American Integrity Insurance Group, Inc.: Form 10-Q for the period ended Jun 30, 2026

The following discussion provides a detailed analysis of our financial condition, results of operations, liquidity, and capital

resources. The following discussion and analysis of our financial condition and results of operations should be read in

conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly

Report on Form 10-Q, as well as our audited consolidated financial statements and related notes included in our Annual

Report on Form 10-K for the year ended December 31, 2025. This analysis includes forward-looking statements, which are

subject to various risks and uncertainties. Actual results may differ from projections due to factors beyond our control, as

detailed under Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and under Part I, Item 1A “Risk

Factors” in our Annual Report on Form 10-K. References to the “Company,” “American Integrity,” “we,” “us” or “our”

refer to American Integrity Insurance Group, Inc.

Overview

We are a profitable and growing insurance group headquartered in Tampa, Florida. Through our insurance carrier

subsidiary, American Integrity Insurance Company (“AIIC”), we provide personal residential property insurance for single-

family homeowners and condominium owners, as well as coverage for vacant dwellings and investment properties,

predominantly in Florida. Florida represented 92.0% of our policies in-force as of June 30, 2026. As of June 30, 2026,

73.2% of our in-force premium was in the insurance market in which we underwrite and sell policies to policyholders

where we choose to offer coverage without the assistance of residual market mechanisms (the “Voluntary Market”).

Moreover, 93.7% of our Voluntary Market in-force premium was in our core Florida market and 6.3% was collectively in

South Carolina, Georgia, and North Carolina, where we have strategically expanded to support and enhance our

relationships with our builder agency network.

We strive to generate consistent underwriting profits, exclusive of investment income or gains and losses from the sale of

invested assets. Our goal is to achieve profitability across economic and insurance cycles by maintaining a conservative

financial position, increasing premiums written and risk exposure when we believe market conditions are favorable, and

reducing risk exposure during periods when we believe market conditions are unfavorable and earning profits is more

challenging. AIIC, our statutory insurance carrier, maintains a Financial Stability Rating of “A” (Exceptional) by

Demotech, and a financial strength rating of “BBB+” with a stable outlook from the Kroll Bond Rating Agency, LLC.

Additionally, the Company maintains a BB+ issuer rating, with a stable outlook, from the Kroll Bond Rating Agency, LLC.

We generate revenue primarily from insurance premiums earned, net of reinsurance ceded. We also generate revenue from

policy fees, installment income fees, income generated through the investment of our assets, and realized gains or losses on

the sale of our invested assets. Our financial results are highly seasonal due to the occurrence of hurricanes and tropical

storms typically between June 1st and November 30th of each year in Florida and the other states in which we operate. Our

reinsurance purchasing, including our catastrophe excess of loss reinsurance coverages, which commence on June 1st

annually, also materially influences our financial results and are impacted by changes in reinsurance rates or alterations in

terms and conditions, including in attachment or loss retention levels.

Key Factors Affecting Our Results of Operations and Comparability Between Periods

Florida Trends. Prior to the legislative reforms passed in December 2022, the legal and regulatory environment in Florida

posed significant challenges for property and casualty insurers, particularly due to excessive litigation and aggressive

claims practices relating to issues such as assignment of benefits abuse, extended statute of limitations, and attorney fee

multipliers, which led to disproportionately high litigation rates in Florida relative to other geographies. These factors

increased claims costs and reinsurance expenses, impacting the profitability of insurers operating in Florida. Recent

legislative changes, however, have improved operating conditions in the Florida insurance market, including a reduction in

claims litigation activity since the reforms were enacted in December 2022. We believe these legislative reforms provide

greater opportunities for us to profitably underwrite residential property insurance in Florida.

Citizens “Take-out” Program. Pursuing take-outs from Citizens Property Insurance Corporation (“Citizens”) may distort

the comparability of our financial results between periods depending on the number of policies and unearned premiums

assumed. In 2026, we expect take-outs to be a smaller portion of our gross premiums written compared to 2024 and 2025.

While we expect there will continue to be opportunities to assume some policies from Citizens, we believe the number of

policies available that meet our underwriting and profitability standards has declined and may continue to decline over

time. Policies assumed via the Citizens take-out program carry immaterial upfront acquisition costs and are covered by our

current treaty year reinsurance program which may impact comparability between periods. As a result, periods of heavy

take-out activity result in lower expense ratios and loss ratios.

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Changing Climate Conditions. Over the past two decades, the increasing frequency and severity of severe weather events

have highlighted the unpredictable nature of climate trends. Climate change has the potential to influence the occurrence

and intensity of natural disasters, including convective storms, hurricanes, tornadoes, hailstorms, severe winter storms, and

flooding, among others. This unpredictability creates challenges in assessing future risks and exposures.

We continuously monitor climate data and collaborate with climate change and catastrophe modeling experts to refine our

risk assessment models, enhancing our preparedness for evolving climate-related challenges.

Seasonality of our Business. Our business is seasonal as hurricanes and other named storms typically occur in the

geographies where we operate between June 1st and November 30th of each year. This may result in significant variability

in our losses and loss adjustment expenses (“LAE”) depending on the number, location and strength of hurricanes and

other named storms during these months as compared to other months. In addition, because our catastrophe reinsurance

program renews on June 1st each year, the ceded premiums written recorded in the second quarter are typically

substantially higher than any other quarter during a fiscal year. In some instances, this will cause our reported net

premiums written to be negative (or substantially lower than other quarters) in the second quarter of each year.

