Q4 2024 American Coastal Insurance Corp Earnings Call
Operator: Greetings and welcome to the American Coastal Insurance Corporation earnings call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad.
Greetings and welcome to the American Coastal Insurance Corporation earnings call. At this time, all participants are in a listen only mode.
And what should require operator assistance. Please press star zero on your telephone keypad.
Operator: A question and answer session will follow the formal presentation. You may press star one to be placed into question queue at any time. As a reminder, this conference is being recorded.
A question and answer session will follow the formal presentation. He.
You May press star one to be placed in the question queue at any time.
As a reminder, this conference is being recorded its now my pleasure to turn the call over to your host Karen Daily Vice President with the equity group and American coastal is Investor Relations Representative. Please go ahead Kerry.
Karin Daly: It's now my pleasure to turn the call over to your host, Karin Daly, Vice President with the Equity Group and American Coastal's Investor Relations Representative. Please go ahead, Karin. Thank you, Kevin. And good afternoon, everyone.
Karen Daily: Thank you Kevin and good afternoon, everyone American coastal insurance Corporation has also made this broadcast available on its website at www Dot am coastal dot com.
Karin Daly: American Coastal Insurance Corporation 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. Additionally, you can find copies of the latest earnings release and presentation in the investor relations section of the company's website.
Karen Daily: A replay will be available for approximately 30 days following the call. Additionally, you can find copies of our latest earnings release and presentation in the Investor Relations section of the company's website.
Karin Daly: Speaking today will be President and Chief Executive Officer Bennett Bradford Martz and Chief Financial Officer Svetlana Castle. 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. 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 the company's filings with the U.S.
Speaker Change: Speaking today will be president and Chief Executive Officer, Bennett, Rockford Mart, and Chief Financial Officer said lot of castle.
Speaker Change: 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.
Speaker Change: 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 implied by the forward looking statements.
Speaker Change: Factors that could cause actual results to differ materially may be found in the companys filings with the U S Securities Exchange Commission in the risk factors section of the most recent annual report on Form 10-K, and subsequent quarterly reports on Form 10-Q.
Karin Daly: Securities Exchange Commission in the risk factors section of the most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q.
Karin Daly: 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.
Speaker Change: 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 with that it's my pleasure to turn the call over to Brad Martz Brad.
Bennett Martz: With that, it's my pleasure to turn the call over to Brad Martz. Hello and welcome to American Coastal's fourth quarter 2024 earnings call. Today, I'll provide an operational and strategic update and then turn it over to our CFO, Lana Castle, for more specifics on our fourth quarter and full year results, along with our expectations for 2025.
Speaker Change: Hello, and welcome to American coastal <unk> fourth quarter 2024 earnings call.
Brad Martz: Today, I'll provide an operational and strategic update and then turn it over to our CFO Lana Castle for more specifics on our fourth quarter and full year results along with our expectations for 2025.
Bennett Martz: American Coastal continued to perform very well in the fourth quarter and despite a full retention loss from Hurricane Milton, we remain profitable. and I could not be more optimistic about our future.
Brad Martz: American coastal continued to perform very well in the fourth quarter.
Brad Martz: And despite a full retention loss from hurricane Milton we remain profitable.
Brad Martz: And I could not be more optimistic about our future.
Bennett Martz: In December, we successfully launched a new apartment program in Florida, and our team worked extremely hard to build out the technological and distribution capabilities to underwrite apartments, and these efforts are already starting to pay off. As of today, American Coastal has written 19 new apartment risks, totaling approximately $2.3 million of premium. Most of that exposure is less than 10 years old, with some being brand new. And most risks are located outside of our peak zones for condos, helping improve our spread of risk. The company has received hundreds of high quality submissions from our distribution partners, but we are being very selective with what we've added to our risk portfolio.
Brad Martz: In December.
Brad Martz: We successfully launched a new apartment program in Florida, and our team worked extremely hard to build out the technological and distribution capabilities to underwrite apartments and these efforts are already starting to pay off.
Brad Martz: As of today American.
American coastal his written 19, new apartment risk totaling approximately $2 3 million of Permian.
Brad Martz: Most of that exposure is less than 10 years old with some being brand new.
Brad Martz: And most risks are located outside of our peak zones for condos, helping improve our spread of risk.
Brad Martz: The company has received hundreds of high quality submissions from our distribution partners, but.
Brad Martz: But we are being very selective with what we've added to our risk portfolio.
Bennett Martz: Premium generation is the easy part of our business. Underwriting profit is the goal and we remain laser focused on that as our primary objective for all new business.
Brad Martz: Premium generation is the easy part of our business underwriting profit is the goal and we remain laser focused on that as our primary objective for all new business.
