AII

Hello. Thank you for standing by. My name is Jade, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Integrity Insurance Group First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. A reminder, this call is being recorded. Before we begin, please note that today's remarks may contain forward-looking statements, including comments about the company's outlook, strategy, plans, and expected performance. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially. A full discussion of the risk factors can be found in the company's SEC filings, including its most recently filed annual report on Form 10-K and quarterly report on Form 10-Q.

Management undertakes no obligation to update any forward-looking statements. Furthermore, today's remarks may contain non-GAAP financial measures. A reconciliation of non-GAAP financial measures to their most comparable GAAP measures is included in the company's quarterly press release and can also be found on its website at www.aii.com. References to American Integrity or the company prior to the consummation of the IPO refer to American Integrity Insurance Group, LLC, and after the consummation of the IPO, refer to American Integrity Insurance Group, Inc. With that, I'll turn the call over to American Integrity's founder and Chief Executive Officer, Bob Ritchie. Please go ahead.

Thank you. Good morning, everyone. Before we get into the quarter, I want to take a minute to recognize the change to our executive management team. Ben Lurie is right here with us. Ben, I want to thank you for everything you've done over the past 2 years. You played a key role in our successful public listing. You helped guide us through our very first year as a public company. I'm happy to report Ben will continue to support us through the transition, and he'll remain on the insurance company board and is with us here this morning to answer questions during the Q&A portion of the call. I and our entire team are very grateful, Ben, for your contributions, particularly around capital markets execution and IPO readiness. We want to wish you all the best as you return to Salient Company, our lead investor.

Thank you for your support. Thank you for helping us achieve this important milestone as a public company. I also want to officially welcome Brian Foley, who's here with us as our new Chief Financial Officer. Brian brings impressive and significant capital markets and insurance experience, including his personal and professional work as one of our lead investment bankers when we went public at KBW. In the tireless nights that Ben knows, especially, and David, 24/7 sometimes you were there. You worked closely with our team as we prepared for and successfully executed our public listing. You've been a trusted advisor with us for many years. Brian, you played a meaningful role in helping position the company for the public markets. Brian's familiarity with our business and investor base allows for immediate continuity as we scale as a public company.

I and David Clark, our Executive Chairman, and Jon, our President, couldn't be any happier to welcome Brian, and we're really excited to have you on board. Now let's turn to the quarter. It's been remarkable. The business is performing in line with our expectations, and the underlying trends are consistent with the normal earnings profile that we've outlined to all of you post our initial public offering. In fact, our performance this quarter reflects the continued execution across our core growth drivers with improving visibility into the forward earnings and growth of this business. At a high level, the quarter represents and reflects a business that is transitioning toward more durable, voluntary-driven growth with a more normalized earnings profile.

Our results also reflect our continued expansion into this very voluntary production with early traction in new product lines, which Jon Ritchie will talk about, and incremental geographic diversification across the Southeast. To put data behind that positioning, our multi-channel distribution model continues to deliver consistent, diversified growth. Through March, policies in force are growing double digits across nearly every channel, with independent agents up approximately 9%, company alliances up nearly 40%, builders up over 38%, and national accounts up in excess of 40%. This consistency across our channels reinforces that our 18% year-over-year voluntary customer growth is not dependent on a single source but reflects broad-based demand and execution across the platform. While we have clear momentum, there has been much discussion on the state of the property market, particularly in Florida, where increased capital formation and new entrants are influencing pricing dynamics.

Our view is straightforward. Florida needs more carriers, not fewer. 11 companies are out of business. Large portions of the market continue to remain underserved, we see the continued meaningful room to grow on a disciplined and profitable basis. I'm pleased to report this is particularly evident in the Tri-County region in the middle-aged home market that we've been describing to you. We're executing on that. As we've told you, these are areas where we previously reduced exposure due to historical unfavorable litigation environments that are no longer. With the recent legislative reforms, the market has become much more rational, it's allowed us to reengage profitably across a series of new markets. Importantly, rate adequacy remains regulated and actuarially supported, which we believe limits the sustainability of any particular irrational pricing behavior over time.

In our core Florida market, we're seeing strong traction, as I told you, in the middle-aged homes in Tri-County for HO-3 homeowners policies. These are markets we recently reentered because of these reforms. During the first quarter, here's what's important. We wrote 120 new policies per business day in these markets, up from only 6 policies a day the same period last year. That's a 20x increase year-over-year. These markets represent more than half of the homes in Florida, reinforcing both the scale and durability of the opportunity. This momentum is being driven across all distribution channels, as I mentioned, and supported by long-standing agency relationships, continued disciplined underwriting, and expanded product availability. This is a large and unpenetrated segment of the market for us and one where our product positioning and underwriting discipline are clearly resonating.

