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

Factors, such as business revenue, economic conditions, the volatility and strength of the capital markets, inflation and public health emergencies, can affect the business and economic environment. For example, in recent years, the global economic environment was characterized by persistent inflation, rising interest rates, volatility in global financial markets (leading to, among other things, a decline in equity prices), continued supply chain complications, recessionary fears, and geopolitical uncertainty, including theongoing war between Russiawars and Ukrainemilitary conflicts and the war between Israel and Hamas, and these wars’their impacts on global security and markets.

Major slowdowns in the various housing markets we serve, including as a result of changes in prevailing interest rates or U.S. monetary policies that affect interest rates, could adversely impact our ability to generate new business. For example, this may impact the market for new homes or autos, which could adversely impact our personal lines, Clients or the market for small business start-ups, which could adversely impact our commercial lines Clients. Any changes in U.S. trade policy, including new and existing tariffs as well as other trade measures, could result in reduced economic activity, increased costs in operating our business, reduced demand and/or changes in purchasing behaviors for new homes or autos, material changes in the pricing of new homes or autos, limits on trade with the United StatesU.S. or other potentially adverse economic outcomes. Further, such changes in U.S. trade policy could trigger retaliatory actions, including tariffs and other trade measures, by affected countries, resulting in “trade wars,” which could affect the volume of economic activity in the U.S., including demand for our services. We cannot predict the impact of recent developments or future developments, and such existing or future tariffs or other trade measures could have a material adverse effect on our results of operations, financial position and cash flows. Furthermore, during inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense in case we decide to refinance our existing long-term borrowings, or incur any additional indebtedness.

We derive most of our revenue from commissions and fees.fees, Wewhich are based on insurance premiums we do not determine the insurance premiums on which our commissions are generally based.control. Moreover, insurance premiums are cyclical in nature and may vary widely based on market conditions.conditions, Because of market cycles for insurance product pricing, which we cannot predict or control,making our commission revenues and profitability cansubject beto volatilevolatility orand remain depressed for significantprolonged periods of time.depression. These fluctuations are difficult to predict, which limits our ability to accurately forecast revenues and plan for acquisitions, capital expenditures, dividends, and debt repayments. In addition, there have been and may continue to be variousindustry trends in the insurance industry toward alternative insurance markets including, among other considerations, greater levels of self-insurance, captives, rent-a-captives, risk retention groups and non-insurance capital markets-based solutions to traditional insurance.insurance, which may further reduce premium volumes. Any sustained decrease in premium rates or shift away from traditional insurance could adversely affect our business, financial condition, and results of operations.

Because the revenue we earn on the sale of certain insurance products is based on premiums and commission rates set by insurance carriers, any decreases in these premiums or commission rates, or actions by insurance carrierscarriers, including seeking repayment of commissions, could result in revenue decreases or expenses to us.

Insurance carriers or their affiliates may under certain circumstances seek the chargeback or repayment of commissions asif a result of a policypolicies lapse, surrender,are cancellation,surrendered, rescission,cancelled, default,rescinded, defaulted, or upon other specified circumstances.circumstances, Aswhich acould result of the chargeback or required repayment of commissions, we may incurin an expense in aperiods particular period related toafter revenue previouslywas recognized in a prior period and reflected in our financial statements.recognized. Such an expense could have a material adverse effect on our results of operations and financial condition, particularly if the expense is greater than the amount of related revenue retained by us.

The commission rates arerates, set by insurance carriers and are based on the premiums that the insurance carriers charge.charge, Thewhich potentialare forsubject changesto insignificant premium rates is significant,change due to pricing cyclicality in the insurance market.market, competitive pressures, and carriers’ efforts to reduce costs. In addition, the insurance industry has been characterized by periods of intense price competition due to excessive underwriting capacity and periods of favorable premium levels due to shortages of capacity. Furthermore, carriers may reduce commission rates as they outsource premium production to non-affiliated brokers or agents.

CapacityPremium couldand alsocommission bevariability reducedis influenced by insurance carriers failing or withdrawing from writing certain coverages that we offer our Clients. Commission rates and premiums can change based on prevailing legislative, economiceconomic, and competitive factors that affect insurance carriers. These factors, which are not withinbeyond our control, includeincluding thecarrier capacitycapacity, of insurance carriers to place new business, underwriting and non-underwriting profits of insurance carriers,profitability, consumer demand for insurance products, the availability of comparable products from other insurance carriers at a lower costdemand, and the availability of alternative insurance products,products such as government benefitsprograms andor self-insurance products, to consumers.self-insurance. We cannot predict the timing or extent of future changes in commission rates or premiums or the effect any of these changes will have on our business, financial condition and results of operations.

We derive a significant portion of our insurance carrier capacity from a limited number of insurance carriers. If one or more of these insurance carriers terminatedchanges or terminates their arrangement with us, it could result in less favorable arrangements with new insurance carriers and additional expense.

