SLDE - NASDAQ

Greetings, and welcome to the Slide Insurance Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to hand the floor over to the Slide team to begin.

Thank you, and good morning. With us today are your hosts, Bruce Lucas, Chairman and Chief Executive Officer of Slide; and Andy Omiridis, Chief Financial Officer. By now, everyone should have access to our earnings release, which was published yesterday after the market closed and can be found on our website at ir.slideinsurance.com. Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements, which are based on the expectations, estimates and projections of management regarding the company's future performance, anticipated events or trends and other matters that are not historical facts. Forward-looking statements in our discussion are subject to various assumptions, risks, uncertainties and other factors that are difficult to predict and which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our earnings release and recent filings with the SEC for a more detailed discussion of the risks and uncertainties that could impact the future operating results and financial condition of Slide. Our statements are as of today, February 25, 2026, and we undertake no obligation to update any forward-looking statements we may make, except as required by law. In addition, this call is being webcast, and an archived version will be available shortly after the call ends on the Investor Relations portion of the company's website at www.slideinsurance.com. With that, I'd now like to turn the call over to Chairman and CEO, Bruce Lucas. Please go ahead.

Thank you, and welcome to our fourth quarter 2025 earnings call. We appreciate your continued interest in Slide and are excited to be speaking with you today. 2025 was a significant year for Slide. We took the company public and continue to demonstrate the ability of our tech-enabled coastal specialty focus to deliver the best top and bottom line performance in our sector, and we believe the best is yet to come. We closed out the year with another industry-leading performance. We delivered fourth quarter results that materially outpaced our prior guidance for gross premiums written and net income, primarily as a result of higher voluntary sales, better retention ratios, favorable loss development and assumption activity from Citizens Insurance. Our voluntary sales in the fourth quarter showed strong performance once again, and we believe the trend for year-over-year higher top line growth will persist in 2026. For the quarter, we meaningfully accelerated our gross premiums written, which increased by 57% year-over-year to $618 million. We were opportunistic with respect to the ongoing Citizens depopulation and assumed a significant number of policies in the quarter, driving another strong top line performance. Our vast data set and technology-enabled underwriting approach allows us to find policies and citizens with very attractive return characteristics. We expect to continue to be opportunistic with respect to Citizens depopulation efforts in 2026, albeit at a lesser level as we believe there will be fewer policies that meet our criteria to assume. However, we expect to grow our gross premiums written in 2026 year-over-year as a result of higher policy retentions, higher voluntary sales and the launch of new states in the Northeast and California. In addition to our strong top line results, Slide produced $170 million in net income in the quarter, more than doubling the $75 million in the prior year quarter, which represents yet another quarterly record for Slide. Along with net income, fourth quarter return on equity was once again strong at 16.4% in the quarter. For 2025, Slide produced a 57.4% return on equity, notwithstanding the substantial capital raise in the second quarter from our initial public offering. Meanwhile, our conservative approach to underwriting and reserving continues to lead to best-in-class margins with a quarterly combined ratio of 38% versus 60.9% in the prior year period. Quite simply, our fourth quarter and full year 2025 performance was once again clear evidence of the power of the Slide business model. Our long-term value proposition continues to deliver excellent earnings and attractive returns on equity, creating long-term shareholder value. All of these accomplishments provide us with significant momentum as we progress through 2026. We have carefully and thoughtfully created a high momentum coastal specialty insurer as evidenced by our industry-leading performance, and we have the strongest balance sheet in the coastal specialty sector. Slide is the only coastal specialty insurer to surpass $1 billion in book value, ending the year at just over $1.1 billion, along with $2.9 billion of assets, only 2.9% debt-to-capital ratio and over $1.2 billion in cash and cash equivalents. Our superior balance sheet and future earnings give Slide ample capital to scale faster than its peers, which is a tremendous market advantage. We intend to use our balance sheet and profitability to further expand our geographic footprint in 2026. We have successfully established ourselves in Florida and South Carolina, but as previously mentioned, it is time to pivot toward growing our operations and bringing our unique skill set to other catastrophe-exposed markets. To that end, we continue to produce strong voluntary sales in South Carolina during the fourth quarter, and we believe this trend will continue through 2026. Importantly, we remain on track, pending final regulatory approval to begin writing by peril tailored policies in New York and New Jersey in the first half of 2026, Rhode Island in the second half of 2026, and we expect to launch an excess and surplus product in California in the next 30 to 60 days. As we diversify into these new geographies, we will utilize our decades of experience in our proprietary [ Procast ] technology to underwrite policies that enhance our portfolio, manage our concentration of risk and our reinsurance expense, all while optimizing profitability. We expect to expand thoughtfully in these new states using our large data set and balance sheet to generate growth and enhance bottom line results. We have achieved extraordinary growth from our start-up origins, far exceeding our expectations. Since Slide's launch in 2022, we have produced the best top and bottom line results of any coastal carrier in my career. Since 2022, we have achieved a 55% compounded annual growth rate in gross premiums written while delivering a 7,399% compounded annual growth rate in net income. Our track record is unmatched in the industry, but we are not resting on our prior success. We believe that there is a tremendous long-term opportunity ahead of us, and our results to date have positioned us to successfully continue on this trend moving forward. We're poised for continued growth in 2026 with double-digit increases in policies in force and gross written premiums in our expanding footprint outside of Florida. Our strategic diversification will establish Slide as a leader across multiple regions in catastrophe-exposed homeowners insurance, fueling our growth engine for years to come and delivering sustained long-term success and shareholder value. In the fourth quarter, we repurchased $20 million in equity at an average price of $16.38 a share. On our prior earnings call, I noted that Slide's earnings and balance sheet growth are substantially outpacing our prior estimates, and this trend accelerated in the fourth quarter as evidenced by $170 million in net income in the quarter versus our guidance of $115 million to $125 million. I expect our earnings to be on a strong upward trend through 2026, and we will deploy excess capital in a manner that increases shareholder value. At current trading levels, I fully expect to opportunistically repurchase our stock throughout 2026 as the company has more than enough capital to meet our business plan for growth while retiring undervalued common stock. There are several reasons why we intend to continue our share repurchases in 2026. First, as mentioned, Slide has is an abundance of capital at its disposal and the earnings power of the business is significantly outpacing our prior estimates. We expect that 2026 will produce gross written premiums in the range of $1.85 billion to $1.95 billion and after-tax net income between $455 million and $470 million. As of yesterday's closing price, Slide is trading at less than 2x book value and a sub-5 trailing P/E ratio despite producing a 57% return on equity in the prior year. Our current forward PE ratio for 2026 is similar to our trailing metrics. At these levels, it is very accretive for Slide to retire common stock that is undervalued until a more normalized valuation is reflected in our share price. Our incredible success is a team effort, and I would be remiss if I did not thank all of our employees for their relentless efforts to make Slide in the company it is today. I'm extremely proud to work with you and truly appreciate your sacrifice for our company. We appreciate your continued support of Slide. And with that, I'll now turn the call over to Andy Omiridis to provide some color on our excellent fourth quarter and full year 2025.

