American Coastal Insurance Corp (ACIC) Q3 2024 Earnings Call Highlights: Strong Net Income Amid ...

GuruFocus News
3 min read

In This Article:

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • American Coastal Insurance Corp (NASDAQ:ACIC) reported a strong net income of $28.1 million for the third quarter.

  • The company experienced a significant increase in foreign income, rising by $11.4 million year over year.

  • Gross premium earned grew by $2.4 million to $160.2 million, indicating strong revenue growth.

  • ACIC successfully reduced its quota share from 40% to 20%, leading to lower seeded earned premiums and higher retained underwriting profit.

  • The company maintained a strong liquidity position with cash and investments growing by 83.1% to $571.1 million.

Negative Points

  • ACIC incurred significant after-tax losses from hurricanes Debby, Helene, and Milton, totaling approximately $20 million.

  • The company expects to incur an additional $13 million in premiums to reinstate reinsurance limits used by Hurricane Milton.

  • Operating expenses increased by $9.5 million, driven by higher policy acquisition costs and general administrative expenses.

  • The company faced a decrease in seeding commission income due to the quota share step down.

  • Comparison to prior periods is impacted by the absence of hurricane losses in 2023, affecting year-over-year performance metrics.

Q & A Highlights

Q: Can you provide more details on the impact of recent hurricanes on American Coastal's financials? A: Bennett Martz, President, explained that Hurricane Debby resulted in minimal wind damage with a net impact of about $600,000 after tax. Hurricane Helene caused minor wind damage and extensive flood damage, resulting in a net loss of about $3.2 million after tax. Hurricane Milton, however, caused significant wind damage, leading to an estimated net loss of $16.2 million in the fourth quarter. The company will also incur approximately $13 million in additional premiums to reinstate the reinsurance limit used by Milton.

Q: How did American Coastal perform financially in the third quarter of 2024? A: Svetlana Castle, CFO, reported a strong quarter with a net income of $28.1 million. The gross premium earned grew to $160.2 million, and the combined ratio was 57.7%, below the 65% target. Operating expenses increased, primarily due to higher policy acquisition costs, but were offset by decreased seeding premiums, resulting in an increase in earnings before tax of $18.4 million year over year.

Q: What strategic actions has American Coastal taken recently? A: R Daniel Peed, CEO, highlighted the company's successful participation in its first-ever takeout from Citizens, adding policies to their condo book and launching a new apartment program. This strategic move is expected to contribute to future growth.

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