AMERICAN COASTAL INSURANCE Corp

Previous wording

American Coastal Insurance Corporation (referred to in this document as we, our, us, the Company or ACIC) is a holding company primarily engaged in commercial property and casualty insurance business with investments in the United States. We conduct our business principally through our wholly-owned insurance subsidiary, American Coastal Insurance Company (AmCoastal). Collectively, we refer to the holding company and all our subsidiaries, including non-insurance subsidiaries, as “American Coastal Insurance Corporation,” which is the preferred brand identification for our Company.

Current wording

American Coastal Insurance Corporation (referred to in this document as we, our, us, the Company or ACIC) is a holding company primarily engaged in commercial property insurance business with investments in the United States. We conduct our business principally through our wholly-owned insurance subsidiary, American Coastal Insurance Company (AmCoastal). Collectively, we refer to the holding company and all our subsidiaries, including non-insurance subsidiaries, as “American Coastal Insurance Corporation,” which is the preferred brand identification for our Company.

Previous wording

Our policies in-force increased by 0.4% from 4,239 policies in-force at March 31, 2025 to 4,254 policies in-force at March 31, 2026.

Current wording

Our policies in-force increased by 1.2% from 4,402 policies in-force at June 30, 2025 to 4,453 policies in-force at June 30, 2026.

Previous wording

Net loss and LAE ratio excluding the effects of current year catastrophe losses and prior year reserve development (underlying loss and LAE ratio) is a non-GAAP measure, that is computed by subtracting the effect of current year catastrophe losses and prior year development from the net loss & LAE ratio. We believe that this ratio is useful to investors and it is used by management to highlight the loss trends in our business that may be obscured by current year catastrophe losses and prior year development. Current year catastrophe losses cause our loss trends to vary significantly between periods as a result of their frequency of occurrence and magnitude, and can have a significant impact on the net loss and LAE ratio. Prior year development is caused by unexpected loss development on historical reserves. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. The most directly comparable GAAP measure is the net loss and LAE ratio. The underlying loss and LAE ratio should not be considered as a substitute for the net loss and LAE ratio and does not reflect the overall profitability of our business.

Current wording

Net loss and LAE ratio excluding the effects of current year catastrophe losses and prior year reserve development (underlying loss and LAE ratio) is a non-GAAP measure, that is computed by subtracting the effect of current year catastrophe losses and prior year development from the net loss and LAE ratio. We believe that this ratio is useful to investors and it is used by management to highlight the loss trends in our business that may be obscured by current year catastrophe losses and prior year development. Current year catastrophe losses cause our loss trends to vary significantly between periods as a result of their frequency of occurrence and magnitude, and can have a significant impact on the net loss and LAE ratio. Prior year development is caused by unexpected loss development on historical reserves. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. The most directly comparable GAAP measure is the net loss and LAE ratio. The underlying loss and LAE ratio should not be considered as a substitute for the net loss and LAE ratio and does not reflect the overall profitability of our business.

Previous wording

When we prepare our consolidated financial statements and accompanying notes in conformity with GAAP, we must make estimates and assumptions about future events that affect the amounts we report. Certain of these estimates result from judgments that can be subjective and complex. As a result of that subjectivity and complexity, and because we continuously evaluate these estimates and assumptions based on a variety of factors, actual results could materially differ from our estimates and assumptions if changes in one or more factors require us to make accounting adjustments. During the three months ended March 31, 2026, we reassessed our critical accounting policies and estimates as disclosed in Note 2 to the Notes to Unaudited Condensed Consolidated Financial Statements and our Annual Report on Form 10-K for the year ended December 31, 2025. We have made no changes or additions with regard to those policies and estimates.

Current wording

When we prepare our consolidated financial statements and accompanying notes in conformity with GAAP, we must make estimates and assumptions about future events that affect the amounts we report. Certain of these estimates result from judgments that can be subjective and complex. As a result of that subjectivity and complexity, and because we continuously evaluate these estimates and assumptions based on a variety of factors, actual results could materially differ from our estimates and assumptions if changes in one or more factors require us to make accounting adjustments. During the six months ended June 30, 2026, we reassessed our critical accounting policies and estimates as disclosed in Note 2 to the Notes to Unaudited Condensed Consolidated Financial Statements and our Annual Report on Form 10-K for the year ended December 31, 2025. We have made no changes or additions with regard to those policies and estimates.

