Neptune Insurance Hldgs (NYSE:NP) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Neptune Insurance Hldgs reported a 34% year-over-year increase in revenue to $59.6 million and a 38% increase in adjusted EBITDA to $36.8 million, with a margin improvement to 62%.
The company is leveraging AI to enhance agent productivity and reduce distribution costs, with AI tool Atlas showing significantly higher binding rates for quotes.
Future guidance has been raised for 2026 to $204 million in revenue and an adjusted EBITDA margin above 61%. Initial guidance for 2027 projects $238 million in revenue.
Operational highlights include a significant increase in premium in force (32%) and policies in force (29%), alongside productivity improvements without increasing headcount.
Strategic initiatives focus on expanding distribution channels, enhancing AI capabilities, and introducing new products like the Indemnity Earthquake product.
Management noted the strong performance despite a weak housing market and absence of major hurricanes, emphasizing growth without reliance on favorable external conditions.
The company reported strong cash flow with plans for continued investment, share repurchases, and debt reduction, supported by a low leverage ratio of 1.7 times.
Leadership changes include new board member and upcoming CFO transition, indicating a focus on strengthening management capabilities.
Full Transcript
Trevor Burgess (Chief Executive Officer)
Apparent in our financial and operating results. We’re growing revenue substantially faster than our team size. We’re making our distribution partners more productive. We’re attracting greater demand from risk‑taking partners. And we’re doing all of that at a time when the broader environment hasn’t been helpful. That’s important because we’re not building a business that depends on favorable market conditions to succeed. The fact that it’s a soft insurance market and a slow housing market hasn’t impeded our ability to execute or grow.
We’re building a business with the capabilities to consistently take share, expand the market, and compound our advantages over time. I want to walk through the evidence of that today, including what we’re seeing from our investments in AI, the evolution of our distribution network, the strength of our capacity relationships, and the opportunities we see ahead. But first, let me turn to our third quarter results. The third quarter was another record for Neptune Insurance Hldgs. Revenue grew 34% year over year to $59.6 million. Adjusted EBITDA grew 38% to $36.8 million. That’s a 62% margin, an improvement of 147 basis points from a year ago. Premium in force reached $450 million, up 32%. And we now have more than 336,000 policies in force, up 29%. October 1st marked the anniversary of our first day of trading on the New York Stock Exchange, and it’s worth reflecting on how far we’ve come in that short period.
Our trailing twelve‑month revenue is now 44% higher than at June 30, 2025, the figure reported in our S‑1. We’ve achieved that growth while maintaining exceptional profitability with a rule of 40 of 94. And the growth is broad‑based. It’s coming from the expansion of our distribution network, increasing productivity among our existing agents, and the continued development of our products and technology as we get into operations. Let me start with distribution because I know the impact of AI on insurance purchasing is top of mind for many investors. Our view is straightforward. Greater price transparency and easier access to insurance are opportunities for Neptune Insurance Hldgs, not threats. There are more than 100 million buildings in the United States and approximately 25 million face meaningful flood risk. Yet there are only around 4 million flood insurance policies.
The biggest obstacle to selling flood insurance isn’t price discovery. It’s that millions of property owners don’t know they need it or mistakenly believe they’re already covered. AI has the potential to change that by helping consumers understand their exposure and identify coverage gaps. And Neptune Insurance Hldgs is exceptionally well positioned to serve that demand. Whether a consumer purchases through an insurance agent, directly through neptuneflood.com, or eventually through a personal AI assistant, our technology can support the transaction.
In the near term, we expect AI to make our existing distribution partners substantially more productive over time. As more consumers transact directly, there’s also an opportunity to lower our distribution costs, which today represent our largest expense. We’re already seeing tangible evidence of the opportunity through Atlas. During the third quarter, 7,000 agents used Atlas, exchanging more than 75,000 messages with the platform. And perhaps most importantly, quotes involving Atlas are binding at three and a half times the rate of quotes without an Atlas interaction. That is a powerful indication of the value we’re delivering. Let me give you an example of what that looks like in practice. We recently held a call with a large group of insurance agents, and during the discussion, one agent told us they’d just sold their first ever flood insurance policy.
They’d come to Neptune Insurance Hldgs, run a quote, and started a conversation with Atlas. The tool gave them a sales script, helped them understand the property’s flood exposure, and provided the background they needed to explain the coverage to the customer. They told us that conversation gave them the confidence to present the policy and ultimately close the sale. I love that story because it gets to the heart of what we’re trying to accomplish.
There are tens of thousands of insurance agents across the country who have customers exposed to flood risk but who don’t routinely sell flood insurance. Often it’s because they don’t have the expertise or confidence to have that conversation, and Atlas changes that. It puts flood insurance expertise in the hands of every agent, regardless of their experience. We recently heard from Garrett Mitchell with Rocket Flood, a HUB International company, who said, and I quote, Atlas is making a real difference in our business. The chatbot on Neptune Insurance Hldgs’ quote page is like having an underwriter alongside us through the entire sales process. And with the new Atlas cards, in just three weeks, we’ve bound dozens of endorsements and renewals, generating tens of thousands of dollars of premium. Garrett’s comments show that we’re not simply making our partners more efficient.
We’re also helping drive demand for those partners so they can grow their business. More than 65,000 insurance professionals have now created verified Neptune Insurance Hldgs accounts, and over 43,000 of them were active during the quarter, compared to 39,000 in Q2. We’re not just adding distribution partners. We’re making each relationship more productive and giving agents more reasons to do business with Neptune Insurance Hldgs. The same productivity gains are happening inside our organization. During Q3, our engineering team delivered two and a half times the amount of work it delivered in the same quarter last year with broadly the same number of people. And our service organization operated an average of one human representative for every 30,000 policies in force, a 50% productivity improvement year over year, while improving response times and customer satisfaction.
