AMERICAN COASTAL INSURANCE Corp

DISAGGREGATION OF RELEVANT EXPENSE CAPTIONS

The Company presents its expenses in four major captions: loss and loss adjustment expenses, policy acquisition costs, general and administrative expenses and interest expense. The Company has presented the disaggregation of its general and administrative expenses below for thethree and nine months ended September 30, 2025 and 2024 to enhance disclosure regarding its recast general and administrative expenses.

(1)For the nine months ended September 30, 2025, employee compensation includes $4.5 million, in one-time employee retention tax credit refunds.

(2)For the three and nine months ended September 30, 2025 and 2024, other general and administrative expenses were comprised primarily of regulatory fees, franchise fees, and overhead such as office utilities.

DISCO NTINUED OPERATIONS

On May 9, 2024, the Company entered into the Sale Agreement with Forza in which ACIC agreed to sell and Forza agreed to acquire 100% of the issued and outstanding stock of IIC. Forza’s application to acquire IIC was approved by the NYDFS on February 13, 2025 and the sale closed on April 1, 2025. The Company received cash proceeds totaling $25,679,000 from the sale resulting in a loss on disposal of $247,000, net of tax impact. The Company also recognized a $1,348,000 loss, net of tax impact, on IIC's fixed maturity portfolio, which was included in accumulated other comprehensive loss on the Company's Consolidated Balance Sheets prior to the sale. The total tax benefit related to the sale and realized loss on fixed maturity portfolio was $528,000.

The results from IIC's discontinued operations for thethree and nine months ended September 30, 2025 and 2024 are presented below.

IIC Results from Discontinued Operations

(1) Includes $1,007,000 in tax benefit related to discontinued operations outside of IIC stand-alone results for thenine months ended September 30, 2024.

(2) Excludes loss on sale and realization of unrealized losses on fixed maturity portfolio, the details of which are described above and are not operational results related to IIC.

The major classes of IIC assets and liabilities transferred as a result of the sale as of the date of sale and December 31, 2024 are presented below.

IIC Major Classes of Assets and Liabilities Sold and Disposed

During the first quarter of 2024, due to a change in circumstances, the Company evaluated its capitalized software, previously classified as held for disposal at December 31, 2023. As a result of this evaluation, it was determined that the use case of the software by the Company shifted. The Company reclassified this asset and the associated amortization expense in 2024 in accordance with GAAP guidance, resulting in amortization expense for the capitalized software being captured in continuing operations prospectively. The value of this capitalized software at the time of reclassification was $8,095,000. There wereno other non-cash transactions during thenine months ended September 30, 2025 and 2024.

INVEST MENTS

The following table details fixed-maturity available-for-sale securities, by major investment category, at September 30, 2025 and December 31, 2024:

Equity securities are summarized as follows:

When the Company sells investments, the Company calculates the gain or loss realized on the sale by comparing the sales price (fair value) to the cost or adjusted/amortized cost of the security sold. The Company determines the cost or adjusted/amortized cost of the security sold using the specific-identification method. The following table details the Company's realized gains (losses) by major investment category for thethree and nine months ended September 30, 2025 and 2024, respectively:

(1)Fair value at sale includes maturities and paydowns executed at par value.

The table below summarizes the Company's fixed maturities at September 30, 2025 by contractual maturity period. Actual results may differ, as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturities of those obligations.

The following table summarizes net investment income by major investment category:

Portfolio Monitoring

The Company has a quarterly portfolio monitoring process to identify and evaluate each fixed-income security whose carrying value may be impaired as a result of a credit loss. For each fixed-income security in an unrealized loss position, if the Company determines that it intends to sell the security or that it is more likely than not that it will be required to sell the security before recovery of the cost or amortized cost basis for reasons such as liquidity needs, contractual or regulatory requirements, the security's entire decline in fair value is recorded in earnings.

If management decides not to sell the fixed-income security and it is more likely than not that the Company will not be required to sell the fixed-income security before recovery of its amortized cost basis, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. This is typically indicated by a change in the rating of the security assigned by a rating agency, and any adverse conditions specifically related to the security or industry, among other factors. If the assessment indicates that a credit loss may exist, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses will be recorded in earnings. Credit loss is limited to the difference between a security's amortized cost basis and its fair value. Any additional impairment not recorded through an allowance for credit losses is recognized in other comprehensive income (loss).

