Palomar Holdings Inc

Previous wording

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2024, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report, and in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K as filed with the SEC on February 23, 2024.

Current wording

The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2024, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report, and in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K as filed with the SEC on February 23, 2024.

Previous wording

We are a specialty insurance company that provides property and casualty insurance products to individuals and businesses. We use our underwriting and analytical expertise to provide products for select markets that we believe are underserved by other insurance companies, including the market for earthquake insurance. We use proprietary data analytics and a modern technology platform to offer our customers flexible products with customized and granular pricing for both the admitted and excess and surplus lines (“E&S”) markets.

Current wording

We are a specialty insurance company that provides property and casualty insurance products to individuals and businesses. We use our underwriting and analytical expertise to provide innovative solutions in five product categories: Earthquake, Inland Marine and Other Property, Casualty, Fronting, and Crop. We use proprietary data analytics and a modern technology platform to offer our customers flexible products with customized and granular pricing for both the admitted and excess and surplus lines (“E&S”) markets.

Previous wording

We provide admitted insurance products through our Oregon domiciled insurance company, Palomar Specialty Insurance Company (“PSIC”), and E&S insurance products through our Arizona domiciled surplus lines insurance company, Palomar Excess and Surplus Insurance Company (“PESIC”). Each of our insurance company subsidiaries as carries an “A-“ rating from A.M. Best Company (“A.M. Best”), a leading rating agency for the insurance industry.

Current wording

We provide admitted insurance products through our Oregon domiciled insurance company, Palomar Specialty Insurance Company (“PSIC”), and E&S insurance products through our Arizona domiciled surplus lines insurance company, Palomar Excess and Surplus Insurance Company (“PESIC”). Each of our insurance company subsidiaries carries an “A“ rating from A.M. Best Company (“A.M. Best”), a leading rating agency for the insurance industry.

Previous wording

Our ceded written premiums can be impacted significantly in certain periods due to changes in quota share agreements. In periods where we modify a quota share agreement, ceded written premiums may increase or decrease significantly compared to prior periods and these fluctuations may not be indicative of future trends. Our XOL costs as a percentage of gross earned premiums also may vary each period due to changes in cost of XOL between contract periods, changes of premium in-force during the XOL contract period, or due to acceleration of XOL charges or the need to purchase additional reinsurance due to losses. In addition, the volume of premiums ceded in fronting agreements each period may vary due to the timing of entering new fronting partnerships and terminations of fronting partnerships.

Current wording

Our ceded written premiums can be impacted significantly in certain periods due to changes in quota share agreements. In periods where we modify a quota share agreement, ceded written premiums may increase or decrease significantly compared to prior periods and these fluctuations may not be indicative of future trends. Our XOL costs as a percentage of gross earned premiums also may vary each period due to changes in cost of XOL between contract periods, changes of premium in-force during the XOL contract period, or due to acceleration of XOL charges or the need to purchase additional XOL reinsurance due to losses. In addition, the volume of premiums ceded in fronting agreements each period may vary due to the timing of entering new fronting partnerships and terminations of fronting partnerships.

Previous wording

Gross written premiums increased $118.0 million, or 47.2% to $368.1 million for the three months ended March 31, 2024 compared to $250.1 million for the three months ended March 31, 2023. Premium growth was primarily due to an increased volume of policies written across our lines of business which was driven by new business generated with existing partners, strong premium retention rates for existing business, expansion of our distribution footprint, and new partnerships. The following table summarizes our gross written premiums by line of business and shows each line’s percentage of total gross written premiums for each period:

Current wording

Gross written premiums increased $110.9 million, or 40.4% to $385.2 million for the three months ended June 30, 2024 compared to $274.3 million for the three months ended June 30, 2023. Premium growth was primarily due to an increased volume of policies written across our lines of business which was driven by new business generated with existing partners, strong premium retention rates for existing business, expansion of our distribution footprint, and new partnerships. The following table summarizes our gross written premiums by line of business and shows each line’s percentage of total gross written premiums for each period:

Previous wording

Ceded written premiums increased $57.8 million, or 33.9%, to $228.2 million for the three months ended March 31, 2024 from $170.3 million for the three months ended March 31, 2023. The increase was primarily due to increased premiums ceded under quota share and fronting agreements due to growth in the volume of written premiums subject to quota share or fronting agreements. In addition, we incurred increased XOL reinsurance expense due to growth in exposure and higher rates on XOL reinsurance.

