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Earnings Presentation Q2 2024

Earnings Presentation

2nd Quarter 2024

August 7th, 2024

Company Overview

ACIC is a specialty underwriter of catastrophe exposed property insurance.

American Coastal Insurance Corp. (Nasdaq: ACIC) is the insurance

holding company for two P&C carriers: American Coastal Insurance Company (AmCoastal) and Interboro Insurance Company (IIC) ¹ along with other operating affiliates.

AmCoastal has the #1 market share of commercial residential property insurance (commercial lines) in Florida with roughly 4,000 policies and $656 million of premiumin-force.

IIC's homeowners & fire insurance products (personal lines) are

written exclusively in New York with approximately 18,000 policies and $36 million of premium in-force. ¹

ACIC as of June 30, 2024

Total Assets:

$1.31 billion

Total Equity:

$223 million

Annualized Revenue:

$271 million

Employees:

65

Headquarters:

St. Petersburg, FL

Credit Rating:

BB+ (Kroll)

Specialty Commercial Property

Specialty Homeowners ¹

¹ IIC 's results are classified as discontinued operations.

2

Executive Summary

  • Q2-24Results
    • Non-GAAPCore Income of $19.6m ($0.40) decreased -$7.5m(-27.6%) from $27.1m ($0.62) y/y on higher ceded earned premiums resulting from the 40% gross CAT quota share effective 6.1.2023.
    • Gross premiums earned grew $5.6m (+3.7%)to $155.5m y/y.
    • Our combined ratio of 64.9% was on target but increased 1.8 points from 63.1% in the same period last year.
    • Current year net catastrophe losses in the quarter were effectively nil and we had $1.0m of favorable prior year reserve development.
    • Stockholders' equity attributable to ACIC, increased to $223.1mor $4.63 per share and $5.03 per share excluding unrealized losses in accumulated other comprehensive income.
  • Other Highlights
    • Completed catastrophe reinsurance program renewals effective 6.1.24 at lower cost due to replacing FORA and reducing the quota share. This sets up revenue and earnings in the next 4 quarters to compare favorably with the prior year and added more limit for a potential 3rd event and higher severity protection to support future exposure growth.
    • Executed definitive agreements to divest of Interboro Insurance Company and we anticipate closing during 1Q-25. As a result of the pending sale, IIC is now included in discontinued operations.
    • Began development of a new apartment product to be distributed and underwritten directly through our MGA, Skyway Underwriters.
    • Secured extension and regulatory approval of our exclusive MGA agreement with AmRisc to 1.1.29.

3

2Q-24 Financial Scorecard

Key results all compare favorably to Raymond James' estimates for the current period.

Core Earnings per Share (CEPS)

2Q-24 = $0.40

vs.

Analyst's Est. = $0.30

Book Value per Share (BVPS)

2Q-24 = $4.63

vs.

Analyst's Est. = $4.58

Combined Ratio (CR)

2Q-24 = 64.9%

vs.

Analyst's Est. = 74.3%

Core Retuon Equity (CROE)

2Q-24 = 46.9%

vs.

Analyst's Est. = 28.5%

4

2Q-24 Summary of Key Results

Combined ratio increased 1.8 points and core income declined -$7.5m ($0.22) due to reinsurance costs.

$ in thousands, except per share amounts

Q2-24

Q2-23

Change

2024

2023

Change

Net income (loss)

$

19,054

$

17,779

7.2%

$

42,653

$

285,059

n/m

per diluted share (EPS)

$

0.39

$

0.41

$

0.87

$

6.52

Reconciliation to core income (loss), net of tax:

Investment gains (losses)

$

(57)

$

(5,188)

$

(97)

$

(4,879)

Amortization of intangible assets

$

(481)

$

(641)

$

(1,122)

$

(1,282)

Gain (loss) from discontinued operations

$

(19)

$

(3,465)

$

(129)

$

232,250

Total adjustments

$

(557)

$

(9,294)

$

(1,348)

$

226,089

Core income (loss)

$

19,611

$

27,073

-27.6%

$

44,001

$

58,970

-25.4%

per diluted share (CEPS)

$

0.40

$

0.62

$

0.90

$

1.35

Net loss & LAE ratio

24.1%

20.8%

22.0%

18.4%

Net expense ratio

40.8%

42.3%

37.1%

42.2%

Combined ratio

64.9%

63.1%

1.8

pts

59.1%

60.6%

(1.5) pts

Less: Net current year catastrophe loss & LAE

0.0%

7.9%

0.2%

5.0%

Less: Net (favorable) unfavorable reserve development

-1.5%

-6.8%

-0.8%

-5.0%

Underlying combined ratio

66.4%

62.0%

4.4

pts

59.7%

60.6%

(0.9) pts

5

2Q-24 Operating Overview

Earnings before income tax improved +11.2% despite the significant change in ceded premiums.

