Our $26 price target assumes a multiple of 12X of blended 2026-2027 EPS (excluding investment marks) and 2.0X F12M BVPS (including investment marks) and represents a modest discount to our estimate of intrinsic value. We value the company by discounting capital-adjusted earnings assuming a cost of equity of 10.5% and terminal growth rate of ~4% (vs. the 10% and 4% implied by industry multiples over the past 20 years). The company has traded at 14X F12M EPS and 1.7X last reported book value since its IPO versus industry averages of 12X and 1.35X, respectively, over the past 20 years.

We rate Ategrity High Risk based on the Citi Research quant screen.

Risks to our target price include: Ategrity has a limited operating track record so any missteps (financial or underwriting/growth) could create outsized volatility (valuation more than estimates). In addition, the lack of any diversification outside of the E&S market exposes the company to any material change in pricing or flow of business into standard markets. Finally, the outsized ownership by Zimmer could put public investors at a disadvantage with respect to influencing strategic, operational, financial, and investment decisions.

We believe following idiosyncratic risks are also of importance: If financial performance outpaces the company’s current plans, it could drive estimates higher and positively influence valuation multiples. The company could reallocate out of its Zimmer-related investments, improving operating returns and the quality of earnings, while helping sentiment. Despite concerns about past reserve development, reserves could trend favorably, which would benefit earnings and enhance the credibility of management, helping valuation.