Shares of American Coastal Insurance Corporation (ACIC) plunged 6.15% in pre-market trading on Friday, following the company's Q4 2024 earnings release that raised concerns about the impact of Hurricane Milton and potential pricing pressures in the insurance market.
While ACIC reported a profitable quarter with a net income of $4.9 million, the company's core income declined by $12 million year-over-year due to the full retention loss from Hurricane Milton. The hurricane event contributed 27.8% to ACIC's combined ratio of 91.9%, highlighting its significant impact on the company's underwriting performance.
Additionally, ACIC's operating expenses increased by $15.1 million, driven by higher policy acquisition costs and fees paid to managing general agents (MGAs). This expense growth offset the $3.6 million increase in gross premium earned, further weighing on the company's profitability.
Looking ahead, ACIC acknowledged the potential for pricing pressure in the insurance market. The company expects rates to decrease by 5% to 10% year-over-year on average account renewals, citing favorable trends in loss and reinsurance costs. While this could provide relief to policyholders, it may also impact ACIC's underwriting margins and profitability if not managed effectively.
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