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

As of December 31, 2024,2025, nearly all of our premium in force related to business in coastal states, which are especially subject to adverse weather conditions such as hurricanes, tropical storms, earthquakes, and winter storms. We also have in-force premiums from policies in the State of California, which has beenwas impacted by wildfires. For example, we expect to incur approximately $35.0-$40.0 million of pre-tax catastrophe losses, net of reinsurance, associated with the wildfires that affected Southern California during the first quarter of 2025 for which our incurred losses of reinsurance approximated $32.0 million for the calendar year 2025. A single catastrophic event, or a series of such events, destructive weather patterns, general economic trend, regulatory development or other condition specifically affecting the states in which we conduct business, particularly the more densely populated areas of those states, could have a disproportionately adverse impact on our business, financial condition and results of operations. Therefore, although we attempt to manage our exposure to catastrophes through our underwriting process and the purchase of reinsurance protection, an especially severe catastrophe or series of catastrophes could exceed our reinsurance protection and may have a material adverse impact on our results of operations and financial condition. As further described in Note 13 Reserve for Losses, the Company's 2017 reinsurance agreement with the FHCF was commuted during the third quarter of 2023. This commutation process resulted in a final determination of and payment for known, unknown or unreported claims relating to Hurricane Irma. The final amount paid by the FHCF could vary from the Company’s future estimation of losses to have been recovered from the FHCF. Accordingly, should future re-estimations to Hurricane Irma losses increase the expected loss reserves, all of the increase would be retained.

•the availability of sufficient reliable data and our ability to properly analyze available data;

•regulatory delays in approving filed rate changes;

•the uncertainties that inherently characterize estimates and assumptions;

•inflationary pressures on labor and materials, including supply chain disruptions;

•our ability to stay competitive as evolving competitive technologies emerge such as artificial intelligence (“AI”) and machine learning to make pricing, underwriting, or other decisions;

•our selection and application of appropriate rating and pricing techniques;

•the effect of climate change on frequency and severity of insured events from severe weather;

changes in legal standards, claim resolution practices, and restoration costs; and legislatively imposed consumer initiatives In addition, we could underprice risks, which would negatively affect our profit margins. We could also overprice risks, which could reduce the number of policies we write and our competitiveness. In either event, our profitability could be materially and adversely affected.

The insurance business historically has been a cyclical industry characterized by periods of intense price competition due to excess underwriting capacity, as well as periods when shortages of capacity permitted an increase in pricing. As premium levels increase, there may be new entrants to the market, which could then lead to increased competition, a significant reduction in premium rates, less favorable policy terms and fewer opportunities to underwrite insurance risks, which could have a material adverse effect on our results of operations and cash flows. In addition to these considerations, changes in the frequency and severity of losses suffered by insureds and insurers, including changes resulting from multiple and/or catastrophic weather events, may affect the cycles of the insurance business significantly. We cannot predict whether market conditions will improve, remain constant or deteriorate. Negative market conditions may impair our ability to write insurance at rates that we consider appropriate relative to the risk assumed. If we cannot write insurance at appropriate rates, our business would be materially and adversely affected.

The cost of reinsurance is subject to prevailing market conditions beyond our control such as the amount of capital in the reinsurance market, public policy decisions and the expiration of time-limited governmental programs such as the RAP program, as well as the frequency and magnitude of natural and man-made catastrophes. Our total cost of obtaining reinsurance over the last few years has increased, both on an absolute basis and as a percentage of premiums-in-force, and could increase in the future. We cannot be assured that reinsurance will remain continuously available to us in the amounts we consider sufficient and at prices acceptable to us. As a result, we may determine to increase the amount of risk we retain or look for other alternatives to reinsurance, which could in turn have a material adverse effect on our financial position, results of operations and cash flows. Further, an increase in frequency of severe weather events may cause an increase in credit exposure to the reinsurers with which we transact business.

