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

The following important factors, among others, in some cases have affected, and in the future could affect, our actual results and could cause our actual results to differ materially from historical results and from those expressed in any forward-looking statements made from time to time by us on the basis of our then-current expectations. The words “believes,” “anticipates,” “expects,” “projections,” “outlook,” should,” “could,” “plan,” “guidance,” “likely,” “on track to,” “potential,” “continue,” “targeted,” “designed” and similar expressions are intended to identify forward-looking statements. Our businesses are in rapidly changing and competitive markets, and involve a high degree of risk and unpredictability. Forward-looking projections are subject to these risks and unpredictability.

increases in costs, particularly increasesthose occurring after the time our insurance products are priced, including construction, automobile repair, and medical and rehabilitation costs. ThisThese includeshave resulted from, and may continue to result from, inflation, rises in the cost of products due to disruptions in supply chains, tariffs or other factorsfactors, andas well as “cost shifting” from health insurers to casualty and liability insurers (whether as a result of injured parties without health insurance, coverage changes in health policies to make such coverage secondary to casualty policies, state or federal healthcare legislation, lower reimbursement rates by health insurers or government-sponsored insurance, or legislation and/or litigation related to the Medicare Secondary Payer Act, which may impose reporting, additional costs, and other requirements with respect to medical and related claims paid for Medicare eligible individuals). As it relates to construction, there are often increases in the cost of building supplies and construction labor after a significant event (for example, so called “demand surge” that causes the cost of labor, construction materials and other items to increase in a geographic area affected by a catastrophe). In addition, we are limited in our ability to negotiate and manage reimbursable expenses incurred by our policyholders;

The inherent uncertainties of estimating reserves are greater for certain types of insurance lines, particularly liability lines. These include automobile bodily injury liability, automobile personal injury protection, general liability, and workers’ compensation, where a longer period of time may elapse before a definitive determination of ultimate liability may be made (sometimes referred to as “long-tail” business); environmental liability, where the technological, judicial and political climates involving these types of claims are continuously evolving; and casualty coverages such as professional liability. The emergence of the pandemic in 2020 resulted in an increased level of uncertainty for many lines of business, particularly our long-tailed lines. There is also greater uncertainty in establishing reserves with respect to new business, particularly new business that is generated with respect to newer product lines, by newly appointed agents, or in new geographies where we have less experience in conducting business. In these cases, there is less historical experience or knowledge and less data on which the actuaries can rely. A combination of business that is both new to us and has longer development periods, provides even greater uncertainty in estimating insurance reserves.

Our business is subject to claims arising out of catastrophes that may have a significant impact on our results of operations and financial condition. We have experienced, and in the future will experienceexperience, catastrophe losses, which could have a material adverse impact on our business. Catastrophes can be caused by various natural or manmade events, including hurricanes, tornadoes and other windstorms, hail, floods, earthquakes, fires, drought, severe winter weather and other convective storms, volcanic eruptions, tropical storms, solar flares, tsunamis, sabotage, civil unrest, terrorist actions, explosions, nuclear accidents and power outages, which could be exacerbated by infrastructure failures. The frequency and severity of catastrophes are inherently unpredictable.

Global climate change from rising planet temperatures over the last several decades has been linked to a number of factors that contribute to the increased unpredictability, frequency, duration and severity of weather events, including: changing weather patterns, a rise in ocean temperatures, sea level rise, and drought. Further increases or persistence in these conditions could lead to higher overall losses, which we may not be able to recoup, particularly in a highly regulated and competitive environment, and to higher reinsurance costs. Certain catastrophe models assume an increase in frequency and severity of certain weather or other events, which could result in a disproportionate impact on insurers with certain geographic concentrations of risk. This would also likely increase the risks of writing property insurance in coastal areas or areas susceptible to wildfires or flooding, particularly in jurisdictions that restrict pricing and underwriting flexibility. The threat of catastrophe losses, such as rising seassea or other catastrophe losseslevels, as a result of global climate changechange, may also cause property values in coastal or such other communities to decrease, reducing the total amount of insurance coverage that is required.

Like insurance companies, reinsurance companies can also be adversely impacted by catastrophes. In setting our retention levels and coverage limits, we consider our level of statutory surplus and exposures, as well as the current reinsurance pricing environment and available capacity, but there can be no assurance that we have adequately set these levels or limits or that we will be able to maintain our current or desired levels of reinsurance coverage. In particular, and as discussed under “Reinsurance Program Overview” in Information About Operating Segments - Reinsurance, not all of our 20252026 reinsurance programs for the Core Commercial, Specialty and Personal Lines are fully placed. Reinsurance is a significant factor in our overall cost of providing primary insurance. However, unlike primary insurers, reinsurers are not subject to rate or other restrictionsrules requiring them to continue availabilityto ofprovide reinsurance orcoverage, limitinglimit cost increasesincreases, or mandatingmandate coverage forms. An individual insurer’s reinsurance expense is correlated to the level of losses experienced by its reinsurers. Future catastrophic events and other changes in the reinsurance marketplace, including as a result of investment losses or disruptions due to challenges in the financial markets that have occurred or could occur again in the future, may adversely affect our ability to obtain such reinsurance coverages, as well as adversely affect the cost of obtaining that coverage.

Additionally, the availability, scope of coverage, cost,and andcost of reinsurance, as well as the creditworthiness of reinsurancereinsurers could continue to be adversely affected by new or more frequent catastrophes, terrorist attacks, cyber risks, and the perceived risks associated with future terrorist activities, global conflicts, including the threat of nuclear conflict, and the changing legal and regulatory environmentenvironments (including changes that could create new insured risks). and currency risk. Federal reinsurance for terrorism risks coverage offered by insurers is available under the federal terrorism risk insurance program, but it only applies to certified events of terrorism (as defined in the legislation) and contains certain caps and deductibles. Although the federal terrorism risk insurance program coverage is in effect through December 31, 2027, if this program is modified unfavorably by the government in the future,government, then private reinsurance for events of terrorism may not be available to us or available at reasonable or acceptable rates.rates given the stabilizing effect this federal terrorism program provides the reinsurance market.

