AMERICAN COASTAL INSURANCE Corp

Previous wording

We have historically grown our business through strong organic growth, complemented by strategic acquisitions and partnerships, including our acquisitions of AmCo Holding Company, LLC (AmCo) and its subsidiaries, including AmCoastal, in April 2017.

Current wording

We have historically grown our business through strong organic growth, complemented by strategic acquisitions and partnerships, including our acquisitions of AmCo Holding Company, LLC (AmCo) and AmCoastal in April 2017.

Previous wording

Our policies in-force increased by 11.0% from 3,964 policies in-force at June 30, 2024 to 4,402 policies in-force at June 30, 2025. As of June 30, 2025 and 2024, all of our policies in-force are in the state of Florida.

Current wording

Our policies in-force increased by 8.6% from 3,971 policies in-force at September 30, 2024 to 4,343 policies in-force at September 30, 2025. As of September 30, 2025 and 2024, all of our policies in-force are in the state of Florida.

Previous wording

When we prepare our consolidated financial statements and accompanying notes in conformity with GAAP, we must make estimates and assumptions about future events that affect the amounts we report. Certain of these estimates result from judgments that can be subjective and complex. As a result of that subjectivity and complexity, and because we continuously evaluate these estimates and assumptions based on a variety of factors, actual results could materially differ from our estimates and assumptions if changes in one or more factors require us to make accounting adjustments. During the six months ended June 30, 2025, we reassessed our critical accounting policies and estimates as disclosed in Note 2 to the Notes to Unaudited Condensed Consolidated Financial Statements and our Annual Report on Form 10-K for the year ended December 31, 2024. We have made no material changes or additions with regard to those policies and estimates.

Current wording

When we prepare our consolidated financial statements and accompanying notes in conformity with GAAP, we must make estimates and assumptions about future events that affect the amounts we report. Certain of these estimates result from judgments that can be subjective and complex. As a result of that subjectivity and complexity, and because we continuously evaluate these estimates and assumptions based on a variety of factors, actual results could materially differ from our estimates and assumptions if changes in one or more factors require us to make accounting adjustments. During the nine months ended September 30, 2025, we reassessed our critical accounting policies and estimates as disclosed in Note 2 to the Notes to Unaudited Condensed Consolidated Financial Statements and our Annual Report on Form 10-K for the year ended December 31, 2024. We have made no material changes or additions with regard to those policies and estimates.

Previous wording

We must comply with applicable state insurance regulations that prescribe the type, quality and concentrations of investments our insurance subsidiaries can make; therefore, our current investment policy limits investment in non-investment-grade fixed maturities and limits total investment amounts in preferred stock, common stock and mortgage notes receivable. We do not invest in derivative securities.

Current wording

We must comply with applicable state insurance regulations that prescribe the type, quality and concentrations of investments our insurance subsidiaries can make; therefore, our current investment policy limits investment in non-investment-grade fixed maturities and limits total investment amounts in preferred stock, common stock and mortgage notes receivable. We do not invest in derivative securities, however, we do hold warrants as a result of our surplus note investment. Please see Note 5 for more information.

Previous wording

Two outside asset management companies, which have authority and discretion to buy and sell securities for us, manage our investments subject to (i) the guidelines established by our Board of Directors and (ii) the direction of management. The Investment Committee of our Board of Directors reviews and approves our investment policy on a regular basis.

Current wording

As of September 30, 2025, one outside asset management company which has authority and discretion to buy and sell securities for us, manage our investments subject to (i) the guidelines established by our Board of Directors and (ii) the direction of management. Prior to August 2025, we engaged two outside asset management companies. The Investment Committee of our Board of Directors reviews and approves our investment policy on a regular basis.

Previous wording

Our cash, cash equivalents, restricted cash and investment portfolio totaled $726,243,000 at June 30, 2025, compared to $540,811,000 at December 31, 2024.

Current wording

Our cash, cash equivalents, restricted cash and investment portfolio totaled $695,047,000 at September 30, 2025, compared to $540,811,000 at December 31, 2024.