I'm happy to report we're also seeing that momentum translates into our expansion states. As of March 31st, South Carolina policies enforced increased 119% year-over-year, albeit a small base, but important growth. Georgia increased 332%. In our brand-new state of North Carolina, in just the first quarter, we wrote 360 policies after we entered there. While Florida remains our core and will continue to remain our core, this is early evidence that our model is portable, and it's scalable beyond the state of Florida. While you may see some headline rate movement across our peers and our own business, the effective pricing impact is actually much more modest than it appears, given the inflation guard that we have in place for our residential business. Why?

'Cause inflation is not gone, and homes continue to rise in the cost to rebuild. As a result, the reported rate changes can overstate the true earned premium impact when adjusted for exposure growth and, as I mentioned, inflation guard mechanisms. Additionally, I'm happy to report we're seeing very meaningful reinsurance market improvement and expect substantial and meaningful rate softening on our June first renewal, which we're nearly done with. John's gonna touch on this in more detail in just a minute. Taken together, we expect to deliver consistent profitability with improving earnings and quality driven by a voluntary mix and reinsurance tailwinds. Additionally, I want to touch on one of our core advantages, our agent distribution network. Florida is an agent-driven market. We've spent two decades building strong partnership with agents throughout the state, as well as with national firms.

One example of this engagement is our annual Diamond Gold Agent event, which we just had a few weeks ago. We bring together our top-performing partners, and they compete every year for this. What continues to stand out is the depth of these relationships and their willingness to direct incremental business toward us as we expand our appetite. Their feedback is consistent and valuable. They value how we operate, and they view us as a differentiated partner in this marketplace. This translates directly into the production flow and improved quality of submissions that we're seeing day after day, week after week, and quarter after quarter. Importantly, this growth continues to be concentrated within our highest-performing distribution partners. Among our leading agencies, 3-year gross non-CAT loss ratios are consistently below 20% and in many cases, significantly lower.

We're growing exactly where we wanna grow with the partners, the segments, the geographies that align with our profitability objectives. We're seeing particularly strong momentum with partners such as Goosehead, Advantage Insurance, Brightway, State Insurance, and Sand Group, among others, where growth is being driven by both scale and sustained underwriting profitability. This gives all of us here the confidence that we're not just growing, but we're growing with discipline and continued strong underlying profitability. From a product standpoint, we have a product solution for the vast majority of approximately 9 million homes in Florida on our terms, conditions, and prices, and we remain broadly open for business across our expansion states, which continues to support growth momentum and geographic diversification. We also believe we're well-positioned to support future consolidation of competitor books as market conditions have normalized.

Our API-enabled single entry capabilities are also increasingly important, particularly with large agent partners, and this improves the ease of doing business, and it drives incremental submission flow. In closing, when we talk about growth across areas like Tri-County or middle-aged homes, it really comes back to that foundation of long-standing relationships that we have built, combined with improved legislative and market conditions. We believe American Integrity is well-positioned to continue scaling our business with improved earnings quality and disciplined growth across our targeted markets. With that, I'll turn the call over to John to walk through these very growth drivers in more detail.

Thanks, Bob. I'll spend a few minutes going a bit deeper on what we are seeing in the business and how that's translating into our results, then spend much of my time on the many opportunities that we have in front of us to expand our franchise. Starting with our results, we continue to see growth in our core Florida market. In the first quarter, we wrote over 94,000 new and renewal policies in the voluntary market, reflecting continued momentum in our core business. Combined with healthy retention levels of approximately 83.6% this quarter, our policies in force increased to over 437,000 policies, representing approximately 14% growth year-over-year. As we've discussed, that growth only includes very modest Citizens takeout activity. What you're seeing now is more representative of the underlying run rate of the business.

At the same time, we're seeing an increasing contribution from our targeted growth areas, which is starting to show up in our new business production. When we step back, production remains strong, retention remains stable, and we're seeing growth come through clearly in the areas we've been focused on. Starting with our entry into the Tri-County, this is one of the largest and most important insurance markets in Florida. To put that in perspective, the region represents roughly 28% of the state's households, while today it represents approximately 7% of our policies in force. While early from a penetration standpoint, we are seeing substantial writings growth in our new business production as we reengage with our agent partners and reestablish our presence.

