Q1 2024 American Coastal Insurance Corp Earnings Call

Operator: Greetings and welcome to the American Coastal Insurance Corporation first quarter 2024 financial results conference call and webcast. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I'd like to turn the call over to Karin Daly, Vice President at the Equity Group and American Coastal's Investor Relations Representative.

Greetings and welcome to the American Coastal Insurance Corporation first quarter 'twenty 'twenty four financial results conference call and webcast. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Karin Daly: As a reminder, this conference is being recorded at this time I'd like to turn the call over to Karen Daily Vice President at the equity group and American coastal Investor Relations representative.

Karin Daly: Thank you, John, and good afternoon, everyone. AM Coastal has also made this broadcast available on its website at www.amcoastal.com. A replay will be available for approximately 30 days following the call.

Karin Daly: Thank you John and good afternoon, everyone American.

Karin Daly: American Coastal insurance Corporation has also made this broadcast available on its website at www Dot am coastal dot com.

Karin Daly: A replay will be available for approximately 30 days following the call. Additionally, you can find copies of the latest earnings release and presentation in the investors section of the company's website.

Karin Daly: Additionally, you can find copies of the latest earnings release and presentation in the investor section of the company's website. Speaking today will be Chairman of the Board and Chief Executive Officer R. Daniel Peed, Chief Financial Officer Svetlana Kassel, and President Bennett Brentford Martz. On behalf of the company, I'd like to note that statements made during this call that are not historical facts are forward-looking statements. The company believes these statements are based on reasonable estimates, assumptions, and plans.

Karin Daly: Speaking today will be chairman of the board and Chief Executive Officer are Daniel Peed, Chief Financial Officer, Silvana Castle, and President Bennett Rochefort marks.

Karin Daly: However, if the estimates, assumptions, or plans underlying the forward-looking statements prove inaccurate, or if other risks or uncertainties arise, actual results could differ materially from those expressed in or implied by the forward-looking statement. Factors that could cause actual results to differ materially may be found in a company's filings with the U.S. Securities and Exchange Commission in the risk factor section of the most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. Forward-looking statements speak only as of the date on which they are made, and, except as required by applicable law, the company undertakes no obligation to update or revise any forward-looking statement.

Karin Daly: On behalf of the company I'd like to note that statements made during this call that are not historical facts are forward looking statements the.

Karin Daly: The company believes these statements are based on reasonable estimates assumptions and plans. However, if the estimates assumptions or plans or underlying the forward looking statements prove inaccurate or if other risks or uncertainties arise actual results could differ materially from those expressed in or.

Karin Daly: Slide by the forward looking statements factors.

Karin Daly: Factors that could cause actual results to differ materially may.

Karin Daly: To be found in the company's filings with the U S Securities and Exchange Commission and the risk factors section of the most recent annual report on Form 10-K, and subsequent quarterly reports on Form 10-Q.

Karin Daly: We're looking statements speak only as of the date on which they are made and except as required by applicable law. The company undertakes no obligation to update or revise any forward looking statements.

Karin Daly: With that, it's my pleasure to turn the call over to Mr. Daniel Peed. Dan, you may begin.

Karin Daly: With that it's my pleasure to turn the call over to Mr. Daniel Peed, Dan you may begin.

Robert Daniel Peed: Thanks. Hello, and thank you for joining us on American Coastal's first quarter 2024 earnings call. I plan to provide an update on activities during the first quarter, touch on strategic initiatives that we expect will have a positive impact on the bottom line in the near term, and then I will turn it over to Brad Martz and Mona Cosso, who will provide more detail on the first quarter financial results. First, as announced in January, we enhanced the bench strength of our leadership.

Robert Daniel Peed: Hello, and thank you for joining us on American coastal <unk> first quarter 2024 earnings call.

Robert Daniel Peed: I plan to provide an update on activities from the first quarter touch on strategic initiatives that we expect will have a positive impact on the bottom line in the near term.

Speaker Change: And then I will turn it over to Brad Martz, and Mana Caso, who will provide more detail on our first quarter financial results.

Robert Daniel Peed: Lana Castle joined as the CFO of all entities. Lana has 15 years of experience in the insurance industry with extensive experience in shared service operations, enterprise risk management, and all aspects of finance and accounting. With the addition of Lana as CFO, Brad Martz's role as president shifted to strategic initiatives that enhance shareholder value. In line with our commitment to risk management and compliance, we promoted Andy Gray to Chief Compliance and Risk Officer. Andy is a CPA with more than 30 years of experience in tax, accounting, internal audit, and risk management at the Florida Insurance Corporation.

