Ategrity Specialty Insurance Co Holdings: Form 10-Q for the period ended Jun 30, 2025

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes disclosed in the Prospectus. This discussion 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 section entitled “Risk factors” in our Prospectus, as well as other factors set forth in other parts of this Quarterly Report on Form 10-Q.

Overview

We are a specialty insurance company dedicated to providing excess and surplus (“E&S”) products to small to medium-sized businesses (“SMBs”) across the United States. We have built a proprietary underwriting platform that combines sophisticated data analytics with automated and streamlined processes to efficiently serve our clients and deliver long-term value to our stockholders. The SMB market is characterized by large volumes of small-sized policies, and we believe our competitive edge lies in our ability to offer consistent, high-speed, and low-touch interactions that our distribution partners value. This advantage stems from our technology-driven method of standardizing, simplifying, and automating our transaction process, which we call productionized underwriting.

We target industry verticals where we have deep expertise and develop data-driven insights to gain a competitive advantage. We leverage our expertise and our efficient underwriting platform to deliver tailored insurance products and customized services that meet the needs of our distribution partners. We believe the universe of distributors in the SMB segment of the E&S market is rapidly shifting toward agents and brokers who were raised in the digital age. These digital-native and tech-savvy distribution partners expect real-time, frictionless insurance transactions that mirror the seamless experiences they encounter in their daily lives. In an industry where insurance applications are often submitted via email with slow response times, we have designed a technology-driven underwriting process that addresses our distribution partners’ demands for rapid, high-quality interactions. Our strong value proposition has contributed to an extensive network of distribution partners, which provides us with robust transaction opportunities and diversified sources of business. Our fully integrated claims management function is designed to enable us to resolve claims efficiently and effectively. We take an active approach to risk management through real-time performance analytics, rigorous risk aggregation monitoring, and robust reinsurance protection aimed at minimizing volatility and generating consistent underwriting results.

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 premiums earned

Net premiums earned 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. Policy fees are a flat charge and are 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;
• 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 other underwriting 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. Other underwriting 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-maturity securities, the Utility & Infrastructure Investments, and cash and cash equivalents. We also earn investment income on our short-term investments, equity securities, note receivable from affiliate, and securities sold not-yet purchased. 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 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 income is 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). 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 “—Reconciliation of non-GAAP financial measures”.

Adjusted net income attributable to stockholders is 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 initial public offering. 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 “—Reconciliation of non-GAAP financial measures”.

Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses to net premiums earned.

Expense ratio, expressed as a percentage, is the ratio of underwriting, acquisition, and insurance expenses less fee income to net premiums earned.

Combined ratio is 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’ equity is net income attributable to stockholders expressed as a percentage of average beginning and ending stockholders’ equity during the period.

Adjusted return on stockholders’ equity is 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 “—Reconciliation of non-GAAP financial measures”.

Adjusted diluted earnings per share is a non-GAAP financial measure. We define adjusted diluted earnings per share as adjusted net income attributable to stockholder 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 “—Reconciliation of non-GAAP financial measures”.

Results of operations

Three months ended June 30, 2025, compared to three months ended June 30, 2024

The following table sets forth a summary of our condensed consolidated results of operations for the periods indicated.

($ in thousands)

34

($ in thousands)

NM = Percentage change is not meaningful.

(1) Each of these metrics is a non-GAAP financial measure. See “—Reconciliation of non-GAAP financial measures” for a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP measure.

(2) For the three months ended June 30, 2025 and 2024, net income attributable to stockholders and adjusted net income attributable to stockholders are annualized to arrive at return on stockholders’ equity and adjusted return on stockholders’ equity.

(3) Ratios are calculated using unrounded figures. The sum of components may differ slightly from totals shown due to rounding.

Premiums

The following table presents gross written premiums by product for the three months ended June 30, 2025 and 2024:

($ in thousands, except percentages)

Our gross written premiums were $167.5 million for the three months ended June 30, 2025 compared to $126.6 million for the three months ended June 30, 2024, an increase of approximately $40.9 million, or 32.3%. The increase was primarily driven by growth in our distribution network and increased wallet share with our existing distribution partners. Growth in our casualty lines was consistent with our strategic focus of expanding casualty-related products and verticals. Growth in property lines reflected pricing actions and targeted reductions in catastrophe exposure that were initiated in 2024.