During the first quarter, we saw approximately a quarter of our voluntary Florida new business gross written premium come from Tri-County HO-3 policies, up from low single digits in the year ago first quarter. We believe our re-entry into Middle-Aged homes represent an equally large market opportunity. Like the Tri-County, we are under-penetrated relative to the size of that market opportunity. Additionally, this has historically been the core of our book of business, our bread and butter in an area where we have deep underwriting experience and long-standing agent relationships. We stepped away from this area of the market due to the litigation environment, which made it difficult to write that business profitably. As we have discussed over prior calls, the recent reforms in Florida have changed the dynamic, and we're now able to move back into that market in a way that meets our return expectations.

Importantly, that's not just a market opportunity, it's an area we have a proven track record. We understand the risk characteristics. We have established pricing and underwriting frameworks, and we have long-standing relationships with agents who specialize in this type of business. We are pleased with our early results here as well. In the first quarter, voluntary HO-3 middle-aged homes, excluding Tri-County, contributed approximately one quarter of our Florida new business voluntary gross written premium, up from the low single digits in the comparable quarter last year. We're also seeing encouraging early progress in our Commercial Residential Property Program. This is a program we launched late last year focused on providing coverage for garden-style, 2 and 3-story condo associations, townhome communities, and homeowners associations across Florida.

We are pleased with our modest pace of new business writings in this new line of business, having written 81 policies during the first quarter, inclusive of takeouts. In addition to our opportunities within Florida, we're also continuing to make progress in our expansion across the Southeast, including North Carolina, South Carolina, and Georgia. In South Carolina and Georgia, where we already have an established presence, we're seeing continued growth as we build on our existing home builder relationships and gradually expand our footprint. In North Carolina, we've more recently entered the market, and our focus is on building the business in a measured way, consistent with how we approach new markets more broadly. While these markets are still a smaller portion of the overall portfolio today at less than 4% of our in-force premium, they represent an attractive long-term opportunity to carefully extend our operating model beyond Florida.

Finally, on reinsurance, we are actively working on our 6/1 renewal. As we've discussed previously, market conditions have continued to improve both in terms of pricing and overall available capacity for growth. We're seeing strong engagement from our reinsurance partners, and the environment is more constructive on both pricing and terms than what we have experienced in recent years. It's too early to talk about the final results, but we anticipate a meaningful reduction in risk-adjusted pricing at renewal.

This reflects a combination of factors, including improved underwriting performance across the industry, a broader normalization of the market, and most importantly, the improved litigation environment in Florida, given the legislative changes passed over the last few years. When you step back across all of these areas, the Tri-County, middle-aged homes, commercial residential, and our expansion across the Southeast, we're seeing not only a significant opportunity set, but just as important, early signs of traction and accelerating new business. Production is strong, policy growth is improving, and we have a long runway ahead of us as we execute on our growth initiatives. With that, let me also welcome Brian to the company. Brian has been a tremendous partner over the years, and I am looking forward to working with him as we continue to build our business.

With that, let me turn the call over to Brian to walk through the financials.

Thanks, Jon. Thank you, John, and thank you, Bob. I'm really excited to be here. I've been with you both for many years and have seen not only the business that you are building, but also the incredible culture that you have developed, which translates to a real focus on your employees, agents, and customers. I couldn't be more excited to be here and working with the American Integrity team. Let me turn to our results. I'll walk through the first quarter and highlight the key drivers, including comparisons to the prior year period. Starting with earnings, we generated net income available for common shareholders of $19.9 million or $1.02 per diluted share for the first quarter compared to $35.9 million or $2.78 per diluted share in the prior year period.

The year-over-year comparison is impacted by elevated Citizens' takeout activity in the first quarter of 2025, which created a temporary benefit to earnings. As that activity has moderated, we believe this quarter provides a more representative view of the underlying earnings power of the business. Turning to premiums, gross premiums written were $220 million compared to $212.2 million in the prior year period, representing an increase of 3.7%. This growth was driven by continued expansion in the voluntary market. As Jon highlighted, we're seeing increasing contributions from our targeted growth areas, which is supporting production and shaping the mix of the business. Gross premiums earned increased $20.6 million to $230.8 million compared to $210.2 million in the prior year period.

