AMERICAN COASTAL INSURANCE Corp

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing in Part II, Item 8 of this Form 10-K. The following discussion provides an analysis of our results of operations and financial condition for 2024 as compared to 2023. Discussion regarding our results of operations and financial condition for 2023 as compared to 2022 is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 and the Revised Items of our Form 10-K for the year ended December 31, 2023, filed as Exhibit 99.1 to Form 8-K on October 4, 2024. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed or implied in these forward-looking statements as a result of certain known and unknown risks and uncertainties. See “Forward-Looking Statements.”

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing in Part II, Item 8 of this Form 10-K. The following discussion provides an analysis of our results of operations and financial condition for 2025 as compared to 2024. Discussion regarding our results of operations and financial condition for 2024 as compared to 2023 is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed or implied in these forward-looking statements as a result of certain known and unknown risks and uncertainties. See “Forward-Looking Statements.”

Previous wording

American Coastal Insurance Corporation is a holding company primarily engaged in commercial and personal property and casualty insurance business with investments in the United States. On July 10, 2023, we changed our corporate name from United Insurance Holdings Corp. to American Coastal Insurance Corporation. During the periods presented, we conducted our business principally through two wholly owned insurance subsidiaries: American Coastal Insurance Company (AmCoastal) and Interboro Insurance Company (IIC). Collectively, we refer to the holding company and all our subsidiaries, including non-insurance subsidiaries, as “ACIC,” which is the preferred brand identification for our Company.

Current wording

American Coastal Insurance Corporation is a holding company primarily engaged in commercial property and casualty insurance business with investments in the United States. On July 10, 2023, we changed our corporate name from United Insurance Holdings Corp. to American Coastal Insurance Corporation. During the periods presented, we conducted our business principally through our wholly owned insurance subsidiary, American Coastal Insurance Company (AmCoastal). Collectively, we refer to the holding company and all our subsidiaries, including non-insurance subsidiaries, as “ACIC,” which is the preferred brand identification for our Company.

Previous wording

Our Company’s primary source of revenue is generated from writing insurance in Florida and New York. Our target market in such areas consists of states where the perceived threat of natural catastrophe has caused large national insurance carriers to reduce their concentration of policies. We believe an opportunity exists for ACIC to write profitable business in such areas. During 2022, we also wrote commercial residential insurance in South Carolina and Texas; however, effective May 1, 2022, we no longer write in these states. In addition, during 2022, we wrote personal residential business in six other states; however on February 27, 2023, our former insurance subsidiary, United Property & Casualty Insurance Company (UPC) was placed into receivership with the Florida Department of Financial Services (the "DFS"), which divested our ownership of UPC. The events leading to receivership and results of this subsidiary, now included within discontinued operations, can be seen in Note 4 of the Notes to Consolidated Financial Statements below.

Current wording

Our Company’s revenue is generated from writing insurance in Florida. Our target market in such areas consists of states where the perceived threat of natural catastrophe has caused large national insurance carriers to reduce their concentration of policies. We believe an opportunity exists for ACIC to write profitable business in such areas. On February 27, 2023, our former insurance subsidiary that wrote personal residential business in six states, United Property & Casualty Insurance Company (UPC) was placed into receivership with the Florida Department of Financial Services (the "DFS"), which divested our ownership of UPC. The events leading to receivership and results of this subsidiary, now included within discontinued operations, can be seen in Note 4 of the Notes to Consolidated Financial Statements below.