These are meaningful improvements, and they demonstrate how we’re growing the capabilities of the business considerably faster than its headcount, all while continuing to invest in new products, technology, and underlying infrastructure. I’ve spent a considerable amount of time with capacity partners over the last several months, and the quality of those conversations reflects how far the business has come. These are sophisticated counterparties with their own models, their own views of risk, and many choices about where to deploy capital. They understand our portfolio, they monitor its performance, and increasingly they want to participate in its growth. During the quarter, we renewed another capacity program on improved terms, and with that renewal effective December 1st, none of our active capacity programs will include contingent commissions.
When existing partners want to grow alongside Neptune Insurance Hldgs and new partners want to access the business, that’s meaningful external validation of what we’ve built. Let me turn to the external environment and the broader opportunity ahead. The housing market remains weak, and we’ve now gone through two consecutive years without a major hurricane creating a substantial demand event for flood insurance. Both of those factors have historically supported new business demand, and their absence has created a headwind. Despite that, our premium in force has grown at 32% year over year, and our new business premium during Q3 was up 50, 51% year over year.
That’s an important indicator of the underlying strength of the business. We’re growing our distribution, taking market share, and expanding the insured base without relying on an improvement in those external conditions. A recovery in housing activity would certainly be beneficial, but it isn’t required to deliver on our growth expectations. We’re also monitoring the potential impact of a strong El Niño this winter. We don’t expect it to have a material impact on either overall demand or the underwriting performance of our portfolio. But increased awareness of flood risk is good for the industry. Significant weather events create opportunities to remind property owners of their exposure and of the importance of having flood insurance. We’ll continue working closely with our fantastic distribution partners, particularly on the West Coast and in Hawaii, to translate that awareness into greater insurance adoption and helping to close the protection gap.
We are often asked about potential changes at FEMA around the NFIP. While we have no additional information and don’t expect significant changes in the immediate term, our latest research highlights the opportunity for growth, showing that nearly half of NFIP policies are still priced below their full risk level, representing approximately $2.6 billion in annual subsidies that will continue to burn off in the coming years. Meaningful reform would accelerate that opportunity, but it isn’t a prerequisite for our success.
We’re also continuing to expand our addressable market through new products. Our Indemnity Earthquake product is progressing through beta testing, and we anticipate a formal launch in Q4. Let me finish with our outlook. Shortly after our IPO last year, we introduced initial 2026 revenue guidance of $186 to $189 million. Today, we’re raising that guidance for the fourth time to $204 million, which, if achieved, will result in approximately 28% year over year growth with an adjusted EBITDA margin above 61%. We’re also announcing initial guidance for the full year 2027. We expect approximately $238 million in revenue at an adjusted EBITDA margin of approximately 61%.
That outlook assumes neither a recovery in the housing market nor an above‑average hurricane season. It also excludes any inorganic growth and any substantial contribution from new product lines. In other words, we expect to continue delivering strong, highly profitable growth without needing the external environment to improve. And that brings me back to where I started. The strength of Neptune Insurance Hldgs isn’t any single product, technology, or distribution relationship. It’s how those advantages work together and become more powerful as the business grows. One year after our IPO, Neptune Insurance Hldgs is materially larger, more productive, and more capable. Our distribution network is expanding. Our technology is improving productivity across the business. Our capacity relationships are stronger than ever.
We’re serving 336,000 customers nationwide, and we’ve demonstrated that those advantages translate into sustained growth and exceptional profitability. That’s what gives us confidence in our outlook and in the significant opportunity still ahead of us. With that, I’ll hand it over to Jim.
Jim Steiner (Chief Operating Officer & Chief Financial Officer)
Thanks, Matt. I’ll spend a few minutes on the financial results, the underlying economics of the business and our balance sheet and capital allocation. Starting with the quarter, revenue was 59.6 million, up about 34% year over year. Adjusted EBITDA was a record 36.8 million, up about 38% for an adjusted EBITDA margin of about 62%. So once again, adjusted EBITDA grew faster than revenue and our margin expanded while we kept investing across the business.
A few things are driving that. First, the in-force book keeps growing. We ended the quarter with about $450 million of premium in force and each year, the renewal book contributes more of our revenue. Our revenue retention rate over the last 12 months is about 89%. Retention matters a great deal to our financial model. Each year we start with a larger base of policies already in force. With strong retention, much of that book keeps earning revenue before we write a single dollar of new business.
Second, the operating leverage in the business continues to show through. We don’t retain underwriting risk. As premium grows, we don’t need to provide additional insurance capital, and much of our infrastructure doesn’t need to grow in step with premium. That includes our underwriting platform, our policy administration technology, our data science capabilities, and our corporate functions. Our largest variable expense is distribution commission.
Beyond that, as premium and revenue grow, a meaningful share of additional revenue can convert to adjusted EBITDA while we keep investing in the platform. That’s why we believe margins above 60% and continued investment and growth are entirely compatible. You can see the same dynamic in our productivity numbers. Over the last 12 months, revenue per employee was about 3.2 million and adjusted EBITDA per employee was about 2 million. Those figures keep rising because revenue is growing much faster than the organization.
Turning to cash flow, during the quarter we generated 25.9 million of operating cash flow. For the first nine months of the year, operating cash flow was 69.3 million. That cash gives us a lot of flexibility in how we allocate capital. At quarter-end, we had 215 million outstanding on the revolver. Our total net leverage ratio as defined in our credit facility was about 1.7 times, compared with about 2.9 times a year ago. Over the last 12 months, we’ve reduced leverage while also returning capital to shareholders.