All residential insurance companies that write admitted business in Florida, including Heritage P&C, are required to obtain reinsurance through the FHCF, and this coverage comprises a substantialsignificant portion of the Heritage P&C reinsurance program for our Florida insured properties. The limit and retention of the FHCF coverage is subject to upward or downward adjustment based on, among other things, submitted exposures to FHCF by all participants. We have purchased private reinsurance alongside our FHCF layer to fill in gaps in coverage that may result from the adjustment of the limit or retention of our FHCF coverage; however, such reinsurance would not cover any losses we may incur as a result of FHCF’s inability to pay the full amount of our claims. If a catastrophic event occurs in Florida, the FHCF may not have sufficient funds to pay all of its claims from insurance companies in full or in a timely manner. This could result in significant financial, legal and operational challenges to our Company. In the event of a catastrophic loss, the FHCF’s ability to pay may be dependent upon its ability to issue bonds in amounts that would be required to meet its reinsurance obligations. There can be no assurance that FHCF will be able to do this. While we believe FHCF currently has adequate capital and financing capacity to meet its reinsurance obligations, there can be no assurance that it will be able to meet its obligations in the future, and any failure to do so could have a material adverse effect on our liquidity, financial condition and results of operations.

•an influx of new capital in the marketplace as existing companies attempt to expand their businesses and new companies attempt to enter the insurance business as a result of better premium pricing and/or policy terms;

•an increase in programs in which state-sponsored entities provide property insurance in catastrophe-prone areas;

•changes in state regulatory climates; and the passage of federal proposals for an optional federal charter that would allow some competing insurers to operate under regulations different or less stringent than those applicable to us.

•the accuracy of our adjusters as they make their assessments and submit their estimates of damages;

•the training, background and experience of our claim’s representatives;

•the ability of our claims department to ensure consistent claims handling;

•the ability of our claims department to translate the information provided by adjusters into acceptable claims resolutions;

•the availability and timing of information from, and the overall degree of cooperation or lack thereof by, policyholders and their representatives; and the ability of our claims department to maintain and update its claims handling procedures and systems as they evolve over time based on claims and geographical trends in claims reporting.

Financial stability ratings are important factors in establishing the competitive position of insurance companies and can have a significant effect on an insurance company’s business. Many insurance buyers, agents, brokers and secured lenders use the ratings assigned by rating agencies to assist them in assessing the financial stability and overall quality of the companies from which they are considering purchasing insurance or in determining the financial stability of the company that provides insurance. Each of our insurance company affiliates currently maintain a Demotech rating of “A” (“Exceptional”) or higher. Our insurance company subsidiaries and the Company is also rated BBB-BBB or better by KBRA. These financial stability ratings provide an objective baseline for assessing solvency and should not be interpreted as (and are not intended to serve as) an assessment of a recommendation to buy, sell, or hold, any securities of an insurance company or its parent holding company, including shares of our common stock.

A portion of our income is, and likely will continue to be, generated by the investment of our capital, premiums and loss reserves. The amount of income generated is a function of our investment policy, available investment opportunities and the amount of available cash invested. We are also constrained by investment limitations required by our state insurance regulators. At December 31, 2024,2025, approximately 99%99.7% of our total investments were invested in fixed-maturity securities. We may, under certain circumstances, be required to liquidate our investments in securities at prices below book value, which may adversely affect our financial results. This risk could be amplified in periods of rising interest rates. We currently hold all of our cash in accounts with eighttwelve financial institutions and, as a result of this concentration, a portion of the balances in such accounts exceeds the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. While we monitor and adjust the balances in our accounts as appropriate, these balances could be impacted if any of these financial institutions fail and could be subject to other adverse conditions in the financial markets.

Loss frequency and severity in the property and casualty insurance industry and multi-peril personal lines business has continued to increase in recent years, often driven by actual and social inflation. Litigation and assignment of benefits (“AOB”) in the State of Florida is an example of these trends. For example, in recent years, Florida homeowners have been assigning the benefit of their insurance recovery to third parties, which has resulted in increases in the size and number of claims and the amount of litigation, interference in the adjustment of claims, the assertion of bad faith actions and one-way rights to claim attorney fees. The Florida legislature enacted several reform bills in the last several years with the intention toof limitlimiting AOB and frivolous litigation. These legislative changes have positively impacted the Florida property insurance market by curtailing AOB and litigated claims abuses. There can be no assurance that this legislation will further reduce the future impact of AOB or litigated claims practices and legislative changes could be reversed in whole or in partypart in the future.

