United Insurance(ACIC) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the reported period Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining the accounting policies and specific financial line items Condensed Consolidated Balance Sheets (Unaudited) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific reporting dates | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :---------------------------- | :------------------------------ | | Total Assets | 1,346,865 | 1,216,112 | | Total Liabilities | 1,054,565 | 980,452 | | Total Stockholders' Equity | 292,300 | 235,660 | | Cash, Cash Equivalents and Restricted Cash | 407,212 | 199,393 | | Unpaid Losses and Loss Adjustment Expenses | 219,242 | 322,087 | Condensed Consolidated Statements of Comprehensive Income (Unaudited) This section outlines the company's financial performance over specific periods, including net income, premiums earned, and earnings per share | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net Income | 26,442 | 19,054 | | Net Premiums Earned | 78,443 | 63,381 | | Diluted EPS | 0.53 | 0.39 | | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net Income | 47,790 | 42,653 | | Net Premiums Earned | 146,715 | 126,012 | | Diluted EPS | 0.96 | 0.87 | Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) This section details changes in the company's equity over time, reflecting net income, other comprehensive income, and capital transactions | Metric | June 30, 2025 ($ thousands) | June 30, 2024 ($ thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Total Stockholders' Equity | 292,300 | 223,073 | | Net Income (Six Months) | 47,790 | 42,653 | | Other Comprehensive Income, net (Six Months) | 5,872 | (4) | Condensed Consolidated Statements of Cash Flows (Unaudited) This section reports the cash inflows and outflows from operating, investing, and financing activities over specific periods | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | 154,392 | 250,886 | | Net cash provided by (used in) investing activities | 29,756 | (152,814) | | Net cash provided by financing activities | 774 | 11,458 | | Cash, cash equivalents and restricted cash at end of period | 407,212 | 281,362 | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed disclosures and explanations for the figures presented in the unaudited condensed consolidated financial statements, covering the company's organization, significant accounting policies, discontinued operations, investments, and other financial components 1) ORGANIZATION, CONSOLIDATION AND PRESENTATION%20ORGANIZATION,%20CONSOLIDATION%20AND%20PRESENTATION) This section describes the company's structure, primary business, and the impact of recent divestitures on its reporting segments - American Coastal Insurance Corporation (ACIC) is a property and casualty insurance holding company primarily focused on commercial residential property insurance in Florida through its wholly-owned subsidiary, American Coastal Insurance Company (AmCoastal)[31][34] - The company completed the sale of Interboro Insurance Company (IIC) on April 1, 2025, with IIC's results now classified as discontinued operations[31][33] - Following the IIC sale, the company operates under one reportable segment, which consists of its commercial lines business[34][40] 2) SIGNIFICANT ACCOUNTING POLICIES%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section confirms the consistency of accounting policies and discusses the assessment of new accounting standards - There have been no changes to the company's significant accounting policies as reported in its Annual Report on Form 10-K for the year ended December 31, 2024[43] - The company is assessing the impact of ASU No. 2024-03 (Expense Disaggregation Disclosures), effective for fiscal years beginning after December 15, 2026[44] - The company intends to adopt ASU No. 2023-09 (Improvements to Income Tax Disclosures) in its 2025 Annual Report on Form 10-K and does not believe it will have a material impact[45] 3) DISAGGREGATION OF RELEVANT EXPENSE CAPTIONS%20DISAGGREGATION%20OF%20RELEVANT%20EXPENSE%20CAPTIONS) This section provides a detailed breakdown of general and administrative expenses, highlighting key components and non-recurring items | General and Administrative Expenses | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | | :---------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Total G&A Expenses | 7,778 | 11,938 | | Employee compensation | 1,934 | 4,174 | | General and Administrative Expenses | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :---------------------------------- | :------------------------------------------- | :------------------------------------------- |\ | Total G&A Expenses | 17,284 | 23,190 | | Employee compensation | 4,758 | 7,504 | - Employee compensation for both periods includes one-time employee retention