Kingstone Companies, Inc.: Form 10-Q for the period ended Jun 30, 2026

We offer property and casualty insurance products through our wholly-owned subsidiary, Kingstone Insurance Company (“KICO”). KICO is a New York domiciled carrier writing business through retail and wholesale agents and brokers. KICO is actively writing personal lines and commercial auto physical damage insurance in New York, and in 2025 was the 11th largest writer of homeowners insurance in New York. Beginning in June 2026, KICO began writing homeowners coverage in California on a non-admitted basis. KICO is also licensed in the states of New Jersey, Rhode Island, Massachusetts, Connecticut, Pennsylvania, New Hampshire, and Maine. Our wholly-owned subsidiary, Kingstone America Insurance Company ("KAIC"), was licensed to write property and casualty insurance by the state of Connecticut on May 1, 2026. We expect KAIC to begin writing policies in Connecticut in the second half of 2026. For the three months ended June 30, 2026 and 2025, respectively, 98.5% and 97.9% of KICO’s direct premiums written came from the New York policies. For the six months ended June 30, 2026 and 2025, respectively, 98.6% and 98.1% of KICO’s direct premiums written came from the New York policies.

In addition, our wholly-owned subsidiary, Cosi Agency, Inc. (“Cosi”), a multi-state licensed general agency, receives commission revenue from KICO for the policies it places with others and pays commissions to these agencies. In April 2026, Cosi became licensed in California, and we expect to expand our underwriting operations in California during the remainder of 2026 through the policies Cosi writes. Cosi retains the profit between the commission revenue received and the commission expense paid (“Net Cosi Revenue”). Commission expense is reduced by Net Cosi Revenue. Cosi-related operating expenses are primarily employment costs and are included in other operating expenses.

We derive substantially all of our revenue from KICO, which includes revenues from earned premiums, ceding commissions from quota share reinsurance, net investment income generated from its portfolio, and net realized gains and losses on investment securities. All of KICO’s insurance policies are written for a one year term. Earned premiums represent premiums received from insureds, which are recognized as revenue over the period of time that insurance coverage is provided (i.e., ratably over the one year life of the policy). A significant period of time can elapse from the receipt of insurance premiums to the payment of insurance claims. During this time, KICO invests the premiums, earns investment income and generates net realized and unrealized investment gains and losses on investments. Our holding company earns investment income from its cash holdings.

Our expenses include the insurance underwriting expenses of KICO and other operating expenses. Insurance companies incur a significant amount of their total expenses from losses incurred by policyholders, which are referred to as claims. In settling these claims, various loss adjustment expenses (“LAE”) are incurred such as insurance adjusters’ fees and legal expenses. In addition, insurance companies incur policy acquisition costs. Policy acquisition costs include commissions paid to producers, premium taxes, and other expenses related to the underwriting process, including employees’ compensation and benefits.

Other operating expenses include our corporate expenses as a holding company and Cosi expenses. These corporate expenses include legal and auditing fees, executive employment costs and equity compensation, directors' fees, and other costs directly associated with being a public company.

Product Lines

Our product lines include the following:

Personal lines: Our largest line of business is personal lines, consisting of homeowners, dwelling fire, cooperative/condominium, renters, and personal umbrella policies.

Livery physical damage: We write for-hire vehicle physical damage only policies for livery and car service vehicles and taxicabs. These policies insure only the physical damage portion of insurance for such vehicles, with no liability coverage included.

Commercial liability: Through July 2019, we offered businessowners policies, which consist primarily of small business retail, service, and office risks, with limited property exposures. We also wrote artisan’s liability policies for small independent contractors with smaller sized workforces. In addition, we wrote special multi-peril policies for larger and more specialized businessowners risks, including those with limited residential exposures. Further, we offered commercial umbrella policies written above our supporting commercial lines policies.

In May 2019, due to the poor performance of these lines, we placed a moratorium on new commercial lines and new commercial umbrella submissions while we further reviewed this business. In July 2019, due to the continuing poor performance of these lines, we made the decision to no longer underwrite commercial lines or commercial umbrella risks. In-force policies as of July 31, 2019 for these lines were non-renewed at the end of their annual terms. As of June 30, 2026 and December 31, 2025, there were no commercial liability policies in-force. As of June 30, 2026, these expired policies represented approximately 9.3% of loss and LAE reserves net of reinsurance recoverables. See discussion below under “Additional Financial Information”.

Other: We write canine legal liability policies and have a small participation in mandatory state joint underwriting associations.

Key GAAP and Non-GAAP Measures

We utilize the following key GAAP accounting principles generally accepted in the United States and non-GAAP measures in analyzing the results of our insurance underwriting business. See "Non-GAAP Financial Measures" for a reconciliation of the below non-GAAP measures to the most directly comparable GAAP measure:

Direct premiums written, net premiums written: Direct premiums written is a non-GAAP measure, which represent the total premiums charged on policies issued by an insurance company during the respective fiscal period. Net premiums written is a non-GAAP measure, which are direct premiums written less premiums ceded to reinsurers. Net premiums earned, the GAAP measure most comparable to direct premiums written and net premiums written, are net premiums written that are pro-rata earned during the fiscal period presented. All of our policies are written for a twelve-month period. Management uses direct premiums written and net premiums written, along with other measures, to gauge our performance and evaluate results. Direct premiums written and net premiums written are provided as supplemental information, not as a substitute for net premiums earned, and do not reflect the Company’s net premiums earned.

Net loss ratio: The net loss ratio is a GAAP measure of the underwriting profitability of an insurance company’s business. Expressed as a percentage, this is the ratio of net losses and LAE incurred to net premiums earned.

Underlying loss ratio: The underlying loss ratio is a non-GAAP ratio, which is computed as the GAAP net loss ratio excluding the effect of prior year loss reserve development and catastrophes losses. Management believes that this ratio is useful to investors, and it is used by management to reveal the trends in our business that may be obscured by prior year loss reserve development and catastrophe losses. Catastrophe losses cause our loss ratios to vary significantly between periods as a result of their incidence of occurrence and magnitude and can have a significant impact on the net loss ratio. Management believes that this measure is useful for investors to evaluate this component separately when reviewing our underwriting performance. The most directly comparable GAAP measure is the net loss ratio. The underlying loss ratio should not be considered a substitute for the net loss ratio and does not reflect our net loss ratio.

Net loss ratio excluding the effect of catastrophes: The net loss ratio excluding the effect of catastrophes is a non-GAAP ratio, which is computed as the difference between the GAAP net loss ratio and the effect of catastrophes on the net loss ratio. Management believes that this ratio is useful to investors, and it is used by management to reveal the trends in our business that may be obscured by catastrophe losses. Catastrophe losses cause our net loss ratios to vary significantly between periods as a result of their incidence of occurrence and magnitude and can have a significant impact on the net loss ratio. Management believes that this measure is useful for investors to evaluate this component separately when reviewing our underwriting performance. The most directly comparable GAAP measure is the net loss ratio. The net loss ratio excluding the effect of catastrophes should not be considered a substitute for the net loss ratio and does not reflect our net loss ratio.

Net loss ratio excluding commercial lines business: The net loss ratio excluding commercial lines business is a non-GAAP ratio, which is computed as the difference between the GAAP net loss ratio and the effect of commercial lines on the net loss ratio. Management believes that this ratio is useful to investors, and it is used by management to reveal the trends in our business that may be obscured by losses from commercial lines business. Our commercial lines business has been in run-off effective July 2019. Commercial lines losses cause our net loss ratios to vary between periods as a result of changes to their loss reserves during the run-off period and have an impact on the net loss ratio. Management believes that this measure is useful for investors to evaluate this component separately when reviewing our underwriting performance. The most directly comparable GAAP measure is the net loss ratio. The net loss ratio excluding commercial lines business should not be considered a substitute for the net loss ratio and does not reflect our net loss ratio.

Net underwriting expense ratio: The net underwriting expense ratio is a GAAP measure of an insurance company’s operational efficiency in administering its business. Expressed as a percentage, this is the ratio of the sum of acquisition costs (the most significant being commissions paid to our producers) and other underwriting expenses less ceding commission revenue less other income to net premiums earned.

Net underwriting expense ratio excluding the effect of catastrophes: The net underwriting expense ratio excluding the effect of catastrophes is a non-GAAP ratio, which is computed as the difference between the GAAP net underwriting expense ratio and the effect of catastrophes on the net underwriting expense ratio. Management believes that this ratio is useful to investors, and it is used by management to reveal the trends in our business that may be obscured by catastrophe losses. Catastrophe losses cause our net underwriting expense ratios to vary significantly between periods as a result of their incidence of occurrence and magnitude and can have a significant impact on the net underwriting expense ratio. Management believes that this measure is useful for investors to evaluate this component separately when reviewing our underwriting performance. The most directly comparable GAAP measure is the net underwriting expense ratio. The net underwriting expense ratio excluding the effect of catastrophes should not be considered a substitute for the net underwriting expense ratio and does not reflect our net underwriting expense ratio.

Net combined ratio: The net combined ratio is a GAAP measure of an insurance company’s overall underwriting profit. This is the sum of the net loss and net underwriting expense ratios. If the net combined ratio is at or above 100 percent, an insurance company cannot be profitable without investment income, and may not be profitable if investment income is insufficient.