•employing proper underwriting processes;

•carefully evaluating the terms and conditions of our policies;

•geographic diversification; and ceding insurance risk to reinsurance companies.

Regulation limiting rate increases and requiring us to participate in loss sharing may decrease our profitability.

We operate in a regulatory environment where certain entities and organizations have the authority to require us to participate in assessments. Currently these entities and organizations include, but are not limited to, state guaranty funds, state joint underwriting associations, fair plans, wind pools, or the FHCF. Additionally, we are required to participate in guaranty funds for insolvent insurance companies. The funds periodically assess losses against all insurance companies doing business in the state. Our operating results and financial condition could be adversely affected by any of these factors.

Insurance companies currently pass these assessments on to holders of insurance policies in the form of a policy surcharge and reflect the collection of these assessments as fullyliability earnedfor creditsfuture payment to operationsthe inentities levying the period collected.assessments. The collection of these fees, however, may adversely affect our overall marketing strategy due to the competitive landscape of our business. As a result, the impact of possible future assessments on our balance sheet, results of operations or cash flow are indeterminable at this time.

Risks RelatingRelated to Financing

•incur additional indebtedness;

•declare or make any restricted payments, including dividends;

•make investments, including the contribution of capital to our insurance subsidiaries;

•create liens on any of our current or future assets;

•consolidate, merge, sell, or otherwise dispose of all or substantially all of our current or future assets; and enter into certain transactions with our affiliates.

Although we have paid dividends on our common stock in the past, the declaration and payment of dividends will beare at the discretion of our board of directors and will depend on our profits, financial requirements and other factors, such as restrictions under our credit facilities, which limit our ability to pay dividends, and other legal and regulatory restrictions on the payment of dividends, our overall business condition and other elements our board of directors considers relevant. Therefore, investors who purchase our common stock may only realize a return on their investment if the value of our common stock appreciates.

Risks RelatingRelated to Ownership of Our Common Stock

•the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms, including preferences and voting rights, of those shares without stockholder approval;

•stockholder action can only be taken at a special or regular meeting and not by written consent;

•advance notice procedures for nominating candidates to our board of directors or presenting matters at stockholder meetings; and allowing only our board of directors to fill vacancies on our board of directors.

•our operating results, including a shortfall in revenues or operating performance from that expected by securities analysts and investors;

•recognition of large unanticipated accounting charges, such as impairment charges;

•changes in securities analysts’ estimates of our financial performance or the financial performance of our competitors or companies in our industry generally;

•a downgrade of our Demotech or KBRA rating;

•the announcement of a material event or anticipated event involving us or our industry or the markets in which we operate; and the other risk factors described in this Annual Report.

We are a super-regional property and casualty insurance holding company that primarily provides personal and commercial residential insurance products across our multi-state footprint. We provide personal residential insurance in Alabama, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, and Virginia and commercial residential insurance in Florida, Hawaii, New Jersey, and New York. We provide personal residential insurance in FloridaFlorida, Hawaii and South Carolina on both an admitted and non-admitted basis and in California on a non-admitted basis. As a vertically integrated insurer, we control or manage substantially all aspects of risk management, underwriting, claims processing and adjusting, actuarial rate making and reserving, customer service, and distribution. Our financial strength ratings are important to us in establishing our competitive position and can impact our ability to write policies.

We continue to monitor the effects of general changes in economic and market conditions on our business. As a result of general inflationary pressures, we have experienced, and may continue to experience, increased cost of materials and labor needed for repairs and to otherwise remediate claims throughout all states in which we conduct business. Additionally, we anticipate continued rising costs and constrained availability of catastrophe reinsurance. We mitigate thesethe conditionsimpact of inflation by continued exposure management, implementation of increasedrate ratesincreases and the use of inflation guard, which ensures appropriate replacement cost values for our business to reflect the inflationary impact on costs to repair properties. Use of inflation guard impacts both premium and total insured value ("TIV"). To the extent that reinsurance costs rise, we may seek to recoup the cost of properties.reinsurance in future rate filings as well as mitigate the cost through exposure management.

