American Integrity Insurance Group - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered exceptionally strong profitability and growth: total revenues rose 62.2% YoY to $71.9M, net income was $38.1M, and the combined ratio improved to 42.9% from 75.9% YoY, driven by Citizens take-outs, voluntary growth, and a meaningfully lower loss and expense ratio.
• Results beat thin S&P Global consensus: EPS $2.92 vs $2.85 and revenue $71.9M vs $68.0M; estimate breadth remains minimal (1 estimate each), so revisions and coverage builds are key next catalysts for multiples*.
• The company placed a larger, lower cost reinsurance program ($1.93B single-event/$2.59B aggregate; expected $433M seeded premiums; retentions of $35M for 1st/2nd events) and executed a $565M ILS transaction, supporting capacity and risk transfer heading into hurricane season.
• Strategic updates: weighted-average rate filings down ~3% (offset by inflation vigilance); planned Tri-County (Miami-Dade/Broward) entry in fall 2025 via existing agency relationships; focus remains on disciplined underwriting and geographic balance.
• Near-term narrative drivers: sustainability of unusually low combined ratio as Citizens denominator effects normalize, reinsurance cost tailwinds, pace of voluntary growth, and execution on South Florida expansion.

What Went Well and What Went Wrong

What Went Well

• Material profitability inflection: combined ratio fell to 42.9% (loss 30.9%, expense 12.0%), with underlying loss ratio at 30.0%, reflecting litigation reform benefits, favorable severity/frequency trends, and operating leverage from Citizens take-outs.
• Scaled growth with higher quality mix: net premiums earned +66.5% YoY; policies in-force +42.9% YoY to 383,332; in-force premium +34.6% YoY to $909.5M, aided by voluntary growth and Citizens take-outs, with retention of 78.1% and targeted geographic expansion.
• Risk transfer and pricing: reinsurance program expanded with significant risk-adjusted price decreases; rate filings (HO3/DP1) completed with weighted-average ~3% cuts, reflecting improved market structure post-2022 reforms.

Management quote: “We do not write every policy. We write the right policy… built to deliver predictable results across very unpredictable environments.”.
Management quote: “These results reflect disciplined, strategic execution… and a culture aligned around a mission that matters.”.

What Went Wrong

• Temporary denominator effect; normalization ahead: management flagged that Citizens take-outs temporarily depress loss/expense ratios by boosting net earned premium without corresponding cat costs; ratios should revert toward more normal levels as reinsurance expenses amortize.
• Concentration/Florida macro and inflation: company remains highly exposed to Florida regulatory/weather dynamics; management is monitoring ~5% inflation impacts on severity and ITV even as frequency trends improve.
• Citizens take-out tailwind likely fades: management expects the pool to shrink; “best days for large scalable takeouts are already behind us,” placing more emphasis on voluntary growth and new geographies for 2H25/2026.

Transcript

Operator (participant)

Hello, and thank you for standing by. My name is Lacey, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Integrity Insurance Group First Quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Before we begin, please note that today's remarks may contain forward-looking statements, including comments about our outlook, strategy, plans, and expected performance. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially.

A full discussion of risk factors can be found in our SEC filings, including our most recently filed quarterly report on Form 10-Q. We undertake no obligation to update any forward-looking statements. Furthermore, today's remarks may contain non-GAAP financial measures. A reconciliation of non-GAAP financial measures to their most comparable GAAP measures is included in our quarterly press release and can also be found on the company's website at www.aii.com. References to American Integrity, or the company, prior to the consummation of the IPO refer to American Integrity Insurance Group, and after the consummation of the IPO refer to American Integrity Insurance Group. With that, I will turn the call over to our Founder and Chief Executive Officer, Bob Ritchie. You may go ahead.

Rob Ritchie (Founder and CEO)

Thank you, Lacey, and good morning, everyone. Before we begin, I want to take a moment to express my deep appreciation for the many individuals that have made our IPO a success. On May 7, American Integrity Insurance Group began trading on the New York Stock Exchange under the ticker symbol AII. That milestone was a result of nearly two decades of building something special in Florida. To our employees, our agents, our reinsurers, our early investors, and our supporters, thank you. You believe in our mission to bring integrity, discipline, and innovation to the Florida homeowners' property insurance market. Your belief fueled us, and your partnership now propels us forward in this new chapter of our growth. We raised gross proceeds of $100 million.