Bennett Martz: During the fourth quarter, I was very pleased to see new business growth. along with renewal account retention being better than expected. These metrics, combined with our policy assumption from citizens, resulted in ACIC growing its policy count sequentially quarter over quarter. Further, by retaining more of our business using less quota share, we were able to grow total revenues nearly 55% year over year in Q4. Rates are continuing to decrease due to favorable trends in loss and reinsurance costs, but deductible levels and valuations are holding firm, which creates opportunity for us to grow and maintain our underwriting margin.
Brad Martz: During the fourth quarter I was very pleased to see new business growth.
Brad Martz: Along with renewal account retention being better than expected. These.
Brad Martz: These metrics combined with our policy assumption from citizens resulted in a CIC growing its policy count sequentially quarter over quarter.
Brad Martz: Further by retaining more of our business using less quota share we were able to grow total revenues nearly 55% year over year in Q4.
Rates are continuing to decrease due to favorable trends in loss in reinsurance cost, but deductible levels and valuations are holding firm, which creates opportunity for us to grow and maintain our underwriting margins.
Bennett Martz: Next, I'd like to highlight American Coastal's accomplishments enhancing our reinsurance protection. Prior to year-end, the company placed a new three-year catastrophe bond at the top of our core catastrophe reinsurance program that was upsized from $100 million to $200 million and priced well below the expected range. We did this in advance of our 6-1 renewal because of the attractive terms and pricing available at that time. This new top layer also includes a cascading or drop-down feature. for potential second and third hurricane events that has previously not been available to us in the market. at least not since 2020.
Brad Martz: Next I'd like to highlight American coastal accomplishments enhancing our reinsurance protections.
Brad Martz: Prior to year end the company placed a new three year catastrophe bond at the top of our core catastrophe reinsurance program.
Brad Martz: It was upsized from 100 million to 200 billion and priced well below the expected range.
Brad Martz: We did this in advance of our six one renewal because of the attractive terms and pricing available at that time.
Brad Martz: This new top layer also includes a cascading or dropdown feature for.
Brad Martz: For potential second and third hurricane events that has previously not been available to us in the market.
Brad Martz: At least not since 2020, so we're very grateful to have obtained this more robust coverage.
Bennett Martz: So we're very grateful to have obtained this more robust coverage. At January 1st, we also successfully renewed our All Other Perils or AOPCAT program, which protects against non-hurricane catastrophe events, such as tornado and hailstorms. That was completed with a modest improvement in terms. including reducing our retention approximately 37% from $14.25 million to $9 million before tax. We had a similar experience at February 1st with our Excess Per Risk Reinsurance Program, which protects against non-catastrophe peril such as fire. also reducing our retention about 38% from 6.5 million to just 4 million before tax.
Brad Martz: At January one we also successfully renewed our all other perils our E O P cat program, which protects against non hurricane catastrophe events, such as tornado and hail storms.
Brad Martz: That was completed with a modest improvement in terms.
Brad Martz: Including reducing our retention approximately 37% from 14.25 million.
Brad Martz: The 9 million before tax.
Brad Martz: We had a similar experience at February 1st with our excess per risk reinsurance program, which protects against non catastrophe perils such as fire.
Brad Martz: Also reducing our retention at about 38% from $6 5 million to just $4 million before tax.
Bennett Martz: However, the real headline for the period was the placement of a new catastrophe aggregate or CATAG program designed to reduce potential earnings volatility. The purpose of the CAT-AGG is to reduce the probability of our annual net losses from catastrophes exceeding 40 million during 2025. History would suggest it's unlikely American Coastal will feed any losses to the catag, but if the frequency and severity of hurricanes and non-hurricane cat events increases. This program should respond and protect future expected earnings. For the full year 2024, our pre-tax income was approximately $102 million, up nearly 6% year-over-year, despite having incurred $23 million more in net catastrophe losses.
Brad Martz: However, the real headline for the period was the placement of a new catastrophe aggregate or Cat AG program designed to reduce potential earnings volatility.
Brad Martz: The purpose of the Cat AG is to reduce the probability of our annual net losses from catastrophes exceed.
Brad Martz: Exceeding 40 million during 2020 Fox Hill.
Brad Martz: History would suggest it's unlikely American coastal feed any losses to the cafe, but it's the frequency and severity of hurricanes and non hurricane cat events increases.
Brad Martz: This program should respond and protect future expected earnings.
Brad Martz: For the full year 2024, our pretax income was approximately $110 million.
Brad Martz: Up nearly 6% year over year, despite having incurred 23 million more in that catastrophe losses.
Bennett Martz: Even with Hurricane Milton in Q4, American Coastal will remain profitable. and that Cat 3 hurricane event was absorbed within a single quarter's profits, which we've stated previously is our target.
Brad Martz: Even with Hurricane Milton Q4 American coastal remain profitable.
Brad Martz: That cat three hurricane event was absorbed within a single quarter's profits, which we've stated previously is our target.
Brad Martz: Yeah.