Net combined ratio excluding the effect of catastrophes: The net combined ratio excluding the effect of catastrophes is a non-GAAP ratio, which is computed as the difference between the GAAP combined ratio and the effect of catastrophes on the net combined ratio. Management believes that this ratio is useful to investors, and it is used by management to reveal the trends in our business that may be obscured by catastrophe losses. Catastrophe losses cause our net combined ratios to vary significantly between periods as a result of their incidence of occurrence and magnitude and can have a significant impact on the net combined ratio. Management believes that this measure is useful for investors to evaluate this component separately when reviewing our underwriting performance. The most directly comparable GAAP measure is the net combined ratio. The net combined ratio excluding the effect of catastrophes should not be considered a substitute for the net combined ratio and does not reflect our net combined ratio.

Underwriting income: Underwriting income is net pre-tax income attributable to our insurance underwriting business before investment activity. It excludes net investment income, net realized gains from investments, gain on sale of real estate, depreciation and amortization, and interest expense (net premiums earned less expenses included in combined ratio). Underwriting income is a measure of an insurance company’s overall operating profitability before items such as investment income, depreciation and amortization, interest expense and income taxes.

Net income from insurance underwriting business on a standalone basis: Net income from insurance underwriting business on a standalone basis is a non-GAAP measure, which is computed as GAAP net income without the effect of holding company operations on GAAP net income. Management believes that this measure is useful to investors, and it is used by management to reveal the trends in our insurance underwriting business that may be obscured by holding company operations. Holding company operations cause our GAAP net income to vary significantly between periods as a result of their magnitude and can have a significant impact on GAAP net income. Management believes that this measure is useful for investors to evaluate this component separately when reviewing our underwriting performance. The most directly comparable GAAP measure is GAAP net income. Net income from insurance underwriting business on a standalone basis should not be considered a substitute for GAAP net income and does not reflect our GAAP net income.

Critical Accounting Estimates

Our condensed consolidated financial statements include the accounts of Kingstone Companies, Inc. and all wholly-owned subsidiaries. The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions in certain circumstances that affect amounts reported in our condensed consolidated financial statements and related notes. In preparing these condensed consolidated financial statements, our management has utilized information including our past history, industry standards, and the current economic environment, and other factors, in forming its estimates and judgments of certain amounts included in the condensed consolidated financial statements, giving due consideration to materiality. It is possible that the ultimate outcome as anticipated by our management in formulating its estimates in these financial statements may not materialize.

Application of critical accounting estimates involve the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. In addition, other companies may utilize different estimates, which may impact comparability of our results of operations to those of similar companies.

See below a description of these critical accounting estimates. Also see Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.

Loss and Loss Adjustment Expense Reserves

Property and casualty loss and loss adjustment expense (“LAE”) reserves are established to provide for the estimated cost of settling both reported (“case”) and incurred but not reported (“IBNR”) claims and claims adjusting expenses. The liability for these reserves is estimated on an undiscounted basis, using individual case-basis valuations and paid claims, pending claims, statistical analyses and various actuarial reserving methodologies. Due to the inherent uncertainty of the reserve process, actual loss costs could vary significantly compared to estimated loss costs. The below table provides detail of our reserves as of June 30, 2026 and December 31, 2025:

($ in thousands)

(Components may not sum due to rounding)

Case Reserves – Reserves for reported losses are based on an estimate of ultimate loss costs of an individual claim derived from individual case-basis valuations, actual claims paid, pending claims, statistical analyses and various actuarial reserving methodologies.

IBNR Reserves – IBNR reserves are estimates of claims that have occurred but as to which we have not yet been notified to establish the case reserve. IBNR also accounts for loss development on claims that have been reported. IBNR is determined using historical information aggregated by line of insurance and adjusted to current conditions.

Reinsurance

We purchase reinsurance to manage our underwriting risk on certain policies. Reinsurance receivables represent management’s best estimate of loss and LAE recoverable from reinsurers. Reinsurance receivables are estimated using the same methodologies as loss and LAE reserves. Changes in the methods and assumptions used could result in significant variances between actual and estimated losses.

Deferred Income Taxes

Our effective tax rate is based on GAAP income at statutory tax rates, adjusted for non-taxable and non-deductible items, and tax credits. Changes in estimates used in preparing the condensed consolidated statements of income and comprehensive income could result in significant changes to our deferred tax asset or liability.

Deferred tax assets or liabilities are recognized for estimated future tax consequences which result in differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. These assets and liabilities are carried at the enacted tax rates expected to apply when the asset or liability is expected to be recovered or settled. Changes in estimates and assumptions in the condensed consolidated statements of income and comprehensive income, or changes in the enacted tax rate, could result in significant variances between our carried deferred tax and tax recognized on the recovery or settlement of the asset or liability.

Investments

Bonds are classified as held-to-maturity (“HTM”) or available-for-sale (“AFS”), and stocks are generally classified as AFS. Investments classified as HTM are carried at amortized cost, which requires very little judgement. Investments in stocks classified as AFS are generally carried at fair value with an unrealized gain/loss recorded in net income. Investments in bonds classified as AFS are generally carried at fair value with an unrealized gain/loss recorded in accumulated other comprehensive income. Actual results could vary significantly from the fair values recognized in the condensed consolidated statements of income and comprehensive income.

Policies in Force and Direct Premiums Written

See the tables below for our policies in force as of June 30, 2026 and 2025 and direct written premiums for the six months ended June 30, 2026 and 2025. For the six months ended June 30, 2026, our direct written premiums increased by 19.2% compared to the six months ended June 30, 2025, while policies in force increased by 9.9% as of June 30, 2026 as compared to June 30, 2025.

(000’s except percentages)

1Direct premiums written is a non-GAAP measure defined above under "Key GAAP and Non-GAAP Measures". See "Non-GAAP Financial Measures" below for a reconciliation of direct premiums written to the GAAP measure of net premiums earned.

Change in Market Dynamics (underway), and 5-Year Growth Plan (underway)

• Change in Market Dynamics

We refer to the new business described in the next two paragraphs as a Change in Market Dynamics.

On August 2, 2024, two large competitors announced a plan to wind down their personal lines operations in New York State and to non-renew or mid-term cancel their entire book of business before year end 2024. The policyholders of such competitors needed to find alternative coverage. Beginning in the quarter ended September 30, 2024, we began seeing a sizable increase in our policies in force and direct written premiums from these non-renewed and cancelled policies.

On April 14, 2025, KICO entered into an agreement to offer a quote for a replacement policy to selected homeowners policyholders in Downstate New York as one of our competitors pivoted focus away from admitted personal lines business (the "Withdrawal Plan"). The Withdrawal Plan, which includes this transaction, has been approved by the New York State Department of Financial Services ("DFS"). This competitor wrote approximately $70 million in written premium. The Withdrawal Plan has enabled KICO to work with new distribution partners to further increase its footprint in Downstate New York by offering an alternative policy to selected homeowners policyholders with effective dates that started in late third quarter of 2025. This transaction is being handled in a similar manner to the paragraph above, except that we are streamlining the process by providing a quote for eligible policyholders to our producers.

• 5-Year Growth Plan

In 2025, we announced our 5-year goal of $500 million in direct written premium by 2029 (the "5-Year Growth Plan"), effectively doubling the size of our company relative to such time. We developed a strategic plan that outlines how we will achieve this goal through a combination of organic initiatives and strategic inorganic opportunities in our core state of New York along with measured geographic expansion into new states. We intend to maintain our focus on our core expertise of insuring catastrophe-exposed properties.

Relative to geographic expansion, we have conducted a thorough study of selected geographies and states with the help of industry-leading third-party advisors and overlaid important lessons learned from our past challenges to ensure that we do not face such challenges again. We plan to pursue prudent growth at a measured pace in our chosen new states, testing and validating rate adequacy commensurate with risk factors in the new geographies. Under our current plan we went live in California in June 2026, and expect to go live in Connecticut in the second half of 2026.

Consolidated Results of Operations

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025

The following table summarizes the changes in the results of our operations (in thousands) for the periods indicated:

($ in thousands)

NM = Not Meaningful

(Columns in the table above may not sum to totals due to rounding)

(1) Direct premiums written and net premiums written are non-GAAP measures, defined above under "Key GAAP and Non-GAAP Measures", and reconciled under "Non-GAAP Financial Measures" to the GAAP measure of net premiums earned.

(2) For the six months ended June 30, 2025, our personal lines business was subject to a 16% quota share treaty, expiring on January 1, 2026. Effective January 1, 2026, we entered into a 5% personal lines quota share treaty, under a cutoff basis.

(3) The six months ended June 30, 2026 and 2025 include catastrophe losses, which are defined as losses from an event for which a catastrophe bulletin and related serial number has been issued by the Property Claims Services (PCS) unit of the Insurance Services Office (ISO). PCS catastrophe bulletins are issued for events that cause more than $25 million in total insured losses and affect a significant number of policyholders and insurers.

Direct Premiums Written(1)

Direct premiums written during the six months ended June 30, 2026 (“Six Months of 2026”) were $142,097,000 compared to $119,237,000 during the six months ended June 30, 2025 (“Six Months of 2025”). The increase of $22,860,000, or 19.2%, was primarily due to an increase in premiums from our personal lines business. Direct premiums written from our personal lines business for the Six Months of 2026 were $134,890,000, an increase of $22,822,000, or 20.4%, from $112,068,000 in the Six Months of 2025. The 20.4% increase in premiums from our personal lines business was primarily due to organic growth, an increase in retention, and an increase in average premiums primarily from an increase in replacement costs.

Direct premiums written from our livery physical damage business for the Six Months of 2026 were $7,180,000, an increase of $43,000, or 0.6%, from $7,137,000 in the Six Months of 2025. The increase in direct premiums written for livery physical damage was due to an increase in the values of the autos insured offset by a decrease in policies in force.

