266
Assumed		46		6		52
Ceded		(6,580)		(1,464)		(8,044)
Net	$	5,619	$	655	$	6,274


	2017
	Losses		LAE		Total
	(in thousands)
Losses and LAE Incurred:
Direct	$	24,266	$	6,608	$	30,874
Assumed		2		—		2
Ceded		(14,651)		(4,100)		(18,751)
Net	$	9,617	$	2,508	$	12,125

Schedule V - Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2019

Valuation and Qualifying Accounts

Valuation and Qualifying Accounts

Schedule V

Palomar Holdings, Inc. and Subsidiaries

Valuation and Qualifying Accounts


			Additions		Deductions
	Balance at		Amounts		Amounts		Balance at
	Beginning		Charged to		Written		End of
(in thousands)	of Period		Expense		Off		Period
Year Ended December 31, 2019
Valuation Allowance for deferred tax assets	$	1,677	$	—	$	(1,603)	$	74
Year Ended December 31, 2018
Valuation Allowance for deferred tax assets	$	947	$	730	$	—	$	1,677

Schedule II - Balance Sheets - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Fixed maturity securities available for sale, amortized cost	$ 211,278	$ 122,949
Equity securities, cost	$ 21,336	$ 27,188
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	0
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	23,468,750	17,000,000
Common stock, shares outstanding	23,468,750	17,000,000
Palomar Holdings, Inc.
Fixed maturity securities available for sale, amortized cost	$ 28,413	$ 11,668
Equity securities, cost	$ 1,661	$ 1,656
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	0
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	23,468,750	17,000,000
Common stock, shares outstanding	23,468,750	17,000,000

Commitments and Contingencies (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Years ending December 31:
2020	$ 843
2021	879
2022	904
2023	862
2024	478
Total	3,966
Total rent expense		$ 600	$ 800
Total rent expense	$ 600

Capital Stock (Tables)

12 Months Ended

Dec. 31, 2019

Capital Stock

Schedule of common stock reserved for future issuance


Stock options outstanding under 2019 Equity Incentive Plan	1,046,373
Restricted stock units outstanding under 2019 Equity Incentive Plan	6,066
Shares authorized for future issuance under 2019 Equity Incentive Plan	1,347,561
Shares authorized for future issuance under 2019 Employee Stock Purchase Plan	240,000
Total	2,640,000

Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Deferred tax assets:
Losses and LAE reserve discount	$ 10	$ 22
Net operating losses	74	702
Investment amortization	85	119
Unearned premiums	3,748	1,914
Capitalized organizational costs	274	304
Unrealized losses on investments		505
Other	390	306
Total deferred tax assets	4,581	3,872
Deferred tax liabilities:
Deferred acquisition costs	(4,468)	(2,127)
Unrealized gains on investments	(1,396)
Internally developed software	(640)
Other	(2)	(68)
Total deferred tax liabilities	(6,506)	(2,195)
Net deferred tax asset before valuation allowance	(1,925)	1,677
Valuation allowance	(74)	$ (1,677)
Total net deferred tax liabilities	$ (1,999)

Stock-Based Compensation - 2019 Employee Stock Purchase Plan (Details) - 2019 Employee Stock Purchase Plan - shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Apr. 16, 2019
Management Incentive Plan
Shares authorized (in shares)		240,000	240,000
Scenario, Forecast \| Maximum
Management Incentive Plan
Annual increase (in shares)	240,000

Policy Acquisition Costs (Details) - USD ($) $ in Thousands	12 Months Ended
Policy Acquisition Costs (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Deferred Policy Acquisition Costs:
Balance, beginning of year	$ 14,052	$ 15,161	$ 10,654
Direct commissions	59,676	36,934	27,976
Ceding commissions	(17,257)	(15,218)	(3,224)
Premium taxes	5,236	3,362	2,625
Total net additions	47,655	25,078	27,377
Amortization of net policy acquisition costs	(36,506)	(26,187)	(22,870)
Balance, end of year	25,201	14,052	15,161
Acquisition expenses:
Amortization of net policy acquisition costs	36,506	26,187	22,870
Period costs	753	2,037	2,652
Total Acquisition expenses	$ 37,259	$ 28,224	$ 25,522

Underwriting Information - Reportable Segments (Details)	12 Months Ended
	Dec. 31, 2019 segment
Reportable segment
Number of reportable segments	1

Policy Acquisition Costs (Tables)

