Ategrity Specialty Insurance Company Holdings

03/06/2026 | Press release | Distributed by Public on 03/06/2026 16:23

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's discussion and analysis of financial condition and results of operations
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the "Risk Factors" as well as set forth in other parts of this Annual Report on Form 10-K.
Overview
Ategrity Specialty Insurance Company Holdings is a specialty property and casualty insurance holding company dedicated exclusively to the excess and surplus ("E&S") market for small to medium-sized businesses ("SMBs") across the United States. Our underwriting operations are conducted through Ategrity Specialty Insurance Company, a Delaware-domiciled E&S insurer.
We underwrite small and medium-sized commercial risks across selected industry verticals, including Retail, Real Estate, Hospitality, and Construction. The SMB segment of the E&S market is characterized by a high volume of smaller-premium policies, where distribution partners expect speed, clarity, and consistency in the underwriting process. Our operating model uses a technology-driven method to standardize, simplify, and automate these transactions, which we call productionized underwriting. This method incorporates micro-segmentation, centralized underwriting governance, and automated workflows to promote consistent, disciplined execution across a high-volume of E&S transactions.
We operate on a surplus lines basis in 48 states and the District of Columbia. For the year ended December 31, 2025, there were five states in which 5.0% or more of our gross written premiums were concentrated: California (18.9%), Florida (16.1%), Texas (10.1%), New York (8.3%), and Georgia (5.4%).
We operate our business in a single segment and as one reportable segment for purposes of assessing performance, making operating decisions and allocating decisions.
Components of results of operations
Gross written premiums
Gross written premiums are the amount received or to be received for insurance policies written or assumed by us during a specific period of time without reduction for policy acquisition costs,
reinsurance costs, or other deductions. The volume of our gross written premiums in any given period is generally influenced by:
•New business submissions;
•Binding of new business submissions into policies;
•Renewals of existing policies; and
•Average size and premium rate of new and existing policies.
Ceded written premiums
Certain premiums and losses are ceded to other insurance and reinsurance companies under various excess of loss and quota-share reinsurance contracts. Ceded written premiums are the amount of gross written premiums ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential large losses as well as to provide additional capacity for growth. Ceded written premiums are earned over the reinsurance contract period in proportion to the period of risk covered. The volume of our ceded written premiums is impacted by the level of our gross written premiums and any decision we make to increase or decrease retention levels.
Net earned premiums
Net earned premiums represent the earned portion of our net written premiums. Written premiums are earned on a pro rata basis over the terms of the policies, which are generally 12 months. The portion of premiums written applicable to the terms of the policies that have already elapsed is recorded as earned premiums.
Fee income
Fee income includes policy fees charged to insureds and is recognized in earnings when the related premiums are written. These policy fees may be assessed as either a flat amount or a variable charge, depending on the specific policy type. The total amount of policy fee income is primarily impacted by the volume of our written policies.
Losses and loss adjustment expenses
Losses and loss adjustment expenses are a function of the amount and type of insurance contracts we write and the loss experience associated with the underlying coverage. In general, our losses and loss adjustment expenses are affected by:
•frequency of claims associated with the particular types of insurance contracts that we write;
•trends in the average size of losses incurred on a particular type of business;
•mix of business written by us;
•reinsurance agreements we have in place at the time of loss;
•changes in the legal or regulatory environment related to the business we write;
•trends in legal defense costs;
•inflation in building material costs;
•wage inflation; and
•inflation in medical costs.
Losses and loss adjustment expenses are based on actual paid losses and an actuarial analysis of the estimated losses, including losses incurred during the period and changes in estimates from prior periods. Losses and loss adjustment expenses may be paid out over a period of years.
Underwriting, acquisition, and insurance expenses
Underwriting, acquisition, and insurance expenses include policy acquisition costs and operating expenses. Policy acquisition costs are principally comprised of the commissions we pay our brokers, net of ceding commissions we receive on business ceded under certain reinsurance contracts. Policy acquisition costs also include deferred underwriting expenses that are directly related to the successful acquisition of those policies. Operating expenses represent general and administrative expenses related to our insurance business, including employee compensation, software and technology costs, travel, marketing, and professional fees.
Net investment income
We earn investment income on our portfolio of cash and invested assets. Our cash and invested assets are primarily comprised of fixed income securities, the Utility & Infrastructure Investments, loans to affiliates, and cash and cash equivalents. Net investment income related to the Utility & Infrastructure Investments includes our proportionate share of the rebate, dividend, interest and other income, net of investment expenses, and investment management fees for the funds underlying the Utility & Infrastructure Investments. The principal factors that influence net investment income are the size of our investment portfolio and the yield on that portfolio as measured by amortized cost (which excludes changes in fair market value, such as from changes in interest rates) and investment management and other related expenses. The size of our investment portfolio is mainly a function of our invested equity capital along with premiums we receive from our insureds less payments on policyholder claims.
Net realized and unrealized gains (losses) on investments
Net realized and unrealized gains (losses) on investments include realized gains and losses which are a function of the difference between the amount received by us on the sale of a security and the security's amortized cost, as well as the change in unrealized gains (losses) on equity securities and unrealized appreciation (depreciation) on securities sold not yet purchased. Net realized and unrealized gains (losses) on investments also includes appreciation on securities, derivative contracts, and foreign currency transactions allocated from the funds underlying the Utility & Infrastructure Investments. Such allocation represents our proportionate share of the Utility & Infrastructure Investments' net realized gains (losses) of the funds underlying the Utility & Infrastructure Investments which are a function of the difference between the amount received on the sale of a security and the security's amortized cost as well as change in unrealized appreciation (depreciation) on securities, derivative contracts, and foreign currency transactions.
Interest expense
Interest expense primarily consists of fees incurred during the period related to our letters of credit issued for the benefit of Ategrity Specialty on behalf of Ategrity Limited.
Income tax expense (benefit)
Currently our income tax expense (benefit) consists mainly of federal income taxes imposed on our operations. Our effective tax rates are dependent upon the components of pretax earnings and the related tax effects. The amount of income tax expense (benefit) recorded in future periods will depend on the jurisdictions in which we operate and the tax laws and regulations in effect.
Key metrics
We discuss certain key metrics, described below, which provide useful information about our business and the operational factors underlying our financial performance.
