EIG 10-K & 10-Q changes, risk factors and insider trading

Premiums are based on the particular class of business and our estimates of expected losses and LAE and other expenses related to the policies we underwrite. We analyze many factors when pricing a policy, including the policyholder's prior loss history and industry classification. Inaccurate information regarding a policyholder's past claims experience, inaccurate estimates of expected losses and LAE, or the potential for payroll, claimant and/or provider fraud could put us at risk for mispricing our policies, which could have a material adverse effect on our business, financial condition, and results of operations. For example, when initiating coverage on a policyholder, we must rely on the information provided by the policyholder, agent, or the policyholder's previous insurer(s) to properly estimate future claims expense. In order to set premium rates accurately, we must utilize an appropriatea pricing model that correctlyappropriately assesses risks based on individual characteristics and takes into account actual and projected industry characteristics.

Intense competition and the fact that we writeunderwrite only a single line of insurance could adversely affect our ability to sell policies at rates that we deem adequate.

The market for workers' compensation insurance products is highly competitive. Competition in our business is based on many factors, including premiums charged, services provided, ease of doing business, financial ratings assigned by independent rating agencies, speed and reliability of claims payments, reputation, policyholder dividends, perceived financial strength, and overall experience. In some cases, our competitors offer lower pricedlower-priced products than we do. If our competitors offer more favorable prices, policyholder dividends, or payment plans, services or commissions to our agents, brokers, and other distribution partners, we could lose market share and be forced to reduce our premium rates, or increase commission rates, either of which could adversely affect our profitability. We compete with regional and national insurance companies, professional employer organizations, third-party administrators, self-insured employers, and state insurance funds. Our main competitors vary from state to state, but they are usually those companies that offer a full range of services in underwriting, loss control, and claims. We compete based on the services that we offer to our policyholders and on ease of doing business rather than solely on price.

Our business is concentrated in California, where we generated 45%46% of our in-forcegross premiums aswritten offor the year ended December 31, 2024.2025. Accordingly, the loss environment and any unfavorable business, economic, demographic, natural perils, competitive, and regulatory conditions in California could have a significant adverse impact on our business.

Many California businesses are dependent on tourism revenues, which are, in turn, dependent on a robust economy. A downturn in the national economy or the economy of California, or any other event that causes deterioration in tourism, could adversely impact small and mid-sized businesses, such as restaurants and providers of traveler accommodations, that we have targeted as customers. The insolvency of a significant number of small and mid-sized businesses could also have a material adverse effect on our financial condition and results of operations. California is also exposed to climate and environmental changes, especially natural perils such as earthquakes and wildfires. In addition, California could be more adversely impacted by pandemics and terrorist acts than most other states due to population density in its major metropolitan areas. Additionally, the workers' compensation industry has seen a higher level of claims litigation and cumulative trauma claims in California, which could expose us beyond the liabilities currently expected and included in our financial statements. Because of the concentration of our business in California, we may be exposed to losses and business, economic, and regulatory risks or risk from natural perils that are greater than the risks associated with companies with greater geographic diversification.

ADP, our largest distribution agent, generated 17.2%18.6% of our total in-forcegross premiums aswritten, ofexcluding adjustments. for the year ended December 31, 2024.2025. Our agreement with ADP is not exclusive. A termination of this agreement, our failure to maintain a good relationship with ADP, or its failure to successfully market our products could each materially reduce our revenues and could have a material adverse effect on our results of operations. In addition, we are subject to the risk that ADP may face financial difficulties, reputational issues, or problems with respect to its own products and services, any of which may lead to decreased sales of our products and services. Significant industry consolidation among agencies (not limited to ADP), partners, or new entrants to the workers' compensation marketplace could impact our business opportunities and revenues.

If we are unable to obtain reinsurance or collect on ceded reinsurance, our ability to writeunderwrite new policies and to renew existing policies could be adversely affected and our financial condition and results of operations could be materially adversely affected.

We purchase reinsurance to protect us against severe individual claims and from aggregate losses associated with certain catastrophic events. Our reinsurance protection covers natural perils and acts of terrorism events, but excludes nuclear, biological, chemical, and radiological events. On July 1, 2024,2025, we entered into a new reinsurance program that is effective through June 30, 2025.2026. The reinsurance program consists of one treaty covering excess of loss and catastrophic loss events in four layers of coverage.coverage which includes a 10% co-participation share within each layer of coverage retained by us. Our reinsurance coverage is $190.0 million ($171.0 million net of our co-participation), in excess of our $10.0 million retention on a per occurrence basis; including a maximum any one life limit of $20.0 million, subject to certain exclusions.

We could be liable for some or all of those ceded losses if the coverage provided by the LPT Agreement proves inadequate or we fail to collect from the reinsurers to the transaction. As of December 31, 2024,2025, the estimated remainingunpaid liabilitieslosses subjectand LAE ceded to the LPT Agreement werewas $277.1$259.6 million. If we are unable to collect on these reinsurance recoverables, our financial condition and results of operations could be materially adversely affected.

We focus on small and mid-sized businesses, and those businesses may be severely and disproportionately impacted by a downturn in economic conditions or changes in applicable regulations,regulations or regulatory enforcement, taxes, or labor conditions.

The effects of labor supply conditions, inflationary pressures, monetary and fiscal policy measures, recessionary concerns, new, evolving, or conflicting regulations, and overall general economic instability have, at times, caused disruptions in business activity and may do so again in the future. This risk is more significant during periods involving rapid regulatory change. Given our focus on small and mid-sized businesses, certain classes of business that we insure could be adversely and disproportionately affected by these challenges, including thechanges tariffsto proposedglobal intariff the first quarter of 2025policies and potential labor market disruptions due to changes in the rules or enforcement around immigration.