Previous wording

We classify all of our fixed-maturity investments as available-for-sale. Our investments at June 30, 2025 and December 31, 2024 consisted mainly of U.S. government and agency securities, securities of investment-grade corporate issuers, mortgage-backed securities, and states, municipalities and political subdivisions. Our equity holdings as of June 30, 2025 and December 31, 2024 consisted of mutual funds and common stock. At June 30, 2025, approximately 86.8% of our fixed maturities were U.S. Treasuries or corporate bonds rated “A” or better, and 13.2% were corporate bonds rated “BBB” or "BB".

Current wording

We classify all of our fixed-maturity investments as available-for-sale. Our investments at September 30, 2025 and December 31, 2024 consisted mainly of U.S. government and agency securities, securities of investment-grade corporate issuers, mortgage-backed securities, and states, municipalities and political subdivisions. Our equity holdings as of September 30, 2025 and December 31, 2024 consisted of mutual funds and common stock. At September 30, 2025, approximately 82.8% of our fixed maturities were U.S. Treasuries or corporate bonds rated "A" or better, and 17.2% were corporate bonds rated "BBB" or "BB".

Previous wording

AmCoastal’s core catastrophe reinsurance program provides occurrence-based coverage up to an exhaustion point of approximately $1,330,000,000 for a first occurrence and $1,676,000,000 in the aggregate. Under this program, the Company's GAAP retention on a first event is $29,750,000 ($14,000,000 retained by AmCoastal under statutory accounting principles (STAT retained), $15,750,000 (retained separately by the Company's captive). The Company has purchased second and third event retrocession coverage, reducing its second event GAAP retention to $18,500,000 ($14,000,000 STAT retained by AmCoastal, $4,500,000 retained separately by the Company's captive) and third event GAAP retention to $3,750,000, based on three $100,000,000 loss events. AmCoastal’s program provides sufficient coverage for approximately a 1-in-201-year return period, indicating that the probability of a single occurrence exceeding protection purchased is roughly 0.5% estimated by blending the AIR 10, AIR 11.5, RMS 22 and RMS 23 catastrophe models using long-term catalogs including demand surge and based on projected total insured value at September 30, 2025 of $60 billion.. AmCoastal’s program also provides sufficient coverage for a 1-in-100-year event followed by a 1-in-50-year event in the same treaty year, the probability of which is less than 0.1%. While we believe these catastrophe models are very good tools and their output provides reasonable proxies for the probability of exhausting our reinsurance protections, they are imperfect, so actual results could vary dramatically from those expected.

Current wording

AmCoastal’s core catastrophe reinsurance program provides occurrence-based coverage up to an exhaustion point of approximately $1,330,000,000 for a first occurrence and $1,676,000,000 in the aggregate. Under this program, the Company's GAAP retention on a first event is $29,750,000 ($14,000,000 retained by AmCoastal under statutory accounting principles (STAT retained), $15,750,000 (retained separately by the Company's captive). The Company has purchased second and third event retrocession coverage, reducing its second event GAAP retention to $18,500,000 ($14,000,000 STAT retained by AmCoastal, $4,500,000 retained separately by the Company's captive) and third event GAAP retention to $3,750,000, based on three $100,000,000 loss events. AmCoastal’s program provides sufficient coverage for approximately a 1-in-203-year return period, indicating that the probability of a single occurrence exceeding protection purchased is roughly 0.5% estimated by blending the AIR 10, AIR 11.5, RMS 22 and RMS 23 catastrophe models using long-term catalogs including demand surge and based on total insured value at September 30, 2025 of $69 billion. AmCoastal’s program also provides sufficient coverage for a 1-in-100-year event followed by a 1-in-50-year event in the same treaty year, the probability of which is less than 0.1%. While we believe these catastrophe models are very good tools and their output provides reasonable proxies for the probability of exhausting our reinsurance protections, they are imperfect, so actual results could vary dramatically from those expected.

