Ategrity Specialty Holdings LLC (NYSE:ASIC) Q4 2025 Earnings Call Transcript

Ategrity Specialty Holdings LLC (NYSE:ASIC) Q4 2025 Earnings Call Transcript February 19, 2026

Ategrity Specialty Holdings LLC beats earnings expectations. Reported EPS is $0.508, expectations were $0.35.

Operator: Good afternoon, everyone, and thank you for joining us today for Ategrity’s Fourth Quarter Fiscal Year 2025 Earnings Results Conference Call. Speaking today are: Justin Cohen, Chief Executive Officer; Chris Schenk, President and Chief Underwriting Officer; and Neelam Patel, Chief Financial Officer. After Justin, Chris and Neelam have made their formal remarks, we will open the call to questions. [Operator Instructions] Before we begin, I would like to mention that certain matters discussed in today’s conference call are forward-looking statements relating to future events, management’s plans and objectives for the business and the future financial performance of the company that are subject to risks and uncertainties.

Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are referred to in our press release issued today, our final prospectus and other filings filed with the SEC. We do not undertake any obligation to update the forward-looking statements made today. Finally, the speakers may refer to certain adjusted or non-GAAP financial measures on this call. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is also available in our press release issued today, a copy of which may be obtained by visiting the Investor Relations website at investors.ategrity.com. And with that, I will now turn the call over to Justin.

Justin Cohen: Good evening, and thank you all for joining Ategrity’s fourth quarter earnings call. This is Justin Cohen, and I’m joined here today by Chris Schenk, our President and Chief Underwriting Officer; and Neelam Patel, our CFO. Ategrity once again delivered record results in Q4, demonstrating strength on both the top and bottom line. Gross written premiums grew 30% year-over-year, exceeding our guidance of outperforming E&S industry growth by 20 percentage points. Our 84.9% combined ratio in the quarter is a new record for the company. We continue to profitably grow our market share in the small and midsized E&S space because of the 3 key factors. First, in our core specialty verticals, we have identified market gaps and built targeted products around them, producing structural growth while maintaining strict technical discipline.

Second, we have grown our distribution network of nearly 600 partners. Through tight alignment of product and execution, we have driven strong submission volume, including nearly 90% year-over-year growth this quarter. Third, we have engineered our workflows and automation to deliver speed with precision, responding quickly to brokers while maintaining rigorous standards at scale. Together, these factors have driven both growth and margin expansion in a moderating E&S market. Turning to additional dynamics from the quarter. In property, we grew 18% year-over-year with strong sequential acceleration in stark contrast to the overall property market, which contracted as a whole. By focusing on small- and medium-sized attritional risks where we have an underwriting advantage, we positioned ourselves away from the more cyclical large account catastrophe-exposed market.

Our 84.9% combined ratio reflects favorable loss experience, business mix and operating leverage. Net earned premiums grew 25 percentage points faster than operating expenses net of fees, driving a 6.1 percentage point improvement in our overall expense ratio even as we continue to invest in growth initiatives and technology. On technology, in recent weeks, the capital markets have focused on the risks of AI to the specialty insurance industry. At Ategrity, over 2 years ago, we developed a clear road map for integrating AI and made critical investments in that direction. Those investments have now been operationalized, and we will provide some additional context later in the call. Finally, stepping back to broader E&S market dynamics, while industry growth has decelerated, it is less the case in our small and midsized segment.

Competitive intensity increased marginally again this quarter, but we continue to stand out through our business model and execution, driving growth in our market share. With that, I will turn it over to Neelam to discuss the financial results.

Neelam Patel: Thanks, Justin. We delivered another strong quarter with adjusted net income of $25.4 million, up from $22.7 million in the same quarter last year, driven by top line growth, improving margins and continued strength in our investment income. Our gross written premiums were up 30% in the quarter, and the growth was broad-based. Casualty premiums grew 38% and property premiums grew 18%. Net written premiums increased 44%, which reflects higher retention year-over-year. Net earned premiums were up 34%, which is less than net written premium growth because of the natural lagged recognition of our growth trajectory. Net earned premium growth accelerated sequentially due to our expanded premium base and the impact of the reduction in our quota share reinsurance in 2025.

