American Coastal Insurance Q2 Earnings Call Highlights

Key Points

• Second-quarter net income was $21.9 million, while gross written premiums fell 5.3% year over year amid lower pricing and $3.1 million in non-hurricane catastrophe losses. The reported combined ratio rose to 74.3%, and the underlying combined ratio increased to 68.7% from 62.2%.
• American Coastal lowered its first-event hurricane retention to $23.5 million from $49 million at an $8.4 million cost, while maintaining pretax earnings guidance of $85 million to $100 million. However, it reduced total revenue guidance to $300 million-$320 million because of continued market pricing pressure.
• The company repurchased nearly 1.4 million shares during the quarter and expanded its buyback authorization to about $30.6 million. Management also plans to refinance senior notes due next year and reduce long-term debt from $150 million to $75 million.

American Coastal Insurance NASDAQ: ACIC reported second-quarter net income of $21.9 million as the Florida commercial residential property insurer navigated lower pricing and catastrophe losses while maintaining what management described as disciplined underwriting.

President and CEO Bennett Bradford Martz said gross written premiums declined roughly 5% from the prior-year period amid continued downward rate pressure. The quarter also included approximately $3.1 million in non-hurricane catastrophe losses, compared with no such losses in 2025.

“Despite top and bottom line compression year-over-year, our underlying combined ratio of 68.7% was very respectable,” Martz said, adding that quarterly return on equity was 26.6%.

Quarterly Results and Balance Sheet

CFO Lana Castle said core income totaled $16.5 million, down $10.3 million from a year earlier. The decline reflected softening market conditions as well as $4.2 million of one-time benefits recorded in the prior-year quarter.

Gross written premiums fell 5.3% from 2025. Castle said $22.5 million of assumed excess-and-surplus, or E&S, premium partially offset declines in the company’s direct premium business.

• The reported combined ratio was 74.3%, up 13.7 percentage points from the prior-year period.
• The underlying combined ratio, excluding current-year catastrophe losses and prior-year development, was 68.7%, compared with 62.2% a year earlier.
• Cash and investments increased $2.3 million, inclusive of previously declared special dividends totaling $36.6 million, or $0.75 per share.
• Stockholders’ equity rose $23.2 million, or 7.3%, to $340.8 million.
• Book value per share increased 10.7% from year-end 2025 to $7.21.

Management said unfavorable reserve development of approximately $767,000 stemmed from a single 2019 accident-year sinkhole claim that exceeded the company’s excess-per-risk reinsurance coverage. Martz said he does not expect the development to recur and expects favorable development for the full year.

Hurricane Protection and Guidance

Effective Aug. 1, American Coastal reduced its first-event hurricane retention to $23.5 million before income taxes from $49 million. Martz said the change was enabled by the outlook for Florida hurricanes and lower reinsurance pricing, allowing the company to reduce potential downside from a storm.

The additional protection cost approximately $8.4 million, according to Martz. About $4 million will be recognized as ceded earned premium from August through December, with the remainder recognized from January through May 2027. The company’s second- and third-event retentions remain $25 million and $2 million, respectively.

Martz said American Coastal expects to remain profitable even with three full retention events. The company maintained its full-year earnings guidance of $85 million to $100 million before income taxes, inclusive of expected average annual catastrophe losses. Actual earnings could vary based on catastrophe frequency and severity.

However, management reduced its total revenue outlook to between $300 million and $320 million because of current market pricing. Martz said rates, deductibles and policy acquisition costs could remain under pressure into 2027 if there are no major hurricanes or other unexpected developments, though lower reinsurance costs may partially offset those pressures.

Capital Returns and Debt Plans

During the second-quarter trading window, the company repurchased nearly 1.4 million common shares, bringing year-to-date repurchases to more than 1.8 million shares. The board expanded the company’s repurchase authorization to approximately $30.6 million.

Martz said the company intends to cancel repurchased treasury shares and continues to view buybacks as an attractive use of capital. He also said the lower hurricane retention supports the potential for another special dividend if the company has sufficient excess capital, although the size of any potential dividend has not been determined.

American Coastal’s senior notes are due next year, and management said it is evaluating bank debt, bond-market financing and other refinancing alternatives. Martz said the company expects to refinance within six to 12 months and would prefer to complete the process before the next hurricane season.

The current plan is to reduce long-term debt to $75 million from $150 million, which would bring the company below its target debt-to-capital ratio of 20% or less. Martz said the company has sufficient cash on hand to reduce the debt balance by half.

Market Position and Growth Initiatives

American Coastal’s policies in force and total insured value in force were each up roughly 3% to 4% year over year as of June 30. Account retention improved to about 85% in the second quarter, according to Martz.

While average premium has declined, Martz said the company is maintaining its exposure base, continuing to write new business and seeking to preserve underwriting profitability rather than pursuing premium growth at unacceptable returns.

The company expects its E&S venture with ACES participation to contribute closer to $50 million of premium during calendar 2026, rather than the previously discussed $70 million figure for a full 12-month period. For the venture’s first 12 months, management expects between $60 million and $70 million, subject to market conditions.

Management also described its apartment, multifamily and assisted-living initiatives as below expectations because the company lacks an AM Best rating that lenders often require. Martz said American Coastal is pursuing an AM Best rating for ACES Specialty and evaluating fronting relationships that could provide access to rated paper. The company hopes to have a solution in place toward the end of the fourth quarter, enabling it to pursue apartments, assisted-living facilities and other rating-sensitive commercial property business after hurricane season.

About American Coastal Insurance (NASDAQ:ACIC)

American Coastal Insurance Company NASDAQ: ACIC is a specialized property and casualty insurer focused on coastal residential and commercial lines across the Southeastern United States. Headquartered in St. Petersburg, Florida, the company underwrites policies designed to address windstorm and non-windstorm perils in areas exposed to hurricane risk. Since its founding in 2007, American Coastal has positioned itself to meet the insurance needs of homeowners, condominium associations, and small business owners operating near coastal zones.

Through a diversified portfolio of personal lines products, American Coastal offers homeowners insurance, dwelling fire, mobile home, condominium unitowners and renters policies.

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