Core Viewpoint - American Coastal Insurance (ACIC) reported quarterly earnings of $0.42 per share, exceeding the Zacks Consensus Estimate of $0.40 per share, but down from $0.50 per share a year ago, indicating a 5% earnings surprise [1][2] Financial Performance - The company posted revenues of $72.2 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 9.79%, and down from $73.25 million year-over-year [2] - Over the last four quarters, ACIC has surpassed consensus EPS estimates three times, but has topped consensus revenue estimates only once [2] Stock Performance - American Coastal shares have declined approximately 13.6% since the beginning of the year, compared to a decline of 4.3% for the S&P 500 [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.40 on revenues of $81.96 million, and for the current fiscal year, it is $1.50 on revenues of $333.83 million [7] - The trend of estimate revisions for American Coastal is mixed, which could change following the recent earnings report [6] Industry Context - The Insurance - Property and Casualty industry is currently ranked in the top 19% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Data and Key Metrics Changes - American Coastal Insurance reported a net income of $21.3 million, with core income at $20.7 million, a decrease of $3.7 million year-over-year due to increased policy acquisition costs [10] - The company achieved a combined ratio of 65%, aligning with its target, while the non-GAAP underlying combined ratio was 68.2% [10] - Cash and investments grew by 5.2% to $540.8 million, reflecting a strong liquidity position [11] - Stockholders' equity increased by 10.7% to $260.9 million, driven by first-quarter income, with book value per share rising to $5.4, a 10.4% increase from year-end 2024 [12] Business Line Data and Key Metrics Changes - Policies in force grew approximately 6% since year-end, with gross premiums written increasing by over 7% compared to the same period last year [4][10] - The underwriting environment for newer, well-maintained, low-rise, garden-style condos in Florida remains healthy and competitive, with the company open to new business [5] Market Data and Key Metrics Changes - The Florida condominium market is facing challenges related to declining affordability and resale values, but these issues are not significantly impacting the company's business [4][5] - The company is focused on maintaining competitive rates while managing risk, particularly in the Tri County area [19] Company Strategy and Development Direction - The company is increasing its internal quota share from 30% to 45%, which will feed more business to its captive, enhancing its balance sheet [39] - The company is cautiously expanding into the apartment building market, averaging about 15 policies per month, with an average premium of over $100,000 [28][29] - Management emphasizes a selective approach to growth in the apartment initiative, aiming for underwriting returns similar to those achieved in the condo segment [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong reserve position and the effectiveness of its catastrophe reinsurance program, which is expected to increase aggregate protection significantly [11][12] - The company is adopting a more conservative view of hurricane risk, leading to increased protection purchases this year [7] Other Important Information - The company reported a risk-adjusted reinsurance rate decrease of approximately 12%, consistent with the rate decreases shared with policyholders [9] - The company is currently finalizing a new top layer of its catastrophe reinsurance program, which is expected to enhance its coverage [6] Q&A Session Summary Question: Can you explain the rate trend and deductible chart? - Management clarified that the average account rate has been stable, with a decrease from record high levels, but remains healthy at approximately $0.97 as of March 31 [16][18] Question: What has changed regarding the reinsurance program? - Management noted a significant reduction in reinstatement costs from approximately $13 million last year to about $5 million this year, and improvements in coverage for third events [22][23][25] Question: How is the apartment building initiative progressing? - Management reported averaging about 15 policies per month in the apartment initiative, with a focus on maintaining underwriting standards and risk characteristics [28][30] Question: What are the plans for quota sharing going forward? - Management indicated satisfaction with the current quota share structure and mentioned the possibility of further reductions depending on reinsurance costs and availability [37][39] Question: Can you discuss the Amrisk management fee changes? - Management explained that a profit-sharing component was added to the Amrisk agreement, along with a 1% increase in the total percentage of fees, primarily passed on to producers [40][41]

