Ategrity Specialty achieves record Q3 results with 30% gross written premium growth and 78% adjusted net income increase, signaling strong operational leverage and strategic execution.

OPERATOR - (00:01:02)

Good afternoon everyone and thank you for joining us today for Ategrity Specialty's third quarter fiscal year 2025 earnings results conference Call Speaking today are Justin Cohen, Chief Executive Officer, Chris Schenck, 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. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, press Star one again. Thank you. 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, I will now turn the call over to Justin.

UNKNOWN - (00:02:52)

Good.

Justin Cohen - Chief Executive Officer - (00:02:52)

Evening and thank you all for joining Ategrity Specialty's third quarter 2025 earnings call. This is Justin Cohen and I am joined here today by Chris Schenck, our President and Chief Underwriting Officer and Neelam Patel, our CFO delivered record results this quarter. Gross written premiums grew 30% year over year, including accelerating growth in property lines. Our combined ratio improved to 88.7% as we began to demonstrate operating leverage with investment income. Our adjusted net income was 22.8 million, translating into 78% year over year growth. These results were ahead of guidance despite industry data pointing to a deceleration in the ENS market. We believe that's because we are executing a model that is truly differentiated. It's built on specialization, analytics, automation and distribution and we are capitalizing on these strengths to drive sustainable growth and profits. This was a quarter characterized by expanding top line operating leverage and improved economics. First on top line growth we achieved a 30% increase in gross written premiums supported by 70% submission growth. That's 7 0, not 1 7. Our distribution network is exceptionally large for a company our size and we are driving deeper engagement by bringing new and attractive solutions to the market. Second, on operating leverage, our operating expense ratio improved 2.7 percentage points as prior investments in infrastructure and process efficiency began to deliver. Expense growth moderated while earned premiums accelerated and we are realizing this upside even as we invest in new lines of business in next generation technology that are expected to drive the next phase of leverage. Finally, on improved economics, our policy acquisition ratio improved 1.8 percentage points. As we continue to optimize our business mix, we have been deliberately increasing the percentage of our premiums written in our brokerage channel where acquisition costs are lower. This has been underway for several quarters and is now earning through in our results. Now turning back to the broader ENS market where headwinds have emerged in certain areas, competitive intensity has increased but conditions remain rational in the small and medium sized space. This segment has remained relatively insulated given the challenges that new entrants face in trying to profitably write $10,000 policies without the requisite scale. Against that backdrop, we are focused on extending Ategrity Specialty's structural advantages of speed, competitive products and technical pricing to drive disciplined share gains. So with that, I'll now turn it over to Neelam for the financials.

Neelam Patel - Chief Financial Officer - (00:05:46)

