ACIC · Read the filing

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing in Part II, Item 8 of this Form 10-K. The following discussion provides an analysis of our results of operations and financial condition for 2024 as compared to 2023. Discussion regarding our results of operations and financial condition for 2023 as compared to 2022 is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 and the Revised Items of our Form 10-K for the year ended December 31, 2023, filed as Exhibit 99.1 to Form 8-K on October 4, 2024. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed or implied in these forward-looking statements as a result of certain known and unknown risks and uncertainties. See “Forward-Looking Statements.”

OVERVIEW

American Coastal Insurance Corporation is a holding company primarily engaged in commercial and personal property and casualty insurance business with investments in the United States. On July 10, 2023, we changed our corporate name from United Insurance Holdings Corp. to American Coastal Insurance Corporation. During the periods presented, we conducted our business principally through two wholly owned insurance subsidiaries: American Coastal Insurance Company (AmCoastal) and Interboro Insurance Company (IIC). Collectively, we refer to the holding company and all our subsidiaries, including non-insurance subsidiaries, as “ACIC,” which is the preferred brand identification for our Company.

Our Company’s primary source of revenue is generated from writing insurance in Florida and New York. Our target market in such areas consists of states where the perceived threat of natural catastrophe has caused large national insurance carriers to reduce their concentration of policies. We believe an opportunity exists for ACIC to write profitable business in such areas. During 2022, we also wrote commercial residential insurance in South Carolina and Texas; however, effective May 1, 2022, we no longer write in these states. In addition, during 2022, we wrote personal residential business in six other states; however on February 27, 2023, our former insurance subsidiary, United Property & Casualty Insurance Company (UPC) was placed into receivership with the Florida Department of Financial Services (the "DFS"), which divested our ownership of UPC. The events leading to receivership and results of this subsidiary, now included within discontinued operations, can be seen in Note 4 of the Notes to Consolidated Financial Statements below.

On May 9, 2024, the Company entered into a Stock Purchase Agreement (the "Sale Agreement") with Forza Insurance Holdings, LLC ("Forza") in which ACIC will sell and Forza will acquire 100% of the issued and outstanding stock of IIC. The aggregate purchase price for the shares will be equal to IIC's GAAP shareholder’s equity on the closing date. Closing is subject to customary closing conditions, including New York Department of Financial Services ("NYDFS") approval of Forza's application for acquisition of control, and NYDFS approval of a new rate and form filing. On February 13, 2025, Forza’s application to acquire IIC was approved by the NYDFS. The Company and Forza have agreed to close on April 1, 2025. Given IIC is our last remaining personal lines entity and represents the final step in our strategic shift to becoming a specialty commercial underwriter, IIC results of operations and assets and liabilities are captured within discontinued operations and can be seen in Note 4 of the Notes to Consolidated Financial Statements below.

We have historically grown our business through strong organic growth, complemented by strategic acquisitions and partnerships, including our acquisitions of AmCo Holding Company, LLC (AmCo) and its subsidiaries, including AmCoastal, in April 2017, and IIC in April 2016, and our strategic partnership with a subsidiary of Tokio Marine Kiln Group Limited (Tokio Marine), which formed Journey Insurance Company (JIC) in August 2018. Effective June 1, 2022, we merged JIC into AmCoastal, with AmCoastal being the surviving entity.

As a result of our risk appetite in 2024, our policies in-force increased by 0.9% from 22,848 policies in-force at December 31, 2023, to 23,060 policies in-force at December 31, 2024. These values include IIC policies in-force, whose results are captured within discontinued operations.

Our business is subject to the impact of weather-related catastrophes on our loss and loss adjustment expenses (LAE). Over the last three years, the frequency of these catastrophes has increased. As a result, we have experienced increased catastrophe losses incurred during the prior three years. During the years ended December 31, 2024, 2023 and 2022, five, two, and two named storms, respectively, made landfall in our geographic footprint, resulting in retained pre-tax catastrophe losses of $25,442,000, $729,000, and $57,906,000, respectively, excluding our former subsidiary, UPC. In addition, during 2022, we increased our loss and LAE reserves as a result of development trends from 2017’s Hurricane Irma, that indicated our ultimate gross loss estimate should be increased.

AMERICAN COASTAL INSURANCE CORPORATION

For the year ended December 31, 2024, we have consolidated our Operating and Underwriting Expenses and General and Administrative Expenses lines within our Consolidated Statements of Comprehensive Income into the General and Administrative Expenses line. This was done in an effort to align more closely with our peer group for comparability. Accordingly, we have recast our Consolidated Statements of Comprehensive Income for the years ended December 31, 2023 and 2022 to align with this format. We have also added a new note to our consolidated financial statements, Note 3, Disaggregation of Relevant Expense Captions, to provide the users of our financial statements with enhanced insight into this expense line.

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of ACIC. In evaluating our results of operations, we use premiums written and earned, policies in-force and new and renewal policies by geographic concentration. We also consider the impact of catastrophe losses and prior year development on our loss ratios, expense ratios and combined ratios. In monitoring our investments, we use credit quality, investment income, cash flows, realized gains and losses, unrealized gains and losses, asset diversification and portfolio duration. To evaluate our financial condition, we consider our liquidity, financialstrength, ratings, book value per share and return on equity.

AMERICAN COASTAL INSURANCE CORPORATION

Consolidated Net Income (Loss)

Year Ended December 31,

REVENUE:

Net unrealized gains (losses) on equity securities 1,996 814 (1,968)

EXPENSES:

Income (loss) from discontinued operations, net of tax (601) 224,707 (445,414)

Less: Net loss attributable to noncontrolling interests — — (111)

Net income (loss) per diluted share $ 1.54 $ 6.98 $ (10.91)

Return on equity based on GAAP net income (loss) 33.5 % 439.5 % (307.4) %

Effect of current year catastrophe losses on combined ratio 9.3 % 4.9 % 23.5 %

Effect of prior year development on combined ratio (1.4) % (4.9) % (3.6) %

(1) Loss ratio, net is calculated as losses and LAE net of losses ceded to reinsurers, relative to net premiums earned. Management uses this operating metric to analyze our loss trends and believes it is useful for investors to evaluate this component separately from our other operating expenses.

(2) Expense ratio is calculated as the sum of all operating expenses less interest expense relative to net premiums earned. Management uses this operating metric to analyze our expense trends and believes it is useful for investors to evaluate these components separately from our loss expenses.

(3) Combined ratio is the sum of the loss ratio, net and expense ratio. Management uses this operating metric to analyze our total expense trends and believes it is a key indicator for investors when evaluating the overall profitability of our business.

(4) Underlying combined ratio, a measure that is not based on GAAP, is reconciled above to the combined ratio, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this Form 10-K can be found in “Definitions of Non-GAAP Measures”, below.

(5) Included in both the expense ratio and the combined ratio is amortization expense predominately associated with the AmCo and IIC acquisitions, which cause comparative differences among periods.

AMERICAN COASTAL INSURANCE CORPORATION

DEFINITIONS OF NON-GAAP MEASURES

We believe that investors’ understanding of ACIC’s performance is enhanced by our disclosure of the following non-GAAP measures. Our methods for calculating these measures may differ from those used by other companies and therefore comparability may be limited.

Combined ratio excluding the effects of current year catastrophe losses and prior year reserve development (underlying combined ratio) is a non-GAAP measure that is computed by subtracting the effect of current year catastrophe losses and prior year development from the combined ratio. We believe that this ratio is useful to investors, and it is used by management to highlight the trends in our business that may be obscured by current year catastrophe losses and prior year development. Current year catastrophe losses cause our loss trends to vary significantly between periods as a result of their frequency of occurrence and magnitude, and can have a significant impact on the combined ratio. Prior year development is caused by unexpected loss development on historical reserves. We believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. The most directly comparable GAAP measure is the combined ratio. The underlying combined ratio should not be considered as a substitute for the combined ratio and does not reflect the overall profitability of our business.

Net loss and LAE excluding the effects of current year catastrophe losses and prior year reserve development (underlying loss and LAE) is a non-GAAP measure that is computed by subtracting the effect of current year catastrophe losses and prior year reserve development from net loss and LAE. We use underlying loss and LAE figures to analyze our loss trends that may be impacted by current year catastrophe losses and prior year development on our reserves. As discussed previously, these two items can have a significant impact on our loss trends in a given period. We believe it is useful for investors to evaluate these components both separately and in the aggregate when reviewing our performance. The most directly comparable GAAP measure is net loss and LAE. The underlying loss and LAE measure should not be considered a substitute for net loss and LAE and does not reflect the overall profitability of our business.

AMERICAN COASTAL INSURANCE CORPORATION

RESULTS OF OPERATIONS

Consolidated Results

Net income attributable to ACIC for the year ended December 31, 2024 decreased by $234,193,000 to $75,718,000, compared to net income of $309,911,000 for the year ended December 31, 2023. The decrease in net income was driven by the deconsolidation of our former subsidiary, UPC, resulted in a gain of $238,440,000 in 2023. Drivers of net income for 2024 include increased gross premiums earned during the year, increased net investment income, an increase in ceded premiums earned, favorable prior year loss development during the year, and decreased policy acquisition costs, as described below.

Revenues

Our gross written premiums increased by $12,096,000, or 1.9%, to $647,805,000 for the year ended December 31, 2024, from $635,709,000 for the year ended December 31, 2023. The breakdown of the year-over-year changes in both direct and assumed written premiums by state and gross written premium by line of business are shown in the table below.

Direct Written and Assumed Premium By State 2024 2023 Change

New York — — —

Texas — (9) 9

Gross Written Premium by Line of Business

Personal property — — —

(1) Assumed premium written for 2024 and 2023 primarily included commercial property business assumed from unaffiliated insurers.

New and Renewal Policies(1) By State 2024 2023 Change

New York — — —

(1) Only includes new and renewal homeowner, commercial and dwelling fire policies written during the year.

Ceded premiums earned increased by $21,995,000, or 6.4%, to $364,618,000 for the year ended December 31, 2024, from $342,623,000 for 2023. The increase is primarily driven by a $12,334,000 increase in ceded premiums earned from our quota share agreements. This increase is attributed to the change in AmCoastal’s quota share reinsurance coverage during 2024. We had quota share coverage in place at 40% for the first half of 2024 and 20% for the second half of the year, while in 2023 we had no coverage for the first half of the year and 40% coverage for the remainder of the year. This drove increased cessions over the twelve months ended December 31, 2024.

Net investment income increased by $12,495,000, or 150.5%, to $20,795,000 for the year ended December 31, 2024, from $8,300,000 for 2023, driven by increased interest income due to a substantial increase in holdings and higher interest rates year-over-year.