Previous wording

On May 9, 2024, the Company entered into a Stock Purchase Agreement (the "Sale Agreement") with Forza Insurance Holdings, LLC ("Forza") in which ACIC will sell and Forza will acquire 100% of the issued and outstanding stock of IIC. The aggregate purchase price for the shares will be equal to IIC's GAAP shareholder’s equity on the closing date. Closing is subject to customary closing conditions, including New York Department of Financial Services ("NYDFS") approval of Forza's application for acquisition of control, and NYDFS approval of a new rate and form filing. On February 13, 2025, Forza’s application to acquire IIC was approved by the NYDFS. The Company and Forza have agreed to close on April 1, 2025. Given IIC is our last remaining personal lines entity and represents the final step in our strategic shift to becoming a specialty commercial underwriter, IIC results of operations and assets and liabilities are captured within discontinued operations and can be seen in Note 4 of the Notes to Consolidated Financial Statements below.

Current wording

On May 9, 2024, we entered into a Stock Purchase Agreement (the "Sale Agreement") with Forza Insurance Holdings, LLC (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 New York Department of Financial Services ("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 impacts. The Company also recognized a $1,348,000 loss, net of tax impacts, 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. As a result, IIC results of operations and assets and liabilities are captured within discontinued operations and can be seen in Note 4 of the Notes to Consolidated Financial Statements below.

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, and IIC in April 2016, and our strategic partnership with a subsidiary of Tokio Marine Kiln Group Limited (Tokio Marine), which formed Journey Insurance Company (JIC) in August 2018. Effective June 1, 2022, we merged JIC into AmCoastal, with AmCoastal being the surviving entity.

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 its subsidiaries, including AmCoastal, in April 2017.

Previous wording

As a result of our risk appetite in 2024, our policies in-force increased by 0.9% from 22,848 policies in-force at December 31, 2023, to 23,060 policies in-force at December 31, 2024. These values include IIC policies in-force, whose results are captured within discontinued operations.

Current wording

Our policies in-force increased by 5.20% from 4,099 policies in-force at December 31, 2024, to 4,311 policies in-force at December 31, 2025.

Previous wording

Our business is subject to the impact of weather-related catastrophes on our loss and loss adjustment expenses (LAE). Over the last three years, the frequency of these catastrophes has increased. As a result, we have experienced increased catastrophe losses incurred during the prior three years. During the years ended December 31, 2024, 2023 and 2022, five, two, and two named storms, respectively, made landfall in our geographic footprint, resulting in retained pre-tax catastrophe losses of $25,442,000, $729,000, and $57,906,000, respectively, excluding our former subsidiary, UPC. In addition, during 2022, we increased our loss and LAE reserves as a result of development trends from 2017’s Hurricane Irma, that indicated our ultimate gross loss estimate should be increased.

Current wording

Our business is subject to the impact of weather-related catastrophes on our loss and loss adjustment expenses (LAE). During the year ended December 31, 2025, no named storms made landfall in our geographic footprint. During the years ended December 31, 2024 and 2023, five and two named storms, respectively, made landfall in our geographic footprint, resulting in retained pre-tax catastrophe losses of $25,442,000 and $729,000 respectively.

Previous wording

For the year ended December 31, 2024, we have consolidated our Operating and Underwriting Expenses and General and Administrative Expenses lines within our Consolidated Statements of Comprehensive Income into the General and Administrative Expenses line. This was done in an effort to align more closely with our peer group for comparability. Accordingly, we have recast our Consolidated Statements of Comprehensive Income for the years ended December 31, 2023 and 2022 to align with this format. We have also added a new note to our consolidated financial statements, Note 3, Disaggregation of Relevant Expense Captions, to provide the users of our financial statements with enhanced insight into this expense line.

Current wording

For the years ended December 31, 2025 and 2024, we have consolidated our Operating and Underwriting Expenses and General and Administrative Expenses lines within our Consolidated Statements of Comprehensive Income into the General and Administrative Expenses line. This was done in an effort to align more closely with our peer group for comparability. Accordingly, we have recast our Consolidated Statements of Comprehensive Income for the year ended December 31, 2023 to align with this format. We have also added a new note to our consolidated financial statements, Note 3, Disaggregation of Relevant Expense Captions, to provide the users of our financial statements with enhanced insight into this expense line.