Thanks Justin. We delivered another strong quarter of financial performance. Adjusted net income came in at 22.8 million, up from 12.9 million in the same quarter last year, driven by top line growth, improving margins and higher investment income. Let me walk you through the main line items starting with premium. Gross written Premiums grew by 30% in the quarter. Casualty premiums increased by 41% while property premiums went up by 11%, both contributing meaningfully to our overall growth. Net written premiums grew by 42% reflecting a higher retention rate year over year. Net earned premiums were up by 29% reflecting the natural legged earnings recognition of our growth trajectory and a quota share reinsurance treaty we placed in 2024. Net earned premium growth accelerated sequentially, consistent with our prior comments of abating headwinds. In the second half, our fee income came in at $2.2 million compared to $0.2 million a year ago, reflecting higher policy fees as we continue to implement standard market practices. Turning to underwriting results, our underwriting income for the quarter was $10.6 million, up nearly 208% year over year. This translates into a combined ratio of 88.7%, an improvement from 95.3% last year due to reductions in both our loss and expense ratio. The loss ratio declined 2.1 points to 60% with strong underlying results in our property business in the current quarter. We had no prior year development compared to 1.7 points last year that were related to a change in how we reserved for legal expenses. Catastrophe losses represented 4% of net earned premium this quarter, down from 12.1% last year, which had an active hurricane season. Our expense ratio declined 4.5 points to 28.7%, reflecting improvements in both operating efficiency and business mix. Operating expenses represented 10.8% of net earned premiums, down 2.7 points from last year and also lower than the second quarter of 2025. The declines were driven by expense leverage and higher fee income. Policy Acquisition cost as a percentage of net earned premiums declined to 17.9% from 19.7%. The improvement was primarily driven by favorable mix shift as growth has been concentrated in lines of businesses carrying lower gross commission rates and higher ceding commissions. Moving on to investment results, net investment income was 11 million in the third quarter, up from 6.8 million last year driven by increased assets from our IPO and higher yields on our fixed income portfolio. Realized and unrealized gains contributed another 9.2 million supported by strong results in our absolute return portfolio. Our effective tax rate for the quarter was 20.6%, bringing the net income to 22.7 million. Adjusted net income, which adds back IPO related compensation costs was 22.8 million or 46 cents per diluted share. Turning briefly to the balance sheet, our cash and investments grew by 86 million from the second quarter to 1.1 billion, reflecting strong operating cash flow. Book value increased by 29 million driven by 23 million attributable to increased retained earnings and the rest to increased AOCI. Our book value per share ended the quarter at $12.24. With that, I will hand it over to Chris to talk about our underwriting and operating performance.

Chris Schenck - President and Chief Underwriting Officer - (00:09:39)

Thanks Neelam. Ategrity Specialty grew 30% and improved margins this quarter. I'll talk to you about the contributors to those results and then I will provide some perspective on why our differentiated underwriting approach is resonating in the current market. I'll start with top line production. Retentions remained stable. We achieved mid to high single digits renewal rate increases. That was in both Property and Casualty and new business growth was very strong. Four key points illustrate the quality of this growth. First, there was record high demand for integrity quotes. This was in both Property and Casualty where we saw submissions increase more than 70% year over year. Second, we saw stronger partner engagement. Our 2023 and 2024 distribution cohorts contributed meaningfully. They delivered same store growth in the range of 80%. Third, we expanded our distribution reach. After more than doubling our distribution network from 2022 to 2024, the number of active distribution partner once again grew this year by another 25%. This extends our Runway for growth. And fourth, we maintain discipline underwriting. Our hit ratio was in line with plan that is low single digits in brokerage and this is because we are staying selective and firm on price. Last quarter we highlighted three growth initiatives. The retail trade vertical, which we launched in brokerage, our professional liability lines and Project Heartland, our Midwest regional strategy. Each once again contributed meaningfully in Q3. Together they accounted for about half of our growth. Turning to underwriting margins in our property book, we experienced lower frequency and lower severity. And relative to expectations, casualty losses are developing favorably. We recorded a conservative firmwide loss ratio of 60%. Although our pricing loss ratio is meaningfully lower from an operating leverage standpoint. While net written premium grew more than 40%, we realized efficiency gains across our business. This translated into only moderate expense growth in Q3. We process, record submissions and quotes and manage a larger enforced book, all while delivering the speed and service that our brokers expect. As we maintain a conservative hit ratio, automation continues to safeguard operating margins. We also reduced acquisition costs. This is because we wrote more business in our broker channel and capitalized on two new growth initiatives. The first initiative is our digital brokerage channel. We launched a technology enabled solution that provides small business agents and with streamline access to our brokerage product. These agents occasionally need to place mid sized policies and have limited options to do so. Through Ategrity Specialty's digital brokerage, they can now receive quotes on midsize accounts with what we believe is market leading response times. The second initiative is a specialty offering for our real estate vertical. We innovated a product that addresses evolving lending requirements for multifamily developers. These requirements are imposed by Fannie Mae, Freddie Mac and the larger banking sector and we have developed a casualty product that responds to those requirements. This is very different than our standard casualty offering and as far as we know there's nothing comparable in the market. As a result, we have been able to distribute it while achieving superior policy acquisition economics. Finally, turning to our Competitive positioning in Q3, a record number of brokers wanted to present an Ategrity Specialty quote to their clients. As we've talked about, our pricing tends to be higher than our competitors, so we believe that this demand is driven by the appeal of our product. Instead of relying on unfair exclusions and wording ambiguity, we deliver fast, high quality quotes with coverage that the insured actually needs, and for that we charge a fair and technically sound price. Brokers are telling us that they want an Ategrity Specialty quote because they know and trust our product. With tighter lending standards and a more volatile political and judicial environment, there is heightened focus on coverage quality and contract certainty. And our product strategy, which offers clear, comprehensive coverage but only the necessary exclusion, is standing out in a very crowded marketplace. So those are some of the dynamics behind our results. In short, Ategrity Specialty's productionized underwriting model is doing exactly what it was designed to do. It's delivering disciplined growth and expanding margins and at the same time it's strengthening our position in the market. With that, I'll hand it back to Justin. Thanks Chris.