Inflation. We may be adversely affected during periods of high inflation, primarily because of increased labor and material

costs, which could cause claims and claim expenses to increase. This has been evident since the COVID-19 pandemic in

early 2020. In addition, periods of high inflation can lead to periods of high interest rates, which may impact the

performance of our investment portfolios. The impact of inflation on our results cannot be known with any certainty;

however, we revise our reserves for unpaid losses as additional information becomes available, and reflect adjustments to

our reserves, if any, in our earnings in the periods in which we determine the adjustments are necessary. We monitor

inflation trends and factor them into the pricing of our new business and renewal policies.

Cost and Availability of Reinsurance. We purchase excess of loss and quota share reinsurance as part of our capital

management strategy and in an effort to reduce volatility of earnings and protect our balance sheet from the impact of

potential catastrophe events. Our ability to implement an effective reinsurance strategy is dependent, in part, on the cost

and availability of reinsurance coverage. We ceded 60.5% and 69.7% of our gross premiums earned in the six months

ended June 30, 2026 and June 30, 2025, respectively.

Quota share. Effective January 1, 2026, we reduced the percentage of our ceding commission on our quota share

reinsurance treaty from 40% to 25%, which impacted the comparability of our results between periods. A lower ceding

commission increases the amount of premiums we retain on policies we write, and the reduction in the ceding commission

on our quota share reinsurance treaty also reduces the amount reimbursed by reinsurers pursuant to the treaty, which

increases policy acquisition expenses and general and administrative expenses.

Initial Public Offering and Corporate Contribution

On May 9, 2025, we completed our initial public offering (the “IPO”) of an aggregate of 6,875,000 shares of the

Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price to the public of $16.00 per share,

6,250,000 of which shares were sold by the Company and 625,000 of which shares were sold by certain selling

stockholders. The gross proceeds to us from the IPO were $100 million, and gross proceeds to the selling stockholders

from the IPO were $10 million, before deducting underwriting discounts and commissions and estimated offering

expenses. On May 13, 2025, the underwriters completed the exercise of their option to purchase an additional 1,031,250

shares of Common Stock from the selling stockholders resulting in an additional $16.5 million in gross proceeds to the

selling stockholders, before deducting underwriting discounts and commissions. We did not receive any gross proceeds

from the sales of shares of Common Stock by the selling stockholders. In connection with our IPO, we effected a net

issuance of 417,470 shares of restricted stock to certain of our employees and consultants (the “Restricted Stock Grant”)

after giving effect to the withholding of approximately 234,587 shares of Common Stock to satisfy the estimated tax

withholding and remittance obligations (the “Restricted Stock Grant Net Settlement”). We incurred a one-time share-based

compensation expense of $10.4 million in connection with the Restricted Stock Grant and paid $3.8 million in connection

with the Restricted Stock Grant Net Settlement. The compensation expense for these awards was recognized in the second

quarter of 2025. Immediately prior to the IPO, the owners of the equity interests of American Integrity Insurance Group,

LLC (“AIIG”) contributed all of their equity interests to the Company in exchange for an aggregate of 12,904,495 shares of

Common Stock.

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Results of Operations

The following table summarizes our results of operations for the three and six months ended June 30, 2026 and 2025:

($ in thousands, except per share data)

(1) Book value per share is a key financial metric and is the ratio of shareholders’ equity to shares outstanding, each as of the balance

sheet date.

(2) Loss ratio is a key business metric and is the ratio of losses and LAE to net premiums earned plus policy fees. Management uses

this operating metric to analyze our loss trends and believes it is useful for investors to evaluate this component separately from our

other operating expenses.

(3) Expense ratio is a key business metric and is the ratio of policy acquisition expenses and general and administrative expenses to net

premiums earned plus policy fees. Management uses this metric to analyze our expense trends and believes it is useful for investors

to evaluate these components separately from our loss and LAE.

(4) Combined ratio is a key business metric, defined as the sum of the loss ratio and the expense ratio. Management uses this operating

metric to analyze our total expense trends and believes it is a key indicator for investors when evaluating the overall profitability of

our business.

(5) Return on equity is a key business metric, defined as net income divided by the average beginning and ending shareholders’ equity

during the applicable period. This metric is annualized for interim periods by multiplying by the applicable ratio in order to present

return on equity consistently.

(6) Ceded catastrophe excess of loss premiums ratio is a key business metric and a non-GAAP measure defined as ceded catastrophe

excess of loss premiums earned divided by gross premiums earned. We view this ratio as meaningful to our business as it provides a

view into the cost of our catastrophe reinsurance program. The most directly comparable GAAP financial measure is the ratio of

ceded premiums earned to gross premiums earned. The ceded catastrophe excess of loss premiums ratio should not be considered a

substitute for ceded premiums earned and does not reflect the overall profitability of our business.

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(7) Net underlying loss and loss adjustment expense ratio is a key business metric and a non-GAAP measure defined as the ratio of loss

and LAE, net, less current year net catastrophe losses and net prior year reserve development divided by net premiums earned plus

policy fees. We view this ratio as meaningful to our business as it allows us to analyze our loss trends before the impact of

catastrophe losses and prior year reserve development. The most directly comparable GAAP measure is the loss ratio. The net

underlying loss and LAE ratio should not be considered a substitute for the loss ratio and does not reflect the overall profitability of

our business.