The Supplemental Information table below demonstrates progress on our initiatives by providing policy count, premiums-in-force, and total insured value for Florida and all other states as of December 31, 20242025 and comparing those metrics to December 31, 2023.2024. One of our strategies had been to reduce personal lines exposure in Florida, given historical abusive claims practices. Since 2022, several legislative changes have been implemented to positively impact the Florida property insurance market by curtailing assignment of benefits and litigated claims abuses. The positive impact of the legislative changes is reflected in our loss trends.trends, Aswhich such,favorably impact the cost of insurance to our policyholders. Our strategy has been to obtain rate adequacy throughout our portfolio. Through various underwriting, rate making and other actions over the last several years, we anticipatebelieve writingwe morehave organicachieved personalrate lines businessadequacy in Florida.over Coupled90% of our portfolio, with moreeach of those rate adequate rates,territories webeing arecurrently pursuing a strategy of controlled growth in Florida. We have selectively opened personal lines markets across our footprintopen for writing new business. During 2025, we concluded our exposure management initiatives from previous years and began deployment of our managed growth initiative. We anticipate growing our portfolio during 2026 while maintaining our disciplined underwriting standards.

Florida policies-in-force declined from the prior year by 12.8%7.7% and Florida premiums-in-force decreased by 4.0%, while Florida premiums-in-forceTIV increased 1.8%,over andthe Floridaprior total insured value ("TIV") was slightly down.year. The increasedecrease in Florida premiums-in-force was driven mostly by organica growthreduction ofin ourpremium for commercial residential and surplus lines business asrelated well as higher rates across our footprint which was partly offset by a premium reduction associated with fewer Florida personal lines policies. Use of inflation guard also bolstered premiums-in-force. The Florida TIV remained relatively flat asto the reductioncurrent associatedcompetitive withmarket personalin linesthe state. However the in-force policies was offset byfor the strategic growth of our commercial residential portfolio,product asgrew wellresulting asin usehigher ofFlorida inflation guard across the book of business.TIV. Compared to the year ended December 31, 2023,2024, the policy count for markets outside of Florida decreased 14.0%8.5% due to underwriting actions and intentional exposure management, resulting in a TIV decrease of 7.6%2.8% while premiums-in-force increased by 9.8%3.7% due to rating actions.

Over the past three years theThe Company has focused on three main strategic initiatives aimed at achieving consistent long-term quarterly earnings and driving shareholder value including:

•Generating underwriting profit through rate adequacy and more selective underwriting.

•Allocating capital to products and geographies that maximize long-term returns.

•MaintainingTargeting a balanced and diversified portfolio.portfolio

Notable Achievements of OurFulfilled Strategic Profitability Initiatives Since Launch in 20222025

Strategic Profitability Initiatives for 20252026

We continue to address rising reinsurance and loss costs trends in the property insurance sector through continued implementation of increased rates and inflation guard factors resultingwhich resulted in an increase in the average premium per policy of 22.3%8.9% at December 31, 20242025, as compared to the prior year.year . The increase inhigher average premium includesis driven by rate changes, inclusion of inflation in premiums as described below,guard, and changes inby the mix of business written. We experienced intentional growth of our commercial residential business during 20242024, andwith thisin-force premium in that line of business generatesdecreasing significantlyduring higher2025, averagedriven premiumprimarily perby policy.competitive market conditions as described above. New rates, which are subject to approval by our regulators, become effective when a policy is written or renewed, and the premium is earned pro rata over the policy period of one year. As a result of this timing, it can take up to twenty-four months for the complete impact of a rate change to be fully earned in our financial statements. For that reason, we account for inflation in our rate indications and filings with our regulators.

