American Coastal Insurance Corp (ACIC) 2024 Q2 法說會逐字稿

Greetings, and welcome to the American Coastal Insurance Corporation's second quarter 2024 earnings conference call and webcast. (Operator Instructions)

您好，歡迎參加美國海岸保險公司 2024 年第二季財報電話會議和網路廣播。（操作員說明）

It's now my pleasure to turn the call over to your host, Karin Daly, Investor Relations with The Equity Group. Please go ahead, Karin.

現在我很高興將電話轉給主持人 The Equity Group 投資者關係部門的 Karin Daly。請繼續，卡琳。

Thank you, Kevin, and good afternoon, everyone.

謝謝你，凱文，大家下午好。

American Coastal Insurance Corporation has also made this broadcast available on its website at www.amcoastal.com. A replay will be available for approximately 30 days following the call. Additionally, you can find copies of the latest earnings release and presentation in the Investors section of the company's website. Speaking today will be President, Bennett Bradford Martz, and Chief Financial Officer, Svetlana Castle.

美國海岸保險公司也在其網站 www.amcoastal.com 上發布了該廣播。通話後約 30 天內可重播。此外，您可以在公司網站的投資者部分找到最新收益發布和簡報的副本。今天發言的將是總裁 Bennett Bradford Martz 和財務長 Svetlana Castle。

On behalf of the company, I'd like to note that statements made during the call that are not historical facts are forward-looking statements. The company believes these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate, or if other risks or uncertainties arise, actual results could differ materially from those expressed in or implied by the forward-looking statements.

我謹代表公司指出，電話會議期間所做的非歷史事實的陳述均為前瞻性陳述。公司相信這些陳述是基於合理的估計、假設和計劃。然而，如果前瞻性陳述所依據的估計、假設或計劃被證明不準確，或出現其他風險或不確定性，則實際結果可能與前瞻性陳述中明示或暗示的結果有重大差異。

Factors that could cause actual results to differ materially may be found in the company's filings with the US Securities and Exchange Commission, in the Risk Factors section of the most recent annual report on Form 10-K, and subsequent quarterly reports on Form 10-Q. Forward-looking statements speak only as of the date on which they are made, and except as required by applicable law, the company undertakes no obligation to update or revise any forward-looking statements.

可能導致實際結果出現重大差異的因素可在公司向美國證券交易委員會提交的文件、最新 10-K 表年度報告的風險因素部分以及隨後 10-Q 表季度報告中找到。前瞻性陳述僅代表截至其作出之日的情況，除非適用法律要求，否則本公司不承擔更新或修改任何前瞻性陳述的義務。

With that, it's my pleasure to turn the call over to Mr. Brad Martz. Brad, you may begin.

至此，我很高興將電話轉給布拉德·馬茨先生。布拉德，你可以開始了。

Thank you, Karin, and hello. Today, I'll provide an underwriting and commercial residential market update and also review some forward-looking guidance for the remainder of 2024. I'll then turn it over to our CFO, Lana Castle, for more detail on our second quarter results.

謝謝你，卡琳，你好。今天，我將提供承保和商業住宅市場的最新情況，並回顧 2024 年剩餘時間的一些前瞻性指引。然後我會將其轉交給我們的財務長 Lana Castle，以了解有關我們第二季業績的更多詳細資訊。

Page three of our earnings presentation highlights some of our key accomplishments this quarter. Two of these stand out due to their impact on current and future periods. First is the core catastrophe reinsurance renewal effective June 1, 2024, and the second is the entry into formal definitive agreements to divest of the Interboro Insurance Company. The pending sale of Interboro caused its results to be presented as discontinued operations for the quarter and the year. Accordingly, our results from continuing operations now only reflect our profitable commercial lines operations, making comparability and analysis easier going forward given the noise and volatility historically associated with the personal lines business, which is not part of our future.

我們的收益報告的第三頁重點介紹了我們本季的一些主要成就。其中兩項因其對當前和未來時期的影響而脫穎而出。首先是核心巨災再保險續保將於 2024 年 6 月 1 日生效，其次是簽訂正式的最終協議以剝離 Interboro 保險公司。Interboro 的待出售導致其季度和年度業績被列為已終止業務。因此，我們的持續經營業績現在僅反映我們盈利的商業險業務，考慮到歷史上與個人險業務相關的噪音和波動性，這使得未來的可比性和分析變得更加容易，而個人險業務不屬於我們的未來。

Before discussing the impact of our core catastrophe reinsurance renewal, I want to first thank our reinsurance partners to whom we are very grateful for their support and proud to have on our panel. All but one of our incumbent reinsurers renewed their lines with us, and we diversified our panel by adding eight new reinsurers this year. Following our announcement regarding successfully completing our June 1 renewal, we seized an opportunity to strengthen our program further by adding an additional $100 million of limit on the top of our tower to protect against a potential high-severity event and also added third event coverage to protect against a series of more moderate events.

在討論我們核心巨災再保險續保的影響之前，我首先要感謝我們的再保險合作夥伴，我們非常感謝他們的支持，並為能加入我們的小組而感到自豪。除了一家現有的再保險公司外，所有其他再保險公司都與我們更新了產品線，今年我們透過增加八家新的再保險公司來豐富我們的團隊。在我們宣布成功完成6 月1 日續訂後，我們抓住機會進一步加強我們的計劃，在塔頂額外增加1 億美元的限額，以防範潛在的高嚴重性事件，並增加了第三次事件承保範圍防範一系列較溫和的事件。

The current structure, along with a recap of the program highlights, is shown on page 13 of our earnings presentation. While the additional coverages added cost, the replacement of the [FORA] layer in the private market, plus the reduction of the quota share from 40% to 20%, will more than offset that. Thus, we are expecting ACIC's enhanced core catastrophe reinsurance program to have a positive impact on both revenue and earnings growth.

我們的收益報告第 13 頁顯示了當前的結構以及該計劃亮點的回顧。雖然額外的覆蓋範圍增加了成本，但私人市場中 [FORA] 層的更換，加上配額份額從 40% 減少到 20%，將足以抵消這一成本。因此，我們預期 ACIC 強化的核心巨災再保險計畫將對收入和獲利成長產生正面影響。

Given the discontinued operations and reinsurance changes noted for this period, I felt it was appropriate to introduce some forward-looking guidance regarding net income from continuing operations and net premiums earned. Slide seven of our earnings presentation summarizes our outlook by estimating net income from continuing operations, excluding catastrophes, to be between $85 million and $95 million for the full year. This implies earnings growth in the second half of 2024 of between 43% and 77% year-over-year. Potential catastrophe losses could have a significant impact on this. But without any material hurricane losses in the prior year, it's a fair year-over-year comparison.

鑑於這段時期注意到的終止業務和再保險變化，我認為引入一些有關持續業務淨收入和淨保費的前瞻性指導是適當的。我們收益報告的第七張投影片總結了我們的前景，估計全年持續經營淨利潤（不包括災難）在 8,500 萬美元至 9,500 萬美元之間。這意味著 2024 年下半年的獲利年增將在 43% 至 77% 之間。潛在的災難損失可能對此產生重大影響。但如果去年沒有任何重大颶風損失，這是一個公平的年比比較。

If you stress-test our earnings estimates for potential hurricane losses, please note that our retention for a first event is $16.2 million after tax and drops down to $10.3 million after tax for a second and third event, assuming such events are contained within the reinsurance program. As for net premiums earned, we estimate they would be between $285 million and $300 million for the full year 2024, implying revenue growth of between 33% and 46% in the second half of this year.

If you stress-test our earnings estimates for potential hurricane losses, please note that our retention for a first event is $16.2 million after tax and drops down to $10.3 million after tax for a second and third event, assuming such events are contained within the reinsurance程式.至於淨保費收入，我們估計 2024 年全年的淨保費將在 2.85 億美元至 3 億美元之間，這意味著今年下半年的收入成長在 33% 至 46% 之間。

Pages 10 through 12 of our earnings presentation provides some additional color on our risk portfolio and what we're seeing in the Florida commercial residential marketplace. The bottom line is that the market is showing signs of softening, but it's not having a material impact on our expected margin. We still believe a 65% underlying combined ratio is very achievable despite our outlook for lower rates and increased competition.

我們收益報告的第 10 頁到第 12 頁為我們的創投組合以及我們在佛羅裡達州商業住宅市場所看到的情況提供了一些額外的資訊。最重要的是，市場顯示出疲軟的跡象，但這並沒有對我們的預期利潤率產生重大影響。儘管我們預期利率會降低且競爭會加劇，但我們仍然相信 65% 的基本綜合成本率是非常有可能實現的。

The last thing I'd like to highlight, before turning it over to Lana, is the last bullet on page ten of the earnings presentation, indicating our plans to participate in the October 27, 2024 Citizens commercial residential takeout. We have identified a few hundred policies that fit our current underwriting criteria, and we have received approval from the Florida Office of Insurance Regulation to participate on that assumption date. We will likely only get a fraction of the policies we've identified, but we're excited about the opportunity to participate and supplement our growth via this process.

在將其交給 Lana 之前，我想強調的最後一件事是收益簡報第十頁的最後一個項目符號，表明我們計劃參加 2024 年 10 月 27 日的公民商業住宅外賣。我們已經確定了數百份符合我們目前承保標準的保單，並且我們已獲得佛羅裡達州保險監管辦公室的批准，可以在該假設日期參與。我們可能只會獲得我們已確定的政策的一小部分，但我們很高興有機會透過這個過程參與並補充我們的成長。

I'll now turn it over to Lana.

我現在把它交給拉娜。

Thank you, Brad, and hello. I'm Lana Castle, Chief Financial Officer of American Coastal Insurance Corporation, and I'll provide the financial update, but encourage everyone to review the company's press release, earnings and investor presentation, and Form 10-Q for more information regarding our performance.

謝謝你，布拉德，你好。我是拉娜·卡斯爾(Lana Castle)，美國海岸保險公司(American Coastal Insurance Corporation) 首席財務官，我將提供最新財務信息，但鼓勵大家查看公司的新聞稿、收益和投資者演示文稿以及10-Q 表格，以了解有關我們業績的更多資訊。

As reflected on page five of the earnings presentation, American Coastal had a strong quarter with a net income of $19.1 million. Core income was $19.6 million, which is a decrease of $7.5 million year-over-year as a result of higher ceded earned premiums from the 40% gross catastrophe quota share, which was effective June 1, 2023.

正如收益報告第五頁所反映的，American Coastal 季度表現強勁，淨利潤為 1,910 萬美元。核心收入為 1,960 萬美元，年減 750 萬美元，原因是 2023 年 6 月 1 日生效的 40% 總巨災配額份額的分出保費增加。

Page 6 of the presentation shows that gross premiums earned grew $5.6 million to $155.5 million. Our combined ratio was 64.9%, which is on target, but increased 1.8 points from 63.1% in the same period last year. We continue to experience favorable prior year development and feel very good about our reserve position. As shown on page 6 of our presentation, operating expenses decreased $7.1 million. This was primarily driven by $9.6 million or 41% decrease in policy acquisition costs due to an increase in ceding commission income as a result of the 40% quota share mentioned earlier. This was partially offset by increased general and administrative expenses. Despite the significant change in ceded premium, earnings before tax [were] $2.5 million higher year-over-year.

簡報第 6 頁顯示，毛保費收入成長了 560 萬美元，達到 1.555 億美元。我們的綜合成本率為 64.9%，符合目標，但比去年同期的 63.1% 增加了 1.8 個百分點。我們繼續經歷前一年的良好發展，並對我們的儲備地位感到非常滿意。如我們簡報第 6 頁所示，營運費用減少了 710 萬美元。這主要是由於前面提到的 40% 配額份額導致分保佣金收入增加，導致保單獲取成本下降 960 萬美元或 41%。這部分被一般和行政費用的增加所抵銷。儘管分出保費發生重大變化，稅前利潤仍較去年同期增加 250 萬美元。

Page eight shows balance sheet highlights. Cash and investments grew 83.6% to $573 million, reflecting the company's strong liquidity position, with increase in cash of $90.5 million. Stockholders' equity increased 32.2% to $223 million, driven by strong underwriting results. Book value per share is $4.63, a 28.5% increase from year-end. High liquidity and stronger capitalization resulted in significant improvement to our leverage ratios.

第八頁顯示資產負債表亮點。現金和投資成長 83.6%，達到 5.73 億美元，反映出公司強勁的流動性狀況，現金增加了 9,050 萬美元。在強勁的承保業績的推動下，股東權益成長了 32.2%，達到 2.23 億美元。每股帳面價值為 4.63 美元，較年底成長 28.5%。高流動性和更強的資本實力使我們的槓桿率顯著改善。

Page nine of the presentation provides additional detail on our investment portfolio. 99.4% of the portfolio are NAIC Level 1 and Level 2 securities. In the second quarter, we invested $150 million of cash in fixed securities in anticipation of the decrease in cash yield. Our investment strategy is to maintain high-quality portfolio responsive to market conditions within our risk tolerance.

簡報的第九頁提供了有關我們投資組合的更多詳細資訊。 99.4% 的投資組合為 NAIC 1 級和 2 級證券。第二季度，由於預期現金收益率下降，我們將 1.5 億美元現金投資於固定證券。我們的投資策略是在我們的風險承受能力範圍內維持對市場狀況做出反應的高品質投資組合。

I will now turn it over to Brad Martz for closing remarks.

現在我將把它交給布拉德·馬茨（Brad Martz）做總結發言。

Thank you, Lana. I'll conclude by just saying the company remains very well positioned to thrive as we've done successfully through all parts of the insurance cycle since 2007. That completes our prepared remarks today, and we are now happy to take any questions.

謝謝你，拉娜。最後我只想說，公司仍然處於蓬勃發展的有利位置，因為我們自 2007 年以來在保險週期的各個方面都取得了成功。我們今天準備好的演講到此結束，現在我們很樂意回答任何問題。

(Operator Instructions) Gregory Peters, Raymond James.

（操作員說明）Gregory Peters、Raymond James。

Hey, good afternoon, everyone. So, for the first question, I'm going to focus on the first statement you make on slide 10, and then slide 11. I was focused on the TIV down just under 2%, policy count being down just under 6%, with the 100-year PML up. I assume that there's some underlying insurance-to-value initiatives going in there. And maybe you could spend a minute and just talk to us about what we're seeing on slide 11, because it looks like conditions still remain pretty favorable.

嘿，大家下午好。因此，對於第一個問題，我將重點關注您在投影片 10 上所做的第一句話，然後是投影片 11。我關注的是 TIV 下降了近 2%，保單數量下降了近 6%，而 100 年期 PML 則上升了。我認為其中存在一些潛在的保險價值計劃。也許您可以花一點時間和我們談談我們在幻燈片 11 上看到的情況，因為看起來條件仍然非常有利。

Certainly. Thanks, Greg. This is Brad, I'll take that.

當然。謝謝，格雷格。這是布拉德，我接受。

Yes. On slide 11, we just want to continue to demonstrate that year-over-year premium relative to TIV is holding strong. We've noted in the past that we would expect some slight increases to the dotted total insured value line at the bottom, with some small decreases in the blue premium line on top, narrowing that gap in future periods. But the risk versus return profile is what we're focused on with that slide. It remains very good.

是的。在幻燈片 11 中，我們只是想繼續證明相對於 TIV 的同比溢價保持強勁。我們過去曾指出，我們預計底部的總保險價值虛線會略有增加，頂部的藍色保費線會略有下降，從而縮小未來時期的差距。但風險與報酬的關係是我們在這張投影片中關注的重點。它仍然非常好。

As far as the total insured value being down and policy count being down, that's just continued underwriting. We are being disciplined. We've held the line on terms and conditions and pricing, while others attempt to take advantage of softening market conditions. So, we've taken the opportunity to work through changes in some of our peak zones to reduce overall exposure, especially since we've -- those are metric changes since year-end, and we've been able to grow premiums in force, while curbing exposure.

就總保險價值下降和保單數量下降而言，這只是繼續承保。我們正在受到紀律處分。我們在條款和條件以及定價方面保持不變，而其他人則試圖利用市場狀況疲軟的機會。因此，我們藉此機會對一些峰值區域進行了調整，以減少整體風險敞口，特別是因為我們已經——這些是自年底以來的指標變化，而且我們已經能夠有效提高保費，同時限制暴露。

So, we felt like that was a prudent thing to do in the first half of the year going into our catastrophe reinsurance renewal. And now that we've got that new program in place, especially with the additional limit we bought subsequent to 6/1, we feel like we're very well positioned to add some exposure growth. So, part of the reason we did that is because of the anticipation of assuming some business on October 27, which is obviously still in the wind season. So, there is growth on the horizon, but we're still being very selective.

因此，我們認為，在今年上半年進行巨災再保險續保時，這是一項謹慎的做法。現在我們已經實施了新計劃，尤其是在 6 月 1 日之後購買的額外限額，我們覺得我們已經處於非常有利的位置，可以增加一些曝光增長。所以，我們這樣做的部分原因是因為預計 10 月 27 日將開展一些業務，這顯然仍處於風季。因此，成長即將到來，但我們仍然非常有選擇性。

Okay. I guess you mentioned the reinsurance program. So, let's pivot for my follow-up question to the slide 13 where you talk about the '24-'25 cat reinsurance program. So, the first event retention is $16 million, then you say this net maximum reinstatement exposure is $14 million. I assume the $14 million would be if you go through the whole tower, but if you don't go through the whole tower, the net reinstatement will be something less than that. So, when I think about if an event happens that curses your retention, it's going to be $16.2 million-plus whatever portion of reinstatement is due. Is that the correct interpretation?

好的。我猜你提到了再保險計劃。因此，讓我們將後續問題轉向幻燈片 13，其中您談到了「24-25 年巨災再保險計劃」。因此，第一個事件保留為 1600 萬美元，那麼您說此最大淨恢復風險為 1400 萬美元。我認為如果你穿過整座塔，那麼 1400 萬美元就足夠了，但如果你不穿過整座塔，淨恢復將比這個少。所以，當我想到如果發生了一件影響你留任的事件時，那將是 1620 萬美元，加上應得的恢復部分。這是正確的解釋嗎？

That's correct. And the key difference with the reinstatement exposure is that one, that's a pretax number. So, you'd want to probably look at that after tax for apples-to-apples. And then two, the reinstatement premiums are amortized over the remaining term of the treaty period. So, if an event happened on September 1, that reinstatement cost would be amortized from September 1 to May 31, 2025, whereas the loss is recognized in full immediately.

這是正確的。與恢復風險的主要區別在於，這是一個稅前數字。因此，您可能需要比較一下稅後的情況。第二，恢復保費在條約期限的剩餘期限內攤提。因此，如果事件發生在 9 月 1 日，則恢復成本將從 2025 年 9 月 1 日至 2025 年 5 月 31 日期間攤銷，而損失則立即全額確認。

So, when you have these reinstatement costs, you have a second and third event retentions, if we had three full events in Florida this year, the third event, you would have coverage for the full tower layer going up to the $1.259 billion? Or is there a different amount of coverage that happens in the third event versus the second event?

所以，當你有這些恢復成本時，你有第二次和第三次活動保留，如果我們今年在佛羅裡達州舉辦三場完整的活動，第三次活動，你將覆蓋整個塔樓高達12.59 億美元？或者第三個事件與第二個事件中發生的報道數量是否不同？

They're different amounts of coverage in the second event and the third event. And it really depends on what happens with the first event. So, I think what we are trying to say -- it gets super complicated, but the real way to answer that question is it depends on the size of the first event. And obviously, after a first event, we would try and get guidance to the market as quickly as possible about our estimate of that loss and the remaining reinsurance available.

第二個事件和第三個事件的報道量不同。這實際上取決於第一個事件發生的情況。所以，我認為我們想說的是——它變得非常複雜，但回答這個問題的真正方法是它取決於第一個事件的大小。顯然，在第一次事件發生後，我們會盡力盡快向市場提供有關我們對損失和剩餘可用再保險的估計的指導。

Okay. I figured it was complex. Just final, just -- probably way too soon to say anything. But Debby came through, not sure if it's really material to you guys yet or not. But do you have any comment you can offer yet on that, or do you want to wait for a couple more weeks?

好的。我認為這很複雜。最後，只是──可能現在說什麼還為時過早。但黛比挺過來了，不確定這對你們來說是否真的重要。但你對此有何評論，或者你想再等幾週嗎？

Yes. I can comment that it was mostly a rain event, not a wind event. Our commercial residential portfolio has fared resiliently in the past to similar events. We have one claim at this time. It's very small, roof leak claim, under deductible. So, I'm not -- obviously, we feel for everyone that was impacted by the event. There was a lot of rain, a lot of water on the west coast of Florida, and elsewhere, even outside of Florida, right now. So, never take that lightly at all. The flooding, unfortunately, is -- or fortunately for us, is not covered. We don't cover flood. But that's a peril that we don't have to worry about. But the wind damage we would expect to be close to nothing.

是的。我可以評論說，這主要是一場雨，而不是一場風。我們的商業住宅投資組合過去在類似事件中表現強勁。我們目前有一項主張。這是非常小的屋頂漏水索賠，低於免賠額。所以，顯然，我們對每個受該事件影響的人都感同身受。現在，佛羅裡達州西海岸和其他地方，甚至佛羅裡達州以外的地方都下了很多雨，大量的水。所以，千萬不要掉以輕心。不幸的是，洪水沒有被覆蓋——或者對我們來說幸運的是，洪水沒有被覆蓋。我們不承保洪水。但這是我們不必擔心的危險。但我們預期風害幾乎為零。

Fair enough. All right. Well, thanks for the slide on the guidance, too. I think that's helpful. Congratulations on the quarter.

很公平。好的。好吧，也感謝您的指導幻燈片。我認為這很有幫助。恭喜本季。

You're welcome. Thank you.

不客氣。謝謝。

(Operator Instructions) We've reached the end of our question-and-answer session. And ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

（操作員說明）我們的問答環節已經結束。女士們、先生們，今天的電話會議和網路廣播到此結束。此時您可以斷開線路並度過美好的一天。我們感謝您今天的參與。