Underwriting incomeis a non-GAAP financial measure. We define underwriting income as income before income taxes excluding the impact of net investment income, net realized and unrealized gains (losses) on investments, other income, interest expense, and other expenses (which include expenses relating to corporate activities and expenses recorded by us in connection with the Company's Initial Public Offering. or "IPO"). For a reconciliation of underwriting income to the most directly comparable GAAP financial measure, information about why we consider underwriting income useful and a discussion of the material risks and limitations of underwriting income, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Reconciliation of non-GAAP financial measures".
Adjusted net income attributable to stockholdersis a non-GAAP financial measure. We define adjusted net income attributable to stockholders as net income attributable to stockholders, excluding certain non-operating expenses, which include expenses recorded by us in connection with the Company's IPO. For a reconciliation of adjusted net income attributable to stockholders to the most directly comparable GAAP financial measure, information about why we consider adjusted net income attributable to stockholders useful and a discussion of the material risks and limitations of adjusted net income attributable to stockholders, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Reconciliation of non-GAAP financial measures".
Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses to net earned premiums.
Expense ratio, expressed as a percentage, is the ratio of underwriting, acquisition, and insurance expenses less fee income to net earned premiums.
Combined ratiois the sum of loss ratio and expense ratio. A combined ratio under 100% indicates an underwriting profit. A combined ratio over 100% indicates an underwriting loss.
Return on stockholders' equityis net income attributable to stockholders expressed as a percentage of average beginning and ending stockholders' equity during the period.
Adjusted return on stockholders' equityis a non-GAAP financial measure. We define adjusted return on stockholders' equity as adjusted net income attributable to stockholders, expressed as a percentage of average beginning and ending stockholders' equity during the period. For a reconciliation of adjusted return on stockholders' equity to the most directly comparable GAAP financial measure, information about why we consider adjusted return on stockholders' equity useful and a discussion of the material risks and limitations of adjusted net income attributable to stockholders, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Reconciliation of non-GAAP financial measures".
Adjusted diluted earnings per shareis a non-GAAP financial measure. We define adjusted diluted earnings per share as adjusted net income attributable to stockholders divided by weighted average common shares outstanding - diluted for the period. For a reconciliation of adjusted diluted earnings per share to the most directly comparable GAAP financial measure, information about why we consider adjusted diluted earnings per share useful and a discussion of the material risks and limitations of adjusted diluted earnings per share, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Reconciliation of non-GAAP financial measures".
Results of operations
Year ended December 31, 2025, compared to Year ended December 31, 2024
The following table sets forth a summary of our consolidated results of operations for the years ended December 31, 2025 and 2024.
Year Ended December 31,
($ in thousands) 2025 2024 Change % Change
Gross written premiums $ 581,530 $ 437,036 $ 144,494 33.1 %
Ceded written premiums (156,912) (137,830) (19,082) 13.8 %
Net written premiums $ 424,618 $ 299,206 $ 125,412 41.9 %
Net earned premiums 361,695 290,635 71,060 24.4 %
Fee income 6,582 918 5,664 617.0 %
Losses and loss adjustment expenses 212,147 175,234 36,913 21.1 %
Underwriting, acquisition and insurance expenses 113,309 98,567 14,742 15.0 %
Underwriting income (1)
42,821 17,752 25,069 141.2 %
Net investment income 42,376 24,046 18,330 76.2 %
Net realized and unrealized gains (losses) on investments 12,651 28,140 (15,489) (55.0) %
Interest expense 1,358 2,042 (684) (33.5) %
Other income 1,035 95 940 989.5 %
Other expenses 1,611 1,727 (116) (6.7) %
Income before income taxes 95,914 66,264 29,650 44.7 %
Income tax expense 19,785 12,316 7,469 60.6 %
Net income $ 76,129 $ 53,948 $ 22,181 41.1 %
Less: Net (loss) income attributable to non-controlling interest - General Partner 2,127 6,858 (4,731) (69.0) %
Net income attributable to stockholders $ 74,002 $ 47,090 $ 26,912 57.2 %
Key Metrics
Adjusted net income attributable to stockholders (1)
$ 74,619 $ 48,266
Loss ratio 58.7 % 60.3 %
Expense ratio 29.5 % 33.6 %
Combined ratio
88.2 % 93.9 %
Return on stockholders' equity
14.6 % 13.1 %
Adjusted return on stockholders' equity (1)
14.7 % 13.4 %
Diluted earnings per share $ 1.58 $ 1.28
Adjusted diluted earnings per share(1)
$ 1.61 $ 1.32
(1)Each of these metrics is a non-GAAP financial measure. See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Reconciliation of non-GAAP financial measures" for a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP measure.
Premiums
The following table presents gross written premiums by product for the years ended December 31, 2025 and 2024:
Year Ended December 31,
($ in thousands, except percentages) 2025 % of Total 2024 % of Total
Casualty $ 390,565 67.2 % $ 263,328 60.3%
Property 190,965 32.8 % 173,708 39.7%
Gross written premiums $ 581,530 100.0 % $ 437,036 100.0%
Gross written premiums were $581.5 million for the year ended December 31, 2025 compared to $437.0 million for the year ended December 31, 2024, an increase of approximately $144.5 million, or 33.1%. The increase was primarily driven by the execution of our growth initiatives and increased engagement across our expanding distribution network. Growth in our casualty lines was consistent with our strategic focus of expanding casualty-related products and verticals. The growth in our property lines primarily reflected increased premiums driven by our targeted growth initiatives.
Net written premiums were $424.6 million for the year ended December 31, 2025, compared to $299.2 million for the year ended December 31, 2024, an increase of approximately $125.4 million, or 41.9%. The increase was primarily attributable to higher gross written premiums.
Net earned premiums were $361.7 million for the year ended December 31, 2025, compared to $290.6 million for the year ended December 31, 2024, an increase of approximately $71.1 million, or 24.4%. The increase was primarily due to growth in gross written premiums.
Fee income
Fee income was $6.6 million for the year ended December 31, 2025 compared to $0.9 million for the year ended December 31, 2024, an increase of approximately $5.7 million. The increase was driven by implementation of market-standard policy-related fees.
Loss Ratio
Our loss ratio was 58.7% for the year ended December 31, 2025 compared to 60.3% for the year ended December 31, 2024. The decrease in the loss ratio was primarily driven by strong performance in our property portfolio and by the absence of net adverse prior year development in the current period.