12 Months Ended

Dec. 31, 2019

Policy Acquisition Costs

Schedule of policy acquisition costs deferred and amortized


	December 31,
	2019		2018		2017
	(in thousands)
Deferred Policy Acquisition Costs:
Balance, beginning of year	$	14,052	$	15,161	$	10,654
Additions to deferred balance:
Direct commissions		59,676		36,934		27,976
Ceding commissions		(17,257)		(15,218)		(3,224)
Premium taxes		5,236		3,362		2,625
Total net additions		47,655		25,078		27,377
Amortization of net policy acquisition costs		(36,506)		(26,187)		(22,870)
Balance, end of year	$	25,201	$	14,052	$	15,161
Acquisition expenses:
Amortization of net policy acquisition costs	$	36,506	$	26,187	$	22,870
Period costs		753		2,037		2,652
Total Acquisition expenses	$	37,259	$	28,224	$	25,522

Summary of Operations and Basis of Presentation (Details) $ / shares in Units, $ in Millions				12 Months Ended
	Jan. 09, 2020 shares	Apr. 22, 2019 USD ($) $ / shares shares	Mar. 15, 2019	Dec. 31, 2019 state
Number states Company underwrites catastrophe insurance on an admitted basis \| state				27
Forward stock split			17,000,000
IPO
Issuance of common stock in initial public offering, net of offering costs (in shares)		6,468,750
Share price (in dollars per share) \| $ / shares		$ 15.00
Proceeds from Issuance Initial Public Offering \| $		$ 87.4
Underwriter option
Issuance of common stock in initial public offering, net of offering costs (in shares)		843,750
Underwriter option \| Subsequent Event
Issuance of common stock in initial public offering, net of offering costs (in shares)	750,000

Investments - Securities on Deposit (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Investments
Fair Value	$ 217,151	$ 122,220
Securities on deposit with state regulatory authorities
Investments
Fair Value	$ 5,100	$ 5,000