Previous wording

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of ACIC. In evaluating our results of operations, we use premiums written and earned, policies in-force and new and renewal policies by geographic concentration. We also consider the impact of catastrophe losses and prior year development on our loss ratios, expense ratios and combined ratios. In monitoring our investments, we use credit quality, investment income, cash flows, realized gains and losses, unrealized gains and losses, asset diversification and portfolio duration. To evaluate our financial condition, we consider our liquidity, financialstrength, ratings, book value per share and return on equity.

Current wording

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of ACIC. In evaluating our results of operations, we use premiums written and earned, policies in-force and new and renewal policies by geographic concentration. We also consider the impact of catastrophe losses and prior year development on our loss ratios, expense ratios and combined ratios. In monitoring our investments, we use credit quality, investment income, cash flows, realized gains and losses, unrealized gains and losses, asset diversification and portfolio duration. To evaluate our financial condition, we consider our liquidity, financial strength, ratings, book value per share and return on equity.

Previous wording

Net income attributable to ACIC for the year ended December 31, 2024 decreased by $234,193,000 to $75,718,000, compared to net income of $309,911,000 for the year ended December 31, 2023. The decrease in net income was driven by the deconsolidation of our former subsidiary, UPC, resulted in a gain of $238,440,000 in 2023. Drivers of net income for 2024 include increased gross premiums earned during the year, increased net investment income, an increase in ceded premiums earned, favorable prior year loss development during the year, and decreased policy acquisition costs, as described below.

Current wording

Net income for the year ended December 31, 2025 increased by $31,119,000 to $106,837,000, compared to net income of $75,718,000 for the year ended December 31, 2024. Drivers of net income for 2025 include increased gross premiums earned and decreased ceded premiums earned, driving an overall increase in revenues. In addition, we saw decreased losses and LAE, partially offset by increased policy acquisition costs. During 2024, the Company's net loss attributable to discontinued operations was $601,000, compared to net income of $42,000 during 2025.

Previous wording

Ceded premiums earned increased by $21,995,000, or 6.4%, to $364,618,000 for the year ended December 31, 2024, from $342,623,000 for 2023. The increase is primarily driven by a $12,334,000 increase in ceded premiums earned from our quota share agreements. This increase is attributed to the change in AmCoastal’s quota share reinsurance coverage during 2024. We had quota share coverage in place at 40% for the first half of 2024 and 20% for the second half of the year, while in 2023 we had no coverage for the first half of the year and 40% coverage for the remainder of the year. This drove increased cessions over the twelve months ended December 31, 2024.

Current wording

Ceded premiums earned decreased by $23,210,000, or 6.4%, to $341,408,000 for the year ended December 31, 2025, from $364,618,000 for 2024. The increase is primarily driven by a $51,621,000 decrease in ceded premiums earned from our quota share agreements. This decrease is attributed to the change in AmCoastal’s quota share reinsurance coverage during 2024 and 2025. We had quota share coverage in place at 40% for the first half of 2024, decreasing to 20% effective June 1, 2024. Effective June 1, 2025, this coverage was decreased further to 15%. This decrease was partially offset by a $28,010,000 increase in our catastrophe reinsurance coverage, driven by additional coverage purchased due to exposure growth and the decreased quota share cession rate.

Previous wording

Net investment income increased by $12,495,000, or 150.5%, to $20,795,000 for the year ended December 31, 2024, from $8,300,000 for 2023, driven by increased interest income due to a substantial increase in holdings and higher interest rates year-over-year.

Current wording

Net investment income increased by $1,411,000, or 6.8%, to $22,206,000 for the year ended December 31, 2025, from $20,795,000 for 2024, driven by increased interest income due to a substantial increase in holdings and higher overall yield on our 2025 portfolio than our 2024 portfolio..