Net written premiums were $117.3 million for the three months ended June 30, 2025, compared to $84.8 million for the three months ended June 30, 2024, an increase of approximately $32.5 million, or 38.3%. The increase was primarily attributable to higher gross written premiums as well as a decrease in ceded written premiums due to a reduction in quota share reinsurance within our casualty lines.

Net premiums earned were $86.9 million for the three months ended June 30, 2025, compared to $72.6 million for the three months ended June 30, 2024, an increase of approximately $14.3 million, or 19.7%. The increase was primarily due to growth in gross written premiums, offset by the effect of ceded earned premiums from a ceded quota share reinsurance treaty placed in the beginning of 2024.

Fee income

Fee income was $1.5 million for the three months ended June 30, 2025 compared to $0.2 million for the three months ended June 30, 2024, an increase of approximately $1.3 million. The increase was driven by continued implementation of market-standard policy-related fees.

Loss Ratio

Our loss ratio was 58.0% for the three months ended June 30, 2025 compared to 60.8% for the three months ended June 30, 2024. The loss ratio for the three months ended June 30, 2025 benefited from strong performance in our property portfolio, including favorable attritional and catastrophe loss experience. The decrease in the loss ratio compared to the three months ended June 30, 2024 was primarily driven by the lack of prior year development.

Our losses paid in the three months ended June 30, 2025 and 2024 were $33.8 million and $23.6 million, respectively. During the three months ended June 30, 2025, there was no development on our net incurred losses for prior periods. For the three months ended June 30, 2024, we incurred net losses of prior accident years of $2.6 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 three months ended June 30, 2025 and 2024:

($ in thousands, except percentages)

(1) Net of fee income of $1.5 million and $0.2 million for the three months ended June 30, 2025 and 2024, respectively.

(2) Ratios are calculated using unrounded figures. The sum of components may differ slightly from totals shown due to rounding.

Our expense ratio was 31.0% for the three months ended June 30, 2025 compared to 33.2% for the three months ended June 30, 2024. The improvement was driven by a lower policy acquisition ratio.

The decrease in policy acquisition costs as percentage of net earned premiums was primarily attributable to the earned impact of ceding commissions under a quota share contract placed in the beginning of 2024, and changes in our business mix.

The increase in operating expenses was primarily due to an increase in compensation and employee-related expenses, as headcount grew over the past twelve months to support our continued business growth, drive innovation, and to strengthen our operating capabilities ahead of our transition to becoming a public company.

Investing Results

The following tables summarize net investment income and net realized and unrealized gains on investments for the three months ended June 30, 2025 and 2024:

($ in thousands, except percentages)

Net investment income was $11.9 million for the three months ended June 30, 2025, compared to $5.7 million for the three months ended June 30, 2024, an increase of $6.2 million, or 107.6%. This increase was driven by additional investments in fixed-maturity securities and short-term investments including the deployment of proceeds from our initial public offering. Included in net investment income is $2.4 million and $0.7 million attributable to Utility & Infrastructure Investments, net of investment management fees for the three months ended June 30, 2025 and 2024, respectively.

Net realized and unrealized gain on investments was $1.4 million for the three months ended June 30, 2025, compared to a net realized and unrealized loss of $4.2 million for the three months ended June 30, 2024, an increase of $5.6 million. This increase was primarily driven by gains on sales of fixed-maturity securities and a reduction in realized losses in the Utility & Infrastructure Investments compared to the prior-year period.

Interest expense

Interest expense was $0.4 million for the three months ended June 30, 2025 compared to $0.5 million for the three months ended June 30, 2024, a decrease of approximately $0.1 million, or 17.8% related to a decreased cost of our letters of credit.

Income tax expense (benefit)

Income tax expense was $4.7 million for the three months ended June 30, 2025 compared to $1.2 million for the three months ended June 30, 2024, an increase of approximately $3.5 million. Our effective tax rate was 21.1% for the three months ended June 30, 2025 compared to 22.7% for the three months ended June 30, 2024. The decrease in our effective tax rate was driven by an increase in non-taxable pass-through income.