Bennett Martz: ACIC Strong Annual Earnings. produced an exceptional 57.4% return on beginning equity. The company starts 2025 with approximately $236 million of stockholders equity. And given our previous earnings guidance for this year, which we are now reiterating, that implies an expected return on beginning equity of over 30%, inclusive of all cap losses for this year. Net losses incurred will ultimately drive our actual results for 2025, but the risk transfer enhancements added should provide more certainty and less volatility around our performance.
Brad Martz: E C I see strong annual earnings.
Brad Martz: Produced an exceptional 57, 4% return on beginning equity.
Brad Martz: The company starts 2025 was approximately 236 million.
Brad Martz: Stockholders equity.
Brad Martz: And given our previous earnings guidance for this year, which we are now reiterating that implies unexpected return on beginning equity of over 30% inclusive of all cat losses for this year.
Brad Martz: Net losses incurred will ultimately drive our actual results for 2025.
Brad Martz: But the risk transfer enhancements added shouldn't provide more certainty.
Brad Martz: Volatility around our performance.
Svetlana Castle: And with that, I would like to now turn it over to Lana. Thank you, Brad, and hello. I'm Lana Castle, Chief Financial Officer of American Coastal Insurance Corporation, and I will provide a financial update, but encourage everyone to review the company's press release, earnings and investor presentations, and Form 10-K for more information regarding our performance. As reflected on page 5 of the earnings presentation, American Coastal had a profitable quarter despite a full retention from Hurricane Milton, with net income of $4.9 million. Core income was $6 million, a decrease of $12 million year-over-year as a result of $20.53 tax retention from Milton, partially offset by lower seeded earned premiums from the step-down of our gross catastrophe quarter share from 40% to 20%, effective June 1, 2024.
Brad Martz: And with that.
Kalana Lana: I would like to now turn it over Kalana Lana.
Thank you, Brad and Hello, Atlanta Castle, Chief Financial Officer of American Coastal Insurance Corporation, and I will provide the financial update but encourage everyone to review the company's press release earnings and Investor presentations and Form 10-K for more information regarding our performance.
Kalana Lana: As reflected on page five of the earnings presentation American coastal had a profitable quarter. Despite the full attention from hurricane you'll done with net income of $4 9 million.
Core income was $6 million, a decrease of 12 million year over year as a result of point to point twice, the ducks and attention from Milton.
Kalana Lana: Partially offset by lower ceded earned premiums from the step down of our both catastrophe quota share from 40% to 20% effective June 1st 'twenty to 'twenty four.
Svetlana Castle: Page 6 of the presentation shows that gross premium earned grew $3.6 million to $162.7 million. Our combined ratio was 91.9%. Hurricane Milton dropped 27.8% of this ratio. Our non-GAAP underlying combined ratio, which excludes current year catastrophe losses and prior year development, was 65.9%. And our 2024 full-year combined ratio was 67.5%, in line with our 65% target. Our reserve position remains strong. As shown on page 6 of our presentation, operating expenses increased $15.1 million. This was primarily driven by a $13.4 million increase in policy acquisition costs due to a decrease in seeding commission income as a result of the quarter share stepdown mentioned earlier and increased MGA fees paid related to our premium growth quarter over quarter.
Kalana Lana: Six of the presentation shows a gross premiums earned grew $3 6 million to $162 7 million.
Kalana Lana: Our combined ratio was 91, 9% hike in Milton drove Duane to seven 8% of this ratio.
Kalana Lana: Our non-GAAP underlying combined ratio, which excludes current year catastrophe losses and prior year development was 65, 9% and now appointed Duane two for full year combined ratio was 67, 5% in line with our 65% target.
Kalana Lana: Our reserve position remains strong.
Kalana Lana: As shown on page six of our presentation operating expenses increased $15 1 million.
Kalana Lana: This was primarily driven by a $13 4 million increase in policy acquisition costs due to a decrease in ceding Commission income as it is out of the quarter shifts that Don mentioned earlier and increased M. G fees paid related thought PNM growth quarter over quarter.
Svetlana Castle: General and Administrative Expenses also contributed to this increase, increasing by $1.7 million or 17.7%. These increased costs were in line with expectations and offset by the decrease in the previously mentioned seeded premiums earned and increased gross premiums earned.
Kalana Lana: General and administrative expenses also contributor to be some teeth, increasing by $1 7 million or 17, 7%.
Kalana Lana: These increased costs were in line with expectations and offset by the decrease in the previously mentioned ceded premiums on an increased gross premiums earned.
Svetlana Castle: We are very proud to have demonstrated a profitable quarter, despite Milton, proving successful initiatives to have catastrophe events be an earnings event, not an event that erodes our equity position.
Kalana Lana: We're very proud to have demonstrated that the profitable quarter. Despite Milton proven success alone and you said you have to have catastrophe events be an earnings event not in a win that the roads are equity position.