Robert Daniel Peed: First as announced in January we enhanced the bench strength of our leadership team.

Robert Daniel Peed: Lot of castle joined as the CFO of all entities has 15 years of experience in the insurance industry with extensive experience in shared service operations enterprise risk management, and all aspects of finance and accounting.

Robert Daniel Peed: With the addition of Lana CFO, Brad Martz his role as president.

Robert Daniel Peed: Two strategic initiatives that enhance shareholder value.

Robert Daniel Peed: In line with our commitment to risk management and compliance, we promoted Andy Gray chief compliance and risk officer.

Robert Daniel Peed: Andy is a CPA with more than 30 years of experience in tax accounting internal audit and risk management within the Florida insurance.

Robert Daniel Peed: We are excited about these changes, and our results show that Lana and Andy have provided immediate value. Next, I'm happy to report that our earnings continue to be very strong. The first quarter of 2024 ended with a core return on equity of 69.7% driven by an underlying combined ratio of 57.8% and favorable prior year development in both commercial and personal line segments. The book value per share increased by 18.3% from the end of 2023 to March 31st, 2024. First quarter net income continued to trend upward to $23.6 million, or up 38% from the fourth quarter of 2023.

Robert Daniel Peed: We are excited about these changes and our results show that line Andy has provided immediate value.

Robert Daniel Peed: Okay.

Robert Daniel Peed: Next I am happy to report that our earnings continue to be very strong. The first quarter 2024 ended with a core return on equity of 69, 7%.

Robert Daniel Peed: Driven by an underlying combined ratio of 57, 8% and.

Robert Daniel Peed: And favorable prior year development in both commercial and personal lines segments.

Robert Daniel Peed: Book value per share increased by 18, 3% from the end of 2023 to March 31 2024.

Robert Daniel Peed: First quarter net income continue to trend upward to $23 6 million or up 38% from the fourth quarter of 2023.

Robert Daniel Peed: This highlights our expanding net earned premium margin as direct rate increases that took effect in 2023 earned through the book and catch up to the reinsurance premium levels established at 6-1-2023. Furthermore, we expect net written and earned premiums to increase substantially over the next 18 months, accelerated by our planned reduction of external quota share at June 1, 2024. At the same time, we have increased our multi-year reinsurance commitments, enhancing stability. For example, our 2024 catastrophe reinsurance program was marketed with a structure that further protects the balance.

Robert Daniel Peed: This highlights our expanding net earned premium margin as direct rate increases that took effect in 2023 earn through the book and catch up to the reinsurance premium levels are established at 612023.

Robert Daniel Peed: Furthermore, we expect net written and earned premiums to increase substantially over the next 18 months accelerated by our planned reduction of external quota share at June one 2024 at the same time, we have increased our multi year reinsurance commitments enhancing stability.

Robert Daniel Peed: Our 2020 for catastrophe reinsurance program was marketed with a structure that further protects the balance sheet, we have been able to increase the expected exhaustion point with the successful placement of an M. Coastal's multiyear cap on which was oversubscribed at the lower end of the expected coupon range.

Robert Daniel Peed: We have been able to increase the expected exhaustion point with the successful placement of AmCoastal's multi-year cap bond, which was oversubscribed at the lower end of the expected coupon rate. To reduce earnings volatility, we also continue to target a first event retention of less than one quarter's expected underwriting profit before catastrophe loss.

Robert Daniel Peed: To reduce earnings volatility. We also continue to target a first event retention of less than one quarter as expected underwriting profit before cat losses.

Robert Daniel Peed: AmCoastal enjoys a mature and defensible portfolio with both a low underlying combined ratio and net catastrophe exposure near an all-time low. We also enjoy a solid reputation developed over a dozen years, strong reinsurance relationships with long-term partners, and an exclusive distribution partner for the Florida Condominium Association. These are AmCoastal's unmatched competitive advantages in a specialty niche combined with an ongoing firm market expected to continue well above average for several years. Finally, I am excited to announce that we have signed definitive documents for the sale of Interboro Insurance Company.

Robert Daniel Peed: Am coastal enjoys a mature and defensible portfolio with both a low underlying combined ratio and net catastrophe exposure near an all time low we enjoy a solid reputation developed over a dozen years.