tax credit refunds of $2.9 million (three months) and $4.5 million (six months) in 2025[48] 4) DISCONTINUED OPERATIONS%20DISCONTINUED%20OPERATIONS) This section details the financial impact and classification of the Interboro Insurance Company sale as discontinued operations - The sale of IIC closed on April 1, 2025, generating cash proceeds of $25,679 thousand and resulting in a net loss on disposal of $247 thousand[50] - A $1,348 thousand net loss on IIC's fixed maturity portfolio was recognized as part of the sale[50] | IIC Results from Discontinued Operations | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total revenue | 7,808 | 13,543 | | Income (loss) from discontinued operations, net of tax | 1,637 | (129) | 5) INVESTMENTS%20INVESTMENTS) This section provides a breakdown of the company's investment portfolio, including fixed maturities, equity securities, and investment income | Investment Category | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------- | :-------------------------- | :------------------------------ | | Total investments | 319,031 | 341,418 | | Fixed maturities | 248,944 | 281,001 | | Equity securities | 40,502 | 36,794 | | Restricted cash | 91,727 | 62,357 | | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net realized investment gains (losses) | 1,382 | (121) | | Net investment income | 10,304 | 9,364 | - The company determined that none of its fixed-income securities in an unrealized loss position have declines in fair value due to credit losses, and no credit loss allowance was recorded at June 30, 2025[68] 6) EARNINGS PER SHARE (EPS)%20EARNINGS%20PER%20SHARE%20(EPS)) This section presents the basic and diluted earnings per share for the reported periods | EPS Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | | Basic EPS | $0.55 | $0.40 | | Diluted EPS | $0.53 | $0.39 | | EPS Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.99 | $0.90 | | Diluted EPS | $0.96 | $0.87 | 7) PROPERTY AND EQUIPMENT, NET%20PROPERTY%20AND%20EQUIPMENT,%20NET) This section details the net book value of property and equipment, along with depreciation and amortization expenses and asset disposals | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------- | :-------------------------- | :------------------------------ | | Property and equipment, net | 3,745 | 5,736 | | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Depreciation and amortization expense | 2,027 | 2,526 | - During the six months ended June 30, 2025, the company disposed of computer hardware, software, and equipment totaling $1,890 thousand and impaired software totaling $1,035 thousand[99] 8) GOODWILL AND INTANGIBLE ASSETS%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This section outlines the company's goodwill and intangible assets, including their net values and amortization expenses | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------- | :-------------------------- | :------------------------------ | | Goodwill | 59,476 | 59,476 | | Intangible assets, net | 4,689 | 5,908 | | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :-------------------- | :------------------------------------------- | :------------------------------------------- | | Amortization expense | 1,219 | 1,421 | - Estimated amortization expense for intangible assets for the remainder of 2025 is $1,219 thousand[104] 9) REINSURANCE%20REINSURANCE) This section describes the company's reinsurance programs, including catastrophe coverage and quota share agreements, and related recoverables - The company's catastrophe reinsurance programs include AmCoastal's core catastrophe program for windstorms (up to $1.33 billion for first occurrence) and an all other perils excess of loss agreement (up to $88.2 million for first and second events)[107][109][110] - A new catastrophe aggregate excess of loss agreement (CAT Agg) effective January 1, 2025, provides $40 million of aggregate limit to mitigate catastrophe frequency risk[111] - Shoreline Re, the company's captive reinsurance entity, participates in a 45% quota share agreement with AmCoastal for all catastrophe perils and attritional losses[113][114] | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :------------------------------------------ | :-------------------------- | :------------------------------ | | Reinsurance recoverable on paid and unpaid losses, net | 169,622 | 263,419 | 10) LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSE (LAE)%20LIABILITY%20FOR%20UNPAID%20LOSSES%20AND%20LOSS%20ADJUSTMENT%20EXPENSE%20(LAE)) This section details the company's reserves for unpaid losses and loss adjustment expenses, noting changes due to prior year development and recent events | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :-------------------------- | :------------------------------ | | Unpaid losses and loss adjustment expenses | 219,242 | 322,087 | - The company experienced favorable development in the first half of 2025 and 2024 related to prior year losses due to re-estimating ultimate losses[124] - Case reserves decreased due to continued settlement of prior year claims, offset by increases to IBNR reserves as a result of Hurricane Milton in Q4 2024[124] 11) LONG-TERM DEBT%20LONG-TERM%20DEBT) This section provides information on the company's long-term debt, including interest rates and the impact of credit rating changes - The interest rate on the $150 million Senior Notes increased from 6.25% to 7.25% due to a credit rating downgrade in December 2022[127] - On July 21, 2025, the company's rating was upgraded to BBB-, which will decrease the Senior Notes interest rate back to 6.25% effective December 16, 2025[127][179] | Metric | June 30, 2025 ($ thousands) | January 1, 2025 ($ thousands) | | :-------------------- | :-------------------------- | :---------------------------- | | Debt issuance costs | 813 | 980 | 12) COMMITMENTS AND CONTINGENCIES%20COMMITMENTS%20AND%20CONTINGENCIES) This section discloses the company's various commitments and potential liabilities, including legal claims and unfunded investments - The company accrued $1,500 thousand for a D&O policy retention related to a claim alleging wrongful acts by former UPC officers and directors, which remains open as of June 30, 2025[131][133] | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :-------------------------- | :------------------------------ | | Unfunded commitments (partnership investments) | 2,300 | 1,400 | | Operating lease liabilities | 3,248 | 3,323 | - The company received $2,939 thousand (Q2 2025) and $4,469 thousand (H1 2025) in Employee Retention Tax Credit refunds, fully resolving the outstanding balance[139] - A potential loss contingency exists related to variable ceding commissions on shared quota-share reinsurance agreements with former subsidiary UPC, due to a lack of loss data post-receivership[140] 13) ALLOWANCE FOR EXPECTED CREDIT LOSSES%20ALLOWANCE%20FOR%20EXPECTED%20CREDIT%20LOSSES) This section details the allowance for expected credit losses on premiums receivable and reinsurance recoverables | Asset Pool | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :---------------------- | :-------------------------- | :------------------------------ | | Premiums Receivable | 0 | 26 | | Reinsurance Recoverables | 44 | 75 | | Total | 44 | 101 | - The company had no allowance for expected credit losses related to its investment holdings at June 30, 2025, or 2024[145] 14) STATUTORY ACCOUNTING AND REGULATION%20STATUTORY%20ACCOUNTING%20AND%20REGULATION) This section discusses the company's compliance with regulatory capital requirements and the impact of statutory assessments - AmCoastal met all Florida regulatory requirements for capital and surplus ratios at June 30, 2025[146][153] - The company is subject to a 1.0% Emergency Assessment from the Florida Insurance Guaranty Association (FIGA) on direct written premiums from October 1, 2023, through September 30, 2025[147] | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | AmCoastal Statutory Net Income | 36,511 | 41,940 | | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :-------------------------- | :------------------------------ | | AmCoastal Surplus as regards policyholders | 243,788 | 230,001 | 15) ACCUMULATED OTHER COMPREHENSIVE LOSS%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) This section presents the accumulated other comprehensive loss and changes in unrealized investment losses | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :-------------------------- | :------------------------------ | | Accumulated other comprehensive loss | (9,794) | (15,666) | | Changes in net unrealized losses on investments (pre-tax) | 7,254 | N/A | 16) STOCKHOLDERS' EQUITY%20STOCKHOLDERS'%20EQUITY) This section provides details on stockholders' equity, including dividend policies, stock repurchase plans, and 'at the market' offerings - No dividends were declared on common stock during the six months ended June 30, 2025, and 2024[157] - The company has an authorized stock repurchase plan of up to $25 million (since July 2019) but has not repurchased any shares as of June 30, 2025[158] - As of June 30, 2025, 4,373,000 shares have been sold under an 'at the market' offering agreement, generating net proceeds of approximately $38,190 thousand[159] 17) STOCK-BASED COMPENSATION%20STOCK-BASED%20COMPENSATION) This section outlines the stock-based compensation expense for employees and directors, including details on restricted stock and stock options granted | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Employee stock-based compensation expense (pre-tax) | 1,946 | 1,037 | | Director stock-based compensation expense (pre-tax) | 258 | 171 | - Approximately $5,535 thousand of unrecognized employee stock compensation expense and $426 thousand of unrecognized director stock-based compensation expense remain at June 30, 2025[165] | Stock Grants (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------- | :--- | :--- | | Restricted common stock granted (shares) | 447,237 | 501,746 | | Weighted-average grant date fair value (restricted stock) | $11.52 | $7.32 | | Stock options granted (shares) | 76,141 | 196,275 | | Weighted-average grant date fair value (stock options) | $11.63 | $4.82 | 18) SUBSEQUENT EVENTS%20SUBSEQUENT%20EVENTS) This section reports significant events occurring after the reporting period, such as new legislation and credit rating upgrades - The 'One Big Beautiful Bill Act' (OBBBA) was signed into law on July 4, 2025, making permanent certain tax provisions and changing others, mostly effective 2026; the company is evaluating its impact[178] - On July 21, 2025, Kroll Bond Rating Agency upgraded the company's issuer and debt ratings to BBB-, which will reduce the Senior Notes interest rate from 7.25% to 6.25% effective December 16, 2025[179] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and cash flows, highlighting key performance indicators, significant events, and future outlook. It includes an executive summary, detailed analysis of revenues and expenses, and discussions on liquidity and capital resources EXECUTIVE SUMMARY This section provides an overview of the company's business, recent strategic changes, and key operational highlights - ACIC is a holding company primarily engaged in commercial property and casualty insurance in Florida through its wholly-owned subsidiary, AmCoastal[182][183] - The sale of IIC on April 1, 2025, resulted in its classification as discontinued operations, focusing the company's continuing operations on commercial residential insurance[183] - Policies in-force increased by 11.0% to 4,402 at June 30, 2025, from 3,964 at June 30, 2024, all in Florida[184] 2025 Highlights This section summarizes key financial performance metrics for 2025, including net income, diluted EPS, and book value per share | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Consolidated net income | 26,442 | 19,054 | | Net income available to ACIC stockholders per diluted share | 0.53 | 0.39 | | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------------------- | :------------------------------------------- | | Consolidated net income | 47,790 | 42,653 | | Net income available to ACIC stockholders per diluted share | 0.96 | 0.87 | | Core income | 47,408 | 44,001 | | Metric | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :---------------- | | Book value per share | $6.00 | $4.63 | Consolidated Net Income This section presents a summary of the company's consolidated financial performance, including net premiums earned, total revenue, total expenses, and combined ratios | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | | Net premiums earned | 146,715 | 126,012 | | Total revenue | 158,669 | 135,254 | | Total expenses | 97,372 | 80,620 | | Combined ratio | 62.7% | 59.1% | | Underlying combined ratio | 65.0% | 59.7% | Definitions of Non-GAAP Measures This section defines non-GAAP financial measures used by management to assess operational performance, such as underlying combined ratio and core income - The 'underlying combined ratio' is a non-GAAP measure that excludes current year catastrophe losses and prior year reserve development to highlight business trends[194] - The 'underlying loss and LAE' is a non-GAAP measure that excludes current year catastrophe losses and prior year reserve development to analyze loss trends[195] - 'Core income (loss)' is a non-GAAP measure that adjusts net income for amortization of intangible assets, discontinued operations, and realized/unrealized investment gains/losses, net of tax, to evaluate operational performance[196] CRITICAL ACCOUNTING POLICIES AND ESTIMATES This section confirms that there were no material changes or additions to the company's critical accounting policies and estimates - The company reassessed its critical accounting policies and estimates during the six months ended June 30, 2025, and made no material changes or additions[197] RECENT ACCOUNTING STANDARDS This section directs readers to detailed disclosures regarding recent accounting standards and their potential impact on the company - Refer to Note 2 in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of recent accounting standards that may affect the company[198] ANALYSIS OF FINANCIAL CONDITION - JUNE 30, 2025 COMPARED TO DECEMBER 31, 2024 This section analyzes the company's financial position at June 30, 2025, compared to December 31, 2024, focusing on changes in investments, reinsurance, and unpaid losses and loss adjustments Investments This section details the