Previous wording

In addition to the programs described above, AmCoastal purchased a new catastrophe aggregate excess of loss agreement (the “CAT Agg” agreement) to mitigate our catastrophe frequency risk. This agreement provides coverage for in-force, new and renewal business. Effective January 1, 2025, the new CAT Agg agreement provides $40,000,000 of aggregate limit (with a $20,000,000 per occurrence cap) in excess of zero after the $40,000,000 annual aggregate deductible has been met. The CAT Agg agreement limits our losses from all catastrophe loss events, including named windstorms, severe convective storms and winter storm events for the full year ending December 31, 2025.

Current wording

In addition to the programs described above, AmCoastal purchased a new catastrophe aggregate excess of loss coverage (the “CAT Agg” agreement) to mitigate our catastrophe frequency risk. This agreement provides coverage for in-force, new and renewal business. Effective January 1, 2025, the new CAT Agg agreement provides $40,000,000 of aggregate limit (with a $20,000,000 per occurrence cap) in excess of zero after the $40,000,000 annual aggregate deductible has been met. The CAT Agg agreement limits our losses from all catastrophe loss events, including named windstorms, severe convective storms and winter storm events for the full year ending December 31, 2025.

Previous wording

The table below outlines our external quota share agreements in effect for the six months ended June 30, 2025 and 2024.

Current wording

The table below outlines our external quota share agreements in effect for the nine months ended September 30, 2025 and 2024.

Previous wording

(2) The cession rate of this treaty is reduced from 20% to 15% effective 06/01/2025 - 06/01/2026.

Current wording

(2) The cession rate of this treaty was reduced from 20% to 15% effective June 1, 2025 to June 1, 2026.

Previous wording

Reinsurance costs as a percentage of gross earned premium during the three and six months ended June 30, 2025 and 2024 were as follows:

Current wording

Reinsurance costs as a percentage of gross earned premium during the three and nine months ended September 30, 2025 and 2024 were as follows:

Previous wording

Unpaid losses and LAE totaled $219,242,000 and $322,087,000 as of June 30, 2025 and December 31, 2024, respectively.

Current wording

Unpaid losses and LAE totaled $188,703,000 and $322,087,000 as of September 30, 2025 and December 31, 2024, respectively.

Previous wording

ACIC net income for the three months ended June 30, 2025 increased $7,388,000, or 38.8%, to net income of $26,442,000 for the second quarter of 2025 from $19,054,000 for the same period in 2024. Of this income, $28,037,000 is attributable to continuing operations for the three months ended June 30, 2025, an increase of $8,964,000 from $19,073,000 for the same period in 2024. Quarter-over-quarter revenues increased, driven by an increase in gross premiums earned and decrease in ceded premiums earned. This was offset by increased expenses quarter-over-quarter, driven by an increase in policy acquisition costs. In addition, the Company's provision for income taxes increased quarter-over-quarter. The Company's loss from discontinued operations also contributed to this change in net income, increasing $1,576,000 quarter-over-quarter, as the sale of IIC was completed during the quarter. The details of this change in discontinued operations can be seen in Note 4 above.

Current wording

ACIC net income for the three months ended September 30, 2025 increased $4,364,000, or 15.5%, to net income of $32,483,000 for the third quarter of 2025 from $28,119,000 for the same period in 2024. All of this income is attributable to continuing operations for the three months ended September 30, 2025, an increase of $4,814,000 from $27,669,000 of income from continuing operations for the same period in 2024. Quarter-over-quarter revenues increased, driven by an increase in net premiums earned. This was partially offset by increased expenses quarter-over-quarter, driven by an increase in policy acquisition costs and general and administrative expenses, partially offset by decreased loss and loss adjustment expenses.

Previous wording

Expenses for the three months ended June 30, 2025 increased $5,714,000, or 12.8%, to $50,294,000 from $44,580,000 for the same period in 2024. The increase in expenses was primarily due to an increase in policy acquisition costs. This was offset by a decrease in general and administrative expenses, while losses and LAE incurred remained relatively flat. The details of these changes can be seen below.

Current wording

Expenses for the three months ended September 30, 2025 increased $2,618,000, or 5.7%, to $48,690,000 from $46,072,000 for the same period in 2024. The increase in expenses was primarily due to an increase in policy acquisition costs. This was offset in part by a decrease in losses and loss adjustment expenses, while general and administrative expenses remained relatively flat. The details of these changes can be seen below.

