Hello, and welcome to the American Coastal Insurance Corporation's Third Quarter 2023 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Karin Daly, Investor relations with the Equity Group. Please go ahead, Karin.

Thank you, Kevin, and good afternoon, everyone. American Coastal Insurance Corporation has also made this broadcast available on its website at www.amcoastal.com. A replay will be available for approximately 30 days following the call. Additionally, you can find copies of the latest earnings release and presentation in the Investors section of the company's website. Speaking today will be Chairman of the Board and Chief Executive Officer are R. Daniel Peed and President and Chief Financial Officer, Bennett Bradford Martz. On behalf of the company, I'd like to note that statements made during this call that are not historical facts are forward-looking statements. The company believes these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those expressed in or implied by the forward-looking statements. Factors that could cause actual results to differ materially may be found in the company's filings with the U.S. Securities and Exchange Commission in the Risk Factors section of their most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. Forward-looking statements speak only as of the date on which they are made and except as required by applicable law, the company undertakes no obligation to update or revise any forward-looking statements. With that, it's my pleasure to turn the call over to Mr. Daniel Peed. Dan, you may begin.

Thanks, Karin. Hello, and thanks for joining us on our third quarter earnings call. I plan to provide an overview of activities from the third quarter and year-to-date, including focusing on the operating results of our continuing operations. I will then turn it over to Brad Martz, who will expand on the financial results. Our commercial lines segment now comprises over 90% of the third quarter gross written premium and 95% of the gross earned premium with pretax income of $25.9 million in the third quarter and $90.2 million year-to-date. The net loss ratio for commercial lines was 19.5% in the third quarter and 19.7% year-to-date, in line with expectations. Commercial lines net expense ratio continues to trend downwards, 33% in the third quarter and 35.6% year-to-date, down from 43% and 44.2%, respectively, last year. The net combined ratio attributable to the commercial lines segment was 52.5% in the third quarter and 55.3% year-to-date, down from 100.5% and 80.3% year-over-year, respectively. Still addressing the commercial lines segment, prior year development continued to be favorable at 6.2% in the third quarter and 5.5% year-to-date. The CAT loss ratio was 9.7% in the third quarter and 6.5% year-to-date, which is in line with expectations and accounts for seasonal AOP activity as well as Hurricane Idalia. American Coastal was largely unimpacted by Idalia with our current loss estimate well below the reinsurance attachment point of $10 million. Nevertheless, we are aware that Floridians along the Northern Gulf Coast were impacted by Idalia and our thoughts and support goes out to them. American Coastal's commercial segment underlying combined ratio was 48.9% in the third quarter and 54.3% year-to-date, down from 57.7% and 66.1%, respectively, year-over-year. This demonstrates the improvement in profitability produced by the commercial lines portfolio and the earnings power of our commercial…

Thank you, Dan, and hello. Today, I'm pleased to review our financial results but encourage everyone to also review the company's press release, earnings and investor presentations and forms 10-Q and 10-K, including amendments for more information regarding our performance. Pages 3 and 4 of our earnings presentation provide a summary of the quarter ending September 30, 2023, which includes core income of $14.9 million or $0.34 a share to increase nearly $33 million compared to a core loss of $18.1 million or $0.42 a share last year. Net income from continuing operations of $14.4 million or $0.33 a share, improved approximately $42 million versus a net loss of $27.5 million or $0.64 a share in the same period last year. Both core income and net income from continuing operations were driven by strong underwriting performance in our commercial lines segment and lower catastrophe losses year-over-year. Hurricane Idalia represented a gross loss incurred of approximately $4 million and $2.5 million net of reinsurance with the remaining $3.3 million of catastrophe losses stemming from a couple of current year PCS events. While we also continue to see favorable prior year reserve development with $3.3 million in the current quarter from both CAT and Non-CAT losses, helping to offset those CAT losses during the quarter. Our combined ratio for the third quarter improved over 70 points to 68.7% versus last year. Excluding catastrophe losses and prior year reserve development, our underlying combined ratio also improved 27 points to 64.2%, fueled by a $27.4 million or 20% increase in gross premiums earned year-over-year despite our intentional reduction in Commercial lines policies and risk exposures, as well as a $16.4 million decline in personal lines gross premiums written. Page 5 of our earnings presentation provides a breakdown of our results for the quarter, which…

[Operator Instructions] Our first question is coming from [ Aryan Gupta ] from Eagle Eye Asset Private Limited.

I just had a quick question regarding the current quota share agreements that ACIC has in place. So how do you see the pathway to reducing this quota share agreement going forward with [ Berkshire ] and also have like just a sort of quick follow-on question regarding the potential for a sort of captive MGA that ACIC might create and how they would go about doing so.

Thanks for your question. This is Brad Martz. We have -- as you mentioned, we have 2, 20% quota shares, 1 with [ Archery ] and 1 with Berkshire. We view both quota share partners as instrumental in the current catastrophe reinsurance program. If we were to consider reducing those quota shares they contain a tremendous amount of catastrophe limit. These are gross quota shares. So we've got $350 million of aggregate CAT limit in those 2 quota shares, $175 million per occurrence. So task number one would be to replace that CAT limit on an excess of loss basis in the open market, which we're not prepared today to talk about the prospects of doing that. But we have stated it is -- would be our intention over time to reduce the quota share and retain more of our direct underwriting results going forward. And second, as it relates to a captive, we already have the captive forms. It's a Class B reinsurer domiciled in Cayman, it's filed a 953(d) election. So it's a U.S. taxpayer included in our consolidated tax returns, and we have used it in the past and plan to use -- utilize it more extensively going forward. So we want to be very strategic in approaching some of the high expected return on capital layers and opportunities we're seeing in our reinsurance programs today.

Our next question is coming from Bill Dezellem from Tieton Capital Management.

What is the current book value of Interboro?

Current book value is approximately $23 million.

And so if the transaction were to close today, you would be selling it for about $23 million. Is that what we understood in your opening remarks?

That's correct. But the purchase price will be determined at closing. So we do expect Interboro to have some earnings between now and then and hopefully grow its book value. So the purchase price will be reflective of the final closing balance sheet near closing.

Great. And congratulations on getting that agreement put in place or sale put in place. Secondarily, with your commercial lines gross written premiums were up 22.3%. What's the split between price and volume in that 22% increase.

I can respond to that, Bill. Just real quick, is that the volume is actually down, the TIV down about 13%, 14%. So the rate is up around 30%.

Great. That's -- I don't need any level of precision beyond that. Congratulations.

We reach end of our question-and-answer session. I'd like to turn the floor back over to Dan for any further closing comments.

Okay. Thank you. And I want to thank our callers for your time on this call and your interest in our company. So thanks again. Thank you.

That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.