AMERICAN COASTAL INSURANCE Corp (ACIC) stock intrinsic value fair value estimate & owner earnings analysis

American Coastal Insurance (formerly United Insurance Holdings) is today essentially a single-line business. Its subsidiary American Coastal Insurance Company insures condominium and homeowner-association buildings in Florida, sold through independent agents, with underwriting and policy administration run by its own managing general agent, Skyway Underwriters. It also assumes excess-and-surplus-lines business ($28.7 million of premium in the first half of 2026, which management now expects to reach about $50 million for the year, below its earlier hopes of $60-70 million), and it is capitalizing a new surplus-lines carrier, ACES Specialty, which management expects to be operating late in the fourth quarter of 2026. Who runs it, and why that matters. The company used to be much larger. In 2015-2016 it bought other homeowners insurers, including Interboro in New York, and its personal homeowners insurer, United Property & Casualty, came to write business in six states. After Hurricane Ian in 2022 that insurer was found to be about $140 million short in its storm reserves, and Florida regulators placed it into receivership in February 2023. State guaranty associations reported about $971 million of claims and costs from the failure as of March 2025, and Florida's receiver has said it is investigating possible claims against the failed insurer's officers, directors, controlling persons and affiliates. Separately, the state has demanded the full $40 million limit of the company's directors-and-officers insurance, alleging that former officers and directors caused the failure; they deny it and the company expects a lawsuit. The people in charge then are largely the people in charge now: Daniel Peed, today's Executive Chairman, was chief executive when the insurer failed, and Brad Martz, today's chief executive, was president and chief financial officer. Mr. Peed owns about 28% of the shares and holds a proxy over roughly another 6%, so he effectively controls the company, and the annual report itself warns that his interests may conflict with other shareholders'. In fairness, the business that survived is the condominium insurer Mr. Peed built and sold to the company in 2017; he has declined a salary and bonus; executives' bonuses are tied to underwriting results and return on equity; and Florida's whole homeowners market was collapsing at the time, with several insurers failing. We weigh that record directly: we give no value to management's new ventures in any case, we charge the bear case for the kind of expansion that went wrong before, and we set a lower margin-of-safety price. What the business earns. We measure owner earnings as operating cash flow with the timing swings in claims reserves, unearned premiums and reinsurance balances removed, less stock compensation and upkeep spending; for this company that lands very close to net income excluding investment gains. The heavy losses of 2019-2022 belong to the exited homeowners business, so we measure earning power only from 2023 onward, and the 2023 figure excludes a $238 million accounting gain from giving up the failed insurer, which produced no cash. On that basis the company earned about $101 million in 2023, $80 million in 2024 (a Hurricane Milton year) and $122 million in 2025 (almost no hurricane losses), 51% growth in 2025. Those were the peak years of Florida's property-insurance pricing cycle, and the peak has passed: in the second quarter of 2026 the company's net pricing was down 24% from a year earlier, net premiums earned fell 11%, and the expense ratio rose from 41% to 47% as fixed costs were spread over less premium. Earnings excluding investment gains were about $16.5 million in the quarter (including about $3 million of storm losses) against about $27 million a year earlier, and about $36 million for the half. Management says rates will stay under pressure into 2027. Cheaper reinsurance softens the fall, and from August 1, 2026 the company keeps only the first $23.5 million of a first hurricane (down from $49 million, at a cost of about $8.4 million spread to May 2027) and $25 million of a second. Because earned premium has so far fallen by less than half as much as pricing, so more of the cuts are still to come through, and because an average year carries some retained storm cost, we do not treat the 2023-2025 median of about $101 million as lasting; it was earned at prices that have since fallen. We set the normal level at about $50 million a year after interest. Base case (about $18.07 per share). About $30 million for the second half of 2026 (no hurricane has struck Florida this season so far), about $50 million in 2027 including roughly $5 million for a dispute over commissions on reinsurance the company shared with the failed insurer, which the company says may already have become a loss but cannot yet size, about $51 million in 2028 and about $50 million a year thereafter, held flat. That puts 2026 at roughly $66 million, a fall of more than 40% from 2025, and 2027 lower again, against 51% growth in the latest full year. No growth is credited: rising policy counts (up 3-4%), the surplus-lines