Executive Summary

Q1 2025 delivered strong underwriting with combined ratio at 65.0% and underlying combined ratio at 68.2%; core EPS was $0.42 and GAAP diluted EPS was $0.43, with favorable prior-year reserve development (-3.2 pts) and no catastrophe losses in the quarter .
Core EPS modestly beat S&P Global consensus by $0.02 ($0.42 vs $0.40), while revenue missed ($72.2M actual vs $80.0M consensus) amid elevated policy acquisition costs from the quota-share step-down to 20% effective 6/1/24; only one estimate was available for each metric (limited visibility) *.
Book value per share increased to $5.40 from $4.89 at year-end, and underlying BVPS rose to $5.67; equity reached $260.9M supported by net income and investment portfolio gains .
Management highlighted reinsurance renewal progress: expected overall risk-adjusted cost down ~12%, external quota share at 15% for 2025/26, and improved drop-down features via cat bond to enhance 2nd/3rd event protection; formal 8-K disclosure on 5/29/25 confirmed structure and pricing .
Strategic catalysts: continued policy growth (+6% since year-end), 88% account retention, softening rates passed to policyholders without sacrificing margins, and measured expansion into Florida apartments (~$18–$20M annualized premium run rate) .

What Went Well and What Went Wrong

What Went Well

Target combined ratio achieved (65.0%); underlying combined ratio at 68.2% with no current-year CAT losses and $2.2M favorable prior-year reserve development, evidencing disciplined underwriting and strong reserving .
Equity and book value strengthened: BVPS rose to $5.40; underlying BVPS to $5.67; cash, restricted cash, and investments increased to $568.8M, reflecting robust liquidity and investment income ($4.5M) .
Reinsurance renewal progress and risk transfer enhancements (cat bond drop-down, lower reinstatement exposure ~$5.9M max): risk-adjusted rate down ~12.2%, first-event limit ~$1.33B, FHCF at 90% coverage; foundational for 2025 hurricane season .

What Went Wrong

Core income declined 15.3% YoY to $20.7M; net expense ratio rose to 48.3% (vs 33.3% YoY) driven by lower ceding commissions post quota-share step down and higher external management fees; combined ratio increased 11.8 pts YoY .
Revenue missed Wall Street consensus as total revenue reached $72.2M vs $80.0M consensus, reflecting the expense pressure from PAC and the reinsurance mix shift (replacement XoL more cost-effective but lowers ceding ratio) *.
Sequentially, net premiums earned and revenues were down vs Q4 (seasonally impacted and with Milton reinstatement effects amortizing Oct–May), though net income improved sharply as Q4 carried significant CAT loss burden from Hurricane Milton .

Financial Results

Metric	Q1 2024	Q4 2024	Q1 2025
Gross Premiums Written ($USD ‘000)	$184,601	$140,739	$197,852
Gross Premiums Earned ($USD ‘000)	$160,270	$162,710	$162,101
Net Premiums Earned ($USD ‘000)	$62,631	$73,492	$68,272
Total Revenue ($USD ‘000)	$66,598	$79,267	$72,202
Net Income ($USD ‘000)	$23,599	$4,946	$21,348
Diluted EPS (Total, $)	$0.48	$0.10	$0.43
Core Income ($USD ‘000)	$24,390	$5,990	$20,651
Core EPS ($)	$0.50	$0.12	$0.42
Net Loss & LAE Ratio (%)	19.9%	40.5%	16.7%
Net Expense Ratio (%)	33.3%	51.4%	48.3%
Combined Ratio (%)	53.2%	91.9%	65.0%
Underlying Combined Ratio (%)	52.9%	65.9%	68.2%
Book Value per Share ($)	$4.27	$4.89	$5.40

Estimate comparison (S&P Global):

Metric	Q1 2025 Actual	Q1 2025 Consensus	Surprise
Core/Primary EPS ($)	0.42*	0.40*	+$0.02*
Total Revenue ($USD)	72,202,000	80,042,000*	-$7,840,000*

Values marked with an asterisk were retrieved from S&P Global. Only one estimate was available for EPS and revenue, limiting consensus robustness.

Reinsurance ceding ratios:

Reinsurance Cost as % of Gross Earned Premium	Q1 2024	Q4 2024	Q1 2025
Non-at-Risk (%)	(0.2%)	(0.3%)	(0.3%)
Quota Share (%)	(31.5%)	(16.2%)	(16.2%)
All Other (%)	(29.3%)	(38.3%)	(41.4%)
Total Ceding Ratio (%)	(61.0%)	(54.8%)	(57.9%)

KPIs and operating drivers:

KPI	Q1 2024	Q4 2024	Q1 2025
Policy Acquisition Costs ($USD ‘000)	$9,595	$26,514	$23,466
General & Administrative ($USD ‘000)	$11,252	$11,277	$9,506
Net Investment Income ($USD ‘000)	$4,017	$5,321	$4,511
Favorable PY Reserve Development ($USD ‘000)	—	$(1,325) impact	$(2,194)
Current-Year Cat Losses ($USD ‘000)	$211	$20,405	—

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Income (Continuing Ops)	FY 2025	$70M–$90M (reiterated)	$70M–$90M (unchanged)	Maintained
Combined Ratio Target (ex-CAT)	Ongoing	~65% target	~65% target (Q1 achieved)	Maintained
External Quota Share Cession	6/1/2024–5/31/2025	20%	15% (6/1/2025–5/31/2026)	Lowered
Internal Quota Share to Captive	2025/26	30%	45%	Raised
FHCF Coverage	6/1/2025	N/A prior detail	90%; attaches ~$299.9M, total ~$534.1M	Set
Reinsurance Cost (risk-adjusted)	2025/26	N/A	~−12.2% vs 2024/25	Lowered
Dividends	Q1 2025	$0.50 special dividend declared in Q4 2024	$— in Q1 2025	N/A