Results of operations

Six months ended June 30, 2025, compared to six months ended June 30, 2024

The following table sets forth a summary of our condensed consolidated results of operations for the periods indicated.

($ in thousands)

37

($ in thousands)

NM = Percentage change is not meaningful.

(1) Each of these metrics is a non-GAAP financial measure. See “—Reconciliation of non-GAAP financial measures” for a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP measure.

(2) For the six months ended June 30, 2025 and 2024, net income attributable to stockholders and adjusted net income attributable to stockholders are annualized to arrive at return on stockholders’ equity and adjusted return on stockholders’ equity.

Premiums

The following table presents gross written premiums by product for the six months ended June 30, 2025 and 2024:

($ in thousands, except percentages)

Our gross written premiums were $283.6 million for the six months ended June 30, 2025 compared to $208.2 million for the six months ended June 30, 2024, an increase of approximately $75.4 million, or 36.2%. The increase was primarily driven by growth in our distribution network and increased wallet share with our existing distribution partners. Growth in our casualty lines was consistent with our strategic focus of expanding casualty-related products and verticals. Growth in property lines reflected pricing actions and targeted reductions in catastrophe exposure that were initiated in 2024.

Net written premiums were $207.1 million for the six months ended June 30, 2025, compared to $147.0 million for the six months ended June 30, 2024, an increase of approximately $60.1 million, or 40.9%. The increase was primarily attributable to higher gross written premiums as well as a decrease in ceded written premiums due to a reduction in quota share reinsurance within our casualty lines.

Net premiums earned were $165.2 million for the six months ended June 30, 2025, compared to $140.9 million for the six months ended June 30, 2024, an increase of approximately $24.3 million, or 17.3%. The increase was primarily due to growth in gross written premiums, offset by the effect of ceded earned premiums related to a ceded quota share reinsurance treaty placed in the beginning of 2024.

Fee income

Fee income was $2.1 million for the six months ended June 30, 2025 compared to $0.3 million for the six months ended June 30, 2024, an increase of approximately $1.8 million. The increase was driven by continued implementation of market-standard policy-related fees.

Loss Ratio

Our loss ratio was 58.9% for the six months ended June 30, 2025 compared to 60.4% for the six months ended June 30, 2024. The loss ratio for the six months ended June 30, 2025 benefited from strong performance in our property portfolio including favorable attritional loss experience. The decrease in the loss ratio compared to the six months ended June 30, 2024 was primarily driven by the lack of prior year development in the current period.

Our losses paid in the six months ended June 30, 2025 and 2024 were $66.0 million and $47.5 million, respectively. During the six months ended June 30, 2025, there was no development on our net incurred losses for prior periods. For the six months ended June 30, 2024, we incurred net losses of prior accident years of $4.9 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 six months ended June 30, 2025 and 2024:

($ in thousands, except percentages)

(1) Net of fee income of $2.1 million and $0.3 million for the six months ended June 30, 2025 and 2024, respectively.

Our expense ratio was 31.0% for the six months ended June 30, 2025 compared to 33.6% for the six months ended June 30, 2024. The improvement was driven by a lower policy acquisition ratio.

The decrease in policy acquisition costs as percentage of net earned premiums was primarily attributable to the earned impact of ceding commissions under a quota share contract placed in the beginning of 2024, and changes in our business mix.

The increase in operating expenses was primarily due to an increase in compensation and employee-related expenses, as headcount grew over the past twelve months to support our continued business growth, drive innovation, and to strengthen our operating capabilities ahead of our transition to becoming a public company.

Investing Results

($ in thousands, except percentages)

39

($ in thousands, except percentages)

Net investment income was $19.8 million for the six months ended June 30, 2025, compared to $11.0 million for the six months ended June 30, 2024, an increase of $8.8 million, or 80.2%. This increase was driven by additional investments in fixed-maturity securities and short-term investments including the majority of the proceeds from our initial public offering. Included in net investment income were $2.9 million and $1.4 million attributable to Utility & Infrastructure Investments, net of investment management fees for the six months ended June 30, 2025 and 2024, respectively.