Our losses paid in the years ended December 31, 2025 and 2024 were $133.3 million and $109.5 million, respectively. During the year ended December 31, 2025, there was no development on our net incurred losses for prior periods. For the year ended December 31, 2024, we incurred net losses of prior accident years of $5.4 million. This amount was primarily due to enhancements to our claims reserving approach with respect to loss adjustment expenses in our casualty lines.
Expense ratio
The following table summarizes the components of the expense ratio for the years ended December 31, 2025 and 2024:
Year Ended December 31,
($ in thousands, except percentages) 2025
% of Net Earned Premiums
2024
% of Net Earned Premiums
Policy acquisition costs $ 65,343 18.1 % $ 60,692 20.9 %
Operating expenses, net of fee income (1)
41,384 11.4 % 36,957 12.7 %
Underwriting, acquisition and insurance expenses, net of fee income $ 106,727 29.5 % $ 97,649 33.6 %
(1)Net of fee income of $6.6 million and $0.9 million for the years ended December 31, 2025 and 2024, respectively.
Our expense ratio was 29.5% for the year ended December 31, 2025 compared to 33.6% for the year ended December 31, 2024. The improvement was driven by a lower policy acquisition ratio and operating expense ratio.
The decrease in policy acquisition costs as percentage of net earned premiums was primarily attributable to a favorable shift in our business mix.
The decrease in operating expenses as a percentage of net earned premiums was primarily driven by the continued scaling of our business, where net earned premiums grew at a higher rate than our operating expenses, and by the benefit of an increase in our fee income.
Investing Results
Year Ended December 31,
($ in thousands, except percentages) 2025 2024 $ Change % Change
Investment income
Fixed-maturity securities $ 27,043 $ 14,296 $ 12,747 89.2 %
Short-term investments 5,525 2,703 2,822 104.4 %
Cash equivalents 2,150 5,122 (2,972) (58.0) %
Equity securities - 44 (44) (100.0) %
Loans to affiliates 4,850 1,002 3,848 384.0 %
Securities sold not yet purchased - (569) 569 100.0 %
Total fixed income 39,568 22,598 16,970 75.1 %
Utility & Infrastructure Investments 3,263 1,669 1,594 95.5 %
Other expenses (455) (221) (234) 105.9 %
Net investment income $ 42,376 $ 24,046 $ 18,330 76.2 %
Net realized and unrealized gains (losses) on investments $ 12,651 $ 28,140 $ (15,489) (55.0) %
Net investment income was $42.4 million for the year ended December 31, 2025, compared to $24.0 million for the year ended December 31, 2024, an increase of $18.3 million, or 76.2%. This increase was driven by additional investments in fixed-maturity securities and short-term investments, including the investment of the proceeds from our IPO, as well as income from loans to affiliates. Included in net investment income were $3.3 million and $1.7 million attributable to Utility & Infrastructure Investments, net of investment management fees for the years ended December 31, 2025 and 2024, respectively.
Net realized and unrealized gains on investments were $12.7 million for the year ended December 31, 2025, compared to net realized and unrealized gains of $28.1 million for the year ended December 31, 2024, a decrease in gains of $15.5 million. This change was primarily driven by a decrease in net realized and unrealized gains related to the Utility & Infrastructure Investments, offset by increase in gains on sales of fixed-maturity securities, compared to the prior year period.
Interest expense
Interest expense was $1.4 million for the year ended December 31, 2025 compared to $2.0 million for the year ended December 31, 2024, a decrease of $0.6 million, or 33.5% primarily driven by the termination of our letter of credit agreements in September and October 2025.
Income tax expense (benefit)
Income tax expense was $19.8 million for the year ended December 31, 2025 compared to $12.3 million for the year ended December 31, 2024, an increase of approximately $7.5 million. Our effective tax rate was 20.6% for the year ended December 31, 2025 compared to 18.6% for the year ended December 31, 2024. The increase in our effective tax rate was primarily driven by a decrease in non-taxable pass-through income.
Reconciliation of non-GAAP financial measures
We report our financial results in accordance with GAAP. However, we believe that certain non-GAAP financial measures provide investors in our common stock with additional useful information in evaluating our performance. Management believes that excluding certain items that are not indicative of core performance assists in evaluating our ability to generate earnings and to more readily compare these metrics between past and future periods. These non-GAAP financial measures may be different than similarly titled measures used by other companies.
These non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP. There are limitations related to the use of these non-GAAP financial measures as compared to the most directly comparable GAAP financial measures.
Underwriting income
We define underwriting income as income before income taxes excluding the impact of net investment income, net realized and unrealized gains (losses) on investments, other income, interest expense, and other expenses (which include expenses related to corporate activities and expenses recorded by us in connection with the Company's IPO). Underwriting income is a measure of the pre-tax profitability of our underwriting operations and allows us to evaluate our underwriting performance without regard to net investment income among other things. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. Underwriting income should not be viewed as a substitute for income before income taxes calculated in accordance with GAAP and other companies may define underwriting income differently.
Underwriting income for the years ended December 31, 2025 and 2024 reconciles to income before income taxes as follows:
Year Ended December 31,
($ in thousands) 2025 2024
Income before income taxes $ 95,914 $ 66,264
Less:
Net investment income (42,376) (24,046)
Net realized and unrealized (gains) losses on investments (12,651) (28,140)
Other income (1,035) (95)
Add:
Interest expense 1,358 2,042
Other expenses 1,611 1,727
Underwriting income $ 42,821 $ 17,752
Adjusted net income attributable to stockholders
We define adjusted net income attributable to stockholders as net income attributable to stockholders excluding certain other non-operating expenses, which include expenses recorded by us in connection with the Company's IPO. Adjusted net income attributable to stockholders excludes the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact. We use adjusted net income attributable to stockholders as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted net income attributable to stockholders should not
be viewed as a substitute for net income attributable to stockholders calculated in accordance with GAAP, and other companies may define adjusted net income differently.
