Good afternoon, and thank you for joining us for our next Midwest IDEAS Investor Conference presentation. Presenting next is American Coastal Insurance Corporation, which trades on NASDAQ under the symbol ACIC. Representing the company today is VP Finance and IR, Alex Baty, and Chief Financial Officer, Svetlana Castle.
Thank you, and good afternoon, everybody. We will briefly go over results of our company and what we represent. I will cover more of the general information and then pass it over to Alex to cover some of the detailed financials. Just a housekeeping item, some of the information presented here is looking forward statements, and those are subject to change. A little bit about us and our value proposition. What we are, how we like to present ourselves, is a niche specialized underwriter, disciplined with very high returns and with our historical statistics proving that we've been successful through every cycle of insurance since our inception in 2007. We are currently number 1 admitted commercial residential insurer in Florida. As I mentioned, we've been profitable every year since inception, which includes high severity and high frequency events that hit Florida in the last two years.
Our OE is in mid-20s and 68.6 underlying combined ratio. Our current target is 65%-75%, depending on where we are in the market cycle. Of course, some of that depends on whether we have or don't have catastrophe losses, which does not impact the underlying combined ratio, but it impacts your overall GAAP combined ratio. We are risk-averse when it comes to catastrophe losses. We do get a lot of questions about the volatility on our book, and while absolutely there is some volatility because we cannot predict the weather or how many events we will get in a certain year, we structure our insurance program in such a way that our surplus is always protected and, if anything, catastrophe events are our earnings events versus the capital events.
As of today, we are roughly 50% insider-owned, with a large percentage held by our original founder, Dan Peed. We think that strongly aligns the value for all of the shareholders with such a heavy presence of insider ownership. As of late last year, we have new growth channels, which is our ACES, American Coastal E&S Company. Currently, it is still in the formation with the state of Arizona. We do expect to get licensing later this year, and we expect to start writing business probably in the second quarter of 2027. This slide just highlights some of our key metrics and the results. Currently, we have about 4,400 policies in force. Despite the softer market that right now a lot of insurers are facing in the State of Florida, we actually have been able to grow our brief count in the last year.
That being said, because of the price decline, overall premium is down compared to the last year. Our retention goal is 85% on account based, and we've been able to successfully hit that 85% for the last few years and inclusive of 2026 in the softening market. $573 million is our current premium in force. As I mentioned in the introduction, the three engines currently are AmCoastal, ACES, and Skyway is what we use as an MGA that's affiliated to write apartments. Our new book of business that just commenced last year. AmRisc is who we use to underwrite our condo book of business, which represents currently the majority of our book. This slide just shows our key metrics, how we view, and how we measure our success. Core EPS for 2025 of $2.08. Revenue was $335. Combined ratio 60.1.
2025 was a stellar year. We were still at the parts of the hardening market in 2026, also. 2025, sorry, did not have any catastrophe events in the state of Florida. Book value per share $6.51. Core return on equity in 2025 was an impressive 35.2%, and underlying combined was 61.5. On the revenue, maybe for those of you that are more generalist versus insurance specialist, that represents a net number. C urrently, in order to diversify our risk, about 50% of every dollar we write goes to reinsurers to protect us. The $335 is a number after significant amount of dollars were sent to reinsurers. Underwriting strategy, I think, is what differentiates us from some of our competitors. We target low-rise, usually two to three-story garden-style apartments in the state of Florida, up to $100 million of total insured value.
We honestly don't write a lot in the $100 million bracket. Most of our buildings represent under $35 million of insured value, be a particular construction type. On more than 75% of our book, the way we price our business, it's judgment based, right? We do have filed rates with the state of Florida. E very time total insured value exceeds $5 million, we are able to use a lot of judgment in terms of which price we are able to offer. That price can fluctuate from the filed rates are as high as we want it to be, and also as low as we want to stay competitive to the extent we still feel we're meeting our underwriting targets. American Coastal is currently the MGA leader in their E&S space. We are their only relationship on admitted basis, and those relationships are mutually exclusive.
