American Coastal reports lower net income for Q1’24 as GWP rise

American Coastal Insurance Corporation, a property and casualty insurer, has reported net income for Q1 2024 of $23.6 million, or $0.48 per diluted share, compared to $267.3 million, or $6.14 per diluted share, for Q1 2023.

This decrease in net income reflects $236 million of income from discontinued operations in Q1 2023, while this quarter, none of the firm’s net income was attributable to discontinued operations.

For Q1 2024, drivers of net income includes increased gross premiums earned and decreased expenses, driven by decreases in policy acquisition costs and losses and LAE incurred, partially offset by lower revenues due to higher ceded premiums earned.

Total gross written premium (GWP) increased by $10.3 million to $197.5 million for Q1 2024, from $187.1 million in Q1 2023, due to increased premiums written in Florida. Additionally, there was also an increase in written premiums across the personal lines business, due primarily to rate increases.

Losses and LAE decreased by $0.5 million to $15.9 million for Q1 2024, from $16.4 million in Q1 2023. Along with this, policy acquisition costs decreased by $15.2 million to $11.8 million for the first quarter of 2024, from $27 million in the prior year, due to an increase in ceding commission income due to changes in the terms of the firm’s quota share reinsurance agreements effective June 1st, 2023.

Group-wide, the combined ratio strengthened by 4 percentage points to 58.3% in Q1 2024, as the loss ratio increased 4.2 points to 23.1%, and the expense ratio fell by 8.2 points to 35.2%.

In commercial lines, the firm reported Q1 2024 pre-tax earnings of $32.8 million, compared to $38.9 million for Q1 2023. This decrease is attributed to the increased ceded premiums, increased general and administrative expenses, partially offset by increased gross premiums earned quarter-over-quarter with the firm’s focus on its specialty commercial lines underwriting.

The firm has also reported a decrease of $2.3 million in losses and LAE incurred due to decreased non-catastrophe and catastrophe losses quarter-over-quarter in the segment.

In personal lines, the firm has reported Q1 2024 pre-tax income of $1.1 million, compared to a pre-tax net loss of $1.9 million for Q1 2023. The segment’s decreased expenses were partially offset by decreased net premiums earned of $2.6 million, driven by increased gross unearned premiums and a $1.8 million increase in losses and LAE incurred, driven by increased non-catastrophe losses quarter-over-quarter.

The insurer explains that ceded premiums earned related to its catastrophe excess of loss contracts decreased, driven by the need for less coverage for the 2023-2024 treaty year due to the reduction in the firm’s geographic footprint and exposure, as well as the utilization of quota share reinsurance coverage for its commercial lines operating segment, partially offset by rate increases on the coverage experienced in the current year.

America Coastal’s cash, restricted cash and investment holdings increased from $369 million at December 31st, 2023, to $504.5 million at March 31st, 2024.

Dan Peed, Chief Executive Officer, American Coastal Insurance Corporation, commented: “I am happy to report that we had a strong first quarter, driven by expanding net earned premiums, coupled with a very low underlying combined ratio. American Coastal’s earnings reflect our ability to adapt and unlock value in an evolving insurance landscape and underscores our commitment to delivering value to policyholders and shareholders.

“First quarter net income continued trending upward to $23.6 million, or up 38% from the fourth quarter of 2023. This growth highlights American Coastal’s outperformance in key operational metrics and reaffirms our position as a market leader in our specialty business.”

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