(1) Direct premiums written is a non-GAAP measure, defined above under "Key GAAP and Non-GAAP Measures", and reconciled under "Non-GAAP Financial Measures" to the GAAP measure of net premiums earned.

Net Premiums Written(1) and Net Premiums Earned

Net premiums written increased $32,162,000, or 28.4%, to $145,382,000 in the Six Months of 2026 from $113,220,000 in the Six Months of 2025. Net premiums written represent direct premiums written, less the amount of written premiums ceded under our reinsurance treaties (quota share, excess of loss, and catastrophe). The increase in the Six Months of 2026 is primarily due to changes to our personal lines quota share reinsurance treaty resulting in an increase in retention, the additional premiums due to organic growth, and an increase in average premiums primarily from an increase in replacement costs. See quota share reinsurance treaties discussion below.

(1) Net premiums written is a non-GAAP measure, defined above under "Key GAAP and Non-GAAP Measures", and reconciled under "Non-GAAP Financial Measures" to the GAAP measure of net premiums earned.

Quota share reinsurance treaties

Effective January 1, 2025, we entered into a 16% quota share reinsurance treaty for our personal lines business, covering the period from January 1, 2025 through January 1, 2026 (“2025/2026 Treaty”). Upon expiration of the 2025/2026 Treaty on January 1, 2026, we entered into a new 5% quota share reinsurance treaty for our personal lines business written in all states except California (for which we entered into a new 30% quota share reinsurance treaty) covering the period from January 1, 2026 through January 1, 2027 (“2026/2027 Treaty”). Our personal lines business was subject to the 2026/2027 Treaty in the Six Months of 2026, and the 2025/2026

Treaty in the Six Months of 2025. In the Six Months of 2026, our premiums ceded under quota share treaties decreased by $10,743,000 in comparison to premiums ceded under quota share treaties in the Six Months of 2025 (see table above). The decrease in the Six Months of 2026 was attributable to the decrease in the quota share ceding percentage rate, offset by an increase in direct written premiums subject to the 2026/2027 Treaty compared to direct premiums written subject to the 2025/2026 Treaty. The inception of the 2026/2027 Treaty was recorded as a cutoff, resulting in the return of $13,277,000 from reinsurers to us of previously ceded premiums written that were unearned as of January 1, 2026. The inception of the 2025/2026 Treaty was recorded as a cutoff, resulting in the return of $11,471,000 from reinsurers to us of previously ceded premiums written that were unearned as of January 1, 2025.

Excess of loss reinsurance treaties

In the Six Months of 2026, our ceded excess of loss reinsurance premiums increased $351,000 compared to the ceded excess of loss premiums for the Six Months of 2025. Effective January 1, 2025, we renewed an underlying excess of loss reinsurance treaty (the “Underlying XOL Treaty”) covering the period from January 1, 2025 through June 30, 2025. The Underlying XOL Treaty provided 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms were excluded from the Underlying XOL Treaty. Effective July 1, 2025, the Underlying XOL Treaty was renewed along with our excess of loss reinsurance treaty covering the period from July 1, 2025 through June 30, 2026. Combined, the renewed treaties provide 50% reinsurance coverage for losses of $250,000 in excess of $750,000, and 100% reinsurance coverage for losses in excess of $1,000,000 up to $9,000,000 together with facultative coverage. Retention was increased to $825,000 from $715,000 under the 2025/2026 Treaty.

Catastrophe reinsurance treaties

Most of the premiums written under our personal lines policies are also subject to our catastrophe reinsurance treaties. An increase in our personal lines business historically gave rise to more property exposure, which increased our exposure to catastrophe risk; therefore, our premiums ceded under catastrophe treaties would increase. An increase in our personal lines business historically resulted in an increase in premiums ceded under our catastrophe treaties if reinsurance rates were stable or were increasing. With regard to treaties entered into on July 1, 2025 ("2025/2026 Catastrophe Treaty") and 2024 ("2024/2025 Catastrophe Treaty"), we recorded our catastrophe premiums written for the entire treaty period covering July 1 through June 30, resulting in the entire annual premium written being recorded in the third quarter of 2025 and 2024, respectively. The 2025/2026 Catastrophe Treaty covers 80% of losses on the first layer of 5,000,000 in excess of $5,000,000 (catastrophe coverage of $4,000,000), and losses of $440,000,000 in excess of $10,000,000 (catastrophe coverage of $430,000,000), for a total catastrophe coverage of $434,000,000. The 2024/2025 Catastrophe Treaty covered 95% of losses on the first layer of $5,000,000 in excess of $5,000,000 (catastrophe coverage of $4,750,000), and losses of $280,000,000 in excess of $10,000,000 (catastrophe coverage of $270,000,000), for a total catastrophe coverage of $274,750,000. Catastrophe coverage under the 2025/2026 Catastrophe Treaty increased by $159,250,000 compared to the 2024/2025 Catastrophe Treaty. As a result of recording the entire annual catastrophe premiums at the inception of the treaties, catastrophe premiums in subsequent quarters would be due to premium adjustments. In the Six Months of 2026, our premiums ceded under our catastrophe treaties was $684,000 in comparison to negative $406,000 ceded under catastrophe treaties in the Six Months of 2025 (see table above). The premiums in the Six Months of 2026 was due to reinstatement premiums related to winter catastrophe losses, offset by a no loss bonus from one of our reinsurers. The negative premiums in the Six Months of 2025 was due to a no loss bonus from one of our reinsurers.

Net premiums earned

Net premiums earned increased $26,598,000, or 29.6%, to $116,336,000 in the Six Months of 2026 from $89,738,000 in the Six Months of 2025. The increase was due an increase in retention related to the 11 percentage point reduction in quota share rates discussed above, and the increase in premiums from organic growth, partially offset by an increase in catastrophe premiums due to the increase in catastrophe coverage reflected in ceded catastrophe premiums earned.

Ceding Commission Revenue

The following table summarizes the changes in the components of ceding commission revenue (in thousands) for the periods indicated:

($ in thousands)

51

Ceding commission revenue was $2,937,000 in the Six Months of 2026 compared to $6,040,000 in the Six Months of 2025. The decrease of $3,103,000 is explained below in the discussion of provisional ceding commissions earned and contingent ceding commissions earned.

Provisional Ceding Commissions Earned

In the Six Months of 2026, we earned provisional ceding commissions of $2,629,000 from personal lines earned premiums ceded under the 2026/2027 Treaty, and in the Six Months of 2025, we earned provisional ceding commissions of $6,640,000 from personal lines earned premiums ceded under the 2025/2026 Treaty. The decrease of $4,011,000 in provisional ceding commissions earned was due to the decrease in premiums ceded under these treaties during the Six Months of 2026 compared to the Six Months of 2025, offset by an increase in ceding commission rates under the 2026/2027 Treaty.

Contingent Ceding Commissions Earned

Under our 2025/2026 Treaty and prior years’ quota share treaties before July 1, 2017, we received a contingent ceding commission based on a sliding scale of commission rates and ultimate treaty year loss ratio on the policies reinsured under this agreement based upon which contingent ceding commissions are earned. The sliding scale includes minimum and maximum commission rates in relation to specified ultimate loss ratio. The commission rate and contingent ceding commissions earned increase when the estimated ultimate loss ratio decreases and, conversely, the commission rate and contingent ceding commissions earned decrease when the estimated ultimate loss ratio increases. The lower the ceded loss ratio, the more contingent commission we received. The structure of the 2026/2027 Treaty calls for a fixed provisional ceding commission with no opportunity to earn additional contingent ceding commissions.

Net Investment Income

Net investment income was $6,766,000 in the Six Months of 2026 compared to $4,349,000 in the Six Months of 2025, an increase of $2,417,000, or 55.6%, primarily due to an increase in cash generated from operations invested in fixed-income securities and an increase in average yield on non-cash invested assets. The average yield on non-cash invested assets was 4.4% as of June 30, 2026 compared to 4.0% as of June 30, 2025.

Cash and invested assets were $350,981,000 as of June 30, 2026 compared to $273,550,000 as of June 30, 2025, an increase of $77,431,000, primarily driven by cash flows from operations.

Net (Losses) Gains on Investments

Net losses on investments were $775,000 in the Six Months of 2026 compared to net gains on investments of $408,000 in the Six Months of 2025. Unrealized losses on our equity securities and other investments in the Six Months of 2026 were $570,000, compared to unrealized gains on our equity securities and other investments of $414,000 in the Six Months of 2025. Net realized losses on sales of investments were $205,000 in the Six Months of 2026 compared to net realized losses on sales of investments of $6,000 in the Six Months of 2025.

Gain on Sale of Real Estate

Gain on sale of real estate was $0 in the Six Months of 2026 compared to $1,966,000 in the Six Months of 2025. On March 19, 2025 one of our subsidiaries closed on the sale of our headquarters building in Kingston, New York, along with an adjacent mixed-use property (collectively, the “Property”). The purchase price for the Property was $3,600,000. We are now renting a smaller facility in Kingston, New York.

Other Income

Other income was $365,000 in the Six Months of 2026 compared to $292,000 in the Six Months of 2025, an increase of $73,000, or 25.0%.

Net Loss and LAE

Net loss and LAE was $69,505,000 for the Six Months of 2026 compared to $45,102,000 for the Six Months of 2025. The net loss ratio was 59.7% in the Six Months of 2026 compared to 50.3% in the Six Months of 2025, an increase of 9.4 percentage points.