Significant Accounting Policies	12 Months Ended
Significant Accounting Policies	Dec. 31, 2019
Significant Accounting Policies
Significant Accounting Policies	2. Significant Accounting Policies Cash and Cash Equivalents Cash and cash equivalents include time deposits and marketable securities with original maturities of three months or less at acquisition and are stated at cost, which approximates fair value. The Company maintains cash balances in federally insured financial institutions. Restricted Cash Restricted cash includes cash on deposit with reinsurance carriers. Restricted cash also includes cash held in a fiduciary capacity for the benefit of third-party insurance carriers. Deferred Offering Costs Deferred offering costs, which consist of direct incremental legal and accounting fees relating to the Company's April 2019 initial public offering (IPO), were capitalized as incurred. The deferred offering costs were offset against the IPO proceeds upon the consummation of the offering. Deferred offering costs were $1.1 million at December 31, 2018 and are classified as Prepaid expenses and other assets on the Company's consolidated balance sheet. Investments All of the Company’s investments in fixed maturity securities are classified as available‑for‑sale and are carried at fair value. Unrealized gains and losses related to fixed maturity securities are included in accumulated other comprehensive income as a separate component of stockholder’s equity. Equity securities are carried at fair value with unrealized gains and losses included as a component of net income on the Company’s consolidated statement of income. Prior to 2018, unrealized gains and losses on equity securities were included in accumulated other comprehensive income as a separate component of stockholders’ equity. Premiums and discounts on mortgage‑backed securities and asset‑backed securities are amortized or accrued using the prospective method which considers anticipated prepayments at the date of purchase. To the extent that the estimated lives of such securities change as a result of changes in estimated prepayment rates, the adjustments are included in net investment income using the prospective method. Investment income consists primarily of interest and dividends. Interest income is recognized on an accrual basis. Dividend income is recognized on the ex‑dividend date. Net investment income represents investment income, net of expenses. Other‑than‑temporary declines in fair value of fixed maturity securities are evaluated for amounts considered credit losses by comparing the expected present value of cash flows to be collected to the amortized cost. Once the amount of other‑than‑temporary impairment (OTTI) related to the credit loss is determined, the unrealized loss is then bifurcated into the credit‑related loss and the loss related to all other factors. The credit‑related OTTI loss is recognized as a realized loss in the statement of income and comprehensive income and the cost basis of the security is reduced. The OTTI related to other factors remain in accumulated other comprehensive income. Before 2018, other‑than‑temporary declines in the fair value of equity securities would have been recorded as realized losses in the consolidated statement of income and comprehensive income and the cost basis of the security would have been reduced (see Note 3). The Company uses the specific‑identification method to determine the cost of fixed maturity securities sold and the first‑in, first‑out method for lots of equity securities sold. Fair Value Fair value is defined as the price that the Company would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. The three‑tier hierarchy of inputs is summarized in the three broad levels listed below: Level 1—Unadjusted quoted prices are available in active markets for identical investments as of the reporting date. Level 2—Pricing inputs are quoted prices for similar investments in active markets; quoted prices for identical or similar investments in inactive markets; or valuations based on models where the significant inputs are observable or can be corroborated by observable market data. Level 3—Pricing inputs into models are unobservable for the investment. The unobservable inputs require significant management judgment or estimation. To measure fair value, the Company obtains quoted market prices for its investment securities from its outside investment managers. If a quoted market price is not available, the Company uses prices of similar securities. The fair values obtained from the outside investment managers are reviewed for reasonableness and any discrepancies are investigated for final valuation. The fair value of the Company’s investments in fixed maturity securities is estimated using relevant inputs, including available market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. An Option Adjusted Spread model is also used to develop prepayment and interest rate scenarios. Industry standard models are used to analyze and value securities with embedded options or prepayment sensitivities. These fair value measurements are estimated based on observable, objectively verifiable market information rather than market quotes; therefore, these investments are classified and disclosed in Level 2 of the hierarchy. The fair value of the Company’s investments in equity securities is based on quoted prices available in active markets and classified and disclosed in Level 1 of the hierarchy. Concentration of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, fixed maturity securities and reinsurance recoverables. The Company places its cash and cash equivalents with high credit quality financial institutions and its fixed maturity securities in securities of the U.S. government, U.S. government agencies, and high credit quality issuers of debt securities. The Company evaluates the financial condition of its reinsurers and reinsures its business with highly rated reinsurers and sometimes requires letters of credit or retains funds from reinsurers (see Note 9). Premiums Receivable Premiums receivable are carried at face value net of any allowance for doubtful accounts which approximates fair value. If necessary, the Company records an allowance for doubtful accounts in an amount approximating anticipated losses. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts is not reasonably assured. No allowance for doubtful accounts was required at December 31, 2019 or 2018. Deferred Policy Acquisition Costs The costs of successfully acquiring new business, principally commission expense and premium taxes, are deferred and amortized over the unexpired terms of the policies in force. Premiums Earned Gross premiums written are recorded at policy inception and are earned as revenue ratably over the term of the respective policies. Premiums written not yet recognized as revenue are reflected as unearned premiums on the balance sheet, or as advanced premiums if received prior to the policy effective date. Premiums written but not yet received are recognized as premiums receivable. Premiums receivable are presented on the consolidated balance sheets net of estimated uncollectible amounts. Based on management’s review no allowance for bad debt was required at December 31, 2019 and 2018. A premium deficiency is recognized if the sum of expected losses and loss adjustment expenses, unamortized acquisition costs, and policy maintenance costs exceeds the remaining unearned premiums. A premium deficiency would first be recognized by charging any unamortized acquisition costs to expense to the extent required to eliminate the deficiency. If the