Current wording

Ceded written premiums increased $40.1 million, or 23.7%, to $209.2 million for the three months ended June 30, 2024 from $169.1 million for the three months ended June 30, 2023. The increase was primarily due to increased premiums ceded under quota share and fronting agreements due to growth in the volume of written premiums subject to quota share or fronting agreements. In addition, we incurred increased XOL reinsurance expense due to growth in exposure and higher rates on XOL reinsurance.

Previous wording

Ceded written premiums as a percentage of gross written premiums decreased to 62.0% for the three months ended March 31, 2024 from 68.1% for the three months ended March 31, 2023. This decrease was primarily due to gross written premiums growing at a higher percentage than ceded written premiums during the current quarter.

Current wording

Although our volume of ceded written premiums increased, ceded written premiums as a percentage of gross written premiums decreased to 54.3% for the three months ended June 30, 2024 from 61.7% for the three months ended June 30, 2023. This percentage decrease was driven by changes in our composition of business whereby premiums written in the current period were subject to lower quota share or XOL cession percentages compared to premiums written in the prior period.

Previous wording

Net earned premiums increased $24.6 million, or 29.6%, to $107.9 million for the three months ended March 31, 2024 from $83.2 million for the three months ended March 31, 2023 due primarily to the earning of increased gross written premiums offset by the earning of ceded written premiums under reinsurance agreements. The table below shows the amount of premiums we earned on a gross and net basis and net earned premiums as a percentage of gross earned premiums in each period presented:

Current wording

Net earned premiums increased $39.2 million, or 47.1%, to $122.3 million for the three months ended June 30, 2024 from $83.1 million for the three months ended June 30, 2023 due primarily to the earning of increased gross written premiums offset by the earning of ceded written premiums under reinsurance agreements. The table below shows the amount of premiums we earned on a gross and net basis and net earned premiums as a percentage of gross earned premiums in each period presented:

Previous wording

Commission and other income decreased $0.2 million to $0.5 million for the three months ended March 31, 2024 from $0.7 million for the three months ended March 31, 2023. The balance decreased due to a decrease in commissions and policy related fees caused by changes in our business mix.

Current wording

Commission and other income increased $0.2 million to $0.8 million for the three months ended June 30, 2024 from $0.6 million for the three months ended June 30, 2023. The balance increased due to an increase in commissions and policy related fees driven by increased premiums written.

Previous wording

Losses and loss adjustment expenses increased $6.2 million, or 29.9% to $26.8 million for the three months ended March 31, 2024 from $20.7 million for the three months ended March 31, 2023. Losses and loss adjustment expenses consisted of the following elements during the respective periods:

Current wording

Losses and loss adjustment expenses increased $12.5 million, or 70.0% to $30.4 million for the three months ended June 30, 2024 from $17.9 million for the three months ended June 30, 2023. Losses and loss adjustment expenses consisted of the following elements during the respective periods:

Previous wording

Our catastrophe loss ratio was 3.1% during the three months ended March 31, 2024. Catastrophe losses were primarily related to flood losses.

Current wording

Our catastrophe loss ratio was 2.8% and 2.6% for the three months ended June 30, 2024 and June 30, 2023, respectively. Catastrophe losses were primarily related to severe convective storms for both periods.

Previous wording

Our non-catastrophe loss ratio was 21.8% for the three months ended March 31, 2024 compared to 22.6% during the three months ended March 31, 2023. Non-catastrophe loss ratio decreased due to lower attritional losses on lines of business subject to attritional losses such as Casualty and Inland Marine and other Property.

Current wording

Our non-catastrophe loss ratio was 22.1% for the three months ended June 30, 2024 compared to 18.9% during the three months ended June 30, 2023. Non-catastrophe losses increased due mainly to higher attritional losses on lines of business subject to attritional losses such as Casualty and Inland Marine and Other Property due to premium growth in these lines of business.

Previous wording

Other underwriting expenses increased $5.6 million, or 29.0%, to $24.8 million for the three months ended March 31, 2024 from $19.2 million for the three months ended March 31, 2023. The increase was primarily due to the Company incurring higher payroll, technology, and stock-based compensation expenses associated with growth of the Company.