$ in millions

Gross Premiums Earned Ceded Premiums Earned Net Premiums Earned Investment & Other Income Unrealized G(L) on Equities

Total Revenue

Underlying Loss & LAE Current year CAT Loss & LAE Prior year development (F)/U Net Loss & LAE Operating Expense Interest Expense

Total Expenses

Q2-24

Q2-23

Change

% Chg

$ 155.5

$ 149.8

5.6

3.7%

(92.1)

(71.8)

(20.2)

28.1%

63.4

78.0

(14.6)

-18.7%

5.2

(4.6)

9.8

-213.0%

0.0 0.1 (0.1) -100.0%

68.7

73.5

(4.9)

-6.7%

16.3

15.4

0.9

5.8%

(0.0)

6.2

(6.2)

-100.0%

(1.0)

(5.3)

4.4

-83.0%

15.3

16.2

(1.0)

-6.2%

25.9

33.0

(7.1)

-21.5%

3.4

2.7

0.7

25.9%

44.6

51.9

(7.4)

-14.3%

The 40.0% quota share had a significant impact on net earned premiums and OPEX y/y but was reduced to 20.0% effective June 1st, 2024.

Other income (expense)

0.8

0.8

0.0

0.0%

Earnings from continuing operations before tax

$

24.9

$

22.4

$

2.5

11.2%

Provision (benefit) for income tax

5.8

1.2

4.7

391.7%

Net income from continuing operations

$

19.1

$

21.2

$

(2.1)

-9.9%

6

2024 Full Year & 2H-24 Guidance

Our new reinsurance cost structure effective 6.1.24 set the stage for earning & total revenue growth y/y.

Estimated range of Net Income from Continuing Operations ¹

Low High

FY-24 E

$ 85.0

-

$

95.0

Estimated range of Net

Premiums Earned

Low High

FY-24 E

$ 285.0

-

$ 300.0

FY-23 A

$82.2

FY-23 A

$281.9

Y/Y Change

$

2.8

-

$

12.8

Y/Y Change

$

3.1

-

$

18.1

% Change

3.5%

-

15.6%

% Change

1.1%

-

6.4%

2H-24

E

$

42.3

-

$

52.3

2H-24

E

$

158.9

-

$

173.9

2H-23

A

$29.4

2H-23

A

$119.2

Y/Y Change

$

12.9

-

$

22.9

Y/Y Change

$

39.7

-

$

54.7

% Change

43.8%

-

77.8%

% Change

33.3%

-

45.9%

¹ Earnings estimates exclude potential 2H-24 catastrophe losses.

7

Balance Sheet Highlights

Jun 30,

Dec. 31,

YTD

($ in thousands, except per share amounts)

2024

2023

% Change

Selected Balance Sheet Data

Cash & investments

$

572,580

$

311,874

83.6%

Accumulated other comprehensive income (loss)

$

(19,149)

$

(17,137)

11.7%

Unpaid loss & LAE reserves

$

211,433

$

347,738

-39.2%

Reinsurance recoverable

$

206,436

$

340,820

-39.4%

Net Loss & LAE reserves

$

4,997

$

6,918

-27.8%

Financial debt

$

148,854

$

148,688

0.1%

Stockholders' equity attributable to ACIC

$

223,073

$

168,765

32.2%

Total capital

$

371,927

$

317,453

17.2%

Leverage Ratios

Debt-to-total capital

40.0%

46.8%

-14.6%

Net premiums earned-to-stockholders' equity (annualized)

113.0%

192.8%

-41.4%

Per Share Data

Common shares outstanding

48,132,370

46,777,006

2.9%

Book value per common share

$

4.63

$

3.61

28.5%

Underlying book value per common share

$

5.03

$

3.97

26.6%

Tangible book value per common share

$

3.25

$

2.14

52.1%

Underlying tangible book value per common share

$

3.65

$

2.50

45.7%

Liquidity & Equity have improved significantly since year-end driven by strong underwriting results.

8

Investment Portfolio Overview

  • Strong cash generation has propelled successive quarterly growth in investments and liquid assets.
  • Focus on a resilient and high-quality portfolio considerate of current market conditions and risks.

9

Underwriting Environment

Competition remains limited but is getting more aggressive and driving softer market conditions.

  • TIV down -1.7% and policy count down -5.8% YTD, but 100-YR PML up +3.5% due to model change.
  • Premiums in-force are up 2.0% to $656m with average premium up +8.3% YTD, but average renewal rates started to decline consistent with lower reinsurance costs.
  • Account retention was near target of 85% and submission volume remains strong, but accounts bound relative to submissions received and quotes provided are down y/y due to pricing.
  • Market appears to have peaked and is beginning to soften, but renewal pricing is holding close to expiring. AmCoastal is a market leader and expects to maintain its portfolio at comparable terms.
  • Valuation changes are slowing as replacement cost estimates reflect lower inflation pressure.
  • Our commercial residential take-out application for the October 27th, 2024 assumption date has been approved by the Florida Office of Insurance Regulation.

10

Disclaimer

American Coastal Insurance Corporation published this content on 07 August 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 August 2024 20:52:26 UTC.

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