Financial Data and Key Metrics Changes - American Coastal Insurance reported a net income of $21.3 million, with core income at $20.7 million, a decrease of $3.7 million year-over-year due to increased policy acquisition costs [10] - The company achieved a combined ratio of 65%, aligning with its target, while the non-GAAP underlying combined ratio was 68.2% [10] - Cash and investments grew by 5.2% to $540.8 million, reflecting a strong liquidity position [11] - Stockholders' equity increased by 10.7% to $260.9 million, driven by first-quarter income, with book value per share rising to $5.4, a 10.4% increase from year-end 2024 [12] Business Line Data and Key Metrics Changes - Policies in force grew approximately 6% since year-end, with gross premiums written increasing by over 7% compared to the same period last year [4][5] - The underwriting environment for newer, well-maintained, low-rise, garden-style condos in Florida remains healthy and competitive, with the company passing on savings to policyholders through lower rates [5] Market Data and Key Metrics Changes - The Florida condominium market is facing challenges related to declining affordability and resale values, but these issues are not significantly impacting the company's business [5] - The company is focused on the inland Florida market, which is less affected by the current media attention on high-rise waterfront condos [5] Company Strategy and Development Direction - The company is increasing its catastrophe reinsurance program, with an estimated first event limit expected to rise approximately 16% year-over-year to about $1.35 billion [6] - The company is cautiously expanding into the apartment building market, averaging about 15 policies per month, with an average premium of over $100,000 [30][31] - The company aims to maintain a selective approach in the competitive apartment market while ensuring underwriting returns similar to those achieved in the condo sector [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong reserve position and the effectiveness of its growth strategy, despite increased policy acquisition costs [10][11] - The management team highlighted the importance of maintaining rate adequacy in a competitive market, particularly in areas like Tri County [21] - The company is optimistic about its growth initiatives for 2025, supported by a strong balance sheet and favorable underwriting conditions [12] Other Important Information - The company is increasing its internal quota share from 30% to 45%, which will enhance its balance sheet and capital flexibility [40] - A profit-sharing component was added to the Amrisk management fee agreement, which is expected to benefit both parties [41] Q&A Session Summary Question: Can you explain the rate trend chart on page nine? - The average account rate has been stable, with a decrease from record high levels, currently at 97 cents, which is considered healthy relative to historical premiums [20] Question: What has changed regarding the third event cover in your reinsurance program? - The reinstatement exposure has been reduced from approximately $13 million last year to about $5 million this year, indicating a significant improvement [24] Question: How is the apartment initiative progressing? - The company has averaged about 15 policies per month in the apartment initiative, with premiums aligning with targets, although the market is competitive [30][34] Question: What are the plans for quota sharing going forward? - The external quota share will be 15% from June 1, 2025, to May 31, 2026, with potential for further reductions depending on reinsurance costs and availability [38] Question: Can you discuss the changes to the Amrisk management fee? - The management fee has increased by 1% of premium written, with most of the increase passed on to producers to maintain revenue levels in a softening market [42]

