American Coastal Insurance Corporation Common Stock Investor update

Great. Thanks, Glenn. Good afternoon, everyone. I am Brad Martz, President and CEO of ACIC. Thanks for joining us today. Since we covered the forward-looking statements, let us begin on page 3. We believe ACIC is very well-positioned, undervalued, and on the verge of creating and enhancing shareholder value through actions our team has taken to invest in our future. We described ACIC as a specialty insurer because of the unique features of our underwriting approach. ACIC became the number 1 writer of commercial residential property in Florida because we have highly technical underwriting systems, tools, processes, and experienced people. Our core business is insuring condominium associations in Florida, where ACIC covers the shell or the building envelope, the common areas, and ancillary structures from physical damage. We do not cover contents or liability.

For other income-producing habitational properties like apartments and assisted living facilities, we do the same thing, but also include and price for limited business interruption protection, but also do not cover any liability or flood risk. Underwriting insurance in Florida, the peak zone in the world for hurricane risk, is hard. It is even harder to do it profitably on a consistent basis when storm losses occur. Underwriting discipline means knowing how and when to price risk based on hundreds of primary and secondary risk characteristics that drive our view of risk and what profitable business looks like. I am certain you will hear other insurance companies talk about how good their underwriting is, but I am not aware of any other insurer who can say they have earned an underwriting profit every year they have been in business in the Florida property insurance market over the last 19 years. Nobody. Our track record and our results are among the best in the insurance industry in terms of both return on equity and profit margin, as measured by the combined ratio.

While underwriting and risk selection is our primary competitive advantage, catastrophe reinsurance also plays a critical part in protecting earnings and capital from potential volatility. ACIC has a very sophisticated reinsurance program designed to mitigate risk of loss from both catastrophe and non-catastrophe events. Because our track record of discipline and profitable underwriting is so good, ACIC enjoys a very strong support from the reinsurance market, which allows us to transfer the vast majority of all the risk across our portfolio. We think of the company more like an MGA, transferring risk for the reinsurance industry, not necessarily a traditional insurance company or balance sheet underwriter that is usually retaining all the risk they write.

This catastrophe protection means we do not need to hold as much capital, which helps fuel our consistently strong return on equity. As an insider-owned firm, our interests are aligned with stockholders, and our focus is always on sustainable profitability and ROE. Our core condo business in Florida still has some upside and growth potential, but for the most part, it is a mature and stable platform. However, I believe, we all believe ACIC has a huge growth opportunity in front of us beyond our core business. Our operating model is very scalable and flexible, which means it can be applied to other territories beyond Florida, as well as other classes of commercial property insurance. We will talk more about our growth ambitions in a minute. But moving on to page 4, we are introducing the various companies and brands on this page.

AmCoastal is the Florida-domiciled property and casualty company operating on an admitted basis in Florida. The admitted market is the more highly regulated market where companies must file and get approval for their rates, their underwriting rules, and their policy forms. In Florida, commercial property over $5 million of total insured value, or TIV, is exempt from following our filed rates, which gives American Coastal full unregulated flexibility over how we price our business. This is the vast majority of what we write. And this is a huge advantage over other personal lines admitted carriers who often get stuck fighting with regulators over rate levels and rate adequacy because it is the state's job to protect consumers and keep prices affordable, which conflicts with profitability. AmRisc is a managing general agency that was founded by our Executive Chairman and largest shareholder, Dan Peed.

Dan formed AmRisc with the intent of AmRisc becoming a leader in commercial property insurance in the U.S. He built AmRisc into the biggest and best commercial property underwriter in the U.S. Dan's partner was BB&T, today known as Truist Financial Corporation. So in 2007, Dan convinced BB&T to capitalize American Coastal as a source of dedicated capacity for AmRisc to underwrite profitable commercial property business in Florida. And eventually, American Coastal became so big and successful that Truist decided it should not own a large cat-exposed insurance company. So Dan and the AmRisc management team ultimately swapped equity in AmRisc for ownership of AmCoastal. So I only mention this because we often get questions about the strength of this very important relationship.