Svetlana Castle: Page 7 shows balance sheet highlights. Session investments grew 73.4% to $540.8 million, reflecting the company's strong liquidity position. Stockholders' equity increased 39.6% to $235.7 million, driven by strong underwriting results and inclusive over $24 million dividend paid to shareholders in January 2025.
Kalana Lana: Slide seven shows the balance sheet highlights.
Kalana Lana: Cash and investments grew 7% to three 4% to $540 8 million, reflecting the company's strong liquidity position.
Kalana Lana: Stockholders' equity increased 39, 6% to $235 7 million driven by strong underwriting results and inclusive or 24 point 24 million dividends paid to shareholders in January 'twenty to 'twenty five.
Svetlana Castle: Book value per share is $4.89, a 35.5% increase from year-end 2023. High liquidity and stronger capitalization resulted in significant improvement to our leverage ratios.
Kalana Lana: Book value per share is 489 and $35 five increase from year end 'twenty to 'twenty three.
Kalana Lana: High liquidity and stronger capitalization resulted in significant improvement to our leverage ratios.
Svetlana Castle: The company is in strong position to execute on its 2025 growth initiative. As Brad mentioned, our previously provided forward-looking guidance remains the same, and we project a range between $70 and $90 million of net income in 2025.
Kalana Lana: The company is in a strong position to execute on its 20 to 25 growth initiatives.
Speaker Change: Brad mentioned, our previously provided forward looking guidance remains the same and we project a range between seven to nine 2 million of net income and point to quantify.
Bennett Martz: I'll now turn it over to Brad Martz for closing remarks. Thank you, Lana. I'll conclude today by mentioning that we have received regulatory approval from the state of New York to complete the sale of Interboro.
Kalana Lana: I'll now turn the colorectal Brad Martin for closing remarks.
Brad Martin: Thank you Lana.
Brad Martin: I'll conclude today by mentioning that we have received regulatory approval from the state of New York to complete the sale of <unk>.
Bennett Martz: We have scheduled a closing date for April 1st, so one second past our drop dead date for first quarter. But all kidding aside, we're now working with the buyer on all the closing checklist items and that transaction will add approximately $22 million of cash to our holding company.
Brad Martin: We have scheduled a closing date for April one so one second past are drop dead date for first quarter.
Brad Martin: But all kidding, aside where we're now working with the buyer.
Brad Martin: Although the closing checklist items and that transaction will add approximately $22 million of cash to our holding company.
Bennett Martz: I'm honored and humbled by the opportunity to lead American Coastal into the future and want to thank each and every one of you for your participation and interest in our great That completes our prepared remarks for today's call and we are now happy to take any questions. Thank you.
I'm honored and humbled by the opportunity to lead American coastal into the future.
Brad Martin: And want to thank each and every one of you for your participation and interest in our great company.
Brad Martin: That completes our prepared remarks for today's call and we are now happy to take any questions.
Speaker Change: Thank you will now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one at this time one moment, please while we poll for questions.
Operator: And I'll be conducting a question and answer session.
Operator: If you'd like to be placed in the question queue, please press star one at this time. One moment, please, while we poll for questions.
Gregory Peters: Our first question is coming from Gregory Peters from Raymond James, your line is now live. Hey, good afternoon, everyone. I wanted to go to the Outlook or the guidance slide. And you've provided some expectations around earned premium. Just provide some color on how pricing is. You said pricing's, the pricing environments change because of the profitability. Maybe you can give us an update of how you see that evolving through the course of this year.
Speaker Change: Our first question is coming from Gregory Peters from Raymond James Your line is that right.
Gregory Peters: Hey, good afternoon, everyone.
Speaker Change: Wanted to go to the.
Gregory Peters: The outlook or the guidance slide.
Gregory Peters: And you provided some expectations around earned premium.
Gregory Peters: Just provide some color.
Gregory Peters: Color on how pricing is she said pricing.
Gregory Peters: The pricing environment has changed because of the profitability. Maybe you can give us an update of how you see that evolving through the course of this year.
Bennett Martz: Sure, I'd be happy to. Thanks for your question, Greg. pricing is changing because of expectations of future loss and reinsurance costs. So you know, with those coming down, it's it's you know, our expectation that we'll be able to pass some savings on to our policy holders so we're excited about that. I do think there are a number of reasons for that. You know, inflation moderating some of the reforms that have been enacted in Florida are absolutely having a positive effect in the market especially in terms of litigation. So there are a number of reasons why we're optimistic about the Florida marketplace today but, you know, it's not going to impact our expected profitability.
Gregory Peters: Sure I'd be happy to thanks for your question, Greg our pricing is changing because of expectations of feature.
Gregory Peters: Loss in reinsurance costs, so with those coming down it's it's.
Gregory Peters: Our expectation that we will be able to pass those savings onto our policyholders to work excited about that I do think there are a number of reasons for that you know inflation moderating some of the reforms that have been enacted in Florida are absolutely, having a positive effect in the market, especially in terms of litigation.