business, ACES Specialty and the apartment-building product are not yet proven, repeatable sources of profit, and management has called the apartment product disappointing because the company lacks an A.M. Best rating that lenders require. A return to hard-market pricing would be a call on the market, not a fact about the business. Beyond ten years we keep the $50 million going because the niche is structural: Florida condominium associations must insure their buildings, and the company has held this specialty through Hurricanes Irma, Michael, Ian and Milton; we add no growth on top of it. The business is worth about $1.03 billion before its lenders; the $150 million of senior notes are a claim worth about $155 million; about $876 million is left for shareholders. Bear case (about $9.55 per share). The soft market runs deeper and longer, as Florida's did from 2008 to 2016, and earnings settle near $32 million a year. A storm late in the 2026 season costs part of the first retention. A costly hurricane year (one using both the first- and second-storm retentions, roughly $45 million after tax) and another costing about $25 million fall within the decade. Two consequences of the past land on the company: roughly $20 million after tax to settle the state's claims tied to the failed insurer, beyond what the directors-and-officers policy pays, and about $8 million on the shared-reinsurance commissions. Management repeats its old pattern and puts capital into new lines that lose about $25 million after tax over three years before they are scaled back. The $150 million of notes due December 15, 2027 are handled as management plans, half repaid from cash, but the rest is refinanced at about 9% as lenders price in the company's storm exposure and history. Even here the business covers its interest several times over except in the single worst storm year, which shareholders' equity of $341 million absorbs. The business is worth about $630 million before its lenders, the notes and their costlier replacement are a claim of about $170 million, and about $463 million is left. Bull case (about $23.20 per share). Pricing steadies in 2027 at still-profitable levels, reinsurance keeps getting cheaper and the company holds its position, settling at about $65 million a year, close to its current pace before storms and well below the 2023-2025 peak. Even here we credit nothing to the new ventures. The business is worth about $1.28 billion before its lenders, owes about $155 million and leaves about $1.12 billion. Debt. The only borrowing is the $150 million of unsecured senior notes due December 15, 2027, now paying 6.25% (the company paid a higher 7.25% rate during 2025). Management says it intends to cut them to about $75 million from cash within 6-12 months and refinance the rest, terms not yet known. For an insurer we value the earnings left for shareholders after interest, so the notes are paid for inside the figures above rather than subtracted a second time; the before-lenders figures in each case show the same thing the other way round. Dividends and buybacks. The company has no regular dividend. It paid special dividends of $0.50 per share in January 2025 and $0.75 in January 2026 after strong years, and management says another is likely if profits hold, size undetermined. It bought back 1.8 million shares in the first half of 2026 and added $25 million of repurchase authority in August. These are paid out of the earnings valued above, so we do not add them on top, and we do not count on the special dividend recurring at last year's size in a softer market. What changed since our last estimate. We previously noted the regulators' claim but did not weigh the fact that today's leaders ran the company when its homeowners insurer failed. We now charge the bear case for losses on new ventures and for settling claims tied to the failure, which lowers it from about $9.90 to about $9.55, and we lowered the margin-of-safety price from $10.50 to $9.00. The base and bull cases rose slightly, about 2%, because we now count each year's earnings as they come in through the year rather than at year end; the business assumptions are essentially unchanged. Other notes. Any tax benefit from the failed insurer's past losses is owed to the state receiver under a 2023 agreement, so it adds nothing here. What would make this wrong: a severe season that uses up the company's storm retentions more than once in a year, a deeper fall in condominium premiums as competitors add capacity, a legal outcome from the failed insurer much larger than we allow, or, on the upside, a soft phase that proves short and new lines that prove profitable. The margin-of-safety price of $9.00 is about half the base case and a little below the bear case. From that price, if the shares move toward the base value over about four years, the base case implies about 20% a year including special dividends, while the bear case implies roughly the starting price. The wider margin reflects that the business is concentrated in one coastal state and one line of insurance, its pricing cycle has turned down, its controlling shareholder and executives presided over an insolvency whose legal consequences are unresolved, and they are again pushing into new lines.