Palomar Holdings has completed its acquisition of First Indemnity of America Insurance Co., a subsidiary of ASBCO Ltd., marking the company’s entry to the surety market.
The financial terms of the deal were not disclosed.
Based in Morris Plains, N.J., First Indemnity of America Insurance provides surety products for contractors, businesses, developers and lawyers.
The acquisition will offer a “significant opportunity” for Palomar to diversify its specialty insurance portfolio, said Mac Armstrong, Palomar’s chairman and chief executive.
Surety is a “highly profitable line of business with a healthy growth profile,” Armstrong said. “This acquisition strengthens our ability to generate consistent, profitable growth and enhance our long-term value for shareholders.”
In August, Palomar said it intends to launch an underwritten public offering of up to 1.38 million shares of its common stock priced at $88 per share.
The company said then that it plans to allocate $25 million of the net proceeds from the offering to fund its acquisition of First Indemnity of America. Meanwhile, the remainder of the funds were used for organic growth and selected increases in risk participation in product categories such as crop and earthquake.
Palomar has a 7.63% market share in the earthquake market based on direct premiums written, making it the third-largest writer of earthquake in the US in 2023, according to Best Link.
“Our diversification into attractive lines with limited correlation to the property and casualty cycle, such as crop and surety, will further position Palomar to deliver consistent earnings growth over time,” Armstrong said.
In November, Palomar reported a net income of $30.5 million for the third quarter of 2024, up from $18.4 million in the same period a year earlier. Gross written premiums of the company for the quarter grew 32.2% to $415 million, with net earned premiums up 58.1%.
The company said it expects achieving an adjusted net income of between $124 million and $128 million for full-year 2024, including about $8 million in losses related to Hurricane Milton.
AM Best said that Palomar’s operating entities have a financial rating of A (Excellent), while First Indemnity of American Insurance has a rating of A- (Excellent).
