Q2 2026 American Coastal Insurance Corp Earnings Call

August 5, 2026

Operator 3: Hello everyone. Thank you for joining us. Welcome to the American Coastal Insurance Corporation Q2 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to B. Bradford Martz, President and CEO. Brad, please go ahead.

Speaker #1: ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Bennett Bradford Martz, President and CEO.

Speaker #1: Brad, please go ahead.

Speaker #2: Thank you. 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.

B. Bradford Martz: Thank you. 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. For more information regarding these statements, please note the language on slide two of our earnings presentation. During Q2 2026, American Coastal continued to maintain its market leadership position in Florida commercial residential property insurance, but also experienced continued downward rate pressure, causing gross premiums written to decrease roughly 5% compared to the same period a year ago. Some minor non-hurricane catastrophe losses incurred of approximately $3.1 million also impacted comparability with the prior year, given the lack of any such losses in 2025. Despite top and bottom line compression year-over-year, our underlying combined ratio of 68.7% was very respectable, as was the 26.6% return on equity in the current quarter.

Bennett Bradford Martz: Thank you. 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. For more information regarding these statements, please note the language on slide two of our earnings presentation. During Q2 2026, American Coastal continued to maintain its market leadership position in Florida commercial residential property insurance, but also experienced continued downward rate pressure, causing gross premiums written to decrease roughly 5% compared to the same period a year ago. Some minor non-hurricane catastrophe losses incurred of approximately $3.1 million also impacted comparability with the prior year, given the lack of any such losses in 2025. Despite top and bottom line compression year-over-year, our underlying combined ratio of 68.7% was very respectable, as was the 26.6% return on equity in the current quarter.

Speaker #2: For more information regarding these statements, please note the language on slide 2 of our earnings presentation. During the second quarter of 2026, American Coastal continued to maintain its market leadership position in Florida commercial residential property insurance, but also experienced continued downward rate pressure, causing gross premiums written to decrease roughly 5% compared to the same period a year ago.

Speaker #2: Some minor non-hurricane catastrophe losses incurred of approximately $3.1 million, also impacted comparability with the prior year given the lack of any such losses in 2025.

Speaker #2: Despite top and bottom line compression year over year, our underlying combined ratio of 68.7% was very respectable as was the 26.6% return on equity in the current quarter.

Speaker #2: During the open window trading window, that is, in the second quarter, the company repurchased nearly $1.4 million shares of its common stock, bringing the year-to-date total shares repurchased to just over $1.8 million.

B. Bradford Martz: During the open window, trading window that is, in Q2, the company repurchased nearly 1.4 million shares of its common stock, bringing the year-to-date total shares repurchased to just over 1.8 million. I'm happy to announce that the board of directors has increased our authority to buy back up to roughly $30.6 million worth of our common stock in the future. Our earnings presentation was revamped this quarter with the intent to improve the messaging around what makes ACIC special. I strongly encourage anyone looking to learn more about our company to read that document each period, along with our other filings. As disclosed on page nine of our earnings presentation, we recently seized an opportunity to reduce our first event hurricane retention from $49 million to only $23.5 million before income tax, effective 1 August.

Bennett Bradford Martz: During the open window, trading window that is, in Q2, the company repurchased nearly 1.4 million shares of its common stock, bringing the year-to-date total shares repurchased to just over 1.8 million. I'm happy to announce that the board of directors has increased our authority to buy back up to roughly $30.6 million worth of our common stock in the future. Our earnings presentation was revamped this quarter with the intent to improve the messaging around what makes ACIC special. I strongly encourage anyone looking to learn more about our company to read that document each period, along with our other filings. As disclosed on page nine of our earnings presentation, we recently seized an opportunity to reduce our first event hurricane retention from $49 million to only $23.5 million before income tax, effective 1 August.

Speaker #2: And I'm happy to announce that the board of directors has increased our authority to buy back up to roughly $30.6 million worth of our common stock in the future.

Speaker #2: Our earnings presentation was revamped this quarter with the intent to improve the messaging around what makes ACIC special. I strongly encourage anyone looking to learn more about our company to read that document.

Speaker #2: Each period, along with our other filings. As disclosed on page 9 of our earnings presentation, we recently seized an opportunity to reduce our first event hurricane retention from 49 million dollars to only 23.5 million dollars before income tax, effective August 1st.

Speaker #2: The outlook for hurricanes making landfall in Florida this year, along with continued softening of reinsurance pricing, allowed us to mitigate downside risk from potential hurricanes this year.

B. Bradford Martz: The outlook for hurricanes making landfall in Florida this year, along with continued softening of reinsurance pricing, allowed us to mitigate downside risks from potential hurricanes this year. This change is further evidence that ACIC is continuously monitoring the market and always on the lookout for opportunities to improve our risk-adjusted performance. For the sake of clarity, our reinsurance strategy is to buy more protection when pricing is cost-effective and retain more risk on our balance sheet when it's not. Our second and third event retentions remain unchanged at $25 million and $2 million respectively. Thus, we are confident to state that American Coastal should remain profitable this year even with three full retentions. Lowering American Coastal's potential risk from hurricanes improves the overall quality and reliability of our earnings and cash flows.