Current wording

Other underwriting expenses increased $8.9 million, or 39.7%, to $31.2 million for the three months ended June 30, 2024 from $22.4 million for the three months ended June 30, 2023. The increase was primarily due to the Company incurring higher payroll, technology, and stock-based compensation expenses associated with growth of the Company.

Previous wording

Other underwriting expenses as a percentage of gross earned premiums were 8.2% for the three months ended March 31, 2024 compared to 8.5% for the three months ended March 31, 2023. Excluding the impact of expenses relating to stock-based compensation, catastrophe bonds, and amortization of intangibles, other underwriting expenses as a percentage of gross earned premiums were 6.8% for the three months ended March 31, 2024 compared to 6.8% for the three months ended March 31, 2023. Other underwriting expenses as a percentage of gross earned premiums may fluctuate period over period based on timing of certain expenses relative to premium growth.

Current wording

Other underwriting expenses as a percentage of gross earned premiums were 9.6% for the three months ended June 30, 2024 compared to 9.2% for the three months ended June 30, 2023. Excluding the impact of expenses relating to transactions, stock-based compensation, catastrophe bonds, and amortization of intangibles, other underwriting expenses as a percentage of gross earned premiums were 7.3% for the three months ended June 30, 2024 compared to 6.9% for the three months ended June 30, 2023. Other underwriting expenses as a percentage of gross earned premiums may fluctuate period over period based on timing of certain expenses relative to premium growth.

Previous wording

Net investment income increased $2.0 million, or 39.4%, to $7.1 million for the three months ended March 31, 2024 from $5.1 million for the three months ended March 31, 2023. The increase was primarily due to a higher average balance of investments during the three months ended March 31, 2024 and higher yields on invested assets.

Current wording

Net investment income increased $2.4 million, or 43.7%, to $8.0 million for the three months ended June 30, 2024 from $5.5 million for the three months ended June 30, 2023. The increase was primarily due to a higher average balance of investments during the three months ended June 30, 2024 and higher yields on invested assets.

Previous wording

The Company incurred $3.0 million of net realized and unrealized gains on investments for the three months ended March 31, 2024 compared to $0.1 million of net realized and unrealized gains for the three months ended March 31, 2023 In both periods, the balance was primarily driven by unrealized gains on our equity securities. Unrealized gains and losses on fixed maturity securities are recognized as a component of other comprehensive income*** ***and do not impact our net income. The following table summarizes the components of our investment income for each period presented:

Current wording

The Company incurred insignificant net realized and unrealized gains on investments for the three months ended June 30, 2024 compared to $1.1 million of net realized and unrealized gains for the three months ended June 30, 2023 In both periods, the balance was primarily driven by unrealized gains on our equity securities. Unrealized gains and losses on fixed maturity securities are recognized as a component of other comprehensive income*** ***and do not impact our net income. The following table summarizes the components of our investment income for each period presented:

Previous wording

Income tax expense increased $2.7 million to $8.0 million for the three months ended March 31, 2024 from $5.3 million for the three months ended March 31, 2023 due to higher pre-tax income for the period ended March 31, 2024. During the three months ended March 31, 2024, our income tax rate of 23.2% was higher than the statutory rate of 21% due primarily to non-deductible executive compensation expense. During the three months ended March 31, 2023, our income tax rate of 23.5% was higher than the statutory rate of 21% also due primarily to non-deductible executive compensation expense.

Current wording

Income tax expense increased $2.2 million to $7.6 million for the three months ended June 30, 2024 from $5.5 million for the three months ended June 30, 2023 due to higher pre-tax income for the period ended June 30, 2024. During the three months ended June 30, 2024, our income tax rate of 22.9% was higher than the statutory rate of 21% due primarily to non-deductible executive compensation expense. During the three months ended June 30, 2023, our income tax rate of 23.7% was higher than the statutory rate of 21% also due primarily to non-deductible executive compensation expense.

Previous wording

Net written premiums increased $60.1 million, or 75.4%, to $139.9 million for the three months ended March 31, 2024 from $79.8 million for the three months ended March 31, 2023. The increase was primarily due to an increase in gross written premiums, primarily in our Casualty and Inland Marine and Other Property lines, partially offset by increased ceded written premiums.

