American Coastal Insurance Thesis (ACIC)
Recapitalized Insurance Firm Poised for Growth
Market Cap: $548,366,000
P/B: 1.64x
Bank Debt: $149,270,000
Equity / First Event Retention Ratio: 11x
Equity / 3-Event Retention: 6.29x
Shares Outstanding: 48,765,302
Business Overview
American Coastal Insurance is the largest Property and Casualty balance sheet underwriter in the state of Florida with 4,300 policies. The business has undergone a significant transformation but is anchored by a niche provider of Hurricane/Wind coverage that focuses solely on underwriting commercial residential property, in specific garden-style condominiums that meet specific construction criteria. The majority of the properties are between $5-$65M in TIV with the average TIV across the portfolio of $16M.
The business was founded by Daniel Peed in 2007 and has been profitable since its inception, which is a testament to the quality of the underwriting skill this management team has – to be profitable every year since 2007 in the most catastrophe exposed market in the world is no accident. American Coastal sets a goal of being profitable in any one quarter where an event occurs and profitable for the full year in a three-event season.
American Coastal, until 2023 was a subsidiary of United Insurance Holdings Company before it was spun off following UIHC going into receivership with the Florida Department of Financial Services after Hurricane Ian. It is important to note that UIHC was primarily a personal lines insurer vs American Coastal which is solely focused on Commercial Residential underwriting which carries with it a distinct set of underwriting risk and policy pricing flexibility. In 2021/2022 American Coastal injected $115M of capital to save UIHC which ultimately failed, leaving American Coastal undercapitalized on the other side of the spin off.
Ever since the spin off American Coastal has been in the process of transforming from a small subsidiary of a much larger personal lines company to a stand-alone niche underwriter focused on underwriting profit and generating “broker-style” fees from its new venture into the Managing General Agent (MGA) business. In addition to the MGA opportunity Skyway that we will discuss in detail later on, American Coastal management recently announced new Excess and Surplus opportunities as well through American Coastal Excess & Surplus (ACES) as well as a 6% co-participation in their longtime partner AmRisc’s billion dollar plus E&S book nationwide.
Historical Overview