Bennett Bradford Martz: The outlook for hurricanes making landfall in Florida this year, along with continued softening of reinsurance pricing, allowed us to mitigate downside risks from potential hurricanes this year. This change is further evidence that ACIC is continuously monitoring the market and always on the lookout for opportunities to improve our risk-adjusted performance. For the sake of clarity, our reinsurance strategy is to buy more protection when pricing is cost-effective and retain more risk on our balance sheet when it's not. Our second and third event retentions remain unchanged at $25 million and $2 million respectively. Thus, we are confident to state that American Coastal should remain profitable this year even with three full retentions. Lowering American Coastal's potential risk from hurricanes improves the overall quality and reliability of our earnings and cash flows.

Speaker #2: This change is further evidence that ACIC is continuously monitoring the market and always on the lookout for opportunities to improve our risk-adjusted performance. For the sake of clarity, our reinsurance strategy is to buy more protection when pricing is cost-effective, and retain more risk on our balance sheet when it's not.

Speaker #2: Our second and third event retentions remain unchanged at 25 million and 2 million respectively. Thus, we are confident to state that American Coastal should remain profitable this year even with three full retentions.

Speaker #2: Lowering American Coastal's potential risk from hurricanes improves the overall quality and reliability of our earnings and cash flows. Accordingly, our earnings guidance for the full year currently at 85 million to 100 million, inclusive of net average annual losses expected from catastrophes.

B. Bradford Martz: Accordingly, our earnings guidance for the full year currently remains unchanged at $85 to $100 million, inclusive of net average annual losses expected from catastrophes. Actual earnings before income tax could be higher or lower, depending on actual catastrophe frequency and/or severity. Conversely, our guidance for total revenue is being revised downward to between $300 and 320 million, given the trajectory of the current pricing environment. Without any significant hurricane losses or other surprises this year, we believe that rates, deductibles, and policy acquisition costs will likely remain under pressure into 2027. This is likely to be partially offset by lower reinsurance costs. We remain committed to writing new business and looking for intelligent ways to grow. ACIC will continue to prioritize underwriting profitability as our primary strategic objective.

Bennett Bradford Martz: Accordingly, our earnings guidance for the full year currently remains unchanged at $85 to $100 million, inclusive of net average annual losses expected from catastrophes. Actual earnings before income tax could be higher or lower, depending on actual catastrophe frequency and/or severity. Conversely, our guidance for total revenue is being revised downward to between $300 and 320 million, given the trajectory of the current pricing environment. Without any significant hurricane losses or other surprises this year, we believe that rates, deductibles, and policy acquisition costs will likely remain under pressure into 2027. This is likely to be partially offset by lower reinsurance costs. We remain committed to writing new business and looking for intelligent ways to grow. ACIC will continue to prioritize underwriting profitability as our primary strategic objective.

Speaker #2: Actual earnings before income tax could be higher or lower depending on actual catastrophe frequency and/or severity. Conversely, our guidance for total revenue is being revised downward to between 300 million and 320 million, given the trajectory of the current pricing environment.

Speaker #2: Without any significant hurricane losses or other surprises this year, we believe that rates, deductibles, and policy acquisition costs will likely remain under pressure into 2027.

Speaker #2: But this is likely to be partially offset by lower reinsurance costs. We remain committed to writing new business and looking for intelligent ways to grow.

Speaker #2: But ACIC will continue to prioritize underwriting profitability as our primary strategic objective. I'd like to now turn it over to our CFO, Lana Castle, for more specifics on our financial results.

B. Bradford Martz: I'd like to now turn it over to our CFO, Svetlana Castle, for more specifics on our financial results. Lana?

Bennett Bradford Martz: I'd like to now turn it over to our CFO, Svetlana Castle, for more specifics on our financial results. Lana?

Speaker #2: Lana.

Speaker #3: Thank you, Brad. And hello. I'll provide the financial update, but encourage everyone to review the company's press release earnings and investor presentations and form 10-Q for more information regarding our performance.

Svetlana Castle: Thank you, Brad, and hello. I'll provide the financial update, but 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 seven of the earnings presentation, American Coastal demonstrated another strong quarter with net income of $21.9 million. Our income was $16.5 million, a decrease of $10.3 million driven by softening market conditions and one-time benefits in the prior year totaling $4.2 million. Gross written premiums are down 5.3% from 2025, with $22.5 million of assumed E&S premium offsetting decreases in our direct premiums. Our combined ratio was 74.3%, an increase of 13.7 points from 2025, but in line with our expectations as we navigate the soft market cycle. Our non-GAAP underlying combined ratio, which excludes current year catastrophe losses and prior year development, was 68.7% compared to 62.2% in the prior year.