Premiums and Revenues - Gross premiums written increased by 7.2% from $184,601,000 in Q1 2024 to $197,852,000 in Q1 2025[158] - Net premiums earned rose by 8.6% from $62,631,000 in Q1 2024 to $68,272,000 in Q1 2025[158] - Total revenues increased by 8.0% from $66,598,000 in Q1 2024 to $72,202,000 in Q1 2025[158] - Year-over-year revenues increased by 8.4%, driven by an increase in net premiums earned, despite increased policy acquisition costs[187] - New and renewal policies increased by 134, totaling 1,196 for the three months ended March 31, 2025, compared to 1,062 in the same period in 2024[189] Income and Expenses - Consolidated net income decreased by 9.5% from $23,599,000 in Q1 2024 to $21,348,000 in Q1 2025[158] - Core income for Q1 2025 was $20,651,000, down from $24,390,000 in Q1 2024, representing a decline of 15.0%[158] - Total expenses increased by $11,038,000, or 30.6%, to $47,078,000 for the three months ended March 31, 2025, from $36,040,000 for the same period in 2024[190] - Policy acquisition costs surged by $13,871,000, or 144.6%, to $23,466,000 for the three months ended March 31, 2025, from $9,595,000 in the same period in 2024[194] - General and administrative expenses decreased by $1,746,000, or 15.5%, to $9,506,000 for the three months ended March 31, 2025, from $11,252,000 for the same period in 2024[195] Financial Position - Cash, cash equivalents, restricted cash, and investment portfolio totaled $568,827,000 at March 31, 2025, up from $540,811,000 at December 31, 2024[169] - As of March 31, 2025, total investments amounted to $335,787 million, a decrease from $341,418 million as of December 31, 2024, representing a 1.8% decline[170] - The estimated fair value of U.S. government and agency securities was $150,739 million, accounting for 26.2% of total investments as of March 31, 2025, down from 28.7% at the end of 2024[170] - Unpaid losses and loss adjustment expenses (LAE) totaled $256,289 million as of March 31, 2025, a decrease of 20.5% from $322,087 million as of December 31, 2024[184] Ratios and Performance Metrics - The combined ratio for Q1 2025 was 65.0%, compared to 53.2% in Q1 2024, indicating a deterioration in underwriting performance[159] - The total ceding ratio for reinsurance costs as a percentage of gross earned premium was 57.9% for the three months ended March 31, 2025, compared to 61.0% for the same period in 2024[180] Catastrophe Reinsurance - The core catastrophe reinsurance program provides occurrence-based coverage up to approximately $1,260 million for a first occurrence and $1,610 million in the aggregate[173] - The new catastrophe aggregate excess of loss agreement provides $40 million of aggregate limit with a $20 million per occurrence cap, effective January 1, 2025[175] - The company’s catastrophe losses incurred from all other events totaled $0.3 million for the three months ended March 31, 2025, with no losses from named and numbered storms[182] - A reduction in expense of approximately $6,300 million was realized during the three months ended March 31, 2024, due to a commutation of a private reinsurer's share of core catastrophe reinsurance coverage[176] Cash Flow and Financing - Cash inflows from operating activities decreased to $26,443,000 for the three months ended March 31, 2025, compared to $124,484,000 for the same period in 2024[204] - Net sales of investments totaled $5,300,000 during the three months ended March 31, 2025, compared to net purchases of $2,005,000 in the same period in 2024[205] - Cash provided by financing activities totaled $309,000 for the three months ended March 31, 2025, compared to $11,398,000 for the same period in 2024[206] - As of March 31, 2025, 4,373,000 shares had been sold under the equity distribution agreement, resulting in net proceeds of approximately $38,190,000[199] - The company did not make any capital contributions to its subsidiaries during the three months ended March 31, 2025[198] Sale of Subsidiary - The company completed the sale of IIC to Forza Insurance Holdings, LLC, with the sale closing on April 1, 2025[154]

Core Insights - American Coastal Insurance Corporation (ACIC) reported financial results for Q1 2025, showing a net income of $21.3 million, or $0.43 per diluted share, down from $23.6 million, or $0.48 per diluted share in Q1 2024 [18][44] - The company achieved a combined ratio of 65% and a return on equity exceeding 30% in the first quarter of 2025, indicating strong operational performance despite a decrease in net income [5][8] Financial Performance - Gross premiums written increased by $13.3 million, or 7.2%, to $197.9 million in Q1 2025 from $184.6 million in Q1 2024 [19][44] - Net premiums earned rose by 9% to $68.3 million compared to $62.6 million in the same period last year [2][18] - Total revenue for Q1 2025 was $72.2 million, an increase of 8.4% from $66.6 million in Q1 2024 [2][44] Expense Analysis - Policy acquisition costs surged by $13.9 million, or 144.8%, to $23.5 million in Q1 2025, primarily due to a decrease in ceding commission income [23][44] - General and administrative expenses decreased by $1.8 million, or 15.9%, to $9.5 million, attributed to a non-recurring tax credit refund [24][44] Loss Ratios - Loss and loss adjustment expenses (LAE) decreased by $1.1 million, or 8.8%, to $11.4 million, with the loss ratio as a percentage of