Net realized investment losses and net unrealized gains (losses) on equity securities increased by $7,847,000, or 131.3%, to a net gain of $1,872,000 for the year ended December 31, 2024, from a net loss of $5,975,000 for the year ended December 31, 2023, driven by decreased investment sales in 2024 resulting in decreased realized losses of $6,665,000 on our investment portfolio. During 2023 as a result of liquidity pressure from the receivership of our former subsidiary, UPC, we liquidated investments in a loss position. Please see cash flow for more information. The remainder of the change is related to our re-entering of the equity market during 2024, resulting in unrealized gains on the portfolio of $1,996,000.

AMERICAN COASTAL INSURANCE CORPORATION

Expenses

Expenses for the year ended December 31, 2024, increased $26,513,000, or 15.5%, to $197,061,000, from $170,548,000 for 2023. The increase in expenses was primarily due to an increase in loss and LAE as a result of Hurricane Milton making landfall in 2024, which caused a large increase in catastrophe losses due to the $20,500,000 retention incurred from the storm. The calculations of our combined loss ratios and underlying loss ratios are shown below.

($ in thousands) Year ended

December 31,

% of Gross earned premiums 10.9 % 7.7 % 3.2 pts

% of Net earned premiums 25.3 % 17.8 % 7.5 pts

Less:

% of Gross earned premiums 7.4 % 7.7 % (0.3) pts

% of Net earned premiums 17.3 % 17.8 % (0.5) pts

(1) Underlying loss and LAE is a non-GAAP financial measure and is reconciled above to net loss and LAE, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this Form 10-K can be found in the “Definitions of Non-GAAP Measures” section, above.

The calculations of the Company’s expense ratios are shown below.

($ in thousands) Year ended

December 31,

% of Gross earned premiums 18.1 % 18.7 % (0.6) pts

% of Net earned premiums 42.2 % 43.1 % (0.9) pts

Loss and LAE increased by $22,641,000, or 48.5%, to $69,319,000 for the year ended December 31, 2024, from $46,678,000 for the year ended December 31, 2023. Loss and LAE expense as a percentage of net earned premiums increased 7.5 points to 25.3% for the year ended December 31, 2024, compared to 17.8% for the year ended December 31, 2023. In addition, during the year ended December 31, 2024, prior year reserve favorable development was lower on both catastrophe and non-catastrophe losses. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the year ended December 31, 2024 would have been 7.4%, a decrease of 0.3 points from 7.7% during the year ended December 31, 2023.

Policy acquisition costs decreased by $4,446,000, or 5.9%, to $70,990,000 for the year ended December 31, 2024, from $75,436,000 for the year ended December 31, 2023. The primary driver of the decrease was an increase in ceding commission income of $6,959,000, driven by the changes in the terms of our quota share reinsurance agreement described above. This was partially offset by increased external management fees of $1,745,000, which fluctuated in conjunction with the year-over-year increase in gross written premium.

General and administrative expenses increased by $7,197,000, or 19.2%, to $44,756,000 for the year ended December 31, 2024, from $37,559,000 for the year ended December 31, 2023, driven by increased overhead costs such as increased amortization of capitalized software totaling $2,836,000 and an increase in salaries totaling $1,522,000. In addition, we saw an increase in the use of third parties for audit, tax, and legal services, totaling $1,065,000 and $620,000, respectively.

AMERICAN COASTAL INSURANCE CORPORATION

We experienced favorable reserve development in the current year and its historical impact on our net loss and net underlying loss ratios is outlined in the following table.

Historical Reserve Development

Consolidated net loss and LAE ratio (LR) 31.1 % 43.1 % 17.8 % 25.3 %

Prior year reserve favorable development on LR (2.4) % (3.6) % (4.9) % (1.4) %

Current year catastrophe losses on LR 5.4 % 23.5 % 4.9 % 9.3 %

(1) Underlying net loss and LAE Ratio is a non-GAAP measure and is reconciled above to the Consolidated net loss and LAE Ratio, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this Form 10-K can be found in the “Definitions of Non-GAAP Measures” section, above.

AMERICAN COASTAL INSURANCE CORPORATION

ANALYSIS OF FINANCIAL CONDITION

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our accompanying consolidated financial statements and related notes in Part II, Item 8 in this Form 10-K.

Investments

The primary goals of our investment strategy are to preserve capital, maximize after-tax investment income, maintain liquidity and minimize risk. To accomplish our goals, we purchase debt securities in sectors that represent the most attractive relative value, and we maintain a moderate equity exposure. Limiting equity exposure manages risks and helps to preserve capital for two reasons: first, bond market returns are less volatile than stock market returns, and second, should the bond issuer enter bankruptcy liquidation, bondholders generally have a higher priority than equity holders in a bankruptcy proceeding.

We must comply with applicable state insurance regulations that prescribe the type, quality and concentrations of investments our insurance subsidiaries can make; therefore, our current investment policy limits investment in non-investment-grade fixed maturities and limits total investment amounts in preferred stock, common stock and mortgage notes receivable. We do not invest in derivative securities.

Two outside asset management companies, which have authority and discretion to buy and sell securities for us, manage our investments subject to (i) the guidelines established by our Board of Directors and (ii) the direction of management. The Investment Committee of our Board of Directors reviews and approves our investment policy on a regular basis.

Our cash and investment portfolios totaled $540,811,000 at December 31, 2024, compared to $311,874,000 at December 31, 2023.

The following table summarizes our investments, by type:

Estimated Fair Value Percent of Total Estimated Fair Value Percent of Total

States, municipalities and political subdivisions 17,197 3.2 % 16,964 5.4 %

Foreign governments 427 0.1 % — — %

Other common stocks 4,976 0.9 % — — %

Total equity securities 36,794 6.8 % — — %

We classify all of our investments as available-for-sale. Our investments as of December 31, 2024 and 2023 consisted mainly of U.S. government and agency securities, securities of investment-grade corporate issuers, mortgage-backed securities, and states, municipalities and political subdivisions. Our equity holdings as of December 31, 2024 consisted of mutual funds and common stock. We held no equities as of December 31, 2023. Most of the corporate bonds we hold reflected a similar diversification. At December 31, 2024, approximately 87.8% of our fixed maturities were U.S. Treasuries, or corporate bonds rated “A” or better, and 12.2% were corporate bonds rated “BBB” or “BB”.

AMERICAN COASTAL INSURANCE CORPORATION

Reinsurance

We follow the industry practice of reinsuring a portion of our risks. Reinsurance involves transferring, or "ceding", all or a portion of the risk exposure on policies we write to another insurer, known as a reinsurer. To the extent that our reinsurers are unable to meet the obligations they assume under our reinsurance agreements, we remain primarily liable for the entire insured loss under the policies we write.

Our catastrophe reinsurance coverage consists of three separate placements:

1.AmCoastal’s core catastrophe reinsurance program in effect June 1 through May 31, annually, which includes excess of loss and quota share treaties providing coverage for catastrophe losses from named or numbered windstorms;

2.AmCoastal’s all other perils catastrophe excess of loss agreement in effect January 1 through December 31, annually, which provides protection from catastrophe loss events other than named or numbered windstorms and earthquakes; and

3.IIC’s core catastrophe reinsurance program in effect June 1 through May 31, annually, which provides protection from all catastrophe losses.

This reinsurance protection is an essential part of our catastrophe risk management strategy. It is intended to provide our stockholders with an acceptable return on the risks assumed by our insurance entities, and to reduce the variability of earnings, while providing surplus protection. Although reinsurance agreements contractually obligate our reinsurers to reimburse us for the agreed-upon portion of our gross paid losses, they do not discharge our primary liability. In the event one or more of our reinsurers fail to fulfill their obligation, the surplus of our statutory entities may decline, and we may not be able to fulfill our obligation to policyholders, or we may not be able to maintain compliance with various regulatory financial requirements. Additionally, we face the risk that actual losses incurred from one or more catastrophic events may be above the modeled expected loss resulting in losses exceeding our reinsurance coverage, which may result in a decline in surplus, and as a result we may not be able to fulfill our obligations to policyholders, or we may not be able to maintain compliance with various regulatory financial requirements. The details of our programs and the likelihood of a catastrophic event exceeding these three coverages are outlined below.

AmCoastal’s core catastrophe reinsurance program provides occurrence-based coverage up to an exhaustion point of approximately $1,260,000,000 for a first occurrence and $1,610,000,000 in the aggregate. Under this program, our GAAP retention on a first event is $20,500,000 ($10,000,000 retained by AmCoastal under statutory accounting principles (STAT retained), $10,500,000 retained separately by our captive). We have purchased second and third event retrocession coverage, reducing our second and third event GAAP retentions to $13,000,000 ($10,000,000 STAT retained by AmCoastal, $3,000,000 retained separately by our captive). AmCoastal’s program provides sufficient coverage for approximately a 1-in-206-year return period, indicating that the probability of a single occurrence exceeding protection purchased is roughly 0.5%, estimated by equally blending the AIR and RMS catastrophe models using long-term catalogs including demand surge. AmCoastal’s program also provides sufficient coverage for a 1-in-100-year event followed by a 1-in-50-year event in the same treaty year, the probability of which is less than 0.1%. While we believe these catastrophe models are very good tools and their output provides reasonable proxies for the probability of exhausting our reinsurance protections, they are imperfect, so actual results could vary materially from those expected.

AmCoastal’s all other perils catastrophe excess of loss agreement provides protection from catastrophe loss events other than named windstorms and earthquakes up to $172,000,000 in the aggregate. This agreement provides sufficient coverage for a 1-in-450-year return period, indicating that the probability of a single occurrence exceeding protection purchased is no more than 0.2%.

IIC’s core catastrophe reinsurance program, which is reported under discontinued operations, provides coverage up to an exhaustion point of approximately $82,500,000 in the aggregate, with a retention of $2,500,000 per occurrence. Based on IIC’s probable maximum losses (PML), the program provides sufficient coverage for two 1-in-130-year events in the same season, indicating the probability of a single occurrence exceeding protection purchased is no more than 0.1%.

Effective December 15, 2023, we agreed to commute a private reinsurer’s share of core catastrophe reinsurance coverage and replace this gap in coverage with new coverage provided by one of our other private reinsurers. This transaction resulted in additional expense of approximately $6,300,000 for the year ended December 31, 2023, and a reduction in expense of approximately $6,300,000 and $15,700,000 during the three and six months ended June 30, 2024, respectively.

AMERICAN COASTAL INSURANCE CORPORATION

Where we think prudent, particularly where premium rates are high relative to the risk, we retain risk whereby AmCoastal purchases reinsurance from Shoreline Re, our captive reinsurance entity. Shoreline Re participates on AmCoastal's all other perils catastrophe excess of loss agreement and AmCoastal's excess per risk agreement. In addition, Shoreline Re participates in a 30% quota share agreement with AmCoastal, which provides coverage for all catastrophe perils as well as attritional losses incurred.