Lana Castle: Thank you, Brad, and hello. I'll provide the financial update, but 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 seven of the earnings presentation, American Coastal demonstrated another strong quarter with net income of $21.9 million. Our income was $16.5 million, a decrease of $10.3 million driven by softening market conditions and one-time benefits in the prior year totaling $4.2 million. Gross written premiums are down 5.3% from 2025, with $22.5 million of assumed E&S premium offsetting decreases in our direct premiums. Our combined ratio was 74.3%, an increase of 13.7 points from 2025, but in line with our expectations as we navigate the soft market cycle. Our non-GAAP underlying combined ratio, which excludes current year catastrophe losses and prior year development, was 68.7% compared to 62.2% in the prior year.

Speaker #3: As reflected on page 7 of the earnings presentation, American Coastal demonstrated another strong quarter with net income of $21.9 million. Core income was $16.5 million.

Speaker #3: A decrease of 10.3 million driven by softening market conditions and one-time benefits in the prior year, totaling $4.2 million. Gross written premiums are down 5.3% from 2025, with 22.5 million of assumed NS premium of 13 decreases in our direct premiums.

Speaker #3: Our combined ratio was 74.3%. An increase of 13.7 points from 2025, but in line with our expectations as we navigate the soft market cycle.

Speaker #3: Our non-GAAP underlying combined ratio, which excludes current year catastrophe losses and prior year development, was 68.7%, compared to 62.2% in the prior year. We continue to demonstrate underwriting discipline through the market cycle.

Svetlana Castle: We continue to demonstrate underwriting discipline through the market cycle. Page 16 shows balance sheet highlights. Cash and investments increased $2.3 million, inclusive of our previously declared special dividends of $0.75 per share or $36.6 million. The company's liquidity position remains strong. Stockholders' equity increased $23.2 million, or 7.3%, to $340.8 million, driven by our underwriting results. Book value per share is $721, a 10.7% increase from year-end 2025. This concludes our prepared remarks. We'll now open the floor for questions.

Lana Castle: We continue to demonstrate underwriting discipline through the market cycle. Page 16 shows balance sheet highlights. Cash and investments increased $2.3 million, inclusive of our previously declared special dividends of $0.75 per share or $36.6 million. The company's liquidity position remains strong. Stockholders' equity increased $23.2 million, or 7.3%, to $340.8 million, driven by our underwriting results. Book value per share is $721, a 10.7% increase from year-end 2025. This concludes our prepared remarks. We'll now open the floor for questions.

Speaker #3: Page 16 shows balance sheet highlights. Cash and investments increased 2.3 million, inclusive of our previously declared special dividends of 75 cents per share or 36.6 million.

Speaker #3: The company's liquidity position remains strong. Stockholders' equity increased 23.2 million, or 7.3%, to $340.8 million driven by our underwriting results. Book value per share is $721, a 10.7% increase from year-end 2025.

Speaker #3: This concludes our prepared remarks. We'll now open the floor for questions.

Speaker #1: We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand.

Operator 3: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. The first question comes from the line of Mitchell Rubin with Raymond James. Your line is open. Please go ahead.

Speaker #1: To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Operator 3: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. The first question comes from the line of Mitchell Rubin with Raymond James. Your line is open. Please go ahead.

Speaker #1: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. The first question comes from the line of Mitchell Rubin.

Speaker #1: With Raymond James. Your line is open. Please go ahead.

Speaker #4: Hey, good afternoon. This is Mitch on for Greg. On the first event retention buydown, I appreciated the rationale you provided. What did it cost, and with the new authorization in place, how does the lower retention factor into capital return for the rest of the year?

Mitchell Rubin: Hey, good afternoon. This is Mitchell in for Greg. On the first event retention buydown, I appreciated the rationale you provided. What did it cost? With the new authorization in place, how does the lower retention factor into capital return for the rest of the year?

Speaker #2: Hi, Mitch. Thanks for your question. This is Brad. The cost was approximately 8.4 million dollars, so about $4 million of that will be expenses seeded earned this year.

B. Bradford Martz: Hi, Mitch. Thanks for your question. This is Brad. The cost was approximately $8.4 million. About $4 million of that will be expensed as seed to earn this year from August to December, and the remainder as seed to earn from January through 31 May. We'll spread that cost over the 10-month period. I think it factors favorably into the prospect for a special dividend. Obviously, we've stated that if we're profitable and earning sufficient returns on capital and we feel like we have excess capital, the prospect for a special dividend remains good. Considering we've been profitable all 18 years of our operations since our inception in 2007, with this year expecting to be the 19th consecutive year of underwriting profitability, this should help guarantee a special dividend is declared, but how big is undetermined at this time.

Bennett Bradford Martz: Hi, Mitch. Thanks for your question. This is Brad. The cost was approximately $8.4 million. About $4 million of that will be expensed as seed to earn this year from August to December, and the remainder as seed to earn from January through 31 May. We'll spread that cost over the 10-month period. I think it factors favorably into the prospect for a special dividend. Obviously, we've stated that if we're profitable and earning sufficient returns on capital and we feel like we have excess capital, the prospect for a special dividend remains good. Considering we've been profitable all 18 years of our operations since our inception in 2007, with this year expecting to be the 19th consecutive year of underwriting profitability, this should help guarantee a special dividend is declared, but how big is undetermined at this time.