We are not able to write condominium associations and admitted market through anybody but AmRisc, and AmRisc, on the other hand, is not able to write admitted condo book for anybody but American Coastal. On the reinsurance side, we have a very long-term history with a lot of credible reinsurers. We use highly rated paper as well as some fully collateralized reinsurers. For the past two years, we added more than 10 new reinsurers to the panel. We actually had so much demand this year that we had to turn down some of the reinsurers or reduce capacity to others because our book has been profitable, our history has been very favorable to reinsurers, and as a result, we've been able to continue to expand the reinsurance panel, which is very important when you write business in the State of Florida.
This slide just shows, maybe in a little more technical way, how we manage through the insurance cycle and our hard markets and soft markets, they are part of insurance, right. It does not mean that one is particularly worse than the other. Both are needed to have the market in balance. We have seen softer market than it is today. We still were profitable. Currently, while substantially below where the historical hard market been in the last two years, we are still above the lowest point, at least in our history, in terms of the technical pricing and managing risk exposure and being disciplined in underwriting is key. We do have some accounts that we turn down when we do not feel that the price is attractive enough to us. We never compete on the price. If anything, we compete on the quality of risk, on our relationship.
Some of those accounts, we are completely fine if they go to our competitors, but we do ask that question a lot, right. You are in a soft market. There is a lot of competition that sees how profitable you have been. Are you worried about that. We watch it closely, but honestly, we are so big that some of those startups actually good to test the market. Some healthy competition is appreciated, but none of those risks currently are viewed by as by major. This shows our, as I indicated earlier, managing the catastrophe protection and making sure we accurately portray that message and investors understand how we structure our risk appetite. This just shows that for 2026, 2027, kind of 12-year catastrophe calendar period coverage, we have $1.7 billion on the first event named windstorm limit, and on the first event, we have $23.5 million retention.
This number has been decreased from originally almost $50 million, which we placed as of 1 June . However, we saw continued excess capacity on the reinsurance side. As a result, that brought the pricing to very favorable level. While none of us can predict the weather, we felt that the price was attractive enough for us to purchase down the retention from $50 million- $23.5 million. Even with $50 million, we still plan to be profitable on a calendar year basis, but $23.5 million further protects the surplus of the company. Overall, our philosophy has been to be profitable in any given quarter with one event and to be profitable for the year or maybe at break even with three catastrophe events. We currently feel very confident that this is where the company is positioned.
As I mentioned earlier, 25- 31 was the reinsurance panel expansion from 2025 to 2026/2027. Some takeaways, if you want the summary or the snapshot of where we are, again, very strong core cat catastrophe program. That is not the only program we place. In the appendix to this presentation, if you want further detail to additional reinsurance we purchase, you are welcome to study that, and we are always here to answer any additional questions. F or the sake of time, we are just not covering the detail of those reinsurance programs in this particular format. We have multi-year placement, which allows us to have three-year continuity with some of their portions of our catastrophe tower, and currently it is about $760 million that is placed in multi-year. The reinsurance cost, it has been down, trending down, consistent with where the pricing is overall of the insurance market.
The margins generally stay intact, at least when it comes to your premium versus the reinsurance one. W here obviously some of the insurance company are seeing some deterioration is on expense ratio, because while direct costs are variable, some of the fixed costs are here. During harder market, when you have more premium dollars to collect, naturally that expense ratio will be lower. This is why our combined ratio targets have shifted slightly upwards. This is where we see our growth because we do have a lot of questions. Your condo is a mature book of business. It has been profitable. However, it is still some concentration because it is one product and in one state. H ow we see ourselves going forward. For right now, what we have added in March of 2026 is a portion of AmRisc nationwide E&S book.
We are taking a small percentage of it, and it is projected to be at about $70 million on the 12-month basis. If the pricing and the capacity shift slightly, that number can be as high as $100 million, but currently we budget for about $70 million. This was kind of our first step in the E&S, which, in 2027, is expected to start showing significant results. Skyway, as I mentioned, is our internal MGA. During the softer market, we were able to build a policy admin system to have our underwriting done fully in-house. As ACES gets licensed, we will add E&S products to the same platform that we were able to build for our admitted product, and that will be done completely in-house. We currently have a team of eight underwriters. As the book grows, we might add a little bit to that team.
However, overall, we do not need to change the headcount, which will be very beneficial to managing our expenses. E&S opportunities, this is just an illustration of overall market opportunity. Florida, Texas and South Carolina are the states we are going to target first. Down the road, we might further expand that panel, but for the next two years, these are the states where first we have historical experience with, and second, the risk characteristics and profile of their properties will be very similar because there will be CAT exposure. Overall, as you can see, it is a very significant market opportunity. Even if we just take a small portion of that overall market, that will create significant top line for the company.