Robert Daniel Peed: Reinsurance relationships with long term partners and an exclusive distribution partner for Florida condominium associations.

Robert Daniel Peed: These are an M coastal's unmatched competitive advantages and a specialty niche combined with an ongoing firm market.

Robert Daniel Peed: Expect it to continue well above average for several years.

Robert Daniel Peed: Finally, I'm excited to announce that we signed definitive documents for the sale of integral insurance company.

Robert Daniel Peed: Closing is subject to customary regulatory approvals, but we anticipate that process will be smooth, and we look forward to a seamless transition of interest. This represents a milestone in our divestment of our personal lives. With that, I'll turn it over to Lana Castle to go over more specific financial results.

Robert Daniel Peed: Closing is subject to customary regulatory approvals, but we anticipate that process will be smooth and we look forward to a seamless transition of integral this represents a milestone in our divestment of our personal lines operations.

Robert Daniel Peed: With that I will turn it over to Lana Castle to go over more specific financial results.

Lana Kassel: Thank you, Dan, and hello. I'm Lana Kassel, Chief Financial Officer of American Coastal Insurance Corporation, and I'll provide a financial update, but I encourage everyone to review the company's press release, earnings and investor presentations, and Form 10-Q for more information regarding our performance. As reflected on page 4 of the earnings presentation, American Coastal had a strong quarter with a net income of $23.6 million. Core income was $24.3 million, which is a decrease of $6.4 million year-over-year as a result of the high CDEUR premium from the 40% gross catastrophic quarter share, which was effective June 1, 2023.

Svetlana Castle: Thank you, Dan and Hello, I'm, Glenn <unk>, Chief Financial Officer of American both to Insurance Corporation, and I will provide a financial update but encourage everyone to review the company's press release earnings and Investor presentation, and Form 10-Q, one formation garden outperformance.

Lana Kassel: Is it reflected on page four of the earnings presentation Medical <unk> still had a strong quarter with a net income of $28 6 million or income was $24 3 million, which is a decrease of $6 4 million year over year.

Lana Kassel: As a result of higher ceded earned premium from the 40% gross catastrophe quarter share, which was effective June <unk> 'twenty to 'twenty two.

Lana Kassel: Gross premium written, however, increased $10.4 million from Q1 2023 to $197.5 million, and gross premium earned grew $24.3 million to $168.8 million due to improved adequacy and valuation in commercial and personal lines. Our combined ratio was 58.3%, which is a 4-point improvement from 62.3% in the same period last year. We are very pleased with this result.

Lana Kassel: Gross premium written however, increased 10.1 million from Q1 2023 to $197 5 million and gross premiums earned were $24 3 million to 168 8 million due to an improved rate adequacy and lineation of commercial and personal lines.

Lana Kassel: Our combined with sure what's you've to eight 3%, which is a four point improvement conflicts ticked up one 3% in the same period last year. We are very pleased with this result. This improvement is due to a decrease in that expense very sharp or eight 2% offset by an increase in net loss ratio of two.

Lana Kassel: This improvement is due to a decrease in net expense ratio of 8.2%, offset by an increase in net loss ratio of 4.2%. The increase in net loss ratio is driven by catastrophe losses in our personal life. As Dan mentioned, we continue to experience favorable prior year development and feel very good about our reserve position. As shown on page 5 of our presentation, operating expenses decreased $13.8 million. This was primarily driven by $15.2 million, or a 56.3% decrease in policy acquisition costs to $11.8 million from $27 million due to an increase in seeding commission income as a result of the 40% quota share mentioned earlier.

Lana Kassel: 2% increase in net loss ratio is driven by catastrophe losses in our personal lines.

Lana Kassel: Jim mentioned, we continued to experience favorable prior year development and feel really good about our reserve position.

Lana Kassel: As shown on page five of our presentation operating expenses decreased $13 8 million that this was primarily driven by a $15 2 million to six 3% decrease as bullish as acquisition cost to $11 8 million from 27 million due to an increase in ceding Commission income as a result of the 40% quota share I mentioned earlier.

Lana Kassel: This was partially offset by increased external management fees and premium taxes related to the company's increased commercial alliance growth rate in premiums. Despite the significant change in CEDAW premium, earnings before tax were close to last year.

Lana Kassel: This was partially offset by increased external management fees and premium taxes related to the company's increased commercial lines gross written premium.