We invest in data analytics, using software and experienced personnel, to continuously evaluate our underwriting criteria and manage exposure to catastrophe and other losses. Our policy retention has remained steadily in the range of 90% despite the rate increases we have implemented, in large part due to a challenging property insurance market in many of the regions in which we operate. Weather losses and a higher cost of reinsurance have impacted these markets.90.0%. While we believe our rates are generally competitive with private market insurers operating in our space, we are focused on managing exposure and achieving rate adequacy throughout our book of business.business as well as providing high levels of customer service to our agents and policyholders.

Other revenue is primarily comprised of policy and pay-plan fees and also includes rental income due under non-cancelable leases for space at the Company’s commercial property in Clearwater, Florida, andwhich allwas policysold andin pay-planthe fees.third quarter of 2025. Our regulators have approved a policy fee on each policy written for certain states; to the extent these fees are not subject to refund, the Company recognizes the income immediately when collected. The Company also charges pay-plan fees to policyholders that pay premiums in more than one installment and record the fees as income when collected.

Policy acquisition costs (“PAC”) consist of: (i) commissions paid to outside agents at the time of policy issuance, (ii) policy administration fees paid to a third-party administrator at the time of policy issuance,third-party, (iii) premium taxes and (iv) inspection fees. We recognize policy acquisition costs ratably over the term of the underlying policy. We earn ceding commissions on our net quota share reinsurance contract and certain other reinsurance contracts, which are reported as a reduction to policy acquisition costs and general and administrative expenses based upon the proportion these costs bear to production of new business. Refer to Note 11 “Deferred Policy Acquisition Costs” to our consolidated financial statements under Item 8 of this Annual Report on Form 10K. Ceding commission income is deferred and earned over the contract period. The amount and rate of ceding commissions earned on the net quota share contract can slide within a prescribed minimum and maximum, depending on loss performance and how future losses develop. Refer to Note 11 “Deferred Policy Acquisition Costs” to our consolidated financial statements under Item 8 of this Annual Report on Form 10K.

Provision for income taxes consists of federal and state corporate level income taxes. The effective tax rate can fluctuate throughout the year as estimates used in the quarterly tax provision are updated with additional information throughout the year and updated with actual amounts in the fourth quarter. The effective tax rate can vary from the 25.9%25.8% statutory federal and state blended rate depending on the amount of pretax income in proportion to permanent tax differences as well as state tax apportionment. The 2023 effective tax rate was favorably impacted by the release of valuation allowance associated with the operations of our captive reinsurer, Osprey.

•Gross premiums earned of $1.4$1.43 billion, an improvement of 6.2%1.8% from $1.3$1.41 billion in the prior year, reflecting higher gross premiums written over the last twelve months driven by a higher average premium per policy as described above.months.

•Net premiums earned of $767.9$794.2 million, an improvement of 10.1%3.4% from $697.2$767.9 million in the prior year, reflecting the higher gross earned premium outpacingcoupled thewith increasea reduction in ceded premiums forcompared to the prior year.

•Losses and loss adjustment expenses incurred of $447.0$313.2 million, upa 4.9%29.9% improvement from $426.1$447.0 million in the prior year. The increasedecrease primarily stems from highersignificantly lower catastrophe losses,losses partly offset byand lower weather and attritional losses as describedwell below.as Additionally,favorable wenet experiencedloss $25.4development. Net weather and catastrophe losses for the current accident year were $77.5 million, a decrease from $146.7 million ofin adversethe prior year. Catastrophe losses in the current year were $33.2 million, down from $104.6 million in the prior year. Other weather losses totaled $44.3 million, up from the prior year development compared to $1.6 millionamount of $42.1 million. Net favorable prior year development in 2023. The adverseloss development was driven$13.5 largelymillion byfor developmentthe ofcurrent Hurricaneyear Irmacompared claims. Theto net unfavorable loss development stemmedof primarily$25.4 from losses associated with Hurricane Irma,million for which the lossesprior were fully retained.year.