Speaker #2: From August to December, and the other the remainder as seeded earned from January through May 31st. So we'll spread that cost over the 10-month period.

Speaker #2: And it I think it factors favorably into the prospect for a special dividend. Obviously, we've stated that if we're profitable and earning sufficient returns on capital and we feel like we have excess capital, you know, the prospect for a special dividend remains good.

Speaker #2: And considering we've been profitable, you know, all 18 years, of our operations since our inception in 2007, this year expecting to be the 19th consecutive year of underwriting profitability you know, this should help guarantee the a special dividend is declared.

Speaker #2: But how big and is undetermined at this time.

Speaker #4: Thanks for the color. I'm not for my second question, so this quarter had around 767,000 of unfavorable reserve development. Could you provide any color on where that showed up and whether it's an area that could be recurring?

Mitchell Rubin: Thanks for the color on that. For my second question, this Q2 had around $767,000 of unfavorable reserve development. Could you provide any color on where that showed up and whether it's an area that could be recurring?

Speaker #2: We don't believe it's recurring. It really all stemmed from a single claim from the 2019 accident year. It was one of our last remaining sinkhole losses.

B. Bradford Martz: We don't believe it's recurring. It really all stemmed from a single claim from the 2019 accident year. It was one of our last remaining sinkhole losses that just slightly was above or beyond our excess per risk reinsurance coverage. Unfortunately, the net result was a slight impact to adverse reserve development. Aside from that, the quarter was in line with all other periods, and I fully expect we'll have favorable development for the full year. Nothing to worry about with reserves.

Bennett Bradford Martz: We don't believe it's recurring. It really all stemmed from a single claim from the 2019 accident year. It was one of our last remaining sinkhole losses that just slightly was above or beyond our excess per risk reinsurance coverage. Unfortunately, the net result was a slight impact to adverse reserve development. Aside from that, the quarter was in line with all other periods, and I fully expect we'll have favorable development for the full year. Nothing to worry about with reserves.

Speaker #2: That just slightly was above or beyond our excess per risk reinsurance coverage. So unfortunately, the net result was slight impact to adverse reserve development.

Speaker #2: But aside from that, the quarter was in line with all of the periods and I fully expect we'll have favorable development for the full year.

Speaker #2: So nothing to worry about with reserves.

Speaker #4: Thank you.

Mitchell Rubin: Thank you.

Speaker #1: The next line of question comes from the line of Dalton Willett with Sharmis Capital Partners. Your line is open. Please go ahead.

Operator 3: The next line of question comes from the line of Dalton Willets with Sharmis Capital Partners. Your line is open. Please go ahead.

Operator: The next line of question comes from the line of Dalton Willets with Sharmis Capital Partners. Your line is open. Please go ahead.

Speaker #5: Hey, Brad. How you doing? Just a quick question on some of the market share dynamics. You know, comparing the same quarter last year, it looks like policy count is slightly up.

Dalton Willets: Hey, Brad. How you doing? Just a quick question on some of the market share dynamics. Comparing the same quarter last year, it looks like policy count is slightly up. Can you talk a little bit about where you're at with market share gains or losses and how you guys are thinking about that dynamic?

Speaker #5: Can you talk a little bit about where you’re at with market share gains or losses, and how you guys are thinking about that dynamic?

Speaker #2: Hi, Dalton. Sure. Yeah, you are correct. Policies in force and total insured value in force as of June 30th, 2026 was they were both up roughly you know, between 3 and 4 percent year over year.

B. Bradford Martz: Hi, Dalton. Sure. Yeah, you are correct. Policies in force and total insured value in force as of 30 June 2026, they were both up roughly between 3% and 4% year over year. We're maintaining the exposure base. That is not the problem. Account retention improved over Q1, so it was right around 85% for Q2. Very much right where we want it to be. We've been actively writing new business to help fill in the gaps. We still see attractive opportunities in the market. Our technical model price is still above historical levels on most of the risks we see. We're being cautious, definitely more cautious, but it's all about premium retention right now. We don't control the market forces and dynamics. All we can do is try and build the best risk portfolio around those dynamics.

Bennett Bradford Martz: Hi, Dalton. Sure. Yeah, you are correct. Policies in force and total insured value in force as of 30 June 2026, they were both up roughly between 3% and 4% year over year. We're maintaining the exposure base. That is not the problem. Account retention improved over Q1, so it was right around 85% for Q2. Very much right where we want it to be. We've been actively writing new business to help fill in the gaps. We still see attractive opportunities in the market. Our technical model price is still above historical levels on most of the risks we see. We're being cautious, definitely more cautious, but it's all about premium retention right now. We don't control the market forces and dynamics. All we can do is try and build the best risk portfolio around those dynamics.

Speaker #2: So we're maintaining the exposure base. You know, that is not the problem. Account retention improved over the first quarter. So it was right around 85 percent for the second quarter.

Speaker #2: It very much right where we want it to be. And we've been actively writing new business to help, you know, fill in the gaps.

Speaker #2: So we still see attractive opportunities in the market. Our technical model price is still above historical levels. On most of the risks we see.