For the yearyears ended December 31, 20242025 and 2023,2024, five insurance carriers accounted for 44.2%40.1% and 43.1%,44.2%, respectively, of our Total Written Premium. For the yearyears ended December 31, 2025 and 2024, The Progressive Corporation accounted for 13% of our total revenues, and for the year ended December 31, 2023, The Progressive Corporation and The Travelers Companies, Inc. accounted for 11% and 10%13% of our total revenues, respectively. Should any of these insurance carriers seek to change or terminate their arrangement with us, we could be forced to move our business to another insurance carrier, which could result in less favorable arrangements and additional expense.

If insurance intermediaries or insurance carriers experience liquidity problems, insolvency or other financial difficulties, or do not timely provide required information or payments to us, we could encounter delays in payments owed to us, the loss of insurance carrier appointments, E&O claims and difficulty collecting receivables owed to us by insurance carriers. These conditions may adversely affect our revenue and make it difficult for us to accurately predict our future results, which could harm our business, financial condition and results of our operations.

Contingent commissions we receive from insurance carriers are less predictable than standard commissions, and any decrease in the amount of these kinds ofcontingent commissions we receive could adversely affect our results of operations.

TypicallyTypically, an average of approximately 3%4% of our total revenue consists of contingent commissions we receive from insurance carriers. Contingent commissions are paid by certain insurance carriers based upon the profitability, volume or growth of the business placed with those insurance carriers during the prior year. If, due to the current economic environment or for any other reason, including weather-related factors, we are unable to meet applicable profitability, volume or growth thresholds, or if one or more insurance carriers increase their estimate of loss reserves (over which we have no control), contingent commissions we receive could be less than anticipated, which could adversely affect our business, financial condition and results of operations.

We have employees and other labor sources and operations in the Philippines, vendors (including third party technology providers) outside of the U.S., and we may in the future expand our operations to other countries. While these arrangements may lower operating costs, they also subjectexpose us to the uncertain political climates,unrest, includingtrade political unrest and uncertainty, and potential disruptions in international trade, economicdisruptions, sanctions, as well as import and /export controls and any amendments to those laws, as well as potentially increasedcontrols, data security and privacy risks and local economic, fluctuations in the value ofrisks, currency andfluctuations, inflation and labor conditions.

Our oversight aimed at ensuring adherence to applicable quality and compliance standards may be more difficult with offshore employees, labor sources, operations or vendorsvendors, located outside of the United States andwhich may both make it more difficult for us to achievehinder our operational objectives and may expose us to additional liability. Countries outside of the United StatesU.S. may be subject to relatively higher degrees of political, financial and social instability and may lack the infrastructure to withstand political unrest or natural disasters. The occurrence of natural disasters, pandemicswhich could disrupt offshore work or politicalforce or economic instability in these countries or regions could interfere with work performed by these labor sources and vendors or could result in our havingus to replace or reduce these labor sourcesvendors or vendors. Our operations or vendors in other countries could potentially shut down suddenly fordue any reason, includingto financial problems or personnel issues. Such disruptions could decrease efficiency, increase our costs, and have an adverse effect on our business and results of operations.

The practice of utilizing labor based in foreign countries has come under increased scrutiny in the United States.U.S.. Governmental authorities could seek to impose financial costs or restrictions on foreign companies providing services to clients or companies in the United States.U.S. Governmental authorities may attempt to prohibit or otherwise discourage us from sourcing services from offshore labor. In addition, insurance carriers may require us to use U.S.-based labor based in the United States for regulatory or other reasons.reasons, Towhich thecould extentincrease that we are required to use labor based in the United States, we may face increased costs as a result of higher-priced U.S.-based labor.costs.

Furthermore, ifa theweakening U.S. dollar were to weaken in relation to the currencies used in these foreign countries, that may alsocould reduce the cost savings achievablefrom through our strategy of contracting outoutsourcing certain services and couldadversely have an adverse effect onaffect our business, financial conditioncondition, and results of operations. OurIn addition, failure to successfullyeffectively manage our international operations and the associatedrelated risks effectively could limit theour future growth of our business.growth.

We are exposed to various risks arising out of natural disasters, including earthquakes, hurricanes, fires, floods, landslides, tornadoes, typhoons, tsunamis, hailstorms, explosions, climate events or weather patterns and pandemic health events, as well as man-made disasters, including acts of terrorism, military actions, security breaches, cyberattacks and other similar incidents, explosions and biological, chemical or radiological events. Climate change may cause more extreme weather conditions such as more intense hurricanes, thunderstorms, tornadoes and snow or ice storms, as well as rising sea levels and increased volatility in seasonal temperatures. The continued threat of terrorism and ongoing military actions may cause significant volatility in global financial markets, and a natural or man-made disaster could trigger an economic downturn in the areas directly or indirectly affected by the disaster. These consequences could, among other impacts, result in a decline in business and increased claims from those areas. They could also result in reduced underwriting capacity of our insurance carriers, making it more difficult for our agents to place business. Disasters also could disrupt public and private infrastructure, including communications and financial services, which could disrupt our normal business operations. Any increases in insurance carrier loss ratios due to natural or man-made disasters could impact our contingent commissions, which are primarily driven by both growth and profitability metrics.

