American Coastal Insurance Corporation

Greetings and welcome to the American Coastal Insurance Corporation's second quarter 2024 earnings conference call and webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Karen Daly, Investor Relations with the Equity Group. Please go ahead, Karen.

Thank you, Kevin, and good afternoon, everyone. American Coastal Insurance Corporation has also made this broadcast available on its website at www.amcoastal.com. A replay will be available for approximately 30 days following the call. Additionally, you can find copies of the latest earnings release and presentation in the investor section of the company's website. Speaking today will be President Bennett Bradford Martz and Chief Financial Officer Svetlana Castle. On behalf of the company, I'd like to note that statements made during the call that are not historical facts are forward-looking statements. The company believes these statements are based on reasonable estimates, assumptions, and plans. However, if the estimates, assumptions, or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, Actual results could differ materially from those expressed in or implied by the forward-looking statement. Factors that could cause actual results to differ materially may be found in the company's filings with the U.S. Securities and Exchange Commission, in the risk factors section of the most recent annual report on Form 10-K, and subsequent quarterly reports on Form 10-Q. Forward-looking statements speak only as of the date on which they are made and, except as required by applicable law, the company undertakes no obligation to update or revise any forward-looking statements. With that, it's my pleasure to turn the call over to Mr. Brad Mard. Brad, you may begin.

Thank you, Karen, and hello. Today, I'll provide an underwriting and commercial residential market update and also review some forward-looking guidance for the remainder of 2024. I'll then turn it over to our CFO, Lana Castle, for more detail on our second quarter results. Page three of our earnings presentation highlights some of our key accomplishments this quarter. Two of these stand out due to their impact on current and future periods. First is the Core Catastrophe Reinsurance Renewal, effective June 1, 2024. And the second is the entry into formal definitive agreements to divest of Interboro Insurance Company. The pending sale of Interboro caused its results to be presented as discontinued operations for the quarter and the year. Accordingly, our results from continuing operations now only reflect our profitable commercial lines operations, making comparability and analysis easier going forward, given the noise and volatility historically associated with the personal lines business, which is not part of our future. Before discussing the impact of our core catastrophe reinsurance renewal, I want to first thank our reinsurance partners to whom we are very grateful for their support and proud to have on our panel. All but one of our incumbent reinsurers renewed their lines with us, and we diversified our panel by adding eight new reinsurers this year. Following our announcement regarding successfully completing our June 1st renewal, we seized an opportunity to strengthen our program further by adding an additional $100 million of limit on the top of our tower to protect against a potential high severity event, and also added third event coverage to protect against a series of more moderate events. The current structure, along with a recap of the program highlights, is shown on page 13 of our earnings presentation. While the additional coverage is added cost, the replacement of the four-layer in the private market plus the reduction of the quota share from 40 percent to 20 percent will more than offset that. Thus, we are expecting ACIC's enhanced or catastrophe reinsurance program to have a positive impact on both revenue and earnings growth. Given the discontinued operations and reinsurance changes noted for this period, I felt it was appropriate to introduce some forward-looking guidance regarding net income from continuing operations and net premiums earned. Slide 7 of our earnings presentation summarizes our outlook by estimating net income from continuing operations, excluding catastrophes, to be between $85 million and $95 million for the full year. This implies earnings growth in the second half of 2024 of between 43% and 77% year over year. Potential catastrophe losses could have a significant impact on this, but without any material hurricane losses in the prior year, it's a fair year over year comparison. If you stress test our earnings estimates, for potential hurricane losses, please note that our retention for a first event is $16.2 million after tax and drops down to $10.3 million after tax for a second and third event, assuming such events are contained within the reinsurance program. As for net premiums earned, we estimate they will be between $285 and $300 million for the full year 2024. implying revenue growth of between 33% and 46% in the second half of this year. Pages 10 through 12 of our earnings presentation provide some additional color on our risk portfolio and what we're seeing in the Florida commercial residential marketplace. The bottom line is that the market is showing signs of softening, but it's not having a material impact on our expected margins. We still believe a 65% underlying combined ratio is very achievable despite our outlook for lower rates and increased competition. The last thing I'd like to highlight before turning it over to Lana is the last bullet on page 10 of the earnings presentation indicating our plans to participate in the October 27th, 2024 Citizens Commercial Residential Takeout. We have identified a few hundred policies that fit our current underwriting criteria, and we have received approval from the Florida Office of Insurance Regulation to participate on that assumption date. We will likely only get a fraction of the policies we've identified, but we're excited about the opportunity to participate and supplement our growth via this process. I'll now turn it over to Lana.