Palomar Holdings Inc announced plans to offer up to 1.38 million shares of common stock at $88 each in an underwritten public offering.
The offering could generate approximately $121.4 million in gross proceeds. According to a filing with the U.S. Securities and Exchange Commission, Palomar intends to use $25 million of the net proceeds to acquire First Indemnity of America Insurance Co., a subsidiary of ABSCO Ltd.
According to AM Best, the company also stated that the funds from the offering will be allocated toward general corporate expenses and to support growth initiatives. The initial offering will include 1.2 million shares, with underwriters being granted an option to purchase an additional 180,000 shares within 30 days.
The acquisition of First Indemnity was approved by the boards of directors of both companies and is expected to close late this year or early in 2025, pending regulatory approvals and customary closing conditions.
First Indemnity, domiciled in New Jersey, specializes in underwriting surety bonds for small- to medium-sized contractors, primarily in the Northeast United States. The company is licensed in 16 states and holds a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” (Excellent), with stable outlooks. The transaction is not expected to significantly impact First Indemnity’s current ratings.
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AM Best also recently upgraded Palomar Holdings Inc.'s Long-Term Issuer Credit Rating to “bbb” (Good) from “bbb-” (Good). The Financial Strength Rating of Palomar’s three subsidiaries was also upgraded to A (Excellent) from A- (Excellent), with Long-Term ICRs improved to “a” (Excellent) from “a-” (Excellent). The outlooks for these ratings were revised to stable from positive.
AM Best noted that Palomar’s balance sheet strength is very strong, with a robust operating performance, a limited business profile, and appropriate enterprise risk management. The company has reported net income in each of the past five calendar years, with profitability increasing in recent years.
The combined ratio, based on GAAP reporting, remained well below 90 for the last three years, improving the five-year average to the mid-80s, alongside strong return measures. Palomar’s management continues to evaluate and refine its portfolio to ensure strict adherence to underwriting standards, resulting in favorable loss experience despite a higher expense ratio.
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