Universal Insurance Holdings, Inc.: Form 10-Q for the period ended Jun 30, 2025

Unless the context otherwise requires, all references to “we,” “us,” “our,” and “Company” refer to Universal Insurance Holdings, Inc. (“UVE”) and its wholly-owned subsidiaries. You should read the following discussion together with our unaudited condensed consolidated financial statements (“Financial Statements”) and the related notes thereto included in “Part I, Item 1—Financial Statements,” and our audited condensed consolidated financial statements and the related notes thereto included in “Part II, Item 8—Financial Statements and Supplementary Data” in our Annual Report on Form 10-K for the year ended December 31, 2024. Operating results for any one quarter are not necessarily indicative of results to be expected for any quarter or for the year.

Cautionary Note Regarding Forward-Looking Statements

In addition to historical information, this report may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These forward-looking statements may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets,” and other words with similar meanings. These statements may address, among other things, our strategy for growth, catastrophe exposure and other risk management, product development, investment results, regulatory approvals, market position, expenses, financial results, litigation and reserves. We believe that these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements. A detailed discussion of the risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is set forth below, which are a summary of those in the section titled “Risk Factors” (Part I, Item 1A) of our Annual Report on Form 10-K for the year ended December 31, 2024. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

Risks and uncertainties that may affect, or have affected, our financial condition and operating results include, but are not limited to, the following:

• As a property and casualty insurer, we may face significant losses, and our financial results may vary from period to period, due to exposure to catastrophic events and severe weather conditions, the frequency and severity of which could be affected by climate change.
• Because we conduct the majority of our business in Florida, our financial results are affected by the regulatory, economic, and weather conditions in Florida.
• Actual claims incurred have exceeded, and in the future may exceed, reserves established for claims, adversely affecting our operating results and financial condition.
• If we fail to adequately price the risks we underwrite, or if emerging trends outpace our ability to adjust prices timely, or if we lose desirable exposures to competitors by overpricing our risks, we may experience underwriting losses depleting surplus at the Insurance Entities and capital at the holding company.
• Unanticipated increases in the severity or frequency of claims adversely affect our profitability and financial condition.
• The failure of the risk mitigation strategies we utilize could have a material adverse effect on our financial condition or results of operations.
• Pandemics, including COVID-19 and other outbreaks of disease, could impact our business, financial results, and growth.
• Because we rely on independent insurance agents, the loss of these independent agent relationships and the business they control or our ability to attract new independent agents could have an adverse impact on our business.
• We rely on models as a tool to evaluate risk, and those models are inherently uncertain and may not accurately predict existing or future losses.
• Reinsurance may be unavailable in the future at reasonable levels and prices or on reasonable terms, which may limit our ability to write new business or to adequately mitigate our exposure to loss.
• Reinsurance subjects us to the credit risk of our reinsurers, which could have a material adverse effect on our operating results and financial condition.
• Our financial condition and operating results are subject to the cyclical nature of the property and casualty insurance business.
• We have entered new markets and expect that we will continue to do so, but there can be no assurance that our diversification and growth strategy will be effective.
• Our success depends, in part, on our ability to attract and retain talented employees, and the loss of any one of our key personnel could adversely impact our operations.
• We could be adversely affected if our controls designed to ensure compliance with guidelines, policies and legal and regulatory standards are not effective.
• The failure of our claims professionals to effectively manage claims could adversely affect our insurance business and financial results.
• Litigation or regulatory actions could result in material settlements, judgments, fines, or penalties and consequently have a material adverse impact on our financial condition and reputation.
• Our future results are dependent in part on our ability to successfully operate in a highly competitive insurance industry.
• A downgrade in our financial strength or stability ratings may have an adverse effect on our competitive position, the marketability of our product offerings, and our liquidity, operating results and financial condition.
• Breaches of our information systems or denial of service on our website could have an adverse impact on our business and reputation.
• We may not be able to effectively implement or adapt to changes in technology, particularly with respect to artificial intelligence, which may result in interruptions to our business or even in a competitive disadvantage.
• Lack of effectiveness of exclusions and other loss limitation methods in the insurance policies we write or changes in laws and/or potential regulatory approaches relating to them could have a material adverse effect on our financial condition or our results of operations.
• We are subject to market risk, which may adversely affect investment income.
• Our overall financial performance depends in part on the returns on our investment portfolio.
• We are subject to extensive regulation and potential further restrictive regulation may increase our operating costs and limit our growth and profitability.
• UVE is a holding company and, consequently, its cash flow is dependent on dividends and other permissible payments from its subsidiaries.
• Regulations limiting rate changes and requiring us to participate in loss sharing or assessments may decrease our profitability.
• The amount of statutory capital and surplus that each of the Insurance Entities has and the amount of statutory capital and surplus it must hold vary and are sensitive to a number of factors outside of our control, including market conditions and the regulatory environment and rules.
• To service our debt, we will require a significant amount of cash. Our ability to generate cash depends on many factors.
• Our indebtedness could adversely affect our financial results and prevent us from fulfilling our obligations under the Notes.

OVERVIEW

We are a vertically integrated holding company offering property and casualty insurance and value-added insurance services. In addition, we generate revenue from our investment portfolio, reinsurance brokerage services, the receipt of managing general agency fees from policy holders and from other sources of revenue (collectively “Other Revenue Sources”). We develop, market and underwrite insurance products for consumers predominantly in the personal residential homeowners’ line of business and perform substantially all insurance-related services for our insurance entities, including risk management, claims management, and distribution. Our insurance entities, Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC” and together with UPCIC, the “Insurance Entities”), offer insurance products through both an appointed independent agent network and our online distribution channels across 19 states with Florida representing 74.6% of our direct premiums written for the six months ended June 30, 2025. We seek to produce an underwriting profit (defined as earned premiums-net minus losses, loss adjustment expense (“LAE”), policy acquisition costs and other operating costs) over the long term, along with growing our Other Revenue Sources.

The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations. This MD&A should be read in conjunction with our Financial Statements and accompanying Notes appearing elsewhere in this Report (the “Notes”). In addition, reference should be made to our audited Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements and “Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2024. Except for the historical information contained herein, the discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed above under “—Cautionary Note Regarding Forward-Looking Statements.”

Trends and Geographical Distribution

Florida Trends

We seek to achieve long-term rate adequacy and earnings for the Insurance Entities while managing our risks through market cycles and looking to take advantage of what we believe to be market opportunities. Prior to significant statutory reforms adopted in December 2022, the Florida personal lines residential insurance market experienced distressed conditions wherein insurance companies’ major costs items, such as losses, LAE and reinsurance, increased and led to rising premiums and reduced product availability for consumers. In addition to taking steps to adjust rate levels, manage exposures and refine our prospective outlook of expected losses, we recorded adverse claim development on prior years’ loss reserves to address the impacts of Florida’s market disruptions on claim cost trends.

As insurance availability declined among admitted insurers prior to the statutory reforms, Citizens’ policy count increased from below 500,000 in mid-2020 to more than 1.4 million in 2023. Citizens’ ability to adjust rates is limited by law. Therefore, while Citizens was created to be the residual property insurance market in Florida, in periods of increasing premiums its policies may be priced lower than those in the admitted market. This causes Citizens, for many policy types and areas of Florida, to become viewed as a desirable lower-cost alternative to the admitted market. Even as the Florida market shows signs of improvement, this might continue for several years due to statutory and potential public policy limitations on Citizens’ ability to adjust rates. The Insurance Entities’ competitive position compared to Citizens, and the competitive position of the admitted market as a whole, might improve over the next several years as Citizens’ rate levels continue to adjust, more policies reach Citizens’ maximum limits due to replacement cost increases, and more of Citizens’ policyholders become subject to a statutory requirement to purchase flood insurance.

Law changes adopted in December 2022 sought to curtail certain claimants’ abusive claims practices against insurance carriers, which contributed substantially to the Florida market’s previous problems. Among the reforms, the Florida Legislature eliminated policyholders’ former one-way statutory right to attorneys’ fees and eliminated the ability of policyholders to assign their insurance benefits to third parties. The Florida Legislature also reduced the post-loss time period for submitting claims to one year as contrasted with prior laws permitting claims to be reported two years or even three years after loss events, which led to extended solicitations of claims by contractors, public adjusters, and attorneys and created challenges for insurers in evaluating the cause and amount of the late-reported claims. These law changes and other related measures have reduced expected loss and loss adjustment expenses for recent exposure periods, which should lead to insurers’ base rate levels flattening and starting to decline. The law changes also enhanced service standards for the benefit of policyholders through faster claims-response requirements, increased penalties for non-compliance, enhanced regulatory oversight of insurers’ financial conditions and holding company systems, and other consumer protections.

Although the Insurance Entities’ number of remaining claims subject to pre-reform laws continues to decline, it will be several years before all of these claims are settled or brought to an adjudicated conclusion. We are optimistic that the legislative reforms will continue to gradually improve the Florida claims environment as claims associated with the pre-reform era continue to be resolved and more of the Insurance Entities’ claims benefit from the reforms.

The evolving impacts of the reforms are beginning to alter the competitive landscape in the Florida residential property insurance market. Favorable effects of the reforms led many insurers, including us, to file overall average base rates in 2024 equal to or slightly lower than the prior year's rates. The impact of the reforms varies by territory, as different areas of Florida historically have had different incidences of represented and litigation claims most affected by the reforms. Rate levels also remain subject to broad considerations affecting the insurance industry or the economy as a whole, such as inflation affecting labor and materials and litigation financing.

In addition, the reforms have prompted many admitted market insurers, including us, to expand the availability of products. Approximately 14 new insurers have also entered the market since the reforms were enacted. Expanded writings by existing and new admitted market insurers have led to Citizens’ policy count declining from its October 2023 peak of 1.4 million policies to approximately 780,000 policies as of June 2025. Citizens projects that it will have less than 700,000 policies by the end of 2025. With the benefits of the reforms continuing to emerge, new and existing competitors in the post-reform market often remain selective as to the policy types, locations, coverage limits or other characteristics of policies they write, leading to segmentation in the market. The degree of competition in the evolving Florida market therefore varies by territory, policy form and other factors. As a result, our ability to write the volume or types of policies we seek differs by territory, policy type and other characteristics and is changing as the market evolves.

