ACIC 10-K & 10-Q changes, risk factors and insider trading

•catastrophe losses experienced in prior years;

•catastrophe losses projected to be incurred, using third-party catastrophe modeling software;

•catastrophe loss estimates used to develop prices for our products; or our current reinsurance coverage (which would cause us to have to pay such excess losses).

The frequency and severity of weather conditions are inherently unpredictable, but the frequency and severity of property claims generally increase when severe weather conditions occur. We write a majorityall of our policies in Florida, a state that has experienced significant hurricanes in recent years, which some weather analysts believe is consistent with a period of sustained greater hurricane activity. There is a growing consensus today that climate change is increasing the frequency and severity of catastrophic events or severe weather conditions which, in addition to the attendant increase in claims-related costs, may also cause an increase in our reinsurance costs and/or negatively impact our ability to provide insurance to our policyholders in the future. In addition, increased catastrophic events could result in increased credit exposure to the reinsurers we transact business with. Our actual losses from catastrophic events may be larger than anticipated should our reinsurers fail to meet their obligations.

Because we conduct a significant portionall of our business in Florida, our financial results substantially depend on, and could be adversely affected by, the regulatory, legal, economic, political, demographic, competitive and weather conditions present in that state.

As of December 31, 2024,2025, a significant numberall of our policies in-force were concentratedwritten in Florida and a majorityall of our TIV was concentrated in Florida. Therefore, the prevailing regulatory, legal, economic, political, demographic, competitive, weather and other conditions in Florida will likely have a more significant impact on our revenues and profitability compared to such conditions in other jurisdictions in which we operate.profitability. Furthermore, changes in such conditions in Florida could make doing business in Florida less attractive for us, which could have a more pronounced effect on us than it would on other insurance companies that are more geographically diversified.

AmCoastal has a managing agency contract (the MGA contract) with AmRisc, pursuant to which AmRisc serves as AmCoastal’s managing general agent for binding and writing commercial residential property lines for condominium, townhome and homeowners association insurance written in Florida. The contract between AmCoastal and AmRisc is exclusive. Under the MGA contract with AmCoastal, AmRisc must produce a certain volume of business for AmCoastal. Therefore, failure of AmRisc to produce the required volume of business could cause us to lose substantial premiums and could require us to seek one or more alternative managing general agents. If we were unable to find aone or more replacement managing general agent,agents, our revenues could decrease, which could have a material adverse effect on our business, financial condition and results of operations. Given the concentration of AmCoastal’s commercial business and operations with AmRisc, AmRisc may have substantial leverage in negotiations with AmCoastal regarding the MGA contract, and amendments to the terms and conditions of the MGA contract or other changes to the commercial relationship between AmRisc and AmCoastal could have a material adverse effect on our business, financial condition and results of operations. Following the termination or expiration of the MGA contract, AmCoastal’s ability to compete for and solicit renewals of business previously underwritten by AmRisc may be limited by legal, commercial and other impediments, including AmRisc’s relationship with other insurance producers that control the business. Such impediments could have a material adverse effect on our financial condition and results of operations due to the concentration of AmCoastal’s business with AmRisc.

Our insurance subsidiariessubsidiary areis subject to assessments levied by various governmental and quasi-governmental entities in the states in which we operate.Florida. For example, in May 2023, Florida enacted a consumer protection law that increased the maximum administrative fines that may be levied on insurance companies by the FLOIR by 250% generally, and 500% for violations stemming from a state of emergency such as a hurricane. While we may have the ability to recover these assessments from policyholders through policy surcharges in some states in which we operate,Florida, our payment of the assessments and our recoveries may not offset each other in the same reporting period in our financial statements and may causehave a material adverse effect on our results of operations in a particular reporting period.

“Internal control over financial reporting” refers to those processes within a company that are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to annually assess the effectiveness of our internal control over financial reporting. Management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2023; however, thesethis weaknessesweakness werewas remediated as of December 31, 2024 as described in more detail in Part II, Item 9A of thisour report.2024 Annual Report on Form 10-K, filed with the SEC on March 10, 2025.

We use computer systems to store, retrieve, evaluate and utilize customer, employee, company and third-party data and information. Our business is highly dependent upon our information technology systems and the ability of key vendors and third-party administrators to perform necessary business functions efficiently and without interruption. Our ability to process policies and adjust claims in a timely manner could be impaired by an unplanned shutdown or failure of one or more systems or facilities due to man-made or natural disruption.disruptions. These include an event leading to power outages, loss of facility access, a major internet failure, a pandemic or a failure of one or more of our information technology, telecommunications or other systems. Because our information technology and telecommunications systems interface with and often depend on third-party systems, we could experience service denials if demand for such service exceeds capacity or a third-party system fails or experiences an interruption. If sustained or repeated, such a business interruption, system failure or service denial could result in a deterioration of our ability to write and process new and renewal business, provide customer service, pay claims in a timely manner or perform other necessary business functions.

Despite our continualongoing evaluation of potential attackers’ techniques and tactics and our efforts in monitoring, training, planning and prevention, our information technology systems are vulnerable to computer viruses, natural disasters, unauthorized access, cyber-attacks, system failures, human error and negligence, and similar disruptions. Therethere is no assurance that our security measures will provide fully effective protection from information technology disruptions, such disruptions.as those caused by cyber-attacks, system failures, human error, unauthorized access, natural disasters or malicious software. Because modern technology platforms and the malicious techniques used to obtain unauthorized access or to sabotage systems evolve rapidly, we may be unable to anticipate thesesome techniques or to implement comprehensive counter measures. A material breach in the security of our information technology systems and data could include the theft of our confidential or proprietary information, including trade secrets, and the personally identifiable information of our customers, claimants, agents and employees. From time to time, we have experiencedexperience threats to our data and information technology systems, including malwaresystem failures, service disruptions and computer virus attacks, attempts ofto gain unauthorized access, system failures and disruptions.access. Disruptions or security breaches resulting in a loss or damage to our data or inappropriate disclosure of proprietary or confidential information, or the personally identifiable information of our customers, claimants, agents and employees, could cause significant damage to our reputation, adversely affect our relationships with our customers, result in litigation or regulatory investigations, increase remediation costs and/or regulatory penalties, and ultimately harm our business. Third parties to whom we outsource certain functions are also subject to the risks outlined above, any one of which may result in our incurring substantial costs and other negative consequences, including a material adverse effect on our business, financial condition and results of operations.