premium deficiency were greater than unamortized acquisition costs, a liability would be accrued for the excess deficiency. The Company does not consider anticipated investment income when determining if a premium deficiency exists. There was no premium deficiency at December 31, 2019 or 2018. Commission and Other Income Commission and other income is comprised of commissions earned on policies where the Company has no exposure to underlying risk and fees earned in conjunction with underwriting policies. Commission and fee income is earned at the time the policy is written. Property and Equipment Property and equipment are capitalized and carried at cost less accumulated depreciation. Depreciation for property and equipment is calculated on a straight‑line basis using useful lives of 3 to 5 years. Leasehold improvements and other fixed assets are capitalized and depreciated over the useful lives of the properties and equipment. Expenditures for maintenance and repairs are charged to operations as incurred. Upon disposition, the asset cost and related depreciation are removed from the accounts and the resulting gain or loss is included in the Company’s results of operations. Capitalized Software Costs associated with the implementation of certain internal systems are capitalized and carried at capitalized cost less accumulated amortization and are included as a component of prepaid expenses and other assets on the Company’s consolidated balance sheet. Costs capitalized include internal personnel costs, external developer costs, and interest. The implementation costs relate to systems built on software which the Company purchases under a cloud computing arrangement and accounts for as a service contract. As such, capitalized costs are amortized over the term of the service contract, which currently ends in December 2024. Intangible Assets Upon acquisition, the entire PSIC purchase price was allocated to separately identifiable indefinite lived intangible assets. The Company acquired seven state licenses in the acquisition to which $0.7 million was allocated. Indefinite lived intangible assets are initially recognized and measured at fair value; intangible assets are subsequently evaluated for impairment annually or more frequently if circumstances warrant it. No impairments of intangible assets were recognized for the years ended December 31, 2019, 2018 or 2017. Impairment of Long‑Lived Assets Long‑lived assets with finite lives are tested for impairment whenever recognized events or changes in circumstances indicate the carrying value of these assets may not be recoverable. If indicators of impairment are present, the fair value is calculated using estimated future cash flows expected to be generated from the use of those assets. An impairment loss is recognized only if the carrying amount of a long‑lived asset or asset group is not recoverable and exceeds its fair value. The carrying amount of a long‑lived asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. This assessment is based on the carrying amount of the asset or asset group at the date it is tested for recoverability. An impairment loss is measured as the amount by which the carrying amount of a long‑lived asset or asset group exceeds its fair value. No impairments of long‑lived assets were recognized for the years ended December 31, 2019, 2018 and 2017. Reserve for Losses and Loss Adjustment Expenses The reserve for unpaid losses and loss adjustment expenses includes estimates for unpaid claims and claim adjustment expenses on reported losses and estimates of losses incurred but not reported (IBNR), net of salvage and subrogation recoveries. The liability is based on individual claims, case reserves and other estimates reported by policyholders, as well as management estimates of ultimate losses and loss adjustment expenses. Inherent in the estimates of ultimate losses and loss adjustment expenses are expected trends in claims severity and frequency and other factors that could vary significantly as claims are settled. The Company’s estimates of ultimate losses and loss adjustment expenses are based in part upon the estimation of claims resulting from natural disasters such as hurricanes and earthquakes. Estimation by management of the ultimate losses and loss adjustment expenses resulting from catastrophic events is inherently difficult because of the potential severity of property catastrophe claims. Therefore, the Company uses both proprietary and commercially available models, as well as historic claims experience, for purposes of providing an estimate of ultimate losses and loss adjustment expenses. For other difficult estimates of ultimate losses and loss adjustment expenses, the Company utilizes historical severity data that may be immature and subject to significant variation, in addition to using loss development methods based on paid and reported losses. For these estimates, industry data may also be utilized. Ultimate losses and loss adjustment expenses may vary materially from the amounts provided in the consolidated financial statements. Estimates of unpaid losses and loss adjustment expenses are reviewed regularly and, as experience develops and new information becomes known, the liabilities are adjusted as necessary. Such adjustments, if any, are reflected in operations in the period in which they become known and are accounted for as changes in estimates. The Company does not discount its liability for unpaid losses and loss adjustment expenses. The Company does not write insurance policies covering toxic clean‑up, asbestos‑related illness or other environmental remediation exposures. Reinsurance The Company purchases excess of loss and quota share reinsurance to protect it against the impact of losses. Reinsurance premiums, commissions, ceded unearned premiums are accounted for on bases consistent with the underlying terms of the reinsurance contracts and in proportion to the amount of insurance protection provided. The Company receives ceding commissions in connection with certain ceded reinsurance. The ceding commissions are capitalized and amortized as a reduction of underwriting, acquisition and insurance expenses. Amounts applicable to prepaid reinsurance premiums are reported as assets in the accompanying consolidated balance sheets. Reinsurance recoverables represent paid losses and loss adjustment expenses and reserves for unpaid losses and loss adjustment expenses ceded to reinsurers that are subject to reimbursement under reinsurance treaties. Premiums earned and losses and loss adjustment expenses incurred are stated in the accompanying consolidated statements of income and comprehensive income net of amounts ceded to reinsurers. Income Taxes The Company is taxed as a property/casualty insurer for federal income tax purposes. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and the tax bases of assets and liabilities, using enacted tax rates expected to be in effect during the year in which the basis differences reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company recognizes the tax benefit of uncertain tax positions where the position is more likely than not to be sustained assuming examination by taxing authorities. Based on its evaluation for the tax years ended December 31, 2019 and 2018, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. The Company recognizes interest and penalties related to uncertain tax positions, if any, as a component of income tax expense. The Company has not been assessed interest or penalties by any major tax jurisdictions for the respective tax years ended December 31, 2019, 2018, and 2017. Earnings Per Share Basic earnings per share is calculated by dividing net income by the weighted‑average common shares outstanding for the period. Diluted earnings per share reflects the dilution which could occur if equity-based awards are converted into common share equivalents as calculated using the treasury stock method. When inclusion of additional common share equivalents increases the earnings per share or reduces the loss per share, the effect on earnings per share is anti-dilutive, and the diluted net earnings or net loss per share is computed excluding these common share equivalents. Recent Accounting Pronouncements The Company currently qualifies as an emerging growth company (“EGC”) under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Accordingly, the Company is provided the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non‑emerging growth companies or (ii) within the same time periods as private companies. The Company is currently electing to adopt new or revised accounting guidance within the same time period as private companies, unless, as indicated below, management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance. If the Company ceases to be an EGC, it will no longer have the option to adopt guidance within the same time periods as private companies. Recently adopted accounting pronouncements In January 2016, the FASB issued “ASU 2016‑01, Financial Instruments—Overall (Subtopic 825‑10): Recognition and Measurement of Financial Assets and Financial Liabilities.” Among other things, this new guidance requires the Company’s equity investments to be measured at fair value with changes in fair value recognized in net income. Under the current guidance, equity investments are measured at fair value with changes in fair value recognized in accumulated other comprehensive income as a component of stockholder’s equity. The Company adopted this guidance on January 1, 2018 and began recognizing changes in fair value of equity securities into net income. Upon adoption, the Company made a $3.2 million cumulative‑effect adjustment to increase retained earnings and decrease accumulated other comprehensive income. In the future, this guidance will impact the Company’s results of operations, as changes in fair value of equity investments will impact net income rather than other comprehensive income. The future impact will vary depending on the volatility of the overall equity market and the amount the Company decides to invest in equity securities. In August 2016, the FASB issued “ASU 2016‑15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, in order to reduce diversity in the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The Company adopted this guidance on January 1, 2018. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements. In May 2014, the FASB issued “ASU 2014-09, Revenue from Contracts with Customers (Topic 606).” This guidance applies to all companies that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards, such as insurance contracts. Under this guidance, a company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Judgments required in adopting this update included identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Nearly all the Company’s consolidated revenue is outside the scope of Topic 606 except for the commission and fee income that the Company's 100% owned insurance agency earns from third-party insurers, which was $1.4 for each of the years ended December 31, 2019 and 2018. Effective January 1, 2019, the Company adopted Topic 606 using the modified retrospective transition method. The application of the key aspects of Topic 606 to the in-scope transactions resulted in recognition of revenues and related expenses consistent with the previous revenue guidance. Adoption had no impact on the Company’s reported fee income or expense and there was no cumulative effect of initially applying the guidance. Recently issued accounting pronouncements not yet adopted In February 2016, the FASB issued new guidance for accounting for leases, “ASU 2016‑02, Leases (Topic 842).” Under current guidance, leases are only included on the balance sheet if the criteria to classify the agreement as a capital lease are met. This update will require the recognition of a right‑of‑use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. This guidance was subsequently amended multiple times and offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This new guidance requires a modified retrospective adoption, applying the new standard to all leases existing at the date of initial application, with early adoption permitted. An entity may choose to use the standard’s effective date, rather than the beginning of the earliest comparative period presented, as the date of initial application. An entity would record the effects of initially applying the new guidance as a cumulative‑effect adjustment to retained earnings. Consequently, an entity’s reporting for the comparative periods presented in the year of adoption would continue to be in accordance with the current guidance, including the current disclosure requirements. To facilitate transition, the new guidance includes a package of practical expedients that entities may elect to apply on adoption. The package of practical expedients relates to the identification and classification of leases and initial direct costs for leases that commenced before the effective date. The new guidance also includes a practical expedient permitting the use of hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. Under the Company’s current status as an EGC, this update will be effective for annual reporting periods beginning after December 15, 2020, and interim reporting periods within fiscal years beginning after December 31, 2021 with early adoption permitted. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements. In June 2016, the FASB issued “ASU 2016‑13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” Current guidance delays the recognition of credit losses until it is probable a loss has been incurred. This updated guidance will require financial assets measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net income. Credit losses relating to available‑for‑sale debt securities will also be recorded through an allowance for credit losses, with the amount of the allowance limited to the amount by which fair value is below amortized cost. In 2019, the FASB issued amendments to this guidance which provide an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost and provide additional clarification and implementation guidance. Under the Company’s current status as an EGC, this update and its amendments will be effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, but not before annual reporting periods beginning on or after December 15, 2018. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements. In August 2018, the FASB issued “ASU 2018‑13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. Among other things, this new guidance eliminates the need to disclose transfers between Level 1 and Level 2 of the fair value hierarchy, changes the policy for timing of transfers and the valuation processes for Level 3 fair value measurements and includes requirements to disclose quantitative information about Level 3 measurements. This new guidance will be effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted this guidance on January 1, 2020 and adoption did not have an impact on the Company’s consolidated financial statements. The Company will continue to monitor the composition of its investment portfolio and will make appropriate disclosures based on this guidance.

Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2019

Property and Equipment

Schedule of Property and Equipment


			Accumulated		Net
December 31, 2019	Cost		Depreciation		Book Value
	(in thousands)
Leasehold improvements	$	879	$	(342)	$	537
Computer hardware		144		(64)		80
Office equipment and furniture		519		(291)		228
Total	$	1,542	$	(697)	$	845


			Accumulated		Net
December 31, 2018	Cost		Depreciation		Book Value
	(in thousands)
Leasehold improvements	$	879	$	(225)	$	654
Computer hardware		108		(51)		57
Office equipment and furniture		454		(218)		236
Total	$	1,441	$	(494)	$	947

Reserve for Losses and Loss Adjustment Expenses - Additional Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Reserve for Losses and Loss Adjustment Expenses
Loss and loss adjustment expense reserve redundancy	$ 0.2	$ 1.9	$ 0.1

Fair value measurements - Transfers (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Fair value measurements
Fair value, assets, Level 1 to Level 2	$ 0	$ 0
Fair value, assets, Level 2 to Level 1	0	0
Fair value, liabilities, Level 1 to Level 2	0	0
Fair value, liabilities, Level 2 to Level 1	0	0
Fair value, assets, transfers into Level 3	0	0
Fair value, assets, transfers out of Level 3	0	0
Fair value, liabilities, transfers into Level 3	0	0
Fair value, liabilities, transfers out of Level 3	$ 0	$ 0

Subsequent Events	12 Months Ended
Subsequent Events	Dec. 31, 2019
Subsequent Events
Subsequent Events	22. Subsequent Events On January 9, 2020, the Company and certain selling stockholders completed the January 2020 Secondary Offering of 5,750,000 shares of common stock at a public offering price of $49.00 per share. Of the 5,750,000 shares sold, 750,000 represented the underwriters’ exercise of their option to purchase additional shares. The offering was comprised of 5,000,000 shares sold by certain selling stockholders and 750,000 shares sold by the Company. The Company’s net proceeds from the January 2020 Secondary Offering were approximately $35.4 million, after deducting underwriting discounts and commissions and offering costs.

Fair value measurements

12 Months Ended

Dec. 31, 2019

Fair value measurements

Fair value measurements

4. Fair value measurements

The following tables present the Company’s fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018:


December 31, 2019	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Fixed maturity securities
U.S. Governments	$	—	$	13,679	$	—	$	13,679
States, territories, and possessions		—		2,445		—		2,445
Political subdivisions		—		1,942		—		1,942
Special revenue excluding mortgage/asset-backed securities		—		18,436		—		18,436
Industrial and miscellaneous		—		129,013		—		129,013
Mortgage/asset-backed securities		—		50,136		1,500		51,636
Equity securities		—		22,328		—		22,328
Cash, cash equivalents, and restricted cash		28,350		4,999		—		33,349
Total assets	$	28,350	$	242,978	$	1,500	$	272,828


December 31, 2018	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Fixed maturity securities
U.S. Governments	$	—	$	15,269	$	—	$	15,269
States, territories, and possessions		—		1,221		—		1,221
Political subdivisions		—		815		—		815
Special revenue excluding mortgage/asset-backed securities		—		12,453		—		12,453
Industrial and miscellaneous		—		65,126		—		65,126
Mortgage/asset-backed securities		—		27,336		—		27,336
Equity securities		25,171		—		—		25,171
Cash, cash equivalents, and restricted cash		9,924		—		—		9,924
Total assets	$	35,095	$	122,220	$	—	$	157,315
Liabilities:
Long-term notes payable	$	—	$	—	$	20,000	$	20,000
Total liabilities	$	—	$	—	$	20,000	$	20,000

The carrying amounts of financial assets and liabilities reported in the accompanying consolidated balance sheets including cash and cash equivalents, restricted cash, receivables, reinsurance recoverable, and accounts payable and other accrued liabilities approximate fair value due to their short term‑maturity.

