AMERICAN COASTAL INSURANCE Corp Q4 FY2024 earnings call

• Successfully launched a new apartment program in Florida, with 19 new apartment risks written, totaling ~$2.3 million premium, mostly outside peak condo zones.
• Enhanced reinsurance protections: Placed a $200 million three-year catastrophe bond with cascading feature, renewed AOPCAT program with reduced retention, and renewed Excess Per Risk program with reduced retention.
• Q4 saw new business growth and better-than-expected renewal account retention, leading to 55% year-over-year revenue growth in Q4.
• Focused on underwriting profit for new business, with premium generation easy but underwriting profit as the primary goal.
• Reserve position remains strong; operating expenses increased due to policy acquisition costs and general and administrative expenses, but offset by increased gross premiums earned.

American Coastal's fourth quarter performance showed a profitable quarter despite a full retention from Hurricane Milton. Gross premium earned grew to $162.7 million, an increase of $3.6 million. The combined ratio was 91.9%, with Hurricane Milton contributing 27.8% to this ratio. The non-GAAP underlying combined ratio (excluding current year catastrophe losses and prior year development) was 65.9%. For the full year 2024, the combined ratio was 67.5%, in line with the 65% target. Cash and investments grew to $540.8 million, and stockholders' equity increased to $235.7 million. The company launched a new apartment program in Florida, with 19 new apartment risks written totaling approximately $2.3 million of premium.

• Reiterated 2025 net income projection between $70 million and $90 million.
• Starts 2025 with ~$236 million of stockholders' equity, expecting over 30% return on beginning equity inclusive of CAT losses.
• 2025 goal for apartment premium is ~$20 million, with potential to exceed, ramping up to June 1 and then seasonally quieting.

• Factors causing actual results to differ from forward-looking statements as outlined in SEC filings.
• Reinsurance market changes and their potential impact on underwriting and profitability.
• Regulatory risks related to product filings and approvals for new programs like the apartment program.

Q: Gregory Peters asked about pricing evolution A: Pricing changing due to lower loss and reinsurance costs, expecting to pass savings to policyholders, targeting 65% combined ratio before CAT.

Q: Peters asked about apartment market target A: Aspirational market size $200-$300 million, 2025 goal ~$20 million, modest impact to earnings in 2025, larger impact in 2026-2027.

Q: Peters asked about reinsurance renewal A: Actively working on structure, goal to push exhaustion point closer to 250-year return period, expiring program was ~230-year.

Q: Bill Dezellem asked about apartment market scaling A: Required developing product, filing rates, building systems, partnering with distributors like AmRisc.

Q: Dezellem asked about back office systems for apartments A: Heavy lift to replicate condo book activities internally.

Q: Dezellem asked about incremental profitability between condo and apartment business A: Similar combined ratio, trading slightly higher loss cost for tenant occupancy with reduced operating expenses.

Q: Dezellem asked about California fires implications A: Small impact on Florida, global reinsurance market can handle it, potential pressure on CAT capacity globally but little impact on American Coastal.

Q: Dezellem asked about new reinsurance coverage A: New CAT bond has cascading feature for second and third events, providing more protection than previous years.