Speaker #2: So we're being cautious. Definitely more cautious. But it's all about premium retention right now. You know, we don't control the market forces and dynamics all we can do is try and build the best risk portfolio around those dynamics.

Speaker #2: But yeah, we're maintaining or maybe even growing our market leadership position and feel good about that. Don't feel good about the decline in average premium, but that's you know, that's going to go up and down over time.

B. Bradford Martz: Yeah, we're maintaining or maybe even growing our market leadership position and feel good about that. Don't feel good about the decline in average premium, but that's going to go up and down over time.

Bennett Bradford Martz: Yeah, we're maintaining or maybe even growing our market leadership position and feel good about that. Don't feel good about the decline in average premium, but that's going to go up and down over time.

Speaker #5: Yeah. Absolutely. And then can you talk a little bit about the 30 million roughly contribution from the new E&S venture with the ACES co-participation and what you guys are seeing there and if you're still thinking 70 to 80 for the full year 26?

Dalton Willets: Yeah, absolutely. Can you talk a little bit about the $30 million, roughly, contribution from the new E&S venture with the ACE's co-participation and what you guys are seeing there? If you're still thinking $70 to 80 million for the whole year of 2026?

Speaker #2: Yeah, it's going fine. This was probably a little bit behind expectations. I don't believe, for the full year—when you talk about the full year—when we said what we thought, that $70 million would encompass a full 12 months.

B. Bradford Martz: Yeah, it's going fine. This was probably a little bit behind expectations. I don't believe for the full year, when we said what we thought, that $70 million would encompass a full 12 months. If you're thinking calendar year, it's probably going to be closer to $50 million for the full year. Somewhere along those lines. Yeah, for the first 12 months, we would expect it to be somewhere between $60 million and $70 million. Could be more, could be less. AmRisc is working extremely hard to find quality risks to utilize that capacity, and they're doing a good job. They're fighting the same fight we're fighting on with rate decreases and erosion of other terms and conditions. They're disciplined underwriters, too. We've got a lot of trust and faith in them.

Bennett Bradford Martz: Yeah, it's going fine. This was probably a little bit behind expectations. I don't believe for the full year, when we said what we thought, that $70 million would encompass a full 12 months. If you're thinking calendar year, it's probably going to be closer to $50 million for the full year. Somewhere along those lines. Yeah, for the first 12 months, we would expect it to be somewhere between $60 million and $70 million. Could be more, could be less. AmRisc is working extremely hard to find quality risks to utilize that capacity, and they're doing a good job. They're fighting the same fight we're fighting on with rate decreases and erosion of other terms and conditions. They're disciplined underwriters, too. We've got a lot of trust and faith in them.

Speaker #2: So if you're thinking calendar year, it's probably going to be closer to 50 million for the full year. Somewhere along those lines. But yeah, for the first 12 months, we would expect it to be you know, somewhere between 60 and 70.

Speaker #2: Could be more, could be less. Amarisk is working extremely hard to find quality risks to utilize that capacity. And they're doing a good job.

Speaker #2: They're fighting the same fight we're fighting with rate decreases and erosion of other terms and conditions. But they're disciplined underwriters too. We've got a lot of trust and faith in them.

Speaker #2: And you know, the revenue will be very important to help offset weakness in our core condominium book of business. But the reality is, is our mind is always on the bottom line, not the top line.

B. Bradford Martz: The revenue will be very important to help offset weakness in our core condominium book of business. The reality is our mind is always on the bottom line, not the top line. Like I said at the intro, we'd love to grow and find attractive opportunities to grow, but we're only going to do so if we can earn an acceptable return on capital.

Bennett Bradford Martz: The revenue will be very important to help offset weakness in our core condominium book of business. The reality is our mind is always on the bottom line, not the top line. Like I said at the intro, we'd love to grow and find attractive opportunities to grow, but we're only going to do so if we can earn an acceptable return on capital.

Speaker #2: We'd love like I said, at the intro, we'd love to grow and find attractive opportunities to grow. But we're only going to do so if we can earn an acceptable return on capital.

Speaker #5: Fantastic. And then last one, if I can. Next year you guys have the senior notes coming due. I know there's been talk of, you know, refinancing you may not need to keep all of that because can you talk a little bit about, you know, how much of that you might plan on refinancing and then, you know, from debt to cap ratio that would take you, you know, say if you've only kept 50 million of that, you would be nicely below your, you know, 20 to 25 percent debt to cap target.

Dalton Willets: Fantastic. Last one, if I can. Next year, you guys have the senior notes coming due. I know there's been talk of refinancing. Can you talk a little bit about how much of that you might plan on refinancing, and then from debt to capital ratio, that would take you, say if you only kept $50 million of that, you would be nicely below your 20% to 25% debt to capital target. Is that kind of the plan to get there from here?

Speaker #5: Is that kind of the plan to get there from here?

Speaker #2: Yes, it is. We still believe a 20 percent debt to capital ratio 20 percent or less, I should say, is appropriate for a company with our earnings power and risk profile.