The fair value of the Company’s long‑term debt was determined by calculating the present value of expected future cash flows under the terms of the note agreements discounted at an estimated market rate of interest at December 31, 2018. This is a level 3 measurement. The Company repaid its long-term notes payable in May 2019 and did not have any long-term debt at December 31, 2019.

Transfers between levels result from changes in the availability of market observable inputs and are recorded at the beginning of the reporting period. There were no transfers between Level 1, Level 2 or Level 3 during 2019 or 2018.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Statutory financial information (Tables)

12 Months Ended

Dec. 31, 2019

Statutory financial information

Summary of statutory net income and statutory capital surplus


	December 31,
	2019		2018		2017
	(in thousands)
Statutory net income (loss)	$	(17,911)	$	9,609	$	(4,128)
Statutory capital and surplus		116,296		63,731		61,338

- Definition

Tabular disclosure of how the entity's reporting under GAAP as of the balance sheet date differs from the results based on prescribed and permitted accounting practices of the state or country of domicile in which a relevant statutory filing is made, or differences in results based on the National Association of Insurance Commissioners (NAIC) prescribed practices, or a combination thereof. Describes the accounting practices used and the related monetary effect on statutory surplus, net income, and risk-based capital. If an insurance enterprise's risk-based capital would have triggered a regulatory event had it not used a permitted practice, that fact is disclosed in the financial statements. Permitted statutory accounting practices include practices not prescribed but allowed by the domiciliary state insurance department regulatory authority.

+ References + Details

Stock-Based Compensation - 2019 Equity Incentive Plan (Details) - 2019 Equity Incentive Plan - shares	Dec. 31, 2019	Apr. 16, 2019
Management Incentive Plan
Shares authorized (in shares)	1,347,561	2,400,000
Annual automatic increase to the number of shares of common stock reserved for issuance, as a percentage of common stock issued and outstanding as at the immediately preceding fiscal year end		3.00%

Long-term Debt - Surplus Notes (Details) - USD ($) $ in Millions		1 Months Ended
	Feb. 03, 2015	Sep. 30, 2018	Aug. 31, 2018
Notes Payable, Other Payables \| Surplus Notes
Long-term debt
Outstanding surplus notes			$ 17.5
Term	7 years
Pay down of surplus notes		$ 17.5
Pre-payment, penalty		0.1
Unamortized debt issuance costs		0.4
Notes Payable, Other Payables \| Surplus Notes \| London Interbank Offered Rate (LIBOR)
Long-term debt
Interest rate spread (as a percent)	8.00%
Senior Notes \| 2018 Floating Rate Notes
Long-term debt
Debt instrument, face amount		$ 20.0

Retirement and Post-Employment Retirement Plans (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Retirement and Post-Employment Retirement Plans
Employer matching participants gross wages (as a percent)	3.00%
Contributions to plan	$ 0.3	$ 0.2	$ 0.2

Reserve for Losses and Loss Adjustment Expenses - Reconciliation of Liability for Claims and Claim Adjustment Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Short-duration Insurance Contracts, Historical Claims Duration
Reserve for losses and loss adjustment expense net of reinsurance	$ 3,869	$ 4,165	$ 4,432	$ 3,336
Total reinsurance recoverable on unpaid claims	12,952
Reserve for losses and loss adjustment expenses	16,821	$ 16,061	$ 17,784
Homeowners’ Insurance
Short-duration Insurance Contracts, Historical Claims Duration
Reserve for losses and loss adjustment expense net of reinsurance	562
Total reinsurance recoverable on unpaid claims	4,961
Special Property Insurance
Short-duration Insurance Contracts, Historical Claims Duration
Reserve for losses and loss adjustment expense net of reinsurance	2,112
Total reinsurance recoverable on unpaid claims	7,983
Reinsurance- Nonproportional assumed property
Short-duration Insurance Contracts, Historical Claims Duration
Reserve for losses and loss adjustment expense net of reinsurance	1,195
Other
Short-duration Insurance Contracts, Historical Claims Duration
Total reinsurance recoverable on unpaid claims	$ 8