American Coastal’s Earnings Call Contradictions: ACES Venture Guidance Plummets to $50M, Multifamily Timelines Shift

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Date of Call: Aug 5, 2026

Financials Results

• Revenue: Gross premiums written decreased roughly 5% compared to the same period a year ago; total revenue guidance revised downward to between $300 million and $320 million for the full year.

Guidance:

• Earnings guidance for the full year remains unchanged at $85 million to $100 million, inclusive of net average annual losses from catastrophes.
• Total revenue guidance revised downward to between $300 million and $320 million for the full year.
• Expect continued downward pressure on rates, deductibles, and policy acquisition costs into 2027, partially offset by lower reinsurance costs.

Business Commentary:

Market Leadership and Rate Pressure:

• American Coastal Insurance Corporation maintained its market leadership in Florida commercial residential property insurance, but experienced a 5% decrease in gross premiums written compared to the same period a year ago.
• This decline was due to continued downward rate pressure and minor non-hurricane catastrophe losses.

Financial Performance and Strategy:

• The company reported a net income of $21.9 million for the quarter, with a combined ratio of 74.3%, an increase of 13.7 points from the previous year.
• Despite softening market conditions, American Coastal demonstrated underwriting discipline and maintained a strong liquidity position, with a focus on underwriting profitability.

Share Repurchase and Capital Management:

• American Coastal repurchased nearly 1.4 million shares in the second quarter, bringing the year-to-date total to 1.8 million, with increased authorization to buy back up to 30.6 million worth of shares.
• This action reflects the company's confidence in its business and aims to reduce share count, benefiting from insider ownership concentration.

Reinsurance Strategy and Risk Mitigation:

• The company reduced its first-event hurricane retention from $49 million to $23.5 million, effective August 1st, amidst a favorable outlook for hurricanes and softening reinsurance pricing.
• This strategic move aims to improve the overall quality and reliability of earnings and cash flows, ensuring profitability even with multiple retentions.

New Business Ventures and Challenges:

• The new ENS venture with ACES is expected to contribute around $50 million for the full year, facing challenges similar to American Coastal's in rate decreases and competitive dynamics.
• The company is exploring solutions to overcome constraints, such as obtaining an AM Best rating, to expand into new areas like apartments and assisted living facilities.

Sentiment Analysis:

Overall Tone: Neutral

• The company maintains market leadership but experiences 'continued downward rate pressure' and top/bottom line compression. Management expresses confidence in profitability for the year and the prospect for a special dividend, but acknowledges challenges from a soft market cycle and the need to monitor for irrational pricing.

Q&A:

• Question from Mitchell Rubin (Raymond James): On the first event retention buy down, I appreciated the rationale you provided. What did it cost? And with the new authorization in place, how does the lower retention factor into capital return for the rest of the year?
  Response: The cost was approximately $8.4 million, expensed over 10 months. It factors favorably into the prospect for a special dividend, which remains likely if profitable and returns on capital are sufficient.

• Question from Mitchell Rubin (Raymond James): This quarter had around $767,000 of unfavorable reserve development. Could you provide any color on where that showed up and whether it's an area that could be recurring?
  Response: The unfavorable development stemmed from a single sinkhole claim from the 2019 accident year and is not believed to be recurring. The quarter was otherwise in line, and full-year development is expected to be favorable.

• Question from Dalton Willett (Charmis Capital Partners): Just a quick question on some of the market share dynamics. You know, comparing the same quarter last year, it looks like policy count is slightly up. Can you talk a little bit about where you're at with market share gains and losses and how you guys are thinking about that dynamic?
  Response: Policies in force and total insured value were up 3-4% year-over-year. Account retention improved to around 85%. The company is maintaining/growing market leadership, focusing on premium retention amid soft market forces.

• Question from Dalton Willett (Charmis Capital Partners): Can you talk a little bit about the $30 million roughly contribution from the new ENS venture with the ACES co-participation and what you guys are seeing there and if you're still thinking $70 to $80 for the whole year 26th?
  Response: The venture is a little behind expectations; for a calendar year, full-year contribution is now expected to be closer to $50 million (vs. prior $70-80 for a full 12 months). It helps offset weakness in the core condominium book.

• Question from Dalton Willett (Charmis Capital Partners): Next year, you guys have the senior notes coming due. I know there's been talk of refinancing. Can you talk a little bit about how much of that you might plan on refinancing? And then from debt to cap ratio, that would take you, say, if you only kept $50 million of that, you would be nicely below your 20%, 25% debt to cap target. Is that kind of the plan to get there from here?
  Response: Plan is to reduce long-term debt from $150 million to $75 million, cutting it in half. This would bring the debt-to-capital ratio to around 15%, in line with the target of 20% or less, using cash on hand.