A downgrade in our financial strength rating could reduce the amount of business that we are able to writeunderwrite or result in the termination of certain of our agreements with our strategic partners.

The financial strength ratings of AM Best and other rating agencies are subject to periodic review using, among other things, proprietary capital adequacy models, and are subject to revision or withdrawal at any time. Insurers' financial strength ratings are directed toward the concerns of policyholders and insurance agents and are not intended for the protection of investors or as a recommendation to buy, hold, or sell securities. Our competitive position relative to other companies is determined in part by our financial strength rating. A reduction in our AM Best rating could adversely affect the amount of business we could write,underwrite, as well as the relationships we currently have with our insurance agents, brokers, distribution partners, reinsurers, and others.

Several factors contribute to the inherent uncertainty in establishing estimated loss and LAE reserves, including the length of time to settle long-term, severe cases, claim cost inflation (deflation) trends, potential claimant and/or provider fraud, current and future economic conditions, and uncertainties in the long-term outcome of legislative reforms. Judgment is required in applying actuarial techniques to determine the relevance of historical payment and claim settlement patterns under current facts and circumstances. InRecently, trends in the frequency of cumulative trauma claims in California, our largest state, have accelerated beyond historical levels. Additionally, in certain states, we have a relatively limited operating history and must rely on a combination of industry experience and our specific experience regarding claims emergence and payment patterns, medical cost inflation, and claim cost trends, adjusted for future anticipated changes in claims-related and economic trends, as well as regulatory and legislative changes, to establish our best estimate of reserves for losses and LAE. As we receive new information and update our assumptions over time regarding the ultimate liability, our loss reserves may prove to be inadequate to cover our actual losses, and we have in the past made, and may in the future make, adjustments to our reserves based on various factors.

While we have no international operations, recent geo-political uncertainties, including impactsthe fromeffects of ongoing conflicts abroad have indirectly impacted the value of our investment portfolio, and may continue to impact our investment portfolio in the future.

Investment income is a key component of our revenue and net income. Our investment portfolio is managed by independent asset managers that operate under investment guidelines approved by our AuditAFI Committee. Although these guidelines stress diversification and capital preservation, our investments are subject to a variety of risks that are beyond our control, including risks related to general economic conditions, interest rate fluctuations or prolonged periods of high or low interest rates, and market volatility. Interest rates are highly sensitive to many factors, including governmental fiscal and monetary policies and domestic and international economic and political conditions. These and other factors affect the capital markets and, consequently, the value of our investment portfolio.

Our future capital requirements will depend on many factors, including state regulatory requirements, our ability to writeunderwrite new business successfully, and our ability to establish premium rates and reserves at levels sufficient to cover losses. If we must raise additional capital, equity or debt financing may not be available on terms that are favorable to us. In the case of equity financings, there could be dilution to our stockholders and the securities may have rights, preferences, and privileges senior to our common stock. In the case of debt financings, we may be subject to covenants that restrict our ability to freely operate our business. If we cannot obtain adequate capital on favorable terms or at all, we may be unable to implement our future growth or operating plans and our business, financial condition, and results of operations could be materially adversely affected.

Our business is highly dependent upon the successful and uninterrupted functioning of our information technology and telecommunications systems, including those of third parties to which we outsource certain functions. We rely on these systems to operate key aspects of our business, including processing and generating new and renewal business, providing customer service, administering and making payments on claims, facilitating collections, and underwriting and administering the policies we write.underwrite. Additionally, our business and operations involve the collection, storage, transmission, and other processing of personal data and certain other sensitive and proprietary data.

Our success depends on our ability to maintain effective information technology systems, to enhance those systems to better support our business in an efficient and cost-effective manner, and to develop innovative technologies and capabilities, including those involving the use of data, analytics, and artificial intelligence, in pursuit of our long-term strategy. We have multiple initiatives that are focused on developing innovative technologies and capabilities and enhancing our information technology infrastructure. Some long-term technology development and new business initiativesinitiatives, including the entrance into excess workers' compensation, may negatively impact our expense ratios as we invest in such initiatives, may cost more than anticipated to complete, or may not be completed. Additionally, these initiatives may be more time-consuming than anticipated, may not deliver the expected benefits upon completion, and/or may need to be replaced or become obsolete more quickly than expected, all of which could result in accelerated recognition of expenses. If we fail to successfully execute on new business initiatives, fail to maintain or enhance our existing information technology systems, or if we were to experience failure in developing and implementing new technologies, our relationships, ability to do business with our clients and/or our competitive position may be adversely affected. We could also experience other adverse consequences, including additional costs or write-offs of capitalized costs, unfavorable underwriting and reserving decisions, internal control deficiencies, and information security breaches resulting in loss or inappropriate disclosure of data.

We are a Nevada holding company. Through our insurance subsidiaries, we provide workers' compensation insurance coverage to small and mid-sized businesses engaged in low-to-mediumlower hazard industries. Workers' compensation insurance is provided under a statutory system wherein most employers are required to provide coverage for their employees' medical, disability, vocational rehabilitation, and/or death benefit costs for work-related injuries or illnesses. We provide workers' compensation insurance throughout most of the United States, with a concentration in California, where 45%46% of our in-force2025 gross written premiums arewere generated. Our revenues primarily consist of net premiums earned, net investment income, and net realized and unrealized gains and (losses) on investments.