It is an exclusive relationship, and once people know AmCoastal used to be affiliated with AmRisc and was founded and controlled by Dan, it is easier to understand why the relationship is so strong and mutually beneficial. ACIC recently announced a new long-term agreement with AmRisc designed to keep our exclusive arrangement with them in Florida for condo business, more perpetual in nature versus what used to be a rolling five-year term, which was a regulatory constraint and often confused investors about the sustainability of that relationship. Our relationship has never been stronger and continues to grow, as evidenced by our announcement in March of this year for American Coastal to provide AmRisc capacity for their nationwide E&S commercial property business.

That co-participation arrangement will add roughly $70 million of new premium to ACIC in the first full year of operation, which can be scaled up or down over time, depending on the expected returns on capital from that business, as well as the capacity needs of AmRisc. Ultimately, we expect that to grow over time. The key takeaway here is that our core business with AmCoastal and AmRisc is strong and on very solid footing. That leads us to Skyway and ACES Specialty Insurance Company. ACES is just short for American Coastal E&S. These two entities are the growth engine for ACIC going forward. Skyway was formed as our wholly owned and controlled MGA platform because we did not want to be solely dependent on AmRisc long term. We were dependent on them fully until 2024.

However, today, Skyway has many of the same underwriting and claims handling capabilities as AmRisc and is now ready to achieve scale. Last year was our first full year of operation, and while we did great by working with the same national wholesale brokers AmRisc uses to produce our core condo business in Florida. Our exclusive relationship with AmRisc is limited to condos. So it is our intent to use Skyway to underwrite condominium business outside of Florida, plus all other classes of commercial property in every state, including Florida. Skyway is our operational growth engine that has the ability to underwrite for our balance sheet carriers as well as third-party carriers, which is expected to generate service fee income in addition to underwriting profits over time. This is a key differentiator for us. Most MGAs like AmRisc take no risk. They are 100% dependent on third-party carriers to take risk.

With Skyway, AmCoastal, and ACES, we can do both. We are an MGA with multiple balance sheets that can co-participate or take all the risk. That is unique. This leads us to ACES Specialty, our newly formed and licensed E&S insurance company. Excess and surplus lines, or E&S, is the unregulated insurance market in the U.S. E&S carriers have full control over their rates, their rules, and forms without any regulatory interference. So E&S is typically where the more complex and more challenging risk to underwrite reside. Our condo business in Florida also does not require an AM Best rating because there is no commercial lender or institutional investor requiring one at the condominium association level. So AmCoastal has obtained ratings from KBRA and Demotech instead. However, for all other types of commercial property, the opposite is true.

We formed ACES with the intent of getting it rated by AM Best to open up the rest of the commercial property market we have previously not been able to access. In the short term, meaning the next 1-2 years, we intend to partner with other carriers while we work on capitalizing and rating and licensing ACES in the various states where we want to operate. We can actually grow faster than if we just used ACES alone. Long term, fronting partnerships like the one we announced in March with Fortegra and Arch will not be necessary since ACES gives us the ability to control our own destiny over time. That's the key. Moving to page 5. This page highlights our key underwriting strategies.

All you really need to know here is ACIC targets what we call low-rise or garden-style buildings, which are generally three stories or less with superior risk characteristics. Our average policy typically has six buildings with total insured value of about $16 million per policy and an average policy premium of about $120,000 today. We can write properties of up to $100 million of total insured value, but that's rare. We typically then use sophisticated catastrophe models to aggregate all this exposure and estimate the losses we could expect from thousands of historical and theoretical catastrophe events. This exposure management is essentially how we optimize the risk portfolio for underwriting profitability and also determine how much reinsurance protection to buy. That segues nicely into page 6, which provides an overview of our core catastrophe reinsurance program designed to protect against hurricane risk. There are two parts to our reinsurance program.