We purchase reinsurance by transferring (known as ceding) part of the risk that we have assumed to reinsurance companies in exchange for part of the premium we receive in connection with the risk. As of December 31, 2024,2025, our reinsurance receivablerecoverables (including from the MCCA) amounted to approximately $2.0 billion. Although reinsurance makes the reinsurer liable to us to the extent the risk is transferred or ceded to the reinsurer, it does not relieve us (the reinsured) of our liability to our policyholders. Accordingly, we bear counterparty risk with respect to our reinsurers, including risks resulting from over-concentration of exposures within the industry. Although we monitor our reinsurers and their financial condition, we cannot be sure that they will pay the reinsurance recoverables owed to us currently or in the future or that they will pay such recoverables on a timely basis. The contractual obligations under reinsurance agreements are typically with individual subsidiaries of the reinsurance group and are not typically guaranteed by other group members. In certain circumstances, with “unauthorized” reinsurers or those with lower financial strength ratings, we may require collateral equal to 100% of estimated reinsurance recoverables. The collateral can serve to mitigate credit risk. In the event of losses, we may look to “draw down” on this collateral to satisfy reinsurance recoveries due to us, but if the collateral held is insufficient to meet those recoveries, we will be exposed to losses.

Our insurance businesses are subject to supervision and regulation by the state insurance authority in each state where we transact business. This system of supervision and regulation relates to numerous aspects of an insurance company’s business and financial condition, including: limitations on the authorization of lines of business,business; underwriting limitations,limitations; the ability to utilize credit-based insurance scores,scores; pricing models,models; use artificial intelligence (“AI”),; use of gender, geographic location, information publicly available information (such as on social media), education, occupation, incomeincome, or other factors in underwriting,underwriting; the setting of premium rates,rates; the requirement to write certain classes of business that we might otherwise avoidavoid, or charge different premium rates,rates; restrictions on the ability to withdraw from certain lines of business or terminate policiespolicies, or classes of policyholders and the approval of policy forms,forms; the establishment of standards of solvency,solvency; the licensing of insurers and agents,agents; the ability to terminate agents,agents; supervisory and liability responsibilities for agents,agents; compensation of and contractual arrangements with independent agents,agents; concentration of investments,investments; levels of reserves,reserves; the payment of dividends,dividends; transactions with affiliates,affiliates; changes of control,control; and, information security, protection of private information of our agents, policyholders, claimants and others (which may include highly sensitive financial or medical information or other private information such as social security numbers, driving records or driver’s license numbers). From time to time, various states and Congress have proposed to prohibit or otherwise restrict the use of credit-based insurance scores or other risk-based pricing factors in underwriting or rating our Personal Lines business. The elimination of the use of risk-based pricing factors could cause significant disruption to our business and our confidence in our pricing and underwriting. Most insurance regulations are designed to protect the interests of policyholders rather than stockholders and other investors.

Legislative and regulatory restrictions are constantly evolving and are subject to the then-current political pressures. For example, following major events, states have considered, and in some cases adopted, proposals such as homeowners’ “Bill of Rights,” restrictions on storm deductibles, additional mandatory claim handling guidelines and mandatory coverages. More recently, the California Insurance Commissioner restricted the ability of carriers to non-renew certain coverages in wildfire disaster areas, and the New York Department of Financial Services and regulatory agencies in other states have enacted comprehensive cybersecurity regulations and required insurers to take steps related to global climate change.

Our business could be negatively impacted by adverse state and federal legislation orlegislation, regulation, executive orders, or judicial developments, including those resulting in: decreases in rates, including for example, recent regulatory or bureau actions to mandate reduced premiums for workers’ compensation insurance; limitations on premium levels or limitations that inhibit our ability to secure timely approvals of rate filings; coverage and benefit mandates; limitations on the ability to manage care and utilization or other claim costs; requirements to write certain classes of business or in certain geographies; restrictions on underwriting, methods of compensating independent producers, or our ability to cancel or renew certain business (which negatively affects our ability to reduce concentrations of property risks); higher liability exposures for our insureds; increased assessments or higher premium or other taxes; and enhanced ability to pierce “no fault” thresholds, recover non-economic damages (such as “pain and suffering”), or pierce policy limits.

These regulations serve to protect customers and other third parties and are often heavily influenced by the then-current political environment. If we are found to have violated an applicable regulation, an administrative or judicial proceedingsproceeding may be initiated against us that could result in censures, fines, civil penalties (including punitive damages), the issuance of cease-and-desist orders, premium refunds or the reopening of closed claim files, among other consequences. These actions could have a material adverse effect on our financial position and results of operations.

Further, as we continue to expand our business into new regions, either organically or through acquisition,acquisitions, we may become subject to the regulations and different regulatory bodies governing such business in those locales.

In response to concerns about the overall cost and affordability of automobile insuranceinsurance, in Michigan,June the2019, stateMichigan enacted legislation in(which Junebecame 2019effective July 2, 2020) that significantly changed no-fault and PIP systems. The legislation, which was effective July 2, 2020,legislation eliminated the requirement that all insureds purchase unlimited PIP coverage and instead substituted instead tiered limits, ranging from zero (for those with certain health benefits meeting specified criteria) to unlimited benefits. In contrast, the minimum amounts of bodily injury coverage drivers arewere required to purchase increased, and we anticipate an increase in tort liability and related litigation from these changes.increased. The legislation includesincluded underwriting and other restrictions and mandates, in addition to subjecting rates, forms and rules to prior approval from the Michigan Department of Insurance and Financial Services (“Michigan Insurance Department”) before implementation.