Current wording

Net written premiums increased $131.0 million, or 70.8%, to $315.9 million for the six months ended June 30, 2024 from $185.0 million for the six months ended June 30, 2023. The increase was primarily due to an increase in gross written premiums, primarily in our Casualty and Inland Marine and Other Property lines, partially offset by increased ceded written premiums.

Previous wording

Acquisition expenses increased $6.1 million, or 23.8%, to $31.8 million for the three months ended March 31, 2024 from $25.7 million for the three months ended March 31, 2023. The increase was primarily due to higher commissions and premium-related taxes resulting from higher gross earned premiums. This was partially offset by higher earned ceding commissions and fronting fees due to an increase in premiums subject to a quota share or fronting agreement. Acquisition expenses as a percentage of gross earned premiums were 10.5% for the three months ended March 31, 2024 compared to 11.4% for the three months ended March 31, 2023. Acquisition expenses as a percentage of gross earned premiums decreased due to the recognition of higher ceding commission and fronting fee income as a percentage of gross earned premiums resulting from growth in lines of business subject to a quota share and fronting premiums during the past 12 months.

Current wording

Acquisition expenses increased $15.9 million, or 30.7%, to $67.6 million for the six months ended June 30, 2024 from $51.7 million for the six months ended June 30, 2023. The increase was primarily due to higher commissions and premium-related taxes resulting from higher gross earned premiums. This was partially offset by higher earned ceding commissions and fronting fees due to an increase in premiums subject to a quota share or fronting agreement. Acquisition expenses as a percentage of gross earned premiums were 10.7% for the six months ended June 30, 2024 compared to 11.1% for the six months ended June 30, 2023. Acquisition expenses as a percentage of gross earned premiums decreased due to the recognition of higher ceding commission and fronting fee income as a percentage of gross earned premiums due to changes in mix of business produced.

Previous wording

The following table summarizes our cash flows for the three months ended March 31, 2024 and 2023:

Current wording

The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023:

Previous wording

Our cash flow from operating activities was positive during the three months ended March 31, 2024 and 2023 due to net income and a decrease in net operating assets in each period.

Current wording

Our cash flow from operating activities was positive during the six months ended June 30, 2024 and 2023 due to net income and a decrease in net operating assets in each period.

Previous wording

Cash used in investing activities for the three months ended March 31, 2024 and 2023 related primarily to purchases of fixed maturity securities in excess of sales and maturities in each period.

Current wording

Cash used in investing activities for the six months ended June 30, 2024 and 2023 related primarily to purchases of fixed maturity securities in excess of sales and maturities in each period.

Previous wording

Cash used in financing activities for three months ended March 31, 2024 was related to $9.6 million in payments on our lines of credit, offset by the receipt of $1.9 million in proceeds from stock option exercises and the receipt of $0.4 million in proceeds from our employee stock purchase plan. Cash provided by financing activities for three months ended March 31, 2023 was related to $35.0 million in borrowings from our FHLB line of credit, the receipt of $0.1 million in proceeds from stock option exercises and the receipt of $0.4 million in proceeds from our employee stock purchase plan, offset by the repurchase of $6.8 million of our common stock.

Current wording

Cash used in financing activities for six months ended June 30, 2024 was related to $52.6 million in payments on our lines of credit, offset by the receipt of $4.0 million in proceeds from stock option exercises, the receipt of $0.4 million in proceeds from our employee stock purchase plan and the receipt of $1.1 million in proceeds from policy holder contributions of surplus. Cash provided by financing activities for six months ended June 30, 2023 was related to $35.0 million in borrowings from our FHLB line of credit, the receipt of $0.3 million in proceeds from stock option exercises and the receipt of $0.4 million in proceeds from our employee stock purchase plan, offset by the repurchase of $15.6 million of our common stock.

Previous wording

We do not have any current plans for material capital expenditures other than current operating requirements. We believe that we will generate sufficient cash flows from operations to satisfy our liquidity requirements for at least the next 12 months and beyond. The key factor that will affect our future operating cash flows is the frequency and severity of catastrophe losses. To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $766.4 million in cash and investment securities available at March 31, 2024. We also have the ability to access additional capital through pursuing third‑party borrowings, sales of our equity or debt securities or entrance into a reinsurance arrangement.