During the three and nine months ended September 30, 2025, the Company determined that none of its fixed-income securities shown in the table below that are in an unrealized loss position have declines in fair value that are reflected as a result of credit losses. Therefore, no credit loss allowance was recorded at September 30, 2025. The issuers of the Company's debt security investments continue to make interest payments on a timely basis. The Company does not intend to sell, nor is it likely that it would be required to sell the debt securities before it recovers the amortized cost basis. Equity securities are reported at fair value with changes in fair value recognized in the valuation of equity investments.

The following table presents an aging of the Company's unrealized investment losses by investment class:

(1) This amount represents the actual number of discrete securities, not the number of shares or units of those securities. The numbers are not presented in thousands.

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Assets and liabilities recorded on the Company's Unaudited Condensed Consolidated Balance Sheets at fair value are categorized in the fair value hierarchy based on the observability of inputs to the valuation techniques as follows:

Level 1: Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company can access.

Level 2: Assets and liabilities whose values are based on the following:

(a) Quoted prices for similar assets or liabilities in active markets;

(b) Quoted prices for identical or similar assets or liabilities in markets that are not active; or

(c) Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect the Company's estimates of the assumptions that market participants would use in valuing the assets and liabilities.

The Company estimates the fair value of our investments using the closing prices on the last business day of the reporting period, obtained from active markets such as the NYSE, Nasdaq and NYSE American. For securities for which quoted prices in active markets are unavailable, the Company uses a third-party pricing service that utilizes quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs to estimate the fair value of those securities for which quoted prices are unavailable. The Company's estimates of fair value reflect the interest rate environment that existed as of the close of business on September 30, 2025 and December 31, 2024. Changes in interest rates subsequent to September 30, 2025 may affect the fair value of the Company's investments.

The fair value of the Company's fixed maturities is initially calculated by a third-party pricing service. Valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of proprietary models, produce valuation information in the form of a single fair value for individual fixed-income and other securities for which a fair value has been requested. The inputs used by the valuation service providers include, but are not limited to, market prices from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, liquidity spreads, currency rates and other information, as applicable. Credit and liquidity spreads are typically implied from completed transactions and transactions of comparable securities. Valuation service providers also use proprietary discounted cash flow models that are widely accepted in the financial services industry and similar to those used by other market participants to value the same financial information. The valuation models take into account, among other things, market observable information as of the measurement date, as described above, as well as the specific attributes of the security being valued, including its term, interest rate, credit rating, industry sector and, where applicable, collateral quality and other issue or issuer specific information. Executing valuation models effectively requires seasoned professional judgment and experience.

Any change in the estimated fair value of the Company's fixed-income securities would impact the amount of unrealized gain or loss the Company has recorded, which could change the amount the Company has recorded for its investments and other comprehensive income (loss) on its Unaudited Condensed Consolidated Balance Sheets as of September 30, 2025.

The following table presents the fair value of the Company's financial instruments measured on a recurring basis by level at September 30, 2025 and December 31, 2024, respectively:

(1) Other common stocks in the fair value hierarchy exclude common stock interests that are measured at estimated fair value using the net asset value per share (or its equivalent) practical expedient.

(2) Other investments included in the fair value hierarchy exclude limited partnership investments that are measured at estimated fair value using the net asset value per share (or its equivalent) practical expedient and investments carried at amortized cost.

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; this is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). There wereno financial instruments measured on a non-recurring basis at September 30, 2025 and December 31, 2024.

The carrying amounts for the following financial instrument categories approximate their fair values at September 30, 2025 and December 31, 2024 because of their short-term nature: cash and cash equivalents, accrued investment income, premiums receivable, reinsurance recoverable, reinsurance payable, other assets, and other liabilities. The carrying amount of the Company's senior notes approximate fair value.

The Company is responsible for the determination of fair value and the supporting assumptions and methodologies. The Company has implemented a system of processes and controls designed to provide assurance that its assets and liabilities are appropriately valued. For fair values received from third parties, the Company's processes are designed to provide assurance that the valuation methodologies and inputs are appropriate and consistently applied, the assumptions are reasonable and consistent with the objective of determining fair value, and the fair values are accurately recorded.

At the end of each quarter, the Company determines whether it needs to transfer the fair values of any securities between levels of the fair value hierarchy and, if so, the Company reports the transfer as of the end of the quarter. During the quarter ended September 30, 2025, the Company transferredno investments between levels.