In addition, we may transmit, receive and store personally identifiable, confidential and proprietary information by any number of standard data transmission methods or other electronic means. We may be unable to keep such information confidential,confidential in all events, especially with clients, vendors, service providers, counterparties and other third parties who may not have or use appropriate controls to protect confidential information. Furthermore, we are subject to compliance with laws and regulations enacted by U.S. federal and state governments, or enacted by various regulatory organizations or exchanges relating to the privacy and security of the information of clients, employees or others. The compromise of personally identifiable, confidential or proprietary information could result in remediation costs, legal liability, regulatory action and reputational harm.

Furthermore, in recent years the SEC has maintained a focus on cybersecurity. In August 2023, the SEC adopted new cybersecurity disclosure rules, aimed at enhancing and standardizing disclosures made by public companies regarding cybersecurity risk management, strategy, governance and incident reporting. Some jurisdictions have also enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data. AmCoastal, in particular, processes sensitive personal information of its policyholders, which exposes AmCoastal to heightened risk. Many regulators have indicated an intention to take more aggressive enforcement actions regarding cybersecurity matters, and private litigation resulting from such matters is increasing and resulting in progressively larger judgments and settlements.

In connection with an acquisition, merger, dispositionmerger or other strategic transaction, we could incur debt, amortization expenses related to intangible assets, large and immediate write-offs, assume liabilities or issue stock that would dilute our current stockholders’ percentage of ownership. As a result, there is a risk of transaction-related litigation. Such strategic transactions could pose numerous risks to our operations, including risks relating to:

•incurring substantial unanticipated integration costs;

•diverting significant management attention and financial resources from our other operations and disrupting our ongoing business during the integration process;

•losing key employees, particularly those of the merged operations;

•keeping existing customers and retaining the acquired or merged business’ customers;

•failing to realize the strategic benefits, the potential cost savings or other financial benefits of the acquisitions or mergers;

•incurring unanticipated liabilities or claims from the acquired businesses and contractually-based time and monetary limitations on the seller’s obligation to indemnify us for such liabilities or claims; and limitations on our ability to access additional capital when needed.

We are also subject to a certain level of risk regarding the actual condition of the businesses that we acquire or merge with. Until we actually assume operating control of such businesses and their assets and operations, we may not be able to ascertain the actual value or understand the potential liabilities of the acquired or merged entities and their operations. As a result, we may not be able to complete acquisitions, mergers or other strategic transactions or integrate the operations, products or personnel gained through any such acquisition, merger or other strategic transaction without a material adverse effect on our business, financial condition and results of operations.

From time to time, we have and may continue to invest in entities in which we share ownership or management with third parties. In certain circumstances, we may not have complete control over governance, financial reporting, operations, legal and regulatory compliance or other matters relating to such entities. As a result, we may face certain operating, financial, legal, regulatory, compliance and other risks relating to these entities, including, but not limited to, risks related to the financial strength of other investors; the willingness of other investors to provide adequate funding for the entity; differing goals, strategies, priorities or objectives between us and other investors; our inability to unilaterally implement actions, policies or procedures with respect to the entity that we believe are favorable; legal and regulatory compliance risks relating to actions of the entity or other investors; and theour risk that we will be unableinability to resolve disputes with other investors. As a result, investments in which we share ownership or management subject us to risk and may contribute significantly less than anticipated to our earnings and cash flows.

Our Senior Notes due 2027 (the "Senior Notes") place certain restrictions on the Company’s financial operations. Because we are a holding company, our assets consist primarily of the securities of our subsidiaries. The negative pledge provisions in the Senior Notes limit our ability to pledge securities of our subsidiaries and restrict dispositions of the capital stock of our subsidiaries. Our Senior Notes require us to maintain certain financial ratios and to comply with various operational and other covenants, including limitations on our ability to incur any indebtedness unless certain conditions are met. Details of these covenants can be found in Note 12 in our Notes to Consolidated Financial Statements. Our failure to comply with such restrictions, including as a result of events beyond our control, could result in an event of default and an acceleration of the maturity of the Senior Notes. We cannot assure you that our assets or cash flow would be sufficient to fully repay the Senior Notes, if accelerated, or that we would be able to restructure the payments on the Senior Notes. This could have a material adverse impact on our liquidity, financial condition and results of operations.

The property and casualty insurance industry is highly competitive, and we believe it will remain highly competitive for the foreseeable future. The principal competitive factors in our industry are price, service, coverage options, underwriting guidelines, commission structurestructure, rating and financial condition. We compete with other property and casualty insurers that underwrite commercial property and casualty insurance in the same geographic areas in which we operate and some of those insurers have greater financial resources and have a longer operating history than we do. In addition, our competitors may offer products for alternative forms of risk protection that we presently do not offer or are not similarly regulated in the admitted market, which could adversely affect the sales of our products. Customers may turn to our competitors as a result of price, our failure to deliver on customer expectations, service flaws, technology issues, gaps in operational support or other issues affecting customer experience. We also compete with new companies that continue to enter the insurance market. We may have difficulty controlling our market share due to an increase in reinsurance costs, inflation which increases actual losses and loss adjustment expenses, and losses from the high frequency and severity of catastrophe events in recent years.events. Competition could limit our ability to retain existing business or to write new business at adequate rates, and such limitation may cause a material adverse effect on our results of operations and financial position.