That capital is enabling us to pursue our next phase of growth with strength and purpose through continued Florida expansion, product innovation, and capitalizing on the historic legislative reform in Florida's insurance marketplace. When we founded American Integrity in 2006, in the aftermath of back-to-back hurricane seasons that upended Florida's insurance market, we viewed the inherent volatility as an opportunity to serve the state's homeowners by building a differentiated platform. We believed that capital alone was insufficient to create long-term sustainable enterprise, and we set forth to build a disciplined underwriting company by investing in best-in-class technology and deep, trusted, independent agency relationships. Thriving in Florida requires the ability to navigate both weather and legal instabilities.

Working with our agency partners and taking advantage of our heavy investment in sophisticated underwriting technologies, allowing for granular risk rating structures and block-level analysis, we have been able to focus on newer construction, stricter risk standards, and selected geographic underwriting filters to steer us away from excessive risk during the period of heightened litigation. Our technology underwriting roadmap now includes enhanced mobile quoting tools and further segmentation by roof covering type and deck attachment integrity. Every product we write is informed by our block-level profitability heat maps. We do not enter markets we cannot model, and we built internal infrastructure to reflect that same philosophy. Our litigation department, our claims organization, our actuarial team work side by side to evaluate cause-of-loss trends and root out potential leakage. This has helped us drive down severity and improve fraud detection.

The combination of our underwriting, claims, sales, and legal expertise, all integrated and working together, allows us to engage and inform lawmakers, trade groups, and the Office of Insurance Regulation leadership. In fact, our voice has helped to shape the successful Senate Bill 2A reforms in December 2022. Now that the historic legislative reforms of 2022 have been proven and the claims environment has normalized, we have emerged from this period with a healthy balance sheet and profitable book of business, and we're in position to take full advantage of our strong market position and significant growth opportunities. With that, Jon Ritchie, our President, will walk you through our first quarter operational highlights that underscore our foundation for growth.

Jon Ritchie (President)

Thanks, Bob. I'd like to highlight the operational and growth side of our first quarter results. First, we continue to be pleased with our ability to grow in our core Florida market. In the first quarter of 2025, we wrote 24,554 policies in the voluntary market, up from 14,843 in the first quarter of 2024, and assumed 16,632 additional policies from Citizens. Additionally, we experienced policy retention rates of 78.1% during the quarter on renewal business, which represents a positive trend. The combination of these factors increased our in-force policy count and premiums to 383,000 policies and $910 million, respectively. Our policies in force is up 42.9% over the past year and 7.6% over the past quarter.

More than 70% of our enforced premium is voluntary market premium, with 98% of that in our core Florida market and 2% in Georgia and South Carolina, where we have strategically expanded to support and enhance our relationships with our builder agency network. The loss ratio was 30.9% for the three months ending March 31, 2025, compared to 49.9% for the three months ending March 31, 2024, a decrease of 19 percentage points. This is the result of the reduction of both our quarterly catastrophe and underlying loss ratios, as well as an increase in net premiums earned, driven largely by our recent participation in the Citizens Takeout program.

Through our voluntary and takeout operations, we are expanding our presence in underserved but stable counties, particularly across northern and central Florida and Palm Beach, with new premium growth driven by our targeted risk appetite, segmentation by construction type, and favorable litigation metrics. Our growth in northern Florida and inland central Florida reflects our strategy to balance exposure concentration while riding the best risks in coastal areas through new home and roof year segmentation. We are finalizing our rate filings for our new voluntary writing program in Miami and Broward County, where we have historically had virtually no exposure and anticipate beginning writing voluntary business there in the fall of 2025 through our existing agent relationships. We were pleased to announce recently the favorable completion of the placement of our catastrophe excess of loss reinsurance program, which includes the following highlights.