•UnderwritingGross andpremiums general and administrative expenseswritten decreased 1.9%2.6% in 20242025 and increased 7.6%1.1% in 2023,2024, each compared to the previous year;

•Net investmentpremiums incomeearned increased 0.5%1.7% in 20242025 and 18.6%3.8% in 2023,2024, each compared to the previous year;

•Net realized and unrealized gains (losses) gains on investments were $24.1$(20.4) million, $22.7$24.1 million, and $(51.8)$22.7 million in 2025, 2024, and 2023, and 2022, respectively; and

•Other non-recurring expenses were $11.0$1.1 million in 2025 and $11.0 million 2023. We did not incur any such expenses in 2024 or 2022.2024.

Our underwriting results for the year ended December 31, 2024 reflect increases in net premiums earned from higher new and renewal business premiums, and lower underwriting and general and administrative expenses, partially offset by lower final audit premiums and endorsements, a decrease in favorable prior year loss reserve development, and a higher current accident year loss and LAE ratio. Our investment results benefited from continued strong net investment income and net realized and unrealized gains.

Our underwriting results for the year ended December 31, 2023 reflect increases in net premiums earned from higher new and renewal business premiums, strong final audit premiums, and significant net favorable prior year loss reserve development. Our investment results benefited from a sharp increase in our net investment income due to higher bond yields and net realized and unrealized gains. Our non-underwriting expenses in 2023 included the cost of the early lease termination of our former corporate headquarters and a write-off of previously capitalized cloud computing costs associated with a former policy management system.

A primary measure of our financial strength and performance is our ability to increase Adjusted stockholders' equity and Adjusted stockholders' equity per share over the long-term. We believe that thisthese measurenon-GAAP ismeasures are important to our investors, analysts, and other interested parties who benefit from having an objective and consistent basis for comparison with other companies within our industry. Further, the change in our adjusted stockholders' equity per share (after taking into account stockholder dividends declared) serves as the performance measure associated with our 2025, 2024, 2023, and 20222023 performance share unit awards. The following table shows a reconciliation of our Stockholders' equity on a GAAP basis to our Adjusted stockholders' equity.

(1) Adjusted stockholders' equity is a non-GAAP measure consisting of total GAAP stockholders' equity plus the Deferred Gain, minus Accumulated other comprehensive gainincome (loss), net of tax.

Underwriting income or loss is determined by deducting losses and LAE, commission expenses, and underwriting and general and administrative expenses from net premiums earned. Our underwriting results for the three year period ending December 31, 20242025 are as follows:

Gross premiums written were $776.3$756.1 million, $767.7$776.3 million, and $714.2$767.7 million for the years ended December 31, 2025, 2024, 2023, and 2022,2023, respectively. The modest growthreduction in our premiums written in 20242025 was the result of higher new and renewal business premiums, partiallyprimarily driven by continued strong retention rates, offset by decreases in new business premiums, driven predominately by our pricing and underwriting actions taken to improve underwriting margins, and lower final audit premiums and endorsements. The growth in new business premiums experienced in 2024 was the result of increases in new business submissions, quotes and binds in the majority of the states in which we operate, which is being largely driven by the expansion in the classes of business that we offer. Our premiums written in 20242025 were negatively impacted by a $16.5$14.7 million decrease to our ending final audit premium accrual, partially offset by $10.7$6.7 million of final audit premium pick-up. Further,Lastly, ourwe renewal premiums benefited from strong retention rates experienced throughoutended the year.year with higher policies in-force. Total in-force policies at December 31, 2025 were 133,605 compared to 130,767 in-force policies at December 31, 2024.

The solidmodest growth in our premiums written in 20232024 was the result of higher new and renewal business premiumspremiums, andpartially strongoffset by lower final audit premiums.premiums and endorsements. The growth in new business premiums experienced in 20232024 was mostly the result of increases in new business submissions, quotes, and binds in mosta majority of the states in which we operate, which was being largely driven by our expansion in the classes of business that we offer. Our premiums written in 20232024 benefitedwere fromnegatively impacted by a $3.6$16.5 million increasedecrease to our ending final audit premium accrualaccrual, andpartially $29.2offset by $10.7 million of final audit premium pick-up. Further, our renewal premiums benefited from strong retention rates experienced throughout the year.

Net premiums written are gross premiums written less reinsurance premiums ceded. For each of the years presented, the reinsurance premiums ceded are related to our July 1-1 - June 30 annual reinsurance programs as further described herein.

Losses and LAE, Commission Expenses,Expense, and Underwriting Expenses

Losses and LAE represent our largest expense item and includes claim payments made, amortization of the Deferred Gain, Contingent Commission adjustments, estimates for future claim payments and changes in those estimates for current and prior accident years, and costs associated with investigating, defending, and adjusting claims.claims, amortization of the Deferred Gain and Contingent Commission adjustments. The accuracy of our financial reporting depends in large part on determining our losses and LAE reserves, which are inherently uncertain as they are estimates of the ultimate cost of individual claims based on actuarial estimation techniques. We believe that our loss estimates are adequate; however, given the long-tail nature of workers' compensation claims, ultimate losses aren't typically known with any certainty for many years. Additional information regarding our reserves for losses and LAE is set forth under "–Critical Accounting Estimates –Reserves for Losses and LAE."

Loss and LAE Ratio. We analyze our loss and LAE ratios on both a calendar year and accident year basis.

The accident year loss and LAE ratio is calculated by dividing cumulative losses and LAE for reported events that occurred during a particular year by the net premiums earned for that year. The accident year loss and LAE ratio for a particular year can decrease or increase when recalculated in subsequent periods as theestimated reservesultimate establishedlosses for insured events occurring during that year fluctuate.