Previous wording

Net realized investment losses and net unrealized gains (losses) on equity securities increased by $7,847,000, or 131.3%, to a net gain of $1,872,000 for the year ended December 31, 2024, from a net loss of $5,975,000 for the year ended December 31, 2023, driven by decreased investment sales in 2024 resulting in decreased realized losses of $6,665,000 on our investment portfolio. During 2023 as a result of liquidity pressure from the receivership of our former subsidiary, UPC, we liquidated investments in a loss position. Please see cash flow for more information. The remainder of the change is related to our re-entering of the equity market during 2024, resulting in unrealized gains on the portfolio of $1,996,000.

Current wording

Net realized investment losses and net unrealized gains (losses) on equity securities increased by $4,509,000, or 240.9%, to a net gain of $6,381,000 for the year ended December 31, 2025, from a net gain of $1,872,000 for the year ended December 31, 2024, driven by increased unrealized gains on our equity securities as market conditions were favorable and our holdings increased 40.4% year-over-year.

Previous wording

Expenses for the year ended December 31, 2024, increased $26,513,000, or 15.5%, to $197,061,000, from $170,548,000 for 2023. The increase in expenses was primarily due to an increase in loss and LAE as a result of Hurricane Milton making landfall in 2024, which caused a large increase in catastrophe losses due to the $20,500,000 retention incurred from the storm. The calculations of our combined loss ratios and underlying loss ratios are shown below.

Current wording

Expenses for the year ended December 31, 2025 decreased $1,899,000, or 1.0%, to $195,162,000, from $197,061,000 for 2024. The decrease in expenses was primarily due to a decrease in loss and LAE as a result of Hurricane Milton making landfall in 2024, which caused a large increase in catastrophe losses due to the $20,500,000 retention incurred from the storm. This was offset by an increase in policy acquisition costs, the details of which can be seen below. The calculations of our combined loss ratios and underlying loss ratios are shown below.

Previous wording

(1) Underlying loss and LAE is a non-GAAP financial measure and is reconciled above to net loss and LAE, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this Form 10-K can be found in the “Definitions of Non-GAAP Measures” section, above.

Current wording

(1)Underlying loss and LAE is a non-GAAP financial measure and is reconciled above to net loss and LAE, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this Form 10-K can be found in the “Definitions of Non-GAAP Measures” section, above.

Previous wording

Loss and LAE increased by $22,641,000, or 48.5%, to $69,319,000 for the year ended December 31, 2024, from $46,678,000 for the year ended December 31, 2023. Loss and LAE expense as a percentage of net earned premiums increased 7.5 points to 25.3% for the year ended December 31, 2024, compared to 17.8% for the year ended December 31, 2023. In addition, during the year ended December 31, 2024, prior year reserve favorable development was lower on both catastrophe and non-catastrophe losses. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the year ended December 31, 2024 would have been 7.4%, a decrease of 0.3 points from 7.7% during the year ended December 31, 2023.

Current wording

Loss and LAE decreased by $23,279,000, or 33.6%, to $46,040,000 for the year ended December 31, 2025, from $69,319,000 for the year ended December 31, 2024. Loss and LAE expense as a percentage of net earned premiums decreased 10.3 points to 15.0% for the year ended December 31, 2025, compared to 25.3% for the year ended December 31, 2024. In addition, during the year ended December 31, 2025, prior year reserve favorable development was higher on both catastrophe and non-catastrophe losses and catastrophe losses were lower. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the year ended December 31, 2025 would have been 7.8%, an increase of 0.4 points from 7.4% during the year ended December 31, 2024.

Previous wording

Policy acquisition costs decreased by $4,446,000, or 5.9%, to $70,990,000 for the year ended December 31, 2024, from $75,436,000 for the year ended December 31, 2023. The primary driver of the decrease was an increase in ceding commission income of $6,959,000, driven by the changes in the terms of our quota share reinsurance agreement described above. This was partially offset by increased external management fees of $1,745,000, which fluctuated in conjunction with the year-over-year increase in gross written premium.