Net realized and unrealized loss on investments was $3.2 million for the six months ended June 30, 2025, compared to a net realized and unrealized loss of $1.8 million for the six months ended June 30, 2024, an increase in losses of $1.4 million. This change was primarily driven by an increase in net realized and unrealized losses related to the Utility & Infrastructure Investments offset by gains on sales of fixed-maturity securities, compared to the prior year period.

Interest expense

Interest expense was $0.9 million for the six months ended June 30, 2025 compared to $1.1 million for the six months ended June 30, 2024, a decrease of approximately $0.2 million, or 18.3% related to a decreased cost of our letters of credit.

Income tax expense (benefit)

Income tax expense was $7.0 million for the six months ended June 30, 2025 compared to $3.3 million for the six months ended June 30, 2024, an increase of approximately $3.7 million. Our effective tax rate was 21.1% for the six months ended June 30, 2025 compared to 20.0% for the six months ended June 30, 2024. The increase in our effective tax rate was 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 initial public offering). 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 three and six months ended June 30, 2025 and 2024 reconciles to income before income taxes as follows:

($ in thousands)

40

($ in thousands)

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 initial public offering. 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 three and six months ended June 30, 2025 and 2024 reconciles to net income attributable to stockholders’ as follows:

($ in thousands)

(1) In the three and six months ended June 30, 2025, other non-operating expenses includes share-based compensation expenses recorded by us related to our initial public offering.

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 three and six months ended June 30, 2025 and 2024 reconciles to return on stockholders’ equity as follows:

($ in thousands, except percentages)

(1) For the three and six months ended June 30, 2025 and 2024, net income and adjusted net income attributable to stockholder are annualized to arrive at return on stockholders’ equity and adjusted return on stockholders’ equity.

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 three and six months ended June 30, 2025 and 2024 reconciles to diluted earnings per share as follows:

($ in thousands, except share and per share data)

Liquidity and capital resources

We are organized as a holding company with our operations primarily conducted by Ategrity Specialty, which is domiciled in Delaware. We may receive cash through (1) loans from banks, (2) issuance of equity and debt securities, (3) corporate service fees from Ategrity Specialty, (4) payments from our subsidiaries pursuant to the Tax Agreement (as defined herein) and other transactions, and (5) dividends from Ategrity Specialty and Ategrity Limited. We may use the proceeds from these sources to contribute funds to Ategrity Specialty or Ategrity Limited in order to support premium growth, reduce our reliance on reinsurance, or pay dividends and taxes, and for other business purposes. 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.

We have two letter of credit agreements, each in the amount of $35.0 million. These letters of credit were issued to the benefit of Ategrity Specialty on behalf of Ategrity Limited as collateral for its liabilities under the quota-share reinsurance agreement. As of June 30, 2025, no amounts were drawn on the letters of credit.

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.

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 salaries, rent, taxes, and interest expense. 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:

($ in thousands)

Operating activities

Our net cash provided by operating activities was approximately $50.8 million for the six months ended June 30, 2025, compared to $64.7 million for the six months ended June 30, 2024. The decrease was primarily driven by the timing of premiums receipts, claim payments, reinsurance recoveries and operating payables.

Investing activities

Net cash used in investing activities was approximately $185.9 million for the six months ended June 30, 2025, compared to net cash used in investing activities of approximately $231.8 million for the six months ended June 30, 2024. The decrease in cash used in investing activities was primarily driven by a significant deployment of excess cash balances into short term investments during the six months ended June 30, 2024.

Financing activities

Net cash provided by financing activities was approximately $132.0 million for the six months ended June 30, 2025, compared to cash used in financing activities of $414.0 million for the six months ended June 30, 2024, and consisted primarily of net proceeds from our initial public offering 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 six months ended June 30, 2025, property insurance represented 33.3% 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, 2024, we purchased catastrophe reinsurance coverage of $48.0 million per event in excess of our $12.0 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 $96.0 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, 2024, Ategrity Specialty has only contracted with reinsurers with A.M. Best financial strength ratings of “A-” (Excellent) or better. As of June 30, 2025 we recorded an allowance for credit losses of $0 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

As of June 30, 2025, there has been no material change to our contractual obligations and commitments from the disclosure included in “Management’s Discussion and Analysis of Results of Financial Condition and Results of Operations—Contractual obligations and commitments” in the Prospectus.