The effects of climate change continue to create an alarming level of concern for the state of the global environment. As a result, the global business community has increased its political and social awareness surrounding the issue. Though the federal government has recently issued policies to reverse climate-related regulatory trends, international, state, and local agencies continue to propose numerous initiatives to supplement the global effort to combat climate change. If new legislation or regulation is enacted, we could incur increased costs and capital expenditures to comply, which may impact our financial condition and operating performance.

In addition, the U.S. Federal Reserve has in the past identified climate change as a systemicpotential risk to the economy.economic stability of the financial system. It also reported that a gradual change in investor sentiment regarding climate risk introduces the possibility of abrupt tipping points or significant swings in sentiment, which could create unpredictable follow-on effects in financial markets,markets. andIf this occurred, not only would we may be negatively impacted by athe general economic decline.decline but a drop in the stock market affecting our stock price could negatively impact our ability to grow through mergers and acquisitions financed using our Class A Common Stock. While the U.S. Federal Reserve withdrew from the Network of Central Banks and Supervisors for Greening the Financial System on January 17, 2025, potentially signaling a reversal of climate change policies, these risks remain and international, state, and local agencies continue to propose numerous initiatives to supplement the global effort to combat climate change.remain.

We are subject to litigation, regulatory investigations and claims arising in the normal course of our business operations. The risks associated with these matters often may be difficult to assess or quantify and the existence and magnitude of potential claims often remain unknown for substantial periods of time. While we have insurance coverage for some of these potential claims, othersWe may face claims that are not be covered by insurance, insurance carriers may disputewhere coverage is disputed, or any ultimatewhere liabilities may exceed ouravailable coverage.limits.

We are subject to laws and regulations, as well as regulatory investigations. The insurance industry has been subject to a significant level of scrutiny by various regulatory bodies, including state attorneys general and insurance departments, concerning certain practices within the insurance industry, as well as those regulating international trade such as economic sanctions, anti-money laundering and counter-terrorism financing. From time-to-time, we receive informational requests from governmental authorities. We have cooperated and will continue to cooperate fully with all governmental agencies.

There have been a number of revisions to existing,existing laws and regulations, or proposals to modify or enact new laws and regulations regarding insurance agents and brokers. These actions have imposed or could impose additional obligations on us with respect to our products sold.we sell. Some insurance carriers have agreed with regulatory authorities to end the payment of contingent commissions on insurance products, which could impact our commissions that are based on the volume, consistency and profitability of business generated by us.

We cannot predict the impact that any new laws, rules or regulations may have on our business and financial results, particularly in light of potential changes implemented by the new Trump administration. Given the current regulatory environment and the number of Branches operating in local markets throughout the country, it is possible that we will become subject to further governmental inquiries and subpoenas and have lawsuits filed against us. Regulators may raise issues during investigations, examinations or audits that could, if determined adversely, have a material impact on us. The interpretations of regulations by regulators may change and statutes may be enacted with retroactive impact. We could also be materially adversely affected by any new industry-wide regulations or practices that may result from these proceedings.

We have significant insurance agency and brokerage operations, and are subject to claims and litigation in the ordinary course of business resulting from alleged and actual errors and omissions in placing insurance and rendering coverage advice. These activities, if any, could involve substantial amounts of money. Since E&O claims against us may allege our liability for all or part of the amounts in question, claimants may seek large damage awards. These claims can involve significant defense costs. Errors and omissions could include failure, whether negligently or intentionally, to place coverage on behalf of Clients, to provide insurance carriers with complete and accurate information relating to the risks being insured, or to appropriately apply funds that we hold in trust. It is not always possible to prevent or detect errors and omissions, and the precautions we take may not be effective in all cases. Given the unpredictability of E&O claims and of litigation that could flow from them, it is possible that an adverse outcome in a particular matter could have a material adverse effect on our results of operations, financial condition or cash flow in a given quarterly or annual period.

The business of providing insurance products and services is highly competitive and we expect competition to intensify. To the extent that the financial services industry experiences further consolidation, we may experience increased competition from insurance carriers and the financial services industry, as a growing number of larger financial institutions increasingly, and aggressively, offer a wider variety of financial services, including insurance intermediary services. We compete for Clients on the basis of reputation, Client service, program and product offerings and our ability to tailor products and services to meet the specific needs of a Client.

In addition, in recent years, private equity sponsors have invested tens of billions of dollars into the insurance sector, transforming existing players and creating new ones to compete with large brokers. These new competitors, alliances among competitors or mergers of competitors could emerge and gain significant market share, and some of our competitors may have or may develop a lower cost structure, adopt more aggressive pricing policies or provide services that gain greater market acceptance than the services that we offer or develop. Competitors may be able to respond to the need for technological changes and innovate faster, or price their services more aggressively. They may also compete for skilled professionals, finance acquisitions, fund internal growth and compete for market share more effectively than we do. To respond to increased competition and pricing pressure, we may have to lower the cost of our services or decrease the level of service provided to Clients, which could have an adverse effect on our business, financial condition and results of operations. In addition, a number of insurance carriers are engaged in the direct sale of insurance, primarily to individuals, and do not pay commissions to brokers or other market intermediaries. Furthermore, we compete with various other companies that provide risk-related services or alternatives to traditional insurance services, including insurtech start-up companies, which are focused on using technology and innovation, including artificial intelligence, digital platforms, data analytics, robotics and blockchain, to simplify and improve the Client experience, increase efficiencies, alter business models and effect other potentially disruptive changes in the industries in which we operate.