Our calendar year loss and LAE ratio is analyzed to measure profitability in a particular year and to evaluate the adequacy of premium rates charged in a particular year to cover expected losses and LAE from all periods, including development (whether favorable or unfavorableadverse) of reserves established in prior periods. In contrast, our accident year loss and LAE ratios are analyzed to evaluate underwriting performance and the adequacy of the premium rates charged in a particular year in relation to ultimate losses and LAE from insured events occurring during that year. The loss and LAE ratios provided in this report are on a calendar year basis, except where they are expressly identified as accident year loss and LAE ratios.

The increase in our calendar year losses and LAE from 2023 to 2024 was primarily due to higher earned premiums, a slightly higher current accident year loss and LAE estimate and less net favorable prior year loss reserve development. Net favorable prior year loss reserve development recognized in 2024 was $18.4 million versus $44.9 million in 2023. The increase in our calendar year losses and LAE from 2022 to 2023 was primarily due to higher earned premiums, partially offset by higher net favorable prior year loss reserve development. Net favorable prior year loss reserve development recognized in 2023 was $44.9 million versus $33.5 million recognized in 2022.2023.

ThePrior netaccident year favorable loss reserve development recognized in 2024 resulted primarily from overall favorable loss experience, including decreasing medical paid loss trends in California, partially offset by unfavorable prior year loss experience in accident years 2023 and 2021 associated with certain large claims.

ThePrior netaccident year favorable loss reserve development recognized in 2023 was primarily the result of decreasing medical paid loss trends in California related to accident years 2020 and prior, partially offset by reserve strengthening related to accident year 2021. The rapid economic rebound following the COVID-19 pandemic led to large premium and payroll increases related to accident year 2021 that were recognized through policy audits in subsequent years. In response, we strengthened our reserves for accident year 2021 to reflect the potential for higher losses arising from the higher than expected premium exposure.

Commission Expense Ratio.

Commission expensesexpense includeincludes direct commissions to our agents and brokers, including our partnerships and alliances, for the premiums that they produce for us, as well as agency incentive payments, other marketing costs, and fees.

We refined the presentation of certain expenses associated with our involuntary premium during the year ended December 31, 2024. This revision, which was immaterial, reduced our 2024 commission expenses and commission expense ratio by $2.4 million and 0.3 percentage points, respectively, and increased our 2024 underwriting and general and administrative expenses and underwriting and general and administrative expense ratio by the same amounts. This revision had no effect on our total expenses or net income.

Underwriting and General and Administrative Expense Ratio.Expenses

Underwriting and general and administrative expenses represent those costs required to run the business, including costs incurred to underwrite and maintain the insurance policies we issue, excluding commissions. Variable underwriting expenses, such as premium taxes, policyholder dividends, and other expenses that vary directly with the production of new or renewal business, are recognized as the associated written premiums are earned. Fixed underwriting expenses, such as the operating expenses of EHI and its subsidiaries, do not vary directly with the production of new or renewal business and are recognized as incurred.

Our underwriting and general and administrative expense ratio was 21.7%, 23.5%, 24.9%, and 24.8%,24.9%, and our underwriting expenses were $176.5$165.4 million, $180.0$176.5 million, and $167.3$180.0 million for the years ended December 31, 2025, 2024, and 2023, and 2022, respectively.

During 2024, the decrease in our fixed underwriting expenses decreased by $13.4 million,was primarily the result of decreasesreductions in (i) depreciation and amortization,amortization of $4.8 million; (ii) professional fees,fees of $2.8 million; and (iii) advertising and marketing expenses,expenses partiallyof offset$2.2 by the expense revision we made in 2024 associated with our involuntary premium.million. The decreases in our fixed underwriting expenses were, in large part, the result of our Cerity integration plan that was undertaken in the fourth quarter of 2023.2023, partially offset by the expense revision we made in 2024 associated with our involuntary premium. These decreases were partially offset by increases in our variable underwriting expenses of $9.9 million, which primarily related to ournet allowanceCECL forprovision badon debtpremiums receivable of $7.4 million and premium taxtaxes and assessments.assessments of $1.6 million.

Net investment income was $107.0$116.7 million, $106.5$107.0 million, and $89.8$106.5 million for the years ended December 31, 2025, 2024, and 2023, andrespectively. 2022,The respectively.increase in net investment income in 2025 was primarily the result of returns from our investments in private equity limited partnerships, along with higher book yields on our fixed maturity securities. The consistent level of net investment income in 2024 was due to higher investment yields being partially offset by a lower average invested balance of fixed maturity securities, short-term investments, and cash and cash equivalents, as measured by amortized cost. The lower average invested balances in 2024 resulted primarily from the unwinding of our former Federal Home Loan Bank of San Francisco (FHLB) leveraged investment strategy, which was in effect from the first quarter of 2022 to the fourth quarter of 2023. Pursuant to that strategy, certain of our insurance subsidiaries had received aggregate advances under the FHLB Standard Credit Program, the proceeds from which were used to purchase an equivalent amount of high-quality collateralized loan obligation securities. The increase in net investment income in 2023 was due to higher bond yields, partially offset by lower invested balances of fixed maturity securities and short-term investments, as measured by amortized cost. The average pre-tax ending book yield on our invested assets was 4.9%, 4.5%, 4.3%, and 3.0%4.3% at December 31, 2025, 2024, and 2023, and 2022, respectively.

Realized and unrealized gains and losses on our investments are reported separately from our net investment income. Realized gains and losses on investments include the gain or loss on a security at the time of sale compared to its original or adjusted cost (equity securities) or amortized cost (fixed maturity securities). Realized losses are also recognized for adverse changes in our CECL allowance or when securities are written down because of an other-than-temporary impairment. Changes in the fair value of equity securities and other invested assets are also included in Net realized and unrealized gains (losses) gains on investments on our Consolidated Statements of Comprehensive Income (Loss).

