American Integrity Insurance Group, Inc. (AII) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The company's earnings call shows strong financial performance with improved combined ratio, strategic growth initiatives, and a special dividend. The Q&A reveals management's confidence in growth opportunities, effective capital management, and a positive outlook on reinsurance. While there are some uncertainties, such as retention levels, the overall sentiment is positive, indicating a likely stock price increase of 2% to 8%.

Key Financial Performance

Gross Premiums Earned Grew by nearly 30% year-over-year to $885 million. This growth was attributed to strong underwriting discipline, agent relationships, and the improving health of the Florida marketplace.

Adjusted Net Income Increased to $103 million or $5.97 per diluted share, compared to $37.9 million or $2.94 per diluted share in the prior year. The increase was driven by organic growth and disciplined underwriting.

Combined Ratio Achieved a record of 63.7%, a more than 17-point improvement from 80.9% in 2024. This improvement reflects better underwriting and operational efficiency.

Adjusted Return on Equity Recorded at 42.1%, up from 26.8% in 2024. The increase was due to improved profitability and operational performance.

Customer Count Increased by 19% from 356,000 to nearly 422,000 customers. Growth was driven by organic voluntary growth and strategic initiatives.

Voluntary Customer Count Increased 16% to 327,000 policies during 2025, supported by deep agent relationships and disciplined underwriting.

Gross Premiums Written (4Q 2025) Decreased by $31.2 million to $206.4 million from $237.6 million in the fourth quarter of 2024. The decrease was due to fewer policies assumed from Citizens.

Gross Premiums Earned (4Q 2025) Increased by $29.3 million to $229.1 million from $199.8 million in the fourth quarter of 2024. The increase was driven by new and renewal policies in the voluntary market and participation in the Citizens takeout program.

Net Premiums Earned (4Q 2025) Decreased by $2.4 million to $59.4 million from $61.8 million in the fourth quarter of 2024. The decrease was due to temporary catastrophe reinsurance windfall savings in the prior year.

Net Investment Income (4Q 2025) Increased by $2.1 million to $5.9 million compared to $3.8 million in the fourth quarter of 2024. The increase was driven by higher invested assets from increased premiums and IPO proceeds.

Loss Ratio (4Q 2025) Improved to 42.6% compared to 51.6% in the fourth quarter of 2024. The improvement was due to the lack of catastrophe losses during the period.

Expense Ratio (4Q 2025) Decreased to 20.2% compared to 37.1% in the fourth quarter of 2024. The decrease was driven by higher non-catastrophe ceding commissions.

Combined Ratio (4Q 2025) Improved to 62.8% compared to 88.7% in the fourth quarter of 2024. The improvement reflects better underwriting and operational efficiency.

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Operating Highlights

Commercial Residential Product: Launched in October 2025, designed for Florida's condominium, townhouse, and residential homeowners associations. Early results are promising, with 149 policies assumed from Citizens, representing $5.9 million in unearned premium.

Tri-County Region of Florida: Reentered in Q3 2025, with 29,226 policies in force by year-end, representing 7% of the book. Growth expected to continue through 2026.

Middle-aged Home Market: Renewed focus due to legislative reforms in 2022. Middle-aged homes represented 76% of policies in 2016 but declined to 26% by 2025. Early acceleration in production numbers observed.

North Carolina Expansion: Began writing policies in North Carolina, with out-of-state policies doubling to 26,732 by year-end 2025.

Gross Premiums Earned: Increased by nearly 30% year-over-year to $885 million in 2025.

Adjusted Net Income: Rose to $103 million ($5.97 per diluted share) from $37.9 million ($2.94 per diluted share) in 2024.

Combined Ratio: Achieved a record low of 63.7%, improving from 80.9% in 2024.

Customer Growth: Increased customer count by 19% to nearly 422,000, with voluntary customer count rising 16% to 327,000 policies.

IPO and Financial Strength: Completed IPO in May 2025, raising $100 million, strengthening the balance sheet and enabling diversification and market expansion.

Quota Share Adjustment: Reduced non-cat quota share cession rate from 40% to 25%, expected to drive additional revenue and reduce costs by 50% in 2026.

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Risk or Challenges

Citizens Takeouts Decrease: The company experienced a significant decrease in Citizens takeouts, with fewer policies meeting underwriting and profitability standards. This could limit growth opportunities from this source.

Tri-County Region Reentry: The company reentered the Tri-County region of Florida, which represents a high-risk area. This could increase exposure to potential losses, especially as the company expands its market share in this region.

Middle-Aged Homes Market: The company is reentering the middle-aged homes market, which had previously been avoided due to litigation risks. While legislative reforms have made this market more attractive, it still carries inherent risks.

Quota Share Reduction: The company reduced its non-cat quota share from 40% to 25%, which could increase exposure to underwriting risks and potential losses.

Reinsurance Costs and Coverage: The company purchased more reinsurance coverage due to increased in-force premium and total insured value. While this mitigates risk, it also increases costs, which could impact profitability.

Catastrophe Loss Exposure: Although 2025 was free of catastrophe losses, the company remains exposed to potential future catastrophe events, especially given its concentration in Florida.

Expansion into New Markets: The company is expanding into North Carolina, Georgia, and South Carolina. While this diversification is positive, it introduces operational and market-entry risks.

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Guidance & Outlook

Growth in Tri-County Region: The company reentered the Tri-County region of Florida in Q3 2025 and expects continued growth in this market through 2026, representing a multiyear opportunity. Currently, policies in force in this region represent 7% of the book, with potential market share growth in an area representing 28% of Florida's households.

