Executive Summary

Solid Q2 with profitability and reinsurance reset positioning 2H growth: net income from continuing operations was $19.1M ($0.39 diluted EPS), total revenue $68.7M; combined ratio 64.9% with effectively no current-year CAT losses and $1.0M favorable prior-year development .
Non-GAAP Core EPS $0.40 beat the Raymond James estimate of $0.30; BVPS $4.63 vs RJ $4.58; combined ratio 64.9% vs RJ 74.3%; Core ROE 46.9% vs RJ 28.5%—broad-based beats on the company-cited street frame .
Guidance introduced: FY24 net income from continuing operations $85–$95M (ex-CAT) and net premiums earned $285–$300M; 2H24 implies 43.8%–77.8% Y/Y earnings growth and 33.3%–45.9% NPE growth under the new 20% quota share program effective 6/1/24 .
Near-term catalysts: new reinsurance structure (FORA replaced, added top limit and 3rd event cover) and approved participation in Citizens’ Oct 27 commercial takeout; management targets underlying combined ratio near 65% despite softening conditions .

What Went Well and What Went Wrong

What Went Well
- Core earnings quality held despite higher cessions; EBT rose 11.2% Y/Y even as ceded premiums earned increased materially; core income reached $19.6M and combined ratio was 64.9% .
- Catastrophe impact minimal; current-year CAT losses were effectively nil and prior-year reserve development was $1.0M favorable, supporting a 24.1% net loss ratio .
- Strategic reinsurance renewal: reduced quota share from 40%→20% and replaced FORA in private market while adding $100M of top limit and third-event protection; management expects positive impact on revenue and earnings . Quote: “we… strengthened our program… adding an additional $100 million… and… third event coverage… replacement of the FORA layer… plus the reduction of the quota share from 40% to 20% will more than offset [added cost]” .
What Went Wrong
- Margin mix: underlying combined ratio rose 4.4 pts Y/Y to 66.4% as the benefit from lower PAC was offset by higher ceded premium drag; net loss ratio +330 bps Y/Y to 24.1% .
- Expense optics: G&A increased 54.7% Y/Y (+$3.5M) from higher external legal/audit and higher salary-related expenses .
- Top line optics: total revenue declined 6.6% Y/Y and NPE fell 18.8% Y/Y due to the 40% quota share still impacting most of Q2 (reduction to 20% only from June 1), masking solid gross premium growth (+3.7% Y/Y) .

Financial Results

Metric	Q2 2023	Q1 2024	Q2 2024
Total Revenue ($M)	$73.5	$73.2	$68.7
Gross Premiums Earned ($M)	$149.8	$168.8	$155.5
Net Premiums Earned ($M)	$78.0	$68.7	$63.4
Diluted EPS – Continuing Ops ($)	$0.49	$0.48	$0.39
Core EPS (Non-GAAP) ($)	$0.62	$0.50	$0.40
Net Loss Ratio (%)	20.8%	23.1%	24.1%
Expense Ratio (%)	42.3%	35.2%	40.8%
Combined Ratio (%)	63.1%	58.3%	64.9%
Underlying Combined Ratio (%)	62.0%	57.8%	66.4%

Estimates vs Actuals (company-cited Raymond James benchmarks):

Metric	Actual	Estimate	Surprise
Core EPS	$0.40	$0.30 (Raymond James)	+$0.10
BVPS	$4.63	$4.58 (Raymond James)	+$0.05
Combined Ratio	64.9%	74.3% (Raymond James)	-9.4 pts
Core ROE	46.9%	28.5% (Raymond James)	+18.4 pts

KPI and Mix

Gross written premium: $229.4M (-3.1% Y/Y); all commercial property in Florida .
Ceding ratio mix: Non-at-risk -0.2%; Quota share -26.4%; All other -32.7%; Total ceding 59.3% (vs 47.9% LY) .
Book value per share: $4.63; underlying BVPS $5.03; stockholders’ equity $223.1M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Income from Continuing Ops (ex-CAT, $M)	FY 2024	N/A	$85–$95	Introduced
Net Premiums Earned ($M)	FY 2024	N/A	$285–$300	Introduced
Net Income from Continuing Ops (ex-CAT, $M)	2H 2024	N/A	$42.3–$52.3	Introduced
Net Premiums Earned ($M)	2H 2024	N/A	$158.9–$173.9	Introduced

Notes: Management highlighted reduced quota share to 20% from 6/1/24, FORA replaced, and added top/third-event cover—expected to drive favorable Y/Y comps in the next four quarters .

