Accelerant praised for 'highly attractive model' as equity analysts initiate coverage

By Keira Wingate

Aug 18 - (The Insurer) - Equity analysts are beginning to weigh in on Accelerant Holdings following its July IPO, with early coverage showing both optimism and caution about the specialty insurance platform’s prospects.

The Jeff Radke-led company went public on Thursday, July 24, under the symbol ARX at $21 per share and was trading at $29.45 shortly after 1 p.m. ET (1700 GMT), representing a 40.2% increase compared to the offering price.

Reuters reported the company was valued at $6.4 billion after its shares initially jumped on debut. It ended its first day of trading on the New York Stock Exchange with its share price up 26.5% over its $21 IPO offering price.

Analysts have started coverage on the specialty insurance platform.

TD Cowen analyst Andrew Kligerman initiated coverage with a "buy" rating and a $36 price target, suggesting about 27% upside from Accelerant’s recent trading price.

He pointed to the company’s “highly attractive model”, built around a risk exchange platform that earns fees by connecting managing general agents (MGAs) with capital providers.

“The company is levered to some of the most attractive areas of P&C, has a robust top-line growth track record and outlook (with many levers and drivers) and should generate strong operating leverage,” Kligerman wrote in a research note.

He also highlighted that Accelerant grew exchange written premiums at a rate of more than 60% annually between 2022 and 2024. He projected that growth would continue at about 27% annually through 2027. He also touched on the company’s fixed cost base, which will likely allow margins to expand from 20% to 30% by 2027.

By contrast, Citizens analysts Matthew Carletti and Karol Chmiel took a more measured view, starting coverage with a "market perform" rating. They agreed the business model is “highly differentiated, with a strong likelihood of driving significant revenue growth and profitability for many years to come.” Still, they see the stock as fairly priced.

“Our valuation analysis … suggests fair value in the $32 to $33 range, which is significant upside (>50%) from the IPO price of $21,” they wrote in the report. They added that it is not enough to support a higher rating at this time, but shares are still trading above the IPO price.

Both TD Cowen and Citizens discussed the company’s rapid expansion. The member count has grown to 248 as of June 30, representing an increase of more than 100% over the past three years. Meanwhile, global insurers, including Tokio Marine and QBE, have joined as capital partners.

“We expect this growth to continue at a strong pace in the coming years, with new member growth the seed that can grow further through the avenues below,” analysts at Citizens said.

However, analysts also flagged risks for the company.

Kligerman said risk includes “somewhat limited float and stock overhang, potential pressure on underwriting performance from softening industry pricing, dilution from stock options and a slowdown in industry E&S and MGA market growth.”