We placed $1.93 billion in third-party coverage for a single catastrophic event and $2.59 billion in aggregate, all indemnity-based, with reinsurers A-rated or better or fully collateralized. This represents an increase of 45% over the 2024 treaty and a purchase at the 130-year modeled return period. The total incurred net consolidated catastrophe reinsurance premiums seeded to third parties are expected to total $433 million for the treaty year, which is an increase of 28% of the 2024 treaty year estimate. Our net retention is $35 million for the first and second events, dropping to $15.8 million and $10 million on the third and fourth event, respectively. We issued $565 million of cap bonds under Integrity RE3 Limited, the eighth and largest ILS transaction in our history.

While the size of the program and the retentions were consistent with what we had been expecting, the net cost of the program is significantly less than anticipated, representing a meaningful risk-adjusted pricing decrease. Recent public statements by various reinsurance brokers pointing to high single-digit to low double-digit rate decreases, with more reductions on the top of the program and less under the Florida Hurricane Catastrophe Fund, are consistent with what we have experienced. We believe that the pricing benefits reflect the belief that reinsurers have in the durability and effectiveness of the 2022 reforms, as demonstrated by Hurricane Milton, and that Florida residents will continue to see modest homeowners' insurance rate reductions as a result. We have completed three rate filings this quarter, including our voluntary HO3 and DP1 products, incorporating recent court decisions and non-hurricane severity drivers into our actuarial models.

Rates are down by a weighted average of approximately 3%. Inflation factors that mirror market conditions will continue to be closely monitored and will represent an offset to these rate filings. Early Office of Insurance Regulation feedback on these filings is positive. With that, I'll turn it over to Ben Lurie to walk through the financials.

Ben Lurie (CFO)

Thank you, Jon. I'll briefly share some financial highlights from the first quarter of 2025. Our first quarter as a public company demonstrates the maturity of our platform and the strength of our operating discipline. As you may recall, these numbers were previewed under the recent development section in the S-1. Gross premiums written in the first quarter of 2025 increased by 43.9% to $212.2 million from $147.5 million in the first quarter of 2024. Gross premiums earned in the first quarter of 2025 increased by 33.9% to $210.2 million from $156.9 million in the first quarter of 2024. Net premiums earned in the first quarter of 2025 increased by 66.5% to $65.4 million.

The increase in gross premiums written, gross premiums earned, and net premiums earned in the first quarter of 2025, as compared to the first quarter of 2024, was driven primarily by an increase in assumed written premiums related to our strategic participation in the Citizens Takeout program and by premium from new policies written through the voluntary market. Ceded premiums earned in the first quarter of 2025 increased by 23% to $144.8 million compared to $117.7 million in the first quarter of 2024. Net investment income in the first quarter of 2025 increased 26.3% to $4.1 million compared to $3.2 million in the first quarter of 2024, driven by an increase in the size of our investment portfolio and cash and cash equivalents.

Losses and loss adjustment expenses in the first quarter of 2025 increased a modest 2.4% to $20.9 million compared to $20.4 million in the first quarter of 2024, while growth in gross earned premium grew much faster at 33.9%. As a result, our underlying loss and loss adjustment expense ratio continues to reflect the positive operating environment, dropping from 43.1% in the first quarter of 2024 to 30% in the first quarter of 2025. Policy acquisition and other underwriting expenses in the first quarter of 2025 decreased 42% to $3.1 million compared to $5.4 million in the first quarter of 2024, driven by an increase in non-cat seeded commissions and our participation in the Citizens Takeout program. Those assumed policies do not carry any policy acquisition costs upon initial assumption of the policies.

The expense ratio was 12% for the first three months ended March 31, 2025, compared to 26% for the first three months ended March 31, 2024, a decrease of 14 percentage points. The combined ratio was 42.9% for the first quarter compared to 75.9% for the same period last year, a decrease of 33 percentage points. The decreases in the combined ratio, loss ratio, and expense ratio for the first quarter were due to our net premiums earned increasing more than our LAE, PAC, or G&A costs, in each case primarily due to the temporary benefits of our recent participation in the Citizens Takeout program and the continued realization of operating leverage in the business. Our pre-tax net income increased to $42.9 million in the first quarter of 2025, and our after-tax net income and adjusted net income was $38.1 million in the first quarter of 2025.