Adjusted net income attributable to stockholders for the years ended December 31, 2025 and 2024 reconciles to net income attributable to stockholders as follows:
Year Ended December 31,
($ in thousands) 2025 2024
Net income attributable to stockholders $ 74,002 $ 47,090
Adjustments:
Other non-operating expenses (1)
781 1,489
Tax impact (164) (313)
Adjusted net income attributable to stockholders $ 74,619 $ 48,266
(1)In the years ended December 31, 2025 and 2024, other non-operating expenses includes share-based compensation expenses recorded by us related to our IPO.
Adjusted return on stockholders' equity
We define adjusted return on stockholders' equity as adjusted net income attributable to stockholders, expressed as a percentage of average beginning and ending stockholders' equity during the period. We use adjusted return on stockholders' equity as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted return on stockholders' equity should not be viewed as a substitute for return on stockholders' equity calculated in accordance with GAAP, and other companies may define adjusted return on stockholders' equity and adjusted net income differently.
Adjusted return on stockholders' equity for the years ended December 31, 2025 and 2024 reconciles to return on stockholders' equity as follows:
Year Ended December 31,
($ in thousands, except percentages) 2025 2024
Numerator: Adjusted net income attributable to stockholders
$ 74,619 $ 48,266
Denominator: Average stockholders' equity 506,308 360,002
Adjusted return on stockholders' equity 14.7 % 13.4 %
Adjusted diluted earnings per share
We define adjusted diluted earnings per share as adjusted net income attributable to stockholders divided by weighted average common shares outstanding - diluted for the period. We use adjusted diluted earnings per share as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted diluted earnings per share should not be viewed as a substitute for diluted earnings per share calculated in accordance with GAAP, and other companies may define adjusted diluted earnings per share differently.
Adjusted diluted earnings per share for the years ended December 31, 2025 and 2024 reconciles to diluted earnings per share as follows:
Year Ended December 31,
($ in thousands, except share and per share data) 2025 2024
Numerator: Adjusted net income attributable to stockholders $ 74,619 $ 48,266
Denominator: Weighted-average shares outstanding - diluted 46,233,822 36,647,783
Adjusted diluted earnings per share $ 1.61 $ 1.32
Liquidity and capital resources
Sources and uses of funds
We are organized as a holding company, and conduct our operations primarily through our insurance subsidiaries, Ategrity Specialty and Ategrity Limited. We depend on distributions from our insurance subsidiaries and other sources of liquidity.
We may receive cash through (1) loans from banks, (2) issuance of equity or debt securities, (3) corporate service fees from Ategrity Specialty, (4) payments from our subsidiaries pursuant to the Tax Agreement and other transactions, and (5) dividends from our insurance subsidiaries, subject to regulatory approval. We may use these sources to support premium growth, reduce reliance on reinsurance, pay dividends and taxes, fund operating expenses and meet other holding company obligations.
On a consolidated basis, our primary source of cash is premiums received from our insureds, and our primary uses of cash are payments of losses and loss adjustment expenses and operating expenses. The timing and amount of claim payments can vary significantly depending on claim severity, frequency and catastrophic events. As a result, liquidity management is an important consideration in our business, particularly at our insurance subsidiaries, where claims are paid. Our material cash requirements include payments of insurance claims and loss adjustment expenses, operating expenses, reinsurance premiums, and taxes payable under the Tax Agreement.
We are party to a tax allocation agreement with ZFSG under which consolidated federal and certain state income tax liabilities are settled with ZFSG rather than directly with taxing authorities. As a result, amounts recorded as income tax expense do not necessarily correspond to cash tax payments in the same period. Settlements under the agreement may occur in cash or, in certain circumstances, through the transfer of other assets. Accordingly, historical cash taxes are not indicative of future cash tax requirements and are not expected to represent a consistent recurring use of operating liquidity.
State insurance regulators require our insurance subsidiaries to maintain specified levels of capital and surplus. These capital requirements, along with rating agency considerations, influence our underwriting capacity and reinsurance strategy.
The insurance statutes of the state of domicile of the Company's U.S. insurance subsidiary limits the amount of dividends that may be paid annually without prior regulatory approval. Generally, the limitations are based on the greater of (i) statutory net income, excluding realized capital gains, for the preceding year or (ii) 10.0% of statutory surplus at the end of the preceding year but limited to earned surplus. Insurance regulators have broad discretion to restrict the payment of dividends if statutory surplus is considered inadequate. In the future, state insurance regulatory authorities that have jurisdiction over the payment of dividends by Ategrity Specialty may adopt statutory provisions more restrictive than those currently in effect.
The Company's Bermuda insurance subsidiary is subject to solvency, liquidity and capital requirements prescribed by the Bermuda Monetary Authority ("BMA"). Dividends may not be declared or paid if the insurer fails to meet its Enhanced Capital Requirement or prescribed solvency or minimum liquidity ratio. In addition, prior approval of the BMA is required for reductions of 15%
or more of the total statutory capital or 25% of the total statutory capital and surplus, as set forth in its previous year's financial statements. Further, under the Companies Act, as amended (the "Companies Act"), Ategrity Limited may only declare or pay a dividend, or make a distribution out of contributed surplus, if it has no reasonable grounds for believing that: (1) it is, or would after the payment be, unable to pay its liabilities as they become due, or (2) the realizable value of its assets would be less than its liabilities.
The maximum amount of dividends that our subsidiaries can pay us during 2026 without regulatory approval is $41.7 million.
Liquidity Outlook
As of December 31, 2025, we held $29.7 million in cash and cash equivalents compared to $26.6 million as of December 31, 2024. As of December 31, 2025, we held $1.1 billion in cash and investments compared to $802.0 million as of December 31, 2024.
Management believes that the Company has sufficient liquidity available at our holding company and subsidiaries to meet our operating cash needs and obligations for the next twelve months.
Share repurchase program
On February 12, 2026, our Board of Directors authorized a share repurchase program under which the Company may repurchase up to $50 million worth of its outstanding common stock. The timing and amount of repurchases, if any, will depend on market conditions, capital requirements, and other factors. The authorization does not obligate the Company to repurchase any specific number of shares and may be suspended or discontinued at any time.
Cash flows
Our most significant source of cash is from premiums received from our insureds, which, for most policies, we receive at the beginning of the coverage period. Our most significant cash outflow is for claims that arise when a policyholder incurs an insured loss. Because the payment of claims occurs after the receipt of the premium, often years later, we invest the cash in various investment securities that earn interest and dividends. We also use cash to pay commissions to brokers, as well as to pay for ongoing operating expenses such as employee compensation and benefits, technology costs, taxes, and professional services. We use reinsurance to manage the risk that we take on our policies. We cede, or pay out, part of the premiums we receive to our reinsurers and collect cash back when losses subject to our reinsurance coverage are paid.