net earned premiums dropping to 16.7% from 19.9% [22][44] - The underlying loss and LAE ratio for Q1 2025 was 8.4%, an increase of 0.8 points from 7.6% in Q1 2024 [22][44] Investment Portfolio - The company's cash and investment holdings rose from $540.8 million at the end of 2024 to $568.8 million by March 31, 2025, driven by positive cash flows from operations [26] - Fixed maturities represented approximately 84.3% of total investments as of March 31, 2025, compared to 82.3% at the end of 2024 [26] Book Value - Book value per common share increased by 10.4% from $4.89 at the end of 2024 to $5.40 at March 31, 2025, driven by retained earnings from net income [27][29] - Underlying book value per common share rose by 8.8% from $5.21 to $5.67 during the same period [27][29] Discontinued Operations - The company completed the sale of its subsidiary, Interboro Insurance Company, for approximately $26.5 million, which closed on April 1, 2025 [41]

Financial Performance - Gross premiums written increased by $13.3 million, or 7.2%, to $197.9 million for the quarter ended March 31, 2025, compared to $184.6 million for the same period in 2024[14]. - Net premiums earned rose by $5.6 million, or 9.0%, to $68.3 million for the quarter ended March 31, 2025, from $62.6 million in the prior year[4]. - Total revenue increased by $5.6 million, or 8.4%, to $72.2 million for the first quarter of 2025, compared to $66.6 million for the same quarter in 2024[4]. - Consolidated net income decreased by $2.3 million, or 9.5%, to $21.3 million for the quarter ended March 31, 2025, down from $23.6 million in the previous year[4]. - Core income decreased by $3.7 million, or 15.3%, to $20.7 million for the quarter ended March 31, 2025, compared to $24.4 million for the same period in 2024[4]. - Total expenses increased to $47,078,000 for the quarter, compared to $36,040,000 in the same period of 2024, reflecting a rise of 30.6%[39]. - Net income for the quarter ended March 31, 2025, was $21,348,000, compared to $23,599,000 for the same period in 2024, reflecting a decrease of 9.5%[39]. Ratios and Metrics - The combined ratio for the first quarter of 2025 was 65.0%, an increase of 11.8 percentage points from 53.2% in the same quarter of 2024[9]. - The return on equity based on GAAP net income was 35.4% for the first quarter of 2025, down from 67.7% in the same quarter of 2024[7]. - Book value per common share increased by 10.4% from $4.89 at December 31, 2024, to $5.40 at March 31, 2025[21]. - Underlying book value per common share rose by 8.8% from $5.21 at December 31, 2024, to $5.67 at March 31, 2025[22]. - The weighted average shares outstanding increased to 48,135,231 for the quarter, compared to 47,323,356 in the same quarter of 2024[39]. Expenses and Costs - Policy acquisition costs surged by $13.9 million, or 144.8%, to $23.5 million for the quarter ended March 31, 2025, primarily due to a decrease in ceding commission income[16]. - General and administrative expenses decreased by $1.8 million, or 15.9%, to $9.5 million for the quarter ended March 31, 2025, from $11.3 million in the prior year[17]. Cash and Investments - The company's cash and investment holdings increased from $540.8 million at December 31, 2024, to $568.8 million at March 31, 2025, driven by positive cash flows from operations[20]. - Cash and cash equivalents rose from $137,036 million to $167,155 million, an increase of about 22%[41]. - Total investments decreased from $341,418 million to $335,787 million, a decline of about 1.8%[41]. Assets and Liabilities - Total assets decreased from $1,216,112 million to $1,159,646 million, a decline of approximately 4.7%[41]. - Total liabilities decreased from $980,452 million to $898,766 million, a reduction of about 8.3%[41]. - Stockholders' equity increased from $235,660 million to $260,880 million, reflecting an increase of approximately 10.7%[41]. - Premiums receivable, net increased from $46,564 million to $61,749 million, a growth of approximately 32.5%[41]. - Reinsurance recoverable on paid and unpaid losses decreased from $263,419 million to $202,391 million, a decline of about 23.2%[41]. - Unearned premiums increased from $285,354 million to $321,105 million, an increase of approximately 12.5%[41]. - Accumulated other comprehensive loss improved from $(15,666) million to $(12,836) million, a reduction of about 18.1%[41]. - Retained earnings deficit improved from $(184,772) million to $(163,424) million, reflecting a reduction of approximately 11.6%[41]. Ratings and Financial Stability - The company maintains a Financial Stability Rating of "A", "Exceptional" from Demotech, and an "A-" insurance financial strength rating with a Stable outlook by Kroll[25].