•an influx of new capital in the marketplace as existing companies attempt to expand their businesses and new companies attempt to enter the insurance business as a result of better market conditions, more competitive premium pricing and/or more favorable policy terms;

•an increase in programs in which state-sponsored entities provide commercial property insurance in catastrophe-prone areas;

•changes in state regulatory climates; and the passage of federal proposals for an optional federal charter that would allow some competing insurers to operate under regulations different or less stringent than those applicable to us.

These developments and others could make the property and casualty insurance marketplace more competitive by increasing the supply of insurance available. If competition limits our ability to write new business at adequate rates,rates or reduces our policy retention rates, our future results of operations would be adversely affected.

As a holding company with an operating insurance company subsidiaries,subsidiary, we are subject to the laws and regulations of the various states in which our insurance subsidiaries operate.Florida. From time to time, states pass legislation, and regulators take action, that has the effect of limiting the ability of insurers to manage risk, such as legislation prohibiting insurers from reducing exposures or withdrawing from catastrophe-prone areas, or mandating that insurers participate in residual markets. In addition, legislative initiatives and court decisions can seek to expand insurance coverage for insured losses beyond the original intent of the policies, which could cause our actual loss and loss adjustment expense to exceed our estimates. Further, our ability to adjust pricing to the extent necessary to offset losses or operating costs requires approval of insurance regulatory authorities.

The insurance industry is extensively regulated and supervised. Insurance regulatory authorities generally design insurance rules and regulations to protect the interests of policyholders, and not necessarily the interests of insurers, their stockholders, and other investors. This regulation relates to authorization for lines of business, capital and surplus requirements, investment limitations, underwriting limitations, transactions with affiliates, dividend limitations, changes in control, premium rates and a variety of other financial and non-financial components of an insurance company's business. We are subject to comprehensive regulation and supervision by statethe insuranceOffice departmentsof Insurance Regulation in New York and Florida, the statesstate in which our insurance subsidiariessubsidiary areis domiciled,domiciled as well as all states in which they areand licensed. TheFlorida regulations of each state are unique and complex and subject to change, and certain states may have regulations that conflict with the regulations of other states in which we operate. As a result, we are subject to the risk that compliance with the regulations in one state may not result in compliance with the regulations in another state.change.

We strive to maintain all required licenses and approvals. However, we may not fully comply with the wide variety of applicable laws and regulations. The relevant authority's interpretation of the laws and regulations also may change from time to time. Regulatory authorities have relatively broad discretion to impose fines, and grant, renew or revoke licenses and approvals. If we do not have the required licenses and approvals or do not comply with applicable regulatory requirements, these authorities could preclude or temporarily suspend us from carrying on some or all of our activities or impose substantial fines. In addition, we may face individual and class action lawsuits by insuredinsureds and other parties for alleged violations of certain of these laws or regulations.

State statutes and administrative rules generally require each insurance company to register with the department of insurance in its state of domicile and to furnish information concerning the operations of the companies within the holding company system. Failure to comply with such requirements may materially affect the operations, management or financial condition of the insurers. As part of its registration, eachthe insurance company must identify material agreements, relationships and transactions with affiliates, including loans, investments, asset transfers, transactions outside of the ordinary course of business, certain management, service, and cost sharing agreements, reinsurance transactions, dividends, and other financial and non-financial components of an insurer’s business. SomeFlorida states imposeimposes restrictions or requirerequires prior regulatory approval of specific corporate actions, which may adversely affect our ability to operate, innovate, obtain necessary rate adjustments in a timely manner or grow our business profitably. For example, the FLOIR notified our subsidiary, AmCoastal and its officers and directors, that it was required to show why those officers and directors were not a substantial contributing cause of the insolvency of our former subsidiary, UPC, pursuant to section 624.4073 Fla. Stat., which prohibits officers and directors of insolvent insurers from serving as officers or directors of another insurer unless that officer or director demonstrates that their actions or omissions were not a significant contributing cause of the insolvency. We have been in discussions with the FLOIR and will continue working with the FLOIR on this issue. Our ability to comply with these laws and regulations, and to obtain necessary regulatory action in a timely manner is, and will continue to be, critical to our success.

Currently, the federal government’s role in regulating or dictating the policies of insurance companies is limited. However, from time to timetime, Congress has consideredconsidered, and may in the future considerconsider, proposals that would increase the role of the federal government in insurance regulation, either in addition to or in lieu of state regulation. For example, the Dodd-Frank Act established a Federal Insurance Office (FIO) within the U.S. Department of Treasury to collect data on the insurance industry, recommend changes to the state system of insurance regulation and preempt certain state insurance laws. The potential impact on our business as a result of the Dodd-Frank Act and the FIO’s current and future recommendations remains unclear; however, the implementation of any federal insurance regulations that constrain our business opportunities or reduce investment flexibility could negatively impact our business.

As part of potential, or future, industry-wide investigations, we may from time to time receive requests for information from government agencies and authorities at the state or federal level. If we are subpoenaed for information by government agencies and authorities, potential outcomes could include law enforcement proceedings or settlements resulting in fines, penalties and/or changes in business practices that could causehave a material adverse effect on our results of operations. In addition, these investigations may result in changes to laws and regulations affecting the industry.

Changes to insurance laws or regulations, or new insurance laws and regulations, may be more restrictive than current laws or regulations and could significantly increase our compliance costs, which could have a material adverse effect on our results of operations and our prospects for future growth. Additionally, our failure to comply with certain provisions of applicable insurance laws and regulations could result in significant fines or penalties being levied against us and may causehave a material adverse effect on our results of operations or financial condition.