Ceded premiums earned increased $3.8 million to $148.6 million compared to $144.8 million in the prior year period, driven primarily by the higher gross term premiums, partially offset by the reduction in our quota share session from 40% to 25% beginning January 1. Net premiums earned increased 25.7% to $82.2 million compared to $65.4 million in the prior year period. Stepping back, what you're seeing is a combination of underlying growth in the business and a shift in our quota share session rate, both of which are contributing to higher net premiums earned and greater earnings exposure. Net investment income increased $1.6 million to $5.7 million compared to $4.1 million in the prior year period.

This increase was primarily driven by higher invested assets supported by premium growth and our IPO proceeds. Loss and loss adjustment expenses increased $10.9 million to $31.7 million compared to $20.9 million in the prior year period. Primarily, the result of our larger book of business due to the increase in net premiums earned, driven by the voluntary growth and change in our quota share I previously mentioned. Our loss ratio was 37.3% compared to 30.9% in the prior year quarter. The prior year period benefited from favorable reinsurance dynamics associated with Citizens' takeout activity, which resulted in an unusually low loss ratio. Importantly, there were no catastrophe losses or prior development in the quarter.

Turning to expenses, policy acquisition expense increased by $12.9 million to $16 million as compared to $3.1 million in the prior year period, primarily driven by the increase in policies written during the first quarter, the windfall from Citizens' takeouts during the first quarter of 2025, and less ceding commission due to the reduction in our non-catastrophe quota share reinsurance treaties. G&A expenses increased $11 million to $16 million compared to $5 million in the prior year. As a result, our expense ratio increased to 37.6% compared to 12% in the prior year period. The increase in both the absolute expense levels and the expense ratio was driven by three key factors. First, we have an absence of the favorable impact from Citizens-related activity in the prior year. Second, the reduction in the quota share resulted in lower ceding commission income.

Third, we delivered higher levels of new business production, which naturally increases acquisition costs. It's important to emphasize that this increase was largely structural. As we retain more premium through a lower quota share ceding percentage, we also retain more of the associated expenses while receiving less ceding commission. That dynamic increases the reported expense ratio, but also increases net premiums earned and the long-term earnings potential of the business. While the year-over-year changes in some key ratios were significant, these changes were consistent with our strategy and do not reflect a deterioration in the underlying cost structure. The combined ratio for the quarter was 75% compared to 42.9% in the prior year period. The prior year period benefited from several non-recurring items, including Citizens-related dynamics.

Turning to our balance sheet, shareholders' equity was $335.5 million at quarter end compared to $337 million at year-end. During the quarter, we returned $20 million of capital to shareholders through a special dividend, which drove a slight decline in shareholders' equity during the period. We believe our capital position remains strong and provides flexibility to support both underwriting growth and shareholder return. We are very focused on capital management and will plan to reevaluate our uses of capital after the conclusion of wind season. With that, I'll turn the call back to the operator to open the line for questions.

Your first question comes from the line of Tommy McJoynt from KBW. Please go ahead.

This is Molly Knoell calling in for Tommy. Thank you so much for taking our questions. My first question is on what you're seeing in terms of competition from the Florida specialists and the national carriers. When you're winning share in the new target markets of Tri-County and Middle-Aged Roofs, who are you winning that share from?

Good morning. This is Bob Ritchie. Thank you for the question. Our growth engine is multifaceted. Let me touch first on competition. I mentioned it in my talking points just a few minutes ago. We don't have too much competition. Over 11 carriers and then some, the last series of years, and the old crisis went belly up. There are some headlines that we have 17 new companies. We don't. We have about eight or nine new capital groups. Some companies form sister companies, reciprocals, etc. The second thing I wanna point out is that these are important niche carriers, except for 1 being Slide, that did a lot of the successful book deals. These are small niche carriers that will take numbers of years to create a voluntary program.

I'm happy to say a few of them I highly respect and wish them great success. As we look at the numbers of business opportunities for the company, they're growing, not shrinking. Here's a case in point. Over 130,000 new homes are still being built in Florida. We're being awarded one out of every three of those brand-new homes. Number 2, since reforms, we're able to reemerge into middle-aged homes in South Florida. As I mentioned, as I look at the numbers of homes that we're writing that fit this category, it's a 20x from where we were just 4 quarters ago. For me anyway, and it may be different from what others might be saying in the market, the issue is not scarcity, it's abundance.

What's important is rate adequacy, and I'm happy to report that there is not a competitor out there being allowed to file rates, to buy business, and to take this reform into a wrong scenario. As we look at this, the momentum that we're creating across the entire state, American Integrity, in its 20-year history, has never been more positioned for profitable growth. Thank you for the question.