Gregory Peters: So there are a number of reasons why we're optimistic about the Florida marketplace today, but.
Gregory Peters: It's not going to impact our expected profitability, we're still targeting a combined ratio of 65.
Bennett Martz: We're still targeting a combined ratio of 65 before before CAAT. So margins are intact despite pricing being down between 5 and 10 percent year-over-year on the average account renewal.
Gregory Peters: Before before cat so.
Gregory Peters: Margins are intact, despite pricing being down.
Gregory Peters: Hum.
Gregory Peters: Between five and 10% year over year on the average account renewal.
Bennett Martz: Okay, and then you talked about the apartment. growth, the opportunity to grow your apartment book. Do you have sort of an aspirational target of how how much business you or how big you want that book to get? Obviously you're being very selective but I mean, longer term, do you have a mix in mind that you're thinking about? We do, absolutely. It's a good question. And back on our investor day in December, we did talk a little bit about the market opportunity being somewhere between, you know, $200 and $300 million of premium based on our analysis of the garden-style apartment complexes.
Speaker Change: Okay, and then you talked about the apartment.
Gregory Peters: Gross who has the opportunity to grow your apartment book.
Speaker Change: Do you have sort of an aspirational target of how how much business, you're how big you want that book to get obviously, you're being very selective but.
Speaker Change: Longer term do you have a mix in mind that you are thinking about.
Speaker Change: We do.
Speaker Change: Slowly.
Speaker Change: The question and back to our Investor Day in December we did talk a little bit about the market opportunity being somewhere between two and $300 million of premiums based on our analysis of the garden style apartment complexes Garden style is the same physical sort of risk.
Bennett Martz: Garden-style is the same physical sort of risk characteristics that we're writing today in our condo book. So, we're not going to stray from the secret sauce that has really worked well for us in terms of risk characteristics. The only... know an apartment as occupancy, tenant-occupied versus owner-occupied, obviously that has some potential differences in loss experience from perils like fire, which we obviously price for, but otherwise from a win perspective, which is our primary risk, the fiscal risk characteristics of the building are unchanged. We don't write liability either, so it really is just a property cover.
Characteristics that we're writing today and our condo book, So we're not going to stray from those the secret sauce that has really worked well for us in terms of risk characteristics are the only.
Speaker Change: No one apartment as occupancy tenant occupied versus owner occupied obviously that has some.
Speaker Change: Potential differences and loss experience from her apparel like fire, which we obviously price for but.
Speaker Change: Otherwise from a wind perspective.
Speaker Change: Which is our primary risk that's the physical risk characteristics of the building are unchanged. We don't write liability either so it really is just the property cover and for 2025. We stated our goal is modest at about $20 million of.
Bennett Martz: For 2025, we've stated our goal is modest at about $20 million of premium. We may exceed that, we may not, we're off to a pretty good start. We've got several quotes issued, and I expect we'll have a strong ramp-up leading up to June 1st, and then it'll quiet down, just like typical with the seasonality in our condo book. But yeah, it'll have a modest impact to earnings this year, but I think in 2026, 2027, you'll see a much larger makeshift between condos and apartments.
Speaker Change: Premium.
Speaker Change: We may exceed that we may not or we're off to a pretty good start we've got.
Speaker Change: Several quotes issued and I expect we'll have a strong ramp up leading up to June 1st and then it'll quiet down just like a typical with the seasonality in our condo book, but.
Speaker Change: Yeah, it'll it'll have a modest impact to earnings this year, but I think in 2026 2027, you'll see a much larger.
Speaker Change: Mix shift between condos and apartments.
Bennett Martz: Great.
Bennett Martz: The final question that I'll have for the call will be just. on, you know, you have been important in the insurance renewal coming up. Picking your slide deck, you talked about how the previous year your quota share was reduced from 40 to 20. Can you, you know, give us a preview on how, what kind of changes you think might happen with your reinsurance structure for the renewal? and how the pricing is on that renewal considering that you did have some losses last year. Sure, I'll do my best. It's obviously pretty early. Our team was actually in Bermuda yesterday meeting with some of our insurance partners on Tuesday and Monday as well.
Speaker Change: Great.
Speaker Change: The final question then.
Speaker Change: Okay.
Speaker Change: The call will be just.
Speaker Change:
Speaker Change: You have been important to the insurance renewal coming up.
Speaker Change: In your slide deck, you talked about how big this year your quota share just reduced from 40% to 20.
Speaker Change: Can you.
Speaker Change: Give us a preview on how what kind of changes you think might happen with your reinsurance structure works for the renewal.
Speaker Change: Hum.
Speaker Change: How the pricing is on that renewal considering that you did.
Speaker Change: Now there are some losses last year.
Speaker Change: Sure I'll do my best it's obviously pretty early our team was actually.