The legislation also imposesimposed various cost controls, including medical fee schedules based on a multiple of Medicare reimbursement rates, and mandated PIP premium rate reductions with an eight-year premium rate freeze for the PIP component of automobile policies. The Michigan Insurance Department also enacted regulations to establish statutorily required utilization controls. The rate freeze was effective contemporaneously with the adoption of the legislation and the mandatory rate reduction was effective July 2, 2020, and the expense and utilization controls went into effect on July 1, 2021.

Many medical and other providers who receive reimbursement under the PIP system strenuously objected to the fee schedules, cost controls and utilization restrictions imposed by the new legislation.legislation, Sinceand thesince reformits legislation was adopted,adoption, we have experienced (and may continue to experience) an increase in litigation from medical and otherthese providers demanding higher reimbursementsreimbursements. under the current system, and thatThis litigation could increase depending on the outcome of these and other ongoing legal challenges.

We may incur financial losses resulting from our participation in shared market mechanisms, mandatory reinsurance programs and mandatory and voluntary pooling arrangements.

Additionally, increases in the number of participants or insureds in state-sponsored reinsurance pools, FAIR plans or other residual market mechanisms, particularly in the states of California, Massachusetts, Texas, California, New York, or North Carolina, combined with regulatory restrictions on the ability to adequately price, underwrite, or non-renew business, as well as new legislation, or changes in existing case law, could expose us to significant risks of increased assessments from these residual market mechanisms. There could also be a significant adverse impact as a result of losses incurred in those states due to hurricane or other high loss exposures, as well as the declining number of carriers providing coverage in those regions. We are unable to predict the likelihood or impact of such potential assessments or other actions.

All fifty U.S. states and the District of Columbia have insurance guaranty fund laws requiring property and casualty insurance companies doing business within the state to participate in guaranty associations. These associations are organized to pay contractual obligations under insurance policies issued by impaired or insolvent insurance companies. The associations levy assessments, up to prescribed limits, on all member insurers in a particular state based on the proportionate share of the premiums written by member insurers in the lines of business that the impaired or insolvent insurer is engaged in. Although mandatory assessments by state guaranty funds that are used to cover losses to policyholders of insolvent or rehabilitated companies can be substantially recovered over time through policyholder surcharges or a reduction in future premium taxes in many states (provided the collecting insurer continues to write business in such state), there can be no assurance that all funds will be recoupable in the future. During 2024,2025, we had anet totalassessments assessmenttotaling of $2.8$2.0 million levied against us. As of December 31, 2024,2025, we had $2.3$1.7 million of reserves related to guaranty fund assessments. In the future, these assessments may increase above levels experienced in prior years. Future increases in these assessments depend upon the rate of insolvencies of insurance companies.

As the speed of digitization accelerates, we are subject to risks associated with both our agents’ and our ability to keep pace. In an increasingly digital world, agents who cannot provide a digital or technology-driven experience risk losing customers who demand such an experience, and such customers may choose to utilize more technology-driven agents or abandon the independent agency channel altogether. Additionally, if we are not able to keep pace with competitors’ digital offerings or advancements in the use of new technologiestechnologies, such as artificial intelligenceAI tools, we may not be able to meet the demand from our agents or their customers, which could lead to a loss of customers, agents or both.

Over the past several years, we have made, and our current plans are to continue to make, significant investments in our Core Commercial, Specialty and Personal Lines of businesses, in order to, among other things, strengthen our product offerings and service capabilities, expand into new geographic areas, improve technology and our operating models, build expertise in our personnel, and expand our distribution capabilities, with the ultimate goal of achieving significant, sustained growth. From time to time, we may also identify opportunities for growth through acquisitions. The ability to achieve significant profitable premium growth in order to earn adequate returns on such investments and expenses, and to grow further without proportionate increases in expenses, is an important part of our current strategy. There can be no assurance that we will be successful at profitably growing our business, either organically or through acquisitions, or that we will not alter our current strategy due to changes in our markets, economic conditions or an inability to successfully maintain acceptable margins on new or existing business or for other reasons, including general economic conditions, elevated weather severity or otherwise, in which case premiums written and earned, operating income and net book value could be adversely affected.

As we enter new states or regions or grow our business, either organically or through acquisitions, there can be no assurance that we will not experience higher loss trends than anticipated.

Risks Related to Technology, Information SecuritySecurity, Privacy and PrivacyThird-Party Suppliers

Any failure to protect the confidentiality of customerpersonal information could adversely affect our reputation or expose us to fines, penalties or litigation, which could have a material adverse effect on our business, financial condition and results of operations.

We are required to safeguard the confidential and personal information of our customerscustomers, business partners, employees, claimants and applicants. We are subject to an increasing number of federal, state, local and international laws and regulations regarding privacy, data security, and the use of AI, as well as contractual commitments. These laws and regulations are rapidly evolving, complex, vary significantly from jurisdiction to jurisdiction, and sometimes conflict. In the absence of updated, uniform federal privacy legislation, there is a growing trend in the states in which we operate, to adopt comprehensive privacy legislation that provides consumers with various privacy rights and imposes significant compliance burdens on covered companies. Failure to comply with data security or privacy laws or regulations could subject us to regulatory enforcement actions and fines, penalties, litigation, private rights of action or public statements against us by consumer advocacy groups or others if confidential customerpersonal information is misappropriated from our computer systems, those of our vendors or others with whom we do business, or otherwise. Despite the security measures that may be in place, any such systems may be vulnerable to the types of attacks and security incidents described above. Any well-publicized compromise of security could deter people from entering into transactions that involve transmitting confidential information, impart reputational or other harm, and/or have a material adverse effect on our business. Additionally, privacy legislation may make our business partners more reluctant to share information with us that is useful in conducting our business.