Lana Kassel: Despite the significant change in ceded premium earnings before tax were close to last year $31 2 million for the three months ended Q1 going into 24 compared to $33 8 million for the three months ended Q1 'twenty to 'twenty three.

Lana Kassel: $31.2 million for the three months ended Q1 2024 compared to $33.8 million for the three months ended Q1 2023. Going to the segment results shown on page 6, we are happy to report that personal lines were profitable. Personal lines operating expenses benefited from the collection of $2.5 million of return agent commissions that had a full valuation allowance against the receivable. Commercial lines, which is our core product, had pre-tax earnings of $32.7 million.

Lana Kassel: Going to the segment results shown on page six where hyperthermia import that personal lines book profitable for us.

Lana Kassel: And the lines operating expenses benefited from the collection of $2 5 million downloaded torn agent commissions that kind of.

Lana Kassel: Blue aviation allowance against the receivable.

Lana Kassel: Personal lines, which is our core product had pretax earnings of $32 7 million.

Lana Kassel: Page 7 shows balance sheet highlights. Cash and investments grew 36.7% to $504 million, reflecting the company's strong liquidity position with an increase in cash of $131.6 million. Stockholders' equity increased 20.9% to $204 million as a result of the company's profitability in the first quarter. Book value per share is $4.27, an 18.3% increase from year-end. High liquidity and stronger capitalization resulted in a significant improvement to our leverage ratio. I'll now turn it over to Brad Martz.

Lana Kassel: Seven shows balance sheet highlights cash and investments grew 36, 7% to 504 million, reflecting the company's strong liquidity position with increase in cash of $131 6 million.

Bennett Bradford Martz: Stockholders equity increased 29%, who do hundreds informed me that if it is also the company's profitability in the first quarter was for sure is 427, and a 10, 3% increase from year end.

Bennett Bradford Martz: High liquidity and stronger the delegation resulted in significant improvement to our leverage ratios on our kind of toward the brand remarks.

Bennett Bradford Martz: Thank you, Lana. Today, I'll provide a brief underwriting update and also discuss our pending catastrophe reinsurance program renewal on page 8 of our earnings presentation. It illustrates the enforced premium and exposure trends for our commercial business. Year over year, our premiums in force were up about 16%, and our exposures were down 19%. During the first quarter, policies and total insured value decreased slightly, with our account retention near our target, but new business was lower than expected due to our firm underwriting stance on pricing.

Bennett Bradford Martz: Thank you Lana.

Bennett Bradford Martz: I'll provide a brief underwriting update and also discuss our pending catastrophe reinsurance program renewals.

Bennett Bradford Martz: On page eight of our earnings presentation.

Bennett Bradford Martz: It illustrates the enforced premium and exposure trends for our commercial business year over year, our premiums in force were up about 16% and our exposures were down 19%.

Bennett Bradford Martz: During the first quarter policies and total insured value decreased slightly.

Bennett Bradford Martz: With our account retention near our target, but new business was lower than expected due to our firm underwriting stance on pricing.

Bennett Bradford Martz: This resulted in an average effective rate change of 4.3% across our enforced portfolio during Q1 and a nearly 8% improvement in our PML to premium ratio, which supports our assertion that the risk return profile remains very attractive. On page 9 of our presentation, this is intended to show that market conditions remain favorable for underwriting profitability. We continue to push hard on insurance valuations with an average increase of 8.5% during the quarter.

Bennett Bradford Martz: This resulted in an average effective rate change of four 3% across our in force portfolio during Q1.

Bennett Bradford Martz: And a nearly 8% improvement in our P&L to premium ratio, which supports our assertion that the risk return profile remains very attractive.

Bennett Bradford Martz: On page nine of our presentation.

Bennett Bradford Martz: This is intended to show that market conditions remain favorable for underwriting profitability. We continue to push hard on insurance valuations with an average increase of eight 5% during the quarter.

Bennett Bradford Martz: The adoption of higher deductibles was impacted by our decision to pause the 7.5% and 10% wind deductible offerings until a revised regulatory filing was completed. This has now been fixed, and we will continue to push the appropriate terms and conditions when and where appropriate.

Bennett Bradford Martz: The adoption of higher deductibles was impacted by our decision to pause the seven and a half and 10% wind deductible offerings until a revised regulatory filing was completed.

Bennett Bradford Martz: This has now been fixed and we will continue to push the appropriate terms and conditions, when and where appropriate.

