American Coastal Insurance Corporation (NASDAQ:ACIC), a Florida-based insurer with a market capitalization of $584 million and an impressive "GREAT" financial health rating according to InvestingPro, has renewed its catastrophe excess of loss reinsurance agreement, providing enhanced financial protection against non-windstorm and non-earthquake catastrophic events. The renewal, effective January 1, 2025, secures up to $90 million in coverage above a $10 million attachment point, covering new, in-force, and renewal business. The company's strong gross profit margin of 56% and return on assets of 7.42% suggest solid operational efficiency.
The agreement, which includes participation from ACIC's wholly owned reinsurance subsidiary, Shoreline Re, establishes the company's consolidated retention at $9.8 million per occurrence, net of inuring quota share reinsurance. This represents a risk-adjusted decrease of 8% from the previous year's cost, totaling approximately $11.9 million.
The updated terms also offer an increase in coverage capacity to $176.4 million in aggregate, up by $4.4 million or 2.6% year-over-year, and a significant reduction in the attachment point from $14 million to $10 million. According to InvestingPro's analysis, ACIC appears slightly undervalued at its current price of $12.18, with analysts setting a consensus target of $16 per share.
In parallel, ACIC has procured a new catastrophe aggregate excess of loss reinsurance agreement, effective January 1, 2025, which provides $40 million in aggregate coverage with a $20 million per occurrence limit. This coverage, which comes into effect after a $40 million annual aggregate deductible, spans the entire year and encompasses all catastrophe events, including windstorms, severe convective storms, and winter storms.
The cost for this additional layer of protection is approximately $6.6 million. Trading at a modest P/E ratio of 6.69, ACIC's valuation metrics and detailed analysis are available through InvestingPro's comprehensive research reports, which offer in-depth insights for over 1,400 US stocks.
The company's strategic reinsurance renewals aim to fortify its financial resilience against unpredictable catastrophic events that could impact its operations throughout 2025. The forward-looking statements regarding the reinsurance program's attachment points, total coverage, and costs are based on management's current estimates and projections. However, actual outcomes may vary depending on the reinsurers' capacity to pay claims and the adjustment provisions in the agreements.
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