Current wording

Policy acquisition costs increased by $26,854,000, or 37.8%, to $97,844,000 for the year ended December 31, 2025, from $70,990,000 for the year ended December 31, 2024. The primary driver of the increase was a decrease in ceding commission income of $17,161,000, driven by the changes in the terms of our quota share reinsurance agreement described above. In addition, external management fees increased $9,807,000, as a result of a one percent increase in the management fee and profit share accrual pursuant to the renewal terms for the contract with AmRisc, LLC, effective June 1, 2024.

Previous wording

(1) Underlying net loss and LAE Ratio is a non-GAAP measure and is reconciled above to the Consolidated net loss and LAE Ratio, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this Form 10-K can be found in the “Definitions of Non-GAAP Measures” section, above.

Current wording

(1)Underlying net loss and LAE Ratio is a non-GAAP measure and is reconciled above to the Consolidated net loss and LAE Ratio, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this Form 10-K can be found in the “Definitions of Non-GAAP Measures” section, above.

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 subsidiary 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 December 31, 2025, one outside asset management company, which has authority and discretion to buy and sell securities for us, manages 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 and investment portfolios totaled $540,811,000 at December 31, 2024, compared to $311,874,000 at December 31, 2023.

Current wording

Our cash and investment portfolios totaled $647,744,000 at December 31, 2025, compared to $540,811,000 at December 31, 2024.

Previous wording

We classify all of our investments as available-for-sale. Our investments as of December 31, 2024 and 2023 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 December 31, 2024 consisted of mutual funds and common stock. We held no equities as of December 31, 2023. Most of the corporate bonds we hold reflected a similar diversification. At December 31, 2024, approximately 87.8% of our fixed maturities were U.S. Treasuries, or corporate bonds rated “A” or better, and 12.2% were corporate bonds rated “BBB” or “BB”.

Current wording

We classify all of our investments as available-for-sale. Our investments as of December 31, 2025 and 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 December 31, 2025 consisted of mutual funds and common stock. We held no equities as of December 31, 2024. Most of the corporate bonds we hold reflected a similar diversification. At December 31,

Previous wording

AmCoastal’s core catastrophe reinsurance program 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;

Current wording

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;

Previous wording

IIC’s core catastrophe reinsurance program in effect June 1 through May 31, annually, which provides protection from all catastrophe losses.

Current wording

AmCoastal's catastrophe aggregate excess of loss coverage, in effect Jan 1 through December 31, annually, which provides protection from all catastrophe loss events, including named windstorms, severe convective storms and winter storm events.

Previous wording

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

Current wording

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

Previous wording

AmCoastal’s core catastrophe reinsurance program provides occurrence-based coverage up to an exhaustion point of approximately $1,260,000,000 for a first occurrence and $1,610,000,000 in the aggregate. Under this program, our GAAP retention on a first event is $20,500,000 ($10,000,000 retained by AmCoastal under statutory accounting principles (STAT retained), $10,500,000 retained separately by our captive). We have purchased second and third event retrocession coverage, reducing our second and third event GAAP retentions to $13,000,000 ($10,000,000 STAT retained by AmCoastal, $3,000,000 retained separately by our captive). AmCoastal’s program provides sufficient coverage for approximately a 1-in-206-year return period, indicating that the probability of a single occurrence exceeding protection purchased is roughly 0.5%, estimated by equally blending the AIR and RMS catastrophe models using long-term catalogs including demand surge. 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 materially 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

AmCoastal’s all other perils catastrophe excess of loss agreement provides protection from catastrophe loss events other than named windstorms and earthquakes up to $172,000,000 in the aggregate. This agreement provides sufficient coverage for a 1-in-450-year return period, indicating that the probability of a single occurrence exceeding protection purchased is no more than 0.2%.

Current wording

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%.