We compete, and will continue to compete, with a large number of companies, including international, national and regional insurers, specialty insurance companies, underwriting agencies and financial services institutions. We also compete with mutual insurance companies, reciprocal and exchange companies that may not have shareholders and may have different profitability targets than publicly or privately owned companies. In prior years, there has been substantial consolidation and convergence among companies in the financial services industry, resulting in increased competition from large, well-capitalized financial services firms. Many of our competitors have greater financial, technical, technological, and operating resources than we do, greater access to data analytics or “biglarge-scale data,” and may be able to offer a wider range of, or more sophisticated, core commercial, specialty and personal line products. Some of our competitors also have different marketing, advertising and sales strategies than we do and market and sell their products to consumers directly. In addition, competition in the U.S. property and casualty insurance market has intensified over the past several years. This competition has had, and may continue to have, an adverse impact on our revenues and profitability.

We also face heightened competition resulting from the entry of new competitors and the introduction of new products by new and existing competitors. Recent entries into the property and casualty marketplace by large technology companies, retail companies, so-called “Insurtech” companies and other non-traditional insurance providers, who aim to leverage their technology, expertise, direct access to customers, access and ability to manipulate “biglarge-scale data,” use of artificial intelligence,AI, speed in responding to customer requests and other developing opportunities, may increase competition. Increased competition could make it difficult for us to obtain new or retain existing customers. It could also result in increasing our service, administrative, policy acquisition or general expenses as we seek to distinguish our products and services from those of our competitors. In addition, our administrative, technology and management information systems’ expenditures could increase substantially as we try to maintain or improve our competitive position or keep up with evolving technology in order to deliver the same or similar customer or agency experience as those offered by our competitors.

Our insurance company subsidiaries are rated by A.M. Best, Moody’s, and S&P Global. These ratings reflect the rating agency’s opinion of our insurance subsidiaries’ financial strength, operating performance, position in the marketplace, risk management, and the ability to meet theirpolicyholder obligations to policyholders.obligations. These ratings are not evaluations directed to investors, and are not recommendations to buy, sell or hold our securities. Our ratings are subject to periodic review by the rating agencies, and we cannot guarantee the continued retention or improvement of our current ratings. This is particularly true given that rating agencies may change their criteriaratings or increase capital requirements for various rating levels.criteria.

Other marketMarket fluctuations and difficult general economic, market and political conditions may also negatively affect our business, profitability, investment portfolio, and the market value of our common stock.

At December 31, 2024,2025, we held approximately $9.8$11.5 billion of investment assets in categories such as fixed maturities, limited partnerships, commercial mortgage loans, equity securities, other investments, and cash and short-term investments. Our investments are primarily concentrated in the domestic market. Our investment returns, and thus our profitability, statutory surplus and shareholders’ equity, may be adversely affected from time to time by conditions affecting our specific investments and, more generally, by bond, stock, real estate and other market fluctuations and general economic, market and political conditions, changing government policies, including monetary policies, fiscal policies, governmental shutdowns, and geopolitical risks (which may include the impact of terrorism in various parts of the world, civil unrest, pandemic events, and global or regional hostilities in the Middle East and Ukraine). These broader market conditions are out of our control. Our ability to make a profit on insurance products depends in significant part on the returns on investments supporting our obligations under these products, and the value of specific investments may fluctuate substantially depending on the foregoing conditions. We may use a variety of strategies to hedge our exposure to interest rates and other market risks. However, hedging strategies are not always available and carry certain credit risks, and our hedging could be ineffective. Moreover, increased government regulation of certain derivative transactions used to hedge certain market risks has served to prevent (or otherwise substantially increase the cost associated with) hedging such risks.

Debt securities comprise a material portion of our investment portfolio. Although we have an investment strategy that provides for asset diversification, the concentration of our investment portfolio in any one type of investment, industry or geography could have a disproportionately adverse effect on our investment portfolio. The issuers of debt securities, as well as borrowers under the loans we make, customers, trading counterparties, counterparties under swaps and other derivative contracts, banks which have commitments under our various borrowing arrangements, and reinsurers, may be affected by declining market conditions or credit weaknesses. These parties may default on their obligations to us due to lack of liquidity, downturns in the economy or real estate values, operational failure, bankruptcy or other reasons. Future increasesChanges in interest rates can also affect our debt securities. Future increases could result in increased defaults as borrowers are unable to pay the additional borrowing costs on variable rate securities or obtain refinancing. Conversely, future decreases could result in increased prepayments as borrowers refinance outstanding debt resulting in acceleration of portfolio cash flows and lower investment income. We cannot provide assurance that impairment charges will not be necessary in the future. In addition, evaluation of fixed income securities for credit-related impairment losses includes inherent uncertainty and subjective determinations. We cannot be certain that such impairments are adequate as of any stated date. Our ability to fulfill our debt and other obligations could be adversely affected by the default of third parties on their obligations owed to us.

Deterioration in the global financial markets may adversely affect our investment portfolio and have a related impact on our other comprehensive income, shareholders’ equity and overall investment performance. In response to growing inflation, monetary policies in developed economies tightened in recent years, though easing has begun in the U.S. Despite the easing, financial conditions continue to be tight and remain a challenge to the U.S. economy. Tighter financial conditions pose a challenge to the economy and may increase the likelihood of defaults on our fixed income investments, particularly with respect to non-investment grade debt securities. Also, the effects of geo-political developments and conditions in global financial markets could change rapidly in ways that we cannot anticipate, resulting in additional realized and unrealized losses.