More not to come probably in early 2027 once our ACES is fully licensed and we have defined business plan in terms of how much market we will plan to put on the books in the next year or two. Compounding book value and return in capital, of course, those are all of the key questions that are in a lot of investors that are either currently invested with American Coastal or are planning to invest. Our book value over the last three years has grown from $2.45- $7.21. As I mentioned earlier, 50% inside the ownership. We have currently authorization to repurchase on the compound level about $50 million of buybacks. To date, we have executed $19.4 million. We will continue to watch the market. We will continue where the pricing and the valuations are.
It's not necessarily our main strategy just to continue to do the buybacks. W hen opportunity presents itself and we feel it's prudent, this is where we pull the trigger. L ike I said, of the $19 million currently, another $30 million is authorized for us if we choose to pull that trigger and when we feel the time comes to that. We currently have special dividends that we've been declaring for the past two years. Quarterly dividends are on the table as well because we do have a lot of questions, and we do discuss it with our board of directors regularly. Being that we are in a CAT business, we think longer term, it's better return of shareholders value to wait until the CAT season is done and then calculate how much we can return to shareholders.
In 2024, that number was $0.50 per share, and in 2025, it was $0.75 per share. We have $150 million of senior notes right now. They're maturing at the end of 2027. We don't plan to repay the entire $150 million. We plan to refinance about half of that, and that will align with our goal to target long-term debt to capital ratio of 25% or less. We are currently Kroll rated. We've been given upgrades by them for the last two years, which is unusual. Usually, they give you an upgrade one year, and then you have to wait another two to three to get your next one. W e're very proud that they were able to give us an upgrade every year.
As we get ACES up and running, the long-term goal is to have AM Best rating for E&S carrier, and that way we'll be able to go directly to some markets versus using someone else's front and AM Best paper. As I mentioned, buybacks, it's one of our strategies, but it's not kind of our leading strategy. With that, I'm going to pass it on to Alex. This slide just shows you our overall, where we are compared to the industry, compared to some of our peers. You are welcome to study more of that. Like I mentioned, we are always here to answer questions, but Alex will cover some of our more detailed financials. We thank you all for your time and for being here today.
Thanks, Lana. I'm just going to quickly cover our first half of 2026 results. As you can see here, gross premiums earned for the year of $280 million compared to $328 million last year. That's just a product of that softening market that we were alluding to. What I really would like to point you to here is despite that decrease, total revenue remained relatively flat, decreasing from $159 million- $154 million year- to- date. That's a product of that reinsurance cycle that moves in tandem with ours. Like she alluded to, a softening market, as long as your reinsurance and your margins stay intact, you're still able to conduct business profitably through the market cycle. Consolidated net income for the year, $41 million compared to $48 million last year.
We did have a couple of one-time windfalls that took place, approximately $5 million in the first half of 2025, so what you're seeing is more of a normalized net income figure here. Return on equity annualized based on these results would be 25% for the year. We target 20% here, so exceeding expectations despite the market cycle, and we expect that to continue. The main takeaway when you're looking at our results should be managing this market cycle. Soft market or hard market, our margins remain intact. We're prudent about buying more reinsurance where it makes sense, but we're not overbuying and spending away the margin here. We don't expect that to change. We're disciplined underwriters. That's where we have come from. That's where we've always been.
We've always made a profit every year since inception, and that's just really a testament to the underwriting expertise that we have here. Moving on to the balance sheet, you can see as of 31 December , stockholders' equity was $318 million. As of 30 June , that's increased to $341 million entirely from that operating profit that we've experienced during the first six months. Cash and investments remained relatively flat here. You'll note that's inclusive of the $0.75 dividend that was paid in January of 2026. I mproving capitalization position, we expect to reduce that debt that you're seeing here from $150 million down to $75 million. We're in a strong position to execute on these initiatives. I just wanted to take one second here. Their full bios are available on our website, but to point to our leadership team, starting with Dan Peed.