Our approach to capital allocation remains straightforward. The first call on capital is attractive opportunities to grow Neptune Insurance Hldgs. Beyond that, we intend to continue our share repurchase program opportunistically and to reduce debt over time. We don’t view those as fixed buckets. Our cash generation and capital-light structure give us the flexibility to put capital wherever we see the best expected return. One more item. When RSUs vested on September 30th, we withheld some of the shares to cover employee taxes; that avoided additional dilution. After quarter-end, we paid about 14.2 million in related taxes. Because that cash went out after the quarter closed, it will show up in our fourth-quarter cash flow. With that, I’ll turn it over to Trevor for closing remarks.
Trevor Burgess (Chief Executive Officer)
We recently celebrated the one-year anniversary of our IPO. Over this past year, I’m incredibly proud that we have grown our revenue by 34%, our adjusted EBITDA by 38%, our premium in force by 32%, our policies in force by 29%—all while our number of employees has actually fallen from 60 to 59. In the last year, we have generated $82 million in operating cash flow and have used $49 million to delever and nearly $32 million to buy back stock. Our leverage ratio has fallen from 2.9 to 1.7 times in the last year, giving us incredible flexibility to look at a wide range of strategic opportunities.
I will reiterate that, absent investment opportunities that will grow our business even more quickly, our bias will be to opportunistically buy back stock. There is a paradox at the center of insurance distribution right now. The better AI gets at doing an agent’s job, the more valuable the human agent becomes. The tools to disrupt how insurance is sold are here, but the typical American homeowner is now about 57 and a half, up more than three years since 2010, and homeowners are aging faster than the country as a whole—that’s according to the National Association of Realtors. Even the people buying homes today are older than ever, with a median age of 59.
Those homeowners aren’t going to walk away from an agent they’ve trusted for 20 years just because an AI could do the same job. My own mother isn’t going to. When advice is cheap and everywhere, trust is the scarce thing. So we don’t see AI replacing the agent in the short term. We see AI working through the agent. That’s why we built Atlas Plus. It puts the speed of AI behind the agent, so the relationship stays with the agent and the work gets faster, smarter, and more accurate.
Now, none of this is permanent. The futurist Roy Amara said, we overestimate the effect of technology in the short run and underestimate it in the long run. That still holds. The gap between what AI can do and what customers are ready for will close. Today, Neptune Insurance Hldgs wins by powering the agent. As buyers get more comfortable with AI, Neptune Insurance Hldgs wins by serving them directly, too. Either way, we benefit as this change takes place, however quickly it comes.
I’d like to close by talking about some exciting changes to our board and our management team. David Noble has joined our board of directors as a new independent director. I’ve known David for over 25 years, since we worked together at Morgan Stanley. He has become one of the most celebrated executive coaches of our generation, having repeatedly been a top 50 coach and the author of the Harvard Business Review–published Real-Time Leadership. As we grow as a company, having his voice at the table is a privilege and an honor.
I am also excited to announce today that our Audit Committee Chair, Christian Melej, will join the company in January and become our CFO after the filing of the 10-K. Christian, Matt, Jim, John, and I first worked together in the early days of my leading C1 Bank, where Christian would eventually become our CFO. He is an incredible accountant and thinker, and we are lucky to have him join the team. Jim Steiner, our long-term CFO, will stay on as a board member and as our COO.
Jim has been an incredible business partner, friend, and leader at Neptune Insurance Hldgs, and we appreciate his tireless efforts to build the business we have today, and we look forward to continuing to work together. Thank you to our agents, to our capacity providers, our policyholders, and to our employees for making this quarter possible. Thank you all for joining us, and we’ll now open the call to questions.
OPERATOR
We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Elise Greenspan with Wells Fargo.
Your line is now open. Please go ahead.
Elise Greenspan (Analyst)
Hi, thanks. Good evening. My first question: when you guys were talking about AI, you were talking about, over time, just becoming more efficient, and I think you said with lower distribution costs. Can you just give us a sense as you guys are thinking out just how beneficial AI could potentially be on your expense levels and how we could think about that benefiting your margins over time?
Trevor Burgess (Chief Executive Officer)
Sure. Thank you for that question. First of all, I would say I think it’s going to take a long time to get there, but we have some good examples in other countries where this transformation has taken place, and the United Kingdom is probably a really good example because there, 60% or 70% of homeowners buy their homeowners policies through a comparative rater, which you can think about as being an unsophisticated form of artificial intelligence. And there, the carriers who win the policies pay the online raters a one-time fee of 50 pounds, as opposed to an average of 13% every year that we’re paying an agent today.
So our largest expense category would dramatically fall if consumers decided that they wanted to use AI agents such as Muse or chatbots such as ChatGPT in order to buy their flood insurance. I think it will be a very slow transition, but it would be a transition that would be very profitable for Neptune Insurance Hldgs, as that is our largest cost.
Elise Greenspan (Analyst)
Okay, thanks. And then my second question: when you were talking about guidance, you mentioned that it didn’t include organic growth or contributions from new product lines. I guess in relation to both, can you just give us a sense of what product lines could potentially be launched over the coming year? Or if inorganic growth could be part of the equation and kind of supplemental to the 2027 guidance you guys laid out today?
Trevor Burgess (Chief Executive Officer)
Sure. Thank you. We’re in a very, very envious position of having a very attractive leverage ratio, access to capital, and tremendous free cash flow. And that allows us to think about investing in new perils, such as the earthquake peril, which we have decided we will turn from a beta product to a fully fledged product by the end of the year. That’s starting to gain some steam—still early days, but starting to gain some steam. We will look at other perils that are climate related, that are carefully aligned with the data and the tool set that we have developed at Neptune Insurance Hldgs and that can be broadly applicable.
