NP: Flood of Upside; Initiating Coverage with an Overweight Rating

Research evidence excerpt

NP: Flood of Upside; Initiating Coverage with an Overweight Rating

Neptune Insurance Holdings, Inc. Equity Research

Bull Vs Bear Drivers

Exhibit 2 - Bull vs Bear

BULLISH BEARISH

Bullish Drivers Bearish Drivers

Key Metrics Our Rationale Key Metrics Our Rationale

They're multiple NFIP / FEMA regulation changes that

should serve as positive catalysts for NP including 1) NP's recent secondary only improved its float and still

accelerated Risk 2.0 rollout for the NFIP vs current 18.0% remains relatively low at ~22%. Over time, we would

Potential NFIP / FEMA Regulatory Changes capped annual increase, which should push more policies Low Float expect the float to increase but in the near-to-

into the private market, 2) NFIP stops new business and intermediate term this could cause volatility relative to the

3) there is an accelerated re-zoning of flood zones, which performance of its peers.

could add 16m properties to SFHA

We believe NP should warrant a premium multiple Although flood insurance is a specialized niche, we could

particularly in a softer P&C pricing environment as flood see potential for increased competition over time as

Not Tied To P&C Cycle insurance is not tied to the broader P&C cycle and should Increased Competition From Carriers carriers seek to write their own flood business particularly

continue to show strong top-line growth despite pricing if opportunity arises from NFIP pullback / regulatory

dynamics. changes.

Properties in flood zones should continue to grow as

rezoning continues which should force homeowners to

buy flood insurance (if they have a mortgage) and could Given NP's position as an MGA, the company relies on

see discretionary buying outside of flood zones (60% of capacity providers to be able to continue to grow and any