We use, and we expect to continue to use, reinsurance to help manage our exposure to property risks. Reinsurance is insurance for insurers and is fundamentally a promise by the reinsurer to pay possible future claims in exchange for the payment of a premium by the insurance company seeking reinsurance. Both the availability of reinsurance and the cost of reinsurance are subject to prevailing market conditions beyond our control, which can affect business volume and profitability. We may be unable to maintain our current reinsurance coverage, to obtain additional reinsurance coverage in the event our current reinsurance coverage is exhausted by a catastrophic event, or to obtain other reinsurance coverage in adequate amounts or at acceptable rates. Similar risks exist whether we are seeking to replace coverage terminated during the applicable coverage period or to renew or replace coverage upon its expiration. Market conditions beyond our control determine the availability and cost of reinsurance. For example, reinsurance may be more difficult or costly to obtain after several years with higher frequencies of major catastrophes. We may be unable to reduce per event or aggregate retentions when renewing or replacing our coverage due, in part, to the frequency and severity of storms in prior years and the litigation trends in the state of Florida, which would increase our risk exposure and could ultimately lead to us paying higher claims. We provide no assurance that we can obtain sufficient reinsurance to cover losses resulting from one or more storms or other events in the future, or that we can obtain such reinsurance in a timely or cost-effective manner. If we are unable to renew our expiring coverage or to obtain new reinsurance coverage, either our net exposure to risk would increase or, if we are unwilling to accept an increase in net risk exposures, we may have to reduce the amount of risk we underwrite or accept higher reinsurance costs. Any of these alternatives may causehave a material adverse effect on our results of operations and our financial condition.

Our results of operations and financial condition depend on our ability to underwrite and set premium rates accurately for a wide variety of risks, such as building condition, occupancy and distance to coast. Rate adequacy is necessary to generate sufficient premiums to pay losses, loss adjustment expenses, and underwriting expenses and to earn a profit. While thirdthird-party party administrator(s)administrators may underwrite on behalf of AmCoastal, we are responsible for setting the criteria under which our vendor(s)vendors operate. We must collect and properly analyze a substantial amount of data, closely monitor and timely recognize changes in trends and models and project both severity and frequency of losses with reasonable accuracy. Our ability to successfully perform these tasks is subject to a number of risks and uncertainties, some of which are outside of our control.

In addition, our underwriting process is generally designed to limit our exposure to known and manageable risks. Various provisions of our policies, such as limitations or exclusions from coverage, which have been negotiated to limit our risks, may not be enforceable in the manner we intend. While our product exclusions and conditions may reduce the loss exposure to us and may eliminate known exposures to certain risks, it is possible that a court or regulatory authority could nullify or void policy exclusions and conditions, or that legislation could be enacted modifying or barring the use of these exclusions and limitations.

Our results of operations and financial conditions could be materially and adversely impacted if any of these componentscomponent of our underwriting process dodoes not operate in theirits intended manner.

We rely on internal claims personnel and an unaffiliated third partythird-party claim administration vendorsvendor to evaluate and pay claims made under our policies in an accurate and timely manner. Commercial residential policies often cover several structures and result in complex claims. This level of complexity, along with factors such as (i) the accuracy of adjusters as they make their assessmentassessments and submit their estimates of damage, (ii) the training, background and experience of our claims representatives, and (iii) the ability of our claims personnel to maintain and update our claims processing procedures as laws change and the litigation landscape change, could affect our ability to evaluate and pay claims in an accurate and timely manner. Any failure to pay claims accurately and timely could lead to litigation, undermine our reputation in the marketplace, negatively impact our corporate image and negatively affect our financial results.

Our investment assets are invested by professional investment management firms under the direction of our management team in accordance with investment guidelines approved by the Investment Committee of the Board of Directors. Our investments are subject to market risks and risks inherent in individual securities. In particular, interest rates are highly sensitive to many factors, including monetary and fiscal policy, domestic and international economic and political issues, geopolitical events, economic sanctions, blockades,blockades and other factors beyond our control.

Our portfolio is primarily invested in fixed income securitiessecurities, and changes in the general interest rate environment will affect our returns on, and the fair value of, our fixed maturity and short-term investments. A decline in interest rates reduces the interest rate payable on new fixed income investments, thereby negatively impacting our net investment income. Conversely, rising interest rates reduce the fair value of existing fixed maturities. The volatility of any losses may force us to liquidate securities, which may cause us to incur capital losses. Realized fixed income and equity losses and unrealized equity losses in our investment portfolio would generally reduce our book value and, if significant, could affect our ability to conduct business. In addition, defaults under, or impairments of, any of these investments as a result of financial problems with the issuer and, where applicable, its guarantor could reduce our net investment income and net realized investment gains or result in investment losses.

The fair value of our investment portfolio is also subject to valuation uncertainties. The valuation of investments is more subjective when the markets for these investments are illiquid and may increase the risk that the estimated fair value of our investment portfolio is not reflective of prices at which actual transactions would occur. Additionally, in the case of our private equity limited partnership interests, such valuations are determined by outside managers. Since the majority of our investments are held by our insurance subsidiaries,subsidiary, significant decreases in the fair value of these investments will produce significant declines in the statutory surplus of our insurance business. A long-term material decline in statutory surplus could have an adverse effect on our financial strength ratings and our ability to write new and renewal insurance business, thus potentially reducing our future underwriting profits.

Our determination of the amount of credit allowances to record varies by investment type and is based upon our periodic evaluation and assessment of known and inherent credit risks associated with the respective investment type. We revise our evaluations and assessments as conditions change and new information becomes available, and we reflect changes in the credit allowance in our Consolidated Statements of Comprehensive Income (Loss). We base our assessment of whether a credit allowance is requiredrequired, based on our case-by-case evaluation of the underlying reasons for the decline in fair value. However, we may not accurately assess whether a credit allowance is required and the recorded amounts for a credit allowance in our financial statements may be inadequate.

The property and casualty insurance and reinsurance industryindustries isare historically cyclical and the pricing and terms for our products may decline, which would adversely affect our profitability.

Historically, the financial performance of the property and casualty insurance and reinsurance industryindustries has been cyclical, characterized by periods of severe price competition and excess underwriting capacity, or “soft” markets, followed by periods of high premium rates and shortages of underwriting capacity, or “hard” markets. We cannot predict with certainty when such a period may occur or how long any given hard or soft market will last. Downturns in the property and casualty market may causehave a material adverse effect on our results of operations and our financial condition.