Previous wording

Loss and LAE increased by $263,000, or 1.7%, to $15,540,000 for the second quarter of 2025 from $15,277,000 for the second quarter of 2024. Loss and LAE expense as a percentage of net earned premiums decreased 4.3 points to 19.8% for the second quarter of 2025, compared to 24.1% for the second quarter of 2025. Excluding catastrophe losses and prior year reserve development, our gross underlying loss and LAE ratio for the second quarter of 2025 would have been 10.2%, compared to 10.5% for the second quarter of 2024.

Current wording

Loss and LAE decreased by $2,563,000, or 21.8%, to $9,211,000 for the third quarter of 2025 from $11,774,000 for the third quarter of 2024. Loss and LAE expense as a percentage of net earned premiums decreased 4.4 points to 11.4% for the third quarter of 2025, compared to 15.8% for the third quarter of 2025. Excluding catastrophe losses and prior year reserve development, our gross underlying loss and LAE ratio for the third quarter of 2025 was 6.1%, an increase of 1.0 point, from 5.1% for the third quarter of 2024.

Previous wording

Policy acquisition costs increased by $10,318,000, or 74.0%, to $24,257,000 for the second quarter of 2025 from $13,939,000 for the second quarter of 2024, due to a decrease in reinsurance ceding commission income of $5,756,000, driven by a decrease in our quota share cession rate from 40% to 20%, effective June 1, 2024 and from 20% to 15%, effective June 1, 2025. External management fees also increased by $4,500,000, primarily as the result of a one percent increase in the management fee and profit share accrual pursuant to the renewal terms of the contract with AmRisc, LLC (AmRisc).

Current wording

Policy acquisition costs increased by $4,497,000, or 21.5%, to $25,439,000 for the third quarter of 2025 from $20,942,000 for the third quarter of 2024, due to an increase in external management fees of $3,726,000, primarily as the result of an increase in our commission accrual for 2025. In addition, reinsurance ceding commission income decreased $810,000, driven by a decrease in our quota share cession rate from 20% to 15%, effective June 1, 2025.

Previous wording

RESULTS OF OPERATIONS - COMPARISON OF THE SIX MONTH PERIODS ENDED JUNE 30, 2025 AND 2024

Current wording

RESULTS OF OPERATIONS - COMPARISON OF THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2025 AND 2024

Previous wording

ACIC net income for the six months ended June 30, 2025 increased $5,137,000, or 12.0%, to $47,790,000 from $42,653,000 for the same period in 2024. Of this income, $47,748,000 is attributable to continuing operations for the six months ended June 30, 2025, an increase of $4,966,000 from $42,782,000 for the same period in 2024. Year-over-year revenues increased 17.3%, driven by an increase in net premiums earned. This increase in revenue was offset by increased policy acquisition costs year-over-year, partially offset by decreased general and administrative expenses and losses and LAE incurred.

Current wording

ACIC net income for the nine months ended September 30, 2025 increased $9,501,000, or 13.4%, to $80,273,000 from $70,772,000 for the same period in 2024. Of this income, $80,231,000 is attributable to continuing operations for the nine months ended September 30, 2025, an increase of $9,780,000 from $70,451,000 for the same period in 2024. Year-over-year revenues increased 14.6%, driven by an increase in net premiums earned. This increase in revenue was offset in part by increased policy acquisition costs year-over-year, partially offset by decreased general and administrative expenses and losses and loss adjustment expenses.

Previous wording

Expenses for the six months ended June 30, 2025 increased $16,752,000, or 20.8%, to $97,372,000 from $80,620,000 for the same period in 2024. The increase in expenses was primarily due to an increase in policy acquisition costs year-over-year. This was partially offset by decreased general and administrative expenses and loss and LAE incurred year-over-year. The details of these changes can be seen below.

Current wording

Expenses for the nine months ended September 30, 2025 increased $19,370,000, or 15.3%, to $146,062,000 from $126,692,000 for the same period in 2024. The increase in expenses was primarily due to an increase in policy acquisition costs year-over-year. This was partially offset by decreased general and administrative expenses and loss and loss adjustment expenses year-over-year. The details of these changes can be seen below.