For the Company's investments in U.S. government securities that do not have prices in active markets, agency securities, state and municipal governments, and corporate bonds, the Company obtains the fair values from its investment custodians, which use a third-party valuation service. The valuation service calculates prices for the Company's investments in the aforementioned security types on a month-end basis by using several matrix-pricing methodologies that incorporate inputs from various sources. The model the valuation service uses to price U.S. government securities and securities of states and municipalities incorporates inputs from active market makers and inter-dealer brokers. To price corporate bonds and agency securities, the valuation service calculates non-call yield spreads on all issuers, uses option-adjusted yield spreads to account for any early redemption features, and adds final spreads to the U.S. Treasury curve at 3 p.m. (ET) as of quarter end. Since the inputs the valuation service uses in its calculations are not quoted prices in active markets, but are observable inputs, they represent Level 2 inputs.

Other Investments

The Company acquired investments in limited partnerships, recorded in the other investments line of the Company's Unaudited Condensed Consolidated Balance Sheets, and these investments are currently being measured at estimated fair value utilizing a net asset value per share practical expedient. The Company has also acquired an investment in a commercial mortgage loan, which is classified as held-for-long-term-investment and a surplus note, which is classified as held-to-maturity. Both of these investments are carried on the balance sheet at amortized cost.

The information presented in the table below is as of September 30, 2025 and December 31, 2024:

(1)Distributions will be generated from operating income, investment gains, underlying investments of funds, and from liquidation of the underlying assets of the funds. The Company estimates that the underlying assets of the funds will be liquidated over the next few months to five years.

During the second quarter of 2025, the Company invested $6 million in a surplus note, as seen in the table above. As a term of this investment, during the three months ended September 30, 2025, the Company was issued 18,497 warrantsto purchase common stock of the issuer of the surplus note for no additional consideration. These warrants are free-standing in nature and are not being used as a hedging instrument. The Company does not invest in derivatives as part of its investment strategy and is only a holder of these warrants as a product of its strategy to invest in this surplus note.

As the underlying common stock of the warrants is not publicly traded and the issuer of the warrants has been in operation for less than one year, the fair value to these warrants is not material as of September 30, 2025. For the three months ended September 30, 2025, these warrants had no impact on the Company's financial position, financial performance or cash flows.

Restricted Cash

The Company is required to maintain assets on deposit with various regulatory authorities to support its insurance operations. The cash on deposit with state regulators is available to settle insurance liabilities. The Company also uses trust funds in certain reinsurance transactions.

The following table presents the components of restricted assets:

EARNINGS PER SHARE (EPS)

Basic EPS is based on the weighted average number of common shares outstanding for the period, excluding any dilutive common share equivalents. Diluted EPS reflects the potential dilution resulting from the vesting of outstanding restricted stock awards, restricted stock units, performance stock units and stock options. The following table shows the computation of basic and diluted EPS for thethree and nine months ended September 30, 2025 and 2024, respectively:

See Note 17 of these Notes to Unaudited Condensed Consolidated Financial Statements for additional information on the stock grants related to dilutive securities.

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:

Depreciation and amortization expense under property and equipment was $937,000 and $2,964,000 for thethree and nine months ended September 30, 2025, respectively. Depreciation and amortization expense under property and equipment was $1,218,000 and $3,744,000 for thethree and nine months ended September 30, 2024, respectively. During the first quarter of 2024, the Company moved capitalized software from discontinued operations to continuing operations to align with the Company's use of the system in the current year. Please see Note 4 for more detail.

During the nine months ended September 30, 2025, the Company disposed of computer hardware, software, and equipment totaling $1,903,000. The accumulated depreciation on these systems totaled $1,843,000 at the time of disposal. During the year ended December 31, 2024, the Company disposed of computer hardware and software totaling $1,018,000. The accumulated depreciation on these systems totaled $953,000 at the time of disposal. The Company disposed of office furniture totaling $167,000 during the period. Accumulated depreciation at the time of this disposal totaled $163,000. In addition, the Company disposed of leasehold improvements totaling $311,000 during the period. Accumulated depreciation at the time of this disposal totaled $232,000. Finally, the Company impaired software totaling $1,035,000, due to lower expected cash flows over the remaining life of the software.

GOODWILL AND INTANGIBLE ASSETS

Goodwill

The carrying amount of goodwill at September 30, 2025 and December 31, 2024 was $59,476,000.

There wasno goodwill acquired, disposed of or impaired during thenine months ended September 30, 2025 and 2024.

Intangible Assets

The following is a summary of intangible assets excluding goodwill recorded as intangible assets on the Company's Unaudited Condensed Consolidated Balance Sheets:

(1) Indefinite-lived intangible assets are comprised of state insurance and agent licenses, as well as perpetual software licenses.

Intangible assets subject to amortization and not fully amortized consisted of the following:

No impairment in the value of amortizing or non-amortizing intangible assets was recognized during thenine months ended September 30, 2025 and 2024.