(8) Gross underlying loss and loss adjustment expense ratio is a key business metric and a non-GAAP measure defined as the ratio of

net underlying loss and LAE plus ceded non-catastrophe losses divided by total gross premiums earned and policy fees. We view

this ratio as meaningful to our business as it allows us to analyze our loss trends before the impact of reinsurance and to evaluate the

cost of non-catastrophe losses for every dollar of gross premiums earned. The most directly comparable GAAP measure is the loss

ratio. The gross underlying loss and LAE ratio should not be considered a substitute for the loss ratio and does not reflect the overall

profitability of our business.

Policies In-Force

Policies in-force represents the number of active insurance policies with coverage in effect as of the end of the period

referenced.

In-force premium represents the annual premium for active insurance policies with coverage in effect as of the end of the

period referenced. Our geographic diversification strategy, including expansion into states such as South Carolina, Georgia,

and North Carolina, has generally resulted in lower average premiums compared to Florida due to our view on the

appropriate amount to charge for the risk we underwrite.

The following table shows our policies in-force and in-force premium by product as of June 30, 2026 and June 30, 2025:

($ in thousands)

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The following table shows our policies in-force and in-force premiums by county as of June 30, 2026 and June 30, 2025:

($ in thousands)

Policies in-force were 461,714 as of June 30, 2026, an increase of 15.7% compared to policies in-force of 399,138 as of

June 30, 2025, and an increase of 5.6% compared to policies in-force of 437,308 as of March 31, 2026. The increase in our

policies in-force was primarily due to new policies written through the Voluntary Market and the 2025 Citizens take-outs.

During the three months ended June 30, 2026, we wrote 42,863 policies in the Voluntary Market, which was an increase of

15,077 compared to 27,786 new policies written in the Voluntary Market during the three months ended June 30, 2025. We

experienced policy retention rates of 84.4% during the second quarter of 2026, up from 81.5% during the second quarter of

2025 and up from 83.6% during the first quarter of 2026.

The following table shows our policies in-force and in-force premium by source:

($ in thousands)

(1) Reflects policies assumed from Citizens in or prior to 2014 that have since been renewed directly with the Company.

The Company did not conduct any take-outs in the years 2015 through 2023.

(2) Reflects policies assumed from Citizens in 2024 and 2025 that have since renewed directly with the Company.

(3) There were 68,844 policies assumed from Citizens during 2024; and 53,831 policies, or 78.2%, were still in-force as of

June 30, 2026.

(4) There were 33,861 policies assumed from Citizens during 2025; and 28,887 policies, or 85.3%, were still in-force as of

June 30, 2026.

(5) There were 665 policies assumed from Citizens during the six months ended June 30, 2026; and 641 policies, or

96.4%, were still in-force as of June 30, 2026.

(6) Reflects policies assumed from Citizens during the stated calendar year that have less than a year remaining under

their current Citizens policy and will be offered a renewal policy with the Company upon expiration.

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

Revenues

Gross premiums written increased by $39.6 million, or 13.8%, to $326.6 million for the three months ended June 30, 2026,

compared to $287.0 million for the three months ended June 30, 2025. The increase was primarily driven by growth in our

Voluntary Market writings.

Gross premiums earned increased to $242.3 million for the three months ended June 30, 2026, from $223.7 million for the

three months ended June 30, 2025. The $18.6 million, or 8.3%, increase was due largely to our increase in gross premiums

written.

Ceded premiums earned decreased $20.0 million, or 12.7%, to $137.6 million for the three months ended June 30, 2026,

from $157.6 million for the three months ended June 30, 2025. The decrease in ceded premiums earned was primarily due

to the reduction in our non-catastrophe quota share reinsurance arrangement.

Net premiums earned grew by $38.5 million, or 58.2%, reaching $104.7 million for the three months ended June 30, 2026,

up from $66.2 million for the three months ended June 30, 2025. This increase was due largely to the increase in gross

premiums earned and the decrease in ceded premiums earned.

Policy fees increased $0.7 million, or 25.1%, to $3.7 million for the three months ended June 30, 2026, from $3.0 million

for the three months ended June 30, 2025. The increase in policies written during the three months ended June 30, 2026

contributed to the increase in policy fees.

Net investment income increased $1.4 million, or 30.8%, to $6.2 million for the three months ended June 30, 2026 from

$4.8 million for the three months ended June 30, 2025. The increase in net investment income was due to an increase in

invested assets driven by the increased in-force premiums and the proceeds from our IPO.

Sales of available-for-sale securities resulted in net realized investment loss of $2,431 for the three months ended June 30,

2026 and net realized investment gains of $0.5 million for the three months ended June 30, 2025.

Other income was $0.5 million for the three months ended June 30, 2026, an increase of $0.4 million from $0.1 million for

the three months ended June 30, 2025.

Expenses

Losses and LAE increased $12.0 million, or 56.5%, to $33.2 million for the three months ended June 30, 2026 from $21.2

million for the three months ended June 30, 2025. The increase in losses and LAE was primarily driven by higher net

premiums earned and the reduction of our non-catastrophe quota share reinsurance arrangement from 40% to 25% on

January 1, 2026.

Policy acquisition expenses increased $11.1 million, or 177.2%, to $17.4 million for the three months ended June 30, 2026

from $6.3 million for the three months ended June 30, 2025. The increase was primarily driven by the increase in policies

written during the three months ended June 30, 2026, less ceding commission due to the reduction in our non-catastrophe

quota share reinsurance arrangement from 40% to 25% on January 1, 2026, and the second quarter of 2025 being heavily

impacted by the benefits of Citizens take-outs, which carry immaterial upfront policy acquisition expenses.