Bennett Bradford Martz: Switching over to personal lines, page 10 of our earnings presentation shows the renewal, business rate, and account retention trends for the last six quarters, which are helping drive improvement in underwriting results. Retention in the first quarter was very strong at nearly 92 percent, despite the impact of double-digit average rate increases for policies renewed. Overall, our policy count and total insured value were flat compared to year-end, but with average premiums up, we also saw improvements in our risk-adjusted metrics, with PML to premium and average annual loss to premium, each improving about 4% during the current quarter.

Bennett Bradford Martz: Switching over to personal lines page 10 of our earnings presentation shows the renewal.

Bennett Bradford Martz: Business right and account retention trends for the last six quarters, which are helping drive improvement in underwriting results retention in the first quarter was very strong at nearly 92%. Despite the impact of double digit average rate increases for policies renewed.

Bennett Bradford Martz: Overall, our policy count and total insured value was flat compared to year end, but with average premiums up we also saw improvements in our risk adjusted metrics with P&L, the premium and average annual loss premium each improving about 4% during the current quarter.

Bennett Bradford Martz: Finally, I'd like to touch on the highlights of our projected catastrophe reinsurance renewals on June 1, 2024. Pages 11 and 12 of our presentation show our projected reinsurance towers and our expectations for American Coastal Insurance Company and Interboro Insurance Company. As of today, we have secured over 90% of the total limit being sought, and the placement is progressing in line with our expectations. Our primary goals for this upcoming hurricane season are threefold.

Bennett Bradford Martz: Finally, I'd like to touch on the highlights of our projected catastrophe reinsurance renewals at June one 2024.

Bennett Bradford Martz: Pages, 11, and 12 of our presentation show, our projected reinsurance towers and our expectations for American coastal insurance company, an integral insurance company.

Bennett Bradford Martz: As of today, we have secured over 90% of the total limit being sought in the placement is progressing in line with our expectations.

Bennett Bradford Martz: First, we want to increase overall protection. Second, we want to improve cost efficiency. And third, we want to maintain retentions that are similar as a percentage of our capital from the expiring program, along with those retentions being less than our underwriting profit before an event in any typical quarter. I believe we will achieve all three this year. For American Coastal, we're seeking to purchase roughly $265 million more limit from the private market this year, which will stretch our exhaustion point up closer to $1.2 billion for the 208-year return time compared to the expiring program of 167-year return time as estimated by the AIR hurricane model. $200 million of the additional open market limit was secured in a new three-year catastrophe bond that closed in April.

Bennett Bradford Martz: Our primary goals for this upcoming hurricane season.

Bennett Bradford Martz: Are threefold first we want to increase the overall protection.

Bennett Bradford Martz: Second we want to improve cost efficiency.

Bennett Bradford Martz: And third we want to maintain retentions that are similar as a percentage of our capital from the expiring program along with.

Bennett Bradford Martz: Those retentions being less than I don't know.

Bennett Bradford Martz: Our underwriting profit before an event in any typical quarter.

Bennett Bradford Martz: I believe we will achieve all three this year.

Bennett Bradford Martz: For American coastal we're seeking to purchase roughly 265 million more.

Bennett Bradford Martz: Limit from the private market this year, which will stretch or exhaustion point up closer to $1 2 billion.

Bennett Bradford Martz: Or the 208 year return time compared to the expiring program of 167 year return ton as estimated by the AAR Hurricane model.

Bennett Bradford Martz: $200 million of the additional open market limit was secured in a new three year catastrophe bond that closed in April.

Bennett Bradford Martz: And, as Dan mentioned, the most significant change will be the reduction of our quota share from 40% to 20%. The net result of that... will be a material increase in net premiums earned, partially offset by higher net losses, as we retain more of those, and higher policy acquisition costs, as we see a decrease in seating commissions during the treaty year from June 1st, 2024 through May 31st, 2025, as we seek to retain more of our gross underwriting margins.

Bennett Bradford Martz: And as Dan mentioned, the most significant change will be the reduction of our quota share from 40% to 20%.

Bennett Bradford Martz: The net result of that will.

Bennett Bradford Martz: It will be a material increase in net premiums earned partially offset by higher net losses as we retain more of those.

Bennett Bradford Martz: Higher policy acquisition costs as we see a decrease in ceding commissions during the treaty year from June one 2024 through May 31 2025.