Our fee income was $2.3 million compared to $0.4 million a year ago, reflecting standard policy fees implemented in 2025. Our underwriting income for the quarter was $15.5 million, up 160% year-over-year. That translates into a combined ratio of 84.9% compared to 92.3% last year due to reductions in both our loss and expense ratios. The loss ratio came in at 57.1%, down 1.2 points year-over-year driven by strong underlying results in our property business. We again had no prior year development. Catastrophe losses were 3.2% of net earned premium, down from 3.7% last year due to very few catastrophe events in the fourth quarter. On expenses, the overall expense ratio improved 6.1 points to 27.8%. Operating expense was 10.5% of net earned premiums, down 2.4 points year-over-year and lower than Q2 and Q3 of 2025.

That improvement was driven by earned premiums growing faster than operating expenses, along with the benefit of higher fee income. Policy acquisition costs as a percent of net earned premiums declined to 17.3% from 21%. The improvement was primarily mix driven as growth has been concentrated in lines of business carrying lower acquisition costs and higher ceding commissions. Moving on to investment results. Net investment income was $11.6 million, up from $6.3 million last year, reflecting a larger investment portfolio. Realized and unrealized gains were $6.7 million, supported by strong results in our utility and infrastructure portfolio. Our effective tax rate was 20.2%, bringing net income to $25.3 million. Adjusted net income was $25.4 million or $0.51 per diluted share.

Turning to the balance sheet. Cash and investments increased by $45 million from the third quarter to $1.1 billion, reflecting strong operating cash flow. Book value increased by $26 million, driven by retained earnings. Our book value per share ended the quarter at $12.78, up 21% since the IPO. Overall, the quarter reflects strong growth, underwriting discipline and operating leverage. With that, I’ll turn it over to Chris to discuss underwriting and operating performance.

Chris Schenk: Thanks, Neelam. With 30% growth and an 84.9% combined ratio, this was another record quarter for Ategrity. Core operating metrics, including retention, hit ratios, submissions and rate change were in line with or above our plan. And our cost of product indicators, including frequency and severity signals, continue to track favorably. These results reflect the strength of our productionized underwriting model, which is built on vertical specialization, deep expertise and structured underwriting. I want to highlight 3 drivers behind our results. First, we have capitalized on growth opportunities that have been overlooked by peers. These are differentiated pathways for growth that we can uniquely identify because we specialize in specific verticals and micro segments.

Approximately half of our growth this quarter came from strategic initiatives like Project Heartland, retail trade and our multifamily developer product. In Property, we exited 2025 with premium growth and renewal rate increases. We grew 18%, while many peers contracted. This growth came from states that are often overlooked like North Dakota, Ohio and Nebraska. In property, we also achieved full year rate change in the high single digits. Turning to Casualty. There, we grew 38% and achieved low teens full year rate increases. Our management and professional liability lines were strong contributor with premium more than tripling despite broader softening conditions. Second, we achieved greater wallet share with our partners. Notably, our 2023 and 2024 distribution cohorts delivered over 100% same-store growth.

These partners had strong renewals and increased new business placement with Ategrity. Meanwhile, our 2025 cohort added 25% more new partners to our distribution network, and we are seeing strong early signs of engagement. Our submissions increased roughly 90% year-over-year. We achieved premium growth by quoting more business from a larger opportunity set while maintaining pricing discipline. Third, our underwriting platform is driving speed and operating leverage. We are delivering fast, predictable and market-ready quotes without diluting technical rigor. In our brokerage channel, policy count increased 3.5x along record high transaction volumes. Our underwriting efficiency more than doubled. We produced record high quotes while reducing turnaround times.

Process standardization and tech automation allowed us to absorb that growth while driving operating leverage. This contributed to a 2.4-point reduction in our operating expense ratio year-over-year. Looking ahead to 2026, we are executing on initiatives for the next wave of growth. This includes intensifying our regional strategies. In Florida, we launched a brokerage package product supported by a dedicated underwriting team. It is one of the few products of its kind in the market. In New England, we are stepping up to fill a market gap with a playbook for older buildings and dense mixed-use exposures. And in the Midwest, we are doubling down on Project Heartland with a comprehensive branded product. These growth pathways are unique and should allow us to continue to outpace the market.

Finally, I want to build on Justin’s earlier comments on AI. We have been executing on a distinct road map for over 2 years now. AI has already been deployed in our back office, improving risk qualification, data preparation and parameter optimization. In 2026, we are now embedding AI capabilities directly into underwriting workflows with solutions that were built by our in-house innovation lab. Our underwriting model is perfect for implementing AI because it is structured and built on technical pricing with clear risk selection criteria. And the way we select risk and deviate from technical rates is very prescriptive. And as such, we can integrate AI with disciplined guardrails and extract real economic value. We see this as a step change for the company.