UnderwritingOur underwriting management and binding authority aredepend dependent uponon contracts between us and thewith insurance carriers.carriers Thosethat contracts canmay be terminated by the insurance carrier with little advance notice.notice Moreover,or uponallowed expirationto oflapse theat contractexpiration, term, insuranceand carriers may choose those agreementsseek to lapsemodify or request changes in the terms of the program,terms, including the scope of our underwriting authority or thecommission amount of commissions we receive,rates, which could reduce revenues. Termination or changes to these programs could adversely affect our revenuesbusiness, fromoperating theresults, program.and contingent commission opportunities.

In addition, any litigation initiated by competitors, even if without merit, could be costly, time-consuming, divert management’s attention, and negatively impact our financial condition and results of operations. Some of our competitors may be able to sustain the costs of litigation more effectively than we can because they have substantially greater resources. In the event any of such competitors initiate litigation against us, such litigation, even if without merit, could be time-consuming and costly to defend and may divert management’s attention and resources away from our business and adversely affect our business, financial condition and results of operations.

•Climate change regulation in the United States,U.S., individual states, or around the world moving us toward a low-carbon economy, which could create new competitive pressures around innovative insurance solutions; and

We derive a substantial portion of our TWFG MGA business from our relationships with retail insurance brokerage firms. There has been considerable consolidation in the retail insurance brokerage industry, driven primarily by the acquisition of small and mid-size retail insurance brokerage firms by larger brokerage firms, financial institutions or other organizations. We expect this trend to continue. As a result, we may lose all or a substantial portion of the business we obtain from retail insurance brokerage firms that are acquired by other firms who have their own wholesale insurance brokerage operations or established relationships with other wholesale insurance brokerage firms. To date, our business has not been materially affected by consolidation among retail insurance brokers. However, we cannot be assured that we will not be affected by industry consolidation that occurs in the future.

Our failure to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies in the future could reduce our ability to compete successfully and harm our competitive position and results of operations.

Regulations affecting insurance carriers with which we place business may adversely affect how we conduct our operations.

A significant portion of our business is concentrated in Texas, California and Louisiana, representing 52.5%,54.1%, 16.2%15.2% and 13.9%,12.4%, respectively, of our Total Written Premiums in 2024.2025. The insurance business is primarily a state-regulated industry, and therefore, state legislatures may enact laws that adversely affect the insurance industry. BecauseAs our business is concentrated in the states identified above,such, we face greater exposure to unfavorable changes in regulatory conditions in those states than insurance intermediaries whose operations are more diversified through a greater number of states. In addition, the occurrence of adverse economic conditions, natural or other disasters, or other circumstances specific to or otherwise significantly impacting these states could adversely affect our financial condition, results of operations and cash flows. We are susceptible to losses and interruptions caused by hurricanes (particularly in Texas, where our headquarters and several officesBranches are located), earthquakes, power shortages, telecommunications failures, water shortages, floods, fire, extreme weather conditions, geopolitical events such as terrorist acts and other natural or man-made disasters. Our insurance coverage with respect to natural disasters is limited and is subject to deductibles and coverage limits. Such coverage may not be adequate, or may not continue to be available at commercially reasonable rates and terms. For example, recent catastrophes, carrier underwriting losses, and regulatory actions in California may result in a significant decline in the availability of homeowners insurance products and carrier markets.

The industry in which we operate is subject to extensive regulation. We are subject to regulation and supervision both federally and in each applicable local jurisdiction. In general, these regulations are designed to protect Clients, insurance carriers and other parties and to protect the integrity of the financial markets, rather than to protect stockholders or creditors. Our ability to conduct business in these jurisdictions depends on our compliance with the rules and regulations promulgated by federal regulatory bodies and other regulatory authorities. Failure to comply with regulatory requirements, or changes in regulatory requirements or interpretations, could result in actions by regulators, potentially leading to fines and penalties, adverse publicity and damage to our reputation in the marketplace.marketplace There can be no assurance that we will be able to adapt effectively to any changesand, in law. In extreme cases, revocation of our or aour subsidiary’s authority to do business in one or more jurisdictions could result from failure to comply with regulatory requirements.jurisdictions. In addition, we could face lawsuits by Clients, insurance carriers and other parties for alleged violations of certain of these laws and regulations. It is difficult to predict whether changes resulting from new laws and regulations, as well as changes in interpretation of current laws and regulations, will affect the industry or our business and, if so, to what degree.