The higher net loss ratio in the Six Months of 2026 is due to a greater impact from catastrophes, in particular several large winter storm catastrophe events from January and February. The largest of these events was an extended period of subfreezing temperatures in early February resulting in a large number of pipe freeze claims. The total net catastrophe impact for the Six Months of 2026 was $14,006,000, which contributed 12.0 points to the net loss ratio. By comparison, the catastrophe impact for the Six Months of 2025 was 1.2 points. Favorable prior year reserve development decreased the net loss ratio by 2.5 points during the Six Months of 2026 as compared to decreasing the net loss ratio by 0.9 points during the Six Months of 2025. For the Six Months of 2026, property claims overall developed better than expected, driven primarily by reserve takedowns on several fire and water damage claims from accident years 2024 and 2025 as well as a large subrogation recovery on a water damage claim from accident year 2023, resulting in favorable development. For the Six Months of 2025, the favorable prior year development was attributable to reserve takedowns on several fire and water damage claims from accident years 2022 through 2024 as well as a large subrogation recovery on a water damage claim from accident year 2022.

The underlying loss ratio(1) (loss ratio excluding the impact of catastrophes and prior year reserve development) was 50.2% for the Six Months of 2026, a small increase of 0.2 points from the 50.0% underlying loss ratio recorded for the Six Months of 2025. The non-catastrophe loss frequency remained low for the Six Months of 2026, with continued discipline in underwriting. Overall personal lines non-catastrophe severity for the Six Months of 2026 was slightly higher than for the Six Months of 2025. The increase was generally in line with inflation and was offset by higher average premium per policy.

(1) Underlying loss ratio is a non-GAAP ratio, which is computed as the GAAP net loss ratio excluding the effect of prior year loss reserve development and catastrophe losses. See "Non-GAAP Financial Measures" for a reconciliation of underlying loss ratio to the GAAP measure of net loss ratio.

See table below under “Additional Financial Information” summarizing net loss ratios by line of business.

Commission Expense

Commission expense was $21,769,000 in the Six Months of 2026 or 15.2% of direct earned premiums. Commission expense was $19,943,000 in the Six Months of 2025 or 16.1% of direct earned premiums The increase of $1,826,000 in the Six Months of 2026 compared to the Six Months of 2025 was primarily due to an increase in direct earned premiums of $19,822,000, partially offset by a decrease of $725,000 for an accrual of estimated contingent commission based on the profitability of the business.

Other Underwriting Expenses

Other underwriting expenses were $17,016,000 in the Six Months of 2026 compared to $15,133,000 in the Six Months of 2025. The increase of $1,883,000, or 12.4%, was primarily due to increases in salaries and employment costs as described below, an increase in premium taxes due to the growth in direct earned premiums, and an increase in DFS regulatory fees.

Our largest single component of other underwriting expenses is salaries and employment costs, with costs of $8,153,000 in the Six Months of 2026 compared to $7,432,000 in the Six Months of 2025. Salaries and employment costs were 7.0 points of the net underwriting expense ratio in the Six Months of 2026, a reduction of 1.3 points from 8.3 points in the Six Months of 2025 primarily due to the economies of scale with the increase in net premiums earned. The dollar increase in salaries and employment costs was due to annual salary increases, and strengthening of our professional team by investing in hiring talent with insurance industry experience due to the growth in premiums written and anticipated new business in accordance with our 5-Year Growth Plan.

Our net underwriting expense ratio in the Six Months of 2026 was 30.5%, compared with 32.0% in the Six Months of 2025. The following table shows the individual components of our net underwriting expense ratio for the periods indicated:

(Components may not sum to totals due to rounding)

Other Operating Expenses

Other operating expenses were $3,623,000 for the Six Months of 2026 compared to $2,189,000 for the Six Months of 2025. The following table shows a breakdown of the significant components of other operating expenses for the periods indicated:

($ in thousands)

NM=Not Meaningful

(Components may not sum to totals due to rounding)

The increase in the Six Months of 2026 of $1,434,000, or 65.5%, as compared to the Six Months of 2025 was primarily due to an increase in equity compensation and professional fees, partially offset by a decrease in loss on extinguishment of debt. The increase in equity compensation is due to additional restricted stock awards granted to our senior leadership team as of December 31, 2025 pursuant to our employee bonus plan, and to our CEO and CFO pursuant to their respective employment agreements. The increase in professional fees is due to legal fees incurred related to board level projects and additional accounting expenses incurred related to our new requirement for the audit of our internal control over financial reporting. The reduction in loss on extinguishment of debt loss is due to writing off the balance of unamortized debt issue costs upon the prepayment of the 2024 Notes in the Six Months of 2025 as disclosed in Note 7 to the condensed consolidated financial statements.

Depreciation and amortization was $1,477,000 in the Six Months of 2026 compared to $1,237,000 in the Six Months of 2025. The increase of $240,000, or 19.4%, in depreciation and amortization was primarily due to the difference between additional depreciation on software acquired compared to software being fully depreciated.

Interest Expense

Interest expense in the Six Months of 2026 was $129,000 compared to $305,000 in the Six Months of 2025, a decrease of $176,000 or 57.7%. In the Six Months of 2025, as disclosed in Note 7 to the condensed consolidated financial statements, we incurred interest expense in connection with the 2024 Notes which were paid off in the first quarter of 2025. In addition, we also incurred interest expense on the 2022 equipment financing.

Income Tax Expense

Income tax expense in the Six Months of 2026 was $2,449,000, which resulted in an effective tax rate of 20.2%. Income tax expense in the Six Months of 2025 was $3,750,000, which resulted in an effective tax rate of 19.9%. The difference in effective tax rate is due to the effect of permanent differences in the Six Months of 2026 compared to the Six Months of 2025. In the Six Months of 2026, the vesting of restricted stock awards and exercise of stock options resulted in an income tax benefit, due to the increase in the stock price on the vesting date and exercise date as compared to the grant date, which had the effect of reducing the effective tax rate. In the Six Months of 2025, the vesting of restricted stock awards and exercise of stock options resulted in an income tax benefit, due to the increase in the stock price on the vesting date and exercise date as compared to the grant date, which had the effect of reducing the effective tax rate. In the Six Months of 2026, the increase in stock price was not as great as the increase in the Six Months of 2025 on the vesting of restricted stock awards, resulting in a lower tax benefit, which had the effect of increasing the effective tax rate when compared to the prior year.

Net Income

Net income was $9,662,000 in the Six Months of 2026 compared to net income of $15,135,000 in the Six Months of 2025. The decrease in net income of $5,473,000 was due to the items described above.

Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025

The following table summarizes the changes in the results of our operations (in thousands) for the periods indicated:

($ in thousands)

NM = Not Meaningful

(Columns in the table above may not sum to totals due to rounding)

(1) Direct written premiums and net premiums written are non-GAAP measures, defined above under "Key GAAP and Non-GAAP Measures", and reconciled under "Non-GAAP Financial Measures" to the GAAP measure of net premiums earned.

(2) For the three months ended June 30, 2025, our personal lines business was subject to a 16% quota share treaty, expiring on January 1, 2026. Effective January 1, 2026, we entered into a 5% personal lines quota share treaty, under a cutoff basis.

(3) The three months ended June 30, 2026 and 2025 include catastrophe losses, which are defined as losses from an event for which a catastrophe bulletin and related serial number has been issued by the Property Claims Services (PCS) unit of the Insurance Services Office (ISO). PCS catastrophe bulletins are issued for events that cause more than $25 million in total insured losses and affect a significant number of policyholders and insurers.

Direct Premiums Written(1)

Direct premiums written during the three months ended June 30, 2026 (“Three Months of 2026”) were $72,494,000 compared to $61,062,000 during the three months ended June 30, 2025 (“Three Months of 2025”). The increase of $11,432,000, or 18.7%, was primarily due to an increase in premiums from our personal lines business. Direct premiums written from our personal lines business for Three Months of 2026 were $68,965,000, an increase of $11,209,000, or 19.4%, from $57,756,000 in Three Months of 2025. The 19.4% increase in premiums from our personal lines business was primarily due to organic growth, an increase in retention, and an increase in average premiums primarily from an increase in replacement costs.

Direct premiums written from our livery physical damage business for Three Months of 2026 were $3,518,000, an increase of $228,000, or 6.9%, from $3,290,000 in Three Months of 2025. The increase in livery physical damage direct premiums written was due to an increase in the values of the autos insured offset by a decrease in policies in force.

(1) Direct premiums written is a non-GAAP measure, defined above under "Key GAAP and Non-GAAP Measures", and reconciled under "Non-GAAP Financial Measures" to the GAAP measure of net premiums earned.

Net Premiums Written(1)

Net premiums written increased $15,578,000, or 29.8%, to $67,789,000 in Three Months of 2026 from $52,211,000 in Three Months of 2025. Net written premiums represent direct premiums written, less the amount of written premiums ceded under our reinsurance treaties (quota share, excess of loss, and catastrophe). The increase in Three Months of 2026 is primarily due to changes to our personal lines quota share reinsurance treaty resulting in an increase in retention, the additional premiums due to organic growth, and an increase in average premiums, primarily from an increase in replacement costs, See quota share reinsurance treaties discussion below.

Quota share reinsurance treaties

Effective January 1, 2025, we entered into a 16% quota share reinsurance treaty for our personal lines business, covering the period from January 1, 2025 through January 1, 2026 (“2025/2026 Treaty”). Upon expiration of the 2025/2026 Treaty on January 1, 2026, we entered into a new 5% quota share reinsurance treaty for our personal lines business written in all states except California (for which we entered into a new 30% quota share reinsurance treaty) covering the period from January 1, 2026 through January 1, 2027 (“2026/2027 Treaty”). Our personal lines business was subject to the 2026/2027 Treaty in the Three Months of 2026, and the 2025/2026 Treaty in the Three Months of 2025. In the Three Months of 2026, our premiums ceded under quota share treaties decreased by $4,609,000 in comparison to premiums ceded under quota share treaties in the Three Months of 2025 (see table above). The decrease in the Three Months of 2026 was attributable to the decrease in the quota share ceding percentage rate, offset by an increase in direct written premiums subject to the 2026/2027 Treaty compared to direct premiums written subject to the 2025/2026 Treaty.