As a result of all of this, the members' equity increased 14.6% to $186.1 million as of March 31, 2025, compared to $162.4 million as of December 31, 2024. I'll now pass it back to the operator for questions.

Operator (participant)

At this time, I would like to remind everyone, in order to ask a question, press star and then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Michael Phillips with Oppenheimer. You may go ahead.

Michael Phillips (Investment Banking Analyst)

Yeah, good. Thanks. Good morning, everybody. Rob, you mentioned the claims environment has normalized. I guess I want to kind of talk about that for a second. First off, what do you see for current level of litigation claim frequency, and when do you think that normalization actually happened?

Rob Ritchie (Founder and CEO)

Yeah, this is Bob. After the December 2022 reforms, the litigation trends were quite immediate, actually. I am going to ask Jon for a second to talk about some of the details related to it. Yet we saw immediate impact, Michael, in terms of the two things. Number one, new reports coming in began to drop like a rock. In fact, many name-bearing firms discontinued their property insurance divisions. They saw this happening very, very glaringly. The second thing that happened was a very, very hastened attempt by the trial bar to negotiate and to finalize the inventory. For us, we got the advantage of immediately seeing a reduction in new lawsuits based upon the new laws, and then we were able to collapse inventory substantially. Jon, do you have any data points for it?

Jon Ritchie (President)

Yes. We've seen, as Bob said, a significant reduction in litigation frequency, both with our non-catastrophe claims and also our catastrophe claims following the December 2022 reforms. We saw that on the catastrophe front with Hurricane Milton last year, which significantly was less than particularly Hurricane Ian and before that Hurricane Irma. On our non-catastrophe claims, we've seen a proportional reduction in litigation frequency, comparatively speaking, to the time period before the December 2022 reform.

Michael Phillips (Investment Banking Analyst)

Okay. Thank you. I guess I was kind of going if frequency trends have sort of been coming down since and when they normalized, in your opinion, what that might mean for your pricing in prior years and reserve development and how you thought about that. That's kind of where I was trying to go with that.

Jon Ritchie (President)

Yeah. We've seen a reduction in claim frequency even beyond just litigation as a result of the December 2022 reform. We definitely believe that that favorable development of claim activity is reflective in current loss ratios that we're currently experiencing as a company. This is not something unique just for American Integrity. We believe the entirety and the results of 2024 speak to this of the marketplace that claim activity and the claim environment has significantly improved because of the reform and the lack of litigation and the lack of other third-party involvement in claims.

Michael Phillips (Investment Banking Analyst)

Okay. Yeah. Thanks, Jon. On the Broward and Miami-Dade County issues, or moving into that part of the state, you mentioned fall of 2025 through existing agencies. I assume you're going to be at some point appointing new agents there. Can you talk about the process and maybe how long it might take to kind of get to a decent traction in that part of the state?

Rob Ritchie (Founder and CEO)

Happy to. This is Bob. First of all, we have the segmentation already established several ways. Number one, we dominate new builds. And based upon that, our new home builder agents, both within the state and the national carriers, all are waiting for a capacity in the South Florida area where 25% of Floridians live. So we have an automatic availability, number one, there. Number two, we have a lot of national distributors that also have purposeful distributors already in the state. Number three, we have a dedicated South Florida territory marketing manager who is beginning to appoint agents. And we're doing it very thoughtfully. We're not changing our underwriting standards one bit. Yet because of the fact that we do have existing distribution points, the flow of business already is being seen in Palm Beach County and Broward, and we're beginning that same process in Miami-Dade.

We're very happy that we got the distribution network established, and then it will be augmented with new appointments.

Michael Phillips (Investment Banking Analyst)

Yeah. Wonderful. Thank you for all that and congrats on the IPO process. Thanks so much.

Rob Ritchie (Founder and CEO)

Thank you.