State insurance laws grant supervisory agencies, including state insurance departments, broad administrative authority.authority State insurance regulators and the National Association of Insurance Commissioners continually review existing laws and regulations, some of which affect our business. These supervisory agenciesto regulate many aspects of the insurance business, including the licensing of insurance brokers and agents and other insurance intermediaries, the handling of third-party funds held in trust, and trade practices, such as marketing, advertising and compensation arrangements entered into by insurance brokers and agents.business. This legal and regulatory oversight could reduce our profitability or limit our growth by increasing the costs of legal and regulatory compliance, and by limiting or restricting the products or services we sell, the markets we serve or enter, the methods by which we sell our products and services, and the form of compensation we can accept from our Clients, insurance carriers and third parties. Moreover, in response to perceived excessive cost or inadequacy of available insurance, states have from time to time created state insurance funds and assigned risk pools, which compete directly, on a subsidized basis, with private insurance providers.

We are subject to taxation at the federal, state and local levels in the United StatesU.S. and the Philippines. Our future effective tax rate and cash flows could be affected by changes in the composition of earnings in jurisdictions with differing tax rates, changes in statutory rates and other legislative changes, changes in the valuation of our deferred tax assets and liabilities, changes in determinations regarding the jurisdictions in which we are subject to tax, and our ability to repatriate earnings from foreign jurisdictions. From time to time, U.S. federal, state and local and foreign governments make substantive changes to tax rules and their application, which could result in materially higher corporate taxes than would be incurred under existing tax law and could adversely affect our financial condition or results of operations. We are subject to ongoing and periodic tax audits and disputes in U.S. federal and various state, local and foreign jurisdictions. An unfavorable outcome from any tax audit could result in higher tax costs, penalties and interest, thereby adversely affecting our financial condition or results of operations. In addition, changes in tax laws in the United StatesU.S. could materially affect the amount of payments that we are obligated to make under the tax receivable agreement we entered into with the Pre-IPO LLC Members in connection with the IPO (the “Tax Receivable Agreement”).

In addition, we are directly and indirectly affected by new tax legislation and regulation and the interpretation of tax laws and regulations worldwide. Changes in such legislation, regulation or interpretation could increase our taxes and have an adverse effect on our operating results and financial condition. For example, the Organization for Economic Co-operation and Development and numerous jurisdictions have had an increased focus on issues concerning the taxation of multinational businesses and several related reforms have been put forth (including the implementation of a global minimum tax rate of at least 15% for large multinational businesses). These rules, should they be implemented via domestic legislation of countries or via international treaties, could have a material impact on our effective tax rate or result in higher cash tax liabilities. These rules, should they be implemented via domestic legislation of countries or via international treaties, could have a material impact on our effective tax rate or result in higher cash tax liabilities. There can be no assurance that our tax payments, tax credits, or incentives will not be adversely affected by these or other initiatives.

Legislation concerning tort reform has been considered, from time-to-time,time to time, in the U.S. Congress and in several state legislatures. Among the provisions considered in such legislation have been limitations on damage awards, including punitive damages, and various restrictions applicable to class action lawsuits. Enactment of these or similar provisions by Congress, or by states in which we sell insurance, could reduce the demand for casualty insurance policies or lead to a decrease in policy limits of such policies sold, thereby reducing our commission revenues.

In the past, state regulators have scrutinized the mannercompensation inpractices whichof insurance brokers are compensated. For example, the Attorney General of the State of New York brought charges against members of the insurance brokerage community.brokers. Given that the insurance brokerage industry has faced scrutiny from regulators in the past over its compensation practices, and the transparency and discourse to Clients regarding brokers’ compensation, it is possible that regulators may choose to revisit the same or other practices in the future. If they do so, compliance with new regulations along with any sanctions that might be imposed for past practices deemed improper could have an adverse impact on our future results of operations and inflict significant reputational harm on our business.

The following discussion provides commentary on the financial results derived from our audited financial statements for the years ended December 31, 2024, 20232025 and 20222024 prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).GAAP. In addition, we regularly review the following non-GAAP measures when assessing performance: Organic Revenue, Organic Revenue Growth, Adjusted Net Income, Adjusted Net Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Diluted Earnings Per Share and Adjusted Free Cash Flow. See “Non-GAAP Financial Measures” for further information. Discussions of fiscal year 2023 items and year-to-year comparisons between fiscal 2024 and fiscal 2023 that are not included in this Form 10-K can be found in “Part II Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which was filed with the SEC on March 27, 2025 and is available on the SEC’s website at www.sec.gov.

We are a leading, high-growth, independent distribution platform for personal and commercial insurance in the United States.U.S. We are pioneers in the insurance industry, developing an agency model built on innovation and experience with what we believe is a more flexible approach than traditional distribution models. Our offerings are fulsome and flexible in that we offer all lines of insurance, multiple distribution contract options, M&A services, proprietary virtual assistants, proprietary technology, proprietary premium financing, unlimited continuing education, recognition programs, co-op funding, marketing support and overall lower costs to operate. Since our founding in 2001 by our Chief Executive Officer, Richard F. (“Gordy”) Bunch III, we have established a track record of creating solutions for independent agents, insurance carriers and our Clients, with sustainable growth regardless of economic and P&C pricing cycles.