B. Bradford Martz: Yes, it is. We still believe a 20% debt to capital ratio, 20% or less, I should say, is appropriate for a company with our earnings power and risk profile. Depending on interest rates, we're exploring traditional bank debt. We're exploring the bond market. We're exploring all avenues and would expect to get a refinance done within the next six to 12 months. We'd prefer to have this put to bed and taken care of prior to next hurricane season to mitigate any risk of storms impacting our ability to refinance. Our current plan is to cut the debt in half. That's the current outlook is to reduce the outstanding long-term debt from $150 million to $75 million. We've got the cash on hand today to do that.

Bennett Bradford Martz: Yes, it is. We still believe a 20% debt to capital ratio, 20% or less, I should say, is appropriate for a company with our earnings power and risk profile. Depending on interest rates, we're exploring traditional bank debt. We're exploring the bond market. We're exploring all avenues and would expect to get a refinance done within the next six to 12 months. We'd prefer to have this put to bed and taken care of prior to next hurricane season to mitigate any risk of storms impacting our ability to refinance. Our current plan is to cut the debt in half. That's the current outlook is to reduce the outstanding long-term debt from $150 million to $75 million. We've got the cash on hand today to do that.

Speaker #2: So depending on interest rates, you know, we're exploring traditional bank debt. We're exploring the bond market. We're exploring all avenues and would expect to get a refinance done within the next 6 to 12 months.

Speaker #2: So we'd prefer to have this put to bed and taken care of prior to next hurricane season. To mitigate any risk of storms impacting our ability to refinance.

Speaker #2: But our current plan is to cut the debt in half. You know, that's the current outlook is to reduce the outstanding long-term debt from 150 million to 75 million.

Speaker #2: And we've got the cash on hand today to do that.

Speaker #5: Awesome. Awesome. Thank you so much for taking my call. And congrats on another strong quarter.

Dalton Willets: Awesome. Thank you so much for taking my call, and congrats on another strong quarter.

Speaker #2: Thank you.

B. Bradford Martz: Thank you.

Bennett Bradford Martz: Thank you.

Speaker #1: The next question comes from the line of Matt Dane with Tietjen Capital Management. Your line is open. Please go ahead.

Operator 3: The next question comes from the line of Matt Carletti with Tieton Capital Management. Your line is open. Please go ahead.

Operator: The next question comes from the line of Matt Carletti with Tieton Capital Management. Your line is open. Please go ahead.

Speaker #6: Great. Thank you. It's tight in capital management. I did want to ask the multifamily apartment initiative that you folks have rolled out. How has that developed relative to your expectations and help me understand how the competitive landscape has been for that new focus area?

Matt Carletti: Great. Thank you. It's Tieton Capital Management. I did want to ask the multifamily apartment initiative that you folks have rolled out, how has that developed relative to your expectations? Help me understand how the competitive landscape has been for that new focus area.

B. Bradford Martz: Yeah, certainly. Happy to do so. The apartment, multifamily, and assisted living facility is definitely on the disappointing side. We are currently running into challenges by not having an AM Best rating. We plan to solve for that through the formation of Asus Specialty, which we have already commenced discussions with AM Best about getting that rated this year once it's fully capitalized and licensed. Secondarily, we're also evaluating various fronting relationships, including the structure we already have in place with Fortegra to potentially give Skyway access to AM Best-rated paper of sufficient quality and size to access that risk. The brokers love American Coastal. We've been told that over and over. There's nothing wrong with our product, nothing wrong with our company. The lenders have strict security requirements around the AM Best rating.

Bennett Bradford Martz: Yeah, certainly. Happy to do so. The apartment, multifamily, and assisted living facility is definitely on the disappointing side. We are currently running into challenges by not having an AM Best rating. We plan to solve for that through the formation of Asus Specialty, which we have already commenced discussions with AM Best about getting that rated this year once it's fully capitalized and licensed. Secondarily, we're also evaluating various fronting relationships, including the structure we already have in place with Fortegra to potentially give Skyway access to AM Best-rated paper of sufficient quality and size to access that risk. The brokers love American Coastal. We've been told that over and over. There's nothing wrong with our product, nothing wrong with our company. The lenders have strict security requirements around the AM Best rating.

Speaker #2: Yeah, certainly. Happy to do so. The apartment multifamily and assisted living facility is definitely on the disappointing side. We are currently running into challenges with by not having an AM best rating.

Speaker #2: You know, we planned to solve for that through the formation of ACES Specialty, which we have already commenced discussions with AM Best about getting that rated this year.

Speaker #2: Once it's fully capitalized and licensed, and secondarily, we're not going to we're also evaluating and various fronting relationships including the structure we already have in place with Fortegra to potentially give Skyway access to AM best rated paper of sufficient quality and size to access that risk.

Speaker #2: The brokers love American Coastal. We've been told that over and over. There's nothing wrong with our product. Nothing wrong with our company. But the lenders, you know, have strict security requirements around the AM best rating and unfortunately, we've lost some business to midterm cancellations because of that.