The ultimate long-term benefits of Florida’s statutory reforms are unknown and difficult to predict. If future court decisions negatively impact the reforms or other aspects of the residential property insurance business, recent improvements in the market could be moderated or reversed. In addition, the Florida political environment, prevailing sentiment among policymakers or the public, and economic factors beyond insurers’ control may directly or indirectly mitigate the effectiveness of recent reforms. These influences can mask the reforms’ benefits or diminish their perceived effectiveness even when the market shows objective signs of improvement through moderating rate levels, increased product availability and competition, and reductions in Citizens’ policy count. Over time, these political or external influences can result in policymakers questioning the merits of the reforms, considering proposals to reverse them, or pursuing other law changes or interpretations that could negate improvements in the Florida market and renew concerns with rising costs and reduced availability.

Evolving domestic, national or global economic conditions, including the potential impact from tariffs, also may affect our business model, particularly by applying inflationary pressure on our costs for settling claims and the rate-making process. Additionally, interest rate uncertainty driven by Federal Reserve actions related to inflationary trends and federal deficits could present further financial challenges. We will continue to monitor our business model and strategy as these events develop.

Our ability to successfully transact business in the Florida market is influenced by regulatory policies and processes in the state. Rate filings largely rely upon past loss and expense data and take time to develop, file and implement. In both rising and declining premium environments, we therefore can experience significant delays between identifying needed rate adjustments, filing the associated rate changes, and ultimately collecting and earning the resulting adjusted premiums. This challenge can be compounded following active hurricane seasons as regulatory directives may preclude filing or implementing rate changes. Further, the ultimate effectiveness of Florida’s reforms is still unknown and difficult to quantify, especially because future market conditions or claims patterns might differ from recent or past experience. This uncertainty can be compounded by other anticipated changes affecting rating or risk selection, such as FLOIR’s anticipated implementation of updated windstorm mitigation discounts. The effects of a revised discount program currently are unknown and difficult to predict both at the individual policy level and at the aggregate level with respect to insurers’ competitive positions. Similarly, the Company evaluates and periodically adjusts its policy forms in response to market factors and competitive considerations. While policy form changes can be beneficial in the Company’s risk management initiatives, like with rate adjustments, we can experience delays between identifying desired changes, filing, and gaining regulatory approval of the changes, and implementing the new forms.

Our ability to adapt to changes in a transitional market that is experiencing areas of increased competition can influence our effectiveness in writing new policies, retaining existing policies, managing costs in relation to premium and maintaining our longstanding competitive position in the state.

The Company updates its claims-handling procedures over time in response to market trends. The Company has adopted and continually refines initiatives to adjust and pay straightforward, meritorious claims as promptly as possible to mitigate the adverse impacts that can be seen with claims that remain open for longer periods. The Company also has increasingly used video and other technology to facilitate reviews of damaged property and improve efficiency in the claims process. In addition, we have developed in-house expertise to respond to emerging claims, trends, or specialized types of claims such as water damage claims, represented claims, and large-loss claims. The Company additionally has established significant in-house legal services to address litigated or represented claims as cost-effectively as possible, as well as a subrogation unit that seeks to mitigate losses for the benefit of policyholders and the Company when damages are caused by third parties.

The active 2024 hurricane season demonstrated the benefits of the statutory reforms as Florida experienced three land-falling storms without significant setbacks to the emerging competitive environment, the general moderation and reduction of rate levels, or the improved availability and pricing of reinsurance. Nonetheless, hurricanes and other large loss events reduce insurers’ surplus and can limit capacity for writing additional policies even in an improving market. This can moderate the impact of the reforms compared to hurricane-free periods in which insurers and reinsurers can more readily replenish and deploy capital. The full impact of the law changes on our operational initiatives and associated costs is unknown and may evolve differently following an active hurricane season than in a non-catastrophe environment. We will continue to monitor these impacts and market conditions on recording and reporting of claims costs, rate levels, and competitive conditions.

Summary of Recent Rate Changes

In April 2023, UPCIC submitted and received approval for a rate decrease of 1.4% for Homeowners’, and a rate decrease of 1.6% for Dwelling Fire in the State of Florida, effective July 15, 2023, for new and renewal business. This filing resulted from UPCIC’s statutorily required participation in Florida’s Reinsurance to Assist Policyholders Program (“RAP”). This program was unrelated to the FHCF and allowed insurers to access a layer of reinsurance coverage below the FHCF industry retention at no cost to the insurer. In exchange the Insurance Entities adopted a corresponding one-year rate reduction. The RAP program expired with the reinsurance contract year ended May 31, 2024. Accordingly, the rate decrease that was temporarily implemented in response to the RAP coverage expired one year from its effective date, on July 15, 2024.

In July 2023, UPCIC filed a 7.5% rate increase on Florida personal residential homeowners’ line of business, effective July 17, 2023, for new business and November 4, 2023, for renewal business. Additionally, in October 2023, UPCIC filed a 4.1% rate increase on Florida personal dwelling-fire lines of business, effective January 15, 2024, for both new and renewal business. In 2024, UPCIC filed a 5.3% rate decrease on Florida personal dwelling-fire lines of business, effective July 30, 2025, for both new and renewal business. These rate changes were implemented under use and file rating laws and subsequently received regulatory approval. In August 2024, UPCIC implemented new homeowners rates for new policies, resulting in an average rate decrease of 1.5% compared to previous rates. Rates for renewal business are being implemented with an effective date of May 17, 2025.

For 2025, the following rate changes for UPCIC have been approved by regulators in states other than Florida:

• Michigan: +24.8% effective January 20, 2025, for new business, and March 11, 2025, for renewal business
• Georgia: +7.4% effective March 1, 2025, for new business and renewal business
• Alabama: +8.1% effective March 13, 2025, for new business and May 2, 2025 for renewal business
• Indiana: +6.0% effective March 22, 2025, for new business and May 11, 2025, for renewal business
• Massachusetts: +12.9% effective April 8, 2025, for new business and May 28, 2025, for renewal business
• South Carolina: +8.6% effective April 21, 2025, for new business and June 10, 2025, for renewal business
• Minnesota: +15.0%, effective May 16, 2025, for new business and July 20, 2025 for renewal business
• North Carolina: +7.5% effective June 1, 2025, for new business and renewal business
• Pennsylvania: +8.0% effective June 1, 2025, for new business and July 21, 2025, for renewal business
• Delaware: +15.0%, effective June 24, 2025, for new business and August 13, 2025, for renewal business
• New York: +10.2%, effective August 4, 2025, for new business and September 23, 2025, for renewal business
• Illinois: +8.0%, effective August 12, 2025, for new business and October 1, 2025, for renewal business
• Iowa: +20.0%, effective August 20, 2025, for new business and October 24, 2025, for renewal business
• Wisconsin: +15.0%, effective September 2, 2025, for new business and October 22, 2025, for renewal business

The following rate filings are pending approval by state regulators:

• Maryland: +4.6%, the effective date for new business and renewal business is pending approval
• New Jersey: +18.9%, the effective date for new business and renewal business is pending approval

KEY PERFORMANCE INDICATORS

The Company considers the measures and ratios in the following discussion to be key performance indicators for its businesses. Management believes that these indicators are helpful in understanding the underlying trends in the Company’s businesses. Some of these indicators are reported on a quarterly basis and others on an annual basis. Please also refer to “Part II, Item 8—Note 2 (Summary of Significant Accounting Policies)” of our Annual Report on Form 10-K for the year ended December 31, 2024 for definitions of certain other terms we use when describing our financial results.

These indicators may not be comparable to other performance measures used by the Company’s competitors and should only be evaluated together with our condensed consolidated financial statements and accompanying notes.

In addition to our key performance indicators and other financial measures presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”), management also uses certain non-GAAP financial measures to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that non-GAAP financial measures, which may be defined differently by other companies, help to explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the

Company’s business. The non-GAAP measures should not be viewed as a substitute for those determined in accordance with GAAP. The calculation of these key financial measures including the reconciliation of non-GAAP measures to the nearest GAAP measure are found below under “―Non-GAAP Financial Measures.”

Definitions of Key Performance Indicators and GAAP and Non-GAAP Measures

Adjusted book value per common share ― is a non-GAAP measure that is calculated as adjusted common stockholders’ equity divided by common shares outstanding at the end of the period. Management believes this metric is meaningful, as it allows investors to evaluate underlying book value growth by excluding the impact of unrealized gains and losses due to interest rate volatility.

Adjusted common stockholders’ equity ― is a non-GAAP measure that is calculated as GAAP common stockholders' equity less accumulated other comprehensive income (loss). Management believes this metric is meaningful, as it allows investors to evaluate underlying growth in stockholders’ equity by excluding the impact of unrealized gains and losses due to interest rate volatility.

Adjusted net income (loss) available to common stockholders ― is a non-GAAP measure that is calculated as GAAP net income (loss) available to common stockholders, less net realized gains (losses) on investments and net changes in unrealized gains (losses) on equity investments, net of tax. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Adjusted operating income (loss) ― is a non-GAAP measure that is calculated as GAAP operating income (loss), less net realized gains (losses) on investments and net changes in unrealized gains (losses) on equity investments. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Adjusted operating income (loss) margin ― is a non-GAAP measure that is computed as adjusted operating income (loss) divided by core revenue. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Adjusted return on common equity (Adjusted “ROCE”) ― is a non-GAAP measure that is calculated as actual or annualized adjusted net income available to common stockholders divided by average adjusted common stockholders’ equity, with the denominator excluding current period income statement net realized gains (losses) on investments and net changes in unrealized gains (losses) on equity investments, net of tax. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Book Value Per Common Share ― total stockholders’ equity, adjusted for preferred stock liquidation, divided by the number of common shares outstanding as of a reporting period. Book value per common share is the excess of assets over liabilities at a reporting period attributed to each share of common stock. Changes in book value per common share informs shareholders of retained equity in the Company on a per share basis, which may assist in understanding market value trends for the Company’s stock.

Combined Ratio ― the combined ratio is a measure of underwriting profitability for a reporting period and is calculated by dividing total operating costs and expenses (which is made up of losses and LAE and general and administrative expenses) by premiums earned, net, which is net of ceded premium earned. Changes to the combined ratio over time provide management with an understanding of costs to operate its business in relation to net premiums it is earning and the impact of rate, underwriting and other business management actions on underwriting profitability. A combined ratio below 100% indicates an underwriting profit; a combined ratio above 100% indicates an underwriting loss.

Core Loss Ratio ― a common operational metric used in the insurance industry to describe the ratio of current accident year expected losses and LAE, excluding current accident year weather events beyond those expected, to premiums earned. Core loss ratio is an important measure identifying profitability trends of premiums in force. Core losses consist of losses and LAE excluding current accident year weather events beyond those expected and prior years’ reserve development. The financial benefit from the management of claims, including claim fees ceded to reinsurers, is recorded in the condensed consolidated financial statements as a reduction to core losses. The core loss ratio can be measured on a direct basis, using direct earned premiums, or on a net basis, using premiums earned, net (i.e., direct premiums earned less ceded premiums earned).