Justin Cohen - Chief Executive Officer - (00:14:58)

This was another strong quarter for Ategrity Specialty. It reflects an organization that is analytical, efficient and innovative. We are a company that does what we say we're going to do and we remain focused on driving towards sustainable world class returns. For the second quarter in a row, we delivered gross written premium growth more than 20 percentage points above the ENS market. As we look toward the fourth quarter, we believe we have the partner engagement, submission flow and delivery capabilities to achieve that outcome. Again, based on the industry's current growth pace, we believe that would translate into roughly 30% year over year growth. From a margin perspective, we are aiming to deliver a 90% combined ratio in the fourth quarter. Finally, we look forward to spending time with investors and analysts in the days ahead. In addition to discussing our results and strategy, we would love to hear investor input on balancing additional insider support through open market purchases. With the desire to increase public float. We intend to increase our float in the course of time at appropriate valuations, as other specialty insurance companies have after their IPOs. We greatly care about doing the right thing for investors so would appreciate your feedback on this topic. With that, I thank you again for your time and interest in Ategrity Specialty. Operator, Please open the line for questions.

OPERATOR - (00:16:24)

At this time I would like to remind everyone in order to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Alex Scott with Barclays. Please go ahead.

Alex Scott - Equity Analyst - (00:16:39)

Hi.

UNKNOWN - (00:16:41)

Hey.

Alex Scott - Equity Analyst - (00:16:42)

Thanks for taking the question. First one I had is on the property market and just, you know, what you're seeing in the environment on the casualty side, it's kind of like some of the things you're doing are pretty bespoke and nuanced do you feel like as we head into 2026, you're going to be able to continue growing in property at the rates you've been growing through?

Justin Cohen - Chief Executive Officer - (00:17:02)

Yeah, in property. If you'll recall, we talked about last quarter, then the third quarter of 2024, we began raising rates actually somewhat materially in small to medium sized property in the third quarter of this year. Therefore, we lapped those rates. We're not going to get into 2026, but as we're looking forward, you see that we accelerated. Well, you see that we accelerated in this quarter from the growth from last quarter and we're hopeful that we can achieve the same. It is more of just executing our business model and having now gotten ahead of the curve on pricing.

Alex Scott - Equity Analyst - (00:17:37)

That's really helpful. Second thing I wanted to ask you about is just some of the continuation of what you've been doing with technology. But I think it was mentioned earlier.

UNKNOWN - (00:17:46)

On the call that you were looking.

Alex Scott - Equity Analyst - (00:17:47)

To advance some of that further and was just interested in some of the things you're working on, some of the areas you might push on the tech front to further what you're doing in the market.

UNKNOWN - (00:17:56)

Great.