Trends in the insurance industry regarding claims and coverage issues, such as increased litigation andlitigation, the willingness of courts to expand covered causes of loss,loss and juries awarding large damage awards, may contribute to increased litigation costs and increase our loss exposure under the policies that we underwrite.

•judicial expansion of policy coverage and the impact of new theories of liability; and plaintiffs targeting property and casualty insurers in purported class-action litigation relating to claims-handling and other practices.

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 20242025 as compared to 2023.2024. Discussion regarding our results of operations and financial condition for 20232024 as compared to 20222023 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.”

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 twoour wholly owned insurance subsidiaries:subsidiary, 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.Florida. 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. DuringOn 2022,February we27, also2023, wroteour commercial residentialformer insurance insubsidiary South Carolina and Texas; however, effective May 1, 2022, we no longer write in these states. In addition, during 2022, wethat wrote personal residential business in six other states; however on February 27, 2023, our former insurance subsidiary,states, 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 Companywe entered into a Stock Purchase Agreement (the "Sale Agreement") with Forza Insurance Holdings, LLC ("Forza") in which ACIC willagreed to sell and Forza willagreed to acquire 100% of the issued and outstanding stock of IIC. TheForza’s aggregate purchase price for the shares will be equalapplication to IIC'sacquire GAAPIIC shareholder’swas equityapproved onby 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. Onon February 13, 2025, Forza’s application to acquire IIC was approved byand the NYDFS.sale The Company and Forza have agreed to closeclosed on April 1, 2025. GivenThe IICCompany isreceived ourcash lastproceeds remainingtotaling personal$25,679,000 lines entity and representsfrom the finalsale stepresulting in oura strategicloss shifton disposal of $247,000, net of tax impacts. The Company also recognized a $1,348,000 loss, net of tax impacts, on IIC's fixed maturity portfolio, which was included in accumulated other comprehensive loss on the Company's Consolidated Balance Sheets prior to becomingthe sale. As a specialty commercial underwriter,result, 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.2017.

As a result of our risk appetite in 2024, ourOur policies in-force increased by 0.9%5.20% from 22,8484,099 policies in-force at December 31, 2023,2024, to 23,0604,311 policies in-force at December 31, 2024. These values include IIC policies in-force, whose results are captured within discontinued operations.2025.

Our business is subject to the impact of weather-related catastrophes on our loss and loss adjustment expenses (LAE). OverDuring the lastyear threeended years,December the31, frequency2025, ofno thesenamed catastrophesstorms hasmade increased.landfall Asin aour result,geographic we have experienced increased catastrophe losses incurred during the prior three years.footprint. During the years ended December 31, 2024, 20232024 and 2022,2023, five, two,five and two named storms, respectively, made landfall in our geographic footprint, resulting in retained pre-tax catastrophe losses of $25,442,000, $729,000,$25,442,000 and $57,906,000,$729,000 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.respectively.

For the yearyears ended December 31, 2025 and 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 yearsyear 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,financial strength, ratings, book value per share and return on equity.

(1) Loss ratio, netnet, 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.

Net income attributable to ACIC for the year ended December 31, 20242025 decreasedincreased by $234,193,000$31,119,000 to $75,718,000,$106,837,000, compared to net income of $309,911,000$75,718,000 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 2023.2024. Drivers of net income for 20242025 include increased gross premiums earned duringand the year, increased net investment income, an increase indecreased ceded premiums earned, favorabledriving prioran yearoverall lossincrease developmentin duringrevenues. theIn year,addition, we saw decreased losses and decreasedLAE, partially offset by increased policy acquisition costs,costs. asDuring described2024, below.the Company's net loss attributable to discontinued operations was $601,000, compared to net income of $42,000 during 2025.

Our gross written premiums increaseddecreased by $12,096,000,$35,283,000, or 1.9%,5.4%, to $612,522,000 for the year ended December 31, 2025, from $647,805,000 for the year ended December 31, 2024,2024. fromGross $635,709,000premium earned increased $9,652,000, or 1.5%, to $648,260,000 for the year ended December 31, 2023.2025 from $638,608,000 for the same period in 2024. Ceded premiums earned decreased $23,210,000, or 6.4%, to $341,408,000 for the year ended December 31, 2025, from $364,618,000 for the same period in 2024. The breakdown of the year-over-year changeschange in boththese directpremiums and assumed written premiums by statenew and grossrenewal written premium by line of businesspolicies are shown in the tabletables below. More detail regarding our ceded premiums can be seen in our analysis of financial condition below.

Ceded premiums earned increaseddecreased by $21,995,000,$23,210,000, or 6.4%, to $364,618,000$341,408,000 for the year ended December 31, 2024,2025, from $342,623,000$364,618,000 for 2023.2024. The increase is primarily driven by a $12,334,000$51,621,000 increasedecrease in ceded premiums earned from our quota share agreements. This increasedecrease is attributed to the change in AmCoastal’s quota share reinsurance coverage during 2024.2024 and 2025. We had quota share coverage in place at 40% for the first half of 20242024, decreasing to 20% effective June 1, 2024. Effective June 1, 2025, this coverage was decreased further to 15%. This decrease was partially offset by a $28,010,000 increase in our catastrophe reinsurance coverage, driven by additional coverage purchased due to exposure growth and 20% for the seconddecreased halfquota ofshare thecession 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.rate.

Net investment income increased by $12,495,000,$1,411,000, or 150.5%,6.8%, to $20,795,000$22,206,000 for the year ended December 31, 2024,2025, from $8,300,000$20,795,000 for 2023,2024, driven by increased interest income due to a substantial increase in holdings and higher interestoverall ratesyield year-over-year.on our 2025 portfolio than our 2024 portfolio..

Expenses for the year ended December 31, 2024,2025 increaseddecreased $26,513,000,$1,899,000, or 15.5%,1.0%, to $197,061,000,$195,162,000, from $170,548,000$197,061,000 for 2023.2024. The increasedecrease in expenses was primarily due to ana increasedecrease 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. This was offset by an increase in policy acquisition costs, the details of which can be seen below. The calculations of our combined loss ratios and underlying loss ratios are shown below.