The demand is really coming from two areas. One is our risk-taking partners, who would like to do more and more with Neptune Insurance Hldgs because of our success in underwriting flood and, quite frankly, how we operate as a native MGA, where data is incredibly transparent to them in ways that just is not how the industry currently operates. And then second, from our distribution partners, who are incredibly interested in finding more ways to do business with Neptune Insurance Hldgs because of how simple our system is to access and buy product.
So we are continuously looking. Earthquake will be the next official product, and we will look at others. Inorganically, we have looked at a large number of opportunities as they have been presented to us or as we have seen them, and there have not been many that have met our screening criteria, just given our organic growth that we are able to achieve. But if there is one that meets our criteria, we’re happy that we have the capital structure to be able to execute upon that and, quite frankly, the experience as a management team to be able to execute upon them.
Elise Greenspan (Analyst)
Thank you.
OPERATOR
Your next question is from the line of Mike Szuramski with BMO. Your line is now open. Please go ahead.
Mike Szuramski (Analyst)
Hey, thanks. Good afternoon. Maybe just poking around, in a positive way, about the last 12-month revenue retention figure in the very high 80s—89, I believe. I believe it was low 90s a year ago. Obviously your results are excellent, but just kind of curious if, given how important that KPI is, you can talk through what’s going on there in terms of the moving parts.
Jim Steiner (Chief Operating Officer & Chief Financial Officer)
Yeah, a lot of what we’re focused on is really about the lifetime value of a customer relative to their risk. And we’re finding that because of the extraordinary underwriting results that we’ve been able to deliver, we haven’t necessarily needed to push price as much. And we think that that has greatly contributed to, you know, the new business, you know, growth side of the house. So it’s always a trade-off, right, between, you know, how much price you push versus, you know, volume in the door and understanding that elasticity.
Again, we’re fundamentally pricing based upon risk, but we’re able to use, you know, price as—listen, if we can lower prices for consumers and get more new people in the door, then that’s something that we’re going to try to do. That then obviously translates when it comes time to, you know, renew policies. You’re going to see some small variations there as maybe we don’t push price quite as much.
Mike Szuramski (Analyst)
Understood, understood. Okay, got it. So you’re kind of tinkering as you said you would do during the IPO with that. Okay. And maybe just a high-level question: as we’ve tested ChatGPT and some LLMs in recent months, they’ve done a lot better on the consumer side of talking to it and asking, do I need flood insurance, etc., and being able to bind a policy. And it almost always gives us a Neptune Insurance Hldgs quote very fast, much better process than just a couple months ago.
Obviously direct to consumer is still not a big driver of distribution, but curious—since I think we haven’t used Atlas+—are there any kind of analogies, or would you say that Atlas+ experience would be something like the experience where we’re seeing improvement on the consumer side, and that an agent is really getting answers very fast and binding a quote much faster because of AI underneath it?
Trevor Burgess (Chief Executive Officer)
Yeah, Atlas is really our product to help turn agents into super agents. And we have two portions of Atlas live right now. One is on the quote screen, and as Matt mentioned, agents who interact with Atlas when they’re running a quote bind at 3.5 times the rate of people who don’t interact. So we know that it is having a really positive effect—causation, correlation, right, we get it—but still, that’s a big difference and we’re excited. And when we read the questions that they’re asking, you know, a lot of it is just helping them get more comfortable selling flood.
There are some agents who sell flood every single day, and they already know Neptune Insurance Hldgs and they know how to breeze through our system, and they don’t need Atlas+ because they already know it. But the vast majority of agents aren’t selling flood every single day, or maybe they’re selling it once a week. And having the world’s smartest underwriter sitting right there helping you answer the questions is a very, very valuable tool. And we see that in the data.
The second part of Atlas+ is it’s only been out in the wild for about a month now, and probably about 30 or 40% of our agents currently have access to it as we roll it out, and we’re seeing some really exciting early-stage results. What Atlas+ actions, or cards, does is tell the agent what is the next best thing that they can do. And that may be running a new quote, or looking at an expired quote from last year, or sending an email to a customer who’s past due on paying for their renewal.
Or it may be sending them an email saying, hey, you’ve got an endorsement available for pool coverage and that customer we know has a pool, but you didn’t sell in the pool coverage. And click this one button to have the AI send an email out to the customer and they can pay with Apple Pay the 30 bucks to add the pool coverage. We’ve now had over 130 positive tasks completed by consumers—that’s renewals, endorsements—paid as a result of this Atlas+ card.
So we look forward to by the end of the year having enough data to better understand what its impact is going to be. But beyond the direct impact of getting more consumers to pay the renewals and be properly insured with the right endorsements, it’s also acting as a great training tool to agents about what is possible and reminding them of the great things that they can do within the Neptune Insurance Hldgs system. So we are very bullish on these investments on the agent side, just as we’re investing on the direct-to-consumer side.
As you mentioned, and we put out a press release about it, we are fully enabled on ChatGPT. We’re fully enabled for AI agents such as Muse. If someone wants to use Muse to run a Neptune Insurance Hldgs quote, they’re going to be able to do that.
Mike Szuramski (Analyst)
Thank you.
OPERATOR
Your next question is from the line of Andrew Kligaman with TD Cowen. Your line is now open. Please go ahead.
Andrew Kligaman (Analyst)
Good evening. This question is around carriers and, you know, we’re seeing more carriers show up in the flood market. Their volumes seem to be immaterial. But as more carriers leverage AI and digital distribution, what competitive advantages at Neptune Insurance Hldgs are hardest for competitors to replicate?
Trevor Burgess (Chief Executive Officer)
So I think there are a couple of things. First of all, we haven’t seen any carriers gain any material traction that, you know, we’re aware of. I know there are always Lloyd’s syndicates that make an API available to the marketplace. Those APIs are really just connected to an Excel spreadsheet. It’s not a sophisticated pricing tool that’s looking at the nearly 40 million quotes that we’ve run in our history and the thousands of claims data and really understanding the fundamental risk behind this.