Core revenue ― is a non-GAAP measure that is calculated as total GAAP revenue, less net realized gains (losses) on investments and net changes in unrealized gains (losses) on equity investments. Management believes this metric is meaningful, as it allows investors to evaluate underlying revenue trends and enhances comparability across periods by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Debt-to-Equity Ratio ― long-term debt divided by stockholders’ equity. This ratio helps management measure the amount of financing leverage in place in relation to equity and allows investors to evaluate future leverage capacity.

Debt-to-Total Capital Ratio ― long-term debt divided by the sum of total stockholders’ equity and long-term debt (often referred to as total capital resources). This ratio helps management measure the amount of financing leverage in place (long-term debt) in relation to total capital resources and allows investors to evaluate future leverage capacity.

Diluted adjusted earnings per common share ― is a non-GAAP measure, which is calculated as adjusted net income available to common stockholders divided by weighted average diluted common shares outstanding. Management believes this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends.

Direct Premiums Written (“DPW”) ― reflects the total value of policies issued during a period before considering premiums ceded to reinsurers. Direct premiums written, comprised of renewal premiums, endorsements, and new business, is initially recorded as unearned premium in the balance sheet, which is then earned pro-rata over the next year or remaining policy term. Direct premiums written reflect current trends in the Company’s sale of property and casualty insurance products and amounts that will be recognized as earned premiums in the future.

DPW (Florida) ― includes only DPW in the state of Florida. This measure allows management to analyze growth in our primary market and is also a measure of business concentration risk.

Expense Ratio (Including Policy Acquisition Cost Ratio and Other Operating Cost Ratio) ― calculated as general and administrative expenses as a percentage of premiums earned, net. General and administrative expenses are comprised of policy acquisition costs and other operating costs, which include such items as underwriting costs, facilities, and corporate overhead. The expense ratio, including the sub-expense ratios of policy acquisition cost ratio and other operating cost ratio, are indicators to management of the Company’s cost efficiency in acquiring and servicing its business and the impact of expense items to overall profitability.

Losses and Loss Adjustment Expense Ratio or Loss and LAE Ratio ― a measure of the cost of claims and claim settlement expenses incurred in a reporting period as a percentage of premiums earned in that same reporting period. Losses and LAE incurred in a reporting period includes both amounts related to the current accident year and prior accident years, if any, referred to as development. Ultimate losses and LAE are based on actuarial estimates with changes in those estimates recognized in the period the estimates are revised. Losses and LAE consist of claim costs arising from claims occurring and settling in the current period, an estimate of claim costs for reported but unpaid claims, an estimate of unpaid claim costs for incurred-but-not-reported claims and an estimate of claim settlement expenses associated with reported and unreported claims which occurred during the reporting period. The loss and LAE ratio can be measured on a direct basis, which includes losses and LAE divided by direct earned premiums, or on a net basis, which includes losses and LAE divided by premiums earned, net (i.e., direct premium earned less ceded premium earned). The net loss and LAE ratio are measures of underwriting profitability after giving consideration to the effect of reinsurance. Trends in the net loss and LAE ratio are an indication to management of current and future profitability.

Monthly Weighted Average Renewal Retention Rate ― measures the monthly average of policyholders that renew their policies over the period of a calendar year. This measure allows management to assess customer retention.

Premiums Earned, Net ― the pro-rata portion of current and previously written premiums that the Company recognizes as earned premium during the reporting period, net of ceded premium earned. Ceded premiums are premiums paid or payable by the Company for reinsurance protection. Written premiums are considered earned and are recognized pro-rata over the policy coverage period. Premiums earned, net is a measure that allows management to identify revenue trends.

Policies in Force ― represents the number of active policies with coverage in effect as of the end of the reporting period. The change in the number of policies in force is a growth measure and provides management with an indication of progress toward achieving strategic objectives. Inherent seasonality in our business makes this measure more useful when comparing each quarter’s balance to the same quarter in prior years.

Premium in Force ― is the amount of the annual direct premiums written previously recorded by the Company for policies which are still active as of the reporting date. This measure assists management in measuring the level of insured exposure and progress toward meeting revenue goals for the current year, and provides an indication of business available for renewal in the next twelve months. Inherent seasonality in our business makes this measure more useful when comparing each quarter’s balance to the same quarter in prior years.

Return on Average Common Equity (“ROCE”) ― calculated as actual net income (loss) available to common stockholders divided by average common stockholders' equity. ROCE is a capital profitability measure of how efficiently management creates profits.

Total Insured Value ― represents the amount of insurance limits available on a policy for a single loss based on all policies active as of the reporting date. This measure assists management in measuring the level of insured exposure.

Unearned Premiums ― represents the portion of direct premiums corresponding to the time period remaining on an insurance policy and available for future earning by the Company. Trends in unearned premiums generally indicate expansion, if growing, or contraction, if declining, which are important indicators to management. Inherent seasonality in our business makes this measure more useful when comparing each quarter’s balance to the same quarter in prior years.

Weather events ― an estimate of losses and LAE from weather events occurring during the current accident year that exceed initial estimates of expected weather events when establishing the core loss ratio for each accident year. This metric informs management of factors impacting overall current year profitability.

REINSURANCE

Reinsurance enables our Insurance Entities to limit potential exposures to catastrophic events. Developing and implementing our reinsurance strategy to adequately protect our policyholders, balance sheet, and Insurance Entities in the event of one or more catastrophes while maintaining efficient reinsurance costs has been our key strategic priority. To limit the Insurance Entities’ potential exposure to catastrophic events, we purchase significant reinsurance from third-party reinsurers and the FHCF. The FLOIR requires the Insurance Entities, like all residential property insurance companies doing business in Florida, to have a certain amount of capital and reinsurance coverage to cover losses upon the occurrence of a single catastrophic event and a series of catastrophic events occurring in the same hurricane season. The Insurance Entities’ 2025-2026 catastrophe reinsurance program meets the FLOIR’s requirements, which are based on, among other things, successfully demonstrating cohesive and comprehensive reinsurance coverages that protect the policyholders of our Insurance Entities under a series of stress test catastrophe loss scenarios. Similarly, the Insurance Entities’ 2025-2026 catastrophe reinsurance programs meet the stress test and review requirements of Demotech, Inc., for maintaining Financial Stability Ratings® of A (Exceptional) and of Kroll for maintaining insurer financial strength rating of “A-”.

We believe the Insurance Entities’ retentions under the jointly shared reinsurance program is appropriate and structured to protect policyholders and the Insurance Entities’ capital structure. We test the sufficiency of the catastrophe reinsurance coverage by subjecting the Insurance Entities’ personal residential exposures to scenario testing using third-party catastrophe models. These models combine simulations of the natural occurrence patterns and characteristics of hurricanes, tornadoes, earthquakes, and other catastrophes with information on property values, construction types, and occupancy classes. These models’ outputs provide information concerning the potential for simulated large losses, which enables the Insurance Entities to limit the financial impact from catastrophic events. Refer to the risk factors disclosed in “Part I, Item 1A—Risk Factors,” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, for details of specific risks attributable to catastrophic losses and reinsurance.

Effective June 1, 2025, the Insurance Entities entered into multiple reinsurance agreements comprising our 2025-2026 reinsurance program. See “Item 1—Note 4 (Reinsurance).”

Insurance Entities 2025-2026 All States Reinsurance Program (“All States”)

• First event All States combined retention of $45 million.
• All States first event tower extends to $2.526 billion with no co-participation in any of the layers, no limitation on loss adjustment expenses and no accelerated deposit premiums.
• Universal Insurance Holdings, Inc. (“UIH”) established the first event layer of $66 million in excess of $45 million in a captive insurance arrangement. See “Item 1—Note 14 (Variable Interest Entities).”
• Assuming a first event completely exhausts the $2.526 billion tower, the second event exhaustion point would be $1.209 billion.
• Full reinstatement is available on the combined $1.098 billion of the All States first-event catastrophe coverage for a guaranteed second-event coverage. Additionally, a second event private market excess of loss coverage of $66 million in excess of $45 million succeeds the captive in the event of a loss from a second event, resulting in a $66 million reduction in retention on a consolidated basis for a second event.
• For all layers purchased between $111 million and the projected attachment point of the FHCF layer, to the extent that all of our coverage or a portion thereof is exhausted in a first catastrophic event and reinstatement premium is due, we have purchased enough reinstatement premium protection coverage (“RPP”) to fund the reinstatement premiums due on the reinstatement of these coverages. Losses exceeding the RPP limit would be subject to reinstatement premiums.
• Specific third and fourth event private market excess of loss coverage of $86 million in excess of $25 million provides frequency protection for multiple events during the treaty period, an incremental $20 million reduction in retention for a third and fourth event.
• For the FHCF Reimbursement Contracts effective June 1, 2025, the Insurance Entities have continued the election at the 90% coverage level. We estimate the total mandatory FHCF coverage will provide approximately $1.296 billion of coverage for UPCIC, and $21.4 million for APPCIC which complements and inures to the benefit of the All States coverage secured from private market reinsurers and discussed above.
• To further insulate future years, the Insurance Entities have secured certain multi-year treaties, providing $352 million of capacity that extends portions of the catastrophe coverage to include the 2026-2027 treaty year.

Reinsurers

The table below provides the A.M. Best and S&P financial strength ratings for each of the largest rated third-party reinsurers in the Insurance Entities’ 2025-2026 reinsurance program:

(1) No rating is available, because the fund is not rated.

(2) No rating is available, because the reinsurer is fully collateralized with a trust agreement.