The table below outlines the participation of Shoreline Re for each program, including premium received and capital at risk.

Treaty Effective Dates Premium Collected /Cession Rate Capital at Risk (1)

(1) Capital at risk is calculated by taking the aggregate losses Shoreline Re is subject to under the contract, less net premiums earned under the contract.

(2) This treaty provides or provided coverage for all catastrophe perils and attritional losses incurred. For all catastrophe perils, the quota share agreement provides or provided ground-up protection, effectively reducing our retention for catastrophe losses.

(3) Net premiums earned based on estimated subject premiums at 06/01/2024.

The table below outlines our quota share agreements in effect for the years ended December 31, 2024 and 2023. The impacts of these quota share agreements on the financial statements of our former subsidiary, UPC, are included in discontinued operations in 2023 and 2022.

Reinsurer Companies in Scope Effective Dates Cession Rate States in Scope

(1) This treaty provides or provided coverage for all catastrophe perils and attritional losses incurred. For all catastrophe perils, the quota share agreement provides or provided ground-up protection, effectively reducing our retention for catastrophe losses.

(2) The cession rate of this treaty is reduced from 20% to 15% effective 06/01/2025 - 06/01/2026.

(3) This treaty provided coverage on our in-force, new and renewal policies until these states were transitioned to HCPCI and TypTap upon renewal.

Reinsurance costs as a percentage of gross earned premium during the years ended December 31, 2024 and 2023 were as follows:

Non-at-Risk (0.3) % (0.3) %

Total Ceding Ratio (57.1) % (56.6) %

AMERICAN COASTAL INSURANCE CORPORATION

Reinsurance costs as a percentage of gross earned premium for IIC, which is now captured within discontinued operations, during the years ended December 31, 2024 and 2023 were as follows:

IIC

Non-at-Risk (2.5) % (2.9) %

Quota Share — —

Total Ceding Ratio (27.6) % (36.6) %

We amortize our ceded unearned premiums over the annual agreement period, and we record that amortization in ceded premiums earned on our Consolidated Statements of Comprehensive Income (Loss). The table below summarizes the amounts of our ceded premiums written under the various types of agreements, as well as the amortization of ceded unearned premiums:

Year Ended December 31,

Equipment, identity theft, and cybersecurity (2,310) (1,172) (2,269)

The breakdown of our ceded premiums written under the various types of agreements, as well as the amortization of ceded unearned premiums for IIC, which is now captured in discontinued operations, can be seen in the tables below.

Year Ended December 31,

Equipment, identity theft, and cybersecurity (946) (931) (798)

Change in ceded unearned premiums 229 (2,188) 75

AMERICAN COASTAL INSURANCE CORPORATION

Current year catastrophe losses, which are disaggregated between named and numbered storms and all other catastrophe loss events, are shown in the following table.

Current period catastrophe losses incurred

Named and numbered storms 4 $ 25,320 9.2 %

All other catastrophe loss events 7 241 0.1 %

Current period catastrophe losses incurred

Named and numbered storms 1 $ 600 0.2 %

All other catastrophe loss events 10 12,183 4.7 %

Current period catastrophe losses incurred

All other catastrophe loss events 7 212 0.1 %

(1) Incurred loss and LAE is equal to losses and LAE paid plus the change in case and incurred but not reported reserves. Shown net of losses ceded to reinsurers. Incurred loss and LAE and number of events includes the development on storms during the year in which it occurred.

The impact of the current year catastrophes to IIC, which is now captured within discontinued operations, can be seen in the tables below.

Current period catastrophe losses incurred

Named and numbered storms 2 $ 122 0.5 %

All other catastrophe loss events 15 969 3.6 %

Current period catastrophe losses incurred

Named and numbered storms 1 $ 129 — %

All other catastrophe loss events 13 2,367 0.9 %

Current period catastrophe losses incurred

Named and numbered storms — $ — — %

All other catastrophe loss events 11 5,618 12.1 %

AMERICAN COASTAL INSURANCE CORPORATION

See Note 10 in our Notes to Consolidated Financial Statements for additional information regarding our reinsurance program.

Unpaid Losses and Loss Adjustments

We generally use the term “loss(es)” to collectively refer to both loss and LAE. We establish reserves for both reported and unreported unpaid losses that have occurred at or before the balance sheet date for amounts we estimate we will be required to pay in the future, including provisions for claims that have been reported but are unpaid at the balance sheet date and for obligations on claims that have been incurred but not reported at the balance sheet date. Our policy is to establish these loss reserves after considering all information known to us at each reporting period. At any given point in time, our loss reserve represents our best estimate of the ultimate settlement and administration costs of our insured claims incurred and unpaid.

Unpaid losses and LAE totaled $322,087,000 and $347,738,000 as of December 31, 2024 and 2023, respectively. In addition, unpaid losses related to IIC totaled $21,499,000 and $22,483,000 as of December 31, 2024 and 2023, respectively, which have been classified as discontinued operations.

Since the process of estimating loss reserves requires significant judgment due to a number of variables, such as fluctuations in inflation, judicial decisions, legislative changes and changes in claims handling procedures, our ultimate liability will likely differ from these estimates. We revise our reserve for unpaid losses as additional information becomes available, and reflect adjustments, if any, in our earnings in the periods in which we determine the adjustments are necessary.

See Note 11 in our Notes to Consolidated Financial Statements for additional information regarding our losses and LAE.

Discontinued Operations

On February 10, 2023, we announced that a solvent run-off for UPC was unlikely and on February 27, 2023, UPC was placed into receivership with the DFS, which divested our ownership of UPC. As a result, UPC, as well as the activities related directly to supporting the business conducted by UPC, qualify as a discontinued operation. For more information regarding the results of our discontinued operations, see Note 4 in our Notes to Consolidated Financial Statements.

In addition, on May 9, 2024, the Company entered into a Sale Agreement with Forza in which ACIC will sell and Forza will acquire 100% of the issued and outstanding stock of IIC. The aggregate purchase price for the shares will be equal to IIC's GAAP shareholders' equity on the closing date. Closing is subject to customary closing conditions, including NYDFS approval of Forza's application for acquisition of control, and NYDFS approval of a new rate and form filing. On February 13, 2025, Forza’s application to acquire IIC was approved by the NYDFS. The Company and Forza have agreed to close on April 1, 2025. A comparison of the results of IIC's operations for the years ended December 31, 2024 and 2023 can be seen below.

IIC Year-over-Year Results

Net loss attributable to IIC for the year ended December 31, 2024 decreased $1,687,000, or 56.1%, to $1,319,000 from $3,006,000 for the same period in 2023. The details of the revenues and expenses that drove this change are outlined below.

Revenue

IIC gross written premiums increased $5,370,000, or 15.6%, to $39,704,000 for the year ended December 31, 2024 from $34,334,000 for the same period in 2023. This increase was driven primarily by rate increases. The change in IIC gross written premiums and new and renewal policies year-over-year can be seen below.

($ in thousands) Year Ended December 31,

(1) Only includes new and renewal homeowner and dwelling fire policies written during the year.

AMERICAN COASTAL INSURANCE CORPORATION

Net investment income decreased by $181,000, or 8.0%, to $2,093,000 for the year ended December 31, 2024 from $2,274,000 for 2023, driven by decreased interest income due to decreased holdings year-over-year.

Expenses

Expenses attributable to IIC for the year ended December 31, 2024 increased $3,909,000, or 14.9%, to $30,172,000 from $26,263,000 for the same period in 2023. The increase in expenses was primarily due to an increase in our loss and LAE incurred during 2024, driven by increased current year non-catastrophe losses incurred. The details of these changes can be seen below.

The calculations of our loss ratios and underlying loss ratios are shown below.

Year Ended December 31,

% of Gross earned premiums 51.5 % 51.7 % (0.2) pts

% of Net earned premiums 71.2 % 81.6 % (10.4) pts

Less:

Prior year reserve favorable development (955) 400 (1,355)

% of Gross earned premiums 51.2 % 42.5 % 8.7 pts

% of Net earned premiums 70.7 % 67.0 % 3.7 pts

(1) Underlying loss and LAE is a non-GAAP measure and is reconciled above to net loss and LAE, the most directly comparable GAAP measure. Additional information regarding non-GAAP financial measures presented in this document is in the "Definitions of Non-GAAP Measures" section of this Form 10-K.

The calculations of our expense ratios are shown below.

Year Ended December 31,

% of Gross earned premiums 31.4 % 32.2 % (0.8) pts

% of Net earned premiums 43.4 % 50.8 % (7.4) pts

Loss and LAE attributable to IIC increased $2,555,000, or 15.8%, to $18,738,000 for the year ended December 31, 2024 from $16,183,000 for the same period in 2023. Loss and LAE expense as a percentage of net earned premiums decreased 10.4 pts to 71.2% for the year ended December 31, 2024, compared to 81.6% for the same period in 2023. Excluding catastrophe losses and prior year reserve development, our gross underlying loss and LAE ratio for the year ended December 31, 2024 was 51.2%, an increase of 8.7 pts from 42.5% during the year ended December 31, 2023.

Policy acquisition costs attributable to IIC increased $426,000, or 5.4%, to $8,336,000 for the year ended December 31, 2024 from $7,910,000 for the same period in 2023. The primary driver of the increase was an increase in agent commissions and credit card processing fees of $138,000 and $332,000, respectively, both of which vary with changes in gross written premium year-over-year. The increase in agent commissions was partially offset by a decrease in commission rate from 20% to 15% effective January 1, 2024.

General and administrative expenses attributable to IIC increased $928,000, or 42.8%, to $3,098,000 for the year ended December 31, 2024 from $2,170,000 for the same period in 2023, driven by an increase in salary-related expenses of $579,000 and an increase in external professional service costs, such as legal and audit fees, totaling $350,000.

AMERICAN COASTAL INSURANCE CORPORATION

LIQUIDITY AND CAPITAL RESOURCES

We generate cash through premium collections, reinsurance recoveries, investment income, the sale or maturity of invested assets, the issuance of debt and the issuance of additional shares of our stock. We use our cash to pay reinsurance premiums, claims and related costs, policy acquisition costs, salaries and employee benefits, other expenses and stockholder dividends, acquire subsidiaries and pay associated costs, as well as to repay debt and purchase investments.