Justin Cohen - Chief Executive Officer - (00:17:56)

I'll pass that over to Chris to talk about some of the innovations that are actually launching now and others as

Chris Schenck - President and Chief Underwriting Officer - (00:18:00)

Well in the future. Yeah, so as you know, we've been launching pre-priced solutions and some OCR AI enabled intake automation processes and a number of different innovations across the business. We have a innovation lab that we funded about a year ago that is now bringing all of these standalone solutions into one single platform. That is going to be a critical unlock for us in the coming quarters. But what it does, it makes delivery of innovation much more efficient. And we already have an efficient approach to development. But in terms of maintenance of an innovation ecosystem, having everything in one platform allows us to get more value out of it and also enhance it as technology evolves.

Alex Scott - Equity Analyst - (00:18:55)

Got it. Very helpful, thanks.

Justin Cohen - Chief Executive Officer - (00:18:57)

Thanks, Alex.

OPERATOR - (00:19:00)

The next question comes from the line of Pablo Cinzon with JPMorgan. Please go ahead.

Pablo Cinzon - Equity Analyst - (00:19:09)

Hi, good evening. With the employment picture and small business optimism softening a bit, have you seen any change in the economic health of your clients? We have not seen any direct change, but it really matters vertical by vertical

UNKNOWN - (00:19:24)

Yeah. So in a small bit, you said change in our clients.

Pablo Cinzon - Equity Analyst - (00:19:30)

Yeah, the end clients.

UNKNOWN - (00:19:31)

The end clients, yeah. So, you know, there is a dynamic of what we call nano accounts. Nano accounts are accounts that, you know, they're very, they're priced at admitted market pricing, you know, so let's say a small business with sub $1,000 pricing. That business is always, you know, in between ENS and admitted and you know, there is some pulling back of it into the admitted space. Sometimes a lot of that business also go away. So it has never been core to us. And they don't provide really good economics because lower retention and you know, they could be volatile. So we are seeing that sort of disappearance again of the Nano account. So it's not a lot of premium. It can be volume.

Pablo Cinzon - Equity Analyst - (00:20:16)

But in terms of the, you know, we are 2 degrees removed from our end clients. But we are, we do study that and we study the economy. We talked about last quarter how each of our verticals has a different sensitivity but overall we have not seen any material change in our end clients financial and economic health.

UNKNOWN - (00:20:33)

Yeah. So where we are seeing some change in consumer preference or insured preferences is in the mid sized middle market clients. So think of a family real estate investment firm, five apartment buildings. They're now facing tougher lending requirements from Fannie Mae and Freddie Mac. Banks are scrutinizing their financing. Meanwhile there is regulatory uncertainty that's being driven by adoption of building codes on the property side as well as, you know, some things like even the New York City municipal elections which would affect housing and real estate development. So you have all these dynamics that they are really attentive to coverage. So I've had the privilege of meeting some of our retailers and actually some end insureds over the last quarter and that's what I'm hearing from them. They're worried about these developments and how they will affect coverage.

Pablo Cinzon - Equity Analyst - (00:21:38)

Okay, thanks. And then my second question, the submission volumes, interesting data point there. Are you able to process and quote

UNKNOWN - (00:21:47)

As much of those submissions as you're. Seeing or is there any bottleneck in your operations right now? No, we have a very efficient operation and that's been part of our story is to be able to handle this kind of volume. And we've done it. And we talked about during the IPO, process how we had front loaded the investments ahead of growth to be able to manage these. One thing we have done is we've been very conservative about the box within our underwriting appetite. Chris, you want to talk about that? Yeah. So. On the underwriting, sorry, the restriction, ultimately what you're seeing is a lower, lower hit rates for our business or stable hit rates at relatively low levels, which really speaks to the conservatism of what we're doing. But we can handle this volume and. Yeah, sorry. Yeah. So in one of the, in my comments I said also quote volumes went up. Right. That is, I think that's a really strong story for us because we have been investing in the technology capability to handle high volume at the top of the funnel. The top of the funnel being submissions. Right. Where you need to sort through a lot. Not everything is going to fit the box. And we have been tightening the box in each of our channels so we are able to, we were able to handle and absorb that volume with significantly lower relative cost. And when it comes to quotes, our streamlined quoting process for the small to medium size to low medium sized accounts, which is our simplified productionized underwriting, where we're looking at the essential things that matters for the risk at hand and not following the industries, you know, randomness, if you will. You know, for that category, we were able to, you know, crank through a lot of quotes with the resources we had in place.