RESULTS OF OPERATIONS AND ANALYSIS OF FINANCIAL CONDITION

Highlights for the quarter ended June 30, 2025

• For the three months ended June 30, 2025, direct premiums written rose by 3.2%, to $596.7 million. This change reflects a $29.8 million 25.4% increase in direct premiums written outside of Florida, partially offset by an $11.3 million 2.5% decrease in direct premiums written within Florida.
• Rate filings and automatic inflation adjustments to policy values are affecting written and earned premiums as they apply to renewals and new policies. Management continues to focus on risk selection and improving risk diversification along with adjustments to filed rates plans as needed.
• Net investment income increased by 17.7%, due to higher portfolio reinvestment rates as investments matured and were reinvested, as well as an increase in income earning assets.
• The Company continues to see positive loss trends in Florida for policies issued after the legislative reforms implemented in 2022.
• The combined ratio was 97.8% for the three months ended June 30, 2025, an increase of 1.9 points compared to the three months ended June 30, 2024.
• The Insurance Entities successfully secured a combined UPCIC and APPCIC 2025-26 catastrophe reinsurance program with no material changes to historical reinsurance partners or terms and conditions. The Insurance Entities set the top of their combined reinsurance tower for a single All States (including Florida) event to $2.526 billion, an increase of $110 million over the expiring 2024-2025 reinsurance program.
• The Company entered into a committed and unsecured $50.0 million revolving credit line with JP Morgan Chase Bank, N.A., replacing the previous facility of the same amount.
• In the quarter ended June 30, 2025, the Company repurchased 287,007 shares, at an average share price of $25.74, for a total of $7.4 million.
• On May 1, 2025, the Board of Directors approved a new share repurchase program authorizing the Company to repurchase up to $20.0 million of its outstanding shares of common stock through May 1, 2027. As of June 30, 2025, $15.2 million remains available under this program.
• On April 14, 2025, a dividend of $0.16 per common share was declared, with payment made on May 14, 2025.
• Demotech reaffirmed its A rating for UPCIC and APPCIC on April 8, 2025.

Results of Operations for the three months ending June 30, 2025, are compared to the same period last year, unless stated otherwise.

Results of Operations—Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

Net income was $35.1 million for 2025, compared to net income of $35.4 million for 2024. Diluted earnings per share for 2025 was $1.21 compared to $1.21 in 2024. Positive factors in 2025 included higher net premiums earned, investment income, realized gains, and commission revenue, offset by unrealized losses in 2025 compared to unrealized gains in 2024 and higher acquisition costs. There were no catastrophes in the second quarters of 2025 or 2024. Direct premiums earned grew by 6.7% in 2025, due to premium growth in 17 states and policies in force growth in 14 states. The net loss ratio was 72.3% in 2025 compared to 70.6% in 2024, with the combined ratio at 97.8% for 2025 compared to 95.9% for 2024.

A detailed discussion of our results of operations follows the table below (in thousands, except per share data).

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Premium Revenues

Direct premiums written increased by $18.5 million, or 3.2%, for the three months ended June 30, 2025, driven by premium growth in our other states business of $29.8 million, or 25.4%, as compared to the three months ended June 30, 2024 offset by a reduction in premium written within our Florida business of $11.3 million, or 2.5%. The primary factors contributing to the increase in direct written premiums were new and previous rate changes, increased policies in force during 2025 and policy inflation adjustments. There was an increase in policies in force across 14 states. In total, policies in force increased by 7,526, or 0.9%, from 864,817 at March 31, 2025 to 872,343 at June 30, 2025. A summary of the recent rate increases which are driving increases in written premium is discussed above under “Overview—Trends and Geographical Distribution—Florida Trends.”

Rate changes are applied on new business submissions at policy inception and on renewals from the effective date of their renewal, and then are earned subsequently over the policy period. Rate changes that are implemented are in response to trends in claim costs driven by changes in costs of material and labor associated with claims and by law changes in the Florida market, the cost of weather events, the cost of catastrophe and other reinsurance protecting policyholders and the legacy effect of the cost to settle litigated claims in Florida. See “Overview—Trends and Geographical Distribution—Florida Trends and Summary of Recent Rate Changes.” Due to the time associated with analyzing data, preparing and submitting rate filings, implementing new rate levels and earning the corresponding premiums, the Insurance Entities’ rate adjustments typically lag their experience by months or even years. The Insurance Entities’ policies also adjust coverage limits at renewal to account for inflation since the last renewal which is based on third-party industry data sources that monitor inflation factors.

The Insurance Entities oversee their operations by monitoring policy counts, premiums, insured values, and other relevant factors. They periodically review and adjust policy rates and update underwriting guidelines, which influence new business volume and premium trends. Additionally, policy retention plays a crucial role in determining premium trends. These factors influence the amount of reinsurance coverage obtained annually. Direct premiums written continue to increase across the majority of states in which we conduct business. We had policies in force in 19 states at June 30, 2025. In addition, we are authorized to do business in Tennessee. As of June 30, 2025, policies in force increased by 38,910 policies, or 4.7%; premium in force increased $114.5 million, or 5.7%; and total insured value increased $38.4 billion, or 11.4%, compared to June 30, 2024.

Direct premium earned increased by $32.8 million, or 6.7%, for the three months ended June 30, 2025. This increase is due to premiums written over the past year, including rate filings, policy adjustments from inflation, and higher policy counts. See the discussion above for the ― “Overview-Summary of Recent Rate Changes.”

Reinsurance

Reinsurance enables our Insurance Entities to limit potential exposures to catastrophic events and other covered events, but it also increases costs, resulting in lower net earned premiums. These costs are generally recognized over the annual policy period (June 1-May 31). For the three months ended June 30, 2025, ceded premium earned increased $17.5 million to $163.2 million, (31.2% of direct premium earned), compared to $145.7 million, (29.7% of direct premiums earned) for the same period in 2024. The increase in 2025 is attributable to reduced free protection relative to 2024, when participation in Florida’s RAP program provided certain reinsurance at no cost for part of the 2024 period. Slightly higher costs related to the new 2025-2026 reinsurance contracts, compared with the 2024-2025 reinsurance contracts, also increased costs in 2025 when compared to 2024. Refer to the previous discussion and “Item 1— Note 4 (Reinsurance)” for further information on the 2025-2026 reinsurance programs.

Investment Results

Net investment income was $17.3 million for 2025, compared to $14.7 million in 2024, representing a 17.7% increase. This change was due to new investments generating higher returns and an increase of $128.7 million in invested balances during the quarter, partially offset by reduced yields from invested cash balances in 2025.

The yield curve continues to decline over time, particularly in the front end of the curve, which is impacting short duration cash reinvestment rates, along with longer duration rates, resulting in fixed income price increases and decreasing yields. We continue to monitor geopolitical events impacting the U.S. Treasuries market. See “Item 1— Note 3 (Investments)” for information on investment income.

Net realized and unrealized gains for the quarter were mainly due to portfolio adjustments, including exiting profitable and underperforming positions. See ―“Analysis of Financial Condition” for details on changes in total invested assets balances during 2025.

Commissions, Policy Fees and Other Revenue

The majority of commissions are those earned by our licensed reinsurance intermediary, Blue Atlantic Reinsurance Corporation (“BARC”). These commissions are paid to BARC by traditional open market third-party reinsurers for placing reinsurance with our Insurance Entities. BARC does not earn commissions on reinsurance provided by the Florida Hurricane Catastrophe Fund (FHCF), catastrophe bonds or Florida’s RAP program. Commissions paid to BARC are recognized on a pro-rata basis over the underlying reinsurance treaty period, which typically runs from June 1st to May 31st of the following year. Commission revenue increased $4.2 million, or 35.7%, from $11.7 million for 2024 to $15.9 million for 2025. This change was mainly attributable to increased reinsurance spending by the Insurance Entities replacing expiring Florida RAP and catastrophe bond contracts that did not generate commission. Additionally, commissions earned from reinstatement premiums related to Hurricanes Helene and Milton contributed to the total increase.

Policy fees were $5.6 million for both 2025 and 2024. Other revenue, representing revenue from policy installment fees, premium financing, and other miscellaneous income, was $2.0 million in 2025 compared to $2.3 million in 2024.

Operating Costs and Expenses

Losses and Loss Adjustment Expenses

Net losses and LAE, after estimated reinsurance recoveries and estimated subrogation recoveries, were $260.3 million with a 72.3% net loss ratio for the three months ended June 30, 2025, compared to $243.6 million and a 70.6% net loss ratio for the prior-year quarter. The increase in the net loss ratio for 2025 was primarily due to increased cost of reinsurance in the second quarter of 2025, which lowered net earned premiums, thus increasing the net loss ratio when compared to 2024. Increased premium volume in 2025 resulted in proportionate increase in net losses and LAE.

During the three months ended June 30, 2025, weather-related losses in Florida declined compared to the same development stage in previous years. In contrast, non-Florida weather-related losses increased; however, the total losses for 2025 remained comparable to those reported for 2024.

During 2025, there was $71 thousand of prior year development, compared to no net prior year development during 2024. This prior year development was associated with increases in net losses and LAE for prior year catastrophe events. Unfavorable prior-year development arises when claims are settled for amounts exceeding previous estimates or when the liabilities for prior-year claims increase. This situation often results from rising claims costs, the impact of material and labor inflation, and increased expenses associated with litigated claims. Further details can be found under “Overview—Trends and Geographical Distribution—Florida Trends” mentioned above. We continue to observe favorable claim trends on Florida losses after the effective date of the Florida reform legislation (December 16, 2022). However, claims under policies predating the reforms exhibit greater uncertainty. Consequently, these claims in aggregate have experienced and may in the future experience adverse development as claim settlements deviate from previously estimated amounts.

During 2025, the Company continues to settle catastrophe losses on Hurricanes Helene and Milton which occurred in 2024 along with hurricanes from prior years. Our reinsurance program provided the Insurance Entities with adequate protection beyond our retention limit for these prior hurricanes.

Legislation passed in late 2022 aims to reduce claim costs in Florida as the benefits of the reforms are realized. The Company is seeing some benefits of this legislation in 2025 for policies issued after the effective date of the reforms. The transition to the new laws will take several years as many reforms only apply to policies written or renewed after the effective date. Claims under prior laws are still being adjusted, and it will be several years before the impact of abusive practices under the old laws is completely removed, allowing the full benefits of the legislation to be realized.

Consolidated net losses and LAE include results from our adjusting company's activities within our holding system. Adjusting claims internally offers savings for our Insurance Entities and reinsurers. Our claims team and legal group work together efficiently in Florida to handle claims, achieving synergies that third parties cannot. This coordination improves claim handling and saves money by reducing LAE at a consolidated level, especially after catastrophes. We maintain adequate staffing levels to manage claims and litigation efforts related to catastrophes. The expenses associated with these resources during regular operations may result in minimal net benefits. Profits from our claim adjusting company reduce consolidated losses and LAE; for the three months ended June 30, 2025 and 2024, there was no significant financial impact from the claims adjusting companies’ profits on consolidated results.

General and Administrative Expenses

For 2025, general and administrative expenses were $91.8 million compared to $87.1 million during 2024, as follows (dollars in thousands):

39

For 2025, general and administrative expenses increased by $4.7 million, compared to 2024, which was the result of an increase in policy acquisition costs of $5.3 million and a decrease in other operating costs of $0.5 million. The total general and administrative expense ratio was 25.5% for 2025 compared to 25.3% for 2024.