General and administrative expenses decreased $4.7 million, or 20.7%, to $18.2 million for the three months ended June

30, 2026 from $22.9 million for the three months ended June 30, 2025. The decrease was primarily driven by the absence

of one-time IPO related expenses incurred during the three months ended June 30, 2025.

Income tax (benefit) expense was $12.3 million and $(3.4) million for the three months ended June 30, 2026 and 2025,

respectively. Our effective tax rate for the three months ended June 30, 2026 and 2025 was 26.4% and (14.1)%,

respectively. The increase in the effective tax rate was primarily due to the absence of discrete tax benefits recognized in

the prior year period incurred in connection with the IPO. For the three months ended June 30, 2026, our effective tax rate

differed from the U.S. federal statutory rate of 21% primarily due to state income taxes.

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Key Business Metrics and Ratios

Loss ratio

Loss ratio is the ratio of losses and LAE to net premiums earned plus policy fees. We add policy fees to net premiums

earned when calculating our loss and expense ratios to include the total revenue produced by a policy, given they are

earned when a policy is written. Our loss ratio remained unchanged at 30.6% for the three months ended June 30, 2026 and

2025. The loss ratio reflects the impact of the Citizens take-out windfall on net premiums earned for the three months

ended June 30, 2025 and no prior year reserve development for the three months ended June 30, 2026.

Expense ratio

Expense ratio is the ratio of policy acquisition expenses and general and administrative expenses to net premiums earned

plus policy fees. Our expense ratio decreased by 9.5 percentage points to 32.8% for the three months ended June 30, 2026

compared to 42.3% for the three months ended June 30, 2025, driven by the absence of one-time IPO related expenses

incurred during the three months ended June 30, 2025 and partially offset by the absence of Citizens take-out windfalls in

the second quarter of 2026 compared to the second quarter of 2025.

Combined ratio

Combined ratio is the sum of the loss ratio and the expense ratio. We utilize combined ratio to assess our underwriting

performance. A combined ratio below 100% indicates an underwriting profit, while a combined ratio exceeding 100%

indicates an underwriting loss. Our combined ratio decreased to 63.4% for the three months ended June 30, 2026 from

72.9% for the three months ended June 30, 2025 due to the decrease in our expense ratio.

Return on equity

Return on equity is defined as net income, divided by the average beginning and ending shareholders’ equity during the

applicable period. This metric is annualized for interim periods by multiplying by the applicable ratio in order to present

return on equity consistently. Our return on equity decreased to 38.7% for the three months ended June 30, 2026 from

45.1% for the three months ended June 30, 2025. The decrease in return on equity was primarily due to the increase in

average shareholders’ equity following the IPO, which resulted in a larger equity base compared to the prior period.

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

Revenues

Gross premiums written increased by $47.5 million, or 9.5%, to $546.6 million for the six months ended June 30, 2026,

compared to $499.1 million for the six months ended June 30, 2025. The increase was primarily driven by growth in our

Voluntary Market writings.

Gross premiums earned increased to $473.0 million for the six months ended June 30, 2026, from $433.9 million for the

six months ended June 30, 2025. The $39.1 million, or 9.0%, increase was due largely to our increase in gross premiums

written.

Ceded premiums earned decreased $16.2 million, or 5.4%, to $286.1 million for the six months ended June 30, 2026, from

$302.3 million for the six months ended June 30, 2025. The decrease in ceded premiums earned was primarily due to the

reduction in our non-catastrophe quota share reinsurance arrangement.

Net premiums earned grew by $55.3 million, or 42.1%, reaching $186.9 million for the six months ended June 30, 2026, up

from $131.6 million for the six months ended June 30, 2025. This increase was due largely to the increase in gross

premiums earned and the decrease in ceded premiums earned.

Policy fees increased $1.3 million, or 24.9%, to $6.5 million for the six months ended June 30, 2026 from $5.2 million for

the six months ended June 30, 2025. The increase in policies written during the six months ended June 30, 2026

contributed to the increase in policy fees.

Net investment income increased $3.0 million, or 34.0%, to $11.9 million for the six months ended June 30, 2026 from

$8.9 million for the six months ended June 30, 2025. The increase in net investment income was due to an increase in

invested assets driven by the increased in-force premiums and the proceeds from our IPO.

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Sales of available-for-sale securities resulted in net realized investment gains of $50,704 for the six months ended June 30,

2026 and net realized investment gains of $0.5 million for the six months ended June 30, 2025.

Other income was $0.8 million for the six months ended June 30, 2026, an increase of $0.5 million from $0.3 million for

the six months ended June 30, 2025.

Expenses

Losses and LAE increased $22.8 million, or 54.3%, to $64.9 million for the six months ended June 30, 2026 from $42.1

million for the six months ended June 30, 2025. The increase in losses and LAE was primarily driven by higher net

premiums earned and a reduction of our non-catastrophe quota share reinsurance arrangement from 40% to 25% on

January 1, 2026.

Policy acquisition expenses increased $24.0 million, or 255.7%, to $33.4 million for the six months ended June 30, 2026

from $9.4 million for the six months ended June 30, 2025. The increase was primarily driven by the increase in policies

written during the six months ended June 30, 2026, the windfall from Citizens take-outs during the six months ended June

30, 2025, and less ceding commission due to the reduction in our non-catastrophe quota share reinsurance arrangement

from 40% to 25% on January 1, 2026.