Core Points - American Coastal Insurance Corporation (ACIC) will release its financial results for Q1 2025 on May 8, 2025, after market close [1] - A quarterly conference call will be held at 5:00 p.m. ET on the same day, including live remarks and a Q&A session [2][3] Company Overview - American Coastal Insurance Corporation is the holding company for American Coastal Insurance Company, which was established in 2007 to insure condominium and homeowner association properties in Florida [4] - The company has an exclusive partnership with AmRisc Group for the distribution of condominium association properties in Florida, focusing on hurricane-exposed properties [4] - American Coastal Insurance Company has received a Financial Stability Rating of "A, Exceptional" from Demotech and an "A-" insurance financial strength rating with a Stable outlook from Kroll [4] - ACIC holds a 'BB+' issuer rating with a Stable outlook from Kroll [4]

Core Points - American Coastal Insurance Corporation has completed the sale of Interboro Insurance Company to Forza Insurance Holdings for approximately $26.4 million in cash based on GAAP estimated equity as of the closing date [2][3] - The sale marks a strategic transformation for American Coastal, allowing the company to focus entirely on underwriting commercial residential property insurance, enhancing its market leadership and shareholder value [3] Financial Details - The cash received from Forza is approximately $26.4 million, with a reconciliation of the purchase price expected within 30 days based on finalized GAAP equity as of April 1, 2025 [2] Company Background - American Coastal Insurance Corporation is the holding company for American Coastal Insurance Company, which specializes in insuring condominium and homeowner association properties in Florida [5] - The company has a partnership with AmRisc Group for the distribution of condominium association properties and has received a Financial Stability Rating of "A, Exceptional" from Demotech, along with an "A-" insurance financial strength rating from Kroll [5]

Financial Performance - The combined ratio, a measure of underwriting profitability, indicates an underwriting profit when it is under 100%[33] - As of December 31, 2024, the total number of policies in-force is 23,060, a slight increase from 22,848 in 2023[39] - The total TIV (Total Insured Value) of all policies in-force as of December 31, 2024, is $72,390,599, up from $69,595,880 in 2023[41] - The company has remediated material weaknesses in internal control over financial reporting as of December 31, 2024[96][97] - The company’s financial results are subject to fluctuations due to unpredictable weather conditions and catastrophic events, which could exceed loss reserves[86][91] - A downgrade in financial strength ratings could adversely impact business volume and access to additional financing, with significant losses potentially leading to a need for equity capital[145] Risk Management - AmCoastal's RBC (Risk-Based Capital) ratio is 1,470%, while IIC's RBC ratio is 461%, both exceeding minimum requirements as of December 31, 2024[52] - The company’s insurance operations are exposed to risks from catastrophic events, particularly hurricanes, which could significantly impact financial results[83][84] - The company is highly dependent on its information technology systems, and any unplanned shutdown or failure could impair its ability to process policies and claims in a timely manner[98] - The company has experienced threats to its data systems, including malware and unauthorized access, which could lead to significant reputational damage and financial losses[99] - The company faces intense competition in the property and casualty insurance market, which may limit its ability to retain existing business or write new business at adequate rates[114] - The inability to obtain reinsurance on acceptable terms could increase loss exposure and limit underwriting capabilities, adversely affecting financial condition[126] - Counterparty risk related to reinsurance claims could materially affect business results and cash flow[127] - Accurate pricing of risks is critical; failure in loss limitation methods could adversely impact financial results[129] - Increased litigation and expanded coverage issues may contribute to higher litigation costs and loss exposure under policies[141] - The company may face increased litigation costs and inadequate loss reserves due to emerging claims and coverage issues, which could materially affect operating results and cash flows[144] Corporate Governance and Diversity - The diversity statistics show that 28.6% of executive officers are female, a decrease of 8.6 percentage points from December 31, 2023[74] - The company has committed to adding at least two new directors