American Integrity Insurance Group - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered strong top-line and policy growth with total revenues of $74.499M, up 60.6% YoY, and net income of $27.494M; adjusted EPS was $1.84 and GAAP diluted EPS was $1.62. Versus Wall Street, AII posted a revenue beat of ~$5.7M (+8.3%) and an EPS beat of ~$0.16 on adjusted EPS versus consensus*.
• Combined ratio rose to 72.9% from 60.8% YoY, driven by one-time IPO-related costs that added 23.8 points to expense and combined ratios; underlying loss ratio remained favorable amid improved Florida litigation dynamics.
• Strategic catalysts: approval to write voluntary policies in Miami-Dade and Broward, launch of Florida commercial residential lines in Q4, and surpassing 400,000 policies in-force shortly after quarter-end.
• Reinsurance program pricing came in meaningfully below expectations at June 1 renewal; management highlighted rate decreases industry-wide and benefits from legislative reforms, supporting margin durability as normalization resumes post-IPO items.

(Estimates marked with * are from S&P Global; see disclaimer in Estimates Context.)

What Went Well and What Went Wrong

What Went Well

• Robust policy and revenue growth: Total revenues +60.6% YoY to $74.499M; net premiums earned +63.3% YoY to $66.169M; gross premiums written +29.5% YoY to $286.995M. CEO: “We delivered strong results driven by robust policy growth from the voluntary market combined with another quarter of improved policy retention.”
• Distribution and market expansion: Miami-Dade and Broward voluntary rate filings approved; systems and agents ready to begin writing later in August, with tech-enabled census-block pricing and quick rate adjustments.
• Reinsurance and regulatory backdrop favorable: Excess-of-loss renewal priced below expectations; brokers cited high-single to low-double-digit decreases; management emphasized durable benefits from 2022 reforms (e.g., lower litigation frequency, normalized claims environment).

What Went Wrong

• Expense ratio surge and combined ratio optics: Expense ratio increased to 42.3% (from 31.2% YoY) on one-time IPO costs; combined ratio rose to 72.9% (from 60.8%) despite underlying loss ratio stability.
• Higher ceded premiums and reinsurance spend: Ceded premiums earned rose 31.8% YoY to $157.6M with additional coverage reflecting higher in-force premiums/TIV; this diluted reported net premiums earned despite strong gross growth.
• Slight YoY uptick in underlying loss ratio for the quarter: Underlying loss and LAE ratio was 33.1% vs 32.0% in Q2 2024 (though 1H underlying ratio improved to 31.6% vs 37.4% YoY); management noted favorable reserve development and disciplined underwriting into older roofs.

Transcript

Speaker 1

Hello, and thank you for standing by. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Integrity Insurance Group, Inc.'s second 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. As a reminder, this call is being recorded. 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 recent uncertainties that may cause actual results to differ materially. A full discussion of the risk factors can be found in American Integrity Insurance Group, Inc.'s SEC filings, including its most recently filed quarterly report on Form 10-Q.

Management undertakes no obligation to update any forward-looking statements. Furthermore, the American Integrity Insurance Group, Inc.'s plan GAAP financial measures and a reconciliation of plan GAAP financial measures to their most comparable GAAP measures is included in the company's quarterly press release and can also be found on its 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, LLC, and after the consummation of the IPO refer to American Integrity Insurance Group, Inc. With that, I will turn the call over to American Integrity Insurance Group, Inc.'s founder and Chief Executive Officer, Bob Ritchie. Please go ahead.

Speaker 2

Thank you, Mark, and good morning, everyone. I am very pleased to be speaking with you to discuss our second quarter results and our growth initiatives that are designed to further build the value of American Integrity Insurance Group, Inc. for all of our stakeholders. I see a long runway ahead that is anchored in disciplined underwriting, a best-in-class technology platform, and deep, trusted, independent agency relationships. This foundation positions us to thrive in a market that has gone through a transformation given recent legislative and regulatory changes, and it presents significant room for growth that will sustain American Integrity Insurance Group, Inc. for years to come. This can be seen in our second quarter results, where we delivered robust policy growth given our strong distribution network combined with our expansion into underserved but stable counties in Florida.

