What American Coastal Insurance (ACIC) Said on Its Q3 Earnings Call

Key Points

• American Coastal reported strong underwriting performance in Q3, with $19.4 million in net income, a 64.7% combined ratio, core ROE above 24%, nearly 90% account retention and 7% year-to-date policy growth.
• The company is expanding into excess and surplus insurance through newly licensed ACES Specialty, with initial business expected around the end of the 2026 hurricane season via third-party carriers and potential fee-income opportunities beginning in 2027.
• Despite softer commercial property pricing, management plans to remain selective and prioritize profitability; excess capital could support a special dividend, provided fourth-quarter catastrophe losses remain limited.

American Coastal Insurance NASDAQ: ACIC reported third-quarter net income of $19.4 million and said it maintained strong underwriting profitability despite softer commercial property insurance pricing.

President and CEO Bennett Bradford Martz said the Florida commercial residential property insurer retained nearly 90% of its accounts, grew policies in force by roughly 7% year-to-date and increased gross premiums written by 3.2% from a year earlier. The company reported a 64.7% combined ratio and core return on equity exceeding 24%.

“While our core business continues to produce great results, I am very excited about how American Coastal’s business profile is evolving,” Martz said.

Financial results and balance sheet

Chief Financial Officer Lana Castle said core income totaled $20.4 million, down $10.1 million from the prior-year period, which she attributed to softening market conditions. The company’s non-GAAP underlying combined ratio, excluding current-year catastrophe losses and prior-year development, was 68.4%, compared with 57.8% a year earlier.

Revenue decreased to $19.7 million during the quarter, while expenses fell by $4 million, driven by favorable prior-year development and lower operating expenses quarter over quarter, Castle said.

Cash and investments increased 9.3% from year-end. Stockholders’ equity rose $38.1 million, or 12%, to $355.7 million, supported by underwriting results. Book value per share reached $7.52, up 15.5% from the end of 2025.

ACES Specialty and E&S expansion

During the quarter, American Coastal announced that its new excess and surplus, or E&S, carrier, ACES Specialty, was formally licensed. Martz said the carrier is intended to become a cornerstone of the company’s long-term E&S expansion strategy.

In the near term, American Coastal expects to begin producing and underwriting new E&S property policies around the end of the 2026 hurricane season through third-party carriers that already have the necessary financial ratings and licenses. Its managing general agency, Skyway Underwriters, has several submissions in its pipeline, with some already cleared and quoted. Martz said the company could bind new business in December.

Martz said American Coastal is pursuing capacity arrangements that could produce fee income for its MGAs beginning in 2027. However, he said it was too early to provide details on the expected mix between fee income and retained underwriting risk.

The company expects some E&S business initially to be placed with third-party carriers before potentially transitioning to ACES Specialty. Martz said that approach will allow the company to operate in states where ACES may face rating, licensing or seasoning requirements before it can directly write business.

“We are not going to let that stop us,” Martz said. “We will partner with carriers that already meet those requirements and write the business.”

Over the longer term, Martz said American Coastal sees value in maintaining partnerships with external capacity providers, including potential arrangements in which Skyway underwrites business for third parties in exchange for fees. He said the company could also retain a small co-participation in certain business written on behalf of partners.

Soft pricing and underwriting discipline

Management said commercial property insurance remains competitive, with pricing pressure and what Martz described as aggressive activity from certain market participants. Still, he expects the pace of rate declines to moderate in 2027.

Martz said a 20% year-over-year rate decline is not sustainable and noted that the velocity of pricing changes has begun to slow compared with the first half of the year. He said the company expects changes in reinsurance costs to provide an offset to rate pressure.

American Coastal plans to remain selective in both admitted and non-admitted commercial property markets, emphasizing underwriting profitability and risk-adjusted returns rather than premium growth alone. Management said renewal retention remains a priority because renewal accounts tend to be more profitable than new business.

While the company did not provide 2027 guidance, Martz said it could generate year-over-year growth in gross premiums written, gross premiums earned, net premiums earned and revenue next year as its business profile expands. He said that outcome could be possible even if rates continue declining, though plans are still being finalized.

Management expects policy acquisition cost ratios to remain relatively consistent in 2027. Costs may be somewhat higher for E&S business because of fronting fees incurred through third-party carriers, Martz said, but he does not expect that to become a significant headwind to earnings growth.

Capital return considerations

Martz said American Coastal does not expect to need additional capital to pursue its primary goal of growing earnings over time. He said the company has already made the investments required for expansion and retains excess capital that could potentially be returned to shareholders through a special dividend.

Any special dividend would depend on the absence of significant fourth-quarter catastrophe losses. Martz said Hurricane Isaias is expected to have only a minor fourth-quarter impact and is unlikely to affect the board’s consideration of a special dividend later in the year.

The company did not repurchase shares during the third quarter, Martz confirmed.

About American Coastal Insurance (NASDAQ:ACIC)

American Coastal Insurance Corporation is a property and casualty insurance holding company based in Florida. Through its insurance subsidiaries, the company provides coverage for catastrophe-exposed residential properties, with a particular emphasis on commercial residential insurance such as condominium and homeowners' association properties.

The company's principal operating subsidiary is American Coastal Insurance Company, which focuses on property insurance in Florida and other coastal markets where specialized underwriting and catastrophe-risk management are important.

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