•Ceded premium ratio of 45.4%,44.5%, a 1.90.9 point improvement over the prior year ratio of 47.3%,45.4%, driven by growth in gross premiums earned, whichcoupled grewwith atless aceded fasterpremium ratecompared thanto the growthprior inyear cededas premiums.described below.

•Net combinedloss ratio of 94.2%,39.4%, aan 2.118.8 point improvement from 96.3% inover the prior year,year primarilyratio of 58.2%, driven by lowerthe netreduction lossof ratio,losses partlyand offsetLAE byas adescribed above coupled with higher net expensepremiums ratio as described above.earned.

Total revenue was $817.0$847.3 million for the year ended December 31, 2024,2025, up 11.1%3.7% compared to $735.5$817.0 million in the prior year. The increase primarily stems from higher net premiums earned and net investment incomeincome, which includes a realized gain on a building sale, as described below.

Premiums-in-force were $1.4$1.43 billion as of December 31, 2024,2025, representing a 5.7%0.1% increasedecrease from the prior year due to continueda proactivereduction underwritingin actioncommercial andresidential ratein-force increasespremium acrossthat the entire portfolio and strategicoffset growth in our commercial residential product, despite a policy count reduction of over 60,000, driven by an intentional reduction in our personal lines policyin-force count.premium Concurrently,throughout TIVthe decreased by 5.8%.book.

Gross premiums earned were $1.4$1.43 billion for the year ended December 31, 2024,2025, up 6.2%1.8% compared to $1.3$1.41 billion in the prior year,year reflecting higher gross premiums written over the last twelve months driven by a higher average premium per policy, use of inflation guard, and organic growth of the commercial residential business.months.

Ceded premiums were $638.2$636.9 million for the year ended December 31, 2024,2025, updown 1.9%0.2% compared to $626.5$638.2 million in the prior year. The increasedecrease is primarily attributable to reinstatementa premiumfavorable ofadjustment approximately$30.0recorded millionin associatedthe withfourth Hurricanesquarter Ianto and Milton andreflect a higherTIV costtrue ofup on the catastrophe excess of loss reinsurance,reinsurance program and lower catastrophe loss reinstatement premium compared to the prior year, which was partly offset by ahigher lowerceded costpremium foron ourthe net quota share reinsuranceprogram associatedfrom withhigher cession and associatedsubject premium volume changes. To the extent the ultimate losses for Hurricanesthat Ian or Milton grow, additional reinstatement premiums may be incurred depending upon the amount of additional reinsurance limit utilized.program.

Net premiums earned were $767.9$794.2 million for the year ended December 31, 2024,2025, up 10.1%3.4% compared to $697.2$767.9 million in the prior year. The increase primarily stems from higher gross premiums earned outpacingcoupled higherwith lower ceded premiums as described above.

Net investment income, inclusive of net realized gains on debt securities and other investments Net investment income, inclusive of net realized gains (losses)on debt securities and unrealizedother gains (losses) on equity securities,investments was $35.9$39.9 million for the year ended December 31, 2024,2025, up 45.0%11.0% compared to $24.8$35.9 million in the prior year. The increase is primarily due to a gain on a building sale during the third quarter as well as higher investment yields ondriven by higher cash and invested assets associatedbalances withwhich higherare moving out on the yield curve, which was partly offset by lower yields on money market funds and our bank sweep accounts as a result of the current interest rates,rate coupled with higher balances of cash and invested assets.environment.

You should read the following discussion in conjunction with our condensed consolidated financial statements and related notes and other information included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2025 (as amended, the amended“2025 Form 10-K”). Unless the context requires otherwise, as used in this Form 10-Q, the terms “we”, “us”, “our”, “the Company”, “our Company”, and similar references refer to Heritage Insurance Holdings, Inc., a Delaware corporation, and its subsidiaries.