Current wording

We do not have any current plans for material capital expenditures other than current operating requirements. We believe that we will generate sufficient cash flows from operations to satisfy our liquidity requirements for at least the next 12 months and beyond. The key factor that will affect our future operating cash flows is the frequency and severity of catastrophe losses. To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $777.9 million in cash and investment securities available at June 30, 2024. We also have the ability to access additional capital through pursuing third‑party borrowings, sales of our equity or debt securities or entrance into a reinsurance arrangement.

Previous wording

We also have implemented a share repurchase plan and have used and may use our cash in the future to purchase outstanding shares of our common stock. Under our current share repurchase program, shares may be repurchased from time to time in the open market or negotiated transactions at prevailing market rates, or by other means in accordance with federal securities laws.

Current wording

We have previously implemented a share repurchase plan and have used and may use our cash in the future to purchase outstanding shares of our common stock. Under our previous share repurchase program, shares were repurchased from time to time in the open market or negotiated transactions at prevailing market rates, or by other means in accordance with federal securities laws.

Previous wording

There were no share repurchases during the three months ended March 31, 2024. The program ended on March 31, 2024 and no additional shares may be repurchased under this plan. The Company accounts for share repurchases by charging the excess of repurchase price over the common stock’s par value entirely to retained earnings. All repurchased shares are retired and become authorized but unissued shares.

Current wording

The program ended on March 31, 2024 and no shares have been repurchased in 2024. The Company accounts for share repurchases by charging the excess of repurchase price over the common stock’s par value entirely to retained earnings. All repurchased shares are retired and become authorized but unissued shares.

Previous wording

As of March 31, 2024, we had $43.0 million of borrowings outstanding through the FHLB line of credit.

Current wording

As of June 30, 2024, we had no borrowings outstanding through the FHLB line of credit.

Previous wording

At March 31, 2024 total stockholders’ equity was $501.7 million and tangible stockholders’ equity was $489.7 million, compared to total stockholders’ equity of $471.3 million and tangible stockholders’ equity of $458.9 million as of December 31, 2023. Stockholder’s equity increased primarily due to net income earned for the period, activity related to stock-based compensation, and unrealized gains on fixed maturity securities.

Current wording

At June 30, 2024 total stockholders’ equity was $532.6 million and tangible stockholders’ equity was $521.1 million, compared to total stockholders’ equity of $471.3 million and tangible stockholders’ equity of $458.9 million as of December 31, 2023. Stockholder’s equity increased primarily due to net income earned for the period, activity related to stock-based compensation, and unrealized gains on fixed maturity securities.

Previous wording

Our primary investment objectives are to maintain liquidity, preserve capital and generate a stable level of investment income. We purchase securities that we believe are attractive on a relative value basis and seek to generate returns in excess of predetermined benchmarks. Our Board of Directors approves our investment guidelines in compliance with applicable regulatory restrictions on asset type, quality and concentration. Our current investment guidelines allow us to invest in taxable and tax‑exempt fixed maturities, as well as publicly traded mutual funds and common stock of individual companies. Our cash and invested assets consist of cash and cash equivalents, fixed maturity securities, and equity securities. As of March 31, 2024, the majority of our investment portfolio, or $663.0 million, was comprised of fixed maturity securities that are classified as available‑for‑sale and carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income. Also included in our investment portfolio were $37.2 million of equity securities, $2.6 million of equity method investments and $1.9 million of investments in limited partnerships. In addition, we maintained a non‑restricted cash and cash equivalent balance of $61.4 million at March 31, 2024. Our fixed maturity securities, including cash equivalents, had a weighted average effective duration of 3.62 and 3.48 years and an average rating of “A1/A+” and “Aa3/A+” at March 31, 2024 and December 31, 2023, respectively. Our fixed income investment portfolio had a book yield of 4.19% as of March 31, 2024, compared to 4.07% as of December 31, 2023.