Thank you, Bruce, and good morning to everyone. For the fourth quarter of 2025, gross premiums written were $618.5 million, a 57% increase compared to $394.6 million in the prior year period. Strong top line growth was primarily driven by the acquisition of additional policies from Citizens as well as relatively consistent year-over-year renewal rates of existing written policies and a strong increase in commercial residential premiums. At the end of the quarter, we had approximately 493,500 policies in force, up 44% from 1 year ago and up 40% from September 30. In the fourth quarter, Slide assumed approximately 152,000 policies from Citizens. As a reminder, all Citizens policies assumed have different renewal dates, assume premium and renewal premium, which can create lumpiness in how premiums earn through in forward quarters. Total revenue of $347 million increased 46% compared to $238.5 million in the prior year period, primarily attributable to the assumption of policies from Citizens and renewals of existing policies driving an increase in net premiums earned. During the fourth quarter, net losses and loss adjustment expenses incurred were $27.1 million with no losses from significant storms. This compared to $59.1 million in the year ago quarter, which included catastrophe losses of $32.1 million from Hurricane Debby, Helene and Milton. The company takes a conservative approach to reserving for losses. Our loss ratio for the fourth quarter of 2025 improved to 8.3% compared to 26.3% in the prior year period, reflecting favorable prior year development. Policy acquisition and other underwriting expenses in the quarter were $42.3 million compared to $29.1 million in the prior year period. The increase was primarily attributable to greater policies in force on a year-over-year basis and greater investments in technology. G&A expenses were $51.4 million compared to $45.7 million in the prior year period due primarily to growth in staffing to support the company's continued expansion. Our combined ratio improved to 38% compared to 60.9% in the prior year period, primarily as a result of increased net premiums earned from the growth of policies in force, a decrease in cat losses from both hurricane and non-hurricane weather activity and release of reserves related to non-cat events. Net income more than doubled to $170.4 million compared to $75.1 million in the prior year period. Diluted earnings per share for the fourth quarter of 2025 was $1.23 per share. Return on equity was 16.4% during the fourth quarter and 57.4% for the full year. Turning to our balance sheet. As of December 31, 2025, we had cash and cash equivalents of $1.2 billion, an additional $481.8 million of restricted cash held for the benefit of our captive reinsurance sales, invested assets of $593.7 million and outstanding long-term debt of $33.7 million. We believe our balance sheet will enable the company to continue to profitably grow our business over the long term. In the fourth quarter, we repurchased approximately 1.2 million shares at a weighted average price of $16.38. There is approximately $80 million available under our $120 million share repurchase program. I would like to give further detail on the 2026 guidance that Bruce provided. As Bruce stated, 2025 marked a key evolution for Slide as we scaled rapidly through Citizens depopulation and began building our presence in additional catastrophe prone areas outside of Florida. In 2026, Slide expects to generate gross written premiums in the range of $1.85 billion to $1.95 billion, and the company expects to generate net income in the range of $455 million to $470 million. For 2026, top line growth is expected to be driven primarily by sustained organic expansion, including double-digit increases in policies in force and premium outside of Florida, complemented by selective growth opportunities within Florida that reach our return threshold. We expect our established presence in Florida to continue to flourish while we grow into a geographically diversified leader in catastrophe-exposed homeowners insurance. With that, I thank you for your time, and we will now open up the call for Q&A. Operator?