Earnings Call Themes & Trends

Topic	Q4 2023 (Q-2)	Q1 2024 (Q-1)	Q2 2024 (Current)	Trend
Core CAT reinsurance	Expect improvements; commutation charge in Q4 yields net $8M economic benefit; planning larger 6/1 renewal	>90% secured; planned quota share reduction; aim for higher exhaustion and <quarterly underwriting profit first-event retention	Reduced quota share 40%→20%; replaced FORA; added $100M top/third-event cover; positive earnings impact expected	Improving protection/cost
Quota share strategy	Target 65% underlying CR; watch 6/1 reinsurance to adjust	Plan to reduce QS; “single biggest profit impact” from QS reduction	QS reduced to 20% as of 6/1; sets up revenue/EPS growth in 2H	Lower cession, higher net
Citizens takeouts	Evaluating takeout opportunities in 2024	Not detailed	Approved to participate in Oct 27 commercial residential takeout	Incremental growth lever
Underwriting environment/competition	Competition increasing but still firm; expect +10–20% rate in 2024 vs 2023 avg	Firm with more competition; retention strong despite increases	Market beginning to soften; retention near 85%; pricing holding close to expiring	Softening but manageable
Capital/liquidity	ATM raised ~$38M; RBC ~981%; capital adequate to retain more risk	Liquidity improving	Cash/investments up 83.6% YTD to $572.6M; leverage improved	Stronger
Discontinued ops (Interboro)	Plan to divest; targeted YE 2024	Definitive agreements nearly complete	Executed definitive agreements; anticipate closing 1Q25; IIC now discontinued ops	Executing exit

Management Commentary

CEO (press release): “we recorded yet another profitable period… successfully placed our core catastrophe reinsurance program… increasing the exhaustion point… and… signed definitive agreements for the sale of Interboro Insurance Company” .
President (call): “we… strengthened our program further by adding an additional $100 million… and… third event coverage… replacement of the FORA layer… plus the reduction of the quota share from 40% to 20% will more than offset [cost]” .
CFO (call): “Core income was $19.6 million… decrease of $7.5 million year-over-year as a result of higher ceded earned premiums… combined ratio was 64.9%… operating expenses decreased $7.1 million primarily driven by… 41% decrease in policy acquisition costs… EBT were $2.5 million higher y/y” .

Q&A Highlights

Exposure/pricing discipline: Management trimming peak-zone exposure while premiums in-force grew; risk-return profile remains attractive; positioning for exposure growth post-renewal .
Reinstatement economics: Retentions are $16.2M after-tax on first event and $10.3M after-tax on second/third; reinstatement premium amortized over remaining treaty term; net reinstatement exposure cited as pretax .
Multi-event coverage: Second/third event coverage depends on size of first event; management would quickly guide remaining reinsurance after any event .
Weather check: System “Debby” largely a rain event; minimal wind impact; one minor claim under deductible; flood not covered .
Guidance context: Introduced ranges exclude potential 2H CAT losses; 2H growth driven by reduced quota share and program enhancements .

Estimates Context

S&P Global consensus: Unavailable due to access limitations this cycle. Values from S&P Global could not be retrieved at this time; please note consensus comparisons to S&P Global are unavailable.
Company-cited street framing: Q2 Core EPS $0.40 vs Raymond James $0.30; BVPS $4.63 vs $4.58; Combined Ratio 64.9% vs 74.3%; Core ROE 46.9% vs 28.5%—indicating broad beats on the metrics disclosed .
Implications: Estimate models should reflect lower quota share cessions (20% effective 6/1/24), lower PAC from ceding commissions moderating versus Q1, stronger net investment income, and minimal CAT in Q2; expect 2H24 upward adjustments to NPE and net income baselines consistent with guidance .

Key Takeaways for Investors

Structural earnings tailwind: Cutting quota share to 20% and FORA replacement should expand NPE and earnings in 2H24, even with some softening in rates—management guides FY24 net income (ex-CAT) to $85–$95M and 2H growth of 43.8%–77.8% Y/Y .
Underwriting remains disciplined: Combined ratio 64.9% with nil CAT and favorable reserve development; underlying CR elevated Y/Y as mix normalizes post-ceding shift but remains within targeted ~65% framework .
Liquidity/capital improving: Cash and investments rose to ~$573M; BVPS up to $4.63 (underlying $5.03); leverage down (debt/total capital 40.0%)—capacity to retain more risk .
Growth levers: Citizens takeout approval for Oct 27 and development of a new apartment product via MGA channel provide additive exposure growth opportunities .
Watch reinsurance seasonality: Retention economics and reinstatement treatment can shift quarterly optics; after-tax retentions outlined provide a clear stress-test anchor for modeling .
Expense cadence: PAC benefited from higher ceding commissions but will moderate as QS falls; G&A uplift from professional fees bears monitoring; investment income tailwind from redeployment to fixed maturities .
Risk factors: Softening market and more aggressive competitors could pressure rate increases, though management expects margins to hold near targets; hurricane exposure remains the key swing factor each quarter .

Additional Detail

Segment/Mix Detail (Q2 2024 vs Q2 2023)

Gross written premium by state (Q2): Florida $229.4M vs $236.8M (-3.1%); no other states .
Gross written premium by line (Q2): Commercial property $229.4M vs $236.8M (-3.1%); personal property N/A .
Ceding cost mix (Q2): Total ceding ratio 59.3% (QS 26.4%, All Other 32.7%, Non-at-risk -0.2%) vs 47.9% (QS 15.2%, All Other 32.3%, Non-at-risk -0.4%) .

Management Tone and Confidence

CEO emphasized consistent profitability, enhanced reinsurance protection, and portfolio focus post-Interboro divestiture; reiterated focus on long-term shareholder value and product expansion .
President/CFO highlighted stronger liquidity, equity growth, and beats relative to a cited estimate set; affirmed confidence in reserves and target underlying CR despite a softening market .

AMERICAN COASTAL INSURANCE Corp (ACIC)·Q2 2024 Earnings Summary