As a holding company, we do not conduct any business operations of our own and, as a result, we rely on cash dividends or intercompany loans from our management subsidiaries to pay our general and administrative expenses. Insurance regulatory authorities heavily regulate our insurance subsidiaries, including restricting any dividends paid by our insurance subsidiaries and requiring approval of any management fees our insurance subsidiaries pay to our management subsidiaries for services rendered; however, nothing restricts our non-insurance company subsidiaries from paying us dividends other than state corporate laws regarding solvency. Our management subsidiaries pay us dividends primarily using cash from the collection of management fees from our insurance subsidiaries, pursuant to the management agreements in effect between those entities. In accordance with state laws, our insurance subsidiaries may pay dividends or make distributions out of that part of their statutory surplus derived from their net operating profit and their net realized capital gains. The risk-based capital (RBC) guidelines published by the National Association of Insurance Commissioners (NAIC) may further restrict our insurance subsidiaries’ ability to pay dividends or make distributions if the amount of the intended dividend or distribution would cause their respective surplus as it regards policyholders to fall below minimum RBC guidelines. See Note 16 in our Notes to Consolidated Financial Statements and Part II, Item 5 for additional information.

During the year ended December 31, 2024, the Company made capital contributions of $1,265,000 to its reinsurance subsidiary, Shoreline Re. We may make future contributions of capital to our insurance subsidiaries as circumstances require. During the year ended December 31, 2023, we made no capital contributions to our subsidiaries. During the year ended December 31, 2022, we contributed $81,000,000 and $11,200,000 to our former insurance subsidiaries, UPC and FSIC, respectively. The contribution made to FSIC was made prior to the merging of FSIC into UPC. In addition, we contributed $9,574,000 to our reinsurance subsidiary, Shoreline Re.

During December 2024, we received a $14,300,000 dividend from our insurance subsidiary, AmCoastal. During 2022, we received a dividend of $26,000,000 from AmCoastal.

In September 2023, the Company entered into an equity distribution agreement (the “Agreement”) with Raymond James & Associates, Inc., as agent (the “Agent”), of up to 8,000,000 shares of the Company’s common stock, par value $0.0001 per share (the “Shares”). Sales of the Shares under the Agreement will be made in sales deemed to be “at the market offerings”. The Agent is not required to sell any specific amount of Shares but has agreed to act as the Company’s sales agent for a commission equal to 3.0% of the gross proceeds from the sales of the Shares. As of December 31, 2024, 4,373,000 shares had been sold under the Agreement resulting in commissions paid of approximately $1,181,000 and net proceeds of approximately $38,190,000. The Agreement will terminate upon the issuance and sale of all Shares subject to the Agreement, or the Agreement may be suspended or discontinued at any time.

On December 13, 2017, we issued $150,000,000 of senior notes (Senior Notes) that will mature on December 15, 2027 and bear interest at a rate equal to 6.25% per annum payable semi-annually on each June 15 and December 15, commencing June 15, 2018. The Senior Notes are senior unsecured obligations of the Company. We may redeem the Senior Notes at our option, at any time and from time to time in whole or in part, at a redemption price equal to the greater of (i) 100% of the principal amount of the Senior Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon from the date of redemption to the date that is three months prior to maturity. On and after that date, we may redeem the Senior Notes at par. On December 8, 2022, the Kroll Bond Rating Agency, LLC announced a downgrade of our issuer and debt ratings from BBB- to BB+. As a result, pursuant to our agreement, the interest rate of our Senior Notes increased from 6.25% to 7.25% effective on June 15, 2023.

As a result of claim activity from the current and prior years, we have an obligation related to the unpaid policyholder losses and unpaid LAE associated with the settling of these claims. As of December 31, 2024, our total obligation related to these claim payments was $322,087,000, of which we estimate $124,642,000 to be short-term in nature (due in less than twelve months), based upon our cumulative claims paid over the last 23 years. This value includes IIC, which is classified as discontinued operations but is still our obligation until the sale of the entity is complete. While we believe that historical performance of loss payment patterns is a reasonable source for projecting future claim payments, there is inherent uncertainty in these estimated projected settlements, and as a result these estimates will differ, perhaps significantly, from actual future payments.

AMERICAN COASTAL INSURANCE CORPORATION

In addition to our unpaid loss and LAE, as of December 31, 2024, we have outstanding debt obligations related to our notes payable totaling $150,000,000. This is exclusive of interest costs, which we estimate will total $43,500,000 over the life of the debt, based on the current fixed interest rates of these notes. Our short-term obligation related to these notes payable total $10,875,000 in estimated interest payments and no principal payments. For more information regarding these outstanding notes, please see Note 12 in our Notes to Consolidated Financial Statements.

In connection with entering into contracts with our outside vendors, we have minimum obligations due to our vendors over the life of the contracts. Our main vendor obligations are related to underwriting tools, claims and policy administration systems. Our total obligation related to these two categories of obligations are $1,605,000, and $525,000, respectively. Of these obligations, $1,605,000, and $225,000, respectively are short-term in nature.

Cash Flows for the Year Ended December 31, (in millions)

Operating Activities

The principal cash inflows from our operating activities come from premium collections, reinsurance recoveries and investment income. The principal cash outflows from our operating activities are the result of claims and related costs, reinsurance premiums, policy acquisition costs and salaries and employee benefits. A primary liquidity concern with respect to these cash flows is the risk of large magnitude catastrophe events.

During the year ended December 31, 2024, we experienced cash inflows of $243,509,000 compared to outflows of $136,003,000 during the year ended December 31, 2023. This change was driven by changes in our operating assets and liabilities of $398,841,000, offset by a decrease in net income, net of adjustments to reconcile net income to cash of $19,329,000. The change in our operating assets and liabilities is attributed to the placement of UPC into receivership in 2023 as a result of the loss above, divesting our ownership of UPC during 2023.

Investing Activities

The principal cash inflows from our investing activities come from repayments of principal, proceeds from maturities and sales of investments. We closely monitor and manage these risks through our comprehensive investment risk management process. The principal cash outflows relate to purchases of investments. Additional cash outflows relate to the purchase of fixed assets. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption. During the year ended December 31, 2024, cash used in investing activities increased $176,667,000, driven by the purchases of fixed maturities.

Financing Activities

The principal cash inflows from our financing activities come from issuances of debt and other securities. The principal cash outflows come from repayments of debt and payments of dividends. The primary liquidity concern with respect to these cash flows is market disruption in the cost and availability of credit. We believe our current capital resources, together with

AMERICAN COASTAL INSURANCE CORPORATION

cash provided from our operations, are sufficient to meet currently anticipated working capital requirements. During the year ended December 31, 2024, cash used in financing activities increased by $40,609,000 to cash used of $13,840,000 from proceeds of $26,769,000. This was due primarily to $24,102,000 in dividends declared during 2024 and a decrease in proceeds from the issuance of common stock of $15,172,000 year-over-year.

RECENT ACCOUNTING STANDARDS

Please refer to Note 2(v) in our Notes to Consolidated Financial Statements for a discussion of recent accounting standards that may affect us.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. The most critical estimates include those used in determining:

•reserves for unpaid losses,

•fair value of investments,

•investment portfolio credit allowances, and

•goodwill.

In making these determinations, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance industry. It is reasonably likely that changes in these estimates could occur from time to time and result in a material impact on our consolidated financial statements.

In addition, the preparation of our financial statements in accordance with GAAP prescribes when we may reserve for particular risks, including litigation exposures. Accordingly, our results for a given reporting period could be significantly affected if and when we establish a reserve for a major contingency. Therefore, the results we report in certain accounting periods may appear to be volatile and past results may not be indicative of results in future periods.

Reserves for Unpaid Losses and LAE

Reserves for unpaid losses and LAE represent the most significant accounting estimate inherent in the preparation of our financial statements. These reserves represent management’s best estimate of the amount we will ultimately pay for losses, and we base the amount upon the application of various actuarial reserve estimation techniques as well as other material facts and circumstances known at the balance sheet date.

As discussed in Note 11 in our Notes to Consolidated Financial Statements, we determine our ultimate losses by using multiple actuarial methods to determine an actuarial estimate within a relevant range of indications that we calculate using generally accepted actuarial techniques. Our selection of the actuarial estimate is influenced by the analysis of our historical loss and claims experience since inception. For each accident year, we estimate the ultimate incurred losses for both reported and unreported claims. In establishing this estimate, we reviewed the results of various actuarial methods discussed in Note 11 in our Notes to Consolidated Financial Statements.

Fair Value of Investments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are responsible for the determination of fair value of financial assets and the supporting assumptions and methodologies. We use quoted prices from active markets and an independent third-party valuation service to assist us in determining fair value. We obtain only one single quote or price for each financial instrument.

AMERICAN COASTAL INSURANCE CORPORATION

As discussed in Note 5 in our Notes to Consolidated Financial Statements, we value our investments at fair value using quoted prices from active markets, to the extent available. For securities for which quoted prices in active markets are unavailable, we use observable inputs such as quoted prices in inactive markets, quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs. We also have investments in limited partnerships that require us to use the net asset value per share method of valuation to determine fair value.

See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for more information regarding the sensitivity of our fixed maturity portfolio to changes in interest rates.

Investment Portfolio Credit Allowances

For investments classified as available for sale, the difference between fair value and cost or amortized cost for fixed income securities is reported as a component of accumulated other comprehensive income (loss) on our Consolidated Balance Sheets and is not reflected in our net loss of any period until reclassified to net loss upon the consummation of a transaction with an unrelated third party. We have a portfolio monitoring process to identify and evaluate each fixed income security whose carrying value may be impaired as the result of a credit loss.

For each fixed-income security in an unrealized loss position, if we determine that we intend to sell the security or that it is more likely than not that we will be required to sell the security before recovery of the cost or amortized cost basis for reasons such as liquidity needs, contractual or regulatory requirements, the security’s entire decline in fair value is recorded in earnings.

If our management decides not to sell the fixed-income security and it is more likely than not that we will not be required to sell the fixed-income security before recovery of its amortized cost basis, we evaluate whether the decline in fair value has resulted from credit losses or other factors. This is typically indicated by a change in the rating of the security assigned by a rating agency, and any adverse conditions specifically related to the security or industry, among other factors. If the assessment indicates that a credit loss may exist, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses will be recorded in earnings. Credit loss is limited to the difference between a security’s amortized cost basis and its fair value. Any additional impairment not recorded through an allowance for credit losses is recognized in other comprehensive income (loss).

If the estimated recovery value is less than the amortized cost of the security, a credit loss exists and an allowance for the difference between the estimated recovery value and amortized cost is recorded in earnings. The portion of the unrealized loss related to factors other than credit remains classified in accumulated other comprehensive income (loss). If we determine that the fixed income security does not have sufficient cash flow or other information to estimate a recovery value for the security, we may conclude that the entire decline in fair value is deemed to be credit related and the loss is recorded in earnings.

Due to the adoption of Accounting Standards Update (ASU) 2016-01 (ASU 2016-01) as of January 1, 2018, equity securities are reported at fair value with changes in fair value, including impairment write-downs, being recognized in the revenue section of our Consolidated Statements of Comprehensive Income (Loss).

See Note 2(b) in our Notes to Consolidated Financial Statements for further information regarding our credit loss testing.