company's investment strategy and portfolio composition, including cash, equivalents, and fixed maturities - The company's investment strategy aims to preserve capital, maximize after-tax investment income, maintain liquidity, and minimize risk, with a moderate equity exposure[200] | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :------------------------------------------ | :-------------------------- | :------------------------------ | | Total cash, cash equivalents, restricted cash and investments | 726,243 | 540,811 | - At June 30, 2025, approximately 86.8% of fixed maturities were U.S. Treasuries or corporate bonds rated 'A' or better, and 13.2% were corporate bonds rated 'BBB' or 'BB'[203] Reinsurance This section describes the company's reinsurance programs, including catastrophe coverage, aggregate limits, and captive reinsurer participation - The company's catastrophe reinsurance coverage includes AmCoastal's core program for windstorms (up to $1.33 billion for first occurrence) and an all other perils excess of loss agreement (up to $88.2 million for first and second events)[205][206][207] - A new catastrophe aggregate excess of loss agreement (CAT Agg) effective January 1, 2025, provides $40 million of aggregate limit to mitigate catastrophe frequency risk[208] - Shoreline Re, the company's captive reinsurer, participates in a 45% quota share agreement with AmCoastal for all catastrophe perils and attritional losses[211][212] | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :----------------------------- | :----------------------------- | | Total Ceding Ratio | (55.2)% | (60.1)% | Unpaid Losses and Loss Adjustments This section discusses the company's liability for unpaid losses and loss adjustment expenses, highlighting changes and the judgmental nature of estimates - Unpaid losses and LAE totaled $219,242 thousand as of June 30, 2025, a decrease from $322,087 thousand as of December 31, 2024[225] - The process of estimating loss reserves requires significant judgment, and ultimate liability may differ from current estimates due to various factors[226] RESULTS OF OPERATIONS - COMPARISON OF THE THREE MONTH PERIODS ENDED JUNE 30, 2025 AND 2024 This section compares the company's operational results for the three months ended June 30, 2025, against the same period in 2024, detailing changes in revenue and expenses Revenue This section analyzes changes in gross written premiums and policy counts for the reported period | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Gross written premiums | 228,346 | 229,449 | - New and renewal policies increased by 205 in Q2 2025 compared to Q2 2024[232] Expenses This section details the changes in operating expenses, including net loss and LAE, policy acquisition costs, and general and administrative expenses | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Total operating expenses | 32,035 | 25,877 | | Net loss and LAE | 15,540 | 15,277 | | Policy acquisition costs | 24,257 | 13,939 | | General and administrative expenses | 7,778 | 11,938 | - Policy acquisition costs increased due to decreased reinsurance ceding commission income (quota share cession rate reduction) and increased external management fees (AmRisc contract renewal)[238] - General and administrative expenses decreased primarily due to a non-recurring employee retention tax credit refund of $2,939 thousand[239] RESULTS OF OPERATIONS - COMPARISON OF THE SIX MONTH PERIODS ENDED JUNE 30, 2025 AND 2024 This section compares the company's operational results for the six months ended June 30, 2025, against the same period in 2024, detailing changes in revenue and expenses Revenue This section analyzes changes in gross written premiums and policy counts for the reported period | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | | Gross written premiums | 426,198 | 414,050 | - New and renewal policies increased by 339 in H1 2025 compared to H1 2024[243] Expenses This section details the changes in operating expenses, including net loss and LAE, policy acquisition costs, and general and administrative expenses | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total operating expenses | 65,007 | 46,724 | | Net loss and LAE | 26,929 | 27,751 | | Policy acquisition costs | 47,723 | 23,534 | | General and administrative expenses | 17,284 | 23,190 | - Policy acquisition costs increased due to decreased ceding commission income (quota share reinsurance coverage reduction) and increased external management fees (AmRisc contract renewal)[248] - General and administrative expenses decreased primarily due to a non-recurring employee retention tax credit refund of $4,469 thousand[249] LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's sources and uses of cash, capital structure, and cash flow activities from operations, investing, and financing - The company