So I think there is a very material difference in the underwriting that’s taking place, number one. And then number two is really about distribution. And it’s easy to make those available on some comparative rater platforms, but moving into large, sophisticated distributors who want to make sure that you have a history and a track record and are going to be there for a long time and have the ability to do APIs directly into their quoting platforms and run thousands and thousands of quotes a day and write $15 million policies and be in all 50 states plus Washington, D.C.—we have in fact seen a bit of the opposite, where some of our largest distributors in recent recontracting that we’ve done with them have actually shrunk the number of private flood offerings they have, favoring Neptune Insurance Hldgs.
Jim Steiner (Chief Operating Officer & Chief Financial Officer)
Andrew, I would just add on top of that as well. You know, we quoted the new business premium growth number year over year. So we’re up over 50% year over year in terms of new business premium sales. That is fantastic from a sales standpoint. It’s also important to keep in mind that there’s 100 million buildings out there that our goal is to get insured, right? Twenty-five million that are at moderate to severe risk of flooding. And so the market is huge.
There’s a tiny, tiny percent of take-up today. And this is Neptune Insurance Hldgs expanding the market. This is us continuing to sell into those homes that have never had flood insurance before. And that is where that growth in new business is coming from. And that’s what we continue to focus on.
Andrew Kligaman (Analyst)
Thank you for that. And my follow-up question—and you’ve given a lot of good color around EBITDA growth—you’ve taken the guidance EBITDA margin up to above 61%. From 60% to 61, you’ve talked about generating more and more revenue per employee. Is it possible that in the not too distant future you could be talking about EBITDA margins above 62%?
Jim Steiner (Chief Operating Officer & Chief Financial Officer)
So, you know, if you look at Q3, we were 61.7. So we’re getting damn close, right. And it definitely has some seasonality to it, right, because as everyone remembers, right, we’ve got the same costs in Q1 as we do in Q3, right. But in Q1, people aren’t thinking about flood insurance, so we sell a lot less, you know, in the wintertime. So—but we certainly hope that we can continue to, you know, grow margins over time. And we’re seeing some amazing things for the use of AI, some of which we build and some which we buy.
We’re buying AI when it’s something where there’s sophisticated systems that can really do things like customer service, where it’s just a cost to us if the most we can save is a couple hundred thousand dollars. And that’s not something I want my team focused on. We want to be focused on things that are centered around our intellectual property and centered around revenue growth, right? So if I can pay a couple hundred thousand dollars for an AI system that then can be put in front of our incoming customer service emails and successfully service 60, 70, 80% of those, we’re going to be able to get a lot more efficient over time. And so I’m excited by what we’re seeing with technology, our use of technology. And it’s not out of the realm of the possible, but we’ll work there over time.
Andrew Kligaman (Analyst)
Thank you.
OPERATOR
Your next question is from the line of Gregory Peters with Raymond James. Your line is now open. Please go ahead.
Gregory Peters (Analyst)
Good afternoon. I was looking at your slide on distribution—I think it’s slide 13—and at the bottom, in one of the charts, you talk about these cumulative Triton quotes reaching 38.7 million. And as I look at that number, it’s substantially larger than actually the policies in force. So trying to understand what’s going on with the 38.7 million, because it should be nice if you could convert those all to policies in force. Maybe you have some interpretation.
Is it people just getting the same quote over and over again? Or maybe you have some color on what you think is going on there?
Trevor Burgess (Chief Executive Officer)
Sure. I think the first thing to remember is that part of what makes Neptune Insurance Hldgs very special is the technology we have to integrate with very large distribution partners directly into their quoting platforms. And when we do that via an API, that enables them to do things like run a flood quote every time they’re running a homeowner’s quote. But that doesn’t necessarily mean that all of those large distribution partners have mandated that their agents then verbalize that quote every single time that it is run, right.
And that’s what we’re working on—how do we change agent behavior over time? That’s why we’re investing in Atlas. How do we turn agents into super agents? How do we give them tools to do more of the things we’d like them to do? And what we actually see is with our very best agents, where they do offer it every single time, their quote-to-bind ratios can be 5x, 6x, 7x, 8x a agency who doesn’t have the same mandate. And so what we’re working to do is change the agent behavior over time.
And if we can do that, that quote-to-bind ratio will just continue to rise.
Gregory Peters (Analyst)
Okay, I guess the other question, just more big picture: there’s been some small hurricane activity. There’s flooding in Texas and New Mexico, and there’s some stuff up in the Panhandle of Florida. And I’m going to go on the presumption of probably little if no impact on your company, but maybe there has been some impact. Maybe it affects market perception of the demand for flood, or maybe you could just talk about any fallout that you’re seeing as a result of those events as it relates to your business.
Trevor Burgess (Chief Executive Officer)
There certainly have not been any major hurricanes this year that would be the hallmarks of large surges in demand. So the incredible results in the third quarter and the results we’ve had this year have really been because of our operating on all cylinders, growing distribution, working with our distribution partners, selling more, and being focused on delivering great value to consumers. How do we roll out ATLAS Plus to make agents smarter and smarter and how they can sell?
And the weather has not done us any favors this year. It’s done America a favor by not causing a huge amount of damage, but definitely has not created that fear-based buying cycle that we see with very large hurricanes. The only slight exception would be just El Niño in general raising awareness around weather patterns, sometimes in unique areas. But Hawaii is not a big state, right? Not going to make a material difference to our business. But they’ve had a record number of hurricanes that have gone through Hawaii. And California, you saw Governor Newsom declare a state of emergency because of El Niño for this winter. So we’re certainly watching those things and we’ll see if any of that results in some uptick in demand.