Loss and LAE increaseddecreased by $22,641,000,$23,279,000, or 48.5%,33.6%, to $46,040,000 for the year ended December 31, 2025, from $69,319,000 for the year ended December 31, 2024, from $46,678,000 for the year ended December 31, 2023.2024. Loss and LAE expense as a percentage of net earned premiums increaseddecreased 7.510.3 points to 15.0% for the year ended December 31, 2025, compared to 25.3% for the year ended December 31, 2024, compared to 17.8% for the year ended December 31, 2023.2024. In addition, during the year ended December 31, 2024,2025, prior year reserve favorable development was lowerhigher on both catastrophe and non-catastrophe losses.losses and catastrophe losses were lower. Excluding catastrophe losses and reserve development, our gross underlying loss and LAE ratio for the year ended December 31, 20242025 would have been 7.4%,7.8%, aan decreaseincrease of 0.30.4 points from 7.7%7.4% during the year ended December 31, 2023.2024.

Policy acquisition costs decreasedincreased by $4,446,000,$26,854,000, or 5.9%,37.8%, to $97,844,000 for the year ended December 31, 2025, from $70,990,000 for the year ended December 31, 2024, from $75,436,000 for the year ended December 31, 2023.2024. The primary driver of the decreaseincrease was ana increasedecrease in ceding commission income of $6,959,000,$17,161,000, driven by the changes in the terms of our quota share reinsurance agreement described above. ThisIn was partially offset by increasedaddition, external management fees increased $9,807,000, as a result of $1,745,000,a whichone fluctuated in conjunction with the year-over-yearpercent increase in grossthe writtenmanagement premium.fee and profit share accrual pursuant to the renewal terms for the contract with AmRisc, LLC, effective June 1, 2024.

We must comply with applicable state insurance regulations that prescribe the type, quality and concentrations of investments our insurance subsidiariessubsidiary 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.securities, however, we do hold warrants as a result of our surplus note investment. Please see Note 5 for more information.

TwoAs of December 31, 2025, one outside asset management companies,company, which havehas authority and discretion to buy and sell securities for us, managemanages our investments subject to (i) the guidelines established by our Board of Directors and (ii) the direction of management. Prior to August 2025, we engaged two outside asset management companies. The Investment Committee of our Board of Directors reviews and approves our investment policy on a regular basis.

We classify all of our investments as available-for-sale. Our investments as of December 31, 20242025 and 20232024 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, 20242025 consisted of mutual funds and common stock. We held no equities as of December 31, 2023.2024. Most of the corporate bonds we hold reflected a similar diversification. At December 31, 2024,2025, approximately 87.8%82.6% of our fixed maturities were U.S. Treasuries,Treasuries or corporate bonds rated “A” or better, and 12.2%17.4% were corporate bonds rated “BBB” or “BB”.

1.AmCoastal’sAmCoastal’s core catastrophe reinsurance programprogram, including catastrophe bonds (effective April 2024 and December 2024), 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’sAmCoastal’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.3.

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,entity, 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 entitiesentity 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 threetwo 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$1,330,000,000 for a first occurrence and $1,610,000,000$1,676,000,000 in the aggregate. Under this program, ourthe Company's GAAP retention on a first event is $20,500,000$29,750,000 ($10,000,000$14,000,000 retained by AmCoastal under statutory accounting principles (STAT retained), $10,500,000$15,750,000 (retained separately by ourthe Company's captive)). WeThe haveCompany has purchased second and third event retrocession coverage, reducing ourits second event GAAP retention to $18,500,000 ($14,000,000 STAT retained by AmCoastal, $4,500,000 retained separately by the Company's captive) and third event GAAP retentionsretention to $13,000,000$3,750,000, ($10,000,000based STATon retainedthree by$100,000,000 AmCoastal,loss $3,000,000 retained separately by our captive).events. AmCoastal’s program provides sufficient coverage for approximately a 1-in-206-year1-in-203-year return period, indicating that the probability of a single occurrence exceeding protection purchased is roughly 0.5%,0.5% estimated by equally blending the AIR 10, AIR 11.5, RMS 22 and RMS 23 catastrophe models using long-term catalogs including demand surge.surge and based on total insured value at September 30, 2025 of $69 billion. 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 materiallydramatically 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$88,200,000 for a first and second event, totaling $176,400,000 in the aggregate. This agreement provides sufficient coverage for approximately a 1-in-450-year return period, indicating that the probability of a single occurrence exceeding protection purchased is no more than 0.2%.

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.

(3) Net premiums earned based on estimated subject premiums at 06/01/2024.June 1, 2025.

The table below outlines our quota share agreements in effect for the years ended December 31, 20242025 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 2022.2024.

(2) The cession rate of this treaty iswas reduced from 20% to 15% effective 06/01/June 1, 2025 -to 06/01/May 31 , 2026.

American Coastal Insurance Corporation (referred to in this document as we, our, us, the Company or ACIC) is a holding company primarily engaged in commercial property and casualty insurance business with investments in the United States. We conduct our business principally through our wholly-owned insurance subsidiary, American Coastal Insurance Company (AmCoastal). Collectively, we refer to the holding company and all our subsidiaries, including non-insurance subsidiaries, as “American Coastal Insurance Corporation,” which is the preferred brand identification for our Company.

Our policies in-force increased by 0.4%1.2% from 4,2394,402 policies in-force at MarchJune 31,30, 2025 to 4,2544,453 policies in-force at MarchJune 31,30, 2026.

Net loss and LAE ratio excluding the effects of current year catastrophe losses and prior year reserve development (underlying loss and LAE ratio) is a non-GAAP measure, that is computed by subtracting the effect of current year catastrophe losses and prior year development from the net loss &and LAE ratio. We believe that this ratio is useful to investors and it is used by management to highlight the loss 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 net loss and LAE 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 net loss and LAE ratio. The underlying loss and LAE ratio should not be considered as a substitute for the net loss and LAE ratio and does not reflect the overall profitability of our business.