Previous wording

As of March 31, 2026, we engaged one outside asset management company, which has authority and discretion to buy and sell securities for us, manage our investments subject to (i) the guidelines established by our Board of Directors and (ii) the direction of management. Prior to August 2025, we engaged two outside asset management companies. The Investment Committee of our Board of Directors reviews and approves our investment policy on a regular basis.

Current wording

As of June 30, 2026, we engaged one outside asset management company and retain one internal asset manager, which have authority and discretion to buy and sell securities for us, manage our investments subject to (i) the guidelines established by our Board of Directors and (ii) the direction of management. Prior to August 2025, we engaged two outside asset management companies and prior to April 2026 we engaged no internal asset manager. The Investment Committee of our Board of Directors reviews and approves our investment policy on a regular basis.

Previous wording

Our cash, cash equivalents, restricted cash and investment portfolio totaled $599,445,000 at March 31, 2026, compared to $647,744,000 at December 31, 2025. The Company paid a dividend totaling approximately $36.6 million during the first quarter, which drove this decrease, along with changes in operating assets and liabilities.

Current wording

Our cash, cash equivalents, restricted cash and investment portfolio totaled $650,022,000 at June 30, 2026, compared to $647,744,000 at December 31, 2025.

Previous wording

We classify all of our fixed-maturity investments as available-for-sale. Our investments at March 31, 2026 and December 31, 2025 consisted mainly of U.S. government and agency securities, securities of investment-grade corporate issuers, mortgage-backed securities, and states, municipalities and political subdivisions. Our equity holdings as of March 31, 2026 and December 31, 2025 consisted of mutual funds and common stock. At March 31, 2026, approximately 82.5% of our fixed maturities were U.S. Treasuries or corporate bonds rated "A" or better, and 17.5% were corporate bonds rated "BBB" or "BB".

Current wording

We classify all of our fixed-maturity investments as available-for-sale. Our investments at June 30, 2026 and December 31, 2025 consisted mainly of U.S. government and agency securities, securities of investment-grade corporate issuers, mortgage-backed securities, and states, municipalities and political subdivisions. Our equity holdings as of June 30, 2026 and December 31, 2025 consisted of mutual funds and common stock. At June 30, 2026, approximately 81.7% of our fixed maturities were U.S. Treasuries or corporate bonds rated "A" or better, and 18.3% were corporate bonds rated "BBB" or "BB".

Previous wording

AmCoastal’s core catastrophe reinsurance program, including catastrophe bonds (effective April 2024 and December 2024), in effect June 1 through May 31, annually, which includes excess of loss and quota share treaties providing coverage for catastrophe losses from named or numbered windstorms;

Current wording

AmCoastal’s core catastrophe reinsurance program, including catastrophe bonds (effective April 2024, December 2024 and June 2026), in effect June 1 through May 31, annually, which includes excess of loss and quota share treaties providing coverage for catastrophe losses from all perils;

Previous wording

This reinsurance protection is an essential part of our catastrophe risk management strategy. It is intended to provide our stockholders with an acceptable return on the risks assumed by our insurance entity, and to reduce the variability of earnings, while providing surplus protection. Although reinsurance agreements contractually obligate our reinsurers to reimburse us for the agreed-upon portion of our gross paid losses, they do not discharge our primary liability. In the event one or more of our reinsurers fail to fulfill their obligation, the surplus of our statutory entity may decline, and we may not be able to fulfill our obligation to policyholders, or we may not be able to maintain compliance with various regulatory financial requirements. Additionally, we face the risk that actual losses incurred from one or more catastrophic events may be above the modeled expected loss resulting in losses exceeding our reinsurance coverage, which may result in a decline in surplus, and as a result we may not be able to fulfill our obligations to policyholders, or we may not be able to maintain compliance with various regulatory financial requirements. The details of our programs and the likelihood of a catastrophic event exceeding these two coverages are outlined below.