Amortization expense of the Company's intangible assets was $609,000 and $610,000 for thethree months ended September 30, 2025 and 2024, respectively. Amortization expense of the Company's intangible assets was $1,828,000 and $2,030,000 for thenine months ended September 30, 2025 and 2024, respectively. Estimated amortization expense of the Company's intangible assets to be recognized by the Company during the remainder of 2025 and over the next five years is as follows:

REINSU RANCE

The Company's catastrophe reinsurance programs are designed primarily by utilizing third-party catastrophe modeling software and consulting with third-party reinsurance experts to project the Company's exposure to catastrophe events. The Company evaluates modeled expected losses developed by the catastrophe modeling software using its risk portfolio data to estimate probable maximum losses ("PML") across multiple return periods and the average annual loss. The Company monitors and manages its catastrophe risk using this model output along with other internal and external data sources, such as its historical loss experience and industry loss experience, to develop its view of catastrophe risk.

The Company's catastrophe reinsurance coverage consists of two separate placements:

AmCoastal’s core catastrophe reinsurance program, including catastrophe bonds (effective April 2024 and December 2024), in effect June 1 through May 31, annually, which includes excess of loss and quota share treaties providing coverage for catastrophe losses from named or numbered windstorms; and

AmCoastal’s all other perils catastrophe excess of loss agreement in effect January 1 through December 31, annually, which provides protection from catastrophe loss events other than named or numbered windstorms and earthquakes;

This reinsurance protection is an essential part of the Company's catastrophe risk management strategy. It is intended to provide stockholders with an acceptable return on the risks assumed by its insurance entity, and to reduce the variability of earnings, while providing surplus protection. Although reinsurance agreements contractually obligate the Company's reinsurers to reimburse it for the agreed-upon portion of its gross paid losses, they do not discharge the Company's primary liability. In the event one or more of the Company's reinsurers fail to fulfill their obligation, the surplus of the Company's statutory entity may decline, and the Company may not be able to fulfill its obligation to policyholders, or the Company may not be able to maintain compliance with various regulatory financial requirements. Additionally, the Company faces the risk that actual losses incurred from one or more catastrophic events may be above the modeled expected loss, resulting in losses exceeding its reinsurance coverage, which may result in a decline in surplus, and as a result the Company may not be able to fulfill its obligations to policyholders, or the Company may not be able to maintain compliance with various regulatory financial requirements. The details of the Company's programs and the likelihood of a catastrophic event exceeding these two coverages are outlined below.

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 equally blen ding 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%.

AmCoastal’s all other perils catastrophe excess of loss agreement provides protection from catastrophe loss events other than named windstorms and earthquakes up to $88,200,000 for a first and second event, totaling $176,400,000 in the aggregate. This agreement provides sufficient coverage for approximately a 1-in-450-year return period, indicating that the probability of a single occurrence exceeding protection purchased is no more than 0.2%.

In addition to the programs described above, AmCoastal purchased a new catastrophe aggregate excess of loss coverage (the “CAT Agg” agreement) to mitigate the Company's 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 the Company’s losses from all catastrophe loss events, including named windstorms, severe convective storms and winter storm events for the full year ending December 31, 2025.

Effective December 15, 2023, the Company agreed to commute a private reinsurer’s share of core catastrophe reinsurance coverage and replace this gap in coverage with new coverage provided by one of the Company's other private reinsurers. This transaction resulted in a reduction in expense of approximately $6,300,000 and $15,700,000 during the three and six months ended June 30, 2024, respectively.

Where management thinks prudent, particularly where premium rates are high relative to the risk, the Company retains risk whereby AmCoastal purchases reinsurance from Shoreline Re, the Company's captive reinsurance entity. Shoreline Re participates on AmCoastal's all other perils catastrophe excess of loss agreement and AmCoastal's excess per risk agreement. In addition, Shoreline Re participates in a 45% quota share agreement with AmCoastal, which provides coverage for all catastrophe perils as well as attritional losses incurred. The table below outlines the participation of Shoreline Re for each program, including premium received and capital at risk.

(1) Capital at risk is calculated by taking the aggregate losses Shoreline Re is subject to under the contract, less net premiums earned under the contract.

(2) This treaty provides or provided coverage for all catastrophe perils and attritional losses incurred. For all catastrophe perils, the quota share agreement provides or provided ground-up protection, effectively reducing our retention for catastrophe losses.

(3) Net premiums earned based on estimated subject premiums at June 1, 2025.