When we prepare our consolidated financial statements and accompanying notes in conformity with GAAP, we must make estimates and assumptions about future events that affect the amounts we report. Certain of these estimates result from judgments that can be subjective and complex. As a result of that subjectivity and complexity, and because we continuously evaluate these estimates and assumptions based on a variety of factors, actual results could materially differ from our estimates and assumptions if changes in one or more factors require us to make accounting adjustments. During the threesix months ended MarchJune 31,30, 2026, we reassessed our critical accounting policies and estimates as disclosed in Note 2 to the Notes to Unaudited Condensed Consolidated Financial Statements and our Annual Report on Form 10-K for the year ended December 31, 2025. We have made no changes or additions with regard to those policies and estimates.

ANALYSIS OF FINANCIAL CONDITION - MARCHJUNE 31,30, 2026 COMPARED TO DECEMBER 31, 2025

As of MarchJune 31,30, 2026, we engaged one outside asset management company,company and retain one internal asset manager, which hashave 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. Prior to August 2025, we engaged two outside asset management companies.companies and prior to April 2026 we engaged no internal asset manager. The Investment Committee of our Board of Directors reviews and approves our investment policy on a regular basis.

Our cash, cash equivalents, restricted cash and investment portfolio totaled $599,445,000$650,022,000 at MarchJune 31,30, 2026, compared to $647,744,000 at December 31, 2025. The Company paid a dividend totaling approximately $36.6 million during the first quarter, which drove this decrease, along with changes in operating assets and liabilities.

We classify all of our fixed-maturity investments as available-for-sale. Our investments at MarchJune 31,30, 2026 and December 31, 2025 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 MarchJune 31,30, 2026 and December 31, 2025 consisted of mutual funds and common stock. At MarchJune 31,30, 2026, approximately 82.5%81.7% of our fixed maturities were U.S. Treasuries or corporate bonds rated "A" or better, and 17.5%18.3% were corporate bonds rated "BBB" or "BB".

AmCoastal’s core catastrophe reinsurance program, including catastrophe bonds (effective April 2024, December 2024 and DecemberJune 20242026), in effect June 1 through May 31, annually, which includes excess of loss and quota share treaties providing coverage for catastrophe losses from namedall or numbered windstormsperils;

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 entity, 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 entity 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 twothree coverages are outlined below.

AmCoastal’s core catastrophe reinsurance program provides occurrence-based coverage up to an exhaustion point of approximately $1,330,000,000$1,680,000,000 for a first occurrence and $1,676,000,000$1,918,000,000 in the aggregate. Under this program, the Company's GAAP retention on a first event is $29,750,000$49,000,000 ($14,000,000$26,500,000 retained by AmCoastal under statutory accounting principles (STAT retained), $15,750,000$22,500,000 (retained separately by the Company's captive)). The Company has purchased second and third event retrocession coverage, reducingdecreasing its second event GAAP retention to $18,500,000$25,000,000 ($14,000,000$13,300,000 STAT retained by AmCoastal, $4,500,000$11,700,000 retained separately by the Company's captive) and third event GAAP retention to $3,750,000,$2,000,000, based on three $100,000,000 loss events. AmCoastal’s program provides sufficient coverage for approximately a 1-in-217-year1-in-286-year return period, indicating that the probability of a single occurrence exceeding protection purchased is roughly 0.5%0.4% when using the catastrophe model AIR 11.513 (using the long-term catalog with demand surge and 10% loss adjustment expense included) and based on estimated total insured value at September 30, 20252026 of $69$78 billion. 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 useful tools and their outputs provide reasonable proxies for the probability of exhausting our reinsurance protections, they are imperfect, and actual results may differ materially from those expected.

(3) Net premiums earned based on estimated subject premiums at Junetreaty 1, 2025.inception.

The table below outlines our external quota share agreements in effect for the threesix months ended MarchJune 31,30, 2026 and 2025.

Reinsurance costs as a percentage of gross earned premium during the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows:

Unpaid losses and LAE totaled $126,990,000$118,920,000 and $165,701,000 as of MarchJune 31,30, 2026 and December 31, 2025, respectively.

RESULTS OF OPERATIONS - COMPARISON OF THE THREE MONTH PERIODS ENDED MARCHJUNE 31,30, 2026 AND 2025

Our gross written premiums decreased $48,457,000,$12,042,000, or 24.5%,5.3%, to $149,395,000$216,304,000 for the threesecond monthsquarter ended MarchJune 31,30, 2026 from $197,852,000$228,346,000 for the same period in 2025. Gross premium earned decreased $20,967,000,$26,730,000, or 12.9%,16.2%, to $141,134,000$138,730,000 for the threesecond monthsquarter ended MarchJune 31,30, 2026 from $162,101,000$165,460,000 for the same period in 2025. These changes are mainly attributed to a 24% decrease of 24% in our net pricing year-over-year as the market softened.continued to soften. Ceded premiums earned decreased $18,306,000,$17,985,000, or 19.5%,20.7%, to $75,523,000$69,032,000 for the threesecond monthsquarter ended MarchJune 31,30, 2026 from $93,829,000$87,017,000 for the same period in 2025. The breakdown of the quarter-over-quarter change in these premiums and new and renewal policies are shown in the tables below. More detail regarding our ceded premiums can be seen in our analysis of financial condition above.

Expenses for the three months ended MarchJune 31,30, 2026 decreasedincreased $1,395,000,$3,852,000, or 3.0%,7.7%, to $45,683,000$54,146,000 from $47,078,000$50,294,000 for the same period in 2025. The decreaseincrease in expenses was primarily due to an increase in losses and loss adjustment expenses and general and administrative expenses. This was offset in part by a decrease in policy acquisition costs and loss and loss adjustment expenses quarter-over-quarter. This was partially offset by increased general and administrative expenses quarter-over-quarter.costs. The details of these changes can be seen below.