The timing of our cash flows from operating activities can vary among periods due to the timing by which payments are made or received. Some of our payments and receipts, including loss settlements and subsequent reinsurance receipts, can be significant, so their timing can influence cash flows from operating activities in any given period. Management believes that cash receipts from premiums, proceeds from investment sales and redemptions, and investment income are sufficient to cover cash outflows in the foreseeable future.
The following table set forth a summary of our cash flows for the periods indicated:
Year Ended December 31,
($ in thousands) 2025 2024
Net cash provided by operating activities $ 147,190 $ 125,611
Net cash used in investing activities (274,151) (363,270)
Net cash provided by (used in) financing activities 130,109 (414)
Net change in cash and cash equivalents $ 3,148 $ (238,073)
Operating activities
Our net cash provided by operating activities was approximately $147.2 million for the year ended December 31, 2025, compared to $125.6 million for the year ended December 31, 2024. The increase was primarily driven by growth of our business and the timing of premiums receipts, claim payments, reinsurance recoveries and operating payables.
Investing activities
Net cash used in investing activities was approximately $274.2 million for the year ended December 31, 2025, compared to net cash used in investing activities of approximately $363.3 million for the year ended December 31, 2024. The decrease was primarily driven by a significant deployment of excess cash balances into short-term investments during the year ended December 31, 2024.
Financing activities
Net cash provided by financing activities was approximately $130.1 million for the year ended December 31, 2025, compared to cash used in financing activities of $0.4 million for the year ended December 31, 2024. The increase was primarily driven by the net proceeds from our IPO as well as a capital contribution from ZFSG, partially offset by the payment of capital distribution to the Utility General Partner.
Reinsurance
We enter into reinsurance contracts to limit our exposure to potential large losses and to provide additional capacity for growth. Our reinsurance is primarily contracted under quota-share reinsurance treaties and excess of loss treaties. In quota-share reinsurance, the reinsurer agrees to assume a specified percentage of the ceding company's losses arising out of a defined class of business in exchange for a corresponding percentage of premiums, net of a ceding commission. In excess of loss reinsurance, the reinsurer agrees to assume all or a portion of the ceding company's losses, in excess of a specified amount. In excess of loss reinsurance, the premium payable to the reinsurer is negotiated by the parties based on their assessment of the amount of risk being ceded to the reinsurer because the reinsurer does not share proportionately in the ceding company's losses.
For the year ended December 31, 2025, property insurance represented 32.8% of our gross written premiums. When we write property insurance, we buy reinsurance to significantly mitigate our risk to large losses. We use sophisticated computer models to analyze the risk of severe losses from weather-related events and earthquakes. We measure exposure to these catastrophe losses in terms of Probable Maximum Loss ("PML"), which is an estimate of what level of loss we would expect to experience in a windstorm or earthquake event occurring once in every 100 or 250 years. We manage this PML by purchasing catastrophe reinsurance coverage. Effective July 1, 2025, we purchased catastrophe reinsurance coverage of $43 million per event in excess of our $12 million per event retention. Our property catastrophe reinsurance includes a reinstatement provision which requires us to pay reinstatement premiums after a loss has occurred in order to preserve coverage. Including the reinstatement provision, the maximum aggregate loss recovery limit is $86 million and is in addition to the coverage provided by our other property reinsurance.
Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of the reinsurer to honor its obligation could result in losses to us, and therefore, we established an allowance for credit risk based on historical analysis of credit losses for highly rated companies in the insurance industry. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers.
As of December 31, 2025, Ategrity Specialty has only contracted with reinsurers with A.M. Best financial strength ratings of "A-" (Excellent) or better. Reinsurers who do not meet the Company's rating criteria are required to post collateral. At December 31, 2025, the net reinsurance receivable, defined as the sum of paid and unpaid reinsurance recoverables, ceded unearned premiums less reinsurance payables, from five reinsurers represented 64.6% of the total balance. As of December 31, 2025, we recorded no allowance for credit losses related to our reinsurance balances.
Ratings
Ategrity Specialty and Ategrity Limited both have a financial strength rating of "A-" (Excellent) from A.M. Best. A.M. Best assigns 16 ratings to insurance companies, which currently range from "A++" (Superior) to "F" (In Liquidation). "A-" (Excellent) is the fourth highest rating issued by A.M. Best. The "A-" (Excellent) rating is assigned to insurers that have, in A.M. Best's opinion, an excellent ability to meet their ongoing obligations to policyholders. This rating is intended to provide an independent opinion of an insurer's ability to meet its obligation to policyholders and is not an evaluation directed at investors.
The financial strength ratings assigned by A.M. Best have an impact on the ability of the insurance companies to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that the insurance companies receive. The "A-" (Excellent) rating obtained by Ategrity Specialty is consistent with our business plan and allows us to actively pursue relationships with the agents and brokers identified in our marketing plan.
Contractual obligations and commitments
Our gross reserves for losses and loss adjustment expenses at December 31, 2025 were $502.2 million, of which $179.5 million of payments are expected to be paid in less than one year and $322.7 million of payments are expected to be paid in one year or more. Reserves for losses and loss adjustment expenses represent our best estimate of the ultimate cost of settling reported and unreported claims and related expenses. Because claim payments may occur over extended periods of time and are dependent on claim development, actual payment timing may differ materially from the estimates above. See Note 11 of the notes to the consolidated financial statements and "-Critical accounting policies and estimates" for a discussion of estimates and assumptions related to the reserves for unpaid losses and loss adjustment expenses.
Our leases consisted of one operating lease for office space expiring in 2028 that was subject to a renewal option at market rates prevailing at the time of renewal. We became a sublessor of the same office space when we entered into a sublease agreement effective July 1, 2022 with ZFSG. As of December 31, 2025, our obligations under this lease required payments of approximately $0.8 million per year for the remaining term of the lease.
We do not have any other material contractual obligations or commitments.