to improve overall diversity at the Board level[71] - The company’s management team includes three members from underrepresented groups, reflecting its commitment to ESG goals[74] Operational Strategy - The company has made substantial investments in new technology to gain a competitive advantage in underwriting and claims handling[44] - The company distributes personal lines policies through approximately 400 independent agencies as of December 31, 2024[34] - The company has focused on building relationships with independent agents to enhance policyholder satisfaction and business profitability[35] - The company is no longer writing policies in Texas as of May 31, 2022, impacting its geographic distribution[39] - The company relies on approximately 400 independent agencies for marketing its homeowners' insurance product, which limits direct solicitation of existing policyholders[90] Regulatory Environment - The insurance industry is heavily regulated, with potential for further restrictive regulations that may reduce profitability and limit growth[119] - Compliance with evolving privacy and cybersecurity laws, such as the NYDFS regulations, may impose significant costs and operational restrictions on the company[101] - The SEC has adopted new cybersecurity disclosure rules that require public companies to enhance their disclosures regarding cybersecurity risk management, which could impact the company's operations[102] - Changes in state regulations could limit the company's ability to manage risk and adjust pricing, potentially leading to increased losses[116] - Compliance with state insurance regulations is complex and varies by state, posing risks to operational and financial conditions[121] - The federal government's role in insurance regulation is limited, but potential future federal regulations could negatively impact business opportunities[122] - The company may face significant compliance costs due to changes in insurance laws or regulations, which could adversely affect operations and growth prospects[125] Financial Structure - The company's Senior Notes impose restrictions on its financial operations, and failure to comply could result in an event of default, adversely affecting liquidity[113] - The ability of the company's subsidiaries to pay dividends is limited by state insurance regulations, which could adversely affect holding company liquidity and its ability to meet obligations[151] - The company currently does not pay ordinary quarterly dividends, and future payments may be constrained by its holding company structure and regulatory restrictions[149] - The substantial ownership of common stock by R. Daniel Peed allows him to exert significant control over the company, which may conflict with the interests of other stockholders[154] Investment and Asset Management - The company has a portfolio monitoring process for fixed income securities, and any credit losses will be recorded in earnings if the present value of expected cash flows is less than the amortized cost[284] - Goodwill is tested for impairment at least annually, and impairment occurs when the carrying value exceeds the fair value of the reporting segment[288] - There were no related party transactions for the years ended December 31, 2024, 2023, and 2022[290] Community Engagement - In 2024, the company made donations totaling $150,000 for local disaster relief due to Hurricanes Helene and Milton[69] - The company is committed to achieving net-zero carbon emissions by 2030, although further analysis and strategy are necessary[67]

Core Viewpoint - American Coastal Insurance (ACIC) reported quarterly earnings of $0.12 per share, missing the Zacks Consensus Estimate of $0.16 per share, and down from $0.39 per share a year ago, indicating a -25% earnings surprise [1] - The company posted revenues of $79.27 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 4.13% and up from $58.21 million year-over-year [2] Group 1 - The company has surpassed consensus EPS estimates three times over the last four quarters [2] - American Coastal shares have lost about 5% since the beginning of the year, while the S&P 500 has gained 1.3% [3] - The current consensus EPS estimate for the coming quarter is $0.45 on revenues of $78.94 million, and for the current fiscal year, it is $1.50 on revenues of $336.59 million [7] Group 2 - The estimate revisions trend for American Coastal is mixed, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] - The Zacks Industry Rank for Insurance - Property and Casualty is currently in the top 17% of over 250 Zacks industries, suggesting a favorable outlook for the industry [8] - Heritage Insurance, another company in the same industry, is expected to report quarterly earnings of $0.52 per share, reflecting a year-over-year change of -54.8% [9]