Loss and LAE decreasedincreased $1,146,000,by $3,293,000, or 10.1%,21.2%, to $10,243,000$18,833,000 for the threesecond monthsquarter ended March 31,of 2026 from $11,389,000$15,540,000 for the samesecond periodquarter inof 2025. Loss and LAE expense as a percentage of net earned premiums decreasedincreased 1.17.2 points to 15.6%27.0% for the threesecond monthsquarter ended March 31,of 2026, compared to 16.7%19.8% for the samesecond periodquarter inof 2025. Excluding catastrophe losses and prior year reserve development, our gross underlying loss and LAE as a percentage of gross earned premiumsratio for the threesecond monthsquarter ended March 31,of 2026 wouldwas have10.8%, beenan 8.4%,increase orof no0.6 changepoints, from 8.4%10.2% duringfor the threesecond monthsquarter ended March 31,of 2025.

Policy acquisition costs decreased $1,073,000,by $1,554,000, or 4.6%,6.4%, to $22,393,000$22,703,000 for the threesecond monthsquarter ended March 31,of 2026 from $23,466,000$24,257,000 for the samesecond period in 2025. The primary driverquarter of the2025, decreasedue wasto a decrease in external management fees of $3,153,000$5,105,000, primarily as athe resultproduct of the decrease in gross premiums shown above. This was partially offset by a decrease in reinsurance ceding commission income of $2,361,000$2,277,000, asdriven theby result of the Company'sa decrease in our quota share reinsurancecession coveragerate from 20% to 15%, effective June 1, 2025. This was further offset by legacy unearned agent commission collections during the second quarter of 2025, which drove an increase in agent commission expense of $1,536,000 in the second quarter of 2026.

General and administrative expenses increased $1,197,000,by $2,488,000, or 12.6%,32.0%, to $10,703,000$10,266,000 for the threesecond monthsquarter ended March 31,of 2026 from $9,506,000$7,778,000 for the samesecond periodquarter inof 2025, driven by increased salary-relatedsalary expenses,related expenses of $3,168,000, primarily asdue to a non-recurring employee retention tax credit refund of $1,530,000 submitted to the Internal Revenue Service in 2022$2,939,000 that was received during the firstsecond quarter of 2025, which did not recur in 2026. Overall, employee compensation increased $2,389,000, inclusive of this refund.2025. This change was partially offset by a decrease in amortization of $852,000, as assets related to our intellectual property transaction with Slide Insurance Company were fully amortized when the transaction came to its conclusion in January 2026.$944,000. This decrease in amortization corresponds with the decrease seen in other income quarter-over-quarter.income. The full details of our general and administrative expenses can be seen in Note 12, above.

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 subsidiary to pay our general and administrative expenses. Insurance regulatory authorities heavily regulate our insurance subsidiary, including restricting any dividends paid by our insurance subsidiary and requiring approval of any management fees our insurance subsidiary pays to our management subsidiary for services rendered; however, nothing restricts our non-insurance company subsidiaries from paying us dividends other than state corporate laws regarding solvency. Our management subsidiary pays us dividends primarily using cash from the collection of management fees from our insurance subsidiary, pursuant to the management agreements in effect between those entities. In accordance with state laws, our insurance subsidiary may pay dividends or make distributions out of that part of its statutory surplus derived from its net operating profit and its net realized capital gains. The Risk-Based Capital (RBC) guidelines published by the National Association of Insurance Commissioners may further restrict our insurance subsidiary's 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 8 in our Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

The Company made no capital contributions to its subsidiaries during the threesix months ended MarchJune 31,30, 20262026. andThe Company made a capital contribution of $8,269,000 to its reinsurance subsidiary, Shoreline Re, during the six months ended June 30, 2025.

In September 2023, we 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 marketat-the-market” offerings. The Agent is not required to sell any specific amount of Shares but has agreed to act as our sales agent for a commission equal to 3.0% of the gross proceeds from the sales of the Shares. As of MarchJune 31,30, 2026, 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.

Cash Flows for the ThreeSix Months Ended MarchJune 31,30, 2026 and 2025 (in thousands)

During the threesix months ended MarchJune 31,30, 2026, we experienced cash outflowsinflows of $5,736,000$52,760,000 compared to cash inflows of $26,443,000$154,392,000 during the threesix months ended MarchJune 31,30, 2025. This change was driven by a reduction in premiums collected that was more than the reduction in net paid losses during the threesix months ended MarchJune 31,30, 2026 as compared to MarchJune 31,30, 2025. The change in reinsurance recoverable decreased $44,859,000$83,061,000 and the change in ceded unearned premiums decreased $30,825,000,$21,255,000, partially offset by a decrease in the change in unpaid loss and loss adjustment expenses of $27,195,000.$56,172,000 and decrease in the change in unearned premiums of $16,137,000. The change in unpaid loss and loss adjustment expenses and the corresponding reinsurance recoverable balance can beis attributed to the continued settlement of catastrophe claims with no similar activity occurring in 2026.

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 sales of investments. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption. During the threesix months ended MarchJune 31,30, 2026, net purchases of investments totaled $6,459,000 compared to net sales of investments oftotaled $5,300,000$28,021,000 compared to $25,357,000 during the threesix months ended MarchJune 31,30, 2025.

The principal cash outflows from our financing activities come from payments of dividends, repayments of debt, and repurchases of common stock. 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 cash provided from our operations, are sufficient to meet currently anticipated working capital requirements. During the threesix months ended MarchJune 31,30, 2026, cash used in financing activities totaled $41,574,000,$56,041,000, compared to $309,000$774,000 provided by financing activities for the threesix months ended MarchJune 31,30, 2025, driven by the payment of a special cash dividend of $0.75 per share declared in December 2025 and paid in January 2026dividends and treasury stock repurchases of $5,000,000.repurchases.

At MarchJune 31,30, 2026, we did not have any off-balance sheet arrangements or material changes to our contractual obligations during the quarter.