So I would say we’ve done really well, despite there not being any hurricanes and despite there not being a healthy housing market.
OPERATOR
Your next question is from the line of Tommy McJoint with KBW. Your line is now open. Please go ahead.
Tommy McJoint (Analyst)
Hey, thanks. Good evening, everyone. A question on the metric. When I look at commission income as a percentage of written premium, I understand there’s been some moving pieces with your renewals of terms with different capacity programs. And you also mentioned the change in having no contingents in all terms effective on December 1st. When you take those different moving pieces, we saw in the third quarter a nice step up in that metric, that commission income metric.
Is that a good number to use going forward, you think? Or do you think there’s still upside from some of the renewed terms playing out?
Jim Steiner (Chief Operating Officer & Chief Financial Officer)
Hey, Tommy, thanks for the question. The renewal of each of our programs, each of our capacity relationships, happens throughout the year. So it’s not like these all come into effect at the start of Q3 or anything that would cause a particularly large jump at that point. But we continue to negotiate changes to those contracts as they come up year over year. One renews in Q4 that we talked about on the call. And with that renewal, we removed those contingent commissions and got some favorable increases in the ceding commission there.
So I think where we’re at today is a good run rate for the near term. But we continue to produce fantastic underwriting results for our capacity partners, and we continue to provide fantastic growth from a written premium standpoint into those programs. And so as we continue to do so and continue to prove out the model, then, as we always say, we continue to have those negotiations.
Tommy McJoint (Analyst)
Got it. That makes sense. And then you also mentioned your points around the guidance increase throughout the year. And so when you take the latest 2026 revenue guide versus the initial metric about a year ago, it has increased about 9%. So when you step back, what are the two or three largest drivers that you’d attribute that outperformance to? And especially in the face of what’s been a fairly weak housing and a relatively benign weather year.
Trevor Burgess (Chief Executive Officer)
I’ll give you two things and I’ll ask Matt to play cleanup there. One is Jean‑Luc Eckstein, who’s our Chief Customer Officer, and his team have done an absolutely fantastic job making sure that agents across this country understand Neptune Insurance Hldgs, its capabilities, and how we can help them grow their books in the face of a challenging and soft market for most brokers. So flood can be an area of great growth and great value to their customer.
So a big shout out to our distribution team for a lot of hard work this year on making sure that agents understand Neptune Insurance Hldgs’ value proposition. That’s adding new agencies and, really importantly, working with existing agencies to do more and deepen those relationships. The second thing is around technology and ATLAS Plus, helping provide that agent with an amazing tool sitting right next to them when they’re running a quote, helping them to be a super agent and get their questions answered and give them the confidence necessary to sell that policy. It’s an incredible tool, and we’ve had thousands and thousands of agents interact with that and benefit from that tool. Matt, what else would you add?
Matthew Duffy (President & Chief Risk Officer)
Yeah, I’d add two things. One is from a product standpoint. We continue to modify the product and improve the product. Some of the changes we’ve made this year with increasing the limits that are available and adding those optional coverages—we sell every day. We continue to sell more and more higher-limit policies, higher-premium policies, and just have a better product-market fit than we ever have before. I think that continues to be the case in the flood peril, and as Trevor mentioned earlier, we’re getting more and more confident that that’s the case in the earthquake peril as well.
I’d also just mention the sort of turmoil that we’ve seen with the NFIP—with the shutdown at the end of last year and then with the issues again during Q1 at the start of this year. I think more and more agents through that process found the ease of use through Neptune Insurance Hldgs, found our system, and continue to like that process and do more and more business with us. So I think it’s all of these points compounding and combining, which is what allows us to raise the guidance and also set the guidance that we’ve set for 2027.
Tommy McJoint (Analyst)
Thanks, guys.
OPERATOR
Your next question is from the line of John Shanker with Bank of America. Your line is now open. Please go ahead.
Josh Shanker (Analyst)
Yeah, thank you. Josh Shanker, everyone. How y’all doing tonight?
Trevor Burgess (Chief Executive Officer)
Hey, Josh.
Josh Shanker (Analyst)
So, you know, look, the weather’s not really working for you and obviously the housing formation’s not, but you’re doing great anyways. Is there any stats you have around the percentage of homes that are being bound with new coverage, including flood, compared to past years, and the percentage of those homes, I guess, that are getting a Neptune Insurance Hldgs policy, which is probably a very high percentage? Is there a way to think about the take-up rate, how it’s changed over time?
Jim Steiner (Chief Operating Officer & Chief Financial Officer)
There’s not a great way to do that, Josh. There’s not a great public data set around it. There’s some back-of-the-envelope math. If we look at the size of the NFIP and we look at the rate at which they are shrinking over time—and they continue to do so—as we sit here today, Neptune Insurance Hldgs is just shy of 10% of the size of the NFIP from a policy standpoint. That’s up from five years ago; we were 1%, and we’re pushing 10% as we sit here today.
So we obviously continue to grow from a market share standpoint pretty rapidly as we have rapid growth and the NFIP declines. I think if we look at the sort of market rate of turnover with the NFIP, we come back into Neptune Insurance Hldgs winning 20% to 30% of all new policies that are issued from a standalone flood standpoint here, which continues to increase year over year from that same—if we do that same equation.
Josh Shanker (Analyst)
And do you have any thoughts around the percentage of policies that you’re writing that are for a new home purchase versus somebody who’s been shunted out of the NFIP or just changing from another carrier? Is there any way to think about that A little bit?
Jim Steiner (Chief Operating Officer & Chief Financial Officer)
We can look at some data around who’s buying us on a mandatory basis. And we do have some data around the timing of their mortgage and if it’s a new purchase. The estimate that we have is that only about 20% of our policies actually came from the NFIP—actually switched from the NFIP—and everybody else is net new. And that could be net-new existing homeowner or net new because they’re buying a home and never even went into the NFIP. And the breakdown between that, again, the data is not really available and it’s not great.