Our strong policy growth was assisted by another quarter of improving retention on renewals that we believe can continue and that bodes positively for growth to come in the quarters ahead. Importantly, we have significant space for voluntary growth in Florida as our rate filing approvals for Miami-Dade and Broward counties were recently accepted, and we are set to start writing policies there. The tri-county region of Miami-Dade, Broward, and Palm Beach represents one of the most valuable and concentrated homeowner markets in the state of Florida, with approximately 2.37 million occupied housing units in these counties. This accounts for over 26% of the entire state's total households. This corridor is not only densely populated, it is also home to some of the highest property values and insurance premiums in the entire Southeast.

In fact, this tri-county region of three counties would be the 18th largest state in the United States based upon population. American Integrity Insurance Group, Inc.'s tailored product suite, designed specifically for Florida's coastal risk, including single-family homes, condominiums, and investment properties, aligns with the structural makeup and exposure profiles of this tri-county region. Our growth engine is powered by both Citizens Property Insurance Corporation's depopulation program and robust voluntary market expansion, which is allowing us to scale quickly and efficiently into high-yield zip codes while still maintaining our underwriting discipline. Another open-edge market for the company is writing policies on homes with older roofs. Our mix of business has skewed toward new build homes given the strength of our builder-agent relationships. In fact, as we stated before, we've been writing three out of every 10 new roofs on new construction homes in Florida.

That said, it has moved our mix of business toward new build roofs, and we see an opportunity to expand our presence in the existing home market with older roofs because of the reforms. This represents a very large and addressable market and one that is currently underpenetrated by design historically because of the lack of reforms by the company, but now it's a different timeframe. We've started to write policies on older roofs, and we see great potential and will remain focused on the stringent discipline underwriting to ensure we're earning adequate risk-adjusted returns. While we expect Florida will be our core market for many years to come, as we've mentioned before, we've expanded to Georgia and South Carolina given the strength of our builder relationships and I'm happy to report that we're reporting very strong success in growing the policy count in these two states.

Additionally, we have recently been approved to write policies in North Carolina and expect to begin writing business in the fourth quarter, still focused primarily on new construction and builders. As you can see, we have really strong competitive barriers in the state of Florida, and that has positioned us to succeed, and we're opening large markets that represent untapped potential that will translate to sustained policy growth in the years ahead. Additionally, although our successful IPO in May provides us with the capital to fund this high-return organic growth, we are in a position now and couldn't be more excited with the opportunities that lie ahead. Before we turn to operational highlights, I want to take a moment to recognize a very important milestone in our company's history.

Just a very few days ago, we surpassed 400,000 policies in force, 400,000 customers, a number that is both historic and deeply symbolic for every one of us. It's more than just a policy count; it's a statement of trust, scale, and post-IPO momentum. I think it reflects the grit, execution, and values-driven culture that have defined American Integrity Insurance Group, Inc. from day one. Crossing this 400,000 mark tells our employees, our customers, our agents, and now our new investors that we're not just growing, we're building something enduring. In the face of a complex market and rising expectations, we're proving that integrity and resilience remain the most powerful growth engines of all. It is a proud moment for all of us at American Integrity Insurance Group. I want to thank every one of our team members and our partners who helped get us here.

Now, let me turn the call to Jon, who will drill into the details of our growth initiatives.

Speaker 4

Thanks, Bob. I'll focus my comments this morning on our success further expanding our business through the second quarter and highlight several growth initiatives that we have in place, looking to the second half of 2025 and beyond. Starting with our results, we continue to be pleased with our ability to grow in our core Florida market. In the second quarter, we wrote 27,807 policies in the voluntary market, which is an acceleration from the 24,554 policies that we wrote in the sequential first quarter and 22,048 policies that we wrote in the second quarter of 2024. We also assumed 7,372 additional policies from Citizens Property Insurance Corporation, which compares to 16,632 policies from Citizens Property Insurance Corporation assumed in the first quarter of 2025. We continue to expect modest takeout activity going forward.