TWFG was incorporated on January 8, 2024 for the purpose of completing the Reorganization Transactions that were completed on July 19, 2024. Following aour reorganization into a holding company structure as part of the Reorganization Transactions, TWFGTWFG, Inc. is a holding company and its sole material asset is a controlling ownership interest in TWFG Holding. All of our business is conducted through TWFG Holding and its consolidated subsidiaries, and the financial results of TWFG Holding and its consolidated subsidiaries are included in the consolidated financial statements of TWFG.

Pre-IPO, TWFG Holding wasis treated as a pass-through entity for U.S. federal and certain state income tax purposes and accordingly has not been subject to U.S. federal or applicable state income tax. After the IPO, TWFG Holding continues to be treated as a partnership for U.S. federal and state income tax purposes. Accordingly, because of our ownership of the LLC Units, we are subject to U.S. federal, state and local income taxes with respect to our allocable share of any net taxable income of TWFG Holding and are taxed at the U.S. federal income tax rates applicable to corporations.

Contingent income. We may earn contingent income from insurance carriers. Contingent income is highly variable and based primarily on underwriting results and, to a lesser extent, volume.volume placed with the carrier.

Other income. Other income is comprised primarily of interest income on fiduciary funds, income earned for facilitating premium financing arrangements, fees assessed for agent conventionsconventions, interest income on fiduciary funds, and other miscellaneous income.

Other administrative expenses. Other administrative expenses include technology costs, legal and professional fees, office expenses, marketing expense,expenses, survey expenses and other costs associated with our operations. Fluctuations in other administrative expenses are relative to the overall scale of our business operations.

Depreciation and amortization. Depreciation and amortization are primarily comprised of the amortization of finite-lived intangible assets recognized from our strategic asset acquisitions. As we continue to pursue strategic asset acquisitions, we expect our amortization expensesexpense to increase.

Total revenues for the year ended December 31,202431, 2025 increased by $31.7$44.8 million, or 18.4%,22%, compared to the same period in the prior year. The increase of 18.4% was primarily due to a $37.8 million, or 21% increase in commission income,income representingdriven 77.2%primarily by continued organic business growth and the impact of acquisitions in 2025. Also contributing to the increase in total growth,revenues were $4.4 million, or 50%, increase in contingent income, representing$2.4 14.6%million, ofor the23%, totalincrease growth,in fee income, representingand 7.1%$0.1 ofmillion, theor total9%, growthincrease andin other income, representingcompared 1.1% ofto the totalsame growth.period in the prior year. See discussions below for additional information about the changes in our revenues.

Commission income for the year ended December 31, 20242025 increased by $24.5$37.8 million, or 15.4%,21%, compared to the same period in the prior year. The increase was primarilyyear due to higherthe premiumcontinued rates, neworganic business growth and continuedthe rolloutimpact of commission income from our Book of Business acquisitions completedmade in 2023 into the current period. See “—Key Performance Indicators—Total Written Premium” for additional information related to our written premiums.2025.

Commission income for Insurance Services Corporategrew Branchesby $23.4 million, or 15%, for the year ended December 31, 2025 compared to the same period in the prior year. Insurance Service Agency-in-a-Box commission income for the year ended December 31, 20242025 increased by $26.8$15.3 million, or 402.7%,12%, compared to the same period in the prior year. The increase was primarily driven by thewritten branchpremium conversionsvolume, asmix previouslyin described.line Inof addition,business, Corporateand Branchesacquisitions commission income for year ended December 31, 2024 includedduring the full period increases from the Book of Business acquisitions in 2023, while the same period in the prior year reflected partial period increases.year.

ContingentTWFG MGA commission income for the year ended December 31, 20242025 increased by $4.6$14.4 million, or 113.5%,53%, compared to $8.7 million from $4.1 million in the same period in the prior year. The increase in contingentcommission income was primarily driven by underlying$12.0 carriermillion profitabilitygenerated from the acquisition of TWFG MGA FL while the remaining $2.4 million increase was due to increases in written premium and growthcommission rate increases of The Woodlands Insurance Company compared to the same period in our business. Changes in contingent income are unpredictable and dependent upon the targetprior financial and performance metrics established by the insurance carriers.year.

•Policy fees for the year ended December 31, 20242025 increased by $1.4$0.9 million, or 68.4%,24%, compared to the same period in the prior year. The increase in policy fees was primarily due to higher policy count in our TWFG MGA offering and new business growth through our marketing activities.growth.

•TPABranch fees for the year ended December 31, 20242025 decreasedincreased by $0.1$0.5 million, or 26.4%,11%, compared to the same period in the prior year. The decreaseincrease in TPAbranch fees was primarily duedriven toby aincreased loweragent levelcount of TPA services provided by the Company for the year ended December 31, 2024 compared to the same period in the prior year.business.

Other income for the year ended December 31, 20242025 was $1.3$1.4 million, compared to $1.0$1.3 million in the same period in the prior year,year. reflecting anThe increase was primarily comprised of $0.3interest million,earned oron 36.2%.fiduciary funds and premium financing income.

CommissionTotal commission expense for the year ended December 31, 20242025 increased by $1.2$15.4 million, or 1.1%,13%, compared to the same period in the prior year. The increase was primarily due to anbusiness increasegrowth and overall shift in ourbusiness TWFG MGA offering of $1.5 million, or 1.3%, of the total increase, offset by the lower commission expenses in Insurance Services of $0.3 million, or 0.3%, driven by the previously discussed branch conversions.mix. See commission income discussion above for additional information regarding the driver of change.