(4)This treaty was amended on June 1, 2025 to include reinstatement, resulting in additional premium and aggregate losses.

(5)This treaty was commuted on June 1, 2025 with no impact on our consolidated results.

(6) Net premiums earned based on estimated subject premiums at June 1, 2024.

The table below outlines the Company's external quota share agreements in effect for thenine months ended September 30, 2025 and 2024.

(1) This treaty provides or provided coverage for all catastrophe perils and attritional losses incurred. For all catastrophe perils, the quota share agreement provides or provided ground-up protection, effectively reducing the Company's retention for catastrophe losses.

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

Reinsurance recoverable at the balance sheet dates consists of the following:

(1) The Company's reinsurance recoverable balance is net of its allowance for expected credit losses. More information related to this allowance can be found in Note 13.

LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSE (LAE)

The Company determines its reserve for unpaid losses on an individual case basis for all incidents reported. The liability also includes amounts for incurred but not reported ("IBNR") claims as of the balance sheet date.

The table below shows the analysis of the Company's reserve for unpaid losses for thenine months ended September 30, 2025 and 2024 on a GAAP basis:

Based upon the Company's internal analysis and the Company's review of the annual statement of actuarial opinion provided by its actuarial consultants at December 31, 2024, the Company believes that the reserve for unpaid losses reasonably represents the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.

As reflected in the table above, the Company had favorable development in the first nine months of 2025 and 2024 related to prior year losses. This development came as a result of re-estimating ultimate losses in 2025 and 2024 based on historical loss trends. Current year and prior year loss payments made by the Company during the nine months ended September 30, 2025 and nine months ended September 30, 2024 were relatively flat. Case reserves on unpaid losses decreased when compared to the prior period as a result of the continued settlement of claims and re-estimating of reserves, offset by increases to IBNR reserves as a result of Hurricane Milton which made landfall in the fourth quarter of 2024 and has outstanding IBNR reserves of $58,830,000 as of September 30, 2025. Reinsurance recoverable on unpaid losses increased in line with this increase in IBNR.

LONG-TERM DEBT

Senior Notes Payable

On December 13, 2017, the Company issued $150,000,000 of 10-year senior notes (the Senior Notes) that will mature on December 15, 2027 and bear interest at a rate equal to 6.25% per annum payable semi-annually on each June 15 and December 15, commencing June 15, 2018. The Senior Notes are senior unsecured obligations of the Company. The Company may redeem the Senior Notes at its option, at any time and from time to time in whole or in part, prior to September 15, 2027, at a redemption price equal to the greater of (i)100%of the principal amount of the notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments ofprincipal and interest thereon from the date of redemption to the date that is three months prior to maturity, plus accrued and unpaid interest thereon. On or after that date, the Company may redeem the Senior Notes at par, plus accrued and unpaid interest thereon. On December 8, 2022, the Kroll Bond Rating Agency, LLC announced a downgrade of the Company's issuer and debt ratings from BBB- to BB+. As a result, pursuant to the Company's agreement, the interest rate of its Senior Notes increased from 6.25% to 7.25%. On July 21, 2025, the Kroll Bond Rating Agency, LLC announced an upgrade of the Company's issuer and debt ratings from BB+ to BBB-. As a result, pursuant to the Company's indenture, the interest rate of its Senior Notes will decrease from 7.25% to 6.25% effective December 16, 2025.

Financial Covenants

The Company's Senior Notes provide that the Company and its subsidiaries shall not incur any indebtedness unless no default exists and the Company’s leverage ratio as of the last day of any annual or quarterly period (the balance sheet date) immediately preceding the date on which such additional indebtedness is incurred would have been no greater than 0.3:1, determined on a pro forma basis as if the additional indebtedness and all other indebtedness incurred since the immediately preceding balance sheet date had been incurred and the proceeds therefrom applied as of such day. The Company and its subsidiaries also may not create, assume, incur or permit to exist any indebtedness for borrowed money that is secured by a lien on the voting stock of any significant subsidiary without securing the Senior Notes equally. The Company may not issue, sell, assign, transfer or otherwise dispose of, directly or indirectly, any of the capital stock of the Company’s significant subsidiaries as of the issue date of the Senior Notes (except to the Company or to one or more of the Company’s other subsidiaries, or for the purpose of qualifying directors or as may be required by law or regulation), subject to certain exceptions. These covenants are evaluated at the end of each calendar year, and at December 31, 2024, while the Company's leverage ratio was greater than the allowed ratio above, the Company did not incur any additional indebtedness during the period and as a result, the Company was in compliance with the covenants in the Senior Notes.