Measurement of Goodwill and Related Impairment

Goodwill is the excess of cost over the estimated fair value of net assets acquired. Goodwill is not amortized but is tested for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test. We test goodwill for impairment by performing a quantitative assessment. Goodwill is impaired when it is determined that the carrying value of a reporting segment is in excess of the fair value of that reporting segment. The valuation methodologies utilized are subject to key judgments and assumptions that are sensitive to change. Estimates of fair value are inherently uncertain and represent only management’s reasonable expectation regarding future developments.

Please refer to Note 2(k) and Note 9 in our Notes to Consolidated Financial Statements for further information regarding our measurement of Goodwill and Related Impairment.

AMERICAN COASTAL INSURANCE CORPORATION

RELATED PARTY TRANSACTIONS

There were no related party transactions for the years ended December 31, 2024, 2023 and 2022.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our investment objective is to preserve capital, maximize after-tax investment income, maintain liquidity and minimize risk. Our current investment policy limits investment in non-investment grade debt securities, and limits total investments in preferred stock, common stock and mortgage notes receivables. We also comply with applicable laws and regulations that further restrict the type, quality and concentration of our investments. In general, these laws and regulations permit investments, within specified limits and subject to certain qualifications, in federal, state and municipal obligations, corporate bonds, and preferred and common equity securities.

Our investment policy was established by the Investment Committee of our Board of Directors and is reviewed regularly. Pursuant to this investment policy, our fixed-maturity portfolio is classified as available for sale and we report any unrealized gains or losses, net of deferred income taxes, as a component of other comprehensive income (loss) within our stockholders’ equity (deficit). We do not hold any securities that are classified as held to maturity and we do not hold any securities for trading or speculation. We do not utilize any swaps, options, futures or forward contracts to hedge or enhance our investment portfolio. The unrealized gains or losses related to our equity securities are recorded on the income statement per the guidance in ASU 2016-01.

INTEREST RATE RISK

Fixed-income securities are sensitive to potential losses resulting from unfavorable changes in interest rates. We manage the risk by analyzing anticipated movements in interest rates and considering our future capital and liquidity requirements.

The following table illustrates the impact of hypothetical changes in interest rates on the fair value of our fixed-income securities at December 31, 2024 and 2023:

Our calculations of the potential effects of hypothetical interest rate changes are based on several assumptions, including maintenance of the existing composition of fixed-income investments, and should not be considered indicative of future results. Based on our analysis, both a 200 and 300-basis point decrease or increase in interest rates from the December 31, 2024, rates would have a material impact on our results of operations and cash flows in the event divesting of these holdings was necessary. However, we do not anticipate the need to sell securities in an unrealized loss position as of December 31, 2024.

AMERICAN COASTAL INSURANCE CORPORATION

CREDIT RISK

Credit risk can expose us to potential losses arising principally from adverse changes in the financial condition of the issuer of our fixed-maturity securities. We mitigate this risk by generally investing in investment grade securities and by diversifying our investment portfolio to avoid concentrations in any single issuer or market sector.

The following table presents the composition of our fixed-income security portfolio by rating at December 31, 2024 and 2023:

In addition, we are exposed to credit risk through our reinsurance program. Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to us. We evaluate the financial condition of our reinsurers and monitor concentrations of credit risk to minimize our exposure to significant losses from reinsurer insolvencies.

We also are exposed to credit risk through our outstanding premiums receivable balances. We evaluate the age of our premium receivables to minimize our exposure to significant losses due to nonpayment.

After our evaluation of all credit risks described above, if we feel it is necessary, we record a credit loss allowance to address these credit risks. For more information regarding our credit loss allowance, please refer to Note 14.

EQUITY PRICE RISK

Our equity investment portfolio at December 31, 2024 consisted of common stocks and non-redeemable preferred stocks. We may incur potential losses due to adverse changes in equity security prices. We manage this risk primarily through industry and issuer diversification and asset allocation techniques.

During 2024, we re-entered the equities market. Equities represent 10.8% of our total investments (excluding cash, restricted cash and cash equivalents) at December 31, 2024. We held no equity investments at December 31, 2023.

The following table illustrates the composition of our equity portfolio at December 31, 2024:

% of Total

Stocks by Sector Fair Value Fair Value

AMERICAN COASTAL INSURANCE CORPORATION

Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of American Coastal Insurance Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of American Coastal Insurance Corporation and subsidiaries (the ”Company“) as of December 31, 2024 and 2023, the related consolidated statements of comprehensive income (loss), stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the ”financial statements“). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 10, 2025, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Liability for Unpaid Losses and Loss Adjustment Expenses — Refer to Notes 2, 11 and 13 to the Financial Statements

Critical Audit Matter Description

As a provider of property and casualty insurance, the Company establishes reserves for both reported and unreported unpaid losses that have occurred at or before the balance sheet date for amounts estimated which they will be required to pay in the future, including provisions for claims that have been reported but are unpaid at the balance sheet date and for obligations on claims that have been incurred but not reported at the balance sheet date (herein “loss reserves”). Due to the nature and unpredictability in both the severity and frequency of these events and their related claims, the Company uses a significant amount of judgment in estimating the loss reserves, including analyzing historical and industry loss data, claims frequency and severity, claims processing procedures, legislative enactments, judicial decisions and legal developments in imposition of damages, and general economic conditions, including inflation. Additionally, the Company engages independent actuarial specialists in order to assist management in establishing appropriate loss reserves.

Given the amount of judgment necessary to estimate the projected losses to be incurred by the Company as it relates to both reported and unreported claims, performing audit procedures to evaluate whether the Company’s loss reserves were appropriately recorded as of December 31, 2024, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the loss reserves included the following, among others:

•We tested the design, implementation, and operating effectiveness of controls over the liability for unpaid losses and loss adjustment expenses, including those related to the estimation and management’s review of the estimates as well as the selection of underlying assumptions.

•With assistance from our actuarial specialists, we developed an independent expected range of unpaid losses and loss adjustment expense based on historical and industry claim development factors and compared our estimates to management’s estimates and assessed the consistency of management’s approach.

•We evaluated the methods and assumptions used by management to estimate the loss reserves by:

–Testing the underlying data that served as the basis for the actuarial analysis, including historical claims, to test that the inputs to the actuarial estimate were reasonable.

–Performing inquiry of management to discuss the Company’s ultimate recorded reserve actions and understand any trends that have been observed in the Company’s claims data.

–Performing a retrospective review, including comparing prior year estimates of expected incurred losses to actual experience during the current year to identify potential bias in the determination of the liability for unpaid losses and loss adjustment expense.

/s/ DELOITTE & TOUCHE LLP

Tampa, Florida

March 10, 2025

We have served as the Company’s auditor since 2018.

AMERICAN COASTAL INSURANCE CORPORATION

Consolidated Balance Sheets

December 31,

ASSETS

Investments, at fair value:

Equity securities 36,794 —

Total cash, cash equivalents and restricted cash 199,393 157,000

Deferred policy acquisition costs, net 40,282 21,149

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Unpaid losses and loss adjustment expenses $ 322,087 $ 347,738

Reinsurance payable on premiums 83,130 —

Accounts payable and accrued expenses 86,140 74,783

Commitments and contingencies (Note 13)

Stockholders’ Equity:

Accumulated other comprehensive income (loss) (15,666) (17,137)

See accompanying notes to consolidated financial statements.

AMERICAN COASTAL INSURANCE CORPORATION

Consolidated Statements of Comprehensive Income (Loss)

Year Ended December 31,

REVENUE:

Net unrealized gains (losses) on equity securities 1,996 814 (1,968)

EXPENSES:

Income (loss) from discontinued operations, net of tax (601) 224,707 (445,414)

Less: Net loss attributable to NCI — — (111)

OTHER COMPREHENSIVE INCOME (LOSS):

Change in net unrealized gains (losses) on investments 3,355 5,998 (56,600)

Reclassification adjustment for net realized investment losses 124 6,808 32,082

Income tax benefit related to items of other comprehensive income (loss) — — 49

Less: Comprehensive loss attributable to NCI — — (164)

Weighted average shares outstanding

Earnings available to ACIC common stockholders per share

Basic

Diluted

See accompanying notes to consolidated financial statements.

AMERICAN COASTAL INSURANCE CORPORATION

Consolidated Statements of Stockholders’ Equity (Deficit)

Common Stock

Shares Amount

Impact of deconsolidation of discontinued operations — — — — 1,004 (1,004) — — —

Other comprehensive income, net — — — — 3,479 — 3,479 — 3,479

See accompanying notes to consolidated financial statements.

AMERICAN COASTAL INSURANCE CORPORATION

Consolidated Statements of Cash Flows

Year Ended December 31,

OPERATING ACTIVITIES

Depreciation and amortization, including goodwill impairment 8,869 10,626 23,312

Net unrealized losses (gains) on equity securities (1,996) (2,884) 6,585

Provision for uncollectible premiums 24 (19) (37)

Provision for uncollectible reinsurance recoverables 22 236 (40)

Payment receivable in connection with HCI renewal rights agreement — — 3,800

Gain on sale of property and equipment — (588) (12,888)

Fixed asset and intangible asset disposals 141 1,147 2,884

Gain on disposition of former subsidiary (1,007) (238,440) —

Changes in operating assets and liabilities:

INVESTING ACTIVITIES

Proceeds from sales, maturities and repayments of:

Purchases of:

Proceeds from sale of property and equipment — 629 21,236

Cost of property, equipment and capitalized software acquired (22) (196) (3,047)

Disposition of cash on divestiture of subsidiary — (232,582) —

FINANCING ACTIVITIES

Repayments of borrowings — — (4,441)

Proceeds from issuance of common stock 11,621 26,793 —

Net cash provided by (used in) financing activities (13,840) 26,769 (25,390)

Supplemental Cash Flows Information

See accompanying notes to consolidated financial statements.

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

1) ORGANIZATION, CONSOLIDATION AND PRESENTATION

(a)Business

American Coastal Insurance Corporation (referred to in this document as we, our, us, the Company or ACIC) is a property and casualty insurance holding company that sources, writes and services residential commercial and personal property and casualty insurance policies using a network of agents and two wholly owned insurance subsidiaries. On July 10, 2023, we changed our corporate name from United Insurance Holdings Corp. to American Coastal Insurance Corporation. Our two insurance subsidiaries are Interboro Insurance Company (IIC), acquired via acquisition on April 29, 2016; and American Coastal Insurance Company (AmCoastal), acquired via merger on April 3, 2017.