Excess of loss reinsurance treaties

In the Three Months of 2026, our ceded excess of loss reinsurance premiums increased $138,000 compared to the ceded excess of loss premiums for Three Months 2025. Effective January 1, 2025, we renewed an underlying excess of loss reinsurance treaty (the “Underlying XOL Treaty”) covering the period from January 1, 2025 through June 30, 2025. The Underlying XOL Treaty provided 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms were excluded from the Underlying XOL Treaty. Effective July 1, 2025, the Underlying XOL Treaty was renewed along with our excess of loss reinsurance treaty covering the period from July 1, 2025 through June 30, 2026. Combined, the renewed treaties provide 50% reinsurance coverage for losses of $250,000 in excess of $750,000, and 100% reinsurance coverage for losses in excess of $1,000,000 up to $9,000,000 together with facultative coverage. Retention was increased to $825,000 from $715,000 under the 2025/2026 Treaty.

Catastrophe reinsurance treaties

Most of the premiums written under our personal lines policies are also subject to our catastrophe reinsurance treaties. An increase in our personal lines business historically gave rise to more property exposure, which increased our exposure to catastrophe risk; therefore, our premiums ceded under catastrophe treaties would increase. An increase in our personal lines business historically resulted in an increase in premiums ceded under our catastrophe treaties if reinsurance rates were stable or were increasing. With regard to treaties entered into on July 1, 2025 ("2025/2026 Catastrophe Treaty") and 2024 ("2024/2025 Catastrophe Treaty"), we recorded our catastrophe premiums written for the entire treaty period covering July 1 through June 30, resulting in the entire annual premium written being recorded in the third quarter of 2025 and 2024, respectively. The 2025/2026 Catastrophe Treaty covers 80% of losses on the first layer of 5,000,000 in excess of $5,000,000 (catastrophe coverage of $4,000,000), and losses of $440,000,000 in excess of $10,000,000 (catastrophe coverage of $430,000,000), for a total catastrophe coverage of $434,000,000. The 2024/2025 Catastrophe Treaty covered 95% of losses on the first layer of $5,000,000 in excess of $5,000,000 (catastrophe coverage of $4,750,000), and losses of $280,000,000 in excess of $10,000,000 (catastrophe coverage of $270,000,000), for a total catastrophe coverage of $274,750,000. Catastrophe coverage under the 2025/2026 Catastrophe Treaty increased by $159,250,000 compared to the 2024/2025 Catastrophe Treaty. As a result of recording the entire annual catastrophe premiums at the inception of the treaties, catastrophe premiums in subsequent quarters would be due to premium adjustments. In the Three Months of 2026, our premiums ceded under our catastrophe treaties was negative $80,000 in comparison to negative $406,000 ceded under catastrophe treaties in the Three Months of 2025 (see table above). The negative premiums in the Three Months of 2026 was due to reinstatement premiums related to winter catastrophe losses. The negative premiums in the Three Months of 2025 was due to a no loss bonus from one of our reinsurers.

Net premiums earned

Net premiums earned increased $14,252,000, or 30.8%, to $60,467,000 in Three Months of 2026 from $46,215,000 in Three Months of 2025. The increase was due to an increase in retention related to the 11 percentage point reduction in quota share rates discussed above, and the increase in premiums from organic growth, partially offset by an increase in catastrophe premiums due to the increase in catastrophe coverage reflected in ceded catastrophe premiums earned.

(1) Net premiums written is a non-GAAP measure, defined above under "Key GAAP and Non-GAAP Measures", and reconciled under "Non-GAAP Financial Measures" to the GAAP measure of net premiums earned.

Ceding Commission Revenue

The following table summarizes the changes in the components of ceding commission revenue (in thousands) for the periods indicated:

($ in thousands)

Ceding commission revenue was $1,533,000 in Three Months of 2026 compared to $3,081,000 in Three Months of 2025. The decrease of $1,548,000 is explained below in the discussion of provisional ceding commissions earned and contingent ceding commissions earned.

Provisional Ceding Commissions Earned

In Three Months of 2026, we earned provisional ceding commissions of $1,352,000 from personal lines earned premiums ceded under the 2026/2027 Treaty, and in Three Months of 2025, we earned provisional ceding commissions of $3,388,000 from personal lines earned premiums ceded under the 2025/2026 Treaty. The decrease of $2,036,000 in provisional ceding commissions earned was due to the decrease in premiums ceded under these treaties during the Three Months of 2026 compared to the Three Months of 2025, offset by an increase in ceding commission rates under the 2026/2027 Treaty.

Contingent Ceding Commissions Earned

Under our 2025/2026 Treaty and prior years’ quota share treaties before July 1, 2017, we received a contingent ceding commission based on a sliding scale of commission rates and ultimate treaty year loss ratio on the policies reinsured under this agreement based upon which contingent ceding commissions are earned. The sliding scale includes minimum and maximum commission rates in relation to specified ultimate loss ratio. The commission rate and contingent ceding commissions earned increase when the estimated ultimate loss ratio decreases and, conversely, the commission rate and contingent ceding commissions earned decrease when the estimated ultimate loss ratio increases. The lower the ceded loss ratio, the more contingent commission we received. The structure of the 2026/2027 Treaty calls for a fixed provisional ceding commission with no opportunity to earn additional contingent ceding commissions.

Net Investment Income

Net investment income was $3,429,000 in the Three Months of 2026 compared to $2,300,000 in the Three Months of 2025, an increase of $1,129,000, or 49.1%, primarily due to an increase in invested assets and average yield on non-cash invested assets. The average yield on non-cash invested assets was 4.4% as of June 30, 2026 compared to 4.0% as of June 30, 2025.

Cash and invested assets were $350,981,000 as of June 30, 2026 compared to $273,550,000 as of June 30, 2025, an increase of $77,431,000 primarily driven by cash flows from operations.

Net Gains on Investments

Net gains on investments were $240,000 in the Three Months of 2026 compared to net gains of $546,000 in the Three Months of 2025. Unrealized gains on our equity securities and other investments in the Three Months of 2026 were $443,000, compared to unrealized gains of $551,000 in the Three Months of 2025. Net realized losses on sales of investments were $202,000 in the Three Months of 2026 compared to net realized losses of $4,000 in the Three Months of 2025.

Other Income

Other income was $184,000 in the Three Months of 2026 compared to $151,000 in the Three Months of 2025, an increase of $33,000, or 21.9%.

Net Loss and LAE

Net loss and LAE was $23,930,000 for the Three Months of 2026 compared to $17,927,000 for the Three Months of 2025. The net loss ratio was 39.6% in the Three Months of 2026 compared to 38.8% in the Three Months 2025, an increase of 0.8 percentage points.

The net loss ratio for the Three Months of 2026 was higher than for the Three Months 2025 primarily driven by an increase in the frequency and severity of non-catastrophe losses, partially offset by an increase in favorable prior year reserve development and lower catastrophe losses.

For the Three Months of 2026, the underlying loss ratio (loss ratio excluding the impact of catastrophes and prior year development) was higher than for the Three Months of 2025. The underlying loss ratio(1) was 43.1% for the Three Months of 2026, an increase of 4.4 points from the 38.7% for the Three Months of 2025. Overall personal lines non-catastrophe severity for the Three Months of 2026 was higher than for the Three Months of 2025, but the increase was partially offset by higher average premium. Overall personal lines non-catastrophe frequency for the Three Months of 2026 was higher than the same period in 2025 but lower than the long-term average.

There were four newly designated catastrophe events for the Three Months of 2026, none of which had a significant impact on the net loss ratio, and development on events from first quarter of 2026 was favorable. The estimated total net catastrophe impact for the Three Months of 2026 was $(493,000), which contributed -0.8 points to the net loss ratio. By comparison, the impact to the net loss ratio from catastrophes for the Three Months of 2025 was 0.6 points.

There was favorable prior year development of $1,636,000 for the Three Months of 2026, a decrease of 2.7 points on the net loss ratio. By comparison, the impact of favorable prior year development for the Three Months of 2025 was a decrease of 0.5 points to the net loss ratio. For the Three Months of 2026, property claims overall developed better than expected, driven primarily by reserve takedowns on fire and water damage claims from accident year 2025, resulting in favorable development. For the Three Months of 2025, the favorable development was attributable to reserve decreases on fire and water damage claims from accident years 2023 and 2024 as well as a large subrogation recovery on a water damage claim from accident year 2022.

(1) Underlying loss ratio is a non-GAAP ratio, which is computed as the GAAP net loss ratio excluding the effect of prior year loss reserve development and catastrophe losses. See "Non-GAAP Financial Measures" for a reconciliation of underlying loss ratio to the GAAP measure of net loss ratio.

See table below under “Additional Financial Information” summarizing net loss ratios by line of business.

Commission Expense

Commission expense was $11,573,000 in the Three Months of 2026 or 15.7% of direct earned premiums. Commission expense was $10,630,000 in the Three Months 2025 or 16.9% of direct earned premiums. The increase of $943,000 was primarily due to an increase in direct earned premiums of $10,478,000, offset by a decrease of $470,000 in the Three Months of 2026 compared to the Three Months of 2025 for an accrual of estimated contingent commission based on the profitability of the business.