Financial condition

Stockholders’ equity

As of June 30, 2025, total stockholders’ equity was $559.7 million compared to $398.3 million total stockholders’ equity as of December 31, 2024. The $161.4 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 initial public offering, 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 June 30, 2025 and December 31, 2024:

($ in thousands, except percentages)

NM = Percentage not meaningful.

At June 30, 2025, and December 31, 2024, $23.5 million and $26.6 million, respectively, represented the cash and cash equivalents portion of our total cash and invested assets of $978.8 million, $802.0 million, respectively.

At June 30, 2025, and December 31, 2024, $419.2 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 at June 30, 2025 and December 31, 2024, were $251.9 million and $52.6 million of short-term investments. Our fixed-maturity and short-term securities had a weighted average duration of 3.3 years and 3.8 years, respectively, and an average rating of “A”, “A-”respectively, at June 30, 2025 and December 31, 2024. Our fixed-maturity and short-term securities portfolio had a book yield of 5.3% at June 30, 2025 and 5.7% at December 31, 2024.

At June 30, 2025, the amortized cost and fair value of our fixed-maturity securities and short-term investments were as follows:

($ in thousands, except percentages)

At December 31, 2024 , the amortized cost and fair value of our fixed-maturity securities and short-term investments were as follows:

($ in thousands, except percentages)

The amortized cost and fair value of our available-for-sale investments in fixed-maturity securities summarized by contractual maturity as of June 30, 2025, were as follows:

($ in thousands, except percentages)

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.

At June 30, 2025 and December 31, 2024, $166.1 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 audited financial statements of the Absolute Return Utility & Infrastructure Fund and quarterly in the fund’s unaudited financial statements. 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. At June 30, 2025 and December 31, 2024, we invested 17% 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 95.9% and 4.1%, and 94.4% and 5.6% of gross investments, respectively, as of June 30, 2025, and December 31, 2024. As of June 30, 2025 and December 31, 2024, the following table summarizes the sectors of the Absolute Return Utility & Infrastructure Fund’s gross assets:

($ in thousands, except percentages)

(1) Amounts presented are subject to rounding adjustments and, as a result, the totals may not sum.

Off-balance sheet arrangements

As of June 30, 2025, there has been no material change to our off-balance sheet arrangements from the disclosure included in “Management’s Discussion and Analysis of Results of Financial Condition and Results of Operations—Off-balance sheet arrangements” in the Prospectus.

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 aid in fully 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. 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. There have been no material changes to our critical accounting policies and estimates from those disclosed in “Management’s Discussion and Analysis of Results of Financial Condition and Results of Operations—Critical accounting policies and estimates” in our Prospectus.

Accounting pronouncements

There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Operations included in the Prospectus.

Regulatory Developments

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”), which enacts significant changes to the US federal corporate income tax system. The legislation includes, among other provisions, modifications to the treatment of research and development expenditures, permanent full expensing for certain business assets, changes to the interest deduction limitation under Section 163(j), amendments to international tax provisions including the global intangible low-taxed income (“GILTI”) and foreign-derived intangible income (“FDII”) regimes, as well as the permanent extension of the controlled foreign corporation (“CFC”) look-through rule.

Since the tax legislation was enacted after the balance sheet date of June 30, 2025, but before the issuance of these financial statements, the Company has not recognized any tax effects of the new tax legislation in its income tax provision.

The Company is currently evaluating the provisions of the OBBBA including the potential implications for its deferred tax assets, valuation allowance assessments, and effective tax rate. At this time, the financial impact of the new legislation cannot be reasonably estimated.

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.

We are exposed to market risks in the ordinary course of our business. Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in interest rates, equity prices, foreign currency exchange rates, and commodity prices. The primary components of market risk affecting us are credit risk, interest rate risk, and equity rate risk.

There have been no material changes in market risk from the information provided in our Prospectus.