Much of the heavy lifting has been done, but we are taking a responsible approach and we’ll be testing and ramping deployment over the course of this year. We expect this to drive our expense ratio lower once it is fully deployed this year. With that, I’ll turn it back to Justin for closing comments.

Justin Cohen: Thanks, Chris. This was a strong quarter by any measure. We grew top line, expanded margins and continued to deepen distribution relationships, all while maintaining underwriting discipline in a moderating market. Our performance reflects a purpose-built model that is being executed with rigor. With that context, let me turn to our outlook. Our guidance for Q1 ’26, consistent with last quarter’s guidance is for a growth rate that is 20 percentage points above E&S market growth, reflecting more market share gains and the strength of our approach. Further, we are anticipating a combined ratio just below 90%. One last item to cover. Today, we filed an 8-K announcing a share repurchase program, and we are happy to address any questions on that in the Q&A. With that, we thank you for your time listening. And operator, can you please open it up for questions?

Q&A Session

Operator: [Operator Instructions] All right. It looks like our first question today comes from the line of Hristian Getsov with Wells Fargo.

Hristian Getsov: My first question is, can you parse out the rate environment you’re seeing, particularly in casualty and property separately relative to loss trends? And is it safe to assume just given the current rate environment, we should see your mix continue to shift towards casualty in 2026?

Justin Cohen: Chris?

Chris Schenk: Yes. So I’ll start with casualty. The rating environment there is still strong in our verticals. There’s a good deal of demand. We’re seeing that come through in submission flow, and we’re holding firm on pricing. Our technical rates are on a prospective basis. So we have achieved rates above trend, and we don’t see that slowing down in the short term. However, given market dynamics and given where we’re competing, we have left the flexibility to protect our renewals if there’s a shift in the market on all of our lines. So there should — if there’s anything that will — if there’s any slowdown in rates, that will be from that source. On property, we are playing in a very — on a very differentiated play field — playing field in the Midwest.

We’re not seeing a lot of competition going after the type of business we’re winning. So we are able to get the rates that we require for that. We have priced in for tariffs and other factors that are affecting severity. So we are rate adequate on property also. And we have achieved rates above trend.

Justin Cohen: And on mix, to your question on mix, we said in the past that 60% to 70% casualty is the target range for where we expect to be on casualty. We were at 67% this quarter, and we will continue to be within the range, and we wouldn’t — shouldn’t expect us to deviate from there. So around where we are is a strong expectation for mix.

Hristian Getsov: Got it. And then on Project Heartland, I guess, can you guys quantify how much runway there is in expanding distribution? And any quantification of how much this initiative has added to premium growth in the year?

Chris Schenk: Yes. So there’s 2 parts to Project Heartland. It is — there’s an appointment component, adding more partners, and we are nearing the end of that phase. It’s more about getting more wallet share from partners. So we’re just at the beginning of that phase. That is a — we feel like the investments we have made in the Midwest along — not just in distribution, but in terms of developing products and really making a unique play for — in our verticals is really what’s allowing us to stand out. So we see a huge runway for growth. As I mentioned in the comments, we are launching a Heartland product that will allow us to stand out in the market. It’s really a marketing tactic, but it’s also a way for our coverage and our offering to be instantly recognized. That’s going to be the next phase of our efforts there. It does present to us much more — a longer runway for growth.

Operator: And our next question comes from the line of Pablo Singzon with JPMorgan.

Pablo Singzon: So many other insurance companies, some of them are quite large with well-established platforms have shown a strong interest in small commercial E&S and have publicly disclosed growth metrics that are quite impressive. So the question is, do you see any evidence of them showing up in the markets where you compete in?

Justin Cohen: You’re asking it, have there been new players coming in?

Pablo Singzon: Right. And I’m thinking specifically without naming names, like large companies that have an intense interest in small commercial E&S.

Justin Cohen: We have not experienced any pressure from that and have not seen that. You saw some of our metrics as they emerge from this quarter, and I think it demonstrates that we are gaining traction ourselves, and we have not experienced that type of competition.

Pablo Singzon: Okay. And then second question, just on the guidance. Last I checked, I think E&S market is running high single digits. So your 20-plus-percent guidance suggests a high-20s growth rate for 1Q, Justin? Is that a [indiscernible]

Justin Cohen: Yes. We’ve been very deliberate about shifting our guidance to a growth rate above the market. That’s because we don’t forecast the market. That’s not how we spend our efforts, and we don’t think that’s — that would be productive for us to describe our guesses on that. But I think, if you think about where we — based on what we’ve heard and seen in the market, we think that maybe mid- to high single digits would be an appropriate place to benchmark that.