General and administrative expenses increased $6.3 million, or 22.2%, to $34.2 million for the six months ended June 30,

2026 from $27.9 million for the six months ended June 30, 2025. The increase was primarily driven by lower ceding

commissions associated with a reduction in our non-catastrophe quota share reinsurance arrangement from 40% to 25% on

January 1, 2026, partially offset by the absence of one-time IPO related expenses incurred during the six months ended

June 30, 2025.

Income tax expense was $19.6 million and $1.4 million for the six months ended June 30, 2026 and 2025, respectively. Our

effective tax rate for the six months ended June 30, 2026 and 2025 was 26.6% and 2.1%, respectively. The increase in the

effective tax rate was primarily due to the absence of discrete tax benefits recognized in the prior year period, as the 2025

period included a $24 million pretax income adjustment related to non-taxable entities that resulted in $5.0 million of

discrete tax benefits. For the six months ended June 30, 2026, our effective tax rate differed from the U.S. federal statutory

rate of 21% primarily due to state income taxes.

Key Business Metrics and Ratios

Loss ratio

Our loss ratio increased by 2.8 percentage points for the six months ended June 30, 2026, to 33.6%, compared to 30.8% for

the six months ended June 30, 2025. The increase in the loss ratio reflects primarily the impact of the Citizens take-out

windfall on net premiums earned for the six months ended June 30, 2025.

Expense ratio

Our expense ratio increased by 7.6 percentage points to 34.9% for the six months ended June 30, 2026 compared to 27.3%

for the six months ended June 30, 2025, driven by the increase in policies written during the six months ended June 30,

2026, the Citizens take-out windfall for the six months ended June 30, 2025, and less ceding commission due to the

reduction in our non-catastrophe quota share reinsurance arrangement from 40% to 25% on January 1, 2026.

Combined ratio

Our combined ratio increased to 68.5% for the six months ended June 30, 2026 from 58.1% for the six months ended June

30, 2025 due to the increases in our expense ratio and loss ratio.

Return on equity

Our return on equity decreased to 30.6% for the six months ended June 30, 2026 from 56.5% for the six months ended June

30, 2025. The decrease in return on equity was primarily due to the increase in average shareholders’ equity following the

IPO, which resulted in a larger equity base compared to the prior period and the lack of Citizens take-out windfalls.

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Non-GAAP Financial Measures

We utilize certain non-GAAP financial measures to analyze our business and provide useful information about our

financial performance. The non-GAAP financial measures are not recognized terms under GAAP and should not be

considered as alternatives to the corresponding GAAP measures of financial performance, or any other performance

measure derived in accordance with GAAP. Because not all companies use identical calculations, the presentation of the

non-GAAP financial measures may not be comparable to other similarly titled measures of other companies and can differ

significantly from company to company. Our management uses these non-GAAP financial measures, in conjunction with

GAAP financial measures, as an integral part of managing our business and to, among other things: (i) monitor and

evaluate the performance of our business operations and financial performance; (ii) facilitate internal comparisons of the

historical operating performance of our business operations; (iii) facilitate external comparisons of the results of our overall

business to the historical operating performance of other companies that may have different capital structures and debt

levels and different go-to-market models; (iv) review and assess the operating performance of our management team; (v)

analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for

and prepare future annual operating budgets and determine appropriate levels of operating investments.

We monitor the following key business metrics and non-GAAP financial measures that assist us in evaluating our business,

measuring our performance, identifying trends and making strategic decisions. As such, we have presented the following

non-GAAP measures, their most directly comparable GAAP measure, and key business metrics:

Underwriting income (loss)

Underwriting income (loss) is a non-GAAP financial measure defined as income (loss) before income taxes, excluding net

investment income, net realized gains and losses on investments, interest expense, and other income. We use underwriting

income as an internal performance measure in the management of our operations because we believe it gives us and users

of our financial information useful insight into our results of operations and our underlying business performance and

provides insight into the results of how effective our policy underwriting is. Underwriting income (loss) should not be

viewed as a substitute for net income calculated in accordance with GAAP and other companies may define underwriting

income differently.

Underwriting income increased by $20.9 million, or 111.7%, to $39.7 million for the three months ended June 30, 2026

from $18.7 million for the three months ended June 30, 2025. The increase was primarily driven by growth in the

Voluntary Market reflecting higher earned premiums from new and renewal policies, the reduction in our non-catastrophe

quota share reinsurance arrangement and the absence of meaningful one-time IPO related expenses that were incurred in

the second quarter of 2025. For the six months ended June 30, 2026, underwriting income increased by $3.6 million, or

6.2%, to $60.9 million from $57.4 million for the six months ended June 30, 2025. The increase was primarily driven by

higher earned premium from growth in the Voluntary Market, partially offset by a lack of Citizens take-out windfall.

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Underwriting income for the three and six months ended June 30, 2026 and 2025 reconciles to income before taxes as

follows:

($ in thousands)

Adjusted net income and Adjusted earnings per share

Adjusted net income is a non-GAAP financial measure defined as net income excluding net realized gains or losses on

investments, stock compensation expense incurred in connection with our IPO, and certain non-recurring or non-cash

expenses, including those incurred in connection with our IPO, net of tax. We use adjusted net income as an internal

performance measure in the management of our operations because we believe it gives us and users of our financial

information useful insight into our results of operations and our underlying business performance excluding the impact of

realized gains and losses on the sale of securities, and one-time items, which we do not view as core to the underlying

trends in our business. Adjusted net income should not be viewed as a substitute for net income calculated in accordance

with GAAP, and other companies may define adjusted net income differently.