Financial condition
Stockholders' equity
As of December 31, 2025, total stockholders' equity was $614.3 million compared to $398.3 million total stockholders' equity as of December 31, 2024. The $216.0 million increase in total stockholders' equity over the prior year end balance was primarily driven by the issuance of common stock as part of our IPO, net profits generated during the period and a $20.0 million contribution by ZFSG.
Investment portfolio
Our cash and invested assets consist of fixed-maturity securities, cash and cash equivalents, short-term investments, loans to affiliate, and the Utility & Infrastructure Investments.
The table below presents our cash and invested assets as of December 31, 2025 and 2024:
December 31, 2025 December 31, 2024
($ in thousands, except percentages) Fair value % of total Fair value % of total
Cash and cash equivalents $ 29,721 2.7 % $ 26,573 3.3 %
Fixed-maturity securities 558,428 50.5 % 438,752 54.7 %
Short-term investments 220,241 19.9 % 52,612 6.6 %
Utility & Infrastructure Investments 189,859 17.3 % 270,242 33.7 %
Loans to affiliates 106,500 9.6 % 13,501 1.7 %
Other invested assets 280 NM 280 NM
Total cash and invested assets $ 1,105,029 100.0% $ 801,960 100.0%
NM = Percentage not meaningful.
As of December 31, 2025 and 2024, $29.7 million and $26.6 million, respectively, represented the cash and cash equivalents portion of our total cash and invested assets of $1.1 billion and $0.8 billion, respectively.
As of December 31, 2025 and 2024, $558.4 million and $438.8 million, respectively, of our total cash and invested assets was comprised of fixed-maturity securities that are classified as available-for-sale and carried at fair value with unrealized gains and losses on these securities, net of any deferred taxes, reported as a separate component of accumulated other comprehensive income. Also included in our investment portfolio as of December 31, 2025 and 2024, were $220.2 million and $52.6 million of short-term investments. Our fixed-maturity and short-term securities had a weighted average duration of 3.8 years and an average rating of "A-" as of both December 31, 2025 and 2024. Our fixed-maturity and short-term securities portfolio had a book yield of 5.2% as of December 31, 2025 and 5.7% as of December 31, 2024.
As of December 31, 2025, the amortized cost and fair value of our fixed-maturity securities and short-term investments were as follows:
December 31, 2025
($ in thousands, except percentages) Amortized Cost Estimated Fair Value % of Total Fair Value
Fixed-maturity securities:
U.S. Treasury securities and obligations guaranteed by the U.S. government $ 2,073 $ 2,117 0.3 %
Corporate 544,682 556,311 71.4 %
Total fixed-maturity securities 546,755 558,428 71.7 %
Short-term investments 220,241 220,241 28.3 %
Total $ 766,996 $ 778,669 100.0 %
As of December 31, 2024 , the amortized cost and fair value of our fixed-maturity securities and short-term investments were as follows:
December 31, 2024
($ in thousands, except percentages) Amortized Cost Estimated Fair Value % of Total Fair Value
Fixed-maturity securities:
U.S. Treasury securities and obligations guaranteed by the U.S. government $ 84,456 $ 84,195 17.1 %
Corporate 349,693 353,805 72.0 %
Commercial mortgage and asset-backed securities 816 752 0.2 %
Total fixed-maturity securities 434,965 438,752 89.3 %
Short-term investments 52,612 52,612 10.7 %
Total $ 487,577 $ 491,364 100.0 %
The amortized cost and fair value of our available-for-sale investments in fixed-maturity securities summarized by contractual maturity as of December 31, 2025, were as follows:
December 31, 2025
($ in thousands, except percentages) Amortized Cost Estimated Fair Value % of Total Fair Value
One year or less $ 24,329 $ 24,711 4.4 %
After one year through five years 148,375 151,706 27.2 %
After five years through ten years 336,235 343,792 61.6 %
After ten years 37,816 38,219 6.8 %
Total $ 546,755 $ 558,428 100.0 %
Actual maturities may differ from contractual maturities because some borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
As of December 31, 2025 and 2024, $178.9 million and $270.2 million, respectively, represented the investments in the Absolute Return Utility & Infrastructure Fund with fair values measured using our interest in the unadjusted net asset value ("NAV") as reported annually by the Investment Manager in the financial statements of the Absolute Return Utility & Infrastructure Fund. The Utility Limited Partnership operates as a feeder fund in a "master-feeder" structure, in which the Utility Limited Partnership invests substantially all of its assets in the Absolute Return Utility & Infrastructure Fund. As of December 31, 2025 and 2024, we invested 16% and 34%, respectively, of our total cash and invested assets in the Absolute Return Utility & Infrastructure Fund through the Utility Limited Partnership.
The Absolute Return Utility & Infrastructure Fund investment objective is to employ an energy and infrastructure- focused long/short strategy which seeks to deliver absolute returns in all market conditions with minimal correlation to energy sector indices and broader market indices. The Absolute Return Utility & Infrastructure Fund invests primarily in the equities of electric and gas utilities, integrated utilities, water utilities, telecommunication companies, independent power producers and pipelines, exploration and production companies, oilfield service companies, and more broadly in energy and infrastructure-related industries (such as chemicals, materials, transportation infrastructure, and real estate equities). We value our investment in the Absolute Return Utility & Infrastructure Fund at fair value, which is estimated based on our share of the NAV of the Absolute Return Utility & Infrastructure Fund, as provided by the Investment Manager.
The Absolute Return Utility & Infrastructure Fund invests in equity securities and related instruments and derivatives, and fixed income, comprising 95.8% and 4.2%, and 94.4% and 5.6% of gross investments, respectively, as of December 31, 2025 and 2024. The following table summarizes the sectors of the Absolute Return Utility & Infrastructure Fund's gross assets as of December 31, 2025 and 2024:
December 31, 2025 December 31, 2024
% of Total(1)
% of Total(1)
Utilities 64.3 % 60.6 %
Pipelines 26.9 % 20.0 %
Real Estate 6.1 % 10.1 %
Other Sectors 2.7 % 9.3 %
Total 100.0 % 100.0 %
(1)Amounts presented are subject to rounding adjustments and, as a result, the totals may not sum.
Off-balance sheet arrangements
We did not have any off-balance sheet arrangements as of December 31, 2025.
