American Coastal Insurance 2026 Q3 Earnings Call

Before beginning our commentary, I must first ask everyone to please see page 2 of our earnings presentation for more information regarding forward-looking statements. During the third quarter of 2026, American Coastal continued to maintain its market leadership position in Florida commercial residential property insurance, evidenced by, one, strong account retention near 90%; two, policy in force growth of roughly 7% year to date; three, a 3.2% increase in gross premiums written during the current quarter compared to the same period a year ago, despite downward pressure on average account rates; and finally, but most importantly, delivering a combined ratio of 64.7%, which fueled a core return on equity of over 24%. While our core business continues to produce great results, I am very excited about how American Coastal's business profile is evolving.

During the quarter, we announced our new E&S carrier, ACES Specialty, was formally licensed, and it will be the cornerstone of controlling our E&S growth strategy over the long term. In the near term, we remain on track to formally produce and underwrite our first new E&S property insurance policies on or about the end of the 2026 hurricane season, utilizing one or more third-party carriers who already have the financial rating and licenses needed to commence this important strategic initiative. Our MGA, Skyway Underwriters, already has several submissions in the pipeline. We have cleared and quoted many of these, so it is reasonable to expect we will bind some new business in December. Given the challenges with soft market conditions in commercial property insurance, our strategy is to remain very selective and disciplined in both the admitted and the non-admitted commercial property markets.

Thus, I am compelled to reiterate that while top-line growth is nice when new business makes sense, our focus remains locked in on underwriting profitability and risk-adjusted returns on capital. It is currently premature to provide any revenue or earnings guidance for 2027. Our historical process for sharing that annual forward-looking information has been to publish an investor presentation and host a call in January once we have finalized those estimates. The commercial property market remains very dynamic and competitive, with some players doing very reckless and irresponsible things to win new business. This is likely to persist into 2027, but I do expect things to moderate compared to the changes in pricing, terms, and conditions American Coastal experienced this year. ACIC will not require any additional capital to achieve our primary goal of earnings growth over time.

We have made the investments required to expand our business and still have excess capital that could be returned to shareholders through a special dividend, assuming no significant catastrophe losses occur in the fourth quarter. Hurricane Isaias will have a minor impact on our fourth quarter, but it is unlikely to influence our board's consideration of declaring a special dividend later this year. I will now turn it over to our Chief Financial Officer, Lana Castle, for more specifics on our financial results.

Lana? Thank you, Brad, and hello.

I will provide the financial update but encourage everyone to review the company's press release, earnings and investor presentations, and Form 10-Q for more information regarding our performance. As reflected on page 7 of the earnings presentation, American Coastal demonstrated another strong quarter with net income of $19.4 million. Core income was $20.4 million, a decrease of $10.1 million driven by softening market conditions. But the company still produced a strong core return on equity over 24%. Our non-GAAP underlying combined ratio, which excludes current year catastrophe losses and prior year development, was 68.4% compared to 57.8% in the prior year. We continue to demonstrate underwriting discipline through the market cycle. As shown on page 15 of our presentation, revenues decreased to $19.7 million. Expenses decreased $4 million in the current year, driven by favorable prior year development and low operating expenses quarter-over-quarter.

Page 16 shows balance sheet highlights. Cash and investments have increased 9.3% from year-end. The company's liquidity position remains strong. Stockholders' equity increased to $38.1 million or 12% to $355.7 million, driven by our underwriting results. Book value per share is $7.52, a 15.5% increase from year-end 2025. The company is well positioned to navigate the shifting market and capitalize on growth opportunities. This concludes our prepared remarks. We will now open the floor for questions.

Thanks for the question, Mike. Yeah, it is probably a little early to talk about that. We are working on sourcing various forms of capacity for Skyway, one of which would be a fee income earning opportunity for our MGAs. Some of the premium we expect to generate and business we expect to underwrite next year will lead to growth in fee income beginning in 2027. But I would like to defer getting into the specifics of that until we preview our revenue and profitability metrics early next year. My guess is we will be able to demonstrate some nice top-line growth year over year when comparing 2027 to 2026, both in terms of gross premiums written, gross premiums earned, net premiums earned, and total revenues. I do think we have some very positive momentum in our business right now regarding our growth initiatives.

That just has to be tempered, obviously, by good cycle management. While we are optimistic and still feel very comfortable underwriting in the current pricing environment, how much business we actually produce next year, our plans are still being developed and finalized. How much of that will result in fee income growth to the company is also still being determined.