Previous wording

Effective December 15, 2023, we 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 our other private reinsurers. This transaction resulted in additional expense of approximately $6,300,000 for the year ended December 31, 2023, and a reduction in expense of approximately $6,300,000 and $15,700,000 during the three and six months ended June 30, 2024, respectively.

Current wording

Effective December 15, 2023, we 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 our 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.

Previous wording

Where we think prudent, particularly where premium rates are high relative to the risk, we retain risk whereby AmCoastal purchases reinsurance from Shoreline Re, our 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 30% quota share agreement with AmCoastal, which provides coverage for all catastrophe perils as well as attritional losses incurred.

Current wording

Where we think prudent, particularly where premium rates are high relative to the risk, we retain risk whereby AmCoastal purchases reinsurance from Shoreline Re, our 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.

Previous wording

(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.

Current wording

(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.

Previous wording

(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.

Current wording

(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.

Previous wording

(3)Net premiums earned based on estimated subject premiums at 06/01/2024.

Current wording

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

Previous wording

The table below outlines our quota share agreements in effect for the years ended December 31, 2024 and 2023. The impacts of these quota share agreements on the financial statements of our former subsidiary, UPC, are included in discontinued operations in 2023 and 2022.

Current wording

The table below outlines our quota share agreements in effect for the years ended December 31, 2025 and 2024.

Previous wording

(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 our retention for catastrophe losses.

Current wording

(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 our retention for catastrophe losses.

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 May 31 , 2026.

Previous wording

(1) Incurred loss and LAE is equal to losses and LAE paid plus the change in case and incurred but not reported reserves. Shown net of losses ceded to reinsurers. Incurred loss and LAE and number of events includes the development on storms during the year in which it occurred.

Current wording

(1)Incurred loss and LAE is equal to losses and LAE paid plus the change in case and incurred but not reported reserves. Shown net of losses ceded to reinsurers. Incurred loss and LAE and number of events includes the development on storms during the year in which it occurred.

Previous wording

As a holding company, we do not conduct any business operations of our own and, as a result, we rely on cash dividends or intercompany loans from our management subsidiaries to pay our general and administrative expenses. Insurance regulatory authorities heavily regulate our insurance subsidiaries, including restricting any dividends paid by our insurance subsidiaries and requiring approval of any management fees our insurance subsidiaries pay to our management subsidiaries for services rendered; however, nothing restricts our non-insurance company subsidiaries from paying us dividends other than state corporate laws regarding solvency. Our management subsidiaries pay us dividends primarily using cash from the collection of management fees from our insurance subsidiaries, pursuant to the management agreements in effect between those entities. In accordance with state laws, our insurance subsidiaries may pay dividends or make distributions out of that part of their statutory surplus derived from their net operating profit and their net realized capital gains. The risk-based capital (RBC) guidelines published by the National Association of Insurance Commissioners (NAIC) may further restrict our insurance subsidiaries’ ability to pay dividends or make distributions if the amount of the intended dividend or distribution would cause their respective surplus as it regards policyholders to fall below minimum RBC guidelines. See Note 16 in our Notes to Consolidated Financial Statements and Part II, Item 5 for additional information.

Current wording

As a holding company, we do not conduct any business operations of our own and, as a result, we rely on cash dividends or intercompany loans from our management subsidiaries to pay our general and administrative expenses. Insurance regulatory authorities heavily regulate our insurance subsidiary, including restricting any dividends paid by our insurance subsidiary and requiring approval of any management fees our insurance subsidiary pay to our management subsidiaries for services rendered; however, nothing restricts our non-insurance company subsidiary from paying us dividends other than state corporate laws regarding solvency. Our management subsidiary pays us dividends primarily using cash from the collection of management fees from our insurance subsidiary, pursuant to the management agreements in effect between those entities. In accordance with state laws, our insurance subsidiary may pay dividends or make distributions out of that part of their statutory surplus derived from their net operating profit and their net realized capital gains. The risk-based capital (RBC) guidelines published by the National Association of Insurance Commissioners (NAIC) may further restrict our insurance subsidiary’s ability to pay dividends or make distributions if the amount of the intended dividend or distribution would cause their respective surplus as it regards policyholders to fall below minimum RBC guidelines. See Note 16 in our Notes to Consolidated Financial Statements and Part II, Item 5 for additional information.