Other Underwriting Expenses

Other underwriting expenses were $8,655,000, or 11.8% of direct earned premiums, in the Three Months of 2026 compared to $7,727,000, or 12.3% of direct earned premiums, in the Three Months of 2025. The increase of $928,000, or 12.0%, was primarily due to increases in salaries and employment costs as described below, an increase in underwriting fees due to growth and an increase in premium taxes due to the increase in direct earned premiums, and an increase in DFS regulatory fees.

Our largest single component of other underwriting expenses is salaries and employment costs, with costs of $4,288,000 in the Three Months of 2026 compared to $4,081,000 in the Three Months of 2025. Salaries and employment costs were 7.1 points of the net underwriting expense ratio in the Three Months of 2026, a reduction of 1.7 points from 8.8 points in the Three Months of 2025 primarily due to the economies of scale with the increase in net premiums earned. The dollar increase in salaries and employment costs was due to annual salary increases, and strengthening of our professional team by investing in hiring talent with insurance industry experience due to the growth in premiums written and anticipated new business in accordance with our 5-Year Growth Plan.

Our net underwriting expense ratio in the Three Months of 2026 was 30.6% compared to 32.7% in the Three Months of 2025. The following table shows the individual components of our net underwriting expense ratio for the periods indicated:

(Components may not sum to totals due to rounding)

Other Operating Expenses

Other operating expenses were $1,362,000 for the Three Months of 2026 compared to $1,153,000 for the Three Months of 2025. The following table shows a breakdown of the significant components of other operating expenses for the periods indicated:

($ in thousands)

(Components may not sum to totals due to rounding)

The increase in the Three Months of 2026 of $209,000, or 18.1%, as compared to the Three Months of 2025 was primarily due to an increase in equity compensation and professional fees. The increase in equity compensation is due to additional restricted stock awards granted to our senior leadership team as of December 31, 2025 pursuant to our employee bonus plan, and to our CEO and CFO pursuant to their respective employment agreements. The increase in professional fees is due to legal fees incurred related to board level projects and additional accounting expenses incurred related to our new requirement for the audit of our internal control over financial reporting.

Depreciation and Amortization

Depreciation and amortization was $761,000 in the Three Months of 2026 compared to $613,000 in the Three Months of 2025. The increase of $148,000, or 24.1%, in depreciation and amortization was primarily due to the difference between additional depreciation on software acquired compared to software being fully depreciated.

Interest Expense

Interest expense in the Three Months of 2026 was $59,000 compared to $77,000 in the Three Months of 2025, a decrease of $18,000 or 23.4%. We incurred interest expense on the 2022 equipment financing.

Income Tax Expense

Income tax expense in the Three Months of 2026 was $4,042,000, which resulted in an effective tax rate of 20.7%. Income tax expense in the Three Months of 2025 was $2,914,000, which resulted in an effective tax rate of 20.6%. The difference in effective tax rate is due to the effect of permanent differences in the Three Months of 2026 compared to the Three Months of 2025.

Net Income

Net income was $15,470,000 in the Three Months of 2026 compared to net income of $11,252,000 in the Three Months of 2025. The increase in net income of $4,218,000 was due to the circumstances described above.

Additional Financial Information

We operate our business as one segment, property and casualty insurance. Within this segment, we offer an array of property and casualty policies through our producers. The following table summarizes gross and net written premiums, net premiums earned, and net loss and loss adjustment expenses by major product type, which were determined based primarily on similar economic characteristics and risks of loss.

(1) Direct premiums written and net premiums written are non-GAAP measures, defined above under "Key GAAP and Non-GAAP Measures". See "Non-GAAP Financial Measures" below for a reconciliation of direct premiums written and net premiums written to the GAAP measure of net premiums earned.

(2) “Other” includes, among other things, premiums and loss and loss adjustment expenses from our participation in a mandatory state joint underwriting association and loss and loss adjustment expenses from commercial auto.

(3) In July 2019, we decided that we will no longer underwrite commercial liability risks. See discussions above regarding the discontinuation of this line of business.

(4) See discussion above with regard to “Net Loss and LAE”, as to catastrophe losses in the three months and six months ended June 30, 2026 and 2025.

Insurance Underwriting Business on a Standalone Basis(1)

Our insurance underwriting business reported on a standalone basis(1) for the periods indicated is as follows:

(1) Net income from insurance underwriting business on a standalone basis is a non-GAAP measure, which is computed as GAAP net income without the effect of holding company operations on GAAP net income. See "Non-GAAP Financial Measures" for a reconciliation of net income from insurance underwriting business on a standalone basis to the GAAP measure of net income.

An analysis of our direct, assumed and ceded earned premiums, loss and loss adjustment expenses, and loss ratios is shown below:

(Percent components may not sum to totals due to rounding)

The key measures for our insurance underwriting business for the periods indicated are as follows:

(1) For the three months ended June 30, 2026 and 2025, gives effect to the sum of net catastrophe losses and loss adjustment expenses of $(492,670) and $288,688, respectively. For the six months ended June 30, 2026 and 2025, gives effect to the sum of net catastrophe losses and loss adjustment expenses of $14,005,979 and $1,038,885, respectively.

(2) Net loss ratio excluding the effect of catastrophes is a non-GAAP ratio, which is computed as the difference between the GAAP net loss ratio and the effect of catastrophes on the net loss ratio. See "Non-GAAP Financial Measures" for a reconciliation of net loss ratio excluding the effect of catastrophes to the GAAP measure of net loss ratio. Net underwriting expense ratio excluding the effect of catastrophes is also a non-GAAP ratio, which is computed as the difference between the GAAP net underwriting expense ratio and the effect of catastrophes on the net underwriting expense ratio. See "Non-GAAP Financial Measures" for a reconciliation of net underwriting expense ratio excluding the effect of catastrophes to the GAAP measure of net underwriting expense ratio. Net combined ratio excluding the effect of catastrophes is also a non-GAAP ratio, which is computed as the difference between the GAAP net combined ratio and the effect of catastrophes on the net combined ratio. See "Non-GAAP Financial Measures" for a reconciliation of net combined ratio excluding the effect of catastrophes to the GAAP measure of net combined ratio.

Investments

Portfolio Summary

Fixed-Maturity Securities

The following table presents a breakdown of the amortized cost, estimated fair value, and gross unrealized gains and losses of our investments in fixed-maturity securities classified as available-for-sale for which an allowance for credit loss has not been recorded, as of June 30, 2026 and December 31, 2025:

(1) In October 2022, KICO placed certain U.S. Treasury securities to fulfill the required collateral for a sale leaseback transaction in a designated custodian account (see Note 7 – Debt - “Equipment Financing”). As of December 31, 2024, KICO had sold its U.S. Treasury securities and replaced a portion of its other fixed-maturity securities in the designated custodian account. As of June 30, 2026 and December 31, 2025, the amount of required collateral was approximately $2,770,000 and $3,616,000, respectively. As of June 30, 2026 and December 31, 2025, the estimated fair value of the eligible collateral was approximately $2,770,000 and $3,616,000, respectively.

(2) KICO has placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its membership in the Federal Home Loan Bank of New York ("FHLBNY") (see Note 7 – Debt – “Federal Home Loan Bank”). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line. As of June 30, 2026, the estimated fair value of the eligible investments was approximately $9,117,000. KICO will retain all rights regarding all securities if pledged as collateral. As of June 30, 2026 and December 31, 2025 there was no outstanding balance on the FHLBNY credit line.

Equity Securities

The following table presents a breakdown of the cost and estimated fair value of, and gross gains and losses on, investments in equity securities as of June 30, 2026 and December 31, 2025:

Other Investments

The following table presents a breakdown of the cost and estimated fair value of, and gross gains on, our other investments as of June 30, 2026 and December 31, 2025:

68

Held-to-Maturity Securities

The following table presents a breakdown of the amortized cost and estimated fair value of, and gross unrealized gains and losses on, investments in held-to-maturity securities as of June 30, 2026 and December 31, 2025:

Held-to-maturity U.S. Treasury securities are held in trust pursuant to various states’ minimum fund requirements.

A summary of the amortized cost and fair value of our investments in held-to-maturity securities by contractual maturity as of June 30, 2026 and December 31, 2025 is shown below:

69

Credit Rating of Fixed-Maturity Securities

The table below summarizes the credit quality of our available-for-sale fixed-maturity securities as of June 30, 2026 and December 31, 2025 as rated by Standard & Poor’s (or, if unavailable from Standard & Poor’s, then Moody’s, Fitch, or Kroll):

The table below summarizes the average yield by type of fixed-maturity security as of June 30, 2026 and December 31, 2025:

The table below lists the weighted average maturity and effective duration in years on our fixed-maturity securities as of June 30, 2026 and December 31, 2025:

Fair Value Consideration

Fair value is the price that would be received to sell an asset or paid to transfer a liability in a transaction involving identical or comparable assets or liabilities between market participants (an “exit price”). The fair value hierarchy distinguishes between inputs based on market data from independent sources (“observable inputs”) and a reporting entity’s internal assumptions based upon the best information available when external market data is limited or unavailable (“unobservable inputs”). The fair value hierarchy prioritizes fair value measurements into three levels based on the nature of the inputs. Quoted prices in active markets for identical assets have the highest priority (“Level 1”), followed by observable inputs other than quoted prices including prices for similar but not identical assets or liabilities (“Level 2”), and unobservable inputs, including the reporting entity’s estimates of the assumption that market participants would use, having the lowest priority (“Level 3”). As of June 30, 2026 and December 31, 2025, 50% and 47%, respectively, of the investment portfolio recorded at fair value was priced based upon quoted market prices.