Critical accounting policies and estimates
We identified accounting policies and estimates that involve a high degree of judgment and complexity which we believe are the most critical to understanding and evaluating our financial condition and results of our operations. We use significant judgment concerning future results and developments in applying these critical accounting policies and estimates and in preparing our consolidated financial statements. These judgments and estimates affect our reported amounts of assets, liabilities, revenues and expenses, and the disclosure of our material contingent assets and liabilities. See Note 2 to our consolidated financial statements for a description of our other significant accounting policies.
The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect the amounts reported in those financial statements and accompanying notes. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates. We evaluate our estimates regularly using information that we believe to be relevant.
Reserves for unpaid losses and loss adjustment expenses
The reserves for unpaid losses and loss adjustment expenses represent our best estimate of the ultimate cost of settling reported and unreported claims and related expenses. See Note 11 to our consolidated financial statements for a discussion of estimates and assumptions related to the reserves for unpaid losses and loss adjustment expenses.
As a relatively new company, our historical loss experience is limited. We estimate the reserves using individual case-basis valuations of reported claims and statistical analyses. Those estimates are based on our historical information, industry information, and our estimates of future trends in variable factors such as loss severity, loss frequency, and other factors such as inflation. We regularly review our estimates and adjust them as necessary as experience develops or as new information becomes known to us. Such adjustments are included in current operations. Additionally, during the loss settlement period, it often becomes necessary to refine and adjust the estimates of liability on a claim
either upward or downward. Even after such adjustments, ultimate liability may exceed or be less than the revised estimates. Accordingly, the ultimate settlement of losses and the related loss adjustment expenses may vary significantly from the estimate included in our financial statements.
We categorize our reserves for unpaid losses and loss adjustment expenses into two types: case reserves and reserves for incurred but not yet reported losses ("IBNR"). Our gross reserves for losses and loss adjustment expenses at December 31, 2025 were $502.2 million. Of this amount, 69.6% related to IBNR. Our net reserves for losses and loss adjustment expenses at December 31, 2025 were $362.8 million. Of this amount, 69.4% related to IBNR. A 5% change in net IBNR reserves at December 31, 2025 would equate to a $12.6 million change in the net reserve for losses and loss adjustment expenses at such date, as well as a $9.9 million change in net income, and a 2% change in stockholders' equity, at or for the year ended December 31, 2025. Our gross reserves for losses and loss adjustment expenses at December 31, 2024 were $403.6 million. Of this amount, 70.2% related to IBNR. Our net reserves for losses and loss adjustment expenses at December 31, 2024 were $284.0 million. Of this amount, 68.3% related to IBNR. A 5% change in net IBNR reserves at December 31, 2024 would equate to a $9.7 million change in the net reserve for losses and loss adjustment expenses at such date, as well as a $7.7 million change in net income, a 1.9% change in stockholders' equity, at or for the year ended December 31, 2024.
The following table summarizes our gross and net reserves for unpaid losses and loss adjustment expenses at December 31, 2025:
December 31, 2025
(in thousands, except percentages) Gross % of Total Net % of Total
Case reserves $ 152,534 30.4 % $ 111,152 30.6 %
IBNR 349,714 69.6 % 251,682 69.4 %
Total $ 502,248 100.0 % $ 362,834 100.0 %
The following table summarizes our gross and net reserves for unpaid losses and loss adjustment expenses at December 31, 2024:
December 31, 2024
(in thousands, except percentages) Gross % of Total Net % of Total
Case reserves $ 120,317 29.8 % $ 90,035 31.7 %
IBNR 283,259 70.2 % 193,945 68.3 %
Total $ 403,576 100.0 % $ 283,980 100.0 %
Case reserves are established for individual claims that have been reported to us. We are notified of losses by our insureds or their brokers. Based on the information provided, we establish case reserves by estimating the ultimate losses from the claim, including defense costs associated with the ultimate settlement of the claim. Our claims department personnel use their knowledge of the specific claim along with advice from internal and external experts, including underwriters and legal counsel, to estimate the expected ultimate losses.
In addition, we conduct a full spectrum study of reserves annually to analyze reserving adequacy. Reserve analyses are conducted using a multi-method process which includes a full suite of traditional methodologies (such as Chain-Ladder, Bornhuetter-Ferguson, Cape Cod, and Frequency and Severity methods), individual open claim analyses, as well as a sensitivity analysis to provide a range of reasonable estimates.
Our Reserve Committee consists of our Head of Reserving and other select members of senior management. The Reserve Committee meets quarterly to review the actuarial recommendations made by the Head of Reserving. In establishing the quarterly actuarial recommendation for the reserves for losses and loss adjustment expenses, our actuary estimates an initial expected ultimate loss ratio for each of our lines of business by accident year. Input from our underwriting and claims departments, including premium pricing assumptions and historical experience, is considered by our actuary in estimating the initial expected loss ratios. Our reserving methodology uses a loss reserving model that calculates a point estimate for our ultimate losses. Although we believe that our assumptions and methodology are reasonable, our ultimate payments may vary, potentially materially, from the estimates we have made.
In addition, we retain an independent external actuary to assist in determining if the reserve levels are reasonable. The independent actuary is not involved in the establishment and recording of our loss reserve. The independent actuary prepares their own estimate of our reserves for loss and loss adjustment expenses, and we compare their estimate to the reserves for losses and loss adjustment expenses reviewed and approved by the Reserve Committee in order to incorporate important changes and gain additional comfort on the adequacy of those reserves.
The table below quantifies the impact of potential reserve deviations from our carried reserve at December 31, 2025. We applied a sensitivity factor to net reserves for unpaid losses and loss adjustment expenses for our two lines of business. We believe that potential changes such as these would not have a material impact on our liquidity.
Potential Impact on December 31, 2025
Line of business
(in thousands) 		Net Reserves for Unpaid Losses and
Loss Adjustment Expenses 		7.5% Higher Pre-tax Income Stockholders' Equity 7.5% Lower Pre-tax Income Stockholders' Equity
($ in thousands)
Casualty $ 297,635 $ 319,958 $ (22,323) $ (17,635) $ 275,312 $ 22,323 $ 17,635
Property 65,199 70,089 (4,890) (3,863) 60,309 4,890 3,863
The table below quantifies the impact of potential reserve deviations from our carried reserve at December 31, 2024. We applied a sensitivity factor to net reserves for unpaid losses and loss adjustment expenses for our two lines of business. We believe that potential changes such as these would not have a material impact on our liquidity.