B. Bradford Martz: Unfortunately, we've lost some business to midterm cancellations because of that. That has slowed down the quoting and binding activity in apartments. We're kind of in a holding pattern at the moment, but we have enormous opportunity in front of us once we solve that constraint, which we're actively working on and hope to have a solution operational during the tail end of Q4 to start writing both apartments and ALFs, as well as other classes of commercial property that are also more rating sensitive inside and outside of Florida after hurricane season. That's our plan.

Bennett Bradford Martz: Unfortunately, we've lost some business to midterm cancellations because of that. That has slowed down the quoting and binding activity in apartments. We're kind of in a holding pattern at the moment, but we have enormous opportunity in front of us once we solve that constraint, which we're actively working on and hope to have a solution operational during the tail end of Q4 to start writing both apartments and ALFs, as well as other classes of commercial property that are also more rating sensitive inside and outside of Florida after hurricane season. That's our plan.

Speaker #2: And that has slowed down, you know, the quoting and binding activity in apartments. So we're kind of in a holding pattern at the moment.

Speaker #2: But we have, enormous opportunity in front of us once we solve that constraint. Which we're actively working on and hope to have a solution operational, you know, during the tail end of the fourth quarter to start writing both apartments and ALFs as well as other classes of commercial property that are also more rating sensitive.

Speaker #2: Inside and outside of Florida. You know, after hurricane season. That's our plan.

Matt Carletti: Once you do have the lack of the rating cured and have the solution in place, Brad, would you expect that it should be that there is a good amount of business that you should be able to write at reasonable rates? Like you said, the brokers like your product, do you believe that we'll see some business later on fairly quickly after that then?

Speaker #6: And so once you do have this the lack of the rating cured and have the solution in place, Brad, would you expect that it should be that there is a good amount of business that you should be able to write at a reasonable rates and like you said, the brokers like your product and do you believe that that will see some business layer on fairly quickly after that then?

Speaker #2: Yeah, there's enormous opportunity out there. We definitely feel and have been, you know, told by multiple parties that, you know, the opportunity is there.

B. Bradford Martz: Yeah, there's enormous opportunity out there. We definitely feel, have been told by multiple parties that the opportunity is there. Competition is definitely there as well. That has not helped matters, that there's excess capacity in the marketplace, the incumbents are fighting hard to retain those policies. We have a strategy and feel like we can gain a lot more traction with the E&S AM Best rated paper at Skyway's disposal.

Bennett Bradford Martz: Yeah, there's enormous opportunity out there. We definitely feel, have been told by multiple parties that the opportunity is there. Competition is definitely there as well. That has not helped matters, that there's excess capacity in the marketplace, the incumbents are fighting hard to retain those policies. We have a strategy and feel like we can gain a lot more traction with the E&S AM Best rated paper at Skyway's disposal.

Speaker #2: Competition is definitely there as well. That has not helped. It matters that there's excess capacity in the marketplace, and, you know, the incumbents are fighting hard to retain those policies.

Speaker #2: But we have a strategy and feel like, you know, we can gain a lot more traction with the E&S AM best rated paper at Skyway's disposal.

Speaker #6: Okay. That's helpful. Thanks, Brad.

Matt Carletti: Okay. That's helpful. Thanks, Brad.

Speaker #2: Thank you.

B. Bradford Martz: Thank you.

Bennett Bradford Martz: Thank you.

Speaker #1: The next question comes from the line of Akshay Tanna, private investor. Your line is open. Please go ahead.

Operator 3: The next question comes from the line of Akshay Tanna, private investor. Your line is open. Please go ahead.

Operator: The next question comes from the line of Akshay Tanna, private investor. Your line is open. Please go ahead.

Speaker #7: Hi, Brad, team. My question is on the Treasury shares. I see the Treasury shares increased and that's mainly because of the buybacks. I was wondering if you have plans to cancel them or, you know, maybe help us understand why keep them.

Akshay Tanna: Hi, Brad, team. My question's on the treasury shares. I see the treasury shares increased, and that's mainly because of the buybacks. Was wondering if you have plans to cancel them or maybe help us understand why you keep them.

Speaker #2: Yeah, there's that is the plan and as I stated at the beginning, we have reloaded our capacity and increased it now. So we're still going to be on the lookout for additional opportunities to repurchase stock and cancel those shares.

B. Bradford Martz: Yes, that is the plan. As I stated at the beginning, we have reloaded our capacity and increased it now. We're still going to be on the lookout for additional opportunities to repurchase stock and cancel the shares to reduce the overall share count, which obviously doesn't necessarily have an immediate effect for all shareholders. It really just benefits sellers. Certainly reducing some of the share count suggests we believe in our business. We're heavily weighted on insider ownership here, and increasing our concentration investment in the stock is just something we feel compelled to do when you're trading at five times trailing. We're happy to do it. The limitation is going to be the average daily trading volume. It just takes a little bit of time to deploy that capacity.

Bennett Bradford Martz: Yes, that is the plan. As I stated at the beginning, we have reloaded our capacity and increased it now. We're still going to be on the lookout for additional opportunities to repurchase stock and cancel the shares to reduce the overall share count, which obviously doesn't necessarily have an immediate effect for all shareholders. It really just benefits sellers. Certainly reducing some of the share count suggests we believe in our business. We're heavily weighted on insider ownership here, and increasing our concentration investment in the stock is just something we feel compelled to do when you're trading at five times trailing. We're happy to do it. The limitation is going to be the average daily trading volume. It just takes a little bit of time to deploy that capacity.

