Release Date: November 06, 2024

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

Positive Points

• American Coastal Insurance Corp (NASDAQ:ACIC) reported a strong net income of $28.1 million for the third quarter.
• The company experienced a significant increase in foreign income, rising by $11.4 million year over year.
• Gross premium earned grew by $2.4 million to $160.2 million, indicating strong revenue growth.
• ACIC successfully reduced its quota share from 40% to 20%, leading to lower seeded earned premiums and higher retained underwriting profit.
• The company maintained a strong liquidity position with cash and investments growing by 83.1% to $571.1 million.

Negative Points

• ACIC incurred significant after-tax losses from hurricanes Debby, Helene, and Milton, totaling approximately $20 million.
• The company expects to incur an additional $13 million in premiums to reinstate reinsurance limits used by Hurricane Milton.
• Operating expenses increased by $9.5 million, driven by higher policy acquisition costs and general administrative expenses.
• The company faced a decrease in seeding commission income due to the quota share step down.
• Comparison to prior periods is impacted by the absence of hurricane losses in 2023, affecting year-over-year performance metrics.

Q & A Highlights

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

Q: Can you provide more details on the impact of recent hurricanes on American Coastal's financials? A: Bennett Martz, President, explained that Hurricane Debby resulted in minimal wind damage with a net impact of about $600,000 after tax. Hurricane Helene caused minor wind damage and extensive flood damage, resulting in a net loss of about $3.2 million after tax. Hurricane Milton, however, caused significant wind damage, leading to an estimated net loss of $16.2 million in the fourth quarter. The company will also incur approximately $13 million in additional premiums to reinstate the reinsurance limit used by Milton.

Q: How did American Coastal perform financially in the third quarter of 2024? A: Svetlana Castle, CFO, reported a strong quarter with a net income of $28.1 million. The gross premium earned grew to $160.2 million, and the combined ratio was 57.7%, below the 65% target. Operating expenses increased, primarily due to higher policy acquisition costs, but were offset by decreased seeding premiums, resulting in an increase in earnings before tax of $18.4 million year over year.

Q: What strategic actions has American Coastal taken recently? A: R Daniel Peed, CEO, highlighted the company's successful participation in its first-ever takeout from Citizens, adding policies to their condo book and launching a new apartment program. This strategic move is expected to contribute to future growth.

Q: How is American Coastal positioned in terms of reinsurance for future events? A: Bennett Martz, President, stated that the company has nearly its full reinsurance tower in place for any future events. If additional hurricanes impact Florida this year, the net retention would drop to $10.3 million for the next two named windstorms.

Q: What are the expectations for American Coastal's performance in the fourth quarter and beyond? A: Bennett Martz, President, expressed confidence in remaining profitable in the fourth quarter despite the increased hurricane activity. The company expects to post strong results for the full year, with continued revenue growth and a steady underlying combined ratio.

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