ARX — Accelerant Holdings

Summary of Accelerant Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Exchange Written Premium: $1.04 billion, a 17% year-over-year increase (29% growth when adjusted for two atypical members).
• Member Count: Increased to 265, with 17 new members added in the quarter.
• Net Revenue Retention: 135%, indicating strong member growth and retention.
• Gross Loss Ratio: 50%, reflecting stable performance across the portfolio.
• Net Retention: 7% for the quarter.
• Third-Party Direct Written Premium: $336 million, representing 32% of exchange written premium, up from 27% in the previous quarter.
• Revenue: $267 million, a 74% increase year-over-year.
• Adjusted EBITDA: $105 million, over 300% growth year-over-year, with an adjusted EBITDA margin of 39%.
• Adjusted Net Income: $80 million, equating to $0.38 per share.

2. Strategic Updates and Business Highlights

• Accelerant is focusing on expanding its network of third-party insurers, with a goal of having two-thirds of its portfolio written by third-party companies in the medium term (3-5 years).
• The company has onboarded new risk exchange insurers, including a Lloyd's facility, enhancing its underwriting capabilities and market presence.
• Accelerant is leveraging its data capabilities to refine risk models, which has contributed to its strong gross loss ratios and overall profitability.
• The company aims to maintain a high Net Promoter Score (NPS) and continues to attract top managing general agents (MGAs).

3. Forward Guidance and Outlook

• Q4 2025 Guidance: Expected exchange written premium of $1.06 billion to $1.1 billion, with third-party direct written premium projected at $415 million to $430 million.
• Full Year 2026 Guidance: Anticipates at least $5 billion in exchange written premium and $2.1 billion in third-party direct written premium.
• Adjusted EBITDA for 2026 is projected at $269 million.

4. Bad News, Challenges, or Points of Concern

• The company is experiencing delays in member transitions, impacting the expected growth of third-party direct written premium.
• The transition to third-party insurers may lead to a moderation in gross written premium growth over time.
• The potential for fluctuations in net retention and the impact of moving business from owned insurance companies to third-party insurers could affect revenue recognition.
• The company has incurred significant IPO-related expenses, which are non-cash and non-dilutive but still represent a substantial figure impacting net income.

5. Notable Q&A Insights

• Management clarified that while the transition to third-party insurers will moderate growth on the Accelerant side, it is a strategic move to enhance capital efficiency.
• There was discussion about the nature of member departures, which are rare and typically due to performance issues rather than market conditions.
• The gross loss ratio remains strong, attributed to the small size of policies and effective risk management, with expectations to maintain low 50s in the future.
• The company is optimistic about its pipeline, reporting over $3 billion in annualized premium, indicating strong future growth potential.

Overall, Accelerant reported a robust quarter with significant growth metrics, strategic advancements in partnerships, and a positive outlook, despite some challenges related to member transitions and expense management.