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 writing the best risks in coastal areas through new home and roof year segmentation. Our retention rate on renewal business improved to 80.9% in the second quarter from 78.1% in the first quarter, which continues a positive trend that we have been experiencing for several quarters. We believe this is a sign that the legislative and regulatory reforms in Florida are working and contributing to a more stable and rational market.

Taken together, our strong policy growth and improving retention led to the increase in our in-force policy count and premiums to 399,000 policies and $921 million, respectively. Our PIF count was up almost 50% over the past year and 4.1% over the past quarter. Looking to the second half of the year, we are excited to announce that our rate filings for Miami-Dade and Broward counties have been approved and are in our system. This is a region where we have essentially not written business in more than a decade and represents a significant market opportunity. As Bob highlighted, more than a quarter of Florida's population lives in the tri-county area, and the potential premium content of the homes in this market is even higher.

Importantly, we have our distribution network in place with national carriers and home builder agents, and we expect they will begin writing business later this month. Our ability to turn a market on quickly and begin writing business in Miami-Dade and Broward is largely due to the technology platform that we have developed over many years. We have real-time data that allows us to create rates down to a census block level, input those rates for our agents, and quickly adjust rates as market dynamics change. We can also provide underwriting parameters that are appropriate to the regional market conditions and make informed, data-driven decisions to ensure we maintain underwriting discipline. Ultimately, our platform enables us to execute our strategy and new initiatives quickly and efficiently as our agents can begin writing policies almost immediately. This positions us to quickly expand into the very large Miami-Dade and Broward market.

Another new market opportunity is the pending launch of our Florida commercial residential lines. We have been hiring experienced underwriting talent and have the distribution network in place. Additionally, we have filed our rates and expect to begin writing new business in the fourth quarter. That said, we are taking a cautious approach with conservative underwriting as we enter this new line of business and expect volumes to be modest over the near term. Lastly, we continue to have good success in South Carolina and Georgia, where we have strategically expanded to support and enhance our relationships with our builder agency network. That said, Florida remains our core market and where we have built significant competitive advantages over the last 20 years. Today, over 97% of our in-force premium is in our core Florida market, and we do not see that materially changing in the coming years.

Turning to the market, and as I briefly touched on, we are seeing a positive impact from the recent legislative reforms in Florida. Litigation and litigation expense have been dropping rapidly given the decline in frivolous lawsuits. Importantly, consumers will be the beneficiary as they begin to see some rate relief. We have filed a blended rate decrease of 3% and continue to have an appropriate inflation factor that provides an offset to rate decreases. As the market becomes increasingly rational, we expect our retention rate to continue to increase, our inflation guard to offset rate declines, and our new business initiatives to drive growth. Additionally, the legislative reforms in Florida have had a positive impact on reinsurance pricing through our June 1 renewal. As a reminder, we placed our excess of loss reinsurance program at a net cost that was below our expectations, representing a meaningful risk-adjusted price decrease.

Commentary from various reinsurance brokers points to high single-digit to low double-digit rate decreases for the market, with more reductions on the top of the program and less under the Florida Hurricane Catastrophe Fund. With that, let me turn the call over to Ben to walk through the financials.

Speaker 6

Thanks, Jon. I will briefly share some financial highlights from the second quarter of 2025. Gross premiums written increased by 29.5% to $287 million compared to $221.6 million in the second quarter of 2024. Gross premiums earned increased by 39.8% to $223.7 million compared to $160.1 million in the second quarter of 2024. Net premiums earned increased by 63.3% to $66.2 million compared to $40.5 million in the second quarter of 2024. The increase in gross premiums written, gross premiums earned, and net premiums earned as compared to the second quarter of 2024 continued to be driven primarily by new and renewal policies written through the voluntary market and from our strategic participation in the Citizens Property Insurance Corporation takeout program.

