Ategrity Specialty Holdings LLC Q3 FY2025 earnings call

• Top line growth: 30% increase in gross written premiums supported by 70% submission growth, with a large distribution network driving deeper engagement. • Operating leverage: Operating expense ratio improved 2.7 percentage points due to prior investments in infrastructure and process efficiency, with expense growth moderating while earned premiums accelerated. • Improved economics: Policy acquisition ratio improved 1.8 percentage points by increasing premiums in the brokerage channel with lower acquisition costs. Underwriting income up 208% YOY, combined ratio 88.7% due to reduced loss and expense ratios. • Underwriting and operating performance: Property book had lower frequency and severity, casualty losses developing favorably, and efficiency gains across the business. Initiatives like digital brokerage and real estate vertical product launched, driving superior policy acquisition economics.

Ategrity delivered record results in the third quarter. Gross written premiums grew 30% year-over-year, with casualty premiums increasing by 41% and property premiums up 11%. The combined ratio improved to 88.7%, and adjusted net income was $22.8 million, representing 78% year-over-year growth. Net written premiums grew by 42%, net earned premiums by 29%, and fee income was $2.2 million. Underwriting income was $10.6 million, up nearly 208% YOY, with a loss ratio of 60% and expense ratio of 28.7%. Investment income was $11 million, up from $6.8 million YOY, and realized/unrealized gains contributed $9.2 million.

• Expect roughly 30% year-over-year growth in Q4 based on partner engagement, submission flow, and delivery capabilities. • Aiming to deliver a 90% combined ratio in the fourth quarter. • Interest in increasing public float through open market purchases and seeking investor feedback on balancing insider support with public float increase.

• Disappearance of nano accounts (sub-$1,000 pricing) as they move to admitted space, with low economics and volatility. • Conservatism in property reserving, with actuarial-based assessment of late reported claims. • Competitive intensity in the E&S market, though small- and medium-sized space remains rational.

Q: On the property market and tech innovations, what's seen in the environment and future tech plans?

A: Justin and Chris discussed property rate acceleration and ongoing tech innovations like an innovation lab integrating solutions into one platform for efficient delivery.

Q: Impact of economic health on clients?

A: Justin and Chris noted disappearance of nano accounts, but no material change in end clients' financial health, with midsized middle market clients showing some preference shifts.

Q: Fourth quarter guide and fee income modeling?

A: Expect 90% combined ratio, fee income variable by business type, with $1.5 million expected in Q4 and direct third-party expenses associated.

Q: Loss ratio conservatism in property?

A: Conservatism in property reserving is actuarial-based, with claim-by-claim and trend analysis, rolling over and not a one-off event.

Q: Distribution expansion and pricing outlook?

A: Distribution expansion across brokers/agents and growth initiatives, with pricing tied to coverage requirements and lending mandates, not a soft market in mid space due to lending needs.