We are a super-regional property and casualty insurance holding company that primarily provides personal and commercial residential insurance products across our multi-state footprint. We provide personal residential insurance in Alabama, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas, and Virginia and commercial residential insurance in Florida, Hawaii, New Jersey, and New York. We provide personal residential insurance in Florida, Hawaii, and South Carolina on both an admitted and non-admitted basis and in California on a non-admitted basis only. We also provide commercial insurance in the State of Texas on an excess and surplus lines basis. As a vertically integrated insurer, we control or manage substantially all aspects of risk management, underwriting, claims processing and adjusting, actuarial rate making and reserving, customer service, and distribution. Our financial strength ratings are important to us in establishing our competitive position and can impact our ability to write policies.

We continue to monitor the effects of general changes in economic and market conditions on our business. As a result of general inflationary pressures, we have experienced, and may continue to experience, increased cost of materials and labor needed for repairs and to otherwise remediate claims throughout all states in which we conduct business. We mitigate the impact of inflation by implementation of rate increases and through the use of inflation guard, which ensures appropriate replacement cost values for our business to reflect the inflationary impact on costs to repair properties. Use of inflation guard impacts both premium and total insured value ("TIV"). Rising reinsurance costs may be mitigated through exposure management as well as recouping the cost of reinsurance in future rate filings.

The Company has focused on three main strategic initiatives aimed at achieving consistent long-term quarterly earnings and driving shareholder value, includingwhich initiatives will remain in place while the Company also expands its strategy to include its 2026 initiatives:

Generating underwriting profit through rate adequacy and more selective underwriting Allocating capital to products and geographies that maximize long-term returns Targeting a balanced and diversified portfolio InTo continuingcontinue its progress, the Company expects to implementalso thesefocus three strategic initiatives, we plan to targeton the following profitability initiatives in 2026:

Leverage infrastructure and capabilities to foster further growth, which includes our planentry to enter the State of Texas on an excess and surplus lines basis Act as opportunities emerge which will continue our diversification and expansion over the next several years Expand our relationship with reinsurance partners to expand capacity, manage volatility while pursuing growthbasis.

We address reinsurance and loss cost trends in the property insurance sector through rates and inflation guard factors. Over the last several years, we have filed and been approved by state regulators for rate increases to achieve rate adequacy. Our rates are now adequate in over 90% of our territories, which are currently open for new business. We experienced intentional growth of our commercial residential business during 2025, with in-force premium in that line of business decreasing in the first quarter of 2026, driven primarily by competitive market conditions. To the extent that reinsurance and loss cost trends decline, our rates may be adjusted downward in the future. New rates, which are subject to approval by our regulators, become effective when a policy is written or renewed, and the premium is earned pro rata over the policy period of one year. As a result of this timing, it can take up to twenty-four months for the complete impact of a rate change to be fully earned and impact our financial statements.

We may experience rising inflation in the form of increased labor and material costs, which drive up claim costs throughout all states in which we conduct business. However, inflation is increasing at a lower rate than what we have experienced in the last several years. We adjust for changes in inflation by increasing or decreasing the inflation factor used in our pricing. Florida personal lines claim costs associated with litigated claims have decreased over the last several years due to favorable legislation aimed to curtail claims abuse and stabilize the Florida property insurance market. This has had the intended impact and has resulted in better margins for the Company and better rates for Florida policyholders. Accordingly, we have a positive outlook for Florida and the other rate adequate states.

In the following section, we discuss our financial condition and results of operations for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025.

Gross premiums earned were $353.6$351.2 million, consistentcompared withto $353.8$353.6 million earned in the prior year quarter, asreflecting the decline in commercial residential business declineddriven due toby the competitive market conditions described above, but were largely offset by higher gross premiums earned for the personal residential business.above.

Net loss ratio wasdecreased 45.9%,to a30.4%, 3.8an 8.1 point improvement from 49.7%38.5% in the same quarter last year, driven by lower net losses and LAE as described above and relatively flat net premiums earned.

NetThe net combined ratio of 81.0% improved 3.58.0 points to 64.9% from 84.5%72.9% in the prior yearprior-year quarter, primarily driven by athe lower net loss ratio, partly offset by a higher net expense ratio as describeddiscussed above.