• Question from Matt Dane (Tiatan Capital Management): It's tied to capital management. I did want to ask the multifamily apartment initiative that you folks have rolled out. How has that developed relative to your expectations and help me understand how the competitive landscape has been for that new focus area?
  Response: The apartment/assisted living initiative is disappointing due to the lack of an AM Best rating, causing some business loss. The company is working on solutions (rating, fronting relationships) and expects to start writing business late in Q4 after solving the rating constraint.

• Question from Akshay Tanna: I was wondering if you have plans to cancel [treasury shares] or maybe help us understand why keep them.
  Response: The plan is to continue repurchasing stock and canceling shares to reduce the overall share count, which is seen as a way to increase value; insider ownership is concentrated, and they are actively trading at a discount.

• Question from Akshay Tanna: And as I look at the Florida commercial residential property market share that gets shared, I'm looking at a couple of companies that are have an increased market share. So like slide is one, I'm just curious on the long-term threats to the earning part of a core business. Maybe talk a little bit more about it.
  Response: The company does not comment on competitors but states it still believes it is the largest writer, maintaining account retention. Challenges exist from rate pressure and competition, but there is no near-term expectation to shrink the book; the focus is on writing new business and managing the cycle.

Contradiction Point 1

ACES E&S Venture Full-Year Contribution Forecast

The expected annual contribution from the new venture was lowered significantly.

Dalton Willett (Charmis Capital Partners) - Dalton Willett (Charmis Capital Partners)

2026Q2: The full-year contribution is now expected to be around $50 million (calendar year), down from a prior expectation of $70 million for a full 12 months. - Bennett Bradford-Martz(CEO)

Can you provide an update on the $30 million contribution from the ENS venture with ACES co-participation and confirm if the 70-80 target for the year remains on track? - Dalton Willett (Shamis Capital Partners)

2026Q2: For the first 12 months of the venture, the range is $60 million to $70 million. - Bennett Bradford Martz(CEO)

Contradiction Point 2

Timeline for Multifamily/Apartment Initiative Solution

The expected timeline to resolve the rating issue and start writing business was reiterated but requires attention.

Matt Dane (Tiatan Capital Management) - Matt Dane (Tiatan Capital Management)

2026Q2: The goal is to have a solution operational by the end of the fourth quarter to start writing business. - Bennett Bradford-Martz(CEO)

Once the rating issue is resolved and the solution is in place, do you expect a significant increase in business at reasonable rates, given brokers' positive feedback, and will this business materialize quickly? - Matt Dowd (Tieton Capital Management)

2026Q2: There is enormous opportunity... and they hope to have a solution operational by the end of Q4 2026 to start writing apartments... - Bennett Bradford Martz(CEO)

Contradiction Point 3

Expected Full-Year Contribution from ENS/ACES Venture

Guidance for the venture's 2026 contribution was significantly lowered from $70M to $50M.

Will Dalton Willett from Charmis Capital Partners participate in the earnings call? - Dalton Willett (Charmis Capital Partners)

2026Q2: The full-year contribution is now expected to be around $50 million (calendar year), down from a prior expectation of $70 million for a full 12 months. - Bennett Bradford-Martz(CEO)

Can you provide an update on the $30 million contribution from the new ENS venture with ACES co-participation and confirm if the 70-80 million annual target remains on track for 2026? - Michael Phillips (Oppenheimer & Co.)

2026Q1: For 2026, most E&S premium ($50-$80 million) will come from co-participation on the AmRisc portfolio. - Bennett Bradford Martz(CEO)

Contradiction Point 4

Status and Timing of E&S (Skyway Underwriters) Expansion

The timeline for E&S growth via a fronted, rated option shifted from a 2027 initiative to being evaluated for earlier operation.

Matt Dane (Tiatan Capital Management) - Matt Dane (Tiatan Capital Management)

2026Q2: The apartment and assisted living facility initiative has been disappointing... The goal is to have a solution operational by the end of the fourth quarter to start writing business. - Bennett Bradford-Martz(CEO)

How has the multifamily apartment initiative developed relative to expectations, and what is the competitive landscape like in this new focus area? - Michael Phillips (Oppenheimer & Co.)

2026Q1: Skyway's expansion via a fronted AM Best-rated option is more of a 2027 initiative, with premium production expected to start in Q4 2026 after setup with fronting partners. - Bennett Bradford Martz(CEO)

Contradiction Point 5

ACES Venture's 2026 Gross Premium Contribution

Guidance for the full-year contribution from the new ENS venture with ACES co-participation was lowered significantly.

Dalton Willett (Charmis Capital Partners) - Dalton Willett (Charmis Capital Partners)

2026Q2: The venture is slightly behind expectations. The full-year contribution is now expected to be around $50 million (calendar year), down from a prior expectation of $70 million for a full 12 months. - Bennett Bradford-Martz(CEO)

What is the current status of the $30 million contribution from the new ENS venture with ACES co-participation, and is the 70-80 million annual target still on track? - Unknown Attendee (Private Investor)

20260220-2025 Q4: For 2026, ACES premiums are expected to be small (~5% or less of total company revenue guidance). - Bennett Bradford-Martz(CEO)

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