Pablo Cinzon - Equity Analyst - (00:23:45)

Thanks for your answers.

UNKNOWN - (00:23:48)

Thanks, Pablo.

OPERATOR - (00:23:50)

Your next question comes from the line of Elise Greenspan with Wells Fargo. Please go ahead.

UNKNOWN - (00:23:56)

Hey, Elise.

Elise Greenspan - Equity Analyst - (00:23:58)

Hi. Thanks. My first question, you know, within the fourth quarter guide, right. You guys said that you expect to continue to grow about 20% above the industry. Is that a target? Like when we think out to 2026, 2027 and beyond, is that something that you guys think you can kind of hit on a consistent basis?

Justin Cohen - Chief Executive Officer - (00:24:20)

So thanks for that question. We're not going to talk about 26 guidance, but this is the way we think about the business. And as we come to the next quarter, you'll hear from us and how we describe how we expect to take share and we measure that in outsized growth relative to the market. We obviously think we have a big Runway here. Our network continues to grow and we have lots of, not only our existing growth initiatives that you've been talking, that you've been hearing about are still in the early days. We also have new growth initiatives in the pipeline that are to come. These, as you heard, these type of growth opportunities are really truly proprietary to us. And therefore we think we have an edge to be able to continue taking share in the market.

Elise Greenspan - Equity Analyst - (00:25:02)

And then the fee income right. Piece continues to grow a little bit over 2 million in the quarter. And I think right. Just around 2.4 points. A Contra on the expense ratio is that, you know, how do we think about modeling going forward, you know, just relative to the fee income contribution?

Justin Cohen - Chief Executive Officer - (00:25:21)

Yep. The fees can be variable depending on the type of business that we write in the quarter. This happened to be a quarter that lined up for higher fees. We think that we'll even guide to here that as we look to Q4 we think the number would be more like a million and a half. But furthermore, when you think about how you model that as well, there are direct third party expenses that go along with those fees. So it's not just a pure top line adjustment.

UNKNOWN - (00:25:50)

So it's really important to understand there's a service at the end of the fee. Right. So if the service is required for it insured at hand, that's when we charge it. So depending on what we're writing, you know, it's not premium driven, it's volume driven.

Elise Greenspan - Equity Analyst - (00:26:10)

That makes sense. And then from a, from a loss ratio perspective it doesn't sound like there was anything one off in the loss ratio. Obviously some shifting with mix shift towards casualty but anything within the loss ratio. I know there was no PYD and a small amount of cats. But anything else you would call out in the quarter?

Justin Cohen - Chief Executive Officer - (00:26:29)

No, I would just describe that if you're looking at our ex cat ratios for example and you will see that there was some increases there. This is really all associated with conservatism in property. And so we have had a lower, effectively a lower amount of claims. But as a public company we are not taking any risk in terms of late claims coming in. So we have booked at a. At higher losses. So that's really the dynamic that you're seeing there conservatism in our property.

Elise Greenspan - Equity Analyst - (00:27:00)

And with the conservatism in property, would you settle that in the fourth quarter like in the current year or if, if there's favorable development or would that be something you would think about next year?

Justin Cohen - Chief Executive Officer - (00:27:11)

Really it really is rolling and it's really actuarial based and so we leave that to our are ahead of reserving to do that and look at it on a claim by claim basis as well as the trends and the expected downside in terms of late reported claims.

Elise Greenspan - Equity Analyst - (00:27:27)

Thank you.

UNKNOWN - (00:27:29)

Thank you Elise.