• The policy acquisition costs increased by $5.3 million due to higher commissions resulting from a 4.4% increase in net earned premiums compared to the previous year, as well as increased commissions on the growth of premium outside of Florida, which incurs higher commissions. Additionally, accruals for expected increased agent bonus commission in 2025 contributed to higher acquisition costs.
• Other operating costs decreased by $0.5 million due to lower employee related expenses including stock-based compensation and employee benefits and welfare, partially offset by higher policy issuance related costs. The other operating cost ratio was 8.3% for 2025, compared to 8.9% for 2024.

Combined Ratio

As a result of the trends discussed in net premiums earned and net operating expense, the combined ratio for 2025 was 97.8% compared to 95.9% for 2024.

Interest and Amortization of Debt Issuance Costs

Interest and amortization of debt issuance costs were $1.6 million for each of the three months ended June 30, 2025 and 2024, the majority of which is related to our senior unsecured notes.

Income Tax Expense (Benefit)

Income tax expense was $11.3 million and $12.5 million for the three months ended June 30, 2025 and 2024, respectively. Our effective tax rate (“ETR”) decreased to 24.3% for 2025, as compared to 26.1% for 2024. See “Item 1—Note 9 (Income Taxes)” for a table of items reconciling statutory rates to the effective rate for 2025 and 2024.

Other Comprehensive Income (Loss)

Other comprehensive income, net of taxes for the three months ended June 30, 2025 was $10.3 million compared to other comprehensive income of $1.0 million for the prior year quarter reflecting after-tax changes in fair value of available-for-sale debt securities held in our investment portfolio and reclassifications out of accumulated other comprehensive income (loss) for available-for-sale debt securities sold. This quarter’s results reflect favorable shifts in market prices during 2025 compared to 2024. During 2025, maturing securities and investment returns were reinvested at market rates, reducing unrealized losses on maturing securities. The maturity of the remaining securities in an unrealized loss position has also reduced during the year. Over time, unrealized losses on securities in an unrealized loss position lessen as the remaining maturity shortens and securities approach their maturity or par value. See the discussion above and “Part II—Item 8—Note 14 (Other Comprehensive Income (Loss))” for additional information about the amounts comprising other comprehensive income (loss), net of taxes for these periods and “Part II—Item 8—Note 3 (Investments)” for explanations on changes in investments.

Non-GAAP

Core revenue, representing total GAAP revenue, excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) on equity investments, was $400.9 million for 2025, compared to $379.2 million for 2024.

Adjusted operating income (loss) represents GAAP operating income (loss), excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) on equity investments. Adjusted operating income was $48.8 million for 2025, compared to adjusted operating income of $48.5 million for 2024.

Adjusted operating income (loss) margin represents adjusted operating income (loss) divided by core revenue. Adjusted operating income margin was 12.2% for 2025, compared to adjusted operating income margin of 12.8% for 2024.

Adjusted net income (loss) available to common stockholders represents GAAP net income (loss) available to common stockholders, excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) on equity investments, net of tax. Adjusted net income available to common stockholders was $35.7 million for 2025, compared to adjusted net income available to common stockholders of $34.6 million for 2024.

Diluted adjusted earnings (loss) per common share represents adjusted net income (loss) available to common stockholders divided by weighted average diluted common shares outstanding. Diluted adjusted earnings (loss) per share computations exclude any potential common stock instruments that would decrease the loss per share, as they are anti-dilutive. Diluted adjusted earnings per common share was $1.23 for 2025, compared to diluted adjusted earnings per common share of $1.18 for 2024.

Results of Operation for the six months ending June 30, 2025, are compared to the same period last year, unless stated otherwise.

Results of Operations — Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Net income was $76.5 million for 2025, compared to net income of $69.1 million for 2024. Diluted earnings per share in 2025 were $2.64 compared to $2.35 in 2024. Positive factors in 2025 included higher net premiums earned, investment income, realized gains, and commission revenue, offset by unrealized losses in 2025 compared to unrealized gains in 2024 and higher operating costs. Direct premiums earned grew by 6.6% in 2025, due to premium growth in 17 states and more policies in force in 15 states. For 2025, the net loss ratio was 71.4% compared to 71.2% for 2024. The increase in the net loss ratio for 2025 was primarily due to increased cost of reinsurance in 2025, lowering net earned premiums and increasing the net loss ratio when compared to 2024. Increased premium volume in 2025 resulted in proportionate increase in net losses and LAE. There was $71 thousand net prior-year development on catastrophe losses in 2025, compared to no net prior-year development in 2024. As a result of the above and as further explained below, the combined ratio for 2025 was 96.4% compared to 95.7% for 2024. See “Overview—Trends and Geographical Distribution—Florida Trends” regarding our response to the Florida market.

A detailed discussion of our results of operations follows the table below (in thousands, except per share data).

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Premium Revenues

Direct premiums written increased by $39.4 million, or 3.8%, for 2025, driven by reductions in premiums within our Florida business of $22.1 million, or 2.7%, and premium growth in our other states business of $61.4 million, or 29.5%, as compared to 2024. The primary factors contributing to the increase in written premiums were the rate changes implemented in Florida and certain other states and policy inflation adjustments. Additionally, there was an increase in policies in force across 14 states. In total, policies in force increased 16,817, or 2.0%, from 855,526 at December 31, 2024 to 872,343 at June 30, 2025. A summary of the recent rate adjustments that are driving written premium is discussed above under “Overview—Trends and Geographical Distribution—Florida Trends.”

Rate changes are applied on new business submissions at policy inception and on renewals from the effective date of their renewal, and then are earned subsequently over the policy period. The recent rate changes in Florida are in response to claim costs in recent years driven by costs of material and labor associated with claims, the cost of weather events, the cost of catastrophe and other reinsurance protecting policyholders and, more importantly, the prevalence of represented and litigated claims in Florida. Due to the time associated with analyzing data, preparing, and submitting rate filings, implementing new rate levels and earning the corresponding premiums, the Insurance Entities’ rate adjustments typically lag behind their experience by months or even years. In addition, the Insurance Entities’ policies provide for coverage limits to be adjusted at renewal which adjust insured value coverage limits for the impact of changes in inflation occurring since the prior renewal. This is based on third-party industry data sources that monitor inflation factors such as changes in costs for residential building materials and labor.

Management continues to manage policy counts and exposures intended to control the growth of exposures relating to new business. Rate changes continue to take effect, and new business underwriting rules are reviewed and updated as needed in the states in which we underwrite. Direct premiums written continue to increase across the majority of states in which we conduct business. We have policies in force in 19 states as of June 30, 2025. In addition, we are authorized to do business in Tennessee. In 2024, UPCIC received approval from its regulators in Hawaii to withdraw from the state and non-renew all policies in Hawaii. As of June 30, 2025, no policies are in force in Hawaii, and UPCIC is in the process of completing its remaining administrative tasks to finalize its withdrawal from the state. As of June 30, 2025, policies in force increased by 38,910 policies, or 4.7%; premium in force increased $114.5 million, or 5.7%; and total insured value increased $38.4 billion, or 11.4%, compared to June 30, 2024.

Direct premium earned increased by $64.0 million, or 6.6%, for 2025. This change is attributed to the recognition of premiums written over the preceding twelve months, incorporating the effects of implemented rate filings and policy premium adjustments prompted by inflation-induced changes in insured values. See the discussion above for the “—Overview-Summary of Recent Rate Changes.”

Reinsurance

Reinsurance enables our Insurance Entities to limit potential exposures to catastrophic events and other covered events, but it also increases costs, resulting in lower net earned premiums. These costs are generally recognized over the annual policy period (June 1-May 31). For the six months ended June 30, 2025, ceded premium earned increased $27.0 million to $320.8 million, (30.9% of direct premium earned), compared to $293.7 million, (30.2% of direct premiums earned) for the same period in 2024. The increase in 2025 is attributable to reduced free protection relative to 2024, when participation in Florida’s RAP program provided certain reinsurance at no cost for part of the 2024 period. Slightly higher costs related to the new 2025-2026 reinsurance contracts, compared with the 2024-2025 reinsurance contracts, also increased costs in 2025 when compared to 2024. Refer to the previous discussion and “Item 1— Note 4 (Reinsurance)” for further information on the 2025-2026 reinsurance programs.

Investment Results

Net investment income was $33.3 million for the six months ended June 30, 2025, compared to $28.2 million for the six months ended June 30, 2024, an increase of $5.1 million, or 18.2%. Increased investments in our portfolio and higher average book yields on invested assets are driving growth in our investment income. However, a 50 basis point reduction by the Federal Reserve in September 2024, and market expectations of further cuts has reduced yields on our cash investments and longer dated (1yr-10yr) fixed income yields.

For the six months ended June 30, 2025, net realized and unrealized gains (losses) mainly reflected second quarter efforts to exit profitable and underperforming positions.

Commissions, Policy Fees and Other Revenue

The majority of commissions are those earned by our licensed reinsurance intermediary, Blue Atlantic Reinsurance Corporation (“BARC”). These commissions are paid to BARC by traditional open market third-party reinsurers for placing reinsurance with our Insurance Entities. BARC does not earn commissions on reinsurance provided by the Florida Hurricane Catastrophe Fund (FHCF), catastrophe bonds or Florida’s RAP program. Commissions paid to BARC are recognized on a pro-rata basis over the underlying reinsurance treaty period, which typically runs from June 1st to May 31st of the following year. Commission revenue increased $9.4 million, or 41.5%, from $22.7 million in 2024 to $32.1 million in 2025. This change was mainly attributable to increased reinsurance spending by Insurance Entities replacing expiring Florida RAP and catastrophe bond contracts that did not generate commission. Additionally, commissions earned from reinstatement premiums related to Hurricanes Helene and Milton contributed to the total increase.

Policy fees for 2025 were $10.1 million compared to $10.0 million for 2024. The increase of $0.1 million, or 1.2%, was the result of an increase in the combined total number of policies written during 2025 compared to 2024 in states in which we are permitted to charge this fee.

Other revenue, representing revenue from policy installment fees, premium financing, and other miscellaneous income, was $4.3 million for 2025 compared to $4.2 million for 2024.

Operating Costs and Expenses

Losses and Loss Adjustment Expenses

Net losses and LAE, after reinsurance recoveries, were $510.9 million with a 71.4% net loss ratio for 2025, compared to $483.8 million and 71.2% net loss ratio for 2024. The increase in the net loss ratio for 2025 was primarily due to increased cost of reinsurance in the second quarter of 2025, which lowered net earned premiums, thus increasing the net loss ratio when compared to 2024. Increased premium volume in 2025 resulted in proportionate increase in net losses and LAE.