Commission expense for total Insurance Services Corporategrew Branchesby $12.8 million, or 13%, for the year ended December 31, 2025 compared to the same period in the prior year. Insurance Services Agency-in-a-Box commission expense for the year ended December 31, 20242025 increased by $3.7$12.0 million, or 481.4%,13%, compared to the same period in the prior year. The increase was primarily due to the branchgrowth conversions,in asbusiness, previouslyconsistent discussed,with commission income and the full year impactabsence of thea Bookone-time favorable adjustment of Business$1.5 acquisitionsmillion in 2023.2024. The expenses of our Branches are primarily commission expense, which is determined as a percentage of commission income.

The following discussion contains commentary on the financial results derived from the unaudited Condensed Consolidated Financial Statements for the three and six months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 of TWFG, Inc.

Fee income. Fee income is comprised primarily of policy fees, branch fees, license fees and third-party administrator (“TPA”) fees. The Company receives policy fees as compensation for administrative services performed in connection with the placement and issuance of certain policies that are in addition to and separate from commissions paid by the insurance carriers. Branch fees include the monthly recurring fees assessed for the ongoing Client service and back-office support provided to independent branches operating exclusively through the Company pursuant to an exclusive Branch agreement and a one-time branch onboarding fee. License fees are usage-based fees assessed by the Company for the use of its proprietary applications. TPA fees are related to services performed based on service agreements with the insurance carriers.

Commission expense. Commission expense is our largest expense, representing the consideration paid to our agents for producing and retaining business. We expect our commission expense to continue to increase corresponding with our expected business growth.

Salaries and employee benefits. Salaries and employee benefits consist of base compensation and any bonuses, equity compensation and benefits paid and payable to employees. We operate in competitive markets and expect to continue to experience a general rise in compensation and benefits expense commensurate with expected growth in headcount, geographic expansion and the creation of new products and services.

Other administrative expenses. Other administrative expenses include technology costs, legal and professional fees, office expenses, marketing expense, survey expenses and other costs associated with our operations. Fluctuations in other administrative expenses are relative to the overall scale of our business operations.

Depreciation and amortization. Depreciation and amortization are primarily comprised of the amortization of intangible assets recognized from our strategic asset acquisitions. As we continue to pursue strategic asset acquisitions, we expect our amortization expenses to increase.

Interest expense. Interest expense consists of interest payable on indebtedness, commitment fees and imputed interest on deferred acquisition payables.

Interest income. Interest income consists of interest earned on the Company’s cash and cash equivalents which are not held in a fiduciary capacity.

Total revenues for the three months ended MarchJune 31,30, 2026 increased by $19.0$27.2 million, or 35.3%,45.1%, compared to the same period in the prior year. The increase was primarily due to a $18.3$26.1 million, or 37.4%,47.8%, increase in commission income mainlywas driven by the acquisition of TWFG MGA FL, LLC,LLC continued(“TWFG organicMGA businessFL”) growthgrowth, new agent onboarding, strategic acquisitions, and corporatehigher storecommission acquisitionsincome completed after March 31, 2025.rates. Also contributing to the increase in total revenues were the $0.3$0.8 million, or 16.4%, increase in contingent income, $0.3 million, or 11.2%,25.1%, increase in fee income, $0.2 million, or 39.6%, increase in other income, and $0.1 million, or 39.3%,6.6%, increase in othercontingent income compared to the same period in the prior year. See discussions below for additional information about the changes in our revenues.

Total commission income for the three months ended MarchJune 31,30, 2026 increased by $18.3$26.1 million, or 37.4%,47.8%, compared to the same period in the prior year,year. mainlyThe increase was primarily driven by growth in written premiums, including contributions from the acquisitionacquisitions of TWFG MGA FL,FL LLC,and the APIA MGA programs, which generate higher commission rates, as well as continued organic businessgrowth. growth and corporateCorporate store acquisitions completed after MarchJune 31,30, 2025.2025 also contributed to the increase.

Commission income for total Insurance Services grewincreased by $5.3$5.8 million, or 12.9%,12.2%, representing 10.6% of the total growth for the three months ended MarchJune 31,30, 2026, compared to the same period in the prior year. Agency-in-a-Box commission income increased by $3.4 million, or 9.4%, for the three months ended June 30, 2026 compared to the same period in the prior year.year Insurancemainly Servicesdue Agency-in-a-Boxto organic growth and acquisitions. Corporate Branches commission income increased by $2.4 million, or 21.2%, for the three months ended MarchJune 31,30, 2026 increased by $2.9 million, or 8.8%, compared to the same period in the prior year. This increase was driven by higher written premium volume through organic growth and mix in line of business over the period. Insurance Services Corporate Branches commission income for the three months ended March 31, 2026 increased by $2.4 million, or 29.5%, compared to the same period in the prior year. The increase was primarily driven by the acquisitions completed after MarchJune 31,30, 2025 and organic growth.2025.