OPERATOR - (00:27:32)

Your next question comes from the line of Andrew Kleigerman with TD Cowan. Please go ahead.

Andrew Kleigerman - Equity Analyst - (00:27:41)

Justin. I think you guided to just a little while ago do like a 90 combined in the next quarter and I was, I thought that the expense ratios were particularly compelling, particularly the operating expense ratio at 10.8 but the acquisition expense ratio looked better than I had expected as well. Should we be looking at the overall expense ratio at about 29%? Maybe a touch less than that is a run rate in that 90 combined ratio that you just cited?

Justin Cohen - Chief Executive Officer - (00:28:18)

Yeah, that is not far from it. There will be some small benefits coming through on the commission ratio sequentially.

UNKNOWN - (00:28:27)

But.

Justin Cohen - Chief Executive Officer - (00:28:28)

That is Going to be an overtime type situation on a gross basis. There are strengths there. Remember also that we have the quota share rolling off which is going to provide more income to us, but that will be an offset as we move forward as well. And then with the operating expense ratio, with the adjustment in fees, there will be a tick up in the fourth quarter. But we are very enthusiastic about our ability to continue to drive operating leverage over time. And so those are some of the dynamics there and that would lead to that 90% combined.

UNKNOWN - (00:29:02)

Got it.

Andrew Kleigerman - Equity Analyst - (00:29:03)

That was helpful. And yeah, I mean, pretty exciting. 70% increase in submissions. And I know earlier you were talking about the hit ratio not being super high, but what I'm kind of interested in is the expansion of your distribution. And the type of expansion. Is this coming mostly from the brokers as opposed to the agents that are doing kind of smaller ticket stuff like maybe a little color around the type of distribution expansion you're seeing more of?

UNKNOWN - (00:29:40)

Yep.

Justin Cohen - Chief Executive Officer - (00:29:41)

It is very broad based across both brokers and agents. And it also weighs in with our growth initiatives which are, we're obviously opening new relationships for these growth initiatives. Pass it over to Chris to talk further about the details there.

Chris Schenck - President and Chief Underwriting Officer - (00:29:56)

So we are attractive, we're attracting, you know, sort of a broad spectrum of agents and brokers who focus on the small and medium sized risk that we, we are aligned to plus those who have access to unique geographies such as the Midwest. So it's really exciting to watch the numbers come in on our Midwest strategy because you know, these are partners who are, you know, they are in South Dakota and you may not think many of our peers would, you know, maybe not even visit them. And we have, and we have built a strong relationship and explain the value proposition. It's appealing. So that's one demographic that's driving and the other demographic is really what we've talked about before. It's the digital native brokers. It is that new generation of brokers who are a little bit fed up with the way the business is transacted in this space and you know, five.

UNKNOWN - (00:30:49)

Days waiting five days to hear back.

Chris Schenck - President and Chief Underwriting Officer - (00:30:51)

If you're even going to get a quote is just not working for them. We are able to offer something, you know, that is appealing. I, there's a lot of enthusiasm there. And then, you know, there is your, you know, what we call your sort of more established brokers within the larger agencies, within the larger brokerages who really value just the straightforwardness of what we're offering to the market. They know what they're getting. You Know, they have gone through cycles, they've seen the gimmicks and you know, they're kind of over it. And when you can speak plainly to them and say this is what we offer, this is what we don't do, it works. Got it.

Andrew Kleigerman - Equity Analyst - (00:31:31)

And maybe if I could just sneak one more in. I was on the Chubb call this morning and they talked about pricing being, you know, particularly soft in property in the large end of the market. Now it's kind of seeped into the larger end of mid, but the lower end of mid, it just hasn't gotten there yet and certainly not small per their commentary as well as many others. So my question to you is how are you thinking about pricing down the road? Do you think you're small, small business and maybe the lower end of mid will hold up for a long period of time or do you see this pricing pressure seeping in eventually and maybe sooner than later?