Our investment portfolio and shareholders’ equity can be, and in the past have been, significantly impacted by changes in the market values of our securities. U.S. and global financial markets and economies remain uncertain, particularly in light of monetary tightening, inflationary pressures and potential recessionary impacts on the economy. Market uncertainty could result in unrealized and realized losses in future periods, and adversely affect the liquidity of our investments, which could have a material adverse impact on our results of operations and our financial position. Information with respect to interest rate sensitivity is included in “Quantitative and Qualitative Disclosures” in Management’s Discussion and Analysis. Valuation of financial instruments (i.e., Level 1, 2, or 3) include methodologies, estimates, assumptions and judgments that are inherently subjective and open to different interpretations and could result in changes to investment valuations or the ability to receive such valuations upon sale. During periods of market disruption, it may be difficult to value certain of our securities if trading becomes less frequent and/or market data becomes less observable. In addition, in times of financial market disruption, certain asset classes that were in active markets with significant observable data may become illiquid. In those cases, the valuation process includes inputs that are less observable and require more subjectivity and judgment by management. Changes in these subjective methodologies, estimates, assumptions and judgments used to value our investments could also materially affect the valuation of certain investments.

If, following such declines, we are unable to hold our investment assets until they recover in value, or if such asset value never recovers, we would incur impairment losses that would be recognized as realized losses in our results of operations, reduce net income and earnings per share and adversely affect our liquidity and capital position. Impairment determinations, like valuations, are also subjective, and changes to the methodologies, estimates, assumptions and judgments used to determine impairments may affect the timing and amount of impairment losses recognized in our results of operations. Temporary declines in the market value of our available-for-sale fixed maturities are recorded as unrealized losses, which do not affect net income and earnings per share, but increase accumulated other comprehensive loss or reduce accumulated other comprehensive income, which is reflected on our Consolidated Balance Sheets. We cannot provide assurance that we will not have additional impairment losses and/or unrealized or realized investment losses in the future.

We are exposed to significant capital market risks related to changes in interest rates, credit spreads, equity prices, and real estate market conditions. Significant declines in equity prices and real estate market conditions, changes in interest rates, and changes in credit spreads each could have a material adverse effect on our results, financial position or cash flows. Our exposure to interest rate risk relates primarily to the market price and cash flow variability associated with changes in interest rates. Our investment portfolio contains interest rate sensitive instruments, such as fixed income securities, which may be adversely affected by changes in interest rates from governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. A rise in market yields would reduce the fair value of our investment portfolio, but it provides the opportunity to earn higher rates of return on funds reinvested. A decline in interest rates, on the other hand, would increase the fair value of our investment portfolio, but we would earn lower rates of return on reinvested assets. We may be forced to liquidate investments prior to maturity at a loss in order to cover liabilities, and such liquidation could be accelerated in the event of significant loss events, such as catastrophes. Although we take measures to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate the interest rate risk of our assets relative to our liabilities.

Inflationary pressures may negatively impact expenses, reservesexpenses and the value of investments.reserves.

We are a holding company for a group of insurance companies, and our principal assets are the shares of capital stock of these subsidiaries. Our ability to make required interest payments on our debt, as well as our ability to pay operating expenses and pay dividends to shareholders, depends upon the receipt of sufficient funds from our subsidiaries. The payment of dividends by our insurance company subsidiaries is subject to regulatory restrictions and will depend on the surplus and future earnings of these subsidiaries, as well as these regulatory restrictions.subsidiaries. We are required to notify insurance regulators prior to paying any dividends from our insurance subsidiaries, and pre-approval is required with respect to “extraordinary dividends.”

To the extent that our existing capital is insufficient or unavailable to fund our future operating requirements and/or cover claim losses, we may need to raise additional funds through financings or limit our growth. Portions of our existing debt mature in 2025 through 2027. Any future equity or debt financing, if available, may be on terms that are unfavorable to us. In the case of equity financings, dilution to our shareholders could result and, in any case, such securities may have rights, preferences, and privileges that are senior to our common stock. If we are not able to obtain additional capital as necessary, our business, results of operations and financial condition could be adversely affected.

This document contains certain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may address, among other things, our growth strategy; expected developments in our business, including losses and loss reserves; the impact of our routine reserve reviews; our expectations regarding our investment activities or results; our proposed actions in response to trends in our business; as well as our expectations, intentions and other statements that are not historical facts. Words such as: “believes,” “anticipates,” “expects,” “may,” “projections,” “outlook,” “intends,” “should,” “could,” “will,” “plan,” “goal,” “guidance,” “likely,” “on track to,” “potential,” “continue,” “targeted,” “designed,” “positioned,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. We caution readers that accuracy with respect to forward-looking projections is difficult and subject to risks and uncertainties. Those risks and uncertainties, in some cases, have affected, and in the future could affect, our actual results and could cause our actual results for the remainder of 2026 and beyond to differ materially from historical results and from those expressed in any of our forward-looking statements. We operate in a business environment that is continually changing, and as such, new risk factors may emerge over time. We cannot predict these new risk factors, nor can we assess the impact, if any, that they may have on our business in the future.

changes in regulatory, legislative, economic, market and political conditions, particularly with respect to rates, policy terms and conditions, the use of artificial intelligence (“AI”), and other technologies, privacy and data security, payment flexibility, and regions where we have geographical concentration;

volatile and unpredictable developments, including severe weather (whether arising from changing climate conditions or weather patternspatterns, or otherwise) and other natural physical events, catastrophes, pandemics, civil unrest, war, global conflicts, and terrorist actions, and the uncertainty in estimating the resulting losses;

