Can you provide color on the $767,000 of unfavorable reserve development this quarter, its source, and recurrence potential?

The unfavorable development stemmed from a single 2019 sinkhole claim slightly exceeding reinsurance coverage and is not expected to be recurring. Management anticipates favorable development for the full year. “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 was above or beyond our excess per risk reinsurance coverage. So unfortunately the net result was, slight impact to adverse reserve development. 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.”

Policy count is slightly up year-over-year. Can you discuss market share gains/losses and how the company is managing these dynamics?

Policies in force and total insured value were up 3-4% YoY. Account retention improved to 85%. The company is maintaining its market leadership by actively writing new business, focusing on underwriting profitability despite premium pressure. “Policies in force and total insured value in force as of June 30th, 2026, they were both up roughly, you know, between 3 and 4 percent overall. year over year. 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% for the second quarter, very much right where we want it to be.”

How is the $30 million contribution from the ENS Center progressing, and is the full-year 2026 target of $70-$80 million still achievable?

The ENS Center is slightly behind expectations, with calendar year 2026 contribution likely closer to $50 million. However, for the first 12 months, it's expected to be between $60 million and $70 million. The focus remains on quality risks and bottom-line profitability. “This was probably a little bit behind expectations. I don't believe for the full, when you talk about the full year, when we said what we thought that 70 million would encompass a full 12 months. 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 yes, for the first 12 months, we would expect it to be somewhere between 60 and 70.”

ACIC

American Coastal Insurance (ACIC) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Aug 5, 2026

Source: earnings call transcript

Executive summary

American Coastal Insurance Corporation Q2 FY26 — Strong Underwriting Amidst Softening Market

American Coastal Insurance Corporation delivered strong underwriting results in Q2 FY26, evidenced by a robust underlying combined ratio and high return on equity. Despite facing continued downward rate pressure and a revised revenue outlook, the company proactively reduced its hurricane retention and increased its share repurchase authorization, signaling confidence in its capital position and risk management strategy. Management remains committed to underwriting profitability and disciplined growth amidst a softening market.

Highlights

Underlying combined ratio of 68.7% demonstrates strong underwriting discipline.
Return on equity (ROE) was 26.6% for the current quarter.
Company repurchased nearly 1.4 million shares in Q2, bringing year-to-date total to over 1.8 million shares.
Board increased share repurchase authority by 1.4 million shares, totaling $30.6 million.
First event hurricane retention reduced from $49 million to $23.5 million, effective August 1st.

Concerns

Gross premiums written decreased roughly 5% compared to the prior year due to downward rate pressure.
Minor non-hurricane catastrophe losses of approximately $3.1 million impacted comparability.
Fore income decreased by $10.3 million, driven by softening market conditions.
Combined ratio increased 13.7 points from 2025 to 74.3%.
Revenue guidance for the full year was revised downward to between $300 million and $320 million.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year Earnings Before Income Tax	$85 million to $100 million high materiality	FY26	High
Full-year Total Revenue	$300 million to $320 million high materiality	FY26	Medium
ENS Center Contribution (Calendar Year)	closer to $50 million medium materiality	CY26	Medium
ENS Center Contribution (First 12 Months)	between $60 million and $70 million medium materiality	Next 12 months	Medium
Long-term Debt Refinancing	reduce outstanding long-term debt from $150 million to $75 million high materiality	Next 6-12 months	High

Deals & partnerships

ACES Co-participation in ENS Center $30 million

The ENS Center, with ACES co-participation, is contributing to revenue, though slightly behind initial expectations for the calendar year.

Fort Tegra Fronting relationship for AM Best-rated paper

Existing fronting relationship being evaluated to potentially give SkyWay access to AM Best-rated paper for the multifamily initiative.

Risks & headwinds

Downward rate pressure Q2 FY26

Gross premiums written decreased roughly 5%

Mitigation:Prioritizing underwriting profitability; actively writing new business where attractive opportunities exist.

Minor non-hurricane catastrophe losses Q2 FY26

$3.1 million

Mitigation:Proactive reinsurance strategy, including reducing first event hurricane retention.

Softening market conditions Q2 FY26

Fore income decreased $10.3 million; combined ratio increased 13.7 points to 74.3%

Mitigation:Maintaining underwriting discipline; focusing on risk portfolio construction; willingness to shrink book if pricing becomes irrational.