Operator: And our next question comes from the line of Andrew Kligerman with TD Securities.

Andrew Kligerman: 84.9%, you mentioned that it was your record combined ratio. And I’m wondering, you’ve put up some pretty good numbers for the last few years. Could you — and you had no prior year development as well, I think Neelam said on the call. Could you talk a little bit about your reserving methodology? How much, if any, conservatism you’re putting in those numbers? Are there — maybe talk a little bit about that.

Justin Cohen: Andrew, our reserves are in a very strong position overall, both in property and casualty. You heard Chris mention in the prepared remarks that the early indicators for the recent years are coming in very strong. And so we are highly confident in our reserves there. And then in addition, we really had a low quarter of losses and frequency and severity in property, but we have booked losses — we have booked reserves in anticipation of maybe late reporting. So we think that both property and casualty are in strong position.

Andrew Kligerman: That’s very helpful. And I want to talk a little bit — I’m on the road, so I did not see the 8-K. It’s great to hear about a buyback authorization. Could you talk about the amount and the — the want to administer it to really utilize it? And then just in general, could you size up redeployable capital? I know you have de minimis leverage. Do you have the capital on balance sheet to meet this really robust growth of 30% a quarter?

Justin Cohen: Yes. So Andrew, the size of it is $50 million. And the rationale is that we have a — we’re a company that has increased its book value per share since the IPO of about 21%. We trade at 9x consensus forward, and we’ve generated excess capital in just the quarters that we’ve been talking about — in the last 3 quarters that we’ve been reporting to you. So we believe we’re supposed to buy the stock here. I will say we are committed to increasing the float over time. It will just be at a different price. So in terms of excess capital, if you look back to the amounts that we have generated in just the past 3 quarters, that’s actually a fairly sizable number, and it positions us well for deploying the capital in a buyback as well as continuing to grow. So the capital outlook and the growth trajectory with respect to deploying capital has not changed.

Operator: And our next question comes from the line of Matthew Heimermann with Citi.

Matthew Heimermann: A couple of questions. One would be just with the AI in the back office already implemented. I’d be curious with respect to the claims organization, if that has been helping at all — excuse me, LAE costs, whether allocated or unallocated?

Justin Cohen: With respect to AI, we have seen the opportunity set, first and foremost, for us on the underwriting side. So we have not deployed it in a meaningful way yet in the claims side, if you’re referring to that. Did you have a follow-up there?

Matthew Heimermann: Yes. So well, let’s — I have 2 follow-ups to that. One would be just on the — what are, do you think, the use cases for your company on the claims side? And I’d be curious about that. And just part of that is just maybe my own confusion around what’s more back office versus front-of-the house function. So maybe you could actually roll through what you consider to be in back office just so we can maybe level set with that as well?

Justin Cohen: Just on claims, one of the things that’s clear is there is a processing component to incoming claims. And so deploying it there as we do on our intake process in submissions that is — that will ultimately be an easy win. But we’re not, on this call, going to describe how we’re going to be deploying claims in AI. Chris, do you want to talk a little bit about where you’re at?

Chris Schenk: Yes. Just on what’s back office in the context of my comments, we consider that to be everything that happens before an account gets to an underwriter’s desk. So intake to data prep to prequalification. So we have been using AI for prequalification. That allows us to screen out accounts that are not in appetite. The next phase is with risk assessment once the account is on the underwriter’s desk. So there, there’s a spectrum of utilization. It could range from everything from full automation for simple accounts to partial automation of the risk assessment. So this is an individual account level underwriting, where we assess for a specific criteria. Because our model is structured, we are able to identify use cases that are very value-added in multiple ways, one, in making a clearer assessment, a more quantitative assessment; and two, in driving a better quality decision if it’s not a purely quantitative automated assessment.

If it goes to the underwriter’s judgment, [ sort of ] guiding that judgment is the second and third use case there.

Operator: All right. Thank you so much for the question, Matt. And that does conclude our Q&A session for today. So I will now turn the call back over to Justin for closing remarks. Justin?

Justin Cohen: Well, we thank you all very much for listening and for those questions, and we look forward to seeing you in the weeks and months ahead. Thank you very much.