Previous wording

Loss and LAE decreased $822,000, or 3.0%, to $26,929,000 for the six months ended June 30, 2025 from $27,751,000 for the same period in 2024. Loss and LAE expense as a percentage of net earned premiums decreased 3.6 points to 18.4% for the six months ended June 30, 2025, compared to 22.0% for the same period in 2024. Excluding catastrophe losses and prior year reserve development, our gross underlying loss and LAE ratio for the six months ended June 30, 2025 was 9.3%, an increase of 0.3 points from 9.0% during the six months ended June 30, 2024.

Current wording

Loss and LAE decreased $3,385,000, or 8.6%, to $36,140,000 for the nine months ended September 30, 2025 from $39,525,000 for the same period in 2024. Loss and LAE expense as a percentage of net earned premiums decreased 3.8 points to 15.9% for the nine months ended September 30, 2025, compared to 19.7% for the same period in 2024. Excluding catastrophe losses and prior year reserve development, our gross underlying loss and LAE ratio for the nine months ended September 30, 2025 was 8.2%, an increase of 0.5 points, from 7.7% during the nine months ended September 30, 2024.

Previous wording

Policy acquisition costs increased $24,189,000, or 102.8%, to $47,723,000 for the six months ended June 30, 2025 from $23,534,000 for the same period in 2024. The primary driver of the decrease was a decrease in ceding commission income of $15,163,000 as the result of the Company's decrease in quota share reinsurance coverage from 40% to 20%, effective June 1, 2024 and from 20% to 15%, effective June 1, 2025. External management fees also increased $8,917,000 as a result of a one percent increase in the management fee and profit share accrual pursuant to the renewal terms of the contract with AmRisc in 2024.

Current wording

Policy acquisition costs increased $28,686,000, or 64.5%, to $73,162,000 for the nine months ended September 30, 2025 from $44,476,000 for the same period in 2024. The primary driver of the increase was a decrease in ceding commission income of $15,973,000 as the result of the Company's decrease in quota share reinsurance coverage from 40% to 20%, effective June 1, 2024 and from 20% to 15%, effective June 1, 2025. External management fees also increased $12,643,000 as a result of a one percent increase in the management fee and profit share accrual pursuant to the renewal terms of the contract with AmRisc, LLC effective June 1, 2024.

Previous wording

General and administrative expenses decreased $5,906,000, or 25.5%, to $17,284,000 for the six months ended June 30, 2025 from $23,190,000 for the same period in 2024, driven by a non-recurring employee retention tax credit refund of $4,469,000 submitted to the Internal Revenue Service in 2022 and received during the first half of 2025. This non-recurring refund was previously disclosed in our Annual Report on Form 10-K, filed on March 10, 2025, as a gain contingency. In addition, external spending for professional and consulting services decreased $2,540,000 quarter-over-quarter.

Current wording

General and administrative expenses decreased $4,874,000, or 14.6%, to $28,605,000 for the nine months ended September 30, 2025 from $33,479,000 for the same period in 2024, largely driven by a non-recurring employee retention tax credit refund of $4,469,000 submitted to the Internal Revenue Service in 2022 and received during the first half of 2025. This non-recurring refund was previously disclosed in our Annual Report on Form 10-K, filed on March 10, 2025, as a gain contingency. Overall, employee compensation decreased $1,504,000, inclusive of this refund. In addition, external spending for professional and consulting services decreased $388,000 year-over-year, audit fees decreased $352,000 and legal fees decreased $1,248,000. Finally, overhead including software and equipment costs and depreciation and amortization decreased $998,000 year-over-year.

Previous wording

The Company made a capital contribution of $8,269,000 to its reinsurance subsidiary, Shoreline Re during the six months ended June 30, 2025. During the six months ended June 30, 2024, the Company made capital contributions of $1,265,000 to its reinsurance subsidiary, Shoreline Re. We may make future contributions of capital to our insurance subsidiaries as circumstances require.