For the three months ended June 30, 2026, adjusted net income increased by $3.6 million, or 11.4%, to $34.9 million from

$31.3 million for the three months ended June 30, 2025. The increase was primarily driven by higher earned premium,

partially offset by the absence of Citizens take-out windfall for the three months ended June 30, 2025. For the six months

ended June 30, 2026, adjusted net income decreased by $14.6 million, or 21.1%, to $54.7 million from $69.4 million for

the six months ended June 30, 2025. The decrease was primarily due to the tax benefits and Citizens take-out windfall, for

the six months ended June 30, 2025, partially offset by higher earned premium for the six months ended June 30, 2026.

Adjusted earnings per share is a non-GAAP measure, which is calculated as adjusted net income available to common

shareholders 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.

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Adjusted net income and adjusted earnings per share for the three and six months ended June 30, 2026 and 2025 reconcile

to net income and earnings per share, respectively, as follows:

($ in thousands, except per share data)

(1) Material non-recurring items that we do not expect to continue in the future and believe are not reflective of our ongoing operations

and our performance.

(2) Costs associated with the change in a key executive leadership position.

(3) The change in tax status of the Company from a non-taxable entity to a taxable corporation incurred in connection with the IPO

resulted in recognition of a deferred income tax benefit.

(4) We included the tax impact of all adjustments to adjusted net income using the U.S. federal statutory corporate tax rate of 21%.

While the Company’s actual effective tax rates for the three months ended June 30, 2026 and 2025 were 26.4% and (14.1)%,

respectively, and for the six months ended June 30, 2026 and 2025 were 26.6% and 2.1%, respectively, the use of the statutory rate

provides a consistent and simplified approach for comparability. This approach is applied uniformly, including to items that may be

partially or fully nondeductible for tax purposes. The tax effect row is presented exclusive of the change in tax status impact.

(5) Stock-based compensation expense recognized of $10,433 for the three and six months ended June 30, 2025, approximately $4,241

was nondeductible for U.S. federal income tax purposes.

Adjusted return on equity

Adjusted return on equity is a non-GAAP financial measure defined as adjusted net income divided by the average of

beginning and ending shareholders’ equity during the applicable period and is annualized for periods of less than one year.

We use adjusted return on equity as an internal performance measure in the management of our operations because we

believe it gives us and users of our financial information useful insight into our underlying business performance. Adjusted

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return on equity should not be viewed as a substitute for any metrics calculated in accordance with GAAP, and other

companies may define adjusted return on equity differently.

Adjusted return on equity decreased by 11.7 percentage points to 39.6% for the three months ended June 30, 2026 from

51.3% for the three months ended June 30, 2025. Adjusted return on equity decreased by 28.8 percentage points, to 31.0%

for the six months ended June 30, 2026 from 59.8% for the six months ended June 30, 2025. The decrease in adjusted

return on equity was primarily due to the increase in average shareholders’ equity following the IPO, which resulted in a

larger equity base compared to the prior period and the absence of Citizens take-out windfall.

Adjusted return on equity for the three and six months ended June 30, 2026 and 2025 reconciles to return on equity as

follows:

($ in thousands)

(1) Average beginning and ending shareholders’ equity represents the average of shareholders’ equity at the beginning and end of the

period presented.

(2) Adjusted return on equity is the adjusted net income (after tax) divided by the average beginning and ending shareholders’ equity.

Net underlying loss and loss adjustment expense ratio

Net underlying loss and loss adjustment expense ratio is a non-GAAP measure. We calculate the net underlying loss and

loss adjustment expense ratio by subtracting current year net catastrophe losses and prior year net reserve development

from total net losses and LAE and dividing that amount by the sum of total net premiums earned plus policy fees. We use

the net underlying loss and LAE ratio to allow us to analyze our loss trends before the impact of catastrophe losses and

prior year reserve development. These two items can have a significant impact on our loss trends in a given period. We

believe it is useful for investors to evaluate these components both separately and in the aggregate when reviewing our

performance. The most directly comparable GAAP measure is the net loss and LAE ratio. The net underlying loss and LAE

ratio should not be considered a substitute for the net loss and LAE ratio and does not reflect the overall profitability of our

business.

We experienced no net prior year reserve development for the three months ended June 30, 2026 and favorable net prior

year development of $1.7 million for the three months ended June 30, 2025. We experienced no catastrophe losses for the

three months ended June 30, 2026 and for the three months ended June 30, 2025.

The net underlying loss and loss adjustment expense ratio decreased to 30.6% for the three months ended June 30, 2026

from 33.1% for the three months ended June 30, 2025. The decrease was primarily due to growth in net earned premium,

driven by reduced ceded earned premium, outpacing the increase in underlying losses. The prior period benefited from

favorable prior year development of $1.7 million recognized during the three months ended June 30, 2025.

We experienced no net prior year reserve development for the six months ended June 30, 2026 and favorable prior year

development of $1.1 million for the six months ended June 30, 2025.

The net underlying loss and loss adjustment expense ratio increased to 33.6% for the six months ended June 30, 2026 from

31.6% for the six months ended June 30, 2025, primarily due to higher net losses reflecting increased retention due to the

reduction in our non-catastrophe quota share reinsurance arrangement, partially offset by growth in net premiums earned.