Weather-related losses during 2025 significantly decreased in Florida compared to previous years at the same development stage. As of June 30, 2025, the weather impact is less than in any of the past four years. No major weather events have occurred during 2025. Consequently, the Company's loss estimates for 2025 reflect this lack of severe weather.

During the six months ending June 30, 2025, there was $71 thousand of prior year development, compared to no net prior year development during 2024. This prior year development was associated with increases in net losses and LAE for prior year catastrophe events. Unfavorable prior-year development arises when claims are settled for amounts exceeding previous estimates or when the liabilities for prior-year claims increase. This situation often results from rising claims costs, the impact of material and labor inflation, and increased expenses associated with litigated claims. Further details can be found under “Overview—Trends and Geographical Distribution—Florida Trends” mentioned above. We continue to observe favorable claim trends on Florida losses after the effective date of the Florida reform legislation (December 16, 2022). However, claims under policies predating the reforms exhibit greater uncertainty. Consequently, these claims in aggregate have experienced and may in the future experience adverse development as claim settlements deviate from previously estimated amounts.

During 2025, the Company continues to settle catastrophe losses on Hurricanes Helene and Milton which occurred in 2024 along with hurricanes from prior years. Our reinsurance program provided the Insurance Entities with adequate protection beyond our retention limit for these prior hurricanes.

Legislation passed in late 2022 aims to reduce claim costs in Florida as the benefits of the reforms are realized. The Company is seeing some benefits of this legislation in 2025 for policies issued after the effective date of the reforms. The transition to the new laws will take several years as many reforms only apply to policies written or renewed after the effective date. Claims under prior laws are still being adjusted, and it will be several years before the impact of abusive practices under the old laws is completely removed, allowing the full benefits of the legislation to be realized.

Consolidated net losses and LAE include results from our claims adjusting company's activities within our holding system. Adjusting claims internally offers savings for our Insurance Entities and reinsurers. Our claims team and legal group work together efficiently in Florida to handle claims, achieving synergies that third parties cannot. This coordination improves claim handling and saves money by reducing LAE at a consolidated level, especially after catastrophes. We maintain adequate staffing levels to manage claims and litigation efforts related to catastrophes. The expenses associated with these resources during regular operations may result in minimal net benefits. Profits from our claims adjusting company reduce consolidated losses and LAE; for the six months ended June 30, 2025 and 2024, there was no significant financial impact from the claims adjusting company’s profits on consolidated results.

General and Administrative Expenses

For 2025, general and administrative expenses were $179.1 million compared to $165.8 million during 2024, as follows (dollars in thousands):

For 2025, general and administrative expenses increased by $13.3 million compared to 2024, which was the result of an increase in policy acquisition costs of $11.0 million and an increase in other operating costs of $2.3 million. The total general and administrative expense ratio was 25.0% for 2025 compared to 24.5% for 2024. See “—Reinsurance” section above for further information.

• The increase in policy acquisition costs of $11.0 million was due to higher commissions resulting from a 5.4% increase in net earned premiums compared to the previous year, as well as increased commissions on the growth of premium outside of Florida, which incurs higher commissions. Additionally, accruals for expected increased agent bonus commission in 2025 contributed to higher acquisition costs.
• The increase in other operating expenses was largely driven by increased policy issuance and facility costs incurred in 2025 compared to 2024. The other operating cost ratio was 7.9% for each of the six months ended June 30, 2025 and 2024.

Combined Ratio

As a result of the trends discussed above for losses and LAE and general and administrative expenses, the combined ratio for 2025 was 96.4% compared to 95.7% for 2024.

Interest and Amortization of Debt Issuance Costs

Interest and amortization of debt issuance costs was $3.2 million for each of the six months ended June 30, 2025 and 2024.

Income Tax Expense (Benefit)

Income tax expense was $25.3 million for 2025, compared to an income tax expense of $26.3 million for 2024. Our effective tax rate (“ETR”) was 24.9% for 2025, as compared to 27.6% for 2024. See “Item 1—Note 9 (Income Taxes)” for a table of items reconciling statutory rates to the effective rate for six months ended June 30, 2025 and 2024.

Other Comprehensive Income (Loss)

Other comprehensive income, net of taxes for 2025 was $22.4 million compared to other comprehensive loss of $1.5 million for 2024 reflecting after-tax changes in fair value of available-for-sale debt securities held in our investment portfolio and reclassifications out of accumulated other comprehensive income (loss) for available-for-sale debt securities sold. The improvement in 2025 reflects favorable shifts in market prices during 2025 compared to 2024. During 2025, maturing securities and investment returns were reinvested at market rates, reducing unrealized losses on maturing securities. The maturity of the remaining securities in an unrealized loss position has also reduced during the year. Over time, unrealized losses on securities in an unrealized loss position lessen as the remaining maturity shortens and securities approach their maturity or par value. See the discussion above and “Item 1—Note 11 (Other Comprehensive Income (Loss))” for additional information about the amounts comprising other comprehensive income (loss), net of taxes for these periods and “Item 1—Note 3 (Investments)” for explanations on changes in investments.

Non-GAAP

Core revenue, representing total GAAP revenue, excluding net realized gains (losses) on investments and net changes in unrealized gains (losses) on equity investments, was $795.8 million for 2025 compared to $744.1 million for 2024.

Adjusted operating income (loss) represents GAAP operating income (loss), excluding net realized gains (losses) on investment and net changes in unrealized gains (losses) on equity investments. Adjusted operating income was $105.8 million for 2025 compared to adjusted operating income of $94.6 million for 2024.

Adjusted operating income (loss) margin represents adjusted operating income (loss) divided by core revenue. Adjusted operating income margin was 13.3% for 2025 compared to adjusted operating income margin of 12.7% for 2024.

Adjusted net income (loss) available to common stockholders represents GAAP net income (loss) available to common stockholders, excluding net realized gains (losses) on investment and net changes in unrealized gains (losses) on equity investments, net of tax. Adjusted net income available to common stockholders was $77.1 million for 2025 compared to adjusted net income available to common stockholders of $66.0 million for 2024.

Diluted adjusted earnings (loss) per common share represents adjusted net income (loss) available to common stockholders divided by weighted average diluted common shares outstanding. Diluted adjusted earnings per common share was $2.66 for 2025 compared to diluted adjusted earnings per share of $2.25 for 2024.

Analysis of Financial Condition—As of June 30, 2025 compared to December 31, 2024

We believe that the cash flows generated from operations will be sufficient to meet our working capital requirements for at least the next twelve months. We invest amounts considered to be in excess of current working capital requirements.

The following table summarizes, by type, the carrying values of investments as of the dates presented (in thousands):

Total invested assets were $1.50 billion as of June 30, 2025 compared to $1.37 billion as of December 31, 2024. The increase is primarily attributable to investment of excess cash into the portfolio, unrealized gains on our debt and equity securities, and increases in net investment income. Cash and cash equivalents were $367.1 million at June 30, 2025 compared to $259.4 million at December 31, 2024, an increase of 41.5%. See below “—Liquidity and Capital Resources” for more information. Cash and cash equivalents are invested short-term until needed to settle loss and LAE payments, reinsurance premium payments, and operating cash needs, or until they are deployed by our investment advisors.

See “Item 1—Condensed Consolidated Statements of Cash Flows” and “Item 1—Note 3 (Investments)” for explanations on changes in investments.

Prepaid reinsurance premiums reflect the portion of unearned ceded written premium, and may include reinstatement premiums, that will be earned on a pro-rata basis over the coverage period of our reinsurance program, which spans from June 1st to May 31st of the following year. The annual cost initially increases prepaid reinsurance, which is then reduced as prepaid reinsurance is recognized as ceded premiums earned in the Condensed Consolidated Statements of Income, over the policy period of the reinsurance, which typically runs from June 1st to May 31st. As of June 30, 2025, prepaid reinsurance increased by $376.3 million to $639.0 million primarily attributed to the Insurance Entities entering into the 2025-26 catastrophe reinsurance program, commencing on June 1, 2025, and expiring on May 31, 2026. For further details, please refer to “Part I—Item 2—“Reinsurance Program” regarding the Company’s reinsurance placement.

Reinsurance recoverables are the estimated amount of losses, LAE, and expenses to be recovered from reinsurers. As of June 30, 2025, it decreased by $245.6 million to $382.0 million, primarily due to the collection of ceded paid losses from Hurricanes Helene and Milton as well as other prior events collected during the quarter.

Premiums receivable, net represents amounts receivable from policyholders. The increase in premiums receivable, net of $5.7 million to $83.6 million as of June 30, 2025 is consistent with premium trends including seasonality and consumer payment behaviors.

Deferred policy acquisition costs (“DPAC”) increased by $4.0 million to $125.2 million as of June 30, 2025, and is consistent with written premium trends and changes in commissions paid to agents. See “Item 1—Note 5 (Insurance Operations)” for a roll-forward in the balance of our DPAC.

Deferred income taxes represent the estimated tax asset or tax liability caused by temporary differences between the tax return basis of certain assets and liabilities and amounts recorded in the financial statements. During the six months ended June 30, 2025, deferred income tax assets decreased by $27.1 million to $15.1 million, primarily due to an increase in unearned premiums. Each year in June the Insurance Entities enter into new catastrophe reinsurance agreements that increase prepaid reinsurance (ceded unearned premium) which has the effect of reducing deferred income taxes in the second quarter of each year. Deferred income taxes reverse in future years as the temporary differences between book and tax reverse.

See “Item 1—Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses)” for a roll-forward in the balance of our unpaid losses and LAE. Unpaid losses and LAE decreased by $193.4 million to $765.9 million as of June 30, 2025. Overall, unpaid losses and LAE decreased, as a result of payment of current and prior year claims including the settlement of Hurricanes Helene and Milton claims during 2025 along with normal recurring claim activity.

Unearned premiums represent the portion of direct premiums written that will be earned pro-rata in the future. The increase of $27.1 million from December 31, 2024 to $1.09 billion as of June 30, 2025 reflects the seasonality of our business during the year.

Advance premium represents premium payments made by policyholders ahead of the effective date of the policies. The increase of $37.6 million from December 31, 2024 to $83.8 million as of June 30, 2025 reflects customer payment behavior and the payment behavior of mortgage escrow service providers as well as premium trends.