The following discussion contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may address, among other things, our growth strategy; expected developments in our business, including losses and loss reserves; the impact of our routine reserve reviews; our expectations regarding our investment activities or results; our proposed actions in response to trends in our business; as well as our expectations, intentions and other statements that are not historical facts. Words such as: “believes,” “anticipates,” “expects,” “may,” “projections,” “outlook,” “intends,” “should,” “could,” “will,” “plan,” “goal,” “guidance,” “likely,” “on track to,” “potential,” “continue,” “targeted,” “designed,” “positioned,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. We caution readers that accuracy with respect to forward-looking projections is difficult and subject to risks and uncertainties. Those risks and uncertainties, in some cases, have affected, and in the future could affect, our actual results and could cause our actual results to differ materially from historical results and from those expressed in any of our forward-looking statements. In addition to some of the factors in the discussion below, other important factors that could cause actual results to differ materially from those contained in forward-looking statements, are set forth in “Risk Factors” in Part II – Item 1A of this Quarterly Report on Form 10-Q and in Part I – Item 1A of our 2025 Annual Report on Form 10-K.

During the threesix months ended MarchJune 31,30, 2026, our net income was $186.8$378.4 million, compared to $128.2$285.3 million for the threesix months ended MarchJune 31,30, 2025, an improvement of $58.6$93.1 million. This favorable change was primarily due to higher after-tax operating income.

Operating income before interest expense and income taxes (a non-GAAP financial measure; see also “Results of Operations – Consolidated – Non-GAAP Financial Measures”) was $250.2$502.1 million for the threesix months ended MarchJune 31,30, 2026, compared to $186.4$396.3 million for the threesix months ended MarchJune 31,30, 2025, an improvement of $63.8$105.8 million. This increase was primarily due to improvements in current accident year underwritinglosses, resultsprincipally andin Personal Lines, higher net investment income.income, earned premium growth and lower catastrophe losses.

Pre-tax catastrophe losses were $98.9$190.7 million for the threesix months ended MarchJune 31,30, 2026, compared to $95.6$203.1 million during the same period of 2025, ana increasedecrease of $3.3$12.4 million. The catastrophe losses in the first threesix months of 2026 were primarily due to severe convective storms and severe winter storms across multiple states. Included in pre-tax catastrophe losses were $48.8$61.7 million and $12.0$18.0 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively, of favorable prior year catastrophe reserve development. The favorable development in the first quartersix months of 2026 largely related to 2025 catastrophe events. Net favorable development on prior years’ non-catastrophe loss reserves was $25.0$46.5 million for the threesix months ended MarchJune 31,30, 2026, compared to $20.0$38.2 million for the threesix months ended MarchJune 31,30, 2025, an increase of $5.0$8.3 million.

Net premiums written increased 4.3%5.7% in the first threesix months of 2026, compared to the same period in 2025, primarily due to renewal price increases.increases and, to a lesser extent, an increase in new business volume. Operating income before interest expense and income taxes increased in the first threesix months of 2026, compared to the same period in 2025, primarily due to lowerhigher net investment income, improvements in current accident year losses,underwriting results and lower catastrophe losses and higher net investment income.losses. The competitive nature of the Core Commercial market requires us to be highly disciplined in our underwriting process to ensure that we write business at acceptable margins, and we continue to seek rate increases across many lines of business, as appropriate.

Net premiums written increased 2.3%3.4% in the first threesix months of 2026, compared to the same period in 2025, primarily due to renewalan priceincrease increasesin new business volume and, to a lesser extent, anrenewal increaseprice in new business.increases. Operating income before interest expense and income taxes increased in the first threesix months of 2026 compared to the same period in 2025, primarily due to lower current accident year losses, lower catastrophe losses and higher net investment income. The competitive nature of the Specialty market requires us to be highly disciplined in our underwriting process to ensure that we write business at acceptable margins, and we continue to seek rate increases across many lines of business, as appropriate.

Net premiums written increased 2.7% in the first threesix months of 2026, compared to the same period in 2025, primarily due to higher new business volume.and, to a lesser extent, the impact of renewal price increases. Operating income before interest expense and income taxes decreased slightlyincreased in the first threesix months of 2026, compared to the same period in 2025, primarily due to higherimprovement catastrophe losses, partially offset by lowerin current accident year losses,underwriting results and higher favorable development on prior year reserves and higher net investment income.reserves.

Consolidated net income for the three months ended MarchJune 31,30, 2026 was $186.8$191.6 million, compared to $128.2$157.1 million for the three months ended MarchJune 31,30, 2025, an increase of $58.6$34.5 million. This increase was primarily due to higher after-tax operating income of $46.7 million and, to a lesser extent, a decrease in after-tax net realized investment losses of $11.9$30.5 million. Operating income before interest expense and income taxes was $250.2$251.9 million for the three months ended MarchJune 31,30, 2026, compared to $186.4$209.9 million for the three months ended MarchJune 31,30, 2025, an increase of $63.8$42.0 million. This increase was primarily due to lower catastrophe losses, higher net investment income and improvements in current accident year underwriting results, higherdriven netby investmentPersonal income, and earned premium growth.Lines.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

Operating income before interest expense and income taxes was $250.2$251.9 million for the three months ended MarchJune 31,30, 2026, compared to $186.4$209.9 million for the three months ended MarchJune 31,30, 2025, an improvement of $63.8$42.0 million. This increase was primarily due to lower catastrophe losses, higher net investment income and improvements in current accident year underwriting resultsresults, anddriven higherby netPersonal investment income.Lines.

Net premiums written increased $48.9$73.0 million for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. The increase in net premiums written was due to renewal price increases and an increase in new business volume.volume and the impact of renewal price increases.