Ceded premiums earned increased by 31.8% to $157.6 million compared to $119.6 million in the second quarter of 2024 due to the increase in gross premiums earned and the placement of our 2025/2026 catastrophe excess of loss reinsurance programs. The company purchased more reinsurance coverage compared to prior years, reflecting an increase in in-force premium and total insured value. Net investment income increased 40% to $4.8 million compared to $3.4 million in the second quarter of 2024, driven by an increase in invested assets, primarily due to an increase in cash and cash equivalents and fixed maturity securities. Loss and loss adjustment expenses increased 67.6% to $21.2 million compared to $12.6 million in the second quarter of 2024, driven primarily by an increase in gross premiums earned.

Our underlying loss and loss adjustment expense ratio was 33.1% for the second quarter of 2025 compared to 32% in the second quarter of 2024. Our first half of 2025 underlying loss ratio and LAE ratio was 31.6%, a decrease from 37.4% in the first half of 2024. Policy acquisition and other underwriting expenses decreased 4.1% to $6.3 million compared to $6.6 million in the second quarter of 2024, driven by lower acquisition costs associated with the Citizens Property Insurance Corporation takeouts. Our expense ratio increased 11.1 percentage points to 42.3% for the second quarter, from 31.2% in the second quarter of 2024, primarily due to one-time cash and stock-based comp, management fee buyout, and other one-time expenses incurred in connection with the IPO. The combined ratio was 72.9% for the second quarter of 2025 compared to 60.8% for the second quarter of 2024.

It's worth noting that our one-time IPO expenses added 23.8 points to the expense and combined ratios in the quarter. For the second quarter of 2025, our net income available to common shareholders was $27.5 million, and adjusted net income was $31.3 million. Net income was $1.62 per diluted share, and adjusted net income was $1.84 per diluted share based on a weighted average common outstanding shares of approximately 17 million. Total shareholders' equity increased 85.9% to $301.9 million as of June 30, 2025, compared to $162.4 million as of December 31, 2024. That's due both to our organic growth and to the benefit of the IPO proceeds. I'll now turn the call back to the operator to open the line for questions.

Speaker 1

We will now begin the question and answer session. If you would like to ask a question, press the star key followed by the number one on your telephone keypad. Your first question comes from the line of Michael Phillips with Oppenheimer & Co. Inc. Please go ahead.

Speaker 0

Thank you. Good morning, everybody. A question around the tri-county expansion. I'm curious if you think that means any changes to personnel or philosophy or anything on the claims department side, given higher value homes and maybe different service level expectations there?

Speaker 2

Generally, this is Jon. Generally speaking, no. Our platform is built to scale both with internal operations, particularly, as you mentioned, claims in that department. In terms of sales force, we have adequate coverage in the southeast part of the state. Generally speaking, no, there should not be any material changes to staffing or needed operational expenses as we expand into the tri-county region.

Speaker 4

I'll also add on, thank you for that call. We're ready made from a distribution perspective. This is Bob. Based upon our strong builder relationships and national accounts, we will appoint, and we are appointing some quality independent agents to supplement that. I'm happy to tell you that the locomotive is moving already.

Speaker 0

Yeah, it sounds like it is. That's awesome. Congrats. It's a good opportunity. A second question on the rate cut and the inflation guard offset. Again, it sounds like you aren't too concerned at all about kind of your mid to low 30% core loss ratio is phenomenal. Does it sound like you're too worried about pressure on that over the next 18 months or so, given the competitive environment and inflation guards that you have in place? Just kind of hear your thoughts on that.

Speaker 2

Yeah, certainly we're seeing positive trends on the attritional experience in terms of rate making, and the current 2025 annual filings are in place and either implementing or have been implemented, which equates to that number that we quoted. You're absolutely right. The inflation factor is offsetting that, and we'll continue to evaluate both our internal actuarial indications along with market conditions as we move into 2026.