Potential Impact on December 31, 2024
Line of business
(in thousands) 		Net Reserves for Unpaid Losses and
Loss Adjustment Expenses 		7.5% Higher Pre-tax Income Stockholders' Equity 7.5% Lower Pre-tax Income Stockholders' Equity
($ in thousands)
Casualty $236,966 $ 254,738 $ (1,772) $ (14,040) $ 219,194 $ 17,772 $ 14,040
Property 47,014 50,540 (3,526) (2,786) 43,488 3,526 2,786
The amount by which estimated losses differ from those originally reported for a period is known as "development." Development is unfavorable when the losses ultimately settle for more than the
amount reserved or subsequent estimates indicate a basis for reserve increases on unresolved claims. Development is favorable when losses ultimately settle for less than the amount reserved, or subsequent estimates indicate a basis for reducing loss reserves on unresolved claims. We reflect favorable or unfavorable development of loss reserves in the results of operations in the period the estimates are changed.
During the year ended December 31, 2025, the net development on prior accident years was nil.
During the year ended December 31, 2024, the Company recorded net development related to prior accident years of $5.4 million primarily due to enhancements to our claims reserving approach with respect to loss adjustment expenses in our casualty lines.
Investment valuation and fair value
Like other accounting estimates, fair value measurements involve the use of subjective information and require the exercise of uncertainty and judgment. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Three levels of inputs are used to measure fair value of financial instruments: (1) Level 1: quoted price (unadjusted) in active markets for identical assets, (2) Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument, and (3) Level 3: inputs to the valuation methodology are unobservable for the asset or liability.
To measure fair value, we obtain prices for our investment securities from independent pricing services and other observable market inputs through third-party sources. When quoted prices for identical securities in active markets are not available, observable inputs such as quoted prices for similar securities and evaluated pricing are used. Values for U.S. Treasury and publicly traded equity securities are generally based on Level 1 inputs which use the market approach valuation technique. The values of our investments in all other fixed maturity securities generally incorporate significant Level 2 inputs, and in some cases, Level 3 inputs, using the market approach and income approach valuation techniques. The Company did not have any Level 3 fixed-maturity securities measured at fair value on a recurring basis during the periods presented.
We value our investment in the Absolute Return Utility & Infrastructure Fund at fair value, which is estimated based on our proportionate share of the net asset value ("NAV") of the Absolute Return Utility & Infrastructure Fund, as provided by the Investment Manager.
The Company reviews changes in fair value and exercises judgment in evaluating whether such changes are consistent with market conditions and observable inputs.
We periodically review our available-for-sale fixed-maturity securities to determine whether any unrealized losses exist that are due to credit-related factors. An allowance for credit losses is established for any credit-related impairments, limited to the amount by which fair value is below amortized cost basis. Changes in the allowance for credit losses are recognized in earnings and included in net investment income. Unrealized losses that are not credit are recognized in other comprehensive income.
We consider the extent to which fair value is below amortized cost basis in determining whether a credit-related loss exists. We also consider the credit quality rating of the security, with a special emphasis on securities downgraded below investment grade. A comparison is made between the present value of expected future cash flows for a security and its amortized cost basis. If the present value of future expected cash flows is less than its amortized cost basis, a credit loss is presumed to exist and an allowance for credit losses is established. Management may conclude that a qualitative
analysis is sufficient to support its conclusion that the present value of the expected cash flows equals or exceeds a security's amortized cost basis. We also consider whether we intend to sell the security or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis.
When assessing whether we intend to sell a fixed-maturity security or if it is likely to be required to sell a fixed-maturity security before recovery of its amortized cost basis, we evaluate facts and circumstances including, but not limited to, decisions to reposition the investment portfolio, potential sales of investments to meet cash flow needs and potential sales of investments to capitalize on favorable pricing.
Reinsurance recoverable
We enter into reinsurance contracts to limit our exposure to potential large losses and to provide additional capacity for growth. Reinsurance refers to an arrangement in which a company called a reinsurer agrees in a contract (often referred to as a treaty) to assume specified risks written by an insurance company (known as a ceding company) by paying the insurance company all or a portion of the insurance company's losses arising under specified classes of insurance policies in return for a share in premiums.
Reinsurance recoverables recorded on insurance losses ceded under reinsurance contracts are subject to judgments and uncertainties similar to those involved in estimating gross loss reserves. In addition to these uncertainties, our reinsurance recoverables may prove uncollectible if the reinsurers are unable or unwilling to perform under the reinsurance contracts. In establishing our reinsurance allowance for amounts deemed uncollectible, we evaluate the financial condition of our reinsurers and monitor concentration of credit risk arising from our exposure to individual reinsurers. To determine if an allowance is necessary, we consider, among other factors, published financial information, reports from rating agencies, payment history, collateral held, and our legal right to offset balances recoverable against balances we may owe. The allowance for uncollectible reinsurance recoverables is subject to uncertainty and volatility due to the time lag involved in collecting amounts recoverable from reinsurers. Over the period of time that losses occur, reinsurers are billed and amounts are ultimately collected, economic conditions, as well as the operational and financial performance of particular reinsurers may change and these changes may affect the reinsurers' willingness and ability to meet their contractual obligations to us. It is difficult to fully evaluate the impact of major catastrophic events on the financial stability of reinsurers, as well as the access to capital that reinsurers may have when such events occur. The ceding of insurance does not legally discharge us from our primary liability for the full amount of the policies, and we will be required to pay the loss and bear the collection risk if any reinsurer fails to meet its obligations under the reinsurance contracts. We target reinsurers with A.M. Best financial strength ratings of "A-" (Excellent) or better. Reinsurers who do not meet the Company's rating criteria are required to post collateral. Based on our evaluation of the factors discussed above, we believe all of our recoverables are collectible and, therefore, no allowance for uncollectible reinsurance was provided for at December 31, 2025 and December 31, 2024.
Accounting pronouncements
See Note 2 to our consolidated financial statements for further discussion regarding our recent accounting pronouncements.
Regulatory Developments
There were no material regulatory developments during the year ended December 31, 2025.
Emerging growth company
We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012 ( the "JOBS Act"), and we may remain an emerging growth company for up to five years following the IPO. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved.
Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
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