Core Commercial net premiums written were $630.4$574.8 million for the three months ended MarchJune 31,30, 2026, compared to $604.6$536.0 million for the three months ended MarchJune 31,30, 2025. The $25.8$38.8 million increase in net premiums written was primarily driven by renewal price increases.increases and, to a lesser extent, an increase in new business volume.

Core Commercial underwriting profit for the three months ended MarchJune 31,30, 2026 was $17.8$23.2 million, compared to an underwriting loss of $20.0$37.2 million for the three months ended MarchJune 31,30, 2025, a favorable changedecrease of $37.8$14.0 million. Catastrophe losses for the three months ended MarchJune 31,30, 2026 were $30.4$26.4 million, compared to $46.0$22.7 million for the three months ended MarchJune 31,30, 2025, aan decreaseincrease of $15.6$3.7 million.

Core Commercial current accident year underwriting profit, excluding catastrophes, was $46.6$49.0 million for the three months ended MarchJune 31,30, 2026, compared to $24.7$56.9 million for the three months ended MarchJune 31,30, 2025. This increase$7.9 million decrease was primarilydue drivento higher current accident year losses in workers’ compensation and commercial multiple peril lines of business, partially offset by lower current accident year large property losses in ourthe commercial multipleautomobile peril line of business.line.

Specialty net premiums written were $366.7$384.4 million for the three months ended MarchJune 31,30, 2026, compared to $358.3$368.2 million for the three months ended MarchJune 31,30, 2025. The $8.4$16.2 million increase in net premiums written was primarily due to renewalan priceincrease increasesin new business volume and, to a lesser extent, anrenewal increaseprice in new business.increases.

Specialty underwriting profit for the three months ended MarchJune 31,30, 2026 was $56.1$42.2 million, compared to $41.2$47.8 million for the three months ended MarchJune 31,30, 2025, ana increasedecrease of $14.9$5.6 million. Catastrophe losses for the three months ended MarchJune 31,30, 2026 were $9.6$10.0 million, compared to $14.7$14.6 million for the three months ended MarchJune 31,30, 2025, a decrease of $5.1$4.6 million. Net favorable development on prior years’ loss reserves for the three months ended March 31, 2026 was $14.2 million, compared to $15.9 million for the three months ended March 31, 2025, a decrease of $1.7 million.

Specialty current accident year underwriting profit, excluding catastrophes, was $51.5$41.4 million for the three months ended MarchJune 31,30, 2026, compared to $40.0$49.9 million for the three months ended MarchJune 31,30, 2025. TheThis $11.5$8.5 million increase in underwriting resultsdecrease was primarily driven by higher current accident year losses in our Marine & Industrial Property division, partially offset by lower current accident year losses in our E&S and Alternative Markets division and marine line, within our Marine and Industrial Property division, and to a lesser extent, earned premium growth.division.

Personal Lines net premiums written were $562.6$697.6 million for the three months ended MarchJune 31,30, 2026, compared to $547.9$679.6 million for the three months ended MarchJune 31,30, 2025. The $14.7$18.0 million increase in net premiums written was primarily due to higher new business volume.and, to a lesser extent, the impact of renewal price increases.

Net premiums written in the personal automobile line of business were $327.2$390.7 million for the three months ended MarchJune 31,30, 2026, compared to $323.8$389.3 million for the three months ended MarchJune 31,30, 2025, an increase of $3.4$1.4 million. Personal automobile PIF decreased by 2.2%1.5% since MarchJune 31,30, 2025. Net premiums written in the homeowners and other lines of business for the three months ended MarchJune 31,30, 2026 were $235.4$306.9 million, compared to $224.1$290.3 million for the three months ended MarchJune 31,30, 2025, an increase of $11.3$16.6 million. Homeowners PIF decreased by 2.2%1.6% since MarchJune 31,30, 2025.

Personal Lines underwriting profit for the three months ended MarchJune 31,30, 2026 was $52.3$69.4 million, compared to $61.7$25.2 million for the three months ended MarchJune 31,30, 2025, aan decrease in underwriting resultsincrease of $9.4$44.2 million. Catastrophe losses for the three months ended MarchJune 31,30, 2026 were $58.9$55.4 million, compared to an unusually low $34.9$70.2 million for the three months ended MarchJune 31,30, 2025, ana increasedecrease of $24.0$14.8 million. Net favorable development on prior years’ loss reserves for the three months ended MarchJune 31,30, 2026 was $9.2$10.1 million, compared to $2.8$2.6 million for the three months ended MarchJune 31,30, 2025, an increase of $6.4$7.5 million.

Personal Lines current accident year underwriting profit, excluding catastrophes, was $102.0$114.7 million for the three months ended MarchJune 31,30, 2026, compared to $93.8$92.8 million for the three months ended MarchJune 31,30, 2025. TheThis $8.2$21.9 million increase in underwriting results was primarily due to lower current accident year losses in our homeowners and other personal lines.lines and, to a lesser extent, our personal automobile line.

We obtained renewal pricing increases of approximately 11% in our homeowners line and approximately 7% in our personal automobile line during the firstsecond quarter of 2026 and believe that our ability to obtain a similar level of pricing increases will continue.2026. Consistent with our expectations, PIF was largelydown unchangedslightly compared to the end of 2025, butand declined as compared to the first threesix months of 2025, driven by lower policies available to renew year over year from prior margin recapture actions taken. Additionally, our Personal Lines net premiums written may be affected by price competition and the regulatory and overall macroeconomic environment. These factors may also affect our ability to maintain and improve underwriting results.