Debt Issuance Costs

The table below presents the roll forward of the Company's debt issuance costs paid, in conjunction with the debt instruments described above, during thenine months ended September 30, 2025 and 2024:

COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved in claims-related legal actions arising in the ordinary course of business. The Company accrues amounts resulting from claims-related legal actions in unpaid losses and LAE during the period when that it determines an unfavorable outcome becomes probable and can estimate the amounts. Management makes revisions to estimates based on its analysis of subsequent information that the Company receives regarding various factors, including: (i) per claim information; (ii) company and industry historical loss experience; (iii) judicial decisions and legal developments in the awarding of damages; and (iv) trends in general economic conditions, including the effects of inflation.

On October 20, 2023, the Company received notice that the Florida Department of Financial Services ("DFS") filed a notice of claim and demand for tender of policy limits under the Company's director and officer insurance policy (the "Claim"). The Claim alleges that former officers and directors of United Property & Casualty Insurance Company ("UPC") were involved in wrongful acts that resulted in UPC's insolvency. The Claim demands immediate tender of the Company's director and officer’s policy limit of $40,000,000 where the Company has a retention of $1,500,000. The former directors and officers of UPC deny the allegations. Although no litigation hasarisen from the Claim, litigation is anticipated. The directors and officers plan to vigorously defend against the Claim; however, due to the Company's indemnification obligation, during 2023, the Company accrued the policy retention amount of $1,500,000. This claim remains open as of September 30, 2025.

Commitments to fund partnership investments

The Company has fully funded one limited partnership investment and partially funded two additional limited partnership investments. The amount of unfunded commitments was $2,200,000 and $1,400,000 at September 30, 2025 and December 31, 2024, respectively.

Leases

The Company, as a lessee, has entered into leases of commercial office space of various term lengths. In addition to office space, the Company leases office equipment under operating leases.

The classification of operating and lease asset and liability balances within the Unaudited Condensed Consolidated Balance Sheets was as follows:

The components of lease expenses were as follows:

At September 30, 2025, future minimum gross lease payments relating to these non-cancellable operating lease agreements were as follows:

Weighted average remaining lease term and discount rate related to operating leases were as follows:

There were no other cash or non-cash related activities during the nine months ended September 30, 2025 and 2024.

Capital lease amortization expenses are included in depreciation expense in the Company's Unaudited Condensed Consolidated Statements of Comprehensive Income. See Note 7 of these Notes to Unaudited Condensed Consolidated Financial Statements for more information regarding depreciation expense, Note 11 for information regarding commitments related to long-term debt, and Note 14 for information regarding commitments related to regulatory actions.

Subleases

The Company previously leased and occupied office space in which it no longer operates. Effective October 1, 2022, this office space was subleased to a third-party. The sublease was effective from October 1, 2022 through July 31, 2025, with no option to extend. However, on February 29, 2024, this sublease was cancelled as a part of an agreement to terminate the original lease associated with the office space. During the nine months ended September 30, 2024, the Company recognized $33,000 of income related to this sublease, exclusive of the lease expense associated with the original lease.

Employee Retention Credit

A series of legislation was enacted in the United States during 2020 and 2021 in response to the COVID-19 pandemic that provided financial relief for businesses impacted by government-mandated shutdowns, work stoppages, or other losses suffered by employers. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided an employee retention credit, which is a refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers. The tax credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages per employee. During the second quarter of 2022, the Company evaluated its eligibility and filed for a $10,161,000 refund in connection with its Employee Retention Tax Credit for the tax year ended December 31, 2021. During the nine months ended September 30, 2025 the Company received refunds of $4,469,000 that were outstanding as of December 31, 2024. These were recorded as a contra-expense to payroll tax in the periods received. With these receipts, as of September 30, 2025, the Company has received all requested funds from the Internal Revenue Service related to this refund and no longer has an unrecorded gain contingency related to this balance.

Quota Share Commission Loss Contingency

AmCoastal participates in shared quota-share reinsurance agreements with the Company's former subsidiary, UPC, which are subject to a variable ceding commission based on loss experience. With the receivership of UPC in 2023, the Company has not received data related to UPC losses that could unfavorably shift AmCoastal’s commission related to these contracts. In addition, the Company cannot reasonably determine how this shift will be allocated between the contracted parties. Until the Company receives this loss data and provides the updated calculations to both the Company's reinsurance partners and the DFS, as receiver of UPC, the Company is unable to estimate the impact; however, the Company believes a loss contingency related to these commissions may exist as of September 30, 2025.