Bennett Bradford Martz: As we seek to retain more of our gross underwriting margin.

Bennett Bradford Martz: We intend to keep the statutory insurance company's retention at $10 million but increase our captives' first event retention from 2.3 million to approximately 10 million and reduce our second event retention to only 10 million. For Interboro, the exhaustion point will look very similar to the expiring program, despite our exposure base being down about 17% year-over-year at September 30th, 2024, and our retention will be reduced from three million to two and a half million.

Bennett Bradford Martz: We intend to keep the statutory insurance companies retention at $10 million.

Bennett Bradford Martz: But increase our captives first event retention from $2 3 million to approximately $10 million.

Bennett Bradford Martz: And reduce our second event retention to only $10 million.

Bennett Bradford Martz: For into borough the exhaustion point will look very similar to the expiring program. Despite our exposure base being down about 17% year over year at September 32024.

Bennett Bradford Martz: And our retention will be reduced from 3 million to two and a half million.

Bennett Bradford Martz: We expect to have both towers fully placed well before June 1st, and we will provide more information on the final limits, retentions, and costs once both programs have been completed. That completes our prepared remarks for today, and we are now happy to take any questions.

Bennett Bradford Martz: We expect to have both towers fully placed well before June 1st and we will provide more information on the final limits retentions and costs once both programs have been completed.

Bennett Bradford Martz: Yeah.

Bennett Bradford Martz: That completes our prepared remarks for today and we are now happy to take any questions.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 to remove a question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for any questions. And the first question comes from the line of Greg Peters with Raymond James. Please proceed with your question.

Speaker Change: We will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the queue. You May press star two to remove a question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Charles Gregory Peters: One moment, please while we poll for any questions.

Operator: And the next day and the first question comes from the line of Greg Peters with Raymond James. Please proceed with your question.

Charles Gregory Peters: Yeah, hey, good afternoon. This is a sit-on for Greg.

Charles Gregory Peters: Yeah, Hey, good afternoon. This is sid on for Greg.

Sid: I'm hoping you could expand on what you're seeing from a competition perspective in your commercial lines business and how you would expect that to affect rate increases for the balance of the year.

Charles Gregory Peters: Hoping you could expand on what you're seeing from a competition perspective in your commercial lines business and how you would expect that to affect rate increases for the balance of the year.

Robert Daniel Peed: Yeah, thanks, Sid. This is Dan.

Sid: Yeah. Thanks, Ted this is Dan.

Robert Daniel Peed: We do see more competition than we did last year, but we saw almost no competition last year. So I would term the market as being firm and firm at a good level. [inaudible] Some competitors, peers around the edges. In general, they do not have a big impact on our portfolio, our renewal retention rates, and our renewal retention rates have stayed strong and actually have even been better in Minnesota.

Dan: We do see more competition than we did.

Robert Daniel Peed: Last year.

Robert Daniel Peed: But we saw almost no competition last year, so I would I would term the market is being firm.

Robert Daniel Peed: And firm at.

Robert Daniel Peed: Rate adequate very rate adequate levels, our business is quite specialized though and while there are.

Robert Daniel Peed: Some.

Robert Daniel Peed: <unk> peers around the edges.

Robert Daniel Peed: In general.

Robert Daniel Peed: They do not have a big impact on our portfolio our renewal retention rates.

Robert Daniel Peed: Our renewal retention rates.

Robert Daniel Peed: <unk> has stayed strong and actually I have even been better in.

Robert Daniel Peed: March and April.

Robert Daniel Peed: And then they were early earlier in the year.

Sid: Okay, and then as my follow-up, I believe you guys have said in the past that you target a 65% underlying combined ratio, and I'm just curious if that's still the right bogeyman to use for this year, given the strong results this quarter in the projected CAT reinsurance program.

Robert Daniel Peed: Okay, and then as my follow up I believe you guys have said in the past that your target of 65% underlying combined ratio and just curious if that's still the right bogey to use for this year just given the strong results this quarter and the projected cat reinsurance program.

Robert Daniel Peed: This is Dan again. I think 65% is our target considering our reinsurance costs and the other factors in the market right now. We're very happy to have it lower, you know, in the high 50s, but I don't know that we would change our target for that right now. But I expect that at this point in the cycle, we probably will continue to have a strong combined and underlying combined.

Dan: This is Dan again.

Robert Daniel Peed: I think 65% is our is our targeted considering our <unk>.