TWFG MGA commission income for the three months ended MarchJune 31,30, 2026 increased by $12.9$20.3 million, or 179.1%,290.2%, representing 37.2% of the total growth, as compared to the same period in the prior year. TheThis increase in TWFG MGA was primarily driven by the acquisitionacquisitions ofand higher commission rates. TWFG MGA FL,FL LLCcontributed completed$16.2 inmillion 2025.of the total increase of $20.3 million.

Contingent income for the three months ended MarchJune 31,30, 2026 was $1.9$2.2 million, reflecting a $0.3$0.1 million, or 16.4%,6.6%, increase compared to the same period in the prior year. The increase in contingent income was primarily due to underlying growth in our business. Contingent income is unpredictable and dependent upon the target financial and performance metrics established by the insurance carriers.

Fee income for the three months ended MarchJune 31,30, 2026 increased by $0.3$0.8 million, or 11.2%,25.1%, compared to the same period in the prior year. Changes to individual components of fee income are discussed in detail below:

•Policy fees for the three months ended MarchJune 31,30, 2026 increased by $0.4$0.6 million, or 33.5%,56.9%, compared to the same period in the prior year. The increase in policy fees was primarily due to higher policy count driven by renewal and new business growth.

•Branch fees for the three months ended MarchJune 31,30, 2026 increased by $0.1 million, or 5.2%,4.8%, compared to the same period in the prior year. The increase in branch fees was primarily driven by increased agent growth.

•License fees for the three months ended MarchJune 31,30, 2026 decreasedincreased by $0.2$0.3 million, or 13.0%,47.0%, compared to the same period in the prior year. The increase reflects system developments to support expanded state footprints.

Other income for the three months ended MarchJune 31,30, 2026 was $0.5 million compared to $0.4 million in the same period in the prior year. The account balanceincrease was primarily comprised of interest earned on fiduciary funds and interest earned on the $10.0 million other investment helddriven by a third party to facilitate premium financing arrangements.income.

Total commission expense for the three months ended MarchJune 31,30, 2026 increased by $5.2$8.3 million, or 16.4%,24.4% compared to the same period in the prior year. The increase was primarily due to the increased business growth andcombined with the overall shift in business mix. See commission income discussion above for additional information regarding the driver of changes.

Commission expense for total Insurance Services grew by $2.8$1.9 million, or 10.4%,6.4%, for the three months ended MarchJune 31,30, 2026 compared to the same period in the prior year. Insurance Services Agency-in-a-Box commission expense increased by $1.9 million, or 6.9%, for the three months ended MarchJune 31,30, 2026 increased by $2.7 million, or 10.3%, compared to the same period in the prior year. The increase was primarily driven by the increase in our business. Corporate Branches commission expense for the three months ended June 30, 2026 was comparable to the same period in the prior year. The expenses of our Corporate Branches are primarily salaries and benefits, and are primarily fixed expenses, which are not directly related to commission income or written premium.

TWFG MGA commission expense for the three months ended MarchJune 31,30, 2026 increased by $2.3$6.4 million, or 49.4%,141.1%, compared to the same period in the prior year. The increase is primarily driven by the acquisitionexpansion of TWFG MGA FL,through LLCacquisitions and overallnew growth.agent onboarding, and shift in business composition.

Salaries and employee benefits for the three months ended MarchJune 31,30, 2026 wasincreased $9.9by $2.3 million, or 24.1%, to $11.8 million compared to $8.2 million in the same period in the prior year,year. reflectingThe aincrease 20.8% total increase,was primarily driven by $1.5$2.3 million in salariesacquisitions, and employeea benefit$0.3 expenses driven by acquisitions,million increase in corporate employee growth of $0.5 million,growth, offset by a decrease of $0.3 million in stock-based compensation.

Other administrative expenses for the three months ended MarchJune 31,30, 2026 wasincreased $7.4by $3.2 million, or 59.0%, to $8.6 million compared to $4.7 million in the same period in the prior year, reflecting an increase of $2.7 million, or 56.4%.year. The increase was primarily due to higher$2.2 expensesmillion drivenin byacquisitions, businessalong growth.with $1.0 million in information technology cost, insurance expense, and other costs associated with the growth of the business.

Depreciation and amortization for the three months ended MarchJune 31,30, 2026 was $6.2$7.1 million compared to $3.4$3.9 million in the same period in the prior year, reflecting an increase of $2.8$3.2 million, or 83.7%.81.1%. The increase was primarily due to the amortization of intangible assets from our recent asset acquisitions.

Interest income for the three months ended MarchJune 31,30, 2026 was $1.2$0.8 million, compared to $1.9$1.8 million infor the same period in the prior year, reflecting a decrease of $0.7 million.year. The decrease wasreflects attributablelower to the decline inaverage cash balances whichfollowing averagedcapital $155.8deployment millioninto overacquisitions theand threeshare months ended March 31, 2026 compared to $208.3 million on hand as of March 31, 2025.repurchases.

Income tax expense for the three months ended MarchJune 31,30, 2026 was $1.1$1.0 million compared to $0.7$0.6 million for the same period in the prior year.