The Company will continue to monitor the matter for further developments that could affect the outcome of these contingencies and will make any appropriate adjustments each quarter.

ALLOWANCE FOR EXPECTED CREDIT LOSSES

The Company is exposed to credit losses primarily through three different pools of assets based on similar risk characteristics: premiums receivable for direct written business; reinsurance recoverables from ceded losses to its reinsurers; and its investment holdings. The Company estimates the expected credit losses based on historical trends, credit ratings assigned to reinsurers by rating agencies, average default rates, current economic conditions, and reasonable and supportable forecasts of future economic conditions that affect the collectability of the reported amounts over its expected life. Changes in the relevant information may significantly affect the estimates of expected credit losses.

The allowance for credit losses is deducted from the amortized cost basis of the assets to present their net carrying value at the amount expected to be collected. Each period, the allowance for credit losses is adjusted through earnings to reflect expected credit losses over the remaining lives of the assets.

The following tables summarize the Company's allowance for expected credit losses by pooled asset for thenine months ended September 30, 2025 and 2024, respectively:

As of September 30, 2025 and 2024, the Company had no allowance for expected credit losses related to its investment holdings.

STATUTORY ACCOUN TING AND REGULATION

The insurance industry is heavily regulated. State laws and regulations, as well as national regulatory agency requirements, govern the operations of all insurers such as the Company's insurance subsidiary. The various laws and regulations require that insurers maintain minimum amounts of statutory surplus and risk-based capital, restrict insurers' ability to pay dividends, specify allowable investment types and investment mixes, and subject insurers to assessments. AmCoastal is domiciled and operates in Florida and at September 30, 2025, and during the nine months then ended, met all regulatory requirements of the state.

During 2023, the Company received a multi-year Emergency Assessment notice from the Florida Insurance Guaranty Association ("FIGA"). This assessment will be 1.0% on direct written premiums of all covered lines of business in Florida beginning October 1, 2023 through September 30, 2025 to cover the cost of insurance companies facing insolvency. During 2025, FIGA extended this assessment for a third year, beginning October 1, 2025 through September 30, 2026.

The National Association of Insurance Commissioners ("NAIC") has Risk-Based Capital ("RBC") guidelines for insurance companies that are designed to assess capital adequacy and to raise the level of protection that statutory surplus provides for policyholders. Most states, including Florida, have enacted statutory requirements adopting the NAIC RBC guidelines, and insurers having less statutory surplus than required will be subject to varying degrees of regulatory action, depending on the level of capital inadequacy. State insurance regulatory authorities could require an insurer to cease operations in the event the insurer fails to maintain the required statutory capital.

The state laws of Florida permit an insurer to pay dividends or make distributions out of that part of statutory surplus derived from net operating profit and net realized capital gains. The state laws further provide calculations to determine the amount of dividends or distributions that can be made without the prior approval of the insurance regulatory authorities in those states and the amount of dividends or distributions that would require prior approval of the insurance regulatory authorities in those states. Statutory RBC requirements may further restrict the Company's insurance subsidiary's ability to pay dividends or make distributions if the amount of the intended dividend or distribution would cause statutory surplus to fall below minimum RBC requirements.

The Company's insurance subsidiary must file with the various insurance regulatory authorities an “Annual Statement” which reports, among other items, statutory net income and surplus as regards policyholders, which is called stockholders' equity under GAAP. The table below details the statutory net income for thethree and nine months ended September 30, 2025 and 2024 for AmCoastal.

The Company's insurance subsidiary must maintain capital and surplus ratios or balances as determined by the regulatory authority of the state in which it is domiciled. At September 30, 2025, the Company met these requirements. The table below details the amount of surplus as regards policyholders for AmCoastal at September 30, 2025 and December 31, 2024.

ACCUMULATED OTHER COMPREHENSIVE LOSS

The Company reports changes in other comprehensive income items within comprehensive income on the Unaudited Condensed Consolidated Statements of Comprehensive Income, and includes accumulated other comprehensive income (loss) as a component of stockholders' equity on its Unaudited Condensed Consolidated Balance Sheets.

The table below details the components of accumulated other comprehensive loss at period end:

(1) The Company has a valuation allowance on the tax impacts of the unrealized gains (losses) on investments resulting in the net tax (expense) benefit during the period reflecting only the realized position.

STOCKH OLDERS' EQUITY

The Company's Board of Directors declared no dividends on the Company's outstanding shares of common stock to stockholders of record during the nine months ended September 30, 2025 and 2024.