Operator (participant)

Your next question comes from the line of Tommy McJoint with KBW. You may go ahead.

Tommy McJoynt (Director Equity Research)

Hey, good morning, guys. Thanks for taking my question.

Rob Ritchie (Founder and CEO)

Good morning.

Tommy McJoynt (Director Equity Research)

Congrats on the IPO.

Rob Ritchie (Founder and CEO)

Thank you.

Tommy McJoynt (Director Equity Research)

Staying on the topic of the Tri-County area expansion, can you talk about the expected reinsurance cost impact of expanding more meaningfully into that Tri-County area? Just because you're currently underweight in those areas. Does the added geographic diversification actually improve your risk-adjusted cost of reinsurance? Is there an anticipation that because those markets are more expensive from a premium level, your reinsurance costs would have to increase next year? Can you talk about the puts and takes around that?

Jon Ritchie (President)

Yeah. This is Jon. You hit the nail on the head there. Because of the lack of concentration in the Tri-County region, comparatively speaking to the overall state of Florida, we believe that this is a creative and a positive way for our reinsurance program, given the diversification of writings that us now writing in Tri-County is going to allow for the company.

Tommy McJoynt (Director Equity Research)

Great. Okay. The attritional loss ratio in the first quarter improved significantly on a year-over-year basis. Can you talk about the expectations for what those year-over-year trends might look like on the attritional loss ratio side for the upcoming quarters? I know there are some puts and takes around the Citizens Takeouts and the timing of that, but also maybe some weather in the back half of 2024 that we should remember to contemplate. Yeah. Just helpful to think about the attritional loss ratio expectations for the remainder of the year.

Rob Ritchie (Founder and CEO)

Let's talk about the non-cat loss ratio, Tommy. As you know, pure premium frequency times severity. Frequency for all of us. We're not the only benefactor of the historic reforms that have substantially reduced. We have the privilege and, frankly, the advantage of having a superior book as respects age of birth and age of home. Therefore, our frequency has enjoyed a much deeper decline, in my view, than what I've seen with other industry stats. Having said that, the entire industry is enjoying this. Now let's talk about severity. Inflation is still real, 5%. We still have an ITV factor, and we're factoring that in. While we're happy that the newer homes, newer roads enjoy a lower frequency, we're also mindful of that. Net-net, the pure premium is enjoying substantial historic reductions. We see that continuing, especially on the frequency side.

Yet we're measuring and appropriately pricing for any moderate inflation activity. Jon, can you add to that?

Jon Ritchie (President)

Let me add one thing to keep in mind. That is that temporarily our LAE ratio and really all of our ratios are benefiting from the impact of the Citizens Takeouts from the third and fourth quarter. They have the effect of increasing your denominator of net earned premiums on a temporary basis because they are not burdened by incremental cat costs. Because of that denominator issue, it artificially depresses or temporarily depresses all of our ratios during this interim period. That will start to reverse after we have our cat renewal, which just occurred, and those expenses amortize over time. You will see a reversion to a more normalized expense ratio, LAE ratio, loss ratios, things like that over time.

As Bob just alluded to, we still feel like we're in a tremendously positive operating environment, which we expect to continue for quarters and years to come.

Tommy McJoynt (Director Equity Research)

Thank you.

Operator (participant)

Your next question comes from the line of Matthew Carletti with Citizens. You may go ahead.

Matthew Carletti (Managing Director and Senior Equity Analyst)

Hi. This is David from PAT. Good morning.

Jon Ritchie (President)

Good morning.

Rob Ritchie (Founder and CEO)

Good morning.

Matthew Carletti (Managing Director and Senior Equity Analyst)

Just on growth in Florida, you mentioned North Central Florida and Palm Beach. Are there any certain geographies that you are avoiding at this time in Florida?

Rob Ritchie (Founder and CEO)

I'll amplify that with Jon's comments. We're not avoiding. However, exposure management, it's always sacrosanct. Particular examples include Pasco County and also Lee County. We aren't cut off for new business. In fact, our preferred agents still have capacity. Yet as we look at balancing that with writings elsewhere in the state, that's always important.