Liquidity and Capital Resources

Cash Flows

The primary sources of cash flow are from our insurance underwriting subsidiary, KICO, and include direct premiums written, ceding commissions from our quota share reinsurers, loss recovery payments from our reinsurers, investment income and proceeds from the sale or maturity of investments. Funds are used by KICO for ceded premium payments to reinsurers, which are paid on a net basis after subtracting losses paid on reinsured claims and reinsurance commissions. KICO also uses funds for loss payments and loss adjustment expenses on its net business, commissions to producers, salaries and other underwriting expenses as well as to purchase investments and fixed assets.

The primary source of cash flow for the Holding Company are dividends and distributions received from KICO, which are subject to statutory restrictions. For the six months ended June 30, 2026, KICO paid dividends of $1,800,000 to the Holding Company. As of June 30, 2026, the maximum dividends that KICO can pay to the Holding Company is restricted to the lesser of 10% of statutory surplus as shown by its last statement on file with the DFS, or 100% of net investment income for the preceding 36 months, reduced by dividends paid during such period. As of June 30, 2026, the maximum allowable dividend that KICO may pay to the Holding Company was $635,645 without DFS approval. In six months ended June 30, 2026, the Holding Company funded KAIC with an initial investment of $5,100,000. The Holding Company does not expect to receive any dividends from KAIC within the next year.

KICO is a member of FHLBNY, which provides additional access to liquidity. Members have access to a variety of flexible, low-cost funding through FHLBNY’s credit products, enabling members to customize advances. Advances are to be fully collateralized; eligible collateral to pledge to FHLBNY includes residential and commercial mortgage-backed securities, along with U.S. Treasury and agency securities. See Note 3 – Investments to our condensed consolidated financial statements for eligible collateral held in a designated custodian account available for future advances. Advances are limited to 5% of KICO’s net admitted assets as of the end of the previous quarter, which is March 31, 2026. On July 6, 2023, A.M. Best withdrew KICO’s ratings as KICO requested to no longer participate in A.M. Best’s interactive rating process. As a result of the withdrawal of A.M. Best ratings, prior to April 15, 2025, KICO was only able to borrow on an overnight basis. Effective April 15, 2025, based on KICO's credit rating from FHLBNY, KICO can now borrow for a term of up to five years. The maximum allowable advance as of June 30, 2026, based on the net admitted assets as of March 31, 2026, was approximately $18,819,000. Available collateral as of June 30, 2026 was approximately $9,117,000. Effective April 15, 2025, advances are limited to 91% of the amount of available collateral. Prior to April 15, 2025, advances were limited to 85% of the amount of available collateral. There were no borrowings under this facility during the Six Months of 2026 or the Six Months of 2025.

On April 5, 2024, we filed a shelf registration statement on Form S-3 with the SEC under the Securities Act of 1933, as amended, with regard to the registration of $50,000,000 of our equity and debt securities (the “Shelf Registration Statement”). The Shelf Registration Statement was declared effective by the SEC on April 22, 2024. Any offering made pursuant to the Shelf Registration Statement may only be made by means of a prospectus, including a prospectus supplement, forming a part of the effective Shelf Registration Statement, relating to the offering.

In May 2024, we entered into a Sales Agreement with Janney Montgomery Scott LLC (the “Sales Agent”) under which we initially had the ability to issue and sell shares of our Common Stock, from time to time, through the Sales Agent, pursuant to the Shelf Registration Statement, up to an aggregate offering price of approximately $16,400,000 in what is commonly referred to as an “at-the-market” (“ATM”) program. On January 7, 2025, we filed a prospectus supplement providing for a going forward aggregate offering price for the ATM program of $25,000,000. During the six months ended June 30, 2026, we did not sell any shares of our Common Stock under the ATM program. As of June 30, 2026, we had remaining capacity to sell up to an additional $15,945,937 of our Common Stock under the ATM program.

On July 1, 2026, the Holding Company executed a Revolving Loan Note pursuant to a credit agreement (together, the “Citizens Agreement”) with Citizens Bank (“Lender”). Under the Citizens Agreement, we may receive advances from Lender not to exceed an unpaid principal balance of $5,000,000. See Note 15 – Subsequent Events-Debt to our condensed consolidated financial statements.

If the aforementioned sources of cash flow currently available are insufficient to cover our Holding Company cash requirements, we will seek to obtain additional financing.

Cash flow and liquidity are categorized into three sources: (1) operating activities; (2) investing activities; and (3) financing activities, which are shown in the following table:

Net cash provided by operating activities was $37,460,000 in the Six Months of 2026 as compared to $27,132,000 provided by operating activities in the Six Months of 2025. The $10,328,000 increase in cash flows provided by operating activities in the Six Months of 2026 as compared to the Six Months of 2025 was primarily the result of cash provided from net fluctuations in operating assets and liabilities, offset by a decrease in net income (adjusted for non-cash items) of $2,093,000. The net fluctuations in assets and liabilities are related to operating activities of KICO as affected by growth or declines in its operations, payments on claims and other changes, which are described above.

Net cash used in investing activities was $29,982,000 in the Six Months of 2026 compared to $24,513,000 used in investing activities in the Six Months of 2025 resulting in a $5,469,000 increase in net cash used in investing activities. In the Six Months of 2026, we had net cash used by our investment portfolio of $28,238,000, compared to $26,672,000 used in the Six Months of 2025. In the Six Months of 2025 one of our subsidiaries received gross proceeds of $3,600,000 from the sale of real estate that was used as our headquarters building.

Net cash used by financing activities was $2,732,000 in the Six Months of 2026 compared to $2,426,000 provided by financing activities in the Six Months of 2025 resulting in a $5,158,000 increase in net cash used in financing activities. In the Six Months of 2026, we received no proceeds from our ATM offering, compared to $9,484,000 in the Six Months of 2025. In the Six Months of 2025, we satisfied our debt under the 2024 Notes by making principal payments of $5,950,000, with none paid in the Six Months of 2026. In the Six Months of 2026, shareholder dividends were $1,447,000, compared to none in the Six Months of 2025.

Reinsurance

On January 1, 2025, we entered into a 16% quota share reinsurance treaty for our personal lines business, which primarily consisted of homeowners’ and dwelling fire policies, covering the period from January 1, 2025 through January 1, 2026 (“2025/2026 Treaty”). Upon the expiration of the 2025/2026 Treaty on January 1, 2026, we entered into a new 5% quota share reinsurance treaty for our personal lines business written in all states except California (for which we entered into a new 30% quota share reinsurance treaty), covering the period from January 1, 2026 through January 1, 2027 (“2026/2027 Treaty”).

Our excess of loss and catastrophe reinsurance treaties expired on June 30, 2026 and we entered into new excess of loss and catastrophe reinsurance treaties effective July 1, 2026. The new catastrophe reinsurance treaties include the second year of the $125,000,000 catastrophe bond ("Series 2025-1 Notes") issued on July 1, 2025. The Series 2025-1 Notes were priced at 4.5% and issued through a Bermuda-registered special purpose insurer, 1886 Re Ltd., providing KICO with $125,000,000 of collateralized reinsurance protection. The Series 2025-1 Notes offer multi-year protection against named storm events across New York, New Jersey, Connecticut, Massachusetts and Rhode Island on an indemnity trigger and per-occurrence basis. The Series 2025-1 Notes, which were structured and placed by AON Securities LLC, cover four annual risk periods from July 1, 2025, through June 30, 2029.

Effective January 1, 2025, we renewed an underlying excess of loss reinsurance treaty ("Underlying XOL Treaty") covering the period from January 1, 2025 through June 30, 2025. The treaty provided 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms were excluded from the treaty. Effective July 1, 2025, the Underlying XOL Treaty was renewed along with our excess of loss reinsurance treaty covering the period from July 1, 2025 through June 30, 2026 ("2025/2026 XOL Treaties"). Combined, the renewed 2025/2026 XOL Treaties provided 50% reinsurance coverage for losses of $250,000 in excess of $750,000, and 100% reinsurance coverage for losses in excess of $1,000,000 up to $9,000,000 together with facultative coverage. Effective July 1, 2026, the Underlying XOL Treaty was renewed along with our excess of loss reinsurance treaty covering the period from July 1, 2026 through June 30, 2027 ("2026/2027 XOL Treaties"). Combined, the renewed 2026/2027 XOL Treaties provide 50% reinsurance coverage for losses of $250,000 in excess of $750,000, and 100% reinsurance coverage for losses in excess of $1,000,000 up to $11,000,000 together with facultative coverage. For the period October 1, 2024 through April 30, 2025, we purchased catastrophe reinsurance which provides coverage for winter storm losses to the extent of 71% of $4,500,000 in excess of $5,500,000. For the period October 15, 2025 through April 30, 2026, we purchased catastrophe reinsurance which provides coverage for winter storm losses to the extent of 90% of $5,000,000 in excess of $5,000,000. For the period July 1, 2026 through June 30, 2027, we purchased 70% of all perils coverage excluding named storm losses of $5,000,000 in excess of $5,000,000. Effective July 1, 2026, we purchased $495,000,000 of catastrophe reinsurance in excess of $5,000,000, compared to $435,000,000 of catastrophe reinsurance in excess of $5,000,000 in the expiring treaty.

Material terms for our reinsurance treaties in effect for the treaty years shown below are as follows:

(1) For personal lines, includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $9,000,000 in total insured value, which covers direct losses from $3,500,000 to $9,000,000 through June 30, 2026. Effective July 1, 2026, homeowners single risk coverage was increased to $11,000,000 in total insured value, which covers direct losses from $3,500,000 to $11,000,000 through June 30, 2027.

