• Net Income: $4.9 million for the quarter.
• Core Income: $6 million, a decrease of $12 million year-over-year.
• Gross Premium Earned: $162.7 million, an increase of $3.6 million.
• Combined Ratio: 91.9%, with Hurricane Milton contributing 27.8%.
• Underlying Combined Ratio: 65.9%, excluding catastrophe losses and prior year development.
• Full-Year Combined Ratio: 67.5%, aligning with the 65% target.
• Operating Expenses: Increased by $15.1 million, driven by policy acquisition costs and MGA fees.
• Cash and Investments: Grew 73.4% to $540.8 million.
• Stockholders' Equity: Increased 39.6% to $235.7 million.
• Book Value Per Share: $4.89, a $35.5 increase from year-end 2023.
• Projected Net Income for 2025: Between $70 million and $90 million.

• Warning! GuruFocus has detected 3 Warning Signs with ACIC.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• American Coastal Insurance Corp (NASDAQ:ACIC) remained profitable in Q4 2024 despite a full retention loss from Hurricane Milton.
• The company successfully launched a new apartment program in Florida, generating approximately $2.3 million in premiums from 19 new apartment risks.
• ACIC achieved a 55% year-over-year revenue growth in Q4 by retaining more business and reducing quota share.
• The company enhanced its reinsurance protections with a new three-year catastrophe bond, increasing coverage from $100 million to $200 million.
• ACIC's strong annual earnings resulted in a 57.4% return on beginning equity, with a projected return of over 30% for 2025.

Negative Points

• Net income decreased by $12 million year-over-year due to tax retention from Hurricane Milton.
• Operating expenses increased by $15.1 million, driven by higher policy acquisition costs and MGA fees.
• The combined ratio was impacted by Hurricane Milton, contributing 27.8% to the ratio.
• Pricing is expected to decrease by 5% to 10% year-over-year, which may affect profitability.
• The company faces challenges in finalizing reinsurance retention and structure due to ongoing rate-making procedures.

Q & A Highlights

Q: Can you provide an update on how pricing is evolving in the current market environment? A: Pricing is changing due to expectations of future loss and reinsurance costs decreasing. We expect to pass some savings to policyholders. Factors like moderating inflation and reforms in Florida are positively impacting the market, especially in litigation. Despite a 5-10% decrease in pricing year-over-year, we are maintaining our target combined ratio of 65 before CAT, keeping margins intact. - Bennett Martz, President

Q: What are your growth aspirations for the apartment insurance market? A: We see a market opportunity of $200 million to $300 million in premiums for garden-style apartment complexes, similar to our condo book. For 2025, our goal is modest at about $20 million in premiums, with potential for more significant growth in 2026 and 2027. - Bennett Martz, President

Q: What changes do you anticipate in your reinsurance structure for the upcoming renewal? A: We aim to maintain a modest retention absorbed within a typical quarter's earnings and push the exhaustion point closer to a 250-year return period. We have already placed $200 million in the cap bond market, and we are working on finalizing the structure, with clarity expected in a few weeks. - Bennett Martz, President

Q: How does the apartment insurance business compare in profitability to the condo business? A: We target a similar combined ratio for both, though the mix differs slightly. The apartment business may have higher loss costs due to tenant occupancy but benefits from reduced operating expenses due to internal efficiencies. Scale and risk selection will ultimately determine profitability. - Bennett Martz, President

Q: What impact do the recent California fires have on American Coastal's reinsurance? A: While the fires impacted global reinsurance capacity, we don't expect significant effects on American Coastal. The global market can handle the loss, and any pressure on capacity is unlikely to impact us significantly. - Bennett Martz, President

For the complete transcript of the earnings call, please refer to the full earnings call transcript.