Middle-Aged Homes Market: The company has renewed its focus on middle-aged homes, which previously represented 76% of policies in force in 2016 but declined to 26% by 2025. Legislative reforms in 2022 have made this market attractive again, and the company expects accelerated growth in this segment.

Commercial Residential Product: Launched in October 2025, this product targets Florida's condominium, townhouse, and residential homeowners associations. Early results are promising, and the company plans to scale this product responsibly.

Expansion Beyond Florida: The company has doubled its out-of-state policies to 26,732 by year-end 2025, with growth in Georgia, South Carolina, and a new entry into North Carolina. Florida will remain the core market.

Quota Share Reduction: The company reduced its non-cat quota share from a 40% cession rate to 25%, expecting this to drive additional revenue and reduce quota share costs by approximately 50% in 2026. This change is anticipated to positively impact net income.

Reinsurance Pricing: Favorable reinsurance pricing is expected for 2026 renewals, with market commentators estimating risk-adjusted rate decreases ranging from 10% to 20% depending on the region.

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Shareholder Return Plan

Special Cash Dividend: The Board of Directors declared a special cash dividend to stockholders of $1.02 per share, aggregating to $20 million. This decision reflects the company's history of returning capital to stockholders following periods of exceptional performance, while retaining sufficient capital to pursue growth opportunities.

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Key Q&A

Q:How does the company view the competitive environment in 2026, particularly in terms of new business and renewal business?

A:The CEO, Robert Ritchie, stated that while there are 17 new competitors, only 7 are new capital groups, with one being very large and successful. The company has a leadership position in various distribution channels, including IA Florida preferred agents, builder agents, and relationships with national carriers (except State Farm), mortgage companies, and online platforms. They are experiencing record new business days and are bullish about growth opportunities in Florida.

Q:How will the change in the quota share for 2026 impact the expense ratio and profitability?

A:CFO Benjamin Lurie explained that while the quota share program will result in a net increase in general admin and policy acquisition expenses, this will be offset by a decrease in ceded premiums to quota share partners. The net result will be slightly higher expenses but significantly higher net revenues and profitability.

Q:What are the company’s thoughts on capital management and the rationale behind the special dividend?

A:CFO Benjamin Lurie stated that the special dividend was due to windfall earnings from a year without catastrophic storms. The company remains committed to returning excess capital to investors while using IPO proceeds to fund growth initiatives. The special dividend does not signal a lack of growth opportunities.

Q:How does the company prioritize between special dividends and stock buybacks?

A:The company prioritizes getting its stock into the hands of new public shareholders to create liquidity and attract investors. They believe this approach aligns with their growth strategy and will generate positive returns, making the stock more attractive.

Q:What is the trajectory of the average premium per policy, considering changes in business mix and market conditions?

A:President Jon Ritchie stated that the average premium per policy is expected to increase due to the mix of business, including middle-aged homes, Tri-County policies, and commercial policies. While there is downward pressure on primary pricing, the company is seeing early success in commercial policies and expects an upward trajectory in average premiums.

Q:What is the company’s view on competitors’ rate changes in the Florida homeowners market?

A:The company’s 5% average rate decrease aligns with market trends. They monitor competitors’ rate filings and believe the regulator is prudent. The company is not seeing competitors buying market share and expects average premiums to rise due to inflation factors.

Q:How does the company approach reinsurance decisions for the upcoming renewal cycle?

A:The company finds the current reinsurance market advantageous, with abundant capacity and favorable pricing. They plan to maintain consistent retention levels and secure additional cover for third and fourth events. Cat bonds and cascading features are providing flexibility and opportunities.

Q:How does the company manage risk aggregation and concentration as it grows its book of business?

A:The company targets growth in areas like Tri-County and middle-aged homes to complement its portfolio geographically and reduce pressure on peak zones. This strategy offsets concerns about risk concentration and aligns with their long-term objectives.

Q:What is the company’s gross loss ratio, and how is it expected to change?

A:The gross loss ratio is 17%, consistent with the prior year. It may increase modestly as the company writes more middle-aged homes and Tri-County policies. However, the premium collected offsets this increase, and the company is satisfied with the direction of the loss ratio.

Q:How does the company ensure transparency in reporting loss ratios?

A:The company reports gross underlying loss ratios to exclude the effects of reinsurance, providing a clearer view of actual loss experiences. This approach helps investors understand the impact of changes in quota share arrangements.

Q:How does the company view the 2004 hurricane season as a benchmark for reinsurance?

A:The company uses the 2004 hurricane season, which saw four major hurricanes in a single state, as a benchmark for its risk management approach. They aim to be protected against multiple major hurricanes in a single year.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the exact retention levels for the first and second events in the upcoming reinsurance cycle, citing ongoing finalization of the structure. Additionally, while they mentioned a 5% average rate decrease for their portfolio, they did not provide detailed competitor-specific data or broader market analysis.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

AII Transcript

American Integrity Insurance Group, Inc. (AII) Q4 2025 Earnings Call Transcript

Positive2-25

American Integrity Insurance Group, Inc. (AII) Q3 2025 Earnings Call Transcript

Positive11-12

The earnings call reflects strong financial performance with improved profitability and operational efficiency, as evidenced by the decreased expense ratio and combined ratio. The Q&A session supports this with management's confidence in legislative reforms and favorable reinsurance outlook. Despite some unclear responses, the overall sentiment is positive, particularly with a significant increase in book value per share and net income growth.

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