Justin Cohen - Chief Executive Officer - (00:32:21)

Thanks. Thanks, Andrew. We are endeavoring not to make a market call here. We are, what we are seeing is we are getting mid to high single digit rate increases in property which is in our space, which is really quite good. You'll remember that we, I mentioned earlier that we had had higher rate increases that we've anniversaried, but we're getting solid rates.

Chris Schenck - President and Chief Underwriting Officer - (00:32:44)

Yeah. So, you know, pricing is one of those foundation stones for us. You know, technical pricing, cost charging, the cost of product is essential. So I mentioned product and that's becoming more and more the requirement. It is, it's not optional for the insured.

UNKNOWN - (00:33:02)

Right.

Chris Schenck - President and Chief Underwriting Officer - (00:33:02)

So there's been this hypothesis that, you know, it's all about pricing. Customers don't care about coverage once they're in ens. Well, that's not the case anymore because there's a mandate, there's a requirement at the federal level. So I'll give you, you know, if you'll indulge me, I'll give you a very obscure example that is really impactful. And what's happening in the industry right now is nobody else is thinking about it, which is a problem. So there were, there's new national, national electrical codes that were established in 2023. They have to do with things like basically gratifying of buildings.

UNKNOWN - (00:33:34)

Right.

Chris Schenck - President and Chief Underwriting Officer - (00:33:35)

So when there's a coverage under property ordinance and law where you have to, you know, effectively coverage for bringing buildings back up to code once they are repaired. Well, these new requirements are driving up the requirements for ordinance and law. So people might say the property market is soft, but someone is going to get a loan and they need to now have 25% of their building value towards ordinance and loan. So when you start talking about coverage and what is required, they're going to pay a premium for that because they need the loan. So it's not a, you know, in that mint space, it's not a. I don't see the soft market or a perceived soft market filtering up. I see actually maybe a hardening in that space because of lending requirements.

Andrew Kleigerman - Equity Analyst - (00:34:31)

Very interesting. Thank you for that.

OPERATOR - (00:34:37)

Your next question comes from the line of Matthew Heimerman with Citi. Please go ahead.

UNKNOWN - (00:34:45)

Everybody. Hi.

Matthew Heimerman - Equity Analyst - (00:34:48)

A couple quick ones, I think. Just, it's not like you're growing property very rapidly relative to Total, but I'm just curious, does how much more growth.

UNKNOWN - (00:34:59)

Before we'd have to think about reinsurance.

Matthew Heimerman - Equity Analyst - (00:35:02)

Structures changing relative to how you've historically.

UNKNOWN - (00:35:06)

Articulated PMLs and other risk tolerance metrics?

Chris Schenck - President and Chief Underwriting Officer - (00:35:10)

Yeah, no, if you'll recall, we. We operate a limited CAT strategy and so we are not exposing ourselves to incremental amounts of CAT risk and our growth is manageable here and it's well within the context of our existing reinsurance contracts.

UNKNOWN - (00:35:27)

Okay. And that, that's. And that's just tying the or connecting the dots. That's a lot of the property growth. You talked about getting was going to. Come out of Midwest strategy, and that's.

Chris Schenck - President and Chief Underwriting Officer - (00:35:37)

Effectively what we're seeing at this point. Yeah, yeah, yeah. So we've talked about our geospatial spread approach to writing property that's really coming through in the Midwest. You know, there, there are about 730 hamlets, I'll call them in, across the Midwest where, you know, we never had a footprint and, you know, we are now writing business there. Those are large spaces where we are spread out. Right. So that, that geospatial spread element is coming through as we win in the Midwest. The Midwest, as I mentioned, was, along with some other initiatives, was responsible for about 50% of our growth. And that was particularly strong in properties. So we're not adding in Florida. That's the thing. We're not adding in Texas. We're not.

UNKNOWN - (00:36:20)

We're not. We're not only adding in Texas and Florida, rather, we are. It's everywhere.