Sid: Okay, thanks for the answers.

Robert Daniel Peed: Our reinsurance costs and the other factors in the market right now, we're very happy to have it lower in the high Fifty's.

Sid: But I don't know that we would change our our target for that right now, but I expect that.

Sid: At this point in the cycle.

Sid: We probably will continue to have a strong.

Sid: Combined and underlying combined ratio.

Sid: Okay. Thanks for the answers.

Speaker Change: Thank you.

William J. Dezellem: And the next question comes from the line of Bill Dezellem with Titan Capital. Please proceed with your question.

Sid: And the next question comes from the line of Bill does element with Titan Capital. Please proceed with your question.

William J. Dezellem: Thank you. Relative to the reinsurance renewal, you share a fair amount of information, but would it be correct to interpret that as the reduction in seeding, and seeded commissions from 40% to 25% to be the single biggest profit impact on the business as we move forward after June 1?

William J. Dezellem: Thank you relative to the reinsurance renewal.

William J. Dezellem: You you share a fair amount of information, but would it would it be correct to interpret that as the reduction in seeding the ceded commissions from 40% to 25 to be the single biggest prop.

William J. Dezellem: Profit impact on the business as we move forward.

William J. Dezellem: After June one.

Bennett Bradford Martz: Hi Bill, this is Brad. I'll take that one. Yeah, I think that it's probably fair to say that it will have the single most significant impact on the bottom line as we take back, you know, 20% of our gross premiums earned on a go-forward basis. That's a lot of premium. So, obviously, it's going to drive total revenues year over year, and it's going to help drive a net margin, given where the combined ratio is because, proportionally...

William J. Dezellem: Hi, Bill this is Brad I'll take that one.

Bennett Bradford Martz: Yeah, I think that's.

Bennett Bradford Martz: Probably fair to.

Bennett Bradford Martz: To say that it will have the.

Bennett Bradford Martz: The single most significant impact on bottom line.

Bennett Bradford Martz: As we take back 20% of our our gross premiums earned on a go forward basis. That's that's a lot of Permian. So obviously, it's going to drive total revenues year over year, and it's going to help drive and a net margin of <unk>.

Bennett Bradford Martz: Given the where the combined ratio is.

Bennett Bradford Martz: Proportionately.

Bennett Bradford Martz: Proportional reinsurance gets quite expensive the better the combined ratio, so we're happy to continue to have a great strategic quota share partner on our panel. You know, we will continue to use Kodoshare when and where appropriate, but certainly eating more of our own cooking was the goal with that change.

Bennett Bradford Martz: Proportional reinsurance you know gets quite expensive the better the combined ratio.

Bennett Bradford Martz: So we're happy to continue to.

Bennett Bradford Martz: Have a great strategic quota share partner on our panel and.

Bennett Bradford Martz: We.

Bennett Bradford Martz: We will continue to use quota share when and where appropriate but.

Bennett Bradford Martz: Certainly eating more of our own cooking was the goal would that change.

William J. Dezellem: Well, I was going to or should congratulate you on the quarter, but certainly that will be a big swing factor, a favorable swing factor going forward. I do want to..., talk about a couple of numbers sequentially, if we could please. So versus the Q4, first of all, your net premiums earned were up significantly. I believe 24%, 69 million versus 56 million. Would you discuss what led to that big increase versus

Speaker Change: Right, Okay, well I was going to or I should congratulate you on the quarter, but certainly that are that will be a big swing factor favorable swing factor going forward I do want to.

William J. Dezellem: Talk about a couple of numbers sequentially. If we could please so versus the Q4 first of all your net premiums earned were up significantly I believe 24% to 69 million versus 56 million would you discuss what led to that that big increase versus.

William J. Dezellem: Ah versus the Q4.

Bennett Bradford Martz: Yeah, just continue. We have a stronger premium production period in the first quarter. Our best quarter is generally the second quarter. But, you know, it's the cumulative impact of underwriting actions taken both in purse lines and commercial lines. So, continuing to see forward positive movement on average rates. And those, you know, we'll be continuing to earn through throughout most of this year.

Speaker Change: Yes, just continue we have a stronger.

Bennett Bradford Martz: Premium production period and in the first quarter, our best quarter is generally the second quarter, but you know.

Bennett Bradford Martz: It's the cumulative impact of of underwriting actions taken both in personal lines and commercial lines. So continuing to see forward a positive movement on average our.

