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March 26, 2019
Mac Armstrong
Chief Executive Officer
Palomar Holdings, Inc.
7979 Ivanhoe Avenue, Suite 500
La Jolla, CA 92037
Re: Palomar Holdings, Inc.
Registration Statement on Form S-1
Filed March 15, 2019
File No. 333-230346
Dear Mr. Armstrong:
We have reviewed your registration statement and have the following
comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by amending your registration statement
and providing the
requested information. If you do not believe our comments apply to your facts
and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response.
After reviewing any amendment to your registration statement and the
information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-1
Prospectus Summary
Summary Risk Factors, page 9
1. We note your revised disclosures regarding the Stockholders Agreement
with Genstar on
page 135. Please expand the first bullet on page 10 to disclose this
agreement. In
addition, substantially expand your discussion on page 10 under "Our
Sponsor and
Controlled Company Status" to disclose Genstar's right to nominate a
percentage of your
directors corresponding to its ownership, up to 50% of your directors,
and the actions that
you may not take without Genstar's written consent. Additionally, revise
the heading to
this section to include a reference to this agreement. In the risk
factors section, add a new
risk factor to disclose Genstar's right to nominate your directors, and
expand the last risk
factor on page 38 to disclose the restriction on acquisitions or
dispositions.
Mac Armstrong
FirstName LastNameMac Armstrong
Palomar Holdings, Inc.
Comapany2019
March 26, NamePalomar Holdings, Inc.
March 26, 2019 Page 2
Page 2
FirstName LastName
History, page 10
2. We note your revised disclosure that you made a one-time cash
distribution of
approximately $5.1 million to certain of your stockholders to allow
them to satisfy tax
obligations. Please update your disclosure in the related party
transactions section to
disclose these transactions to the extent appropriate, or explain why
no such disclosure is
necessary. To the extent any of these distributions were made to
Genstar or its affiliates,
please also revise the "Our Sponsor" section to disclose this
information.
3. You disclose on page F-34 that the maximum dividend that may be made
in 2019 without
prior approval from Oregon and California insurance authorities is $5
million, and the
maximum dividend that is payable by the Bermuda subsidiary in 2019 is
approximately
$2.9 million. Please explain whether the $5.1 million distribution is
considered to be a
dividend by you or any of your subsidiaries. To the extent that the
distribution reduces
any of the permitted dividend amounts for 2019, please revise your
disclosures as
appropriate, including the risk factor on pages 29-30, to disclose the
effect of the
distribution on those amounts.
Risk Factors
If states increase the assessments that Palomar Specialty Insurance Company is
required to pay. .
.., page 29
4. Your revised disclosure states that your assessments increased from
$9,587 in 2017 to
$1.1 million in 2018. Please revise your MD&A discussion accordingly
to explain this
increase, and as you have applied for admissions in additional states,
any known trends
regarding these assessments.
Our certificate of incorporation will provide that the Court of Chancery of the
State of Delaware
will be the exclusive forum. . ., page 41
5. We refer to your certificate of incorporation and bylaws, which you
have filed as Exhibits
3.1 and 3.3. We note your disclosure that your certificate of
incorporation will provide
that the federal district courts will be the exclusive forum for
claims arising under the
Securities Act. However, your bylaws and certificate of incorporation
do not include
language to that effect. Please reconcile your disclosure and your
governing documents.
Executive Compensation
Outstanding Equity Awards at Fiscal Year-End, page 132
6. We note your revised disclosure that no equity awards were outstanding
as of December
31, 2018, 2017 or 2016. However, we also note your revised disclosure
on page F-36 that
certain officers of one of your subsidiaries and its affiliates are
entitled to Class P Units
under the 2014 Management Incentive Plan of your former parent, and
that there were
outstanding Class P Units as of December 31, 2017 and 2018. To the
extent your named
executive officers had outstanding Class P Units as of December 31,
2017 or 2018, please
Mac Armstrong
FirstName LastNameMac Armstrong
Palomar Holdings, Inc.
Comapany2019
March 26, NamePalomar Holdings, Inc.
March 26, 2019 Page 3
Page 3
FirstName LastName
revise to disclose those units. For guidance, refer to C&DIs
Regulation S-K Question
217.13.
Principal Stockholders, page 137
7. We acknowledge your revised disclosures in response to prior comment
3, but note that
your first two paragraphs continue to state that the information is as
of December 31,
2018. Please ensure that all information provided is as of a recent
date following the
domestication.
Consolidated Financial Statements
Note 8. Reinsurance, page F-27
8. Please revise your disclosures as appropriate to discuss the reason
for the increase to
prepaid reinsurance premiums of $18.3 million and $3.2 million at
December 31, 2018
and 2017.
Note 10. Income Taxes, page F-30
9. Please revise to explain your 71% valuation allowance increase to $1.7
million at
December 31, 2018.
Note 20. Subsequent Events, page F-38
10. We note your domestication transactions that included the $5.1 million
cash dividend to
certain owners, and the conversion of Class P units to common shares
from modifying
your 2014 Management Incentive Plan that increased stock compensation
expense by
$23.0 million. Refer to SAB Topic 1B3 and please provide the
following:
As it does not appear the cash payment is reflected in your December
31, 2018 balance
sheet, to the extent it is significant relative to reported
equity, please revise the face of
your balance sheet to present a pro forma balance sheet alongside
the historical
balance sheet reflecting the distribution accrual.
Please revise to include a pro forma balance sheet presented
alongside the historical
balance sheet giving effect to the conversion of your Class P
units.
If the conversion will result in a material reduction of earnings
per share, please
include pro forma EPS for the latest year and interim period
giving effect to the
conversion.
Item 15. Recent Sales of Unregistered Securities, page II-2
11. Please revise to include the securities issued and consideration
received for your Class P
Units, forward stock split, conversion of Class P units into common
shares, and any other
issuances or grants required to be disclosed, including the floating
rate senior notes issued
in a private placement in 2018. Refer to Item 701 of Regulation S-K.
We remind you that the company and its management are responsible for
the accuracy
Mac Armstrong
Palomar Holdings, Inc.
March 26, 2019
Page 4
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Bonnie Baynes at 202-551-4924 or Lisa Vanjoske at
202-551-3614
if you have questions regarding comments on the financial statements and
related matters.
Please contact Dorrie Yale at 202-551-8776 or Mary Beth Breslin at 202-551-3625
with any
other questions.
Sincerely,
FirstName LastNameMac Armstrong
Division of
Corporation Finance
Comapany NamePalomar Holdings, Inc.
Office of Healthcare
& Insurance
March 26, 2019 Page 4
cc: Michael S. Kagnoff, Esq. - DLA Piper LLP (US)
FirstName LastName