Speaker Change: In Bermuda yesterday meeting with some of our reinsurance partners and Tuesday on Monday as well so.
Bennett Martz: So, you know, we're actively working on the structure and the placement for mid-year. I can just tell you our goals are very similar in terms of, you know, keeping a modest retention that is, you know, absorbed within a typical quarter's earnings. We'd like to push the exhaustion point of the program up closer to the 250-year return period if we can. The expiring program, you know, was was about the 230-year according to AAR. So, that will be a little challenging with model change from both AR and RMS. We look at both. But we're off to a good start with the limit we placed in the cap-on market at the end of December.
Speaker Change: We're actively.
Speaker Change: Actively working on the structure and the placement for mid year.
Speaker Change: I can just tell you our goals are very similar in terms of keeping our.
Speaker Change: <unk> retention that is absorbed within a typical quarters earnings we'd like to push the exhaustion.
Speaker Change: Exhaustion point of the program up closer to the 250 year return period, if we can.
Speaker Change: The expiring program was was about the 230 year. According to E. R M.
Speaker Change: So that that'll be a little challenging with model change from both air and arm as we look at those but we're off to a good start with the limit we placed in the cat bond market and at the end of December so that that 200 million new layer sits on top there is essentially 800.
Bennett Martz: So, that $200 million new layer sits on top. There's essentially $800 million of open market limit that we're placing this year. $400 million is already done in the cap-on market. And the other $400 million will sit some slightly above, alongside, but most of that limit below. Cap Fund, and above our retention. So we haven't finalized our retention yet, and the Florida Hurricane Catastrophe Fund will not be done with their rate-making procedures until the end of March. And that'll finalize the attachment point of the CAT Fund, which is... instrumental in us finalizing the layering and structure.
Speaker Change: Millions of open market limit that we're placing this year 400 millions already done in the cat bond market.
Speaker Change: And the other 400 million will sit you know some slightly above alongside but most of that limit below.
Speaker Change: The Cat fund and above our retention. So we haven't finalized our retention yet and the Florida Hurricane catastrophe fund will not be done with their ratemaking procedures until the end of March and that'll that'll finalize the the attachment point of the Cat fund, which is.
Speaker Change: Instrumental and are finalizing the layering and structure. So we're still a few weeks away from having clarity.
Bennett Martz: So we're still a few weeks away from having clarity on that, but we're actively working on it and we expect to have a very, very successful renewal. Great, makes sense.
Speaker Change: Clarity on that.
Speaker Change: But we're.
Speaker Change: We're actively working on it and we expect to have a very very successful were known.
Speaker Change: Yeah.
Speaker Change: Great makes sense congratulations on your results.
Gregory Peters: Congratulations on your results. Thank you.
Speaker Change: Thank you.
Bill Dezellem: Next question is coming from Bill Dezellem from Tyaton Capital. Your line is now live. Thank you. Congratulations on a good quarter with a big gap. So, I have a couple, three questions. I'd like to start with the apartment market and make sure we're scaling this correctly, that you're referencing the size of this market that you would like to address, two to three hundred million, and would that be versus or compared to the six hundred thirty-eight million gross premiums earned in 2024? Would that be the proper reference point and characterization?
Speaker Change: Thank you. Your next question is coming from builders element from <unk> capital. Your line is now live.
Speaker Change: Alright. Thank you congratulations on a good quarter with a big cat.
Speaker Change: So.
Speaker Change: I have a couple of three questions I'd like to start with the apartment market.
Speaker Change: And make sure. We're scaling this correctly that you are referencing the size of this marketing.
Speaker Change: That you would like to address $2 million to $300 million.
Speaker Change: And would that be versus or compared to the 638 million.
Speaker Change: Gross premiums earned in 2024 would that be the trough for the <unk>.
Speaker Change: Property reference point and characterization.
Bennett Martz: Yes, it would be we ended 2024 with 646 million of in force premiums. The vast majority of that being condos, so yes, I think that's the appropriate reference point in terms of the mix between apartments. I believe in your opening remarks, Brad, you had referenced that there was a lot of work to get ready for the apartment business.
Speaker Change: Yes, it would be we ended our two.
Speaker Change: 2024 with $646 million of in force premiums.
Speaker Change: The vast majority of that being condos. So yes, I think that's the appropriate reference point in terms of the mix between apartments and condos.
Speaker Change: That's helpful and I believe in your opening remarks, Brad you had referenced.
Speaker Change: But there is a lot of work to get ready for the apartment business.
Bennett Martz: For those of us who have never run an insurance company before, could you talk to us about what was required to be ready to do this? kind of that behind-the-scenes view, please. Sure. I can give you a brief executive summary, and that really entailed first developing a product and then filing the rates, rules, and forms with our regulators in Tallahassee, getting approval for those, then building out policy administration systems to be able to, you know, price, quote, bind risk and issue policies. and also establishing our distribution network. So we have partnered with Amwins and CRC and Bridge Specialty, among others, and they are key producers for us on the condo side, so they know us very well and we know them very well.