(2) Through June 30, 2026, catastrophe coverage is limited on an annual basis to two times the per occurrence amounts, except for one occurrence on 80% of the first layer of $5,000,000 in excess of $5,000,000, and one occurrence on 52% of the top layer of $240,000,000 in excess of $200,000,000, which is covered under the catastrophe bond. Effective July 1, 2026, catastrophe coverage is limited on an annual basis to two times the per occurrence amounts, except for one occurrence on: (i) 70% of the first layer of $5,000,000 in excess of $5,000,000 for all perils excluding named storms, and (ii), 95% of the first layer of $5,000,000 in excess of $5,000,000 for named storms, and one occurrence on 45% of the layer of $275,000,000 in excess of $215,000,000, which is covered under the catastrophe bond. Duration of 168 consecutive hours for a non-named catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone. For named storms, duration beginning on the date a watch, warning, advisory, or other bulletin is first issued, continuing for a time period thereafter during which such named storm continues, regardless of its category rating or lack thereof and regardless of whether the watch, warning, advisory or other bulletin remains in effect for such named storm, and ending on the fourth calendar day following the issuance of the last watch, warning, advisory or other bulletin.

(3) For the period July 1, 2024 through June 30, 2025 (expiration date of the catastrophe reinsurance treaty), reinstatement premium protection for $50,000,000 of catastrophe coverage in excess of $10,000,000. For the period July 1, 2025 through June 30, 2026 (expiration date of the catastrophe reinsurance treaty), reinstatement premium protection for $50,000,000 of catastrophe coverage in excess of $10,000,000. For the period July 1, 2026 through June 30, 2027 (expiration date of the catastrophe reinsurance treaty), reinstatement premium protection for $50,000,000 of catastrophe coverage in excess of $10,000,000 for named storms only.

(4) For the period January 1, 2024 through June 30, 2025, the Underlying XOL Treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Excludes losses from named storms. Reduces retention to $530,000 from $730,000 under the quota share treaty that expired on January 1, 2025. Retention increases to $640,000 from $530,000 under the 2025/2026 Treaty. For the period July 1, 2025 through June 30, 2026, the Underlying XOL Treaty combined with the excess of loss treaty provide 50% reinsurance coverage for losses of $250,000 in excess of $750,000, and 100% reinsurance coverage for losses in excess of $1,000,000 up to $9,000,000 together with facultative coverage. For the period July 1, 2026 through June 30, 2027, the Underlying XOL Treaty combined with the excess of loss treaty provide 50% reinsurance coverage for losses of $250,000 in excess of $750,000, and 100% reinsurance coverage for losses in excess of $1,000,000 up to $11,000,000 together with facultative coverage. Increased retention to $715,000 from $640,000 under the 2025/2026 Treaty, and increased retention to $825,000 under the 2026/2027 Treaty (see note 5 below).

(5) The personal lines quota share treaty (homeowners, dwelling fire and canine liability) will expire on January 1, 2027, with none of these coverages to be in effect during the period from January 2, 2027 through June 30, 2027. If and when this treaty is renewed on January 2, 2027, the personal lines quota share treaty, will be as provided for therein. Reinsurance coverage in effect from January 2, 2027 through June 30, 2027 is only for excess of loss, Underlying XOL, and catastrophe reinsurance treaties.

(6) For the 2025/2026 Treaty, 6% of the 16% total of losses ceded under this treaty were excluded from a named catastrophe event. For the 2026/2027 Treaty, there is no exclusion for catastrophe events. Quota share reinsurance under the 2026/2027 treaty is 5% for personal lines business written in all states except California (for which the quota share rate is 30%).

(7) Plus losses in excess of catastrophe coverage.

(8) Effective July 1, 2025 through June 30, 2026, catastrophe coverage is 80% of the first layer of $5,000,000 in excess of $5,000,000. The remaining coverage is at 100% of $430,000,000 in excess of $10,000,000. For the period October 1, 2024 through April 30, 2025, additional catastrophe reinsurance treaty provided coverage for winter storm losses to the extent of 71% of $4,500,000 in excess of $5,500,000. For the period October 15, 2025 through April 30, 2026, an additional catastrophe reinsurance treaty provided coverage for winter storm losses to the extent of 90% of $5,000,000 in excess of $5,000,000. Retention for winter storms was $5,200,000 under the 2025/2026 Treaty from January 1, 2025 through April 30, 2025, $3,900,000 from October 15, 2025 through January 1, 2026, the expiration date of the 2025/2026 Treaty, and $5,000,000 under the 2026/2027 Treaty through April 30, 2026. Effective July 1, 2026 through June 30, 2027, catastrophe coverage is 95% of the first layer of $5,000,000 in excess of $5,000,000 for named storms, 70% for all other catastrophe risks. The remaining coverage is at 100% of $490,000,000 in excess of $10,000,000.

(1) Coverage on all commercial lines policies expired in September 2020; reinsurance coverage is based on treaties in effect on the date of loss.

Inflation

Premiums are established before we know the amount of losses and loss adjustment expenses or the extent to which inflation may affect such amounts. We attempt to anticipate the potential impact of inflation in establishing our reserves, especially as it relates to medical and hospital rates where historical inflation rates have exceeded the general level of inflation. Inflation in excess of the levels we have assumed could cause loss and loss adjustment expenses to be higher than we anticipated, which would require us to increase reserves and reduce earnings.

Fluctuations in rates of inflation also influence interest rates, which in turn impact the market value of our investment portfolio and yields on new investments. Operating expenses, including salaries and benefits, generally are impacted by inflation.

In the Three and Six Months of 2026, there was an increase in interest rates, lower public equity valuations, and significant financial market volatility. The higher interest rates reduced the value of our fixed income securities.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Outlook

Our net premiums earned may be impacted by a number of factors. Net premiums earned are a function of net written premium volume. Net written premiums comprise both renewal business and new business and are recognized as earned premium over the term of the underlying policies. Net written premiums from both renewal and new business are impacted by competitive market conditions as well as general economic conditions. We have made underwriting changes to emphasize profitability over growth and have culled out the type of risks that do not generate an acceptable level of return.

On April 14, 2025, KICO entered into an agreement to offer a quote for a replacement policy to selected homeowners policyholders in Downstate New York as one of our competitors pivoted focus away from admitted personal lines business (the "Withdrawal Plan"). The Withdrawal Plan, which includes this transaction, was approved by the DFS. The Withdrawal Plan enabled KICO to work with new distribution partners to further increase its footprint in Downstate New York by offering an alternative policy to selected homeowners policyholders with effective dates that started in the third quarter of 2025. In March 2026, we announced that we intend to expand into new markets, starting with California, which we entered in the second quarter of 2026.

The first quarter of 2026 included more severe winter weather in the Northeast United States than recent winters with losses incurred from eleven catastrophe events during the months of January and February 2026. The second quarter of 2026 was the most profitable quarter in our history with $15.5 million of net income. On August 6, 2026, we reaffirmed our growth, underwriting and profitability outlook for fiscal year 2026, which was originally issued on March 5, 2026 and affirmed on May 7, 2026. The reaffirmed guidance was issued in a press release included in our Form 8-K filed with the SEC on August 6, 2026 and is based on management’s current expectations as of this date.

See “Forward-Looking Statements” before Part I, Item 1.

Non-GAAP Financial Measures

Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures presented in accordance with GAAP.

The following table reconciles GAAP net premiums earned to net premiums written and direct premiums written for the periods presented:

The following table reconciles the GAAP net loss ratio to the net loss ratio excluding the effect of catastrophes and to the underlying loss ratio for the periods presented:

The following table reconciles the GAAP net loss ratio to the net loss ratio excluding commercial lines business for the periods presented:

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The following table reconciles GAAP net income to net income from insurance underwriting business on a standalone basis for the periods presented:

The following table reconciles the GAAP net loss ratio, GAAP net underwriting expense ratio, and GAAP net combined ratio to the net loss ratio excluding the effect of catastrophes, net underwriting expense ratio excluding the effect of catastrophes, and net combined ratio excluding the effect of catastrophes for the periods presented:

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles.

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We previously disclosed that as of December 31, 2025, our internal control over financial reporting contained a material weakness due to the lack of receiving a Service Organization Control (SOC) 1 Type 2 report for our insurance premium quoting platform system and our general ledger system. Therefore, we cannot rely on the controls within these systems, including automated and manual process level controls, and remaining information technology general controls, that are dependent upon the information derived from such systems. We are working with our insurance premium quoting platform system vendor and our general ledger vendor to develop a remediation plan. During the quarter ended June 30, 2026 we believe we have remediated both material weaknesses, however, it will take time to demonstrate the effectiveness of the remediation which will be completed by December 31, 2026. Because of this material weakness in internal control over financial reporting, as of June 30, 2026, our disclosure controls are not considered effective. Our management concluded that all other internal controls over financial reporting were effective as of June 30, 2026.

A material weakness (within the meaning of PCAOB Auditing Standard 2201) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Changes in Internal Control over Financial Reporting

Except for efforts associated with remediation of the aforementioned material weakness, there have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitation on Effectiveness of Controls

Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by the board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

For a discussion of the Company’s potential risks and uncertainties, see Part I, Item 1A— “Risk Factors” and Part II, Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Annual Report") filed with the SEC, and Part I, Item 2—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein, in each case as updated by the Company's periodic filings with the SEC. There have been no material changes to the risk factors disclosed in Part I, Item 1A of the Company’s 2025 Annual Report.