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The following table summarizes the loss and LAE ratios and the net underlying loss and LAE ratios for the three and six

months ended June 30, 2026 and 2025:

($ in thousands)

Gross underlying loss and loss adjustment expense ratio

Gross underlying loss and loss adjustment expense ratio is a non-GAAP measure. We calculate the gross underlying loss

and LAE ratio by adding net underlying loss and LAE and ceded non-catastrophe losses and dividing that amount by the

sum of total gross premiums earned and policy fees. We use the gross underlying loss and LAE ratio to analyze our loss

trends before the impact of reinsurance.

We believe it is useful for investors to evaluate the cost of non-catastrophe losses for every dollar of gross premiums

earned. The most comparable GAAP measure is the net loss and LAE ratio. The gross underlying loss and LAE ratio

should not be considered a substitute for net loss and LAE ratio and does not reflect the overall profitability of our

business.

The following table summarizes the gross underlying loss and LAE ratios for the three and six months ended June 30, 2026

and 2025:

($ in thousands)

Ceded catastrophe excess of loss premiums ratio

Ceded catastrophe excess of loss premiums ratio is a non-GAAP measure and is defined as ceded catastrophe excess of loss

premiums earned divided by gross premiums earned. We believe it is useful for investors to evaluate ceded catastrophe

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excess of loss premiums ratio as it provides a proxy for our cost of catastrophe reinsurance. The most directly comparable

GAAP measure is the ratio of ceded premiums earned to gross premiums earned. The ceded catastrophe excess of loss

premiums ratio should not be considered a substitute for ceded premiums earned and does not reflect the overall

profitability of our business.

Ceded catastrophe excess of loss premiums ratio decreased 2.8 percentage points, to 39.4% for the three months ended

June 30, 2026 from 42.2% for the three months ended June 30, 2025. This decrease was primarily driven by growth in our

gross premiums earned, which increased at a higher rate than ceded catastrophe excess of loss premium as well as some

end of treaty period adjustments on May 31, 2026.

Ceded catastrophe excess of loss premiums ratio increased 1.1 percentage points, to 42.9% for the six months ended June

30, 2026 from 41.8% for the six months ended June 30, 2025. This increase was primarily a result of the six months ended

June 30, 2025 having higher ceded premiums earned relative to gross premiums earned due to the windfall from Citizens

take-outs compared to the six months ended June 30, 2026 where this benefit was less pronounced.

The calculation of our ceded excess of loss premiums ratio for the three and six months ended June 30, 2026 and 2025 is

shown in the table below:

($ in thousands)

Liquidity and Capital Resources

Liquidity is a measure of a company’s ability to generate cash flows sufficient to meet the short-term and long-term cash

requirements of its business operations. Funds generated from operations have been sufficient to meet our current and long-

term liquidity requirements.

The liquidity of the Company, comprised of cash, cash equivalents and our liquid fixed income portfolios, fluctuates from

time to time. As of June 30, 2026, our liquidity totaled $688.2 million. A portion of that liquidity is not held at AIIC. The

total cash and cash equivalents not held at the insurance subsidiary was $136.5 million as of June 30, 2026. Our liquidity

framework is designed to support operational flexibility, ensuring we can fund claims obligations, capital expenditures, and

growth initiatives without reliance on external financing. In the event of a large loss event, we may utilize proceeds from

our investment portfolios as a source of liquidity to service claims.

On May 9, 2025, we consummated our IPO and received net proceeds of $82 million, after (i) deducting underwriting

discounts and commissions totaling $7.0 million as well as $4.2 million of other expenses related to the offering, (ii) using

approximately $3.8 million of the proceeds from the offering to satisfy the Restricted Stock Grant Net Settlement and (iii)

using $3.0 million of the proceeds of the offering to terminate the management services agreement by and between James

Sowell Company, L.P. and AIIG.

We maintain a disciplined capital management approach, balancing organic growth investments with stockholder return

considerations. Our capital resources include:

• Operating cash flow, which remains the primary source of funding for day-to-day operations and claim payments.
• Reinsurance arrangements, which provide financial resilience against catastrophe loss events.
• Potential strategic financing, including debt instruments or equity offerings, which may be considered to

accelerate expansion opportunities.

Future capital requirements will be driven by business growth, regulatory capital needs, and evolving market conditions.

Our goal is to optimize capital efficiency while maintaining a strong financial foundation for long-term success.

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The principal source of liquidity at the Company is from its subsidiaries, including fees paid by the insurance subsidiary,

AIIC, and dividends paid by other subsidiaries generated from, among other things, income earned on policy fees and fees

paid by AIIC to American Integrity MGA, LLC for general agency, inspections, agent commissions, general operating

expenses and claims adjusting services.

Future capital allocation decisions, including dividend distributions and share repurchases, will be determined by our Board

of Directors based on profitability trends, regulatory considerations, and long-term stockholder value objectives. We did

not declare or pay any dividends during 2025. On February 24, 2026, our Board of Directors declared a special cash

dividend of $1.02 per share of Common Stock payable on March 30, 2026 to stockholders of record at the close of business

on March 16, 2026. The aggregate amount of the payment made in connection with this special cash dividend was

approximately $20.0 million, and we paid such dividend using cash on hand.

While we currently intend to retain any future earnings for use in the operation of our business and have no plans to declare

or pay any additional cash dividends in the foreseeable future, our Board of Directors may, from time to time, reassess

whether to declare dividends in the future.