Our Other segment had operating profit of $2.2$1.1 million for the three months ended MarchJune 31,30, 2026, compared to $0.8an operating loss of $2.6 million for the three months ended MarchJune 31,30, 2025, an increase of $1.4$3.7 million, due to higherlower net investment income.expenses.

It is not possible to know whether the factors that affected loss reserves in the first threesix months of 2026 will also occur in future periods. We encourage you to read our 2025 Annual Report on Form 10-K for more information about our reserving process and the judgments, uncertainties and risks associated therewith.

For the threesix months ended MarchJune 31,30, 2026, favorable catastrophe loss development was $48.8$61.7 million, primarily due to lower than expected losses related to several convective storms across multiple states from accident yearsyear 20252025, and to a lesser extent, accident year 2024, includingimpacting lower than expected largeour commercial multiple peril lossesline in Core Commercial and lower than expectedour homeowners severityline in Personal Lines. In 2025, favorable catastrophe development was $12.0$18.0 million, primarily due to lower than expected losses in our commercial multiple peril line related to events from accident years 2021 thoughyear 2023, and to a lesser extent, accident year 2024, including several convective storms across multiple states,states and Winter Storm Elliot.

For the threesix months ended MarchJune 31,30, 2026, net favorable loss and LAE development, excluding catastrophes, was $25.0$46.5 million. Specialty favorable loss and LAE development of $14.2$25.0 million was primarily due to lower than expected losses in our Marine and Industrial Property division, driven by our inland marine coverage, our E&S and Alternative MarketsMarkets, division,Marine and,& toIndustrial aProperty, lesser extent, ourand Surety and Other division.Specialty WithinLines divisions. Personal Lines,Lines favorable loss and LAE development of $19.3 million was primarily due to lower than expected losses ofin $9.2 million were driven primarily byour homeowners property coverages.

For the threesix months ended MarchJune 31,30, 2025, net favorable loss and LAE development, excluding catastrophes, was $20.0$38.2 million. Specialty favorable loss and LAE development of $15.9$28.4 million was primarily due to lower than expected losses in our Marine and Industrial Property division and, to a lesser extent, in our Professional and Executive Lines division.and Marine & Industrial Property divisions. Within CorePersonal Commercial,Lines, lower than expected losses of $5.4 million were driven primarily by homeowners coverages. Core Commercial favorable loss and LAE development of $4.3 million was primarily due to favorable development in ourthe workers’ compensation lineand werecommercial largelymultiple peril lines, partially offset by higherunfavorable than expected lossesdevelopment in ourthe commercial automobile line.

As of MarchJune 31,30, 2026, we had $9.8$11.2 million of net asbestos and environmental reserves, comprised of $8.1$9.5 million of direct reserves and $1.7 million of assumed reinsurance pool reserves. This compares to net reserves of $10.5 million at December 31, 2025, comprised of $8.3 million of direct reserves and $2.2 million of assumed reinsurance pool reserves. These assumed reinsurance pool reserves relate to pools in which we have terminated our participation, however, we continue to be subject to claims related to years in which we were a participant. Results of operations from these pools are included in our Other segment.

Reinsurance recoverables were $2,051.7$2,078.9 million and $2,011.1 million at MarchJune 31,30, 2026 and December 31, 2025, respectively, of which $65.1$83.0 million and $62.6 million, respectively, represent billable recoverables. A reinsurance recoverable is billable after an eligible reinsured claim is paid by an insurer. Billable reinsurance recoverables related to the Michigan Catastrophic Claims Association (the “MCCA”) were $34.4$33.9 million and $30.5 million at MarchJune 31,30, 2026 and December 31, 2025, respectively, and billable non-MCCA reinsurance recoverables totaled $30.7$49.1 million and $32.1 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. Billed balances outstanding greater than 90 days at MarchJune 31,30, 2026 and December 31, 2025 were not material.

The increase in net investment income for the three and six months ended MarchJune 31,30, 2026 was primarily due to the continued investment of operational cashflows,cashflows and the impact of reinvesting at higher interest rates, and higher partnership income. Income from partnerships can vary significantly from period to period based on the performancerates in the underlyingfixed portfolios.maturity portfolio.

Total cash and investments decreased $460.2$337.3 million, or 4.0%,2.9%, for the threesix months ended MarchJune 31,30, 2026 as compared to December 31, 2025. The decrease in total cash and investments was primarily due to the funding of financing activities, including our debt retirement andretirement, common stock repurchases,repurchases and,and the funding of our dividend payments, as well as to a lesser extent, net market value depreciation.depreciation in our fixed maturity portfolio. These decreases were partially offset by the continued investment of cashflows from operations.

The change in net unrealized losses on fixed maturities was primarily driven by higher interest rates and, to a lesser extent, changes in credit spreads.rates.

Based on ratings by the National Association of Insurance Commissioners (“NAIC”), approximately 95% of our fixed maturity portfolio consisted of investment-grade securities at MarchJune 31,30, 2026 and December 31, 2025. The quality of our fixed maturity portfolio remains strong based on ratings, capital structure position, support through guarantees, underlying security, issuer diversification and yield curve position. Our U.S. Treasury and government agencies fixed maturities are directly or indirectly backed by the full faith and credit of the U.S. government. Our municipal bonds include revenue bonds and general obligations of state and local issuers. Corporate fixed maturities include publicly traded and privately placed securities in the industrial, financial, and utility sectors. Residential mortgage-backed securities are structured securities that are collateralized by residential real estate loans and are primarily U.S. agency-backed. Our commercial mortgage-backed securities are structured securities that are collateralized by commercial real estate loans and are well-diversified by geography, property type, expected maturity and vintage year. Our other asset-backed securities are structured securities that are primarily collateralized by consumer and corporate borrowings, including collateralized loan obligations.