Net investment income increased to $9.9$10.6 million, a 15.1%17.3% increase from $8.6$9.0 million in the firstsecond quarter of 2025, driven mostly by a higher balance of invested assets. We continue to manage our investment portfolio,portfolio whileby maintaining a conservative portfolio with high quality investments and duration liability matched.

The effective tax rate was 25.6%24.9% compared to 23.8% in the prior year firstsecond quarter. We calculate the provision for income taxes during interim reporting periods by applying an estimate of the effective tax rate for the full year. The effective tax rate is 1.81.1 points higher than the prior yearquarter, quarter.with the variance driven by pre-tax income and permanent items. The effective tax rate can fluctuate throughout the year as income changes and estimates used in each quarterly tax provision are updated with additional information.

Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025

Premiums-in-force were $1.427$1.41 billion as of firstsecond quarter 2026, a decrease of 0.4%1.4% compared to $1.432$1.43 billion as of firstsecond quarter 2025, driven mostly by a reduction of commercial residential in-force premium driven by competitive pressures as described above.

NetCeded premiums earned were $199.7 million in first quarter 2026, down 0.2% from $200.0$150.0 million in the prior yearsecond quarter of 2026, a decrease of $7.3 million, or 4.6%, from $157.3 million in the prior-year quarter, primarily driven by athe small reductiondecrease in grossthe premiumsnortheast earnednet andquota relativelyshare flatprogram cededat premiumsyear-end 2025 as describedwell above.as the benefit from one month of the improved pricing of the June 2026 CAT XOL program.

Net investment income was $9.9$10.6 million a 15.1% increase from $8.6 million forin the firstsecond quarter of 2025.2026, an increase of $1.6 million, or 17.3%, from $9.0 million in the prior-year quarter. The increase iswas primarily dueattributable to higher average cash and invested assetsasset balances which are moving out onand the yieldreinvestment curve,of whichmaturing wasassets partlyat higher yields, partially offset by lower yields on money market funds and our bank sweep accounts asresulting a result offrom the current interest rate environment. We continue to manage our investment portfolio, while maintaining a conservative portfolio with high quality investments and duration liability matched.

Total expenses weredecreased $161.8to $130.3 million in firstthe second quarter 2026,of 2026 from $143.2 million in the prior-year quarter, an improvement of 4.3%9.0%. comparedAs discussed below, the decrease was primarily attributable to $169.1 million in the prior year quarter. As described below, a reduction oflower losses and loss adjustment expenses (LAE) isand, the primary driver, coupled withto a smalllesser decreaseextent, inlower policy acquisition costs,general and partlyadministrative expenses, partially offset by higher generalpolicy andacquisition administrative expenses.costs.

GeneralPolicy andacquisition administrative expensescosts were $24.9 million in first quarter 2026, up 4.4% from $23.9$45.5 million in the priorsecond yearquarter of 2026, an increase of 5.5% from $43.1 million in the prior-year quarter. The increase was primarily driven largely by a reduction in ceding commissions and higher human capitalpolicy related costs.

Interest expense, net was $1.8$1.7 million in the firstsecond quarter of 2026, slightly lower than $2.4$1.8 million for the prior year quarter, drivenprimarily bydue to lower interest rates on a lower amount of debt balances outstanding.

The income tax expense was $12.6$20.5 million in firstsecond quarter 2026 compared to $9.5$15.0 million in the prior year quarter, with the higher provision in the current quarter driven by higher pre-tax earnings compared to the prior year quarter. The effective tax rate for the current year quarter was 25.6%24.9% compared to 23.8% in the prior year quarter, an increase of 1.81.1 points.point. We calculate the provision for income taxes during interim reporting periods by applying an estimate of the effective tax rate for the full year. The variance is driven by pre-tax income and permanent items. The effective tax rate can fluctuate throughout the year as income changes and estimates used in theeach quarterly tax provision are updated with additional information.

The net combined ratio was 81.0%64.9% in firstsecond quarter 2026, a 3.58.0 point improvement from 84.5%72.9% in the prior year quarter. The decrease primarily stems from a lower net loss and LAE ratio, partly offset by a higher expense ratio,ratio as described below.