Current wording

This reinsurance protection is an essential part of our catastrophe risk management strategy. It is intended to provide our stockholders with an acceptable return on the risks assumed by our insurance entity, and to reduce the variability of earnings, while providing surplus protection. Although reinsurance agreements contractually obligate our reinsurers to reimburse us for the agreed-upon portion of our gross paid losses, they do not discharge our primary liability. In the event one or more of our reinsurers fail to fulfill their obligation, the surplus of our statutory entity may decline, and we may not be able to fulfill our obligation to policyholders, or we may not be able to maintain compliance with various regulatory financial requirements. Additionally, we face the risk that actual losses incurred from one or more catastrophic events may be above the modeled expected loss resulting in losses exceeding our reinsurance coverage, which may result in a decline in surplus, and as a result we may not be able to fulfill our obligations to policyholders, or we may not be able to maintain compliance with various regulatory financial requirements. The details of our programs and the likelihood of a catastrophic event exceeding these three coverages are outlined below.

Previous wording

AmCoastal’s core catastrophe reinsurance program provides occurrence-based coverage up to an exhaustion point of approximately $1,330,000,000 for a first occurrence and $1,676,000,000 in the aggregate. Under this program, the Company's GAAP retention on a first event is $29,750,000 ($14,000,000 retained by AmCoastal under statutory accounting principles (STAT retained), $15,750,000 (retained separately by the Company's captive)). The Company has purchased second and third event retrocession coverage, reducing its second event GAAP retention to $18,500,000 ($14,000,000 STAT retained by AmCoastal, $4,500,000 retained separately by the Company's captive) and third event GAAP retention to $3,750,000, based on three $100,000,000 loss events. AmCoastal’s program provides sufficient coverage for approximately a 1-in-217-year return period, indicating that the probability of a single occurrence exceeding protection purchased is roughly 0.5% when using the catastrophe model AIR 11.5 (using the long-term catalog with demand surge and loss adjustment expense included) and based on total insured value at September 30, 2025 of $69 billion. AmCoastal’s program also provides sufficient coverage for a 1-in-100-year event followed by a 1-in-50-year event in the same treaty year, the probability of which is less than 0.1%. While we believe these catastrophe models are useful tools and their outputs provide reasonable proxies for the probability of exhausting our reinsurance protections, they are imperfect, and actual results may differ materially from those expected.

Current wording

AmCoastal’s core catastrophe reinsurance program provides occurrence-based coverage up to an exhaustion point of approximately $1,680,000,000 for a first occurrence and $1,918,000,000 in the aggregate. Under this program, the Company's GAAP retention on a first event is $49,000,000 ($26,500,000 retained by AmCoastal under statutory accounting principles (STAT retained), $22,500,000 retained separately by the Company's captive)). The Company has purchased second and third event retrocession coverage, decreasing its second event GAAP retention to $25,000,000 ($13,300,000 STAT retained by AmCoastal, $11,700,000 retained separately by the Company's captive) and third event GAAP retention to $2,000,000, based on three $100,000,000 loss events. AmCoastal’s program provides sufficient coverage for approximately a 1-in-286-year return period, indicating that the probability of a single occurrence exceeding protection purchased is roughly 0.4% when using the catastrophe model AIR 13 (using the long-term catalog with demand surge and 10% loss adjustment expense included) and based on estimated total insured value at September 30, 2026 of $78 billion. AmCoastal’s program also provides sufficient coverage for a 1-in-100-year event followed by a 1-in-50-year event in the same treaty year, the probability of which is less than 0.1%. While we believe these catastrophe models are useful tools and their outputs provide reasonable proxies for the probability of exhausting our reinsurance protections, they are imperfect, and actual results may differ materially from those expected.

Previous wording

(3) Net premiums earned based on estimated subject premiums at June 1, 2025.

Current wording

(3) Net premiums earned based on estimated subject premiums at treaty inception.

Previous wording

(4)This treaty was commuted on June 1, 2025 with no impact on our consolidated results.

Current wording

(5)This treaty was commuted on June 1, 2025 with no impact on our consolidated results.

Previous wording

The table below outlines our external quota share agreements in effect for the three months ended March 31, 2026 and 2025.

Current wording

The table below outlines our external quota share agreements in effect for the six months ended June 30, 2026 and 2025.