Current wording

Our primary investment objectives are to maintain liquidity, preserve capital and generate a stable level of investment income. We purchase securities that we believe are attractive on a relative value basis and seek to generate returns in excess of predetermined benchmarks. Our Board of Directors approves our investment guidelines in compliance with applicable regulatory restrictions on asset type, quality and concentration. Our current investment guidelines allow us to invest in taxable and tax‑exempt fixed maturities, as well as publicly traded mutual funds and common stock of individual companies. Our cash and invested assets consist of cash and cash equivalents, fixed maturity securities, and equity securities. As of June 30, 2024, the majority of our investment portfolio, or $687.1 million, was comprised of fixed maturity securities that are classified as available‑for‑sale and carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income. Also included in our investment portfolio were $37.8 million of equity securities, $2.4 million of equity method investments and $2.6 million of investments in limited partnerships. In addition, we maintained a non‑restricted cash and cash equivalent balance of $47.8 million at June 30, 2024. Our fixed maturity securities, including cash equivalents, had a weighted average effective duration of 3.73 and 3.48 years and an average rating of “A1/A+” and “Aa3/A+” at June 30, 2024 and December 31, 2023, respectively. Our fixed income investment portfolio had a book yield of 4.30% as of June 30, 2024, compared to 4.07% as of December 31, 2023.

Previous wording

In addition to reinsurance purchased from traditional reinsurers, the Company has historically incorporated collateralized protection from the insurance linked securities market via catastrophe bonds. During the first quarter of 2021, the Company closed a $400 million 144A catastrophe bond which became effective June 1, 2021. The catastrophe bond was completed through Torrey Pines Re Pte. Ltd. (“Torrey Pines Re Pte.”). Torrey Pines Re Pte. is a special purpose reinsurance vehicle incorporated in Singapore that provides Palomar with indemnity-based reinsurance covering earthquake events through June 1, 2024. During the second quarter of 2022, the Company closed a $275 million 144A catastrophe bond which became effective June 1, 2022. This catastrophe bond was completed through Torrey Pines Re Ltd., a Bermuda-domiciled special purpose insurer that provides indemnity-based reinsurance covering earthquake events through June 1, 2025. During the second quarter of 2023, the Company also closed a $200 million 144A catastrophe bond which became effective June 1, 2023. This catastrophe bond was also completed through Torrey Pines Re Ltd and provides indemnity-based reinsurance covering earthquake events through June 1, 2026.

Current wording

In addition to reinsurance purchased from traditional reinsurers, the Company has historically incorporated collateralized protection from the insurance linked securities market via catastrophe bonds. During the first quarter of 2021, the Company closed a $400 million 144A catastrophe bond which became effective June 1, 2021. The catastrophe bond was completed through Torrey Pines Re Pte. Ltd. (“Torrey Pines Re Pte.”). Torrey Pines Re Pte. is a special purpose reinsurance vehicle incorporated in Singapore that provides Palomar with indemnity-based reinsurance covering earthquake events through June 1, 2024. During the second quarter of 2022, the Company closed a $275 million 144A catastrophe bond which became effective June 1, 2022. This catastrophe bond was completed through Torrey Pines Re Ltd., a Bermuda-domiciled special purpose insurer that provides indemnity-based reinsurance covering earthquake events through June 1, 2025. During the second quarter of 2023, the Company also closed a $200 million 144A catastrophe bond which became effective June 1, 2023. This catastrophe bond was also completed through Torrey Pines Re Ltd and provides indemnity-based reinsurance covering earthquake events through June 1, 2026. During the second quarter of 2024, the Company also closed a $420 million 144A catastrophe bond which became effective June 1, 2024. This catastrophe bond was also completed through Torrey Pines Re Ltd and provides indemnity-based reinsurance covering earthquake events through June 1, 2027.

Previous wording

Our catastrophe event retention is currently $17.5 million for all perils. Our reinsurance coverage exhausts at $2.71 billion for earthquake events, $800 million for Hawaii hurricane events, and $100 million for continental U.S. hurricane events, providing coverage in excess of our 1 in 250 year peak zone PML and in excess of our A.M. Best requirement. In addition, we maintain reinsurance coverage equivalent to or better than the 1 in 250 year PML for our other lines.

Current wording

Our catastrophe event retention is $20 million for earthquake events and $15.5 million for hurricane events and all other perils. Our reinsurance coverage exhausts at $3.06 billion for earthquake events, $735 million for Hawaii hurricane events, and $117.5 million for continental U.S. hurricane events, providing coverage in excess of our 1 in 250-year peak zone PML and in excess of our A.M. Best requirement. In addition, we maintain reinsurance coverage equivalent to or better than the 1 in 250-year PML for our other lines.