Speaker #2: To reduce the overall share count, which, you know, obviously doesn't necessarily have a immediate effect for all shareholders or really just benefits, you know, sellers.

Speaker #2: But, you know, certainly reducing some of the share count suggests we believe in our business. We're, you know, heavily weighted on insider ownership here and increasing our concentration investment in the stock is just something we feel compelled to do when you're trading at five times trailing.

Speaker #2: So we're happy to do it. You know, the limitation is going to be the average daily trading volume. It just takes a little bit of time to deploy that capacity.

Speaker #7: Got it. Thanks. And I know we've discussed about premiums. Coming down and then competition intensifying as well. And as I look at the Florida commercial residential property market share that gets shared, I'm looking at like a couple of companies that are having increased market share.

Akshay Tanna: Got it. Thanks. I know we've discussed about the premiums coming down, competition intensifying as well. As I look at the Florida commercial residential property market share that gets shared, I'm looking at a couple of companies that have increased market share. Like Slide is one. I'm just curious on the long-term threats to the earning power of the core business. Can you maybe talk a little bit more about it?

Speaker #7: So like Slide is one. I'm just curious on the long-term threats to the earning power of the core business. Can you maybe talk a little bit more about it?

Speaker #7: Like?

Speaker #2: Well, I can't comment on what other companies are doing. I can just tell you that, you know, you can measure market share a number of different ways.

B. Bradford Martz: Well, I can't comment on what other companies are doing. I can just tell you that you can measure market share a number of different ways, whether you do it based on total insured value, policy count, premium, et cetera. We feel like we're still the largest writer of it. We're in great position, we're, again, defending our book of business. We're only losing what we want to lose, where we want to lose it. The stuff we want to keep, we're keeping. Retention is right where we want it. Account retention, that is. That being said, there's obviously challenges on the premium side because of increased interest and competition. We're mindful of that. We know how to manage the cycle. We've seen this before. If we have to shrink the book because pricing becomes irrational, we will, that's not the expectation at the moment.

Bennett Bradford Martz: Well, I can't comment on what other companies are doing. I can just tell you that you can measure market share a number of different ways, whether you do it based on total insured value, policy count, premium, et cetera. We feel like we're still the largest writer of it. We're in great position, we're, again, defending our book of business. We're only losing what we want to lose, where we want to lose it. The stuff we want to keep, we're keeping. Retention is right where we want it. Account retention, that is. That being said, there's obviously challenges on the premium side because of increased interest and competition. We're mindful of that. We know how to manage the cycle. We've seen this before. If we have to shrink the book because pricing becomes irrational, we will, that's not the expectation at the moment.

Speaker #2: Whether you do it based on total insured value, policy count, premium, et cetera, we feel like we're still the largest writer of it. We're in a great position, and we're, again, defending our book of business.

Speaker #2: We're only losing what we want to lose where we want to lose it. The stuff we want to keep, we're keeping. Retention is right where we want it.

Speaker #2: Account retention, that is. You know, but that being said, you know, there's obviously challenges on the premium side because of increased interest and competition.

Speaker #2: So we're mindful of that. We know how to manage the cycle. We've seen this before. And, you know, if we have to shrink the book, because pricing becomes irrational, we will.

Speaker #2: But that's not the expectation at the moment. We still, we're still in a very good position and, you know, many, many periods away from being at pricing levels where we would have to consider that.

B. Bradford Martz: We're still in a very good position, many periods away from being at pricing levels where we would have to consider that, meaning ceding market share. I don't see that as a near-term problem. Could be a longer-term problem, depending on how long this part of the cycle lasts. For right now, we're still actively writing and finding new business opportunities as well. We're winning new business. Retention's where we want it, that's what we're focused on.

Bennett Bradford Martz: We're still in a very good position, many periods away from being at pricing levels where we would have to consider that, meaning ceding market share. I don't see that as a near-term problem. Could be a longer-term problem, depending on how long this part of the cycle lasts. For right now, we're still actively writing and finding new business opportunities as well. We're winning new business. Retention's where we want it, that's what we're focused on.

Speaker #2: And meaning seeding market share. So I don't see that as a near-term problem. Could be a longer-term problem depending on how long this part of the cycle lasts.

Speaker #2: But for right now, we're still actively writing and finding new business opportunities as well. So we're winning new business. Retention is where we want it.

Speaker #2: And that's what we're focused on.

Speaker #7: Okay. Thank you.

Akshay Tanna: Okay. Thank you.

Speaker #1: As a friendly reminder, please if you would like to ask a question, please press star one on your telephone keypad. There are no further questions at this time.

Operator 3: As a friendly reminder, if you would like to ask a question, please press *1 on your telephone keypad. There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Operator: As a friendly reminder, if you would like to ask a question, please press *1 on your telephone keypad. There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Q2 2026 American Coastal Insurance Corp Earnings Call

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