Reinsurance payable, net, represents the unpaid reinsurance premium installments owed to reinsurers, unpaid reinstatement premiums due to reinsurers, and cash advances received from reinsurers, if any. On June 1st of each year, we renew our core catastrophe reinsurance program and record the estimated annual cost of our reinsurance program. These estimated annual costs are increased or decreased during the year based on premium adjustments or as a result of new placements during the year. The annual cost initially increases reinsurance payable, which is then reduced as installment payments are made over the policy period of the reinsurance, which typically runs from June 1st to May 31st. The balance increased by $489.1 million to $709.5 million as of June 30, 2025 as a result of the Insurance Entities entering into the 2025-26 reinsurance program effective June 1, 2025. See “—Liquidity and Capital Resources” for more information about timing of reinsurance premium installment payments.

Income taxes payable, or recoverable, are the amounts due to or from taxing jurisdictions within one year. An income tax payable arises when current income tax liabilities exceed tax payments, whereas an income tax recoverable occurs when tax payments exceed current income tax liabilities. As of June 30, 2025, the was an income tax recoverable of $9 million, compared to income tax payable of $6.6 million as of December 31, 2024.

Commission payable represents amounts due agents on renewal and new policies written and estimated bonus commissions. Commission payable increased by $3.5 million to $29.4 million as of June 30, 2025, primarily driven by seasonality in direct premiums written since year end.

Other liabilities and accrued expenses decreased by $7.5 million to $41.1 million as of June 30, 2025, primarily driven by a decrease in amounts payable for accrued taxes and fees along with a reduction in other operating accrued expenses..

See “—Liquidity and Capital Resources” for more information about the changes in additional paid-in capital during 2025.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity is a measure of a company’s ability to generate sufficient cash flows to meet its short- and long-term obligations. Funds generated from operations have been sufficient and we expect them to be sufficient to meet our current and long-term liquidity requirements.

The balance of cash and cash equivalents, excluding restricted cash, as of June 30, 2025 was $367.1 million, compared to $259.4 million at December 31, 2024. See “Item 1—Condensed Consolidated Statements of Cash Flows” for a reconciliation of the balance of cash and cash equivalents between June 30, 2025 and December 31, 2024. This increase is largely attributable to cash flows from operating activities offset by cash used in investing and financing activities. Our cash investment strategy at times includes cash investments where the right of offset against other bank accounts does not exist. A book overdraft, at times, occurs when aggregating the book balance of all accounts at a financial institution for accounts which have the right of offset, and if the aggregation results in a net negative book balance, that balance is reclassified from cash and cash equivalents in our Condensed Consolidated Balance Sheets to book overdraft. Cash and cash equivalents balances are available to settle book overdrafts, and to pay reinsurance premiums, expenses and claims. Reinsurance premiums are paid in installments during the reinsurance policy period, which runs from June 1st to May 31st of the following year. The FHCF reimbursement premiums are paid in three installments on August 1st, October 1st and December 1st, and third-party reinsurance premiums are generally paid in four installments on July 1st, October 1st, January 1st and April 1st, resulting in significant payments at those times. See “Item 1—Note 12 (Commitments and Contingencies)” and additional discussion below under the caption “—Material Cash Requirements” for more information.

The balance of restricted cash and cash equivalents as of June 30, 2025 and December 31, 2024 represents cash equivalents on deposit with certain regulatory agencies in the various states in which our Insurance Entities do business. In addition, restricted cash may include cash held in trust to collateralize certain policy obligations of our captive reinsurance arrangement. See “Item 1-Note 14 (Variable Interest Entities)”. Restricted cash and cash equivalents were $68.6 million as of June 30, 2025 and $2.6 million on December 31, 2024.

Liquidity is required at the holding company for us to cover the payment of holding company general operating expenses, provide for contingencies if needed, dividends to shareholders (if and when authorized and declared by our Board of Directors), payment for the possible repurchase of our common stock (if and when authorized by our Board of Directors), payment of our tax obligations to taxing authorities, settlement of taxes between subsidiaries in accordance with our tax sharing agreement, capital contributions to subsidiaries or surplus note contributions to the Insurance Entities, if needed, and interest and principal payments on outstanding debt obligations of the holding company. Effective in 2021 for UPCIC and 2022 for APPCIC, the holding company has put in place an ongoing surplus note arrangement with the Insurance Entities, which has been approved by FLOIR as the Insurance Entities’ domestic regulator. Surplus notes are unsecured debt issued by the Insurance Entities that are subordinated to all claims by policyholders and creditors, with interest and principal payments on the surplus notes to the holding company being made only upon the FLOIR’s express approval. Surplus notes are considered bonds in function and payout structure, but are accounted for as equity in the statutory reporting of the Insurance Entities. The holding company has outstanding with the Insurance Entities $178.3 million in surplus notes and accrued interest as of June 30, 2025. Under the terms of the surplus notes, interest accrues at a variable rate which resets annually (currently 11.33% for 2025). The declaration and payment of future dividends to our shareholders, and any future repurchases of our common stock, will be at the discretion of our Board of Directors and will depend upon many factors, including our operating results, financial condition, debt covenants and any regulatory constraints. New regulations or changes to existing regulations or their interpretations imposed on the Company and its affiliates may also impact the availability, amount and timing of future dividend payments to the parent. Principal sources of liquidity for the holding company include dividends paid by our service entities generated from income earned on fees paid by the Insurance Entities to affiliated companies for general agency, inspections and claims adjusting services. Dividends are also paid from income earned from brokerage commissions paid by third party reinsurers earned on reinsurance contracts placed by our wholly-owned subsidiary, Blue Atlantic Reinsurance Corporation, and policy fees charged to policyholders. We also maintain high quality investments in our portfolio as a source of liquidity along with ongoing interest and dividend income earned from those investments.

The maximum amount of dividends that can be paid by Florida insurance companies without prior approval of the FLOIR is subject to restrictions as referenced below and in “Item 1—Note 5 (Insurance Operations).” Dividends from the Insurance Entities can only be paid from accumulated unassigned funds derived from net operating profits and net realized capital gains. Subject to such accumulated unassigned funds, the maximum dividend that may be paid by the Insurance Entities to Protection Solutions, Inc. (“PSI”, formerly known as Universal Insurance Holding Company of Florida), without prior approval (an “ordinary dividend”) is further limited to the lesser of statutory net income from operations of the preceding calendar year or statutory unassigned surplus as of the preceding year end. During the six months ended June 30, 2025 and the year ended December 31, 2024, the Insurance Entities did not pay dividends to PSI. As of June 30, 2025 and December 31, 2024, the Insurance Entities did not have the capacity to pay ordinary dividends.

On November 23, 2021, we issued $100 million of 5.625% Senior Unsecured Notes due 2026. We used the net proceeds to support the Insurance Entities’ statutory capital requirements and for general corporate purposes. If necessary, the Company also has amounts available under our unsecured revolving loan as discussed in “Item 1—Note 7 (Long-term debt).”

Liquidity for the Insurance Entities is primarily required to cover payments for reinsurance premiums, claims payments including potential payments of catastrophe losses (offset by recovery of any reimbursement amounts under our reinsurance agreements), fees paid to affiliates for managing general agency services, inspections and claims adjusting services, agent commissions, premium and income taxes, regulatory assessments, general operating expenses, and interest and principal payments on debt obligations. The principal source of liquidity for the Insurance Entities consists of the revenue generated from the collection of premiums earned, net, interest and dividend income from the investment portfolio, the collection of reinsurance recoverables and financing fees.

Our insurance operations provide liquidity as premiums are generally received months or even years before potential losses are paid under the policies written. In the event of catastrophic events, many of our reinsurance agreements provide for “cash advance” whereby reinsurers advance or prepay amounts to us, thereby providing liquidity, which we utilize in the claim settlement process. In addition, the Insurance Entities maintain substantial investments in highly liquid, marketable securities, which would generate funds upon sale. The average credit rating on our available-for-sale securities was A+ as of June 30, 2025 and December 31, 2024. Credit ratings are a measure of collection risk on invested assets. Credit ratings are provided by third party nationally recognized rating agencies and are periodically updated. Management establishes guidelines for minimum credit rating and overall credit rating for all investments. The duration of our available-for-sale securities was 3.5 years at June 30, 2025 compared to 3.4 years at December 31, 2024. Duration is a measure of a bond’s sensitivity to interest rate changes and is used by management to limit the potential impact of longer-term investments.

The Insurance Entities are responsible for losses related to catastrophic events in excess of coverage provided by the Insurance Entities’ reinsurance programs and retentions before our reinsurance protection commences. Also, the Insurance Entities are responsible for all other losses that otherwise may not be covered by the Insurance Entities reinsurance programs and any amounts arising in the event of a reinsurer default. Losses or a default by reinsurers may have a material adverse effect on either of the Insurance Entities or on our business, financial condition, results of operations and liquidity. See “Item 1—Note 4 (Reinsurance)” for more information.

Capital Resources

Capital resources serve to protect policyholders, provide financial stability for underwriting insurance risks, and enable ongoing business development. The following table provides our stockholders’ equity, total long-term debt, total capital resources, debt-to-total capital ratio and debt-to-equity ratio as of the dates presented (dollars in thousands):

Capital resources, net increased by $84.2 million for the six months ended June 30, 2025, reflecting a net increase in total stockholders’ equity, partially offset by a decline in long-term debt. The change in stockholders’ equity was the result of our net income in the six months ended June 30, 2025 offset by dividends to shareholders. The change in accumulated other comprehensive income (loss) improved as a result of the reduction in unrealized losses in our debt securities portfolio. See the Condensed Consolidated Statements of Stockholders’ Equity and “Item 1—Note 8 (Stockholders’ Equity)” for an explanation of changes in treasury stock. The reduction during 2025 in long-term debt was primarily the result of principal payments on long-term debt of $0.7 million offset by amortization of debt issuance costs of $0.35 million on our 5.625% Senior Unsecured Notes due 2026. See “— Liquidity and Capital Resources” for more information.

Additional paid-in-capital increased by $2.1 million primarily from increases in share-based compensation for the six months ended June 30, 2025.

The debt-to-total capital ratio is total long-term debt divided by total capital resources, whereas the debt-to-equity ratio is total long-term debt divided by stockholders’ equity. These ratios help management measure the amount of financing leverage in place in relation to equity and future leverage capacity.

Non-GAAP

Adjusted common stockholders’ equity, representing GAAP common stockholders’ equity, excluding accumulated other comprehensive income (loss), was $498.5 million as of June 30, 2025 and $436.3 million as of December 31, 2024.

Adjusted book value per common share, representing adjusted common stockholders’ equity divided by outstanding common shares at the end of the reporting period, was $17.85 as of June 30, 2025 and $15.53 as of December 31, 2024.