[Operator Instructions] Our first question is from Tommy McJoynt with KBW.

The first one here is just on your opportunity going forward with continuous Citizens takeouts through the depopulation efforts. We can see that the number of policies that are with Citizens have come down a lot over the past couple of years. So can you talk about what we should expect going forward? Is there a constant sort of churn within Citizens that policies continuously get added and then become available for depopulation? Or is the opportunity set just a lot more limited going forward?

Good question, Tommy. The answer is both. So you have front-end voluntary underwriting taking place to Citizens are adding about 8,000 policies a month. Now not all of those policies are viable. But let's just say as a baseline number, there's 100,000 policies that they're adding to their portfolio annually. And then you have to look at the existing policies. The main driver as to whether or not those policies are a good fit is going to be the reinsurance cost. And so we don't know what the reinsurance market is going to do this year. By all indications, it appears to be a down pricing market, which is good for the Florida consumer. But that would open up a new tranche of policies that would look good to us. So we do think that there is ongoing opportunities at Citizens. I cannot quantify what that is at this point in time. But suffice to say, it is a smaller opportunity than what we have seen in prior years.

And then just second topic to talk about here. You alluded to it there briefly. We've certainly seen the 1/1 headlines about what happened to property cat reinsurance rates coming down quite significantly at the January 1 renewals. Can you talk about your expectations and what's embedded in your guidance for your cost of reinsurance? And just remind us sort of when it renews, is it 6/1 focused? How much of the program renews each year versus multiyear? Yes, just talk about that.

Yes. Another really good question. So we have not received quotes yet from our traditional reinsurance markets. Our reinsurance submission went out this week. So we expect to have a little better understanding of where pricing is going to fall in the next couple of months. But I will note that we did recently place a large ILS bond. It's about $320 million of limit. And that bond risk-adjusted year-over-year was down over 20%. Now I don't know if that's going to be where the traditional reinsurers come in. So I'll just avoid any guidance on that point. Suffice to say, our guidance does have a reduction in reinsurance expenses embedded within it. But we don't know the extent of what that reduction will look like until we get a little further along prior to our 6/1 renewal.

Our next question is from Paul Newsome with Piper Sandler.

I wanted to see if you had a few more thoughts on the competitive environment. We hear just a lot about price declines, particularly in Florida, but even in other areas. And I was wondering, in your view over the last quarter, has it changed materially? Has it -- how has this affected where you're thinking about growing geographically or any other strategic changes that the environment may have led you to adjust your situation?

Yes. I mean, Paul, it's a great question. It's one I get often. We're really not seeing big swings in pricing. There are a lot of newcos that have come in very thinly capitalized. They came in thinking they'd get this great opportunity from Citizens that isn't there anymore for them in the scale that they were planning. They could always reduce rates a little bit to try to get an underwriting advantage, but that would be extremely detrimental to their bottom line results and balance sheet. Right now, the market is trending a little lower, but I'm not seeing big swings. We'll know more once we see what reinsurance pricing looks like because 70% of our premium dollar or more is actually going toward the reinsurance component in the policy premium. So that's the big needle mover, and we need a few more months to go through that renewal process to get a better understanding of what that looks like and its potential impact on rate. But I do feel confident in stating a couple of things around reinsurance. First, I believe that there is -- even with the reinsurance price decline, margins are going to be maintained. They go lockstep with one another. So bottom line numbers should be unaffected by a rate decrease. Second, there are tremendous reinsurance synergies to be gained by expanding our footprint outside of Florida and South Carolina. And that is what we are really focused on more than anything else. We expect to launch California on excess of surplus lines in the next 30 to 60 days. We are on track to launch Northeastern states, New York, New Jersey and later this year, Rhode Island. And there are a lot of other E&S pockets out there that we are going to launch later this year. So we think that even with a decline, potentially a small one in rates this year, we still believe we're on an upward momentum trend for top line growth given the diversification, new state launches and our underwriting at slide has only accelerated over the last 9 months within Florida. And so that's a good trend to have at this point.