Net realized and unrealized gains (losses) gains on investments were $24.1$(20.4) million, $22.7$24.1 million, and $(51.8)$22.7 million for the years ended December 31, 2025, 2024, and 2023, and 2022, respectively.

Net realized and unrealized gains (losses) gains on investments in 20242025 included $26.2$32.9 million of net realized and unrealized gains on equity securities, $(8.854.7) million of net realized losses on fixed maturity securities, and $6.7$1.4 million of unrealized gains on other invested assets. The net investment gains on our equity securities were largely consistent withand the performance of the U.S. equity markets. The net investment losses on our fixed maturity securities were primarily the result of sales associated with the rebalancingfourth ofquarter our fixed maturity2025 investment portfolio,rebalancing, partially offset by a decrease of $1.6$0.7 million in our allowance for CECL. The net investment gains on our other invested assets resulted primarily from an increase in the underlying value of the private equity limited partnership interests we own.

Net realized and unrealized gains (losses) gains on investments in 20232024 included $27.0$26.2 million of net realized and unrealized gains on equity securities, $(8.08.8) million of net realized losses on fixed maturity securities, and $3.7$6.7 million of unrealized gains on other invested assets. The net investments gains on our equity securities were largely consistent with the performance of U.S. equity markets. The net investment losses on our fixed maturity securities were largely concentrated in certain holdings inprimarily the financialresult andof bankingsales sectorsassociated andwith werethe rebalancing of our fixed maturity investment portfolio, partially offset by a decrease of $1.8$1.6 million in our allowance for CECL. The net investment gains on our other invested assets resulted primarily from an increase in the underlying value of the private equity limited partnership interests we own.

You should read the following discussion and analysis in conjunction with our consolidated financial statements and the related notes thereto included in Item 1 of Part I. Unless otherwise indicated, all references to "we," "us," "our," "the Company," or similar terms refer to EHI, together with its subsidiaries. In this Quarterly Report on Form 10-Q, the Company and its management discuss and make statements based on currently available information regarding their intentions, beliefs, current expectations, and projections of, among other things, the Company's future performance, economic or market conditions, including current or future levels of inflation, potential implications of increased tariffs, changes in interest rates, labor market expectations, catastrophic events or geo-politicalgeopolitical conditions, legislative or regulatory actions or court decisions, business growth, retention rates, loss costs, claim trends and the impact of key business initiatives, future technologies and planned investments. Certain of these statements may constitute "forward-looking" statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are often identified by words such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "target," "project," "intend," "believe," "estimate," "predict," "potential," "pro forma," "seek," "likely," or "continue," or other comparable terminology and their negatives. The Company and its management caution investors that such forward-looking statements are not guarantees of future performance. Risks and uncertainties are inherent in the Company’s future performance. Factors that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements include, among other things, those discussed or identified from time to time in the Company’s public filings with the SEC, including the risks detailed in the Company's Annual Reports on Form 10-K and in the Company's subsequent Quarterly Reports on Form 10-Q. Except as required by applicable securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

We provide workers’ compensation insurance throughout most of the United States, with a concentration in California, where 46%47% of our trailing twelve month gross written premiums, excluding adjustments, are generated. In February 2026, we launched a new excess workers’ compensation product thatfocused will be offered toon self-insured enterprises in several jurisdictions across the United States. We wrote our first excess workers’ compensation policy in June 2026. Our revenues primarily consist of net premiums earned, net investment income, and net realized and unrealized gains and losses on investments.

For excess workers’ compensation, our approach is to deliver a flexible, data-driven solution that goes beyond traditional excess coverage by incorporating value-added services. We believe these servicesservices, includingresulting in improved organizational performance and reduced long-term loss costs for our policyholders, will serve as a key competitive advantage in the self-insured market, differentiating us from carriers that offer coverage alone.

Our net income was $10.2$29.1 million and $39.2 million for the three and six months ended MarchJune 31,30, 2026, compared to $12.8$29.7 million and $42.5 million for the corresponding periodperiods of 2025. The key factors that affected our financial performance during the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods of 2025, included:

•Gross premiums written decreased 14.8%19.6% and 17.1%;

•Net premiums earned decreased 1.1%12.2% and 6.9%;

•Net investment income increased 1.1% and decreased 11.8%5.9%;

•Net realized and unrealized lossesgains on investments of $1.7$18.7 million and $17.0 million compared to $12.8$20.9 million and $8.1 million;

•Losses and LAE increaseddecreased 7.0%12.7% and 3.6%;

•Commission expense increaseddecreased 3.0%14.9% and 6.5%;

•Underwriting expenses decreased 4.7%7.9% and 6.3%; and

•Underwriting loss of $12.8$10.1 million and $23.0 million compared to $3.6$11.0 million and $14.6 million.

Three and Six Months Ended MarchJune 31,30, 2026

Our 20252026 underwriting results reflect lower net premiums earnedearned, and higher losses and LAE expensespartially offset by reductions in losses and LAE, commission expenses, and underwriting expenses. Our investment results benefitedwere fromprimarily strong net investment income partially offsetimpacted by favorable net realized and unrealized losses.gains on investments as net investment income was slightly higher for the quarter, but lower in the first half of 2026, as compared to prior year periods.