Pressure on rates, deductibles, and policy acquisition costs into 2027

Directional: 'likely remain under pressure'

Mitigation:Partially offset by lower reinsurance costs; continuous monitoring of the market for opportunities to improve risk-adjusted performance.

Lack of AM Best rating for multifamily apartment initiative Current

Disappointing development, challenges in quoting/binding, midterm cancellations

Mitigation:Forming ASIS Specialty to seek AM Best rating; evaluating fronting relationships (e.g., with Fort Tegra) to access rated paper; solution expected Q4.

Increased competition in the market Current

Directional: 'excess capacity in the marketplace'

Mitigation:Incumbents fighting to retain policies; company focusing on disciplined underwriting and finding new business opportunities.

Longer-term market share erosion Longer term

Directional: 'Could be a longer term problem'

Mitigation:Management does not see it as a near-term problem; will shrink the book if pricing becomes irrational.

What to watch in Q3 FY26

Special dividend declaration

Next quarter

Current Prospects remain good, size undetermined

Target Declaration of a special dividend and its size

Why it matters

Indicates management's confidence in capital position and commitment to shareholder returns.

And 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 and considering we've been profitable, you know, all 18 years ago, of our operations since our inception in 2007, year, expecting to be in the 19th consecutive year of underwriting profitability. This should help guarantee a special dividend is declared, but how big is undetermined at this time.

Find out whether ACIC delivers this. Inve re-checks your case every morning.

Q&A highlights

What was the cost of reducing the first event hurricane retention, and how does this impact future capital returns, particularly special dividends?

The cost was approximately $8.4 million, spread over 10 months. This favorably impacts the prospect for a special dividend, as the company expects to remain profitable and have excess capital, though the size is undetermined.

“The cost was approximately $8.4 million. So about 4 million of that will be Expense this seeded earn this year from August to December and the other. the remainder as seeded earn from January through May 31st. So we'll spread that cost over the 10 month period And I think it factors favorably into the prospect for a special dividend.”

asked by Mitchell Rubin · answered by Unknown Speaker

2 min read 6 chapters

Detailed narrative

Strategic Reinsurance and Risk Management

American Coastal strategically reduced its first event hurricane retention from $49 million to $23.5 million, effective August 1st, leveraging softening reinsurance pricing and the hurricane outlook. This move, costing approximately $8.4 million, aims to mitigate downside risk and improve the quality and reliability of earnings.

The company's reinsurance strategy is dynamic, adjusting retention based on pricing efficiency, with second and third event retentions remaining unchanged at $25 million and $2 million, respectively.

Share Repurchase Program and Capital Allocation

The company actively returned capital to shareholders, repurchasing nearly 1.4 million shares in Q2, contributing to a year-to-date total of over 1.8 million shares. The Board of Directors further increased the repurchase authority by 1.4 million shares, totaling approximately $30.6 million.

Management indicated that the lower hurricane retention factors favorably into the prospect of a special dividend, reinforcing their commitment to capital returns when profitable and with excess capital.

Market Conditions and Underwriting Discipline

Despite a strong underlying combined ratio of 68.7%, American Coastal experienced continued downward rate pressure, leading to a 5% decrease in gross premiums written year-over-year. The reported combined ratio was 74.3%, an increase of 13.7 points from 2025, but in line with expectations for a soft market. Management emphasized prioritizing underwriting profitability over top-line growth, remaining disciplined in the current competitive environment.

Multifamily Apartment Initiative Challenges

The multifamily apartment initiative has been disappointing, primarily due to the lack of an AM Best rating, which is a strict security requirement for lenders. This has led to challenges in quoting and binding activity and some midterm cancellations. The company is actively working on solutions, including forming ASIS Specialty to seek an AM Best rating and evaluating fronting relationships to access AM Best-rated paper, with a goal to have a solution operational by late Q4.

Debt Refinancing Strategy

American Coastal plans to refinance its senior notes coming due next year, with a current outlook to reduce the outstanding long-term debt from $150 million to $75 million. This move aims to achieve a debt-to-capital ratio of 20% or less, which management deems appropriate for its risk profile and earnings power.

The company intends to complete the refinancing within the next six to twelve months, ideally before the next hurricane season.

Market Share and Policy Growth

The company reported that policies in force and total insured value in force were both up roughly 3% to 4% year-over-year as of June 30, 2026. Account retention improved to around 85% for Q2. Despite increased competition and rate pressure, American Coastal believes it is maintaining or growing its market leadership position in Florida commercial residential property insurance, actively writing new business where attractive opportunities exist.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.