Adjusted return on common equity representing actual or annualized adjusted net income (loss) available to common stockholders divided by average adjusted common stockholders' equity, with the denominator excluding current period income statement after-tax net realized gains (losses) on investments and net changes in unrealized gains (losses) on equity investments, was 33.0% as of June 30, 2025, 30.0% as of June 30, 2024, and 12.4% as of December 31, 2024.

Unsecured Revolving Loan

As discussed in “Item 1—Note 7 (Long-term Debt),” the Company entered into a committed and unsecured $50.0 million revolving credit line with JP Morgan Chase Bank N.A. This agreement succeeded the previous $50.0 million unsecured revolving credit line with J.P. Morgan Chase, N.A. As of June 30, 2025, the Company has not borrowed any amount under this unsecured revolving loan. The Company must pay an annual commitment of 0.50% of the unused portion of the commitment. Borrowings mature on May 29, 2026, 364 days after the inception date and carries an interest rate of prime rate plus a margin of 2.0% on borrowings. The credit line is subject to annual renewals. The credit line contains customary financial and other covenants, with which the Company is in compliance.

Long-term Debt

In November 2021, we issued and sold $100 million of 5.625% Senior Unsecured Notes due 2026 (the “Notes”) to certain institutional accredited investors and qualified institutional buyers. The Notes mature on November 30, 2026, at which time the entire $100 million of principal is due and payable. At any time on or after November 30, 2023, the Company may redeem all or part of the Notes. See “Item 1—Note 7 (Long-term debt)” for additional details. As of June 30, 2025, we were in compliance with all applicable covenants.

We will also continue to evaluate opportunities to access the debt capital markets to raise additional capital. We anticipate any proceeds would be used for general corporate purposes, including investing in the capital and surplus of the Insurance Entities.

In addition to the funds typically generated from our operations, we maintain a prudent investment portfolio, mainly consisting of high-grade fixed income securities. Our primary goal is to safeguard capital and ensure sufficient liquidity for potential claims and other financial requirements. The portfolio also aims to achieve a comprehensive return, with a focus on investment income. Our operations have historically produced a steady flow of funds, contributing to the growth of our cash and investments. We have never needed to sell off investments to support our operations or finance activities.

In 2006, UPCIC entered into a $25.0 million surplus note with the State Board of Administration of Florida (the “SBA”) under Florida’s Insurance Capital Build-Up Incentive Program (the “ICBUI”). The outstanding balance on this loan is $1.84 million as of June 30, 2025. The surplus note has a twenty-year term, with quarterly payments of interest based on the 10-year Constant Maturity Treasury Index. As of June 30, 2025, UPCIC’s net written premium to surplus ratio and gross written premium to surplus ratio were in excess of the required minimums and, therefore, UPCIC is not subject to increases in interest rates. See “Item 1—Note 7 (Long-term debt)” for additional details. At June 30, 2025, UPCIC was in compliance with the terms of the surplus note and with each of the loan’s covenants as implemented by rules promulgated by the SBA. Total adjusted capital and surplus, which includes the surplus note, was in excess of regulatory requirements for both UPCIC and APPCIC.

Looking Forward

We continue to monitor various financial metrics related to our business. Although we have not encountered significant adverse effects on our operations or liquidity, conditions are subject to change based on the economic outcomes and the pace and extent of economic, regulatory, and market developments and their impact on us. For more information on our response to the Florida market, please refer to “Overview—Trends and Geographical Distribution—Florida Trends.”

Common Stock Repurchases

We may repurchase shares from time to time at our discretion, based on ongoing assessments of our capital needs, the market price of our common stock, and general market conditions. We will fund the share repurchase program with cash from operations. During 2025, there was one authorized repurchase plan in effect:

• On March 11, 2024, our Board of Directors authorized the repurchase of up to $20.0 million of our common stock through March 11, 2026 (“The March 2026 Share Repurchase Program”) pursuant to which we have repurchased 106,189 shares of our common stock at an aggregate cost of approximately $2.6 million. As of June 30, 2025, we have repurchased all authorized common stock under the March 2026 Share Repurchase Program.
• On May 1, 2025, our Board of Directors authorized the repurchase of up to $20.0 million of our common stock through May 1, 2027 (“The May 2027 Share Repurchase Program”), pursuant to which we have repurchased 180,818 shares of our common stock at an aggregate cost of approximately $4.8 million. As of June 30, 2025, we have the ability to purchase approximately $15.2 million of our common stock under the May 2027 Share Repurchase Program.

In total, during the quarter ended June 30, 2025, we repurchased an aggregate of 287,007 shares of our common stock in the open market at an aggregate purchase price of $7.4 million. See “Part II—Item 2—Unregistered Sales of Equity Securities and Use of Proceeds” for share repurchase activity during the three months ended June 30, 2025.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the financial condition, results of operations, liquidity, or capital resources of the Company, except for multi-year reinsurance contract commitments for future years that will be recorded at the commencement of the coverage period. See “Item 1—Note 12 (Commitments and Contingencies)” for more information.

Cash Dividends

The following table summarizes the dividends declared and paid by the Company during the six months ended June 30, 2025:

In addition, see “Item 1—Note 15 Subsequent Events, on July 9, 2025, the Company declared a quarterly cash dividend of $0.16 per share of common stock, payable on August 8, 2025, to shareholders of record on August 1, 2025.

MATERIAL CASH REQUIREMENTS

The following table represents our material cash requirements for which cash flows are fixed or determinable as of June 30, 2025 (in thousands):

(1) The amount represents the payment of reinsurance premiums payable under multi-year commitments. See “Item 1—Note 12 (Commitments and Contingencies).”

(2) There are generally no notional or stated amounts related to unpaid losses and LAE. Both the amounts and timing of future loss and LAE payments are estimates and subject to the inherent variability of legal and market conditions affecting the obligations and make the timing of cash outflows uncertain. The ultimate amount and timing of unpaid losses and LAE could differ materially from the amounts in the table above. Further, the unpaid losses and LAE do not represent all the obligations that will arise under the contracts, but rather only the estimated liability incurred through June 30, 2025. Unpaid losses and LAE are net of estimated subrogation recoveries. In addition, these balances exclude amounts recoverable from our reinsurance program. See “Item 1—Note 4 (Reinsurance)” and “—Note 6 (Liability for Unpaid Losses and Loss Adjustment Expenses).”

(3) Long-term debt consists of a Surplus note and 5.625% Senior unsecured notes. See “Item 1—Note 7 (Long-Term Debt).”

IMPACT OF INFLATION AND CHANGING PRICES

Our financial statements, prepared in accordance with GAAP, reflect historical dollar values without adjustments for inflation. Performance is influenced by various economic, regulatory, and market factors, including fluctuations in interest rates and inflation. Although efforts are made to consider inflation when determining insurance premiums, competitive and regulatory limitations exist. Interest rates directly affect the market value of our portfolio and investment returns. Interest rates also have an impact on our future borrowing costs. Prolonged inflation could significantly impact future costs, including costs related to settling estimated losses and LAE liabilities.

ARRANGEMENTS WITH VARIABLE INTEREST ENTITIES

We entered into a reinsurance captive arrangement with a VIE in the normal course of business, and consolidated the VIE since we are the primary beneficiary.

For a further discussion of our involvement with the VIE, see “Item 1—Note 14 (Variable Interest Entities).”

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes during the period covered by this Quarterly Report on Form 10-Q to Critical Accounting Policies and Estimates previously disclosed in “Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2024.

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. For more information regarding our key performance indicators, please refer to the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Performance Indicators.”

The following table presents the reconciliation of GAAP revenue to core revenue, which is a non-GAAP measure (in thousands):

The following table presents the reconciliation of GAAP operating income (loss) to adjusted operating income (loss), which is a non-GAAP measure (in thousands):

The following table presents the reconciliation of GAAP operating income (loss) to adjusted operating income (loss) and margin, which are non-GAAP measures (in thousands):

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The following table presents the reconciliation of GAAP net income (loss) available to common stockholders to adjusted net income (loss) available to common stockholders, which is a non-GAAP measure (in thousands):

The following table presents the reconciliation of GAAP stockholders’ equity to adjusted stockholders’ equity and book value per common share to adjusted book value per common share, which is a non-GAAP measure (in thousands):

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The following table presents the reconciliation of GAAP ROCE to adjusted ROCE, which is a non-GAAP measure (in thousands):

(1) Adjusted average common stockholders’ equity excludes current period after-tax net realized gains (losses) on investments and net changes in unrealized gains (losses) on equity investments.

Market risk is the potential for economic losses due to adverse changes in fair market value of available-for-sale debt securities, equity securities (“Financial Instruments”) and investment in real estate. We carry all of our Financial Instruments at fair market value and investment in real estate at net book value in our statement of financial condition. Our investment portfolio as of June 30, 2025 is comprised of available-for-sale debt securities and equity securities, carried at fair market value, which expose us to changing market conditions, specifically interest rates and equity price changes.

The primary objectives of the investment portfolio are the preservation of capital and providing adequate liquidity for potential claim payments and other cash needs. The portfolio’s secondary investment objective is to provide a total rate of return with an emphasis on investment income. None of our investments in risk-sensitive Financial Instruments were entered into for trading purposes.

See “Item 1—Note 3 (Investments)” for more information about our Financial Instruments.

Interest Rate Risk

Interest rate risk is the sensitivity of the fair market value of a fixed rate Financial Instrument to changes in interest rates. Generally, when interest rates rise, the fair value of our fixed rate Financial Instruments declines.

The following tables provide information about our fixed income Financial Instruments as of June 30, 2025 compared to December 31, 2024, which are sensitive to changes in interest rates. The tables present the expected cash flows of Financial Instruments based on years to effective maturity using amortized cost compared to fair market value and the related book yield compared to coupon yield (dollars in thousands):

All securities, except those with perpetual maturities, were categorized in the tables above utilizing years to effective maturity. Effective maturity takes into consideration all forms of potential prepayment, such as call features or prepayment schedules, which shorten the lifespan of contractual maturity dates.

Equity Price Risk

Equity price risk is the potential for loss in fair value of Financial Instruments in common stock and mutual funds and other from adverse changes in the prices of those Financial Instruments.

The following table provides information about the Financial Instruments in our investment portfolio subject to price risk as of the dates presented (in thousands):

A hypothetical decrease of 20% in the market prices of each of the equity securities held at June 30, 2025 and December 31, 2024 would have resulted in a decrease of $18.6 million and $15.6 million, respectively, in the fair value of those securities.

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that disclosure controls and procedures were effective as of June 30, 2025, to ensure that information required to be disclosed by the Company in its reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission’s (“SEC”) rules and forms and that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There was no change in the Company’s internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Please refer to the risk factors previously disclosed in “Part I, Item 1A—Risk Factors,” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.