Our consolidated financial results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025 are as follows:

Underwriting income or loss is determined by deducting losses and LAE, commission expense, and underwriting expenses from net premiums earned. Our underwriting results for the three and six months ended MarchJune 31,30, 2026 and 2025 are as follows:

(1) The LPT Agreement is a non-recurring transaction that no longer provides us with any ongoing cash benefits. We provide our underwriting income and combined ratios excluding the effects of the LPT because we believe that these measures are useful in providing investors, analystsanalysts, and other interested parties a meaningful understanding of our ongoing underwriting performance and provides them with a consistent basis for comparison with other companies in our industry. In addition, we believe that these non-GAAP measures, as presented, are helpful to our management in identifying trends in our performance because the LPT has limited significance to our current and ongoing operations.

Gross premiums written were $180.8$163.4 million and $344.2 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to $212.1$203.3 million and $415.4 million for the corresponding periodperiods of 2025.2025, respectively. For the three and six months ended MarchJune 31,30, 2026, the decreasedecreases in gross premiums written waswere largely driven by declines in both new and renewal business premiumspremiums, drivenprimarily predominately byreflecting our pricing and underwriting actionsactions, takenwhich commenced in 2025 and continue in 2026, taken to return to historical underwriting margins. These decreases were partially offset by increases in our ending final audit premium accruals and a premium restitution of $2.5 million from a former policyholder reflected in both periods. Additionally, during the second quarter of 2026, we bound our first excess workers' compensation policy. Total in-force policies at MarchJune 31,30, 2026 were 130,321127,601 compared to 133,121134,421 in-force policies at MarchJune 31,30, 2025.

Net premiums written were $179.4$162.0 million and $341.4 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to $210.3$201.5 million and $411.8 million for the corresponding periods of 2025, respectively. Reinsurance premiums ceded were $1.4 million and $2.8 million for the three and six months ended June 30, 2026, respectively, compared to $1.8 million and $3.6 million for the corresponding period of 2025.2025, Reinsurance premiums ceded were $1.4 million for the three months ended March 31, 2026, compared to $1.8 million for the corresponding period of 2025.respectively.

Net premiums earned were $180.9$174.1 million and $355.0 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to $183.0$198.3 million and $381.3 million for the corresponding periodperiods of 2025.2025, respectively.

The increase in our calendar year losses and LAE during the three months ended March 31, 2026, as compared to the same period of 2025, was primarily due to a higher currentPrior accident year loss and LAE estimate due to increased cumulative trauma (CT) claim frequency in California. Prior accident yearnet favorable loss reserve development totaled $0.1$0.4 million on our assigned risk business during the threesix months ended MarchJune 31,30, 2026. Prior accident year unfavorableadverse loss reserve development totaled $1.3$1.6 million during the threesix months ended MarchJune 31,30, 2025, which included $0.6$0.7 million ofnet adverse loss reserve development on our voluntary risk business and $0.9 million net unfavorableadverse loss reserve development on our assigned risk business.

Our commission expense ratio was 13.1%12.8% and 12.9% for the three and six months ended MarchJune 31,30, 2026, respectively, compared to 12.6%13.2% and 12.9% for the corresponding periodperiods of 2025, respectively, and our commission expense was $23.7$22.2 million and $45.9 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to $23.0$26.1 million and $49.1 million for the corresponding periodperiods of 2025.2025, The increase in our commission expense ratio and our commission expense for the three months ended March 31, 2026 was primarily driven by a release of commissions payable associated with non-performing policies sent to collections totaling $1.4 million that was recognized in the first quarter of 2025.respectively.

Our underwriting expense ratio was 22.6%22.8% and 22.7% for the three and six months ended MarchJune 31,30, 2026, respectively, compared to 23.4%21.7% and 22.6% for the corresponding periodperiods of 2025, respectively, and our underwriting expenses were $40.9$39.7 million and $80.6 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to $42.9$43.1 million and $86.0 million for the corresponding periodperiods of 2025.2025, Therespectively. decreaseDespite the reduction in our underwriting expenses, our underwriting expense ratio for the three and six months ended MarchJune 31,30, 2026 wasincreased drivendue byto lower premiums earned. As highlighted below, we continue our disciplined focus on expense reduction and our underwriting decisions to reduce policyholder dividends.reductions.

The decrease in underwriting expenses for the three months ended MarchJune 31,30, 2026 was primarily the result of lower policyholder dividends of $1.4 million, net CECL provision on premiums receivable of $1.1 million, compensation-related expenses of $2.6$1.0 millionmillion, and policyholderpremium dividendstaxes and assessments of $1.7$0.7 million. These decreases were partially offset by lower internal AO and other expense allocations of $2.0$0.8 million, each compared to the same period of 2025.

Net investment income increased 1.1% and decreased 11.8%5.9% during the three and six months ended MarchJune 31,30, 2026, respectively, compared to the same periodperiods of 2025. The decreaseincrease for the three months ended MarchJune 31,30, 2026 was primarily related to higher yield on fixed maturity securities. The decrease for the six months ended June 30, 2026 was primarily attributable to reduced distributions from our investments in private equity limited partnerships, which were elevated in the prior period, and lower invested balances, partially offset by higher yields on fixed maturity securities resulting from our investment rebalancing activity in 2025.

RealizedNet realized and unrealized gains and losses on our investments are reported separately from our net investment income. RealizedNet realized gains and losses on investments include the gain or loss on a security at the time of sale compared to its original or adjusted cost (equity securities) or amortized cost (fixed maturity securities). Realized losses are also recognized for adverse changes in our CECL allowance or when securities are written down because of an other-than-temporary impairment. Changes in the fair value of equity securities and other invested assets are also included in Net realized and unrealized losses on investments on our Consolidated Statements of Comprehensive Income (Loss).