Bennett Bradford Martz: Average rates and those are.

Bennett Bradford Martz: We will be continuing to earn in throughout most of this year.

William J. Dezellem: Okay, Brad, so maybe I'm going to expose my ignorance here, but premiums weren't up 24%, or the rate wasn't up 24% sequentially, was it?

Speaker Change: Okay, Brad so maybe I'm going to expose my ignorance here, but premiums werent up 24% our rate wasn't up 24%.

Brad: Sequentially was it.

Bennett Bradford Martz: Will premiums earn lag rates?

Brad: Premiums earned lag written.

William J. Dezellem: My apologies, thank you. And then the policy acquisition costs in Q1 were down from the Q4 level. Would you talk about that sequential change also, please?

Brad: Ah Okay. My apologies. Thank you and then the policy acquisition costs in Q1, our or down from the from the Q4 level would you talk about that sequential change also please.

Bennett Bradford Martz: Sure, the one big change there, Lana mentioned, and we had a recovery on the personal line side that helped improve our combined ratio pretty significantly, over 30 points, in personal lines relative to a clawback of unearned agent commissions that helped boost personal lines results through a reduction of policy acquisition costs because we had previously not recognized any of the accounts receivable associated with those return commission obligations due to uncertainty of collection. But we've been very successful so far in pursuing those balances.

Brad: Sure the one big change there Lana mentioned and we.

Bennett Bradford Martz: We had a oh.

Bennett Bradford Martz: Our recovery and on the personal line side that helped improve our combined ratio pretty significantly over 30 points and personal lines.

Bennett Bradford Martz: Relative to claw back of honor in agent commissions that that helped boost.

Bennett Bradford Martz: Personal lines results through a reduction of policy acquisition costs.

Bennett Bradford Martz: We had previously not rare.

Bennett Bradford Martz: Our recognized any of the the accounts receivable associated with.

Bennett Bradford Martz: Those return and commission obligations due to uncertainty of collection, but we've been very successful so far and in and pursuing those balances. We we worked.

Bennett Bradford Martz: We worked a long time with our regulators and the receiver to gain approval to collect those amounts, and the fruits of our labor were starting to pay off in the first quarter. But I would pretty much characterize that as mostly non-recurring.

Bennett Bradford Martz: A long time with.

Bennett Bradford Martz: With our.

Bennett Bradford Martz: Our regulators and the receiver to gain approval to two <unk>.

Bennett Bradford Martz: Collect those amounts and.

Bennett Bradford Martz: So our label.

Bennett Bradford Martz: Starting to pay off in the first quarter, but I would pretty much characterize that as is mostly nonrecurring.

William J. Dezellem: And finally, congratulations on the sale of Interboro. I don't believe the press release identified the timeline for closing. When do you anticipate that to be?

Speaker Change: Great. Thank you and finally I congratulations on the sale of inter burrow.

William J. Dezellem: Don't believe the press release identified the timeline of closing.

Speaker Change: When when do you anticipate that to be.

William J. Dezellem: Yeah.

Bennett Bradford Martz: We would expect to file our... change control application paperwork with the state of New York here in the next, you know, 30 days. It can take anywhere from six to twelve months, so, you know, we're really going to push hard for a year-end transaction closing, so that would be the ideal time for both parties, so that's our goal. Thank you.

William J. Dezellem: We would expect to file our.

Bennett Bradford Martz: A change of control application paperwork with the state of New York here in the next.

Bennett Bradford Martz: 30 days and.

Bennett Bradford Martz: It can take anywhere from six to 12 months. So we're really going to push hard for a year and transaction closings so that.

Bennett Bradford Martz: That would be the ideal time for both parties. So that's our goal.

William J. Dezellem: Great, thank you for the time, and congratulations again on a great quarter.

Speaker Change: Great. Thank you for the time and congratulations again on a great quarter.

Speaker Change: Thank you Youre welcome.

Operator: There are no further questions at this time, and I would like to turn the floor back over to Dan for any closing comments.

Speaker Change: There are no further questions at this time and I would like to turn the floor back over to Dan for any closing comments.

Robert Daniel Peed: Okay, thank you, and thanks to everyone on the call for your time, and thanks for your interest in our company. And with that, we'll end the call. Thanks again.

Dan: Okay. Thank you and thanks, everyone on the call for your time and thanks for your interest in our company.

Dan: And with that within the call. Thanks again.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

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