Our other subsidiaries include United Insurance Management, L.C. (UIM), a managing general agent; Skyway Claims Services, LLC (SCS), which provides claims adjusting services to our insurance companies; AmCo Holding Company, LLC (AmCo) which is a holding company subsidiary that consolidates its respective insurance company; BlueLine Cayman Holdings (BlueLine), which reinsures portfolios of excess and surplus policies; Shoreline Re, which provides a portion of the reinsurance protection purchased by our insurance subsidiaries when prudent; Skyway Reinsurance Services, LLC, which provides reinsurance brokerage services for our insurance companies; Skyway Legal Services, LLC (SLS), which provides claims litigation services to our insurance companies; and Skyway Underwriters, LLC, a managing general agent that provides technological and distribution services to our insurance companies.

Our primary products are commercial and homeowners residential property insurance. We currently offer commercial residential insurance in Florida. During 2022, we also wrote commercial residential insurance in South Carolina and Texas, however, effective May 1, 2022, we no longer write in these states. In addition, we write personal residential insurance in New York. During 2022, we wrote personal residential business in six other states; however, on February 27, 2023, our former insurance subsidiary, United Property & Casualty Insurance Company (UPC) was placed into receivership with the Florida Department of Financial Services (DFS), which divested our ownership of UPC. The events leading to receivership and results of this subsidiary, now included within discontinued operations, are discussed in Note 4 below.

Effective June 1, 2022, we merged our majority-owned insurance subsidiary, Journey Insurance Company (JIC) into AmCoastal, with AmCoastal being the surviving entity. JIC was formed in strategic partnership with a subsidiary of Tokio Marine Kiln Group Limited (Kiln) on August 30, 2018 and operated independently from AmCoastal prior to the merging of the entities. The Kiln subsidiary held a noncontrolling interest in JIC, which was terminated prior to the merger.

As a result of the Sale Agreement described above, IIC is presented as discontinued operations. The remaining activity captured within continuing operations supports only our commercial residential insurance offerings. Given this fact pattern, we now conduct our operations under one operating segment, which consists of our commercial lines business. Further information regarding this segment can be seen in Note 2(j) below.

(b)Consolidation and Presentation

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP). While preparing our consolidated financial statements, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, as well as reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Reported amounts that require us to make extensive use of estimates include our reserves for unpaid losses and loss adjustment expenses, investments and goodwill. Except for the captions on our Consolidated Balance Sheets and

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

Consolidated Statements of Comprehensive Income (Loss), we generally use the term loss(es) to collectively refer to both loss and loss adjustment expenses.

We include all our subsidiaries in our consolidated financial statements, eliminating intercompany balances and transactions during consolidation. As described in Note 2, our subsidiary, IIC and our former subsidiary, UPC, and activities related directly to supporting the business conducted by UPC qualified as discontinued operations.

2) SIGNIFICANT ACCOUNTING POLICIES

(a)Cash, cash equivalents, and restricted cash

Our cash, cash equivalents, and restricted cash include demand deposits with financial institutions, cash that is held in trust for assumed business, cash held in deposit accounts to satisfy state statutory deposit requirements, and short-term, highly liquid instruments with original maturities of three months or less when purchased.

(b)Investments

We currently classify all our investments in fixed maturities and short-term investments as available-for-sale, and report them, our equity securities and limited partnership investments at fair value. Subsequent to our acquisition of available-for-sale securities, we record changes in value through the date of disposition as unrealized holding gains and losses, net of tax effects, and include them as a component of comprehensive income (loss). We include realized gains and losses, which we calculate using the specific-identification method for determining the cost of securities sold, in net loss. We amortize any premium or discount on fixed maturities over the remaining maturity period of the related securities using the effective interest method, and we report the amortization in net investment income. We recognize dividends and interest income when earned.

Quarterly, we perform an assessment of our investments to determine if any are impaired as the result of a credit loss. An investment is impaired when the fair value of the investment declines to an amount less than the cost or amortized cost of that investment. For each fixed-income security in an unrealized loss position, if we determine that we intend to sell the security or that it is more likely than not that we will be required to sell the security before recovery of the cost or amortized cost basis for reasons such as liquidity needs, contractual or regulatory requirements, the security’s entire decline in fair value is recorded in earnings.

If our management decides not to sell the fixed-income security and it is more likely than not that we will not be required to sell the fixed-income security before recovery of its amortized cost basis, we evaluate whether the decline in fair value has resulted from credit losses or other factors. This is typically indicated by a change in the rating of the security assigned by a rating agency, and any adverse conditions specifically related to the security or industry, among other factors. If the assessment indicates that a credit loss may exist, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses will be recorded in earnings. Credit loss is limited to the difference between a security's amortized cost basis and its fair value. Any additional impairment not recorded through an allowance for credit losses is recognized in other comprehensive income (loss).

A large portion of our investment portfolio consists of fixed maturities, which may be adversely affected by changes in interest rates as a result of governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. A rise in interest rates would decrease the net unrealized holding gains of our investment portfolio, offset by our ability to earn higher rates of return on funds reinvested. Conversely, a decline in interest rates would increase the net unrealized holding gains of our investment portfolio, offset by lower rates of return on funds reinvested.

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

During the year ended December 31, 2022, as a result of UPC’s plan of run-off, management determined that it was more likely than not that we would be required to sell a portion or all of our fixed-income securities attributable to the entity before recovery of their amortized cost basis. These securities were evaluated and none of the unrealized loss position was the result of a credit loss. As a result, we realized impairment losses of $22,718,000 on these securities. Total shareholders’ equity (deficit) was not impacted by such charge; however, our net loss for the year ended December 31, 2022 worsened and other comprehensive income improved by $22,718,000, before tax impacts, in offsetting amounts. The impact on our net loss is captured within our discontinued operations.

(c)Fair Value

See Note 5 in our Notes to Consolidated Financial Statements for a discussion regarding the fair value measurement of our investments at December 31, 2024 and 2023.

(d)Allowance for Expected Credit Losses

See Note 14 in our Notes to Consolidated Financial Statements for a discussion regarding the allowance for expected credit losses at December 31, 2024 and 2023.

(e)Premiums

We recognize premiums as revenue, net of ceded reinsurance amounts, on a daily pro rata basis over the contract period of the related policies that are in force. For any portion of premiums not earned at the end of the reporting period, we record an unearned premium liability.

Premiums receivable represents amounts due from our policyholders for billed premiums and related policy fees. We perform a policy-level evaluation to determine the extent to which the balance of premium receivable exceeds the balance of unearned premium. We then estimate expected credit losses based on historical trends, average default rates, current economic conditions, and reasonable and supportable forecasts of future economic conditions that affect the collectability of the reported amounts. Once these conditions have been examined, we establish an allowance for credit losses for any amounts not expected to be collected. When we receive payments on amounts previously charged off, we credit our expected credit loss expense in the period we receive the payment. The balances of our allowance for uncollectible premiums totaled $26,000 and $49,000 at December 31, 2024 and 2023, respectively.

When we receive premium payments from policyholders prior to the effective date of the related policy, we record an advance premiums liability. On the policy effective date, we reduce the advance premiums liability and record the premiums as described above.

(f)Deferred Policy Acquisition Costs

We incur policy acquisition costs that vary with, and are directly related to, the production of new business. We capitalize policy acquisition costs to the extent recoverable, then we amortize those costs over the contract period of the related policy. Such costs include, but are not limited to: incremental direct costs of contract acquisition, such as commissions; premium taxes; and other essential direct costs that would not have been incurred had a policy not been acquired or renewed.

At each reporting date, we determine whether we have a premium deficiency. A premium deficiency would result if the sum of our expected losses, deferred policy acquisition costs, reinsurance costs and policy maintenance costs (such as costs to store records and costs incurred to collect premiums and pay commissions) exceeded our related unearned premiums plus investment income. Should we determine that a premium deficiency exists, we would write off the unrecoverable portion of deferred policy acquisition costs and record a liability to the extent the deficiency exceeded the deferred policy acquisition costs. We did not have a premium deficiency at December 31, 2024 or 2023 related to our continuing operations.

(g)Debt Issuance Costs

We record our debt issuance costs associated with a recognized debt liability as a direct deduction from the carrying amount of the corresponding debt liability. These costs are then amortized over the life of the liability using the effective interest method.

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

(h)Long-lived Assets

i)Property and Equipment

We record our property and equipment at cost less accumulated depreciation and amortization. We use the straight-line method of calculating depreciation over the estimated useful lives of the assets. We periodically review estimated useful lives and, where appropriate, we make changes prospectively. We charge maintenance and repair costs to expense as incurred.

ii)Capitalized Software

We capitalize certain direct development costs associated with internal-use software. We amortize the capitalized software costs related to our data warehouse, claims systems and policy administration systems over their expected seven-year useful lives.

See Note 8 in our Notes to Consolidated Financial Statements for a discussion of our property, equipment and capitalized software that were held during 2024 and 2023.

iii)Impairment of Long-lived Assets

We annually review our long-lived assets, or more frequently when impairment indicators exist, including intangible assets, to determine if their carrying amounts are recoverable. If the non-discounted future cash flows expected to result from the use and eventual disposition of the assets are less than their carrying amounts, we reduce their carrying amounts to fair value and recognize an impairment loss.

(i)Unpaid Losses and Loss Adjustment Expenses

Our reserves for unpaid losses represent the estimated ultimate cost of settling all reported claims plus all claims we incurred related to insured events that have occurred as of the reporting date, but that policyholders have not yet reported to us.

We estimate our reserves for unpaid losses using individual case-basis estimates for reported claims and actuarial estimates for incurred but not reported (IBNR) claims, and we continually review and adjust our estimated losses as necessary based on our historical experience and as we obtain new information. If our unpaid loss reserves prove to be deficient or redundant, we increase or decrease the liability in the period in which we identify the difference, thereby impacting net income (loss). Though our estimate of the ultimate cost of settling all reported and unreported claims may change at any point in the future, a reasonable possibility exists that our estimate may vary significantly in the near term from the estimated amounts included in our consolidated financial statements.

On our Consolidated Balance Sheets, we report our reserves for unpaid losses gross of the amounts related to unpaid losses recoverable from reinsurers. On our Consolidated Statements of Comprehensive Income (Loss), we report losses net of amounts ceded to reinsurers. We do not discount our loss reserves for financial statement purposes.

(j)Segment Reporting

Operating segments are components of our business about which separate financial information is available and evaluated by our Chief Operating Decision Maker (CODM) in decisions regarding resource allocations and financial performance assessments. Generally, financial information is required to be reported on the basis that is used internally for evaluating segment performance and deciding how to allocate resources to each segment. Segments are determined based on differences in products, internal reporting, and how operational decisions are made.

As described in Note 1, as a result of entering into definitive agreements to sell IIC, we now disclose one reportable operating segment, which consists of our commercial lines business. The details of our commercial lines business is described in Part 1, Item 1, above.