Net realized and unrealized lossesgains on investments were $1.7$18.7 million and $17.0 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to $12.8$20.9 million and $8.1 million for the corresponding periodperiods of 2025.2025, respectively. The net realized and unrealized lossesgains on investments for the three months ended MarchJune 31,30, 2026 and 2025 included $1.2$19.2 million and $11.9$21.0 million of net realized and unrealized lossesgains on equity securities and other investments, respectively, and $0.5 million and $0.9$0.1 million of net realized losses on fixed maturity securities, respectively. The net realized and unrealized gains on investments for the six months ended June 30, 2026 and 2025 included $18.0 million and $9.1 million of net realized and unrealized gains on equity securities and other investments, respectively, and $1.0 million of net realized losses on fixed maturity securities in each period.

The net investment lossesgains on our equity securities during the three and six months ended MarchJune 31,30, 2026 were largely consistent with the performance of the U.S. equity markets. The net investment gains on our other investments during the three and six months ended MarchJune 31,30, 2026 resulted from an increase in the underlying value of the private equity limited partnership interests we own. The net realized investment losses on our fixed maturity securities during the three and six months ended MarchJune 31,30, 2026 included a $0.3$0.4 million and $0.7 million increase in our allowance for CECL.

The net investment lossesgains on our equity securities during the three and six months ended MarchJune 31,30, 2025 were largely consistent with the performance of the U.S. equity markets. The net investment lossesgains on our other investments during the three months ended MarchJune 31,30, 2025 includedresulted primarily from an increase in the underlying value of the private equity limited partnership interests we own. The net investment losses on our other investments during the six months ended June 30, 2025 was primarily driven by the reduction in net asset value due to distributed investment returns from our investments in private equity limited partnerships. The net realized investment losses on our fixed maturity securities during the three and six months ended MarchJune 31,30, 2025 includedwere aprimarily $0.3the millionresult increaseof insales associated with the rebalancing of our allowancefixed formaturity CECL.investment portfolio.

Interest and financing expenses were $1.1$1.3 million and $2.4 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to less than $0.1 million and $0.1 million for the correspondingthree periodand ofsix months ended June 30, 2025. The increase for the three and six months ended MarchJune 31,30, 2026, resulted primarily from interest expense associated with our various advances with the FHLB.

Income tax expense was $2.6$5.6 million and $8.2 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to $3.1$7.3 million and $10.4 million for the corresponding periodperiods of 2025.2025, respectively. The effective tax rate was 20.3%16.1% and 17.3% for the three and six months ended MarchJune 31,30, 2026, compared to 19.5%19.7% for each of the corresponding periodperiods of 2025.2025, respectively. The effective rates during each of the periods presented deviate favorably from the statutory rate of 21.0% due to, in part, income tax benefits and exclusions associated with tax-advantaged investment income, LPT adjustments, Deferred Gain amortization and related adjustments, income adjustments related to the Fund, and tax credits utilized.

Total cash and investments at the holding company were $42.3$34.2 million at MarchJune 31,30, 2026, consisting of $37.9$30.5 million of cash and cash equivalents, $3.9$3.2 million of fixed maturity securities, and $0.5 million of equity securities.

In November 2025, EHI entered into two three-year intercompany loan agreements with its insurance subsidiaries: one with EICN (the "EICN Agreement") and one jointly with EAC, ECIC, EPIC, and CIC (the "Omnibus Agreement"). Together, the agreements provide approximately $200.0 million of lending capacity, with individual advances bearing interest at the prevailing rate published by the FHLB for advances of comparable duration. As of MarchJune 31,30, 2026, $140.0$160.0 million is outstanding under these intercompany loan agreements.agreements, which were primarily utilized to fund our recapitalization plan.

On May 28, 2024, EHI entered into a Credit Agreement (as amended, the Credit Agreement) which provides for a $25.0 million, unsecured, three-year revolving credit facility and is guaranteed by EGI and CGI. On July 29, 2026, EHI and Wells Fargo Bank, National Association, entered into Amendment No. 1 to the Credit Agreement. The Credit Agreement provides for a $35.0 million, unsecured, three-year revolving credit facility and remains guaranteed by EGI and CGI. Borrowings under the Credit Agreement may be used for working capital and general corporate purposes of EHI and its subsidiaries. Pursuant to the terms of the Credit Agreement, EHI has an option to request an increase of the credit available under the facility up to a maximum facility amount of $35.0 million, subject to the consent of the lender(s) and the satisfaction of certain conditions.

The interest rates applicable to loans under the Credit Agreement are generally based on, at EHI's option: (i) a base rate, defined as the higher of the Prime Rate, the Federal Funds Rate plus 0.50% and the Adjusted Term SOFR for a one-month tenor plus 1.00%, or (ii) an Adjusted Term SOFR, defined as the applicable Adjusted Term SOFR plus 1.50%. Borrowings under the Credit Agreement may be used for working capital and general corporate purposes of EHI and its subsidiaries. Interest paid and/or fees incurred pursuant to the Credit Agreement, as applicable, was $0.3 million and less than $0.1 million for each of the three months ended MarchJune 31,30, 2026 and 2025.2025, respectively, and $0.4 million and $0.1 million for the six months ended June 30, 2026 and 2025, respectively.

The Credit Agreement contains covenants that require EHI and its consolidated subsidiaries to maintain: (i) a minimum consolidated net worth, defined as EHI’s total stockholders’ equity excluding any accumulated other comprehensive income or loss, of no less than $800.0 million; and (ii) a debt to total capitalization ratio of no more than 35%, in each case as determined in accordance with the Credit Agreement. As of MarchJune 31,30, 2026, EHI has remained in compliance with all of the covenants associated with the Credit Agreement since its inception.