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024)	Previous Mentions (Q4 2024)	Current Period (Q1 2025)	Trend
Hurricanes/CAT losses	Debby/Helene within retention; Milton expected net loss $16.2M in Q4	Full retention from Milton; profitable quarter despite CAT; CAT bond added	No Q1 CAT losses; favorable PY development; stronger aggregate protection	Loss volatility moderated; protection improved
Reinsurance structure/cost	Lower quota share (40%→20%), reinstatement premiums amortizing	New cat bond with drop-down features; AOP and Excess Per Risk retentions reduced	Core CAT renewal: external QS 15%; risk-adjusted rate −12.2%; FHCF 90%	Structurally stronger, cheaper risk transfer
Pricing/rate adequacy	Combined ratio below target; rate decreases 5–10% expected	Passing savings while maintaining margins	Average account rate ~$0.97; wind deductibles under scrutiny; open to new business	Softening rates with disciplined terms
Policy retention/portfolio	Takeout from Citizens; portfolio stable	Policy count growth QoQ	Policy count +6% since YE; retention ~88%	Healthy growth and retention
Apartment initiative	Announced; ramp expected	19 policies, $2.3M premium	~15 binds/month; $18–$20M annualized run rate; selective underwriting	Measured expansion; competitive market
Expense drivers (PAC/MGA fees)	PAC increased due to QS step-down	PAC +$13.4M; G&A +$1.7M	PAC +144.8% YoY; G&A −15.9% QoQ due to ERC refund	PAC elevated; some G&A relief
Regulatory/macro	Florida reforms moderating litigation	N/A	Florida market softening; FHCF elected at 90%	Supportive backdrop

Management Commentary

“We achieved our target combined ratio of 65% and delivered a return on equity over 30%... net premiums earned increasing 9%... The Company remains focused on disciplined underwriting to support sustainable profitability and value creation” — B. Bradford Martz, CEO .
“Core income was $20.7 million, a decrease of $3.7 million year-over-year due to increased policy acquisition costs... combined ratio was 65%, in line with our target... we continue to feel our reserve position is strong” — Svetlana (“Lana”) Castle, CFO .
“We are now 100% placed except for a new top layer... first event limit up ~16% to ~$1.35B... aggregate protection expected to increase ~32% YoY... risk-adjusted reinsurance rate decrease ~12%” — CEO on reinsurance renewal .
“Average account rate... ~$0.97 as of March 31... we still feel good about rate adequacy... pushing to maintain 5% wind deductibles in Tri-County” — CEO on pricing/terms .
“Apartment initiative averaging ~15 binds/month, ~$100k average premium; ~$18–$20M annualized run rate; competitive market so we’ll be selective” — CEO on new product line .

Q&A Highlights

Rate trends and wind deductibles: Management emphasized maintaining 5% wind deductibles in Tri-County, with average account rate ~$0.97 and cautious adjustments to avoid adverse risk-premium trade-offs .
Reinsurance drop-down and reinstatement: Reinstatement exposure reduced to ~$5M from ~$13M; cat bond $200M x $50M drops to ~$300M for second event (if layers reinstated) and to $50M for third event if layers not reinstated .
Quota share strategy: External QS stepping down to 15% for 2025/26; internal QS increased to 45% to build captive capital while keeping statutory RBC strong .
AmRisc management fee: Contract extension added profit-sharing; total administration+claims fee rose ~1% of premium, most passed through to producers in softening market .
Apartment program: Measured growth with tight underwriting guidelines; expected to diversify inland exposure and maintain condo-like risk characteristics .

Estimates Context

EPS vs consensus: Q1 2025 Primary/Core EPS of $0.42 modestly beat S&P Global consensus of $0.40 (+$0.02). Only one estimate was available (limited consensus depth)*.
Revenue vs consensus: Q1 2025 total revenue of $72.2M missed S&P Global consensus of ~$80.0M, reflecting higher PAC and reinsurance mix dynamics alongside softening market rates*.
Implications: Given limited estimate coverage, revisions may be muted; nonetheless, stronger underwriting and reinsurance improvements could support upward adjustments to full-year profitability trajectory pending hurricane activity *.

Values marked with an asterisk were retrieved from S&P Global.

Key Takeaways for Investors

Underwriting intact: Combined ratio at 65% with no CAT losses and favorable reserve development indicates durable margin discipline despite a softer market .
Expense headwinds manageable: Elevated PAC from quota-share changes pressured YoY core earnings; G&A saw one-time ERC refund; expect expense normalization as reinsurance mix stabilizes .
Reinsurance upgraded: External QS lowered to 15%, FHCF at 90% coverage, and cat bond drop-down features materially enhance second/third event protection with ~12% risk-adjusted cost reduction .
Capital and BV accretion: BVPS up to $5.40, underlying BVPS $5.67; cash/investments rose, and sale of Interboro added ~$26.4M cash at holdco (closed 4/1/25), strengthening flexibility .
Growth levers: Policy count +6% since YE and 88% retention underpin stable earned premium; apartment product adds measured, diversified growth with condo-like wind risk characteristics .
Near-term trading: Revenue miss vs S&P may temper immediate sentiment; however, EPS beat, underwriting quality, and reinsurance catalysts (May 29 8-K) offer supportive narrative into hurricane season * .
Risk monitor: Track hurricane developments, wind deductible trends, and PAC trajectory; watch FHCF attachment and reinstatement dynamics through peak season given program changes .

*Values retrieved from S&P Global.

Citations:

AMERICAN COASTAL INSURANCE Corp (ACIC)·Q1 2025 Earnings Summary