Is your expectation for lower reinsurance costs in guidance prospectively mainly a function of the diversification benefit that you would get when you move outside of Florida? Or is it you're actually thinking that you've got a little bit of expectation that the actual ultimate sort of apples-to-apples prices could fall?

It's both. I mean, definitely, the latter risk-adjusted rates, I believe, will come down in 2026. I just can't comment on what the magnitude of that is going to be and certainly don't want to be in a public forum negotiating what I think that's going to be with our reinsurance partners. But I do think risk-adjusted rates are lower and our cat bond really reflects that. But you also pick up overall diversification benefit on your reinsurance tower as you spread your footprint across a wider geography.

[Operator Instructions] Our next question is from Alex Scott with Barclays.

First one I have for you is on some of the home affordability initiatives that are out there. Could you talk about what you're seeing in the market and how, if at all, some of that could or may not affect your plans, just given how strong your profitability has been?

Yes. I think you're probably referencing the comments by Governor Hochul in New York about 30 days ago. Let's just hope that does not happen. I mean these coastal catastrophe-exposed areas don't tend to fare well when there is a profitability cap. And the reason for that is you have no downside on losses, but you have an upside on profitability. And you really need both of those to be free market exercises because over the long haul, you're going to have some down years there on losses, you're going to have some up years, you average them together, and it becomes a very sustainable model. We'll see what the New York legislature puts in place. We're definitely focused on it because we plan on launching New York very soon. Suffice to say that once we get a better understanding of the proposals, we can give more clear guidance and comments around that market in particular. But I do firmly believe that they put in profitability gaps in New York, you're actually going to see insurers pull out of the state and create an even bigger crisis. And a great example of that would be the California admitted market. You can see it on full display. So time will tell. But right now, I don't have any other insight other than she made some comments, the governor about capping profitability of homeowners companies historically.

Yes. That's helpful. And a good segue into my next question, which was potential for the E&S market in California. I know you mentioned you'd be launching that soon. And I appreciate you probably don't want to provide like break that out in the guidance, but I wanted to get a feel for how impactful you expect that to be relative to the guidance you've given. Is that a significant contributor to your 2026 premium growth?

It's a part of it. I wouldn't say it's significant, but it is definitely a part of it. What I will say is that within our guidance expectations, we do have a premium number that I'm not going to announce publicly that we expect to achieve in California this year. But if I were taking the over under on that number, I'd probably take the over. I think the opportunity there is tremendous. It's the largest insurance state in the country. There is still an admitted insurance crisis in California. Their plan is still adding a tremendous amount of exposure. So the opportunity is still very much attractive. And I think that there is a strong likelihood that we will outperform our internal expectations in California this year.

Our next question is from Matt Carletti with Citizens.

Just a numbers question for me. Andy, in your comments, you mentioned there were some favorable prior period development and obviously low cat. I know there's no named storm. Do you have -- can you provide those numbers, just what the dollar impact of favorable was as well as just weather cats in the quarter?

Sure. So the number was $27.5 million, Matt, for the quarter. And I'm sure what was -- because it was a little muffled. What was the rest of your inquiry?

Just the cats in the quarter. I know there wasn't any named storm, but was there kind of other weather that was on the cat.

No, there really wasn't any -- it's literally it was -- and the breakdown was -- because we have disclosed it in the K, which comes out on Friday, it's '24, '23 and '22, but it's all prior year development and no cat changes our activity.

Yes. And typically, Matt, I'll add that fourth quarter is generally the best loss ratio quarter of the year. Provided you don't have a hurricane in October, loss ratios are always extremely low in Florida in the fourth quarter. So we're not really surprised by the result, but we did have the favorable development, PYD year-over-year of $27.5 million, which helped our numbers some. But I mean, we still produced, call it, $150 million in net income even without that.

There are no further questions at this time. I would like to hand the floor back over to Bruce Lucas for any closing comments.

I would just like to thank everyone for participating on today's earnings call.