As discussed in Note 10 – “Regulatory Requirements and Restrictions” in the notes to our condensed consolidated financial

statements, there are limitations on the dividends a subsidiary may pay to its immediate parent company.

The maximum amount of dividends that can be paid by Florida insurance companies without prior approval of the Florida

Office of Insurance Regulation is subject to restrictions as referenced below and in Note 10 – “Regulatory Requirements

and Restrictions” in the notes to our condensed consolidated financial statements. Dividends from AIIC 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 AIIC to the Company without prior approval 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. As of June 30, 2026, AIIC has not declared dividends.

Liquidity for AIIC 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, claims adjusting services, premium and income taxes, regulatory

assessments, general operating expenses, and interest and principal payments on debt obligations. Principal sources of

liquidity for AIIC consist of the revenue generated from the collection of written premiums and the collection of

reinsurance recoverable.

Cash flows

Our most significant source of cash is from premiums received from our policyholders, which, for most policies, we

receive at the beginning of the coverage period, although some policyholders elect to pay in installments over the duration

of the policy. Our most significant cash outflow is for the cost of our reinsurance agreements in the form of ceded

premiums and for claims that arise when a policyholder incurs an insured loss. Because the payment of claims occurs after

the receipt of the premium, sometimes years later, we invest the cash in various investment securities that earn interest and

dividends. We also use cash to pay commissions to distribution partners, as well as to pay for ongoing operating expenses

such as salaries, professional services and taxes. As described under “Reinsurance” below, we use reinsurance to manage

the risk that we take on our policies. We cede, or pay out, part of the premiums we receive to our reinsurers and collect

cash back when losses subject to our reinsurance coverage are paid.

The timing of our cash flows from operating activities can vary among periods due to the timing by which payments are

made or received. Some of our payments and receipts, including loss settlements and subsequent reinsurance receipts, can

be significant, so their timing can influence cash flows from operating activities in any given period. Management believes

that cash receipts from premiums, proceeds from investment sales and redemptions and investment income are sufficient to

cover cash outflows for the foreseeable future.

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Our cash flows for the six months ended June 30, 2026 and 2025 were:

($ in thousands)

Cash provided by operating activities was $129.8 million for the six months ended June 30, 2026 compared to $95.5

million provided by operating activities for the six months ended June 30, 2025. The increase in cash provided by operating

activities resulted from lower cash outflows related to reinsurance activity and loss payments.

Cash used in investing activities was $(9.8) million for the six months ended June 30, 2026 compared to $(59.9) million

used in investing activities for the six months ended June 30, 2025. The decrease in net cash used in investing activities

was primarily attributable to significantly lower purchases of fixed income securities, partially offset by proceeds of fixed

income securities and short-term investments during the period.

Net cash used in financing activities was $(20.3) million for the six months ended June 30, 2026 compared to $61.9 million

provided by financing activities for the six months ended June 30, 2025. Net cash used in financing activities in the current

year period was primarily attributable to the special cash dividend paid to stockholders during the period. Net cash

provided by financing activities in the prior-year period was primarily driven by the net proceeds from our IPO, partially

offset by distributions to members made prior to the completion of the IPO.

Capitalization

Capital resources provide protection for policyholders, furnish the financial strength to support the business of

underwriting insurance risks and facilitate continued business growth. The following table provides our shareholders’

equity, total long-term debt, total capital resources, debt-to-total capital ratio and debt-to-equity ratio as of June 30, 2026,

and December 31, 2025.

($ in thousands)

The debt-to-total capital ratio is calculated as total long-term debt divided by total capital resources, whereas the debt-to-

equity ratio is calculated as total long-term debt divided by shareholders’ equity. These ratios help management measure

the amount of financing leverage in place in relation to equity and future leverage capacity.

Critical Accounting Estimates

In order to align with GAAP, preparing financial statements requires us to forecast future events through estimates and

assumptions. These projections, along with their underlying assumptions, significantly impact the reported values of assets

and liabilities, the disclosure of potential assets and liabilities, and the recorded figures for revenues and expenses. Among

the accounting estimates, the accounting estimates discussed below are those that demand judgment, where different

decisions could lead to substantial alterations in the reported outcomes. For a detailed discussion of our accounting

policies, see our notes to the condensed consolidated financial statements. Our current critical accounting policies and

estimates are:

Liability for unpaid losses and loss adjustment expenses

We set aside reserves, net of estimated subrogation, to provide for the estimated costs of paying losses and LAE under

insurance policies we issued. Liability for unpaid losses and LAE represent management’s best estimate of the ultimate

45

cost of settling all outstanding claims, including claims that have been incurred, but not yet reported (“IBNR”) as of a

financial statement date. With the assistance of an independent, actuarial firm, we use statistical analysis to establish

liabilities for unpaid losses and LAE. We do not discount the liability for unpaid losses and LAE for financial statement

purposes. In establishing the liability for unpaid losses and LAE, actuarial judgment is relied upon in order to make

appropriate assumptions to estimate a best estimate of ultimate losses. Those estimates are based on our historical

information, industry information and estimates of trends that may affect the ultimate frequency of incurred but not

reported claims and changes in ultimate claims severity.

We regularly review our reserve estimates and adjust them as necessary as experience develops or as new information

becomes known to us. Such adjustments are included in current operations. During the loss settlement period, if we have

indications that claims frequency or severity exceeds our initial expectations, we generally increase our reserves for losses

and LAE. Conversely, when claims frequency and severity trