Hello, everyone. Thank you for joining us and welcome to the American Coastal Insurance Corporation Q2 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Bennett Bradford Martz, President and CEO. Brad, please go ahead.

On behalf of the company, I'd like to note that statements made during this call that are not historical facts are forward-looking statements. For more information regarding these statements, please note the language on slide two of our earnings presentation. During the second quarter of 2026, American Coastal continued to maintain its market leadership position in Florida commercial residential property insurance, but also experienced continued downward rate pressure, causing gross premiums written to decrease roughly 5% compared to the same period a year ago. Some minor non-hurricane catastrophe losses incurred of approximately 3.1 million also impacted comparability with the prior year, given the lack of any such losses in 2025. Despite top and bottom line compression year over year, our underlying combined ratio of 68.7% was very respectable, as was the 26.6% return on equity in the current quarter. During the open window, trading window that is, in the second quarter, the company repurchased nearly 1.4 million shares of its common stock, bringing the year-to-date total shares repurchased to just over 1.8 million. And I'm happy to announce that the Board of Directors has increased our authority to buy back up to roughly 30.6 million worth of our common stock in the future. Our earnings presentation was revamped this quarter with the intent to improve the messaging around what makes ACIC special. I strongly encourage anyone looking to learn more about our company to read that document each period along with our other filings. As disclosed on page nine of our earnings presentation, we recently seized an opportunity to reduce our first event hurricane retention from $49 million to only $23.5 million before income tax effective August 1st. The outlook for hurricanes making landfall in Florida this year, along with continued softening of reinsurance pricing, allowed us to mitigate downside risk from potential hurricanes this year. This change is further evidence that ACIC is continuously monitoring the market and always on the lookout for opportunities to improve our risk-adjusted performance. For the sake of clarity, our reinsurance strategy is to buy more protection when pricing is cost-effective and retain more risk on our balance sheet when it's not. Our second and third event retentions remain unchanged at $25 million and $2 million, respectively. Thus, we are confident to state that American Coastal should remain profitable this year, even with three full retentions. Lowering American Coastal's potential risk from hurricanes improves the overall quality and reliability of our earnings and cash flows. Accordingly, our earnings guidance for the full year currently remains unchanged at $85 million to $100 million, inclusive of net average annual losses expected from catastrophes. Actual earnings before income tax could be higher or lower depending on actual catastrophe frequency and or severity. Conversely, our guidance for total revenue is being revised downward to between $300 million and $320 million given the trajectory of the current pricing environment. Without any significant hurricane losses or other surprises this year, we believe that rates, deductibles and policy acquisition costs will likely remain under pressure into 2027 but this is likely to be partially offset by lower reinsurance costs we remain committed to writing new business and looking for intelligent ways to grow but acic will continue to prioritize underwriting profitability as our primary strategic objective i'd like to now turn it over to our CFO, Lana Castle, for more specifics on our financial results. Lana.

Thank you, Brad, and hello. I'll provide a financial update, but encourage everyone to review the company's press release, earnings and investor presentations, and Form 10Q for more information regarding our performance. As reflected on page seven of the earnings presentation, American Coastal demonstrated another strong quarter with net income of $21.9 million. Foreign income was $16.5 million, a decrease of $10.3 million driven by softening market conditions and one-time benefits in the prior year, totaling $4.2 million. Gross return premiums are down 5.3% from 2025, with $22.5 million of assumed ENS premium of certain decreases in our direct premiums. Our combined ratio was 74.3%, an increase of 13.7 points from 2025, but in line with our expectations as we navigate the soft market cycle. Our non-GAAP underlying combined ratio, which excludes current year catastrophe losses and prior year development, was 68.7% compared to 62.2% in the prior year. We continue to demonstrate underwriting discipline through the market cycle. Page 16 shows balance sheet highlights. Fashion investments increased $2.3 million, inclusive of our previously declared special dividends of $0.75 per share, or $36.6 million. The company's liquidity position remains strong. Stockholders' equity increased $23.2 million, or 7.3%, to $340.8 million, driven by our underwriting results. Book value per share is 721, a 10.7% increase from year-end 2025. This concludes our prepared remarks. We'll now open the floor for questions.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. we ask that you pick up your handset when asking a question to allow for optimum sound quality if you are muted locally please remember to unmute your device please stand by while we compile the q a roster the first question comes from the line of mitchell rubin with raymond james your line is open please go ahead hey good afternoon this is mitch on for greg

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?

Hi, Mitch. Thanks for your question. This is Brad. The cost was approximately $8.4 million, so about $4 million of that will be expense as seeded earned this year from August to December, and the remainder as seeded earned from January through May 31st. So we'll spread that cost over the 10-month period. And I think it factors favorably into the prospect for a special dividend. Obviously, we've stated that if we're profitable and earning sufficient returns on capital, and we feel like we have excess capital, you know, the prospect for a special dividend remains good. And considering we've been profitable, you know, all 18 years of our operations since our inception in 2007, this year expecting to be the 19th consecutive year of underwriting profitability, you know, this should help guarantee a special dividend is declared but how big and um is undetermined at this time thanks for the color on that um for my second question so 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 we don't believe it's recurring it really all stemmed from a single claim from the 2019 accident year. It was one of our last remaining sinkhole losses that just slightly was above or beyond our excess per risk reinsurance coverage. So unfortunately, the net result was a slight impact to adverse reserve development. But aside from that, the quarter was in line with all of periods. And I fully expect we'll have favorable development for the full year. So nothing to worry about with reserves.

Thank you.

The next line of question comes from the line of Dalton Willett with Sharmas Capital Partners. Your line is open. Please go ahead.

Hey, Brad, how you doing? 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?

Hi, Dalton. Sure. Yeah, you are correct. Policies in force and total insured value in force as of June 30th, 2026, they were both up roughly between 3% and 4% year over year. So we're maintaining the exposure base. You know, that is not the problem. Account retention improved over the first quarter. So it was right around 85 percent for the second quarter. It very much right where we want it to be. And we've been actively writing new business to help, you know, fill in the gaps. So we still see attractive opportunities in the market. Our technical model price is still above historical levels on most of the risks we see. So we're being cautious, definitely more cautious, but it's all about premium retention right now. You know, we don't control the market forces and dynamics. All we can do is try and build the best risk portfolio around those dynamics. But, yeah, we're maintaining or maybe even growing our market leadership position and feel good about that. Don't feel good about the decline in average premium, but that's going to go up and down over time.

Yeah, absolutely.

And then can you talk a little bit about the $30 million, roughly, contribution from the new ENS center 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 of 2020? that yeah it's going fine um this was uh probably a little bit um behind expectations i don't believe for the full when you talk about the full year when we said what we thought that 70 million would encompass a full 12 months so if you're thinking calendar year it's probably going to be closer to 50 million for the full year um somewhere somewhere along those lines but yeah for for the first 12 months we would expect it to be you know somewhere between 60 and 70. Could be more, could be less. AMRISC is working extremely hard to find quality risks to utilize that capacity and they're doing a good job. They're fighting the same fight we're fighting on with rate decreases and erosion of other terms and conditions, but they're disciplined underwriters too. We've got a lot of trust and faith in them And, you know, the revenue will be very important to help offset weakness in our core condominium book of business. But the reality is, is our mind is always on the bottom line, the top line. We'd love, like I said, the intro, we'd love to grow and find attractive opportunities to grow. but we're only going to do so if we can earn an acceptable return on capital.

Fantastic. And then the last one, if I can, next year you guys have the senior notes coming due. I know there's been talk of refinancing. You cannot need to keep all of that. 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, you know, 20, 25% debt to cap target. Is that kind of the plan to get there from here?

Yes, it is. We still believe a 20% debt to capital ratio, 20% or less, I should say, is appropriate for a company with our earnings power and risk profile. So depending on interest rates, you know, we're exploring traditional bank debt, We're exploring the bond market. We're exploring all avenues and would expect to get a refinance done within the next six to 12 months. So we would prefer to have this put to bed and taken care of prior to the next hurricane season to mitigate any risk of storms impacting our ability to refinance. But our current plan is to cut the debt in half. That's the current outlook is to reduce the outstanding long-term debt from $150 million to $75 million. And we've got the cash on hand today to do that.

Awesome. Awesome. Thank you so much for taking my call and congrats on another strong quarter. Thank you.

The next question comes from the line of Matt Dane with Tiatin Capital Management. Your line is open. Please go ahead.

Great. Thank you. It's Tiatin 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 uh for for that uh new new focus area uh yeah certainly i'm happy to do so the apartment multi-family and assisted living facility is definitely um on the disappointing side we are currently running into um challenges with by not having an AMBEST rating. You know, we plan to solve for that by through the formation of ACES specialty, which we have already commenced discussions with AMBEST about getting that rated this year once it's fully capitalized and licensed. And secondarily, we're not going to we're also evaluating and various fronting relationships including the the structure we already have in place with with Fort Tegra to potentially give Skyway access to AMS rated paper of sufficient quality and size to to access that risk the brokers love american coastal we've been told that over and over there's nothing wrong with our product nothing wrong with our company but the lenders you know have strict um security requirements around the the ams rating and unfortunately we've lost some business to midterm cancellations because of that and that has slowed down um you know the the quoting and binding activity in apartments. So we're kind of in a holding pattern at the moment, but we have enormous opportunity in front of us once we solve that constraint, which we're actively working on and hope to have a solution operational, you know, during the tail end of the fourth quarter to start writing both apartments and ALFs as well as other classes of commercial property that are also more rating sensitive inside and outside of Florida, you know, after hurricane season. That's our plan.

And so once you do have this, the lack of the rating cured and have the solution in place, Brad, would you expect that it should be that there is a good amount of business that you should be able to write at reasonable rates? And like you said, the brokers like your product And do you believe that we'll see some business later on fairly quickly after that then?

Yeah, there's enormous opportunity out there. We definitely feel and have been told by multiple parties that the opportunity is there. Competition is definitely there as well. um that that has not helped matters that there's excess capacity in the marketplace and and you know the incumbents are fighting hard to retain those policies um but we have a strategy and feel like you know we can gain a lot more traction um with the uh the ens and best rated um paper at are at Skyway's disposal.

Yeah, that's helpful. Thanks, Brad. Thank you.

The next question comes from the line of Akshay Tana, private investor. Your line is open. Please go ahead.

Hi, Brad, team. My question is on the treasury shares. I see the treasury shares increased, and that's mainly because of the buybacks.

I was wondering if you have plans to cancel them or maybe help us understand why keep them yes there's that that is the plan and as i stated at the beginning we we have reloaded our capacity uh and increased it now so um we're still going to be on the lookout for additional opportunities to to repurchase stock and and cancel the shares um to reduce the overall share count which um you know obviously doesn't necessarily have uh a uh an immediate effect for all shareholders or religious benefits you know sellers but um you know certainly reducing some of the the share count um suggests we we believe in our business we're you know heavily weighted on insider ownership here and um increasing our concentration investment in the stock is just something we feel compelled to do when you're trading at five times trailing. So we're happy to do it. The limitation is going to be the average daily trading volume. It just takes a little bit of time to deploy that capacity.

And I know we've discussed about premiums coming down and then competition intensifying as well. And as I look at the uh the florida commercial residential property uh uh market share that um that gets shared um i'm looking at like a couple of companies that have um have any have increased market share so like slide is one i'm just curious on the long term uh threats to the earning part of the core business maybe talk a little bit more about it like well i can't comment on what other companies are doing i can just tell you that you know you can measure market share a number of different ways whether you do it based on total insured value policy count premium etc we feel like we're still

the largest writer of it we're in great position and and we're we're again defending our our book of business we're only losing what we want to lose where we want to lose it the stuff we want to keep we're keeping um retention is right where we want it um account retention that is um you know but that being said you know there there's obviously um challenges on on the premium side because of increased interest and competition so we're mindful of that um we know how to manage the cycle we've seen this before um and you know if we have to shrink the book um because pricing becomes irrational we will but that's not the expectation at the moment we've still we're still in a very good position and you know many many periods away from from being at pricing levels where we we would have to consider that and and meaning seeding market share so um i don't see that as a a near-term problem could be a longer-term problem depending on how long this this part of the cycle lasts but for right now we're still actively writing and um and finding new business opportunities as well so we're winning new business um retention's

where we want it and and that's what we're focused on okay thank you as a friendly reminder please if you would like to ask a question please press star one on your telephone keypad There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.