Dan was the founder and former CEO of American Coastal, and also founded AmRisc, our largest partner with that exclusive partnership in Florida. His background is a loss prevention engineer, so he is deeply ingrained in the underwriting process. He serves as executive chairman now but is incredibly hands-on with the reinsurance spend each year. With our pricing, he meets with AmRisc monthly still alongside of us. He's fully involved and our largest shareholder at this time. Brad Martz, who apologizes that he couldn't be here today, our President and CEO, former CFO, who was succeeded by Lana when he stepped into Dan's role. Troy, Chris, Andy, and Brooke have been with the company for a long time.
All of them come from deep insurance backgrounds, having served in executive level positions prior to this, and are fully capable of managing the market cycle and producing these strong returns. Just to wrap things up, I guess the punchline really here is we're a specialty commercial residential underwriter with the number 1 market share in Florida. We're disciplined through the market cycle. You're not going to see us go and chase price to the bottom and erode that margin that we've spoken to today. Strong returns on equity year-over-year. Never had an underwriting loss. We're fully aligned, majority insider-owned. That's the entire executive team, as well as a vast majority of the employees themselves. Our founder and executive chairman owns about 28% of the company, so he has a vested interest in our success.
We have some growth optionality in the pipeline here through ACES being stood up later this year and capitalized and setting up that E&S platform. Catastrophe protection is top of mind for us, making those storms earnings events, not capital events, and we do not expect to be in a position where we will need to go out and raise capital in an active year. I would just point you to the appendix here. I am not going to spend time going through the detail, but you can see here we have got our other reinsurance structures if you guys would like to take a look at those, as well as the more detailed towers, for some of you that are insurance specialists, just outlining how the protection works for all of our different coverages. With that, any questions? Sure.
Did you say on your reinsurance slide that you already have $764 million that is committed for next year?
Correct.
For the next two years, yes.
For the next two years. Has that happened before with you all?
A lot of that protection is going to be twofold. It is the quota share protection that you will see disclosed, the 15% with Arch, who is our largest reinsurance supporter. As well, we have been in the ILS market the last couple of years, so we have multi-year cat bonds in place. We have had multi-year coverage in place before, but never to the extent that we do today.
Not in the last, I think, maybe three or four years. Historically, we had, then we did not have. Now we have it.
Yeah, just a product of that cycle as well. We have been able to push a little bit on terms there. Sure.
It looks like a solid company, and as per my model, it is materially undervalued. I am just curious, on your guys' end, why would you decide to do a special dividend instead of a buyback? You could potentially have more creative value by doing a buyback.
This is a question that we get a lot. I think the main takeaway here is that we're going to always probably do a hybrid of both, just given we expect the valuation to correct itself over time. We think that right now we're not really getting the credit we deserve, and so we have executed and signaled to the market that we do expect that to go up, and it should go up through those small buybacks. That being said, it's really up to board appetite here. We think that the special dividend gives us a little more flexibility with storm season to-
Okay.
be able to return capital once we know that we're not going to need that capital. Additionally, being majority insider-owned, our float is sort of small, and so unless we do a Dutch tender or something of that nature, it's really difficult to repurchase large tranches of stock.
Yeah, I was going to just add a little bit to it. Completely being inside owned, right, comes with certain pros but also cons in terms of limitations.
Sure.
We have to kind of always play that balancing game. We like to have the two options so we know which one to pull and when. Right now, the plan is still to continue with special dividends. Shares buyback, it's more of like the secondary priority for that.
Sure.
Or are there some national?
It is largely smaller regional insurers that are not scared of the Florida risk. Those large national carriers are really not in that market.
They do not like the market. State Farm and Progressive, they like to stay away from the coast.
Right.
Is it fairly concentrated on the coast?
Yeah. It's a handful of competitors, that appetite we see come in and out of the market. We see people that enter the market as it softens, then based on short memory, clean sheets with windstorms, then they get hit, we've seen them have to back off their concentration there.
Our largest competitor has about 30% overall of our premium, after that it's a significant drop. After that it's maybe 10%, 5%, or we watch them, but it's very difficult to build a relationship with scale given the complex underwriting of the commercial book versus a personal line. It's not nearly as easy to replicate as it might seem.
Do I understand correctly that you are now not writing single-family P&C insurance in Florida?
Correct.
Just commercial.
Give an idea as to why did you decide to do that? You could have done it maybe more selectively, maybe staying away from the coast or whatever.