Previous wording

Reinsurance costs as a percentage of gross earned premium during the three months ended March 31, 2026 and 2025 were as follows:

Current wording

Reinsurance costs as a percentage of gross earned premium during the three and six months ended June 30, 2026 and 2025 were as follows:

Previous wording

Unpaid losses and LAE totaled $126,990,000 and $165,701,000 as of March 31, 2026 and December 31, 2025, respectively.

Current wording

Unpaid losses and LAE totaled $118,920,000 and $165,701,000 as of June 30, 2026 and December 31, 2025, respectively.

Previous wording

Our gross written premiums decreased $48,457,000, or 24.5%, to $149,395,000 for the three months ended March 31, 2026 from $197,852,000 for the same period in 2025. Gross premium earned decreased $20,967,000, or 12.9%, to $141,134,000 for the three months ended March 31, 2026 from $162,101,000 for the same period in 2025. These changes are mainly attributed to a decrease of 24% in our net pricing year-over-year as the market softened. Ceded premiums earned decreased $18,306,000, or 19.5%, to $75,523,000 for the three months ended March 31, 2026 from $93,829,000 for the same period in 2025. The breakdown of the quarter-over-quarter change in these premiums and new and renewal policies are shown in the tables below. More detail regarding our ceded premiums can be seen in our analysis of financial condition above.

Current wording

Our gross written premiums decreased $60,499,000, or 14.2%, to $365,699,000 for the six months ended June 30, 2026 from $426,198,000 for the same period in 2025. Gross premium earned decreased $47,697,000, or 14.6%, to $279,864,000 for the six months ended June 30, 2026 from $327,561,000 for the same period in 2025. These changes are attributed to a 24% decrease in our net pricing year-over-year as the market continued to soften. Ceded premiums earned decreased $36,291,000, or 20.1%, to $144,555,000 for the six months ended June 30, 2026 from $180,846,000 for the same period in 2025. The breakdown of the year-over-year change in these premiums and new and renewal policies are shown in the tables below. More detail regarding our ceded premiums can be seen in our analysis of financial condition above.

Previous wording

Expenses for the three months ended March 31, 2026 decreased $1,395,000, or 3.0%, to $45,683,000 from $47,078,000 for the same period in 2025. The decrease in expenses was primarily due to a decrease in policy acquisition costs and loss and loss adjustment expenses quarter-over-quarter. This was partially offset by increased general and administrative expenses quarter-over-quarter. The details of these changes can be seen below.

Current wording

Expenses for the six months ended June 30, 2026 increased $2,457,000, or 2.5%, to $99,829,000 from $97,372,000 for the same period in 2025. The increase in expenses was primarily due to an increase in loss and loss adjustment expenses and general and administrative expenses. This was partially offset by decreased policy acquisition costs year-over-year. The details of these changes can be seen below.

Previous wording

Loss and LAE decreased $1,146,000, or 10.1%, to $10,243,000 for the three months ended March 31, 2026 from $11,389,000 for the same period in 2025. Loss and LAE expense as a percentage of net earned premiums decreased 1.1 points to 15.6% for the three months ended March 31, 2026, compared to 16.7% for the same period in 2025. Excluding catastrophe losses and prior year reserve development, our underlying loss and LAE as a percentage of gross earned premiums for the three months ended March 31, 2026 would have been 8.4%, or no change from 8.4% during the three months ended March 31, 2025.

Current wording

Loss and LAE increased $2,147,000, or 8.0%, to $29,076,000 for the six months ended June 30, 2026 from $26,929,000 for the same period in 2025. Loss and LAE expense as a percentage of net earned premiums increased 3.1 points to 21.5% for the six months ended June 30, 2026, compared to 18.4% for the same period in 2025. Excluding catastrophe losses and prior year reserve development, our underlying loss and LAE as a percentage of gross earned premiums for the six months ended June 30, 2026 would have been 9.6%, an increase of 0.3 points, from 9.3% during the six months ended June 30, 2025.