Speaker Change: For those of US who had never run an insurance company before did you talk to us about what was required.
Speaker Change: To be ready to do this and and and.
Speaker Change: Kind of that behind the behind the scenes.
Speaker Change: Please.
Speaker Change: Sure.
Speaker Change: I can give you a brief executive summary on that that that really entailed first developing a profit.
Speaker Change: And then the filing and the rates rules and forms with our regulators in Tallahassee getting approval for those than building out.
Our policy administration system to be able to.
Speaker Change:
Speaker Change: Price quote bind risk and issue policies.
Speaker Change: And also establishing our distribution network. So we are we have partnered with am wins in CRC and Enbridge specialty among others.
Speaker Change: And they are key producers for us on the condo side. So they know us very well and we know them very well we're not.
Bennett Martz: We're not venturing into foreign territory with people who we don't know. So we know Florida, we know our producers, we know this product. We've underwritten it before. We're very comfortable with the risk, again, given that it's substantially identical to a condo, but it did require a lot of steps for us to be able to to underwrite this appropriately.
Speaker Change: Venturing into a foreign territory with with people, who we don't know so we know, Florida, we know our producers we know this product we've underwritten it before.
Speaker Change: We're very comfortable with the risk again, given that it's substantially identical to a condo, but it did require a lot of steps for us to be able to.
Speaker Change: To underwrite this.
Speaker Change: Appropriately.
Bennett Martz: And how about back office systems, was there a heavy lift to accomplish that or is it essentially the same systems? No, it was it was pretty heavy lift. I mean, we were really starting, you know, with a team that had substantial experience and in building and integrating and implementing very complex architecture, but, you know, that that was not our foray. You know, historically, 100% of our business has been produced by AmRisk. We have a fantastic partnership with AmRisk. We are not seeking to compete with AmRisk. I have to reiterate that again, but obviously we are producing some of this stuff internally.
Speaker Change: And how 'bout back office systems.
Speaker Change: It's a heavy lift to accomplish that or if there is essentially the same systems.
Speaker Change: No. It was it was a pretty heavy lift I mean, we were really starting.
Speaker Change:
Speaker Change: You know what.
Speaker Change: A team that had substantial experience and building and integrating and implementing.
Speaker Change: Very complex.
Speaker Change: Architecture, but you know that that was not our foray you know historically, 100% of our business has been produced by M risk and.
Speaker Change: With a fantastic partnership with Amyris, we are not seeking to compete with Ameren. It's gonna have to reiterate that again, but obviously we are producing some of this stuff internally and so we had to.
Bennett Martz: And so we had to do our best to replicate a lot of the activities that are on the condo book that are being done by a third party that is unaffiliated with.
Speaker Change: Do our best to replicate a lot of the activities that.
Speaker Change: On the condo book that are being done by by a third party that has an affiliated with the company.
Speaker Change: Okay.
Bennett Martz: And then one additional question on that front, if you look at a million dollars of gross premiums earned on the condo business underwritten by AmRisk versus a million dollars of gross premium written or earned on the apartment business, what is the incremental level of profitability to American Coastal now that you are doing that, the work that AmRisk does for you on the condo front? I wouldn't say there's a huge incremental level. I think we're still targeting a similar combined ratio. It's just the mix of how we get there is slightly different. So we'll trade a slightly higher loss cost for the tenant occupancy of apartments for reduced operating expenses for some of the internal efficiencies we've created doing this in-house.
Speaker Change: And then one additional question on that front, if you look at a million dollars of the growth.
Speaker Change: Gross premiums earned on the condo business underwritten by am risk versus a $1 million.
Speaker Change: Gross premiums.
Speaker Change: Written and earned.
Speaker Change: On the on the apartment business what is the.
Speaker Change: Incremental level of profitability to American coastal now that you were doing that.
Speaker Change: Our work at Am risk does for you on the on the economy front.
Speaker Change: Okay.
Speaker Change: I wouldn't say there's.
Speaker Change: A huge incremental level I think we're still targeting a similar combined ratio. Its just the mix of how we get there is slightly different so.
Speaker Change: We'll trade a slightly higher loss cost for the tenant occupancy.
Speaker Change: Apartments for reduced operating expenses for for you know some of the internal efficiencies we've created with doing this in house, but obviously scale has a lot to do with that and it really depends on how much business, we write and how good of underwriters, we are and how good of a job we do with risk selection risk.
Bennett Martz: But obviously scale has a lot to do with that. It really depends on how much business we write and how good of underwriters we are and how good of a job we do with risk selection. Risk selection is the ultimate determinant of underwriting profitability in this business. Our binding ratio is right around 10% today. So I think we're being very, very picky. And that's a good thing. We'll start slow. I'm sure we'll make some mistakes along the way and pivot accordingly, but I think we're off to a good start and yeah, if we can approach a similar combined ratio, I'd be thrilled.