Jon Ritchie (President)

The only county that we do not write in and we will not write in is Monroe County and the Keys.

Rob Ritchie (Founder and CEO)

Now, let me give you another perspective because this is all public in terms of how we've expressed the roadshow and how we've gone public here. We enjoy a dominant position in certain trade areas. Even as a 20-year company, there are areas that Jon has amplified in his talking points that we want to grow aggressively and responsibly, of course. When we do that, it balances out the reinsurance spend. It balances out spread of risk. For us, it amplifies the beauty of the portfolio that's growing. I might add also this growth is not dependent upon Citizens. We're growing voluntary very aggressively.

Matthew Carletti (Managing Director and Senior Equity Analyst)

Absolutely. With that, are you able to provide your current view on the Citizens pool and if you are seeing any additional opportunities for takeouts going forward?

Jon Ritchie (President)

It's our opinion that the current policy count within Citizens is shrinking. We all know that. The opportunities for sizable takeouts that we conducted in the fourth quarter of 2024 are likely in the rearview mirror. With that being said, we will continue to look on a go-forward basis for strategic opportunities to take on more business from Citizens. We're not going to sacrifice our underwriting guidelines or pricing guidelines just to attract more business from Citizens. We do feel that the pool of opportunity within Citizens is shrinking. We're of the opinion that the best days for large scalable takeouts are already behind us.

Michael Phillips (Investment Banking Analyst)

Thank you.

Rob Ritchie (Founder and CEO)

Your next question comes from the line of Paul Newsom from Piper Sandler.

Paul Newsome (Managing Director)

You've hit most of my hot-button questions, but I was hoping you could talk a little bit more about just the most recent competitive environment. There's some talk that it's just becoming more competitive with your peers being more aggressive in the market. Any thoughts on that if you think it's true or anything that's changed more recently?

Rob Ritchie (Founder and CEO)

Sure. Good morning, Paul. It's Bob. Thanks for joining on the line. First of all, there's 8 million rooftops. Seriously, it's not a situation for a company of our size and the growth trajectory. I have stated publicly and privately we need more, not less, competitors. I rejoice with companies that are coming in responsibly. As I look at the responsibility factor, happily, I do not see any finance being approved by the Office of Insurance Regulation allowing a competitor to sell underpriced business, number one. Number two, as we look at our own growth, while it certainly is supported by market dynamics, the thing we do enjoy, and I do not say this with any degree of taking it for granted, is American Integrity is the leader in terms of quality independent agency relationships.

Based upon that, we feel we're rewarded more times than not, at least a first or second chance to get that business. With that comes a responsibility, of course, to serve them. I am not deterred by some of the new entrants. Furthermore, I know that except for one large national carrier, the nationals are not coming back into Florida. I do not disregard competition. We do not live in a vacuum. I am not deterred. I also am not challenged by our growth estimates and our forecast based upon, frankly, 20 years of development of relationships where we're in the spot of being able to be awarded business. I hope that helps you.

Paul Newsome (Managing Director)

That's great. Appreciate it. Congrats on the quarter.

Rob Ritchie (Founder and CEO)

Thank you.

Operator (participant)

That concludes today's question and answer session. I will now turn the call back over to Bob Ritchie for closing remarks.

Rob Ritchie (Founder and CEO)

Thank you, Lacey. First of all, thanks for joining us on the call. Greatly, greatly appreciate every one of your questions. We went public because we believe our platform, this culture, this purpose is worth investing in, not just with capital, but with commitment. We do not write every policy. We write the right policy. We are not taking shortcuts. We are investing in infrastructure, continuing to deepen our relationships, and investing in our culture and our people. We do not view underwriting claims and capital markets as separate. We view them as levers and a single system built to deliver predictable results across very unpredictable environments. While we are proud of what we have built, we are not stopping. We are engaged by what lies ahead. We are humbled by the trust of our agents, our employees that are listening on this line, our reinsurers, our new shareholders that placed confidence in us.

Thanks to all of you for believing in American Integrity. I'm looking forward to the future.

Operator (participant)

This concludes today's call. You may now disconnect.