Our CODM is our President and CEO. Our CODM uses net income that is also reported on the Consolidated Statements of Comprehensive Income (Loss) to make decisions on how to allocate resources, for example deciding whether to reinvest profits for items such as product development or acquisitions, or whether to pay dividends. Net income is used to monitor budget

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

versus actual results. Net income is also used in competitive analysis by benchmarking against our peers. This analysis is used in assessing performance of our operating segment and in establishing targets for management.

In addition, our measure of segment assets is reported on the Consolidated Balance Sheets as total assets. The accounting policies of our operating segment are the same as those described in our summary of significant accounting policies.

Revenue, profit or loss and significant segment expenses can be seen on the Consolidated Statements of Comprehensive Income (Loss). Additional reconciliation of certain expenses can be seen within Note 3, below.

(k)Goodwill

Goodwill is the excess of cost over the estimated fair value of net assets acquired. We attribute all goodwill associated with our acquisitions to one reporting segment.

Goodwill is not amortized but is tested for impairment at least annually, or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test. The goodwill impairment process requires a comparison of the estimated fair value of a reporting segment to its carrying value. We test goodwill for impairment by performing a quantitative assessment. In performing the quantitative impairment test, we use a discounted cash flow valuation approach.

The discounted cash flow valuation approach requires judgments about revenues, operating earnings projections, capital market assumptions and discount rates. The key inputs, judgments and assumptions necessary in determining estimated fair value of the reporting segment include projected operating earnings, current book value, the level of economic capital required to support the mix of business, long-term growth rates, comparative market multiples, control premium, the account value of in-force business, projections of new and renewal business, as well as margins on such business, the level of interest rates, credit spreads, equity market levels, and the discount rate that we believe is appropriate for the respective reporting segment.

The valuation methodology utilized is subject to key judgments and assumptions that are sensitive to change. Estimates of fair value are inherently uncertain and represent only management’s reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Declines in the estimated fair value of our reporting segments could result in goodwill impairments in future periods, which could materially adversely affect our results of operations or financial position.

For the 2024 annual goodwill impairment tests we utilized the quantitative assessment for our continuing operations, determining that the goodwill was not impaired for the reporting segment. For the 2023 annual goodwill impairment tests we utilized the quantitative assessment for our continuing operations, determining that the goodwill was not impaired for the reporting segment. For the 2022 annual goodwill impairment tests we utilized the quantitative assessment for our commercial lines reporting segment, determining that the goodwill was not impaired for the reporting segment. During the third quarter of 2022, as a result of the strategic decision to place UPC into an orderly runoff, we recognized impairment of goodwill totaling $13,569,000 all related to our discontinued operations.

(l)Intangible Assets

Identifiable intangible assets that are amortized generally represent the cost of client relationships, trade names and agency agreements acquired. In valuing these assets, we make assumptions regarding useful lives and projected growth rates, and significant judgment is required. We periodically review identifiable intangibles for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amounts of the assets exceed their respective fair values, additional impairment tests are performed to measure the amount of the impairment loss, if any.

Non-amortizing intangible assets generally represent the cost of insurance licenses acquired. Non-amortizing intangible assets are tested for impairment in the fourth quarter of each fiscal year by comparing the fair value of the licenses acquired to their carrying values. We established fair value for purposes of impairment testing using the income approach. If the carrying value of a license acquired exceeds its fair value, an impairment loss is recognized equal to that excess. During 2024, we disposed of licenses that we no longer held and evaluated all other intangible assets. During 2024,2023 and 2022, we determined that the fair values of all remaining intangible assets were not impaired.

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

(m)Leases

We evaluate if a leasing arrangement exists upon inception of a contract. A contract contains a lease if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Identified property, plant or equipment for all of our leases are physically distinct and explicitly identified. In addition, we assess whether a contract implicitly contains the right to control the use of a tangible asset that is not already owned.

Our leases expire at various dates and may contain renewal options. Our leases do not contain termination options. The exercise of lease renewal options are at our sole discretion and are only included in the determination of the lease term if we are reasonably certain to exercise the option. Our lease agreements do not contain any material residual value guarantees or restrictive covenants.

Right-of-use assets and lease liabilities are based on the present value of the minimum lease payments over the lease term. We have elected the practical expedient related to lease and non-lease components, as an accounting policy election for our office equipment leases, which allows a lessee to not separate non-lease from lease components and instead account for consideration received in a contract as a single lease component. We have also elected the practical expedients to exclude leases considered to be short-term and with values that fall under our capitalization threshold.

A portion of our lease agreements include variable lease payments which are not recorded in the initial measurement of the lease liability and right-of-use asset balances. Our office equipment lease agreements may include variable payments based on usage of the equipment.

We utilized discount rates to determine the present value of the lease payments based on information available at the commencement date of the lease. We used an incremental borrowing rate based on factors such as lease term to determine the appropriate present value of future lease payments, as the rate implicit in the lease is not always readily available. When determining the incremental borrowing rate, we considered the rate of interest we would pay on a secured borrowing in an amount equal to the lease payments for the underlying asset under similar terms.

(n)Income Taxes

We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. Should a change in tax rates occur, we recognize the effect on deferred tax assets and liabilities in operations in the period that includes the enactment date. Refer to Note 15 for additional information. Realization of our deferred income tax assets depends upon our generation of sufficient future taxable income.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant taxing authority. We recognize interest accrued related to uncertain tax benefits and penalties as income tax expense. As of December 31, 2024, we have no accrued penalties or interest related to uncertain tax benefits.

In June 2022, we assessed our deferred tax position and believed it was more likely than not that the benefit from certain net operating loss (NOL) carryforwards, net capital operating loss carryforwards and other net deferred tax assets would not be realized. In recognition of this risk, we recorded a valuation allowance against these deferred tax assets as of June 30, 2022. During the second quarter of 2023, we evaluated our position based on the results of our continuing operations and determined that it was more likely than not that we would be able to realize the benefit from our NOL carryforwards and business tax credit carryforwards and reversed the valuation allowance on the Company’s deferred tax assets, with the exception of the deferred tax assets attributable to capital loss carryforward amounts and other capital asset inventory items, as well as the deferred tax assets related to the dual consolidated losses of the Company’s Bermuda subsidiaries. As of December 31, 2024, we still have a valuation allowance on these items. The Company continues to evaluate its position as it relates to the valuation allowance on its deferred tax assets.

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

On May 15, 2023, we entered into the Tax Memorandum with DFS. As a result of this Memorandum, any benefit received from the use of UPC's net operating losses is due to the DFS as the receiver of UPC. The expense related to this remittance is presented within our provision for income taxes on our Consolidated Statements of Comprehensive Income (Loss), offsetting the tax benefit recognized.

On December 27, 2023, the Bermuda Government passed the Corporate Income Tax Act 2023, conforming to the OECD BEPS Pillar 2 framework. This act enacts a 15% corporate income tax that will generally become effective for Bermuda domiciled entities on or after January 1, 2025. The legislation provides for a number of exemptions, including a limited international presence exemption, which can defer the effective date until January 1, 2030, if the consolidated group operates in six or fewer jurisdictions, has less than €50 million in tangible assets located within Bermuda, and none of its Bermuda entities are subject to the Income Inclusion Rule in any other jurisdiction. As of December 31, 2024, the Company determined that none of its Bermuda domiciled entities will be subject to the Bermuda Corporate Income Tax for the tax year beginning on January 1, 2025. The Company will continue to evaluate if and when its Bermuda domiciled entities become subject to the Bermuda Corporate Income Tax.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act (the IRA). The IRA contains $500 billion in new spending and tax breaks that aim to boost clean energy, reduce healthcare costs, and increase tax revenues. We reviewed the corporate tax impacts of the IRA and identified two provisions that required further analysis to determine the impact to our business.

First, the IRA established a corporate alternative minimum tax (CAMT) equal to 15% of average adjusted financial statement income (AFSI) over the CAMT foreign tax credit for the tax year. The CAMT is effective for tax years beginning after December 31, 2022 and only applies to corporations with an AFSI in excess of one billion dollars over three years. We are not subject to CAMT in 2024, due to this AFSI requirement.

Second, the IRA imposes a nondeductible 1% excise tax on the net value of certain stock that a publicly traded corporation repurchases occurring after December 31, 2022. To calculate the net value of a certain stock, the fair market value of the stock repurchased is reduced by the fair market value of the stock issued or provided to employees during that tax year. We did not repurchase stock in 2024. The Company will continue to monitor for any stock repurchases in 2025 and thereafter so that it remains in compliance with this excise tax requirement.

Pillar Two, the global minimum tax initiative from the Organization for Economic Co-operation and Development, requires Multinational Enterprises to pay a 15% tax on income in each country that they operate. A “top-up tax” on the parent company of a multinational group for any income earned by a subsidiary in a low-tax jurisdiction that falls below the 15% minimum tax rate must be accrued. The Company is currently doing business in the U.S., the Cayman Islands and Bermuda. The Cayman Islands does not have a corporate income tax, while Bermuda has enacted a corporate income tax, becoming effective for tax years beginning on or after January 1, 2025. The Pillar Two legislation provides for transitional relief for multinational groups that are in the initial phase of their international activity. This transitional relief can be available until the tax year beginning January 1, 2030. For companies that are in the initial phase of its international activity, any potential “top-up” tax is reduced to zero. It has been determined that the Company qualifies for this transitional relief for 2024 and therefore the Company has not included any additional income tax expense in its financial statements related to the Pillar Two global minimum tax rules for 2024.

We did not incur any material tax penalties or income-tax-related interest during the years ended December 31, 2024, 2023 or 2022. Tax penalties or income-tax-related interest incurred would be included in our provision (benefit) for income taxes on our Consolidated Statements of Comprehensive Income (Loss).

(o)Advertising Costs

We expense all advertising costs as an operating expense when we incur those costs. For the years ended December 31, 2024, 2023 and 2022, we incurred advertising costs of $41,000, $29,000, and $693,000, respectively.

(p)Earnings Per Share (EPS)

We report both basic EPS and diluted EPS. To calculate basic EPS, we divide net income (loss) attributable to ACIC common stockholders (net income (loss) less the net income (loss) attributable to noncontrolling interests (NCI)) by the weighted-average number of shares of common stock outstanding during the period. We calculate diluted EPS using the treasury method by dividing net loss attributable to ACIC common stockholders by the weighted-average number of shares of

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

common stock, common stock equivalents, and restricted shares outstanding during the period. Common share equivalents are only included when they are dilutive.

(q)Concentrations of Risk

Our current operations subject us to the following concentrations of risk:

•a concentration of revenue because we write only property insurance policies;

•a concentration of revenue because we source 100% of our commercial lines business from AmRisc, LLC (AmRisc);

•a geographic concentration resulting from the fact that, though we operated in several states historically, 100% of our commercial lines business is now in Florida and 100% of our personal lines business is now in New York.