Speaker Change: Election is the ultimate determinant of underwriting profitability in this business and you know we are are binding ratio was right around 10% today. So I think we're being very very picky and that's a good thing will start slow I'm sure we'll make some.
Speaker Change: Mistakes, along the way and pivot accordingly, but I think we're off to a good start and yeah I. If if we can approach a similar combined ratio would be thrilled, but you know in.
Bennett Martz: But you know, in all, the reality is that it might be, you know, it'll be hard to compete with the condo book. The condo book is a very mature book. It's been around 17 plus years. It's very well underwritten, very stable. So you know, it'll take us time. I think to get there, but. The objective is to have it be very complicated. That's helpful.
Speaker Change: And in all the reality is that it it might be.
Speaker Change: It'll be hard to compete with the condo book the condo book is a very mature book.
Speaker Change: It's been around 17 plus years, its very well underwritten very stable. So you know it'll it'll take us time, I think to get there but.
Speaker Change: You know the objective is is to have it be very comparable.
Speaker Change: That's helpful and then jumping.
Bill Dezellem: And then, jumping to reinsurance, if I may, last month the California fires made big headlines. What implications, if any, do you see for American Coastal now that a little bit of time has passed and the industry has had time to evaluate the impact? You know, my personal opinion on this is that it may have a small impact on Florida, but I don't think it'll have a significant impact. Obviously capacity was impacted in the global reinsurance market with a pretty big loss being seeded out of California, but you know, it's a big global reinsurance market. I think they can handle it.
Speaker Change: Jumping to reinsurance if I may.
Speaker Change: Last month, the California fires.
Speaker Change: Big headlines.
Speaker Change: Implications if any do you see for American coastal now that a little bit of time has passed.
Speaker Change: And the industry has had time to evaluate the impact.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: My personal opinion on this is that it may have a small impact on Florida, but I don't think it'll have a significant impact.
Speaker Change: Obviously capacity was impacted in the global reinsurance market with a pretty big loss being seeded out of California, but.
Speaker Change: It's a big global reinsurance market I think they can handle it I think they will address their underwriting and pricing for California separately, but you know it could put pressure on capacity.
Bennett Martz: I think they will address their underwriting and pricing for California separately. But you know, it could put pressure on capacity, you know, for all forms of CAT globally, just because it is such a big loss. So you know, that that could impact some carriers in Florida, but I don't expect it to impact have much impact on America.
Speaker Change: You know for all forms of cat globally, just because it is such a big loss. So you know that that could impact.
Speaker Change: Some carriers in Florida, but I don't expect it to impact have much impact on American coastal.
Bill Dezellem: Thank you.
Speaker Change: Okay. Thank you and then relative to the one one renewal do you in your opening remarks referenced.
Bennett Martz: And then relative to your 1-1 renewal, you in your opening remarks referenced coverage that previously has not been available for several years. That sounds significant. Would you please kind of re-walk through that and the implications and how that's important to you all? Sure. And, you know, when I say hasn't been available, I really mean available, you know, to us, maybe, maybe others were successful in purchasing. but you know for us it's been a while and we just think that's superior coverage at the end of the day. Instead of limit having you know fixed attachment and exhaustion point you know the what this new catastrophe bond will do for us is it has the potential for you know after the first event to drop down to 50 million for a second event and for a third event you know providing us you know substantially more protection than we've had in years past and at least the most two recent years you know for a high frequency year.
Speaker Change: Coverage that previously has not been available for several years does that challenge a significant would you please kind of.
Speaker Change: Reward through that and the implications and how that's important too.
Speaker Change: Do you want.
Speaker Change: Sure and you know when I say it hasn't been available I really mean available to us maybe maybe others were successful in purchasing you know.
Speaker Change: Hum.
Speaker Change: Limit that cascades or drops down.
Speaker Change:
Speaker Change: But for US it's been a while and we just think that's superior coverage at the end of the day.
Speaker Change: Instead of limit having you know fixed attachment exhaustion point you know the what this new catastrophe bond will do for us is.
Speaker Change: It has the potential for after first event to drop down to 50 million for a second event and for a third event, providing us substantially more protection than we've had.
Speaker Change: In years past.
Speaker Change: At least the most two recent years.
Speaker Change: For for a high frequency of year.
Bill Dezellem: Great, thank you and congratulations on your promotion. Thanks, Bill.
Speaker Change: Great. Thank you and Oh, congratulations on your promotion.
Bill: Thanks Bill.
Operator: Thank you.
Bill: Thank you we've reached end of our question and answer session and ladies and gentlemen that does conclude today's teleconference and webcast. You may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.
Operator: We've reached the end of our question and answer session.
Operator: And ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Bill: Yeah.