In July 2019, the Company's Board of Directors authorized a stock repurchase plan of up to $25,000,000 of its common stock. As of September 30, 2025, the Company has not yet repurchased any shares under this stock repurchase plan but may be in and out of the market as the Company sees fit. The timing and volume of repurchases are at the discretion of management, based on the capital needs of the business, the market price of ACIC common stock, and general market conditions. The plan has no expiration date, and the plan may be suspended or discontinued at any time.

In September 2023, the Company entered into an equity distribution agreement (the “Agreement”) with Raymond James & Associates, Inc., as agent (the “Agent”), of up to 8,000,000 shares of the Company’s common stock, par value $0.0001 per share (the “Shares”). Sales of the Shares under the Agreement will be made in sales deemed to be “at the market offerings”. The Agent is not required to sell any specific amount of Shares but has agreed to act as the Company’s sales agent for a commission equal to 3.0% of the gross proceeds from the sales of the Shares. As of September 30, 2025,4,373,000 shares have been sold under the Agreement resulting in commissions paid of approximately $1,181,000 and net proceeds of approximately $38,190,000. The Agreement will terminate upon the issuance and sale of all Shares subject to the Agreement, or the Agreement may be suspended or discontinued at any time.

See Note 17 in these Notes to Unaudited Condensed Consolidated Financial Statements for information regarding stock-based compensation activity.

STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation under the fair value recognition provisions of ASC Topic 718 -Compensation - Stock Compensation. The Company recognizes stock-based compensation cost over the award’s requisite service period on a straight-line basis for time-based restricted stock grants and performance-based restricted stock grants. The Company records forfeitures as they occur for all stock-based compensation.

The following table presents the Company's total stock-based compensation expense:

(1)The after-tax amounts are determined using the 21% corporate federal tax rate.

The Company had approximately$4,819,000 of unrecognized stock compensation expense at September 30, 2025 related to non-vested stock-based compensation granted, which it expects to recognize over a weighted-average period of approximately 1.9 years. The Company had approximately$304,000 of unrecognized director stock-based compensation expense at September 30, 2025 related to non-vested director stock-based compensation granted, which it expects to recognize over a weighted-average period of approximately 0.6 years.

Restricted stock, restricted stock units and performance stock units

Stock-based compensation cost for restricted stock awards, restricted stock units and performance stock units is measured based on the closing fair market value of the Company's common stock on the date of grant, which vest in equal installments over the requisite service period of typically three years. Restricted stock awards granted to non-employee directors vest over a one-year period. Each restricted stock unit and performance stock unit represents the Company's obligation to deliver to the holder one share of common stock upon vesting.

Performance stock units vest based on the Company's return on average equity compared to a defined group of peer companies. On the grant date, the Company issues the target number of performance stock units. They are subject to forfeitures if performance goals are not met. The actual number of performance stock units earned can vary from zero to 150 percent of the target for the awards.

The Company granted 19,435 and 96,967 shares of restricted common stock during thethree months ended September 30, 2025 and 2024, respectively, which had a weighted-average grant date fair value of$10.76 and $7.88, respectively. The Company granted 466,672 and 598,713 shares of restricted common stock during thenine months ended September 30, 2025 and 2024, respectively, which had a weighted-average grant date fair value of$11.48 and $7.41, respectively.

The following table presents certain information related to the activity of the Company's non-vested restricted common stock grants:

Stock options

Stock option fair value was estimated on the grant date using the Black-Scholes-Merton formula. Stock options vest in equal installments over the requisite service period of typically three years. The following weighted-average assumptions were used to value the stock options granted:

The expected annual dividend yield for options granted during 2025 and 2024 is based on no dividends being paid in future quarters. The expected volatility is a historical volatility calculated based on the daily closing prices over a period equal to the expected term. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the grant date. Expected term takes into account thethree-year graded vesting term and the 10-year contractual term of the option.

The Company granted 76,141 and 196,275 stock options for thenine months ended September 30, 2025 and 2024, respectively, which had a weighted average grant date fair value of$11.63 and $4.82 per share, respectively.

The following table presents certain information related to the activity of the Company's stock option grants:

(1) The vested shares are calculated based on all vested shares at September 30, 2025, inclusive of those that have since expired. The weighted average exercise prices, weighted-average remaining contractual term and aggregate intrinsic value is calculated based on only vested shares that are outstanding and exercisable at September 30, 2025.

(2) Presented in ones.

SUBSEQ UENT EVENTS

The Company evaluates all subsequent events and transactions for potential recognition or disclosure in its financial statements. As of the date of the filing the Company has experienced no subsequent events which required disclosure.