Previous wording

Policy acquisition costs decreased $1,073,000, or 4.6%, to $22,393,000 for the three months ended March 31, 2026 from $23,466,000 for the same period in 2025. The primary driver of the decrease was a decrease in external management fees of $3,153,000 as a result of the decrease in gross premiums shown above. This was partially offset by a decrease in ceding commission income of $2,361,000 as the result of the Company's decrease in quota share reinsurance coverage from 20% to 15%, effective June 1, 2025.

Current wording

Policy acquisition costs decreased $2,627,000, or 5.5%, to $45,096,000 for the six months ended June 30, 2026 from $47,723,000 for the same period in 2025. The primary driver of the decrease was a decrease in external management fees of $8,258,000 as a result of the decrease in gross premiums shown above. This was partially offset by a decrease in ceding commission income of $4,637,000 as the result of the Company's decrease in quota share reinsurance coverage from 20% to 15%, effective June 1, 2025. This was further offset by legacy unearned agent commission collections during the first six months of 2025, which drove an increase in agent commission expense of $1,749,000 in the first six months of 2026.

Previous wording

General and administrative expenses increased $1,197,000, or 12.6%, to $10,703,000 for the three months ended March 31, 2026 from $9,506,000 for the same period in 2025, driven by increased salary-related expenses, primarily as a non-recurring employee retention tax credit refund of $1,530,000 submitted to the Internal Revenue Service in 2022 that was received during the first quarter of 2025, which did not recur in 2026. Overall, employee compensation increased $2,389,000, inclusive of this refund. This was partially offset by a decrease in amortization of $852,000, as assets related to our intellectual property transaction with Slide Insurance Company were fully amortized when the transaction came to its conclusion in January 2026. This decrease in amortization corresponds with the decrease seen in other income quarter-over-quarter. The full details of our general and administrative expenses can be seen in Note 12, above.

Current wording

General and administrative expenses increased $3,685,000, or 21.3%, to $20,969,000 for the six months ended June 30, 2026 from $17,284,000 for the same period in 2025, driven by increased salary-related expenses, primarily due to a non-recurring employee retention tax credit refunds of $4,469,000 that were received during 2025. Overall, employee compensation increased $5,557,000, inclusive of this refund. This was partially offset by a decrease in amortization of $1,796,000, as assets related to our intellectual property transaction were fully amortized when the transaction came to its conclusion in January 2026. This decrease in amortization corresponds with the decrease seen in other income year-over-year. The full details of our general and administrative expenses can be seen in Note 12, above.

Previous wording

As a holding company, we do not conduct any business operations of our own and, as a result, we rely on cash dividends or intercompany loans from our management subsidiary to pay our general and administrative expenses. Insurance regulatory authorities heavily regulate our insurance subsidiary, including restricting any dividends paid by our insurance subsidiary and requiring approval of any management fees our insurance subsidiary pays to our management subsidiary for services rendered; however, nothing restricts our non-insurance company subsidiaries from paying us dividends other than state corporate laws regarding solvency. Our management subsidiary pays us dividends primarily using cash from the collection of management fees from our insurance subsidiary, pursuant to the management agreements in effect between those entities. In accordance with state laws, our insurance subsidiary may pay dividends or make distributions out of that part of its statutory surplus derived from its net operating profit and its net realized capital gains. The Risk-Based Capital (RBC) guidelines published by the National Association of Insurance Commissioners may further restrict our insurance subsidiary's ability to pay dividends or make distributions if the amount of the intended dividend or distribution would cause their respective surplus as it regards policyholders to fall below minimum RBC guidelines. See Note 8 in our Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

Current wording

As a holding company, we do not conduct any business operations of our own and, as a result, we rely on cash dividends or intercompany loans from our management subsidiary to pay our general and administrative expenses. Insurance regulatory authorities heavily regulate our insurance subsidiary, including restricting any dividends paid by our insurance subsidiary and requiring approval of any management fees our insurance subsidiary pays to our management subsidiary for services rendered; however, nothing restricts our non-insurance company subsidiaries from paying us dividends other than state corporate laws regarding solvency. Our management subsidiary pays us dividends primarily using cash from the collection of management fees from our insurance subsidiary, pursuant to the management agreements in effect between those entities. In accordance with state laws, our insurance subsidiary may pay dividends or make distributions out of that part of its statutory surplus derived from its net operating profit and its net realized capital gains. The Risk-Based Capital (RBC) guidelines published by the National Association of Insurance Commissioners may further restrict our insurance subsidiary's ability to pay dividends or make distributions if the amount of the intended dividend or distribution would cause their respective surplus as regards policyholders to fall below minimum RBC guidelines. See Note 8 in our Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

Previous wording

The Company made no capital contributions to its subsidiaries during the three months ended March 31, 2026 and 2025.