On February 17, 2026, EHI borrowed $20.0 million under the Credit Agreement as part of the Company’sour recapitalization plan. The advance bears interest at a rate of 5.50%5.15% based on the three-month Adjusted Term SOFR, with a reset date of MayAugust 18, 2026. As of MarchJune 31,30, 2026, $20.0 million was outstanding under the Credit Agreement. The outstanding balance is classified as long-term debt as the amended Credit Agreement doesexpires noton expireJuly until29, May 28, 2027.2029. Advances can be repaid at any time without prepayment penalties or additional fees.

The primary sources of cash for our operating subsidiaries, which include our insurance and other operating subsidiaries, are premium collections, investment income, sales and maturities of investments, and reinsurance recoveries. The primary uses of cash for our operating subsidiaries are payments of losses and LAE, commission expense, underwriting expenses, ceded reinsurance, investment purchasespurchases, and dividends paid to their parent.

Total cash and investments held by our operating subsidiaries was $2,445.9$2,415.2 million at MarchJune 31,30, 2026, consisting of $115.4$83.0 million of cash and cash equivalents, and restricted cash, $2,029.8$2,034.7 million of fixed maturity securities, $190.3$179.7 million of equity securities, $95.8$96.1 million of other invested assets, and $14.6$21.7 million of short-term investments. Sources of immediate and unencumbered liquidity at our operating subsidiaries as of MarchJune 31,30, 2026 consisted of $115.2$82.8 million of cash and cash equivalents, $182.8$170.9 million of publicly traded equity securities whose proceeds are available within two business days, and $762.9$787.2 million of highly liquid fixed maturity securities whose proceeds are also available within two business days. We believe that our subsidiaries’ liquidity needs over the next 12 months and for the longer-term period thereafter will be met with cash from operations, investment income, and maturing investments.

Each of our insurance subsidiaries are members of the FHLB. Membership allows our subsidiaries access to collateralized advances, which may be used to support and enhance liquidity management. The amount of advances that may be taken is dependent on our statutory admitted assets on a per company basis. The following table summarizes the terms and maturities of the advances outstanding at MarchJune 31,30, 2026.

These advances were assumed by EHI through the intercompany loan agreements as described above and executed as part of the Company’s recapitalization plan. Interest incurred and paid on these borrowings during the three and six months ended MarchJune 31,30, 2026 was $0.9$1.0 million.million and $1.9 million, respectively.

Various state laws and regulations require us to hold investment securities or letters of credit on deposit with certain states in which we do business. Securities having a fair value of $587.0$585.3 million and $587.4 million were on deposit at MarchJune 31,30, 2026 and December 31, 2025, respectively. These laws and regulations govern both the amount and types of investment securities that are eligible for deposit. Additionally, standby letters of credit from the FHLB have been issued in lieu of $170.0 million of securities on deposit at both MarchJune 31,30, 2026 and December 31, 2025.

We purchase reinsurance annually to protect us against the costs of severe claims and certain catastrophic events. On July 1, 2025,2026, we entered into a new reinsurance program that is effective through June 30, 2026.2027. The reinsurance program consists of one treaty covering excess of loss and catastrophic loss events in four layers of coverage. Our reinsurance coverage is $190.0 million in excess of our $10.0 million retention on a per occurrence basis; including a maximum any one life limit of $20.0 million, subject to certain exclusions. Our previous reinsurance program consisted of one treaty covering excess of loss and catastrophic loss events in four layers of coverage, which includesincluded a 10% co-participation share within each layer of coverage retained by us. OurThe reinsurance coverage iswas $190.0 million ($171.0 million net of our co-participation) in excess of our $10.0 million retention on a per occurrence basis, including a maximum any one life limit of $20.0 million, subject to certain exclusions. We believe that our reinsurance program currently meets our needs.

Certain reinsurance contracts require funds owned by us to be held in trust for the benefit of the ceding reinsurer to secure the outstanding liabilities we have assumed. The fair value of fixed maturity securities held in trust for the benefit of our ceding reinsurers was $3.0 million and $3.1 million at MarchJune 31,30, 2026 and December 31, 2025, respectively.

Net cash provided by operating activities for the threesix months ended MarchJune 31,30, 20262025 included net premiums received of $178.3$385.4 million and investment income received of $28.2$58.1 million. The cash provided by these operating activities waswere partially offset by net claims payments of $129.7$274.9 million, underwriting expenses paid of $46.7$92.1 million, commissions paid of $26.8$50.2 millionmillion, and interestfederal income taxes paid of $1.1$11.6 million.

Net cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 related primarily to investments of premiums received and the reinvestment of funds from investment sales, maturities, redemptionsredemptions, and interest income. The cash outflows used in these activities were partially offset by investment sales, maturities, and redemptions whose proceeds were used to fund claims payments, underwriting expenses, stockholder dividend payments, and common stock repurchases.

Net cash provided by investing activities for the threesix months ended MarchJune 31,30, 2025 related primarily to returns from our investments, investment sales, maturities, and redemptions whose proceeds were used to fund claims payments, underwriting expenses, stockholder dividend payments, and common stock repurchases. Those investing cash inflows were partially offset by investments of premiums received and the reinvestment of funds from investment sales, maturities, redemptionsredemptions, and interest income.

Net cash used in financing activities for the threesix months ended MarchJune 31,30, 20252026 related primarily to stockholder dividend payments and common stock repurchases.repurchases offset by FHLB advances and borrowings on the Credit Agreement.