American Coastal Insurance Corporation

Greetings and welcome to the American Coastal Insurance Corporation earnings call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may press star one to be placed into question queue at any time. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Karen Daly, Vice President with the Equity Group and American Coastal's Investor Relations Representative. 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 relations section of the company's website. Speaking today will be President and Chief Executive Officer Bennett Bradford Martz and Chief Financial Officer Svetlana Castle. On behalf of the company, I'd like to note that statements made during this call that are not historical facts or 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 Exchange Commission in the risk factor 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 Brad Martz. Brad?

Hello, and welcome to American Coastal's fourth quarter 2024 earnings call. Today, I'll provide an operational and strategic update and then turn it over to our CFO, Lana Castle, for more specifics on our fourth quarter and full year results, along with our expectations for 2025. American Coastal continued to perform very well in the fourth quarter, and despite a full retention loss from Hurricane Milton, we remained profitable. And I could not be more optimistic about our future. In December, We successfully launched a new apartment program in Florida, and our team worked extremely hard to build out the technological and distribution capabilities to underwrite apartments, and these efforts are already starting to pay off. As of today, American Coastal has written 19 new apartment risks, totaling approximately $2.3 million of premium. Most of that exposure is less than 10 years old, with some being brand new. and most risks are located outside of our peak zones for condos, helping improve our spread of risk. The company has received hundreds of high-quality submissions from our distribution partners, but we are being very selective with what we've added to our risk portfolio. Premium generation is the easy part of our business. Underwriting profit is the goal, and we remain laser-focused on that as our primary objective for all new business. During the fourth quarter, I was very pleased to see new business growth along with renewal account retention being better than expected. These metrics combined with our policy assumptions from citizens resulted in ACIC growing its policy count sequentially quarter over quarter. Further, by retaining more of our business using less quota share, we were able to grow total revenues nearly 55% year over year in Q4. Rates are continuing to decrease due to favorable trends in loss and reinsurance costs, but deductible levels and valuations are holding firm, which creates opportunity for us to grow and maintain our underwriting margin. Next, I'd like to highlight American Coastal's accomplishments enhancing our reinsurance protections. Prior to year end, the company placed a new three-year catastrophe bond at the top of our core catastrophe reinsurance program that was upsized from 100 million to 200 million and priced well below the expected range. We did this in advance of our 6 renewal because of the attractive terms and pricing available at that time. This new top layer also includes a cascading or drop-down feature for potential second and third hurricane events that has previously not been available to us in the market. at least not since 2020. So we're very grateful to obtain this more robust coverage. At January 1st, we also successfully renewed our All Other Perils or AOPCAT program, which protects against non-hurricane catastrophe events such as tornado and hailstorms. That was completed with a modest improvement in terms, including reducing our retention approximately 37% from 14.25 million to $9 million before tax. We had a similar experience at February 1st with our excess per risk reinsurance program, which protects against non-catastrophe perils such as fire, also reducing our retention about 38% from $6.5 million to just $4 million before tax. However, the real headline for the period was the placement of a new catastrophe aggregate or CAT-AG program designed to reduce potential earnings volatility. The purpose of the CAAT-AG is to reduce the probability of our annual net losses from catastrophes exceeding 40 million during 2025. History would suggest it's unlikely American coastal will feed any losses to the CAAT-AG, but if the frequency and severity of hurricanes and non-hurricane CAAT events increases, This program should respond and protect future expected earnings. For the full year 2024, our pre-tax income was approximately $102 million, up nearly 6% year-over-year, despite having incurred $23 million more in net catastrophe losses. Even with Hurricane Milton in Q4, American Coast will remain profitable. And that Cat 3 hurricane event was absorbed within a single quarter's profit, which we've stated previously is our target. ACIC's strong annual earnings produced an exceptional 57.4% return on beginning equity. The company starts 2025 with approximately $236 million of stockholders' equity. And given our previous earnings guidance for this year, which we are now reiterating, that implies an expected return on beginning equity of over 30%, inclusive of all CAT losses for this year. Net losses incurred will ultimately drive our actual results for 2025, but the risk transfer enhancements added should provide more certainty and less volatility around our performance. And with that, I would like to now turn it over to Lana. Lana?