generates cash primarily from premium collections, reinsurance recoveries, investment income, and asset sales, and uses it for claims, expenses, debt, and investments[250] - As a holding company, ACIC relies on cash dividends or intercompany loans from its management subsidiaries, which are subject to regulatory restrictions for insurance subsidiaries[251] - The company made a capital contribution of $8,269 thousand to Shoreline Re and received a dividend of $23,000 thousand from AmCoastal during H1 2025[252][253] | Cash Flow Activity | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | 154,392 | 250,886 | | Net cash provided by (used in) investing activities | 29,756 | (152,814) | | Net cash provided by financing activities | 774 | 11,458 | | Cash, cash equivalents and restricted cash at end of period | 407,212 | 281,362 | - The decrease in operating cash flow was driven by changes in reinsurance payable and recoverable, while the swing in investing cash flow was due to net sales of investments and proceeds from the IIC sale[257][258] OFF-BALANCE SHEET ARRANGEMENTS This section confirms the absence of off-balance sheet arrangements and material changes to contractual obligations - As of June 30, 2025, the company did not have any off-balance sheet arrangements or material changes to contractual obligations during the quarter[260] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section reiterates the company's exposure to market risks, including interest rate risk, credit risk, and equity price risk, and confirms no material changes during the quarter - The company is exposed to market risks, including interest rate risk (fixed-maturity securities), credit risk (issuers of fixed-maturities), and equity price risk (equity securities)[261] - There were no material changes in market risk during the quarter ended June 30, 2025[261] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting, with no material changes identified during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[263] - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2025[263] - No changes in internal control over financial reporting materially affected or are reasonably likely to materially affect the company's internal control during the quarter ended June 30, 2025[264] PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity security sales, defaults, and other miscellaneous information Item 1. Legal Proceedings This section details the company's involvement in claims-related legal actions in the ordinary course of business and provides an update on a specific D&O insurance policy claim - The company is involved in routine claims-related legal actions and accrues amounts for probable unfavorable outcomes[267] - A claim for $40 million under the D&O policy, with a $1.5 million retention, related to UPC's insolvency, remains open as of June 30, 2025, with litigation anticipated[268] Item 1A. Risk Factors This section updates the risk factors, emphasizing the company's reliance on agent relationships, particularly with AmRisc, and the potential adverse impact of losing these relationships or failing to attract new agents - There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K, except as set forth in this section[269] - The company's business heavily relies on its exclusive managing agency contract with AmRisc, and the loss of this relationship or AmRisc's failure to produce required business volume could materially adversely affect the company[270] - The company's success also depends on strong relationships with its network of 10 independent wholesalers for apartment insurance, who own customer relationships and represent competing insurers[271] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms that the company did not engage in any unregistered sales or repurchases of equity securities during the reported period - During the six months ended June 30, 2025, the company did not sell any unregistered equity securities or repurchase any of its equity securities[272] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the period - None[273] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Not applicable[274] Item 5. Other Information This section states that there is no other information to disclose - None[275] Item 6. Exhibits This section lists the exhibits filed or furnished with the Form 10-Q, including certifications and XBRL documents - Exhibits include amendments to the Certificate of Incorporation and Bylaws, Certifications of Principal Executive and Financial Officers (302 and 906), and XBRL documents[277] SIGNATURES This section contains the required signatures of the company's authorized officers, confirming the filing of the report - The report was signed by B. Bradford Martz, President & Chief Executive Officer, and Svetlana Castle, Chief Financial Officer, on August 7, 2025[281]