Credit risk

Credit risk is the potential loss resulting from adverse changes in an issuer’s ability to repay its debt obligations. We have exposure to credit risk as a holder of fixed-maturity investments. Our risk management strategy and investment policy is to primarily invest in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to particular ratings categories and any one issuer. At June 30, 2025 and December 31, 2024, our fixed- maturity and short-term securities portfolio had an average rating of “A” and “A-” respectively, with approximately 41% and 33%, respectively, of securities in that portfolio rated “A” or better by at least one nationally recognized rating organization. Our policy is to invest predominantly in investment grade securities, while making strategic, risk-adjusted allocations to targeted investment opportunities across the credit spectrum. We monitor the financial condition of all of the issuers of fixed-maturity securities in our portfolio. The credit profile of our fixed-maturity and short-term securities portfolio was comprised of 37.5% AAA, 2.7% A, 47.2% BBB, 11.1% BB and 1.1% below BB or unrated securities at June 30, 2025 and 27.9% AAA, 4.9% A, 52.3% BBB, 11.8% BB and 3.1% below BB or unrated securities at December 31, 2024.

We are exposed to credit losses from reinsurers being unable to meet their obligations. We evaluate the financial condition of potential reinsurers and reinsure our business with highly rated reinsurers with a rating of “A-” (Excellent) or better from A.M. Best. We have not experienced any credit losses from reinsurance recoverables and did not record an allowance for uncollectible reinsurance recoverables as of June 30, 2025 and December 31, 2024.

Interest rate risk

The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates or exchange rates. As of June 30, 2025 and December 31, 2024, we had cash, cash equivalents and short-term investments of $275.4 million and $79.2 million, respectively, consisting of interest-bearing money market accounts and investments in government agency securities, for which the fair market value would be affected by changes in the general level of United States interest rates. However, due to the short-term maturities and the low-risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash and investments.

Equity risk

Our Utility & Infrastructure Investments have equity risk due to the equity strategy, and therefore, we have indirect equity risk through our Utility & Infrastructure Investments. Equity risk represents the potential economic losses due to adverse changes in equity security prices. As of June 30, 2025 and December 31, 2024, we had no direct holdings of equity securities.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2025, our disclosure controls and procedures were effective at the reasonable assurance level.

In connection with the preparation of our consolidated financial statements for the year ended December 31, 2024, we previously identified a material weakness in our internal control over financial reporting. Specifically, we did not design an effective control over the preparation and review of the financial supplemental schedules required by Regulation S-X that accompany the consolidated financial statements that operated with sufficient precision to detect misstatements in the schedules.

As of June 30, 2025, we have completed the remediation of this material weakness. Remediation measures included implementing enhanced review procedures and strengthening our internal control policies and procedures related to the preparation, review, and oversight of financial reporting.

Changes in Internal Control over Financial Reporting

Apart from the remediation measures described above, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Other than the following risk factor, there have been no material changes in our risk factors in the quarter ended June 30, 2025 from those set forth in the section entitled “Risk factors,” in the Prospectus, which is incorporated herein by reference. You should carefully consider the factors discussed in the Prospectus, which could materially affect our business, financial condition or future results.

Changes in tariffs, trade policies or other governmental restrictions could increase our costs, create inflationary pressures and adversely affect our results of operations.

Changes in U.S. or foreign government trade policies, including the imposition of new tariffs, duties, quotas, or other trade restrictions, as well as uncertainty regarding future trade relations, could increase the cost or reduce the availability of certain goods and services. Tariffs or other restrictions on imports may also contribute to broader inflationary pressures, which could increase our operating costs and the costs of goods and services used in the repair or replacement of insured property and equipment. These inflationary effects may cause claims costs to rise, potentially at a pace greater than our ability to adjust pricing, which could negatively impact our loss ratios and underwriting profitability.

In addition, changes in trade policy may lead to market volatility, reduced economic activity, or shifts in customer behavior, which could adversely affect our customers, suppliers, and counterparties. The extent to which tariffs or other trade restrictions will be imposed, remain in place, or be escalated is uncertain, and our inability to effectively mitigate their impact, particularly if claims costs increase as a result, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.