Matthew Heimerman - Equity Analyst - (00:36:26)

Okay, that's good. As a Minnesota kid, I never really thought about my backyard as the English countryside.

UNKNOWN - (00:36:32)

But I appreciate the compare.

Matthew Heimerman - Equity Analyst - (00:36:36)

The other question, a couple other questions I have was just can you give us any sense of just kind of what the growth rates look by maybe the premium cohorts because you add a couple brokerage clients through your digital channel with A small Asian in the Midwest.

UNKNOWN - (00:36:54)

That's a disproportionate. I'm just wondering if there's another lens on growth kind of by account size or cohorts. The account size bands have not changed meaningfully in any way. We have, as Chris mentioned earlier, we've written less of these nano accounts, but we're also writing small mid sized accounts. So there are offsets there. So really overall, the bands themselves are not changing very much. Okay, that's helpful. And I guess the last one is. Well, two one numbers question quick was just can you give the. Can you split the utility income disclosure. In the press release between kind of income and Mark. Sorry, the. In your investment income disclosure, can you split the utility income between income and marks? Yep. It's less than 100k net in core NII for the utility and infrastructure investments in NII. Are you asking for further split in the realized and unrealized gains now? If I've got that, I can, I can, I think I can back that out of the utility and then I can wait for the queue for the rest. Thank you. The other question was just can you elaborate, use this term, improved economics.? And it wasn't clear as I was listening and maybe I didn't hear what you were trying to say, but in. Your opening comments you talked about improved. Economics in the quarter and it implied more than just kind of what's happening. With the expense ratio. But I just wondered if you could. Revisit that if there's any. Anything you'd embellish or clarify there. Yeah, we were referring to the holistic nature of. Now that we have scale in brokerage. That as we're writing more business in brokerage that is accretive to our bottom line. And you're seeing that in the commission ratio. You're. You can see it in the expense ratio, but you can't exactly see how that's coming through. But that's, that's what's happening. No, that's a lot. Because I was trying to contrast it. With your rate comment and it didn't. It wasn't obvious from that. That that would have in and of itself. Explained it. So. Okay, thank you for that. To acquire an account and historic. Yeah. Yeah. Okay, thanks everyone. Have a good night. Thank you. Your last question comes from the line of Alex Scott with Barclays. Please go ahead.

Alex Scott - Equity Analyst - (00:39:20)

Hey guys, thanks for taking the follow up. I just wanted to see if you could give any color on products that you may be prepping to expand into the brokerage area by going off market a bit. Can you talk about if you have any of that kind of activity going on over the next six months or so?

Justin Cohen - Chief Executive Officer - (00:39:39)

Right. In terms of the. This question of upmarket, what you've seen, we don't think of it that way. What we've done in the past six months is we have taken products and verticals that we underwrite and we have opened them in the brokerage channel. Those are paying off and those we're going to continue to pay, those have those work over the next several quarters. Anything else, Chris, you'd like to add to that on product?

Chris Schenck - President and Chief Underwriting Officer - (00:40:05)

Yeah, so we launched a retail vertical most recently in brokerage. That's an example of what's to come in terms of true product launches. Nothing on the roadmap that we can discuss now. And what we are continuously doing, though, for the micro segments we're in, we are genuinely studying the external environment and trying to model out those cause and effect scenarios and optimize our offering within each of those verticals. So when we think of product, we don't think about doing more products. We think about like really meeting the evolving needs of these markets that we're already in. And that's a huge opportunity for us. Very helpful. Thank you, guys.

Alex Scott - Equity Analyst - (00:40:46)

Thank you.

OPERATOR - (00:40:50)

There are no further questions at this time. Management, do you have any closing remarks?

UNKNOWN - (00:40:55)

No, we just want to thank everyone for joining and listening and we look forward to catching up with many of you in the days ahead. Take care.

OPERATOR - (00:41:03)

Ladies and gentlemen, this concludes today's call. Thank you all for joining and you may now disconnect.