Speaker 0

Jon, do you think that in the current, the last two quarters you've been 30, 31, 32, 33, do you think that's kind of a good run rate for the next year and a half or so, or is that kind of a low bar?

Speaker 2

On a frequency and severity basis, from a pure premium perspective, we do believe that we are likely seeing the full benefit of the legislative reform, particularly from a frequency perspective, which has been fairly consistent over the last series of quarters, and even severity has flatlined in spite of inflationary trends. From a pure premium standpoint, we do believe that this is probably the full benefit of the legislative reform reflective in the current quarter.

Speaker 4

This is Bob. As forces such as, hopefully down the road, the high water marks of reinsurance spend perhaps coming down and other elements improving this operating environment, obviously that ratio is going to change. It's a function of math. The important thing, and we'll continue to emphasize this with you, is giving you specific frequency and severity or that pure premium number, which is the most important barometer in our view.

Speaker 0

Okay. Thank you, and congrats.

Speaker 2

Thank you.

Speaker 1

The next question comes from the line of Tommy McJoy with KBW. Tommy, please go ahead.

Speaker 5

Hey, good morning, guys. Thanks for taking our questions. The first one is a question about the benefits of geographic diversification to your cost of reinsurance. It sounds like you've spoken on this call about two different drivers of geographic diversification being one, the expansion into the tri-county region, as well as thinking about other states in the Southeast. The question is really, is there a way to think about the amount of premium that you can grow in those new markets without having any incremental cost of reinsurance around that? That should ultimately feed into a lower sort of cost of reinsurance relative to written premium. What can you share about any numbers around how that benefit looks?

Speaker 2

Yeah, this is Jon. Specifically within the state of Florida, certainly adding exposure in the southeast part of the state is going to help from an aggregation perspective, which will incrementally aid the PML within the state. Outside of Florida, we don't believe there to be a material benefit to the PML by writing in Georgia and South Carolina. It's not punitive, but it certainly is not accretive in a positive way for the PML. Certainly, writing in tri-county, there is a portion of that business which will be beneficial to the PML on a go-forward basis. From an operating perspective, it takes leverage off of certain zones within the state of Florida, particularly the southwest region where we do have a sizable market share, which will allow us some time to begin regrowing in Lee County in particular from a new business perspective.

Speaker 4

Tommy, this is Bob. I'll add. While this Palm Beach County series of takeouts over these last six, eight, nine months created both top line and bottom line profit growth and exposures for us, those 12,000 policies in Palm Beach were the tremendous asset for American Integrity Insurance Group, as Jon has mentioned, to balance the portfolio. We're a market leader. We have 400,000 policies. There aren't but a couple of folks that we compete with in that particular size frame. We have been heretofore the only major Florida pure play not to participate in tri-county. The benefits to us, done properly, of course, with risk selection and pricing, are abounding. Top line, bottom line, PML to premium, reinsurance, aggregation, diversification. It's really a remarkable and a fact of us being in a position of properly balancing what a market leader looks like now that we're public.

Speaker 5

Thanks for that. The second question, why are you able to so meaningfully outhunt your weight class in the new home market? It sounds like you insure three of every 10 homes at Englehurst at 30% market share versus just a close to a multi-digit overall market share in Florida. What is that moat that you guys have in the new home channel and what prevents competitors from trying to replicate your channels?

Speaker 4

Yeah, thanks for that. When there's a moat, it always has to be defended. We have smart competition. We estimate three out of ten. Guess what? Seven out of ten are going elsewhere. Here's been the method for us. Years and years ago, we focused on the Westwoods, the Hippos, those builder agents outside of Florida. I'm going to put a name on it. Our UEP of Sales and Marketing, Dick Dowd, who I used to work with at American Modern, joined us six and a half years ago. Dick Dowd has taken our entry point and created an outstanding depth of share of wallet, especially with agencies like Westwood, with agencies like Hippo and others. It has to do also with our technology. We and others have it too, of course. To write with builders, you need APIs, and you have to attend to making business easier for them.