Thank you. I appreciate it. In terms of your capital priorities going forward, would you consider buybacks or issuing another special dividend this year, or do you plan to primarily use excess capital for growth at this point?

Yeah. Hello. Good morning. This is Brian, and thanks for the question. Look, growth is our top priority, as you've heard from both Bob and Jon, and we feel very strongly that we can execute on our growth plan. We're heading into wind season, like I mentioned, I think it's prudent to not make any decisions at this moment. In the conclusion of that, if there is excess capital, we will consider both.

Thank you.

Your next question comes from the line of Mitchell Rubin from Raymond James. Please go ahead.

Hey, good morning, guys. Thanks for taking my questions. First on the Tri-County Middle-Aged Roof and High Net Worth initiatives, how do those influence the way you guys are thinking about reinsurance structure and limit needs heading into the 6/1 renewals?

Yes. This is Jon. Thanks for the question. The diversification both of geography and risk characteristics certainly is additive in terms of the benefit to our overall reinsurance structure here within the state of Florida. Specifically South Florida is taking some pressure off of other peak zones where we have written a fair amount of business, quality business, and we're happy with our market share in the regions that we have a higher market share. Overall, it smooths out the portfolio throughout the state, both in South Florida and in the Middle-Aged Roof homes are disproportionately coming from Central Florida, where throughout the litigation crisis that we just exited, we had to non-renew a healthy amount of that business. It's complementary to the portfolio, and we're really happy with the results that we're seeing thus far.

Thanks for the color on that. On Citizens, how should investors think about the remaining takeout opportunity and what portion of the current Citizens book they'll need to do your underwriting and return thresholds?

This is Bob Ritchie. I'll tell you how we view it. I'm not saying it's like every other carrier. The days of robust, profitable Citizens takeouts are over. Matter of fact, I believe as you look at the Citizens book of business, it's sort of a few drips and drabs that we'll always participate in. It would be very unwise for any carrier, be it American Integrity or a new company to rely solely upon takeouts as a growth engine. For us, it never has been a growth engine. It was an opportunity, a remarkable one. We were founded as a takeout company. Takeouts can be a great strategy, yet if we dig any more as an industry, there's gonna be trouble. For us, I'm happy to report we are among the strongest voluntary platforms in the industry.

I as the CEO, I'm very, very bullish about running the business as we want, where we want, with whom we want. Matter of fact, our growth has never been stronger. With that, we're continuing to increase customer count.

Thank you.

At this time, there are no further questions. I will now turn the call back to Robert Ritchie for closing remarks.

Thank you, Jade, and thanks to all of you that joined this morning. I wanna start by saying how proud I am of our team. So proud of our leadership team. They've been with us for years and years. Our leadership team is collaborative and works so well together. I'm equally proud of every one of our 340 American Integrity associates. It's because of our team and the strong execution that we're seeing across all business, the collaboration between departments makes us successful. The results this quarter reflect the continued momentum that we've been building and the strength of the foundation that we've been put in place. As we look ahead, a few important things stand out. First, we're operating from a position of strength. Our balance sheet and our capital are solid. Our leadership is solid. Our business model is solid.

Our agent relationships are solid, and all of these are increasingly being driven. Here's the important thing, by repeatable voluntary production. We don't rely upon deals. This is repeatable. Voluntary production is increasing in its quantity and in its diversification. Second, we're seeing meaningful, very effective results across, as I mentioned, and Jon Ritchie did, our multiple growth and distribution initiatives. Whether it's our entry into Tri-County again, our expansion back into middle-aged homes, the continued progressive successful build of our Commercial Residential product, or our progress across the Southeast in Georgia and South Carolina and North Carolina. These are all areas where we have experience, established relationships, and a clear path to win. Finally, the third point, we remain focused as ever on disciplined execution, and that means maintaining underwriting quality, managing expenses, and structuring our reinsurance program to support both growth and long-term profitability.

In a few weeks, we'll be able to report the remarkable renewal on our 6/1 program that we're almost completed with. We're building a business that is not only growing, but we're doing so in a way that we believe is sustainable and it's durable across every cycle. We've proven that in 20 years. I couldn't feel better, the team couldn't feel better about where we are today and the opportunities ahead. I wanna thank you for your support and your time this morning.

This concludes today's call. Thank you all for attending. You may now disconnect.