Accelerant Holdings (ARX)

Context
Another investor posted about Accelerant Holdings (ARX) at Value Investors Club in January. It's now available to read for anyone that signs up: https://valueinvestorsclub.com/idea/ACCELERANT_HOLDINGS/7385578837#description. If you're interested in ARX, I highly recommend getting a free account and reading the original article.

Since the original VIC post, ARX has declined 25%. However, I believe recent news shows the bull case in the article is coming to fruition.

Overview
Accelerant is a risk exchange focused on specialty insurance. They connect specialty insurance underwriters (the sellers on Accelerant's platform) with risk capital buyers. Their specialized technology (developed by a team of ~150 engineers) reduces friction for both buyers and sellers. As of September 2025 the exchange had 265 global members, 92+ risk capital partners, and 15+ issuing carriers with 500+ specialty products.

The long-term bull case is they become the primary way smaller underwriter teams connect with buyers globally, and there isn't another company attempting quite the same thing. The key questions are: does the market need such a thing, and can Accelerant execute?

Does the market need Accelerant?
It sure seems to! 2025 revenue is 51% higher than 2024, and Q4 2025 revenue is 25% higher than Q4 2024. In Q4, third-party direct written premium is up to 40% of exchange written premium, from 21% in Q4 2024. This is critical because Accelerant "seeded" the exchange with Hadron, a fronting carrier owned by Accelerant's PE sponsor, and increasing third-party involvement is essential for overall economics of the exchange.
Accelerant's tech improves insurance flows including loss reduction (e.g., identifying subrogation opportunities).
One key differentiator seems to be offering 5-year capacity commitments to members.
In 2023 (our only such data point) they had an independent third-party collect a Net Promoter Score (NPS) from their members and got 89.
Member churn is cited as < 1% and net revenue retention was 135% in Q3 2025 (the last one we have data for).

Valuation
Note: ARX had $1676mm cash as of last report, but $71.9mm of it is restricted because it's used in insurance flows and total $470mm or so for statutory surplus. So $1206mm is "excess" for the business.
Enterprise value: $1516mm (222mm shares ** $11.71 + 122mm debt - 1206mm cash)
2025 adj. EBITDA: $241mm (1)
2026 estimated adj. EBITDA (2): > $269mm
2025 EV/adj. EBITDA: 6.3
2026 EV/estimated adj. EBITDA: < 5.64
(1) Excludes $41mm in irregular (i.e., non-repeatable) gains.
(2) Based on prior estimate. Management has indicated they will guide above this.

I expect ARX to receive at least a 14X EBITDA multiple to match 2026 EV/EBITDA of slower-growing peers, and 2026 adj. EBITDA of $280mm, which would yield ~$23/share. If it grows as I expect it will deserve a premium multiple over time.

Other points:

1. The top cofounders (Jeffery Radke, Christopher Lee-Smith, Frank O'Neill) own 46.6% of shares outstanding. Management interests are strongly aligned with shareholder interests.
2. In November 2025, the CEO, COO, Chief Underwriting Officer, head of distribution, and a director all purchased shares in the open market. In total they bought $1.9mm in shares at $13.10-$13.44. This reinforces my view that the current $11 quote doesn't reflect the business fundamentals.