Accelerant Holdings Q3 FY2025 earnings call

• Company Overview: Accelerant is a 2-sided platform with supply side (specialty underwriters) and demand side (risk capital partners). It focuses on exchange written premium, member count, net revenue retention on the supply side, and gross loss ratio, third-party direct written premium on the demand side.
• Q3 Performance: Exchange written premium was $1.04 billion, up 17% year-over-year (29% excluding atypical members). Member count reached 265 with 17 net additions. Net revenue retention was 135%. Gross loss ratio was 50%, and third-party direct written premium was $336 million (32% of exchange written premium).
• Third-Party Insurers: Aims for 2/3 of the portfolio to be written by third-party insurance companies. Signed 4 new risk exchange insurers including Lloyd's and Ozark, expects $2.1 billion in premium with third-party insurers in 2026.
• Data and Analytics: Ingested more third-party exposure data, enhancing risk scoring models, driving organic growth.
• Financials: Adjusted EBITDA was $105 million, up over 300% year-over-year. Adjusted net income was $80 million, and revenue was $267 million, up 74% year-over-year.

Exchange Services: Revenue was $85 million, growing 34% year-over-year, with adjusted EBITDA of $59 million at a 70% margin. MGA Operations: Revenue was $81 million (including $30 million from investment gains, underlying revenue $51 million, growing 18% year-over-year), with adjusted EBITDA of $45 million (underlying $15 million) at a 30% margin. Underwriting: Revenue was $118 million, with adjusted EBITDA of $18 million, and a gross loss ratio of 50.1%. Revenue contribution: Exchange Services likely contributes a significant portion via the 8% fee on premium, MGA Operations from ownership stakes in MGAs, and Underwriting from net earned premium retention.

• Q4 2025: Expect Exchange Written Premium of $1.06 billion to $1.1 billion, third-party direct written premium of $415 million to $430 million, and adjusted EBITDA of $57 million to $62 million.
• Full Year 2026: Expect at least $5 billion in exchange written premium, $2.1 billion in third-party direct written premium, and $269 million in adjusted EBITDA. Net retention expected to be approximately 10% in 2026.

• Member Transitions: Delays in member transitions are affecting third-party direct written premium projections, though steps are being taken to address this.
• Regulatory and Market Risks: Changes in regulatory environment or market conditions could impact portfolio performance and growth.
• Dependency on Key Partners: Reliance on key risk capital partners and third-party insurers could pose risks if relationships change.

Q: On the guide, asked about expense side with moving business to third parties.

A: Jay Green mentioned some cost shift but expects margins to hold fairly constant in the near term.

Q: About growth outlook and EBITDA vs premium growth.

A: Jay and Ryan explained margin maintenance as business shifts to fee-based segments like Exchange Services and MGA Operations.

Q: About Lloyd's relationship.

A: Jeffrey Radke discussed a strong relationship with Lloyd's, beneficial for members due to its credit quality and licenses.

Q: On the medium-term guide of 2/3 third party.

A: Jeffrey Radke stated it's not a change in view, with diversification of third-party insurers continuing.

Q: On expense ratio in Underwriting segment.

A: Jay Green mentioned factors like favorable gross loss ratio, DAC, acquisition costs, and expected cost migration as business moves to third-party insurers, but expects expense ratio to hold relatively consistent for now.