Current wording

The Company made no capital contributions to its subsidiaries during the six months ended June 30, 2026. The Company made a capital contribution of $8,269,000 to its reinsurance subsidiary, Shoreline Re, during the six months ended June 30, 2025.

Previous wording

Cash Flows for the Three Months Ended March 31, 2026 and 2025 (in thousands)

Current wording

Cash Flows for the Six Months Ended June 30, 2026 and 2025 (in thousands)

Previous wording

During the three months ended March 31, 2026, we experienced cash outflows of $5,736,000 compared to cash inflows of $26,443,000 during the three months ended March 31, 2025. This change was driven by a reduction in premiums collected that was more than the reduction in net paid losses during the three months ended March 31, 2026 as compared to March 31, 2025. The change in reinsurance recoverable decreased $44,859,000 and the change in unearned premiums decreased $30,825,000, partially offset by a decrease in the change in unpaid loss and loss adjustment expenses of $27,195,000. The change in unpaid loss and loss adjustment expenses and the corresponding reinsurance recoverable balance can be attributed to the continued settlement of catastrophe claims with no similar activity occurring in 2026.

Current wording

During the six months ended June 30, 2026, we experienced cash inflows of $52,760,000 compared to $154,392,000 during the six months ended June 30, 2025. This change was driven by a reduction in premiums collected that was more than the reduction in net paid losses during the six months ended June 30, 2026 as compared to June 30, 2025. The change in reinsurance recoverable decreased $83,061,000 and the change in ceded unearned premiums decreased $21,255,000, partially offset by a decrease in the change in unpaid loss and loss adjustment expenses of $56,172,000 and decrease in the change in unearned premiums of $16,137,000. The change in unpaid loss and loss adjustment expenses and the corresponding reinsurance recoverable balance is attributed to the continued settlement of catastrophe claims in 2026.

Previous wording

The principal cash inflows from our investing activities come from repayments of principal, proceeds from maturities and sales of investments. We closely monitor and manage these risks through our comprehensive investment risk management process. The principal cash outflows relate to sales of investments. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption. During the three months ended March 31, 2026, net purchases of investments totaled $6,459,000 compared to net sales of investments of $5,300,000 during the three months ended March 31, 2025.

Current wording

The principal cash inflows from our investing activities come from repayments of principal, proceeds from maturities and sales of investments. We closely monitor and manage these risks through our comprehensive investment risk management process. The principal cash outflows relate to sales of investments. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption. During the six months ended June 30, 2026, net sales of investments totaled $28,021,000 compared to $25,357,000 during the six months ended June 30, 2025.

Previous wording

The principal cash outflows from our financing activities come from payments of dividends, repayments of debt, and repurchases of common stock. The primary liquidity concern with respect to these cash flows is market disruption in the cost and availability of credit. We believe our current capital resources, together with cash provided from our operations, are sufficient to meet currently anticipated working capital requirements. During the three months ended March 31, 2026, cash used in financing activities totaled $41,574,000, compared to $309,000 provided by financing activities for the three months ended March 31, 2025, driven by the payment of a special cash dividend of $0.75 per share declared in December 2025 and paid in January 2026 and treasury stock repurchases of $5,000,000.

Current wording

The principal cash outflows from our financing activities come from payments of dividends, repayments of debt, and repurchases of common stock. The primary liquidity concern with respect to these cash flows is market disruption in the cost and availability of credit. We believe our current capital resources, together with cash provided from our operations, are sufficient to meet currently anticipated working capital requirements. During the six months ended June 30, 2026, cash used in financing activities totaled $56,041,000, compared to $774,000 provided by financing activities for the six months ended June 30, 2025, driven by the payment of dividends and treasury stock repurchases.