But that’s about the best direction I can give you right now. We are working on some data that may help us to be able to better answer that question in the coming years.
Josh Shanker (Analyst)
All right, I appreciate. I’m going to ask some more questions offline about this, but thanks for the answers. Great.
OPERATOR
Your next question is from the line of Paul Newsome with Piper Sandler. Your line is now open. Please go ahead.
Paul Newsome (Analyst)
Good evening. Was hoping you could give us maybe a little bit of your most recent thoughts on the rollout mechanically of the earthquake business and, you know, in terms of how it’ll proceed from a state perspective, an agent licensing perspective, et cetera. Just to give us a sense of the pace of what might or might not happen with a new product.
Trevor Burgess (Chief Executive Officer)
Yeah, thanks for the question about the earthquake product. A couple of things. When we launched in beta, it was available just in one state, California, and only available via our agent portal. So an agent had to sign in and directly run a unique earthquake quote. What’s next in the progression is, in the past week, we’ve begun testing cross-selling, which means when an agent in California runs a flood quote, they have the opportunity to immediately see what the earthquake quote would be without having to do any additional work.
We actually sold our first cross-sell policy today, so that was an exciting milestone there. Next on the journey will be API availability, where we will make the earthquake product available via API to our large quoting partners. And then next will be the direct-to-consumer portal for earthquake, which allows us then to do things like include a new kind of ATLAS Plus action card, which would be a cross-sell from an existing flood policy to then have an agent be able to click one button and send their consumer a new earthquake quote and have that consumer fulfill entirely online if that’s what they’d like to do.
So when we talk about fully launching a product, it means taking full advantage of Neptune Insurance Hldgs’ entire suite of technology and all that comes with it. And we’re now two out of three or four or five of the steps along the way. So we hope by the end of the year all of those steps are completed, and we’ll call it a fully launched product at that point. Importantly, this is an E&S product. It is technically a deductible buy-down product that fits under the export list. And so it does not require any unique licensing from the agents. But there are steps that agents have to go through to sell a surplus lines product in California, and our system is sophisticated and builds those systems and the processes.
Paul Newsome (Analyst)
That’s great. Separate question. Is there, now as you’re past the IPO, an optimal amount of financial leverage for Neptune Insurance Hldgs in your opinion that over time you want to be at, or is it just sort of a we’ll-see-as-we-go kind of process from a financial leverage perspective?
Trevor Burgess (Chief Executive Officer)
You know, we’re at a pretty low level of leverage right now at 1.7 times. And obviously this is somewhat dependent upon, you know, the interest rates of the moment and other opportunities, I would say, other than month-to-month opportunities to buy back stock. I’m not a big fan of adding a ton of leverage to buy back your own stock. Right. So buy back stock with free cash flow, maybe smoothed out using the revolver, but certainly not going to, at this point, lever up to buy back a lot of stock.
And so really, what having a low amount of leverage enables us to do is be very opportunistic if there are inorganic growth opportunities in front of us. Right. And if there are ways that we can find companies that can really benefit from Neptune Insurance Hldgs’ technology, then we’ll want to take advantage of that. So no set target for leverage, but I’m very happy to be in the position we’re in as a company.
OPERATOR
Your next question is from the line of David Motemaden with Evercore ISI. Your line is now open. Please go ahead.
David Motemaden (Analyst)
Hey, guys, thanks for squeezing me in here. Just a question on the 17% revenue growth for next year that you guys are projecting. It sounds like the commission rate is stable here and could be up. I guess that would be up for the full year in ’27. But maybe you could talk a little bit about what you guys are contemplating both on, like, the PIF growth side, but also how you’re thinking about premium growth and pricing. You know, if some of the good, you know, good lifetime loss ratio results, you guys are thinking of passing that through in lower pricing to drive volume.
Trevor Burgess (Chief Executive Officer)
Hey, David. Yeah, thanks. Thanks for the question. So I think, you know, we continue to be more and more bullish around, you know, our ability to grow PIF, to grow distribution and to drive those new business sales. I think from a pricing standpoint, we have a goal to get as many people covered as possible. Right. This is an issue that America has faced for a long time, the low coverage rates that we have in the country. And so we want to get more and more people insured. The portfolios need to continue to make sense from a capacity standpoint for our capacity providers. And so that’s always sort of the tension that we play with at Neptune Insurance Hldgs.
But we expect to continue to have very good premium and revenue retention figures as we look into next year, as well as strong new business growth, you know, quarter over quarter as we get through next year. What we’re not planning on there is a particularly strong hurricane season, any uptick in the housing market, anything happening with the NFIP, right, any inorganic growth opportunities, or any particular growth in new products that we might put out there, including the earthquake product that we have today.
And so I think we continue to become more and more bullish quarter over quarter. And I think that’s reflected in the revenue growth that we’ve put out there. It’s obviously, as we get bigger and bigger and that revenue number gets bigger, it’s harder to put up larger growth percentages. But that’s what we continue to work on.
David Motemaden (Analyst)
Great, thanks. And then maybe just a quick follow-up. You know, the Palomar agreement seems to have been a pretty big success. Is there any sense you could give us now that that sunset, how much that has contributed to the growth here? You know, if I just sort of look at, I think you guys have added on a quarterly basis about 20,000 units. Is there any way you could size how much Palomar is within that, that I guess is now being lapped?
Trevor Burgess (Chief Executive Officer)
Yeah. So if we look at Q3 revenue growth of 34%, you know, outside of the Palomar deal, that growth would have been 30%. So we continue, you know, outside of the Palomar deal to grow very rapidly. But we have a fantastic relationship with Palomar. They’re a great team over there. We’re very thankful for the relationship. And I think this has been a really, really good scenario, a really good use case from both sides where Palomar, their portfolio has been able to benefit greatly over the last 12 months.
And we’ve also been able to add nicely to Neptune Insurance Hldgs’ growth at the same time.
David Motemaden (Analyst)
Awesome. Thanks for that.
OPERATOR
Your next question is from the line of Rob Cox with Goldman Sachs. Your line is now open. Please go ahead.
Rob Cox (Analyst at Goldman Sachs)
Oh, thanks. Yeah. Just a question, going back to the AI agent discussion and noting the press release you put out on Muse. You know, I’m just curious if you have good data on how AI agents are interacting with your platform today and, if so, what you think that tells you about how this might develop over time.
Trevor Burgess (Chief Executive Officer)
I would say it’s entirely immaterial at this point and it’s a good hobbyist exercise for people at this time. But, you know, if you look at the average age of a homeowner in America, this is not yet a mass-market product for buying insurance. I hope someday it becomes that. But it’s not impactful today at all.
Rob Cox (Analyst at Goldman Sachs)
Yeah. If I could follow up on maybe just the premium per policy trend. So up 2% year over year. I know you guys have increased limits on some products and you’re still getting price increases. So I’m just curious what is sort of dragging down the premium per policy year over year as opposed to what it would be otherwise.
Trevor Burgess (Chief Executive Officer)
You have to look at mix as well. Right. So during a government shutdown year such as last year, you’re going to sell a lot of, you know, A-zone mandatory policies. And as that went off, you may sell a higher percentage of X-zone policies, which are on average, you know, lower price. So you really have to look at mix as well before just looking at, you know, overall premium average.
Rob Cox (Analyst at Goldman Sachs)
Perfect. Thanks.
OPERATOR
Your next question is from the line of Cave Montezarri with Deutsche Bank. Your line is now open. Please go ahead.
Cave Montezarri (Analyst)
Thank you. My first question is on the CFO transition. Things seem to be going pretty well with Jim, so I’m just curious to know if you can give us any color on why the transition and why now.
Trevor Burgess (Chief Executive Officer)
I’ll give you my view and then, if Jim wants to add anything, I’m happy to have him jump in. You know, we’ve been at this for 10 years now and it’s been an incredible experience. And what we’re finding is that we need, at least for some period of time, we need more help at the senior levels. And Jim has done an incredible job as CFO. But by becoming our full-time COO, he’s going to be able to help us to, you know, automate and transition as many of those things to technology as possible over time.
Christian is someone that we’ve worked with before. He was the CFO of the bank that we all worked at and ran for years. And so he’s a known quantity. Until yesterday he was our chair of our audit committee at Neptune Insurance Hldgs. So he has a deep understanding of Neptune Insurance Hldgs and its financials. And so this is a great opportunity to share the workload and broaden the base. Jim, anything you would add?
Jim Steiner (Chief Operating Officer & Chief Financial Officer)
Yeah, just add, given the history that I’ve had with Christian, there’s really no one else in the world I would feel more comfortable handing the reins over to as my successor in this role. Also would just remind everyone that I’m staying on as the COO. There’s plenty of operational things to get done around here for now in the foreseeable future and will remain on the board in an oversight function. And my eyes will be on the financials just as yours are.
Cave Montezarri (Analyst)
Great, thank you. And a follow-up is on just price transparency. It’s a lot of assurance, and I hear you loud and clear that older people are less likely to use, like, a personal agent to buy insurance, but they could be using it to just shop around, you know, educate themselves and maybe eventually let that trigger a discussion with a broker. So my question is, you know, if that happens, how well positioned is Neptune Insurance Hldgs to compete in a world where there is more price transparency?
Trevor Burgess (Chief Executive Officer)
Boy, that would be a tremendous opportunity for Neptune Insurance Hldgs and probably the biggest opportunity for us because two things would happen if everybody used an AI agent to get educated. The first is that 21 million Americans would find out that their house is at high risk of flooding and that they need to buy flood insurance and they don’t have a policy today. So that AI is going to tell them the truth about the science and that would be fantastic.
So job number one, please everyone use an AI agent and get educated about your risk because it’ll expand the market from 4 million policies today to 25 million. So that would be number one. And then number two is you have to remember that there are currently 1.7 million people who have NFIP policies who could save money by switching to Neptune Insurance Hldgs today. So if they’ve got the AI agent out there shopping for them, Neptune Insurance Hldgs is the primary beneficiary of that. Right. We have the capacity relationships to be able to grow and serve those. All 1.7 million of them found out tomorrow because of an AI agent that they could save money by switching to Neptune Insurance Hldgs.
We’re the only one with the capacity to be able to actually effectuate that change. So both of those things would be tremendous outcomes for Neptune Insurance Hldgs. We have the best data. So like a Progressive, you have the best data, you’re going to win in a, you know, sophisticated, you know, open and transparent marketplace.
Cave Montezarri (Analyst)
Makes sense. Thank you.
OPERATOR
There are no further questions at this time. I will now turn the call back to Trevor Burgess for closing remarks.
Trevor Burgess (Chief Executive Officer)
I want to thank everyone for joining the call today. We are thrilled by third quarter’s results and the momentum that we have in this business. I think I said this last quarter, but I’m going to repeat it. I have never been more excited about Neptune Insurance Hldgs, the prospects, and where we can go with this company. How we are using technology is incredibly innovative. We have a lot of exposure to a lot of different insurance companies, and what we are doing is bleeding edge and is leading the industry and I think will serve us very well as this AI transition continues to take place.
So thank you all for your help. Thank you for the questions, and look forward to the quarter ahead.
OPERATOR
This concludes today’s call. Thank you for attending. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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