•a group concentration of credit risk with regard to our reinsurance recoverable, since all of our reinsurers engage in similar activities and have similar economic characteristics that could cause their ability to repay us to be similarly affected by changes in economic or other conditions; and

•a concentration of credit risk with regard to our cash, because we choose to deposit all of our cash at six financial institutions.

We mitigate our geographic and group concentrations of risk by entering into reinsurance contracts with financially stable reinsurers, and by securing irrevocable letters of credit from reinsurers when necessary.

With regard to our cash balances held at financial institutions, we had $196,930,000 and $153,814,000 in excess of Federal Deposit Insurance Corporation insurance limits at December 31, 2024 and 2023, respectively.

(r)Managing General Agent Fees and Policy Fees

Our policy fees consist of the managing general agent (MGA) fee and a pay-plan fee. We defer MGA fees as unearned revenue and recognize revenue on a pro rata basis over the term of the underlying policies. We record pay-plan fees, which are charged to all policyholders that pay premium in more than one installment, as income when collected. We report all policy-related fees as other revenue on our Consolidated Statements of Comprehensive Income (Loss).

(s)Reinsurance

We follow industry practice of reinsuring a portion of our risks. Reinsurance involves transferring, or “ceding”, all or a portion of the risk exposure on policies we write to another insurer, known as a reinsurer. To the extent that our reinsurers are unable to meet the obligations they assume under our reinsurance agreements, we remain liable for the entire insured loss.

Our reinsurance agreements are short-term, prospective contracts. We record an asset, ceded unearned premiums, and a liability, reinsurance payable, for the entire contract amount upon commencement of our new reinsurance agreements. We amortize our ceded unearned premiums over the 12-month contract period.

We record provisional ceding commissions that we receive in connection with our reinsurance contracts for the 2024, 2023 and 2022 underwriting years as an offset to deferred acquisitions costs.

We record amounts recoverable from our reinsurers on paid losses plus an estimate of amounts recoverable on unpaid losses. The estimate of amounts recoverable on unpaid losses is a function of our liability for unpaid losses associated with the reinsured policies; therefore, the amount changes in conjunction with any changes to our estimate of unpaid losses. Though our estimate of amounts recoverable from reinsurers on unpaid losses may change at any point in the future because of its relation to our reserves for unpaid losses, a reasonable possibility exists that our estimate may change significantly in the near term from the amounts included in our consolidated financial statements.

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

We estimate uncollectible amounts receivable from reinsurers based on an assessment of factors including the creditworthiness of the reinsurers and the adequacy of collateral obtained, where applicable. As of December 31, 2024 and December 31, 2023, our ending credit loss allowance related to reinsurance recoverables was $75,000, and $97,000, respectively.

(t)Assessments

Pursuant to Florida Statute 631.57, the state has the ability to levy assessments against insurers. We record guaranty fund and other insurance-related assessments imposed upon us as an expense in the period the regulatory agency imposes the assessment. To recover Florida Insurance Guaranty Association (FIGA) assessments, we calculate and begin collecting a policy surcharge that will allow us to collect the entire assessment over a 12-month period, based on our estimate of the number of policies we expect to write. We then submit an information-only filing to the insurance regulatory authority requesting formal approval of the policy FIGA surcharge. The process may be repeated in successive 12-month periods until we collect the entire assessment. We record the recoveries as revenue in the period that we collect the cash. While current regulations allow us to recover from policyholders the amount of assessments imposed upon us, our payment of the assessments and our recoveries may not offset each other in the same fiscal period in our consolidated financial statements.

Where permitted by law or regulatory authority, we collect assessments imposed upon policyholders as a policy surcharge and we record the amounts collected as a liability until we remit the amounts to the regulatory agency that imposed the assessment. During 2023, we received two assessment notices from FIGA. These assessments will be 1.0% and 0.7% on direct written premiums of all covered lines of business in Florida to cover the cost of insurance companies facing insolvency. These assessments are in addition to the 2022 1.3% assessment, described below, and is recoupable from policyholders. During 2022, we received an assessment notice from FIGA. This assessment was 1.3% on direct written premium of all covered lines of business in Florida to cover the cost of an insurance company facing insolvency.

(u)Discontinued Operations

As described in Note 1, during the second quarter of 2024, the Company entered into the Sale Agreement with Forza in which ACIC will sell and Forza will acquire 100% of the issued and outstanding stock of IIC. The activities related directly to supporting the business conducted by IIC were evaluated for qualification as discontinued operations.

As described in Note 4, effective February 27, 2023, our former subsidiary, UPC, was placed into receivership with the DFS. This receivership divested our ownership of UPC. This disposal, as well as the activities related directly to supporting the business conducted by UPC were evaluated for qualification as a discontinued operation. The results of operations of business are reported as discontinued operations when the disposal represents a strategic shift that will have a major effect on the entity's operations and financial results. When a business is identified for discontinued operations reporting:

•Results for prior periods are retroactively reclassified as discontinued operations;

•Results of operations are reported in a single line, net of tax, in the Consolidated Statements of

Comprehensive Income (Loss); and

•Assets and liabilities are reported as held for disposal in the Consolidated Balance Sheets.

Additional details by major classification of operating results and financial position are included in Note 4.

(v)Accounting Pronouncements

Recently Adopted Policies

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segments Disclosures. This update requires the disclosure of significant segment expenses that are part of an entity’s segment measure of profit or loss and regularly provided to the CODM. In addition, it adds or makes clarifications to other segment-related disclosures, such as clarifying that the disclosure requirements in ASC 280 are required for entities with a single reportable segment and that an entity may disclose multiple measures of segment profit and loss. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with early adoption permitted. We adopted this guidance as of December 31, 2024 and have included all required disclosures in Note 2(j) above.

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

Pending Policies

In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 2204-40): Disaggregation of Income Statement Expenses. This update requires disaggregated disclosure of income statement expenses for entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for all entities for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are assessing the impact of this new accounting standard on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures. This update amends the Codification to enhance the transparency and decision usefulness of income tax disclosures. This ASU requires additional disaggregation of the reconciliation between the statutory and effective tax rate for an entity and of income taxes paid, both of which are disclosures required by current GAAP. The amendments improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We do not intend to elect to early adopt and are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures.

3) DISAGGREGATION OF RELEVANT EXPENSE CAPTIONS

We present our expenses in four major captions, loss and loss adjustment expenses, policy acquisition costs, general and administrative expenses and interest expense. We have presented the disaggregation of our general and administrative expenses below for the years ended December 31, 2024, 2023, and 2022 to enhance disclosure regarding our recast general and administrative expenses.

Year Ended December 31,

General and Administrative Expenses

Loss on disposal of indefinite life intangible assets — 200 2,358

Provision for expected credit losses (44) (219) 291

(1) For the years ended December 31, 2024, 2023, and 2022, other general and administrative expenses are comprised primarily of software licensing and external professional services such as legal, actuarial, tax, and auditing fees.

4) DISCONTINUED OPERATIONS

On May 9, 2024, the Company entered into the Sale Agreement with Forza in which ACIC will sell and Forza will acquire 100% of the issued and outstanding stock of IIC. The aggregate purchase price for the shares will be equal to IIC's GAAP shareholders' equity on the closing date. Closing is subject to customary closing conditions, including NYDFS approval of Forza's application for acquisition of control, and NYDFS approval of a new rate and form filing. On February 13, 2025, Forza’s application to acquire IIC was approved by the NYDFS. The Company and Forza have agreed to close on April 1, 2025.

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

The results from IIC's discontinued operations for the years ended December 31, 2024, 2023, and 2022 are presented below.

IIC Results from Discontinued Operations

Year Ended December 31,

REVENUE:

Net realized investment gains (losses) (66) (19) 29

EXPENSES:

Other income — 11 1

Loss from discontinued operations, net of tax $ (601) $ (3,006) $ (15,452)

(1) 2024 results include $385,000 related to discontinued operations outside of IIC stand-alone results.

(2) 2024 results include $1,103,000 in tax benefit related to discontinued operations outside of IIC stand-alone results.

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

The major classes of IIC assets and liabilities as of December 31, 2024 and 2023 are presented below.

IIC Major Classes of Assets and Liabilities to be Sold

ASSETS

Fixed maturities, available-for-sale $ 38,523 $ 42,316

Other investments 978 —

Accrued investment income 317 337

Reinsurance recoverable on paid and unpaid losses, net 259 282

Deferred policy acquisition costs, net 3,647 3,892

LIABILITIES

Unpaid losses and loss adjustment expenses $ 21,499 $ 22,483

Reinsurance payable on premiums 3,966 2,312

Accounts payable and accrued expenses 1,058 501

Operating lease liability 69 37

On August 25, 2022, we announced that our former subsidiary, UPC, had filed plans for withdrawal in the states of Florida, Louisiana, and Texas and intended to file a plan for withdrawal in the state of New York. All filed plans entailed non-renewing personal lines policies in these states. Additionally, we announced that Demotech, an insurance rating agency, notified UPC of its intent to withdraw UPC's Financial Stability Rating. On December 5, 2022, the FLOIR issued Consent Order No. 303643-22-CO that provided for the administrative supervision and approval of the plan of run-off for UPC (the "Consent Order"). The Consent Order provided formal approval of UPC's Plan of Run-Off (the "Plan") to facilitate a solvent wind down of its affairs in an orderly fashion. On February 10, 2023, we announced that a solvent run-off of UPC was unlikely, driven by Hurricane Ian losses which exhausted UPC's reinsurance coverage. On February 27, 2023, UPC was placed into receivership with the DFS, which divested our ownership of UPC.

In the first quarter of 2023, the assets and liabilities of UPC were divested. In addition, activities provided by our entities, SCS, SLS and UIM, related directly to supporting the business conducted by UPC were included. The assets and liabilities for the balance sheet as of the date of disposal are retrospectively reclassified as held for disposal, and the results of UPC and activities related directly to supporting the business conducted by UPC are classified as discontinued operations for all periods presented. This activity was included in our personal lines operating segment in previous filings.

AMERICAN COASTAL INSURANCE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2024

The results from UPC’s discontinued operations, including the supporting activities provided by SCS, SLS and UIM for the years ended December 31, 2024, 2023 and 2022, are presented below.

UPC Results from Discontinued Operations

Year Ended December 31,

REVENUE:

Net realized investment gains (losses) — 1,343 (25,599)

Net unrealized gains (losses) on equity securities — 2,080 (4,617)

EXPENSES:

General and administrative expenses — 11,307 50,939

Other income (loss) — (2,004) 52

Provision (benefit) for income taxes — (317) 963

Loss from discontinued operations, net of tax $ — $ (10,727) $ (429,962)

ACIC US Equity

ACIC · 10-K · period ended 2024-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

ACIC US Equity☆

ACIC · 10-K · period ended 2024-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

ACIC US Equity