Financial Performance Overview

American Coastal Insurance Corporation (ACIC) reported a decrease in net income attributable to the company of $234,193,000 to $75,718,000 for the year ended December 31, 2024, compared to net income of $309,911,000 in 2023. This decrease was primarily driven by the deconsolidation of the company’s former subsidiary, UPC, which resulted in a gain of $238,440,000 in 2023.

Key drivers of ACIC’s 2024 net income include:

• Increased gross premiums earned during the year
• Increased net investment income
• Increased ceded premiums earned
• Favorable prior year loss development
• Decreased policy acquisition costs

Revenue and Profit Trends

ACIC’s gross written premiums increased by $12,096,000, or 1.9%, to $647,805,000 in 2024 from $635,709,000 in 2023. This increase was driven by growth in the company’s Florida market.

Ceded premiums earned increased by $21,995,000, or 6.4%, to $364,618,000 in 2024, primarily due to changes in ACIC’s quota share reinsurance coverage. Net investment income increased by $12,495,000, or 150.5%, to $20,795,000 in 2024 due to higher interest rates and increased investment holdings.

Net realized investment losses and unrealized gains on equity securities improved by $7,847,000, or 131.3%, to a net gain of $1,872,000 in 2024. This was driven by decreased investment sales and ACIC’s re-entry into the equity market.

On the expense side, losses and loss adjustment expenses (LAE) increased by $22,641,000, or 48.5%, to $69,319,000 in 2024. This was primarily due to increased catastrophe losses from Hurricane Milton. The company’s loss ratio (net losses and LAE as a percentage of net premiums earned) increased to 25.3% in 2024 from 17.8% in 2023.

Policy acquisition costs decreased by $4,446,000, or 5.9%, to $70,990,000 in 2024, driven by increased ceding commission income. General and administrative expenses increased by $7,197,000, or 19.2%, to $44,756,000 in 2024, due to higher overhead costs.

Strengths and Weaknesses

Key strengths of ACIC include:

• Diversified geographic footprint, with a focus on the Florida market
• Strong reinsurance program that provides protection for catastrophe losses
• Improved investment portfolio performance, with increased net investment income
• Disciplined underwriting and expense management, as evidenced by the decrease in policy acquisition costs

Weaknesses include:

• Exposure to catastrophe losses, as demonstrated by the impact of Hurricane Milton in 2024
• Potential volatility in earnings due to the impact of prior year reserve development and catastrophe losses
• Increasing general and administrative expenses, which could pressure profitability if not well-managed

Outlook and Future Considerations

Looking ahead, ACIC’s financial performance will likely continue to be influenced by its ability to manage catastrophe risk, maintain disciplined underwriting, and effectively control expenses. The company’s reinsurance program and geographic diversification should help mitigate the impact of future catastrophe events, but the frequency and severity of such events remains a key risk factor.

ACIC’s investment portfolio performance will also be an important driver of future results, as the company seeks to balance the need for capital preservation and liquidity with the pursuit of higher investment returns. The company’s re-entry into the equity market could provide additional upside, but also introduces more volatility to the investment portfolio.

Overall, ACIC appears to be well-positioned, with a strong market presence, effective risk management strategies, and a focus on operational efficiency. However, the company will need to continue to adapt to changing market conditions and effectively manage its exposure to catastrophe risk and other key challenges in order to deliver consistent financial performance and shareholder value in the years ahead.