Previous wording

During the year ended December 31, 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. During the year ended December 31, 2023, we made no capital contributions to our subsidiaries. During the year ended December 31, 2022, we contributed $81,000,000 and $11,200,000 to our former insurance subsidiaries, UPC and FSIC, respectively. The contribution made to FSIC was made prior to the merging of FSIC into UPC. In addition, we contributed $9,574,000 to our reinsurance subsidiary, Shoreline Re.

Current wording

During the year ended December 31, 2025, the Company made capital contributions of $8,269,000 to its reinsurance subsidiary, Shoreline Re. In addition, the Company made a $15,000,000 contribution to form a new excess and surplus insurance entity, that has not yet begun operations. We may make future contributions of capital to our insurance subsidiary as circumstances require. During the year ended December 31, 2024, the Company made capital contributions of $1,265,000 to its reinsurance subsidiary, Shoreline Re. During the year ended December 31, 2023, we made no capital contributions to our subsidiaries.

Previous wording

On December 13, 2017, we issued $150,000,000 of senior notes (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. We may redeem the Senior Notes at our option, at any time and from time to time in whole or in part, at a redemption price equal to the greater of (i) 100% of the principal amount of the Senior Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon from the date of redemption to the date that is three months prior to maturity. On and after that date, we may redeem the Senior Notes at par. On December 8, 2022, the Kroll Bond Rating Agency, LLC announced a downgrade of our issuer and debt ratings from BBB- to BB+. As a result, pursuant to our agreement, the interest rate of our Senior Notes increased from 6.25% to 7.25% effective on June 15, 2023.

Current wording

On December 13, 2017, we issued $150,000,000 of senior notes (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. We may redeem the Senior Notes at our option, at any time and from time to time in whole or in part, at a redemption price equal to the greater of (i) 100% of the principal amount of the Senior Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon from the date of redemption to the date that is three months prior to maturity. On and after that date, we may redeem the Senior Notes at par. On December 8, 2022, the Kroll Bond Rating Agency, LLC announced a downgrade of our issuer and debt ratings from BBB- to BB+. As a result, pursuant to our agreement, the interest rate of our Senior Notes increased from 6.25% to 7.25% effective June 15, 2023. 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 decreased from 7.25% to 6.25% effective December 16, 2025.

Previous wording

As a result of claim activity from the current and prior years, we have an obligation related to the unpaid policyholder losses and unpaid LAE associated with the settling of these claims. As of December 31, 2024, our total obligation related to these claim payments was $322,087,000, of which we estimate $124,642,000 to be short-term in nature (due in less than twelve months), based upon our cumulative claims paid over the last 23 years. This value includes IIC, which is classified as discontinued operations but is still our obligation until the sale of the entity is complete. While we believe that historical performance of loss payment patterns is a reasonable source for projecting future claim payments, there is inherent uncertainty in these estimated projected settlements, and as a result these estimates will differ, perhaps significantly, from actual future payments.

Current wording

As a result of claim activity from the current and prior years, we have an obligation related to the unpaid policyholder losses and unpaid LAE associated with the settling of these claims. As of December 31, 2025, our total obligation related to these claim payments was $165,701,000, of which we estimate $83,995,000 to be short-term in nature (due in less than twelve months), based upon our cumulative claims paid historically. While we believe that historical performance of loss payment patterns is a reasonable source for projecting future claim payments, there is inherent uncertainty in these estimated projected settlements, and as a result these estimates will differ, perhaps significantly, from actual future payments.