As a tech-enabled company, we certainly have the wherewithal to compete. That is a moat, not that others do not have it, but many do not. Thirdly, I think I mentioned this in the first earnings call, you work real hard to get your strategic advantages. When the opportunity happens based upon market movement, you go for it. When ASI was purchased by Progressive, which I thought could have been a great thing, I love Progressive, I'm not saying anything negative, ASI was the dominant, the dominant in new builds. We were probably number three. Today we're number one based upon the underwriting appetite for Progressive with Florida residential property. The fourth thing is we just aligned all 330 of our employees, especially during the crisis when heretofore old roofs were risky. We lived on that. We took that crisis, we took that absolute necessity to reshape, to reform.

Happy to say under Brent's leadership and under Dick's leadership and Brent Rantoloff, the two of them have led the course. That's what has caused this. We don't take it for granted. These are prime movers that anyone would love to have. The minute you think you got it, you might lose it. Every day we work hard to please them and to serve. That's what our mousetrap has been about. Hope that helps you.

Speaker 5

It does, thanks. I'll sneak one last housekeeping one in real quick. Of the 399,000 policies in force at quarter end, what was the mix between voluntary PIP versus Citizens?

Speaker 4

Citizens would have made up roughly about 100,000, 110,000 of the mix. About the voluntary was about 289,000 or so. Yeah, about 100,000 was Citizens.

Speaker 1

If you would like to ask a question, see the first star followed by the number one on your telephone keypad. Your next question comes from the line of Mitch Rubin with Raymond James. Mitch, please go ahead.

Speaker 3

Thank you guys for taking my call today. This is Mitch on behalf of Greg Peters. I was wondering if you could provide some additional color on the favorable reserve development this quarter. Thanks.

Speaker 2

Yes, we saw favorable development just based upon some prior accident years, particularly our non-catastrophe losses came in favorably compared to where we believed that they were. We were pleased with the results.

Speaker 3

All right, thank you for the answers on that. Could you also talk a little bit more about the expansion into some older roofs and how that's impacting your view on PMLs? Thank you.

Speaker 2

Yeah, our expansion into older roofs, as we mentioned during the call, is a product of the legislative reform and our belief and conviction that we can now begin to write that segment of the housing stock in Florida. In terms of the impact to PML, certainly newer rooftops are going to have a lower PML compared to older rooftops. However, the premium that we're collecting for those older rooftops compensates for that. We are being very tactical in terms of how far we're willing to stretch in terms of age of roof particularly. That is a metric that we continuously monitor and observe.

Speaker 4

We have a lot of leeway. This is Bob Ritchie. When you consider that over 80% of our current portfolio is new roofs, the impact to PML, number one, is priced, and number two, we'll be very well balanced in the scope of things.

Speaker 3

That makes sense. Thank you.

Speaker 1

Just don't forget your question at this time. I will now turn the call back over to Bob Ritchie for closing remarks. Bob?

Speaker 4

Thank you, Mark. Thanks to all of you for joining our call this morning. Greatly appreciated. We're in a very strong position given our technology platform, given our distribution network, given our balance sheet, and most importantly, our team of 330 dedicated employees that are all on the same side of the fence, pulling the same rope post-IPO. We have significant room to grow our market share. As we expand into new markets across Florida, as well as introduce new products, these will sustain our growth for years to come. We're not just doing deals. We don't rely upon takeouts. We're a company that will opportunistically invite that opportunity, but we're a well-oiled distribution machine. Importantly, the legislative changes in Florida have created a more rational market and one that will benefit consumers and carriers and investors over time. I'm excited with all the opportunities ahead.

I'm grateful for the trust that you have extended to us with this IPO. Grateful that you're following our company. I'm looking forward to updating each and every one of you, both individually, private calls, and also on our third quarter call. Thanks again for your time and your trust.

Speaker 1

This is today's call. Thank you all for joining. You may now disconnect.