Current wording

The Company made a capital contribution of $8,269,000 to its reinsurance subsidiary, Shoreline Re during the nine months ended September 30, 2025. During the nine months ended September 30, 2024, the Company made capital contributions of $1,265,000 to its reinsurance subsidiary, Shoreline Re. We may make future contributions of capital to our insurance subsidiaries as circumstances require.

Previous wording

During the six months ended June 30, 2025, the Company received a dividend of $23,000,000 from AmCoastal.

Current wording

During the nine months ended September 30, 2025, the Company received a dividend of $23,000,000 from AmCoastal.

Previous wording

Cash Flows for the Six Months Ended June 30, 2025 and 2024 (in thousands)

Current wording

Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (in thousands)

Previous wording

During the six months ended June 30, 2025, we experienced cash inflows of $154,392,000 compared to $250,886,000 during the six months ended June 30, 2024. This change was driven by a decrease in the change in reinsurance payable of $93,500,000 and a decrease in the change in reinsurance recoverable of $40,509,000, partially offset by a decrease in the change in unpaid loss and loss adjustment expenses of $34,920,000. The change in reinsurance payable can be attributed to the pricing change in the renewal of our core catastrophe program in 2025, with the risk adjusted decrease being -12.4%. The change in unpaid loss and loss adjustment expenses and the corresponding reinsurance recoverable balance can be attributed to the continued settlement of catastrophe claims with no similar activity occurring in 2025.

Current wording

During the nine months ended September 30, 2025, we experienced cash inflows of $118,777,000 compared to $241,907,000 during the nine months ended September 30, 2024. This change was driven by a decrease in the change in reinsurance payable of $68,695,000 and a decrease in the change in reinsurance recoverable of $74,531,000, partially offset by a decrease in the change in unpaid loss and loss adjustment expenses of $42,051,000. The change in reinsurance payable can be attributed to the pricing change in the renewal of our core catastrophe program in 2025, with the risk adjusted decrease being -12.4%. The change in unpaid loss and loss adjustment expenses and the corresponding reinsurance recoverable balance is attributed to the continued settlement of catastrophe claims with no similar activity occurring in 2025.

Previous wording

The principal cash inflows from our investing activities come from repayments of principal, proceeds from maturities and sales of investments. We closely monitor and manage these risks through our comprehensive investment risk management process. The principal cash outflows relate to sales of investments. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption. During the six months ended June 30, 2025, net sales of investments totaled $25,357,000 compared to net purchases of investments of $152,814,000 during the six months ended June 30, 2024. We also had net proceeds from the sale of our former subsidiary, IIC, of $4,495,000 in 2025.

Current wording

The principal cash inflows from our investing activities come from repayments of principal, proceeds from maturities and sales of investments. We closely monitor and manage these risks through our comprehensive investment risk management process. The principal cash outflows relate to sales of investments. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption. During the nine months ended September 30, 2025, net sales of investments totaled $12,896,000 compared to net purchases of investments of $162,893,000 during the nine months ended September 30, 2024. We also had net proceeds from the sale of our former subsidiary, IIC, of $4,495,000 in 2025.

Previous wording

The principal cash outflows from our financing activities come from repayments of debt and payments of dividends. The primary liquidity concern with respect to these cash flows is market disruption in the cost and availability of credit. We believe our current capital resources, together with cash provided from our operations, are sufficient to meet currently anticipated working capital requirements. During the six months ended June 30, 2025, cash provided by financing activities totaled $774,000, compared to $11,458,000 provided by financing activities for the six months ended June 30, 2024. The decrease in inflow in 2025 is attributed to the proceeds received from the issuance of our common stock, primarily under our at the market program described above during 2024.

Current wording

The principal cash outflows from our financing activities come from repayments of debt and payments of dividends. The primary liquidity concern with respect to these cash flows is market disruption in the cost and availability of credit. We believe our current capital resources, together with cash provided from our operations, are sufficient to meet currently anticipated working capital requirements. During the nine months ended September 30, 2025, cash provided by financing activities totaled $774,000, compared to $11,621,000 provided by financing activities for the nine months ended September 30, 2024. The decrease in inflow in 2025 is attributed to the proceeds received from the issuance of our common stock, primarily under our at the market program described above during 2024.