The personal lines environment is different than our current environment in that we have freedom of rate. As we manage these market cycles, the personal lines tended to be a game of catch-up, where you would take rates down and regulators have to approve it. It's a long process, and then you get hit by a couple years of storms, and it was more difficult to manage that cycle. Here we have freedom of rate. We are able to act very quickly when the market hardens, and we just think it's a better use of capital.
In personal lines, there is a lot more competition. A lot of them, they kind of exited the market because there was a lot of fraud on the litigation of those claims. As some of you know, the adjusters were knocking on people's doors saying, "You need a new roof. You need new windows. You need new doors." Currently, some of them have reentered, or the new startups have started, but our appetite is not on the personal lines. When we grow, we want to grow commercial book, and the new products that we will be looking at for E&S carrier will have similar characteristics to our current book.
What is your attitude now toward expanding out of Florida? I did not follow completely on the screen. I understand that you are in the process of expanding.
We are in the process. We have not yet started writing in any of those states because we are still waiting for Arizona to give us a license for our new E&S carrier. Once we get that license, which should be towards the end of this year, we will need the fronting paper with AM Best rating to start writing E&S. As we do that, we will concurrently be filing for rating with AM Best to get our own rating so we do not have to use the fronting, but that is a one to three year initiative from this point on.
Sure.
Relative to your AmRisc relationship, that is $70 million- $80 million this year. What are you anticipating in 2027, and then 2028 if you have a line of sight on that?
We would expect that $70 million to remain relatively flat over the next year, since it is just a line of an existing book. Market conditions could have that fluctuate up or down, but we do not expect it to change materially at this time.
ACES capitalization. I do not have the accounting in my head here. Does that somehow affect your capital levels as you start thinking after hurricane season about that special dividend or is that a non-factor?
We currently have our $30 million already set aside for the initial ACES capitalization. Ultimately, we need 100 to get AM Best rating. We will probably let ACES grow organically to build that capital. However, if the market conditions are such that we do think it is a huge market opportunity and we do not want to wait, we are fully prepared to add additional capital to ACES, but that will not prevent us from paying special dividends because we are in excess capital and cash position. B etween special dividends and ACES capitalization, we will be able to meet both of those goals if needed.
Sorry, go ahead.
No, I said if needed, right? Because we might not do the $100 million.
Okay. It won't affect whether you do the dividend or not, but may impact the size of the dividend.
Potentially, right. Most likely, if we have our very active cat season where the insurance company takes, I don't know, three, four retentions, maybe it will impact the special dividend at that time. O ne event by itself, and ACES capitalization, they will have no impact on a special dividend.
Thank you, guys. I'll have one more for you. As you think about going from $30 million capitalization, capping of the ACES to $100 million, you would have to have a Well, actually, how could you do that internally to do it quickly enough that you get that AM Best rating as fast as you like? That almost seems like that's-
Sure. There's several levers that we can pull here. The admitted statutory entity has significant excess capital on hand that we can request an extraordinary dividend from the Florida Office of Insurance Regulation, which would provide an influx of capital almost immediately. We prefer not to take that path if we don't need to. W e wouldn't sacrifice a market opportunity in lieu of taking that path. I should say, we also have the captive entity that participates on the admitted carrier's book of business via quota share, and there is some capital sitting at that entity. Once we make it through wind season, we could commute that and free up some capital as well. There's a couple different levers in the background that we can pull internally that don't require us to-
It's internal, like left pocket, right pocket, how you share the capital. Given that our American Coastal entity is currently in about 1,300 RBC position, risk-based capital, for those of you that are not familiar with the acronym. Florida requirement is 350. Our internal target is about 600, so we can pull about $100 million of surplus out of insurance company, put it in E&S. We still have that healthy RBC. It will depend, like I said. If we do feel we can write, I don't know, $200 million of E&S premium on day 1, which I don't think will be the case, but let's say the market is hardened, there is a ton of opportunities there, then we'll just move the capital.
In the meantime, we can slowly grow that from $30 million as ACES is profitable to maybe $50 million, $60 million, when it gets more portion that we have to supplement.
Great. Thank you both.
Sure.
Is the plan to transition ACES technology platform to Skyway?
Skyway would operate as the MGA behind ACES. ACES would just remain the E&S carrier. Any other questions? We thank you all for your time and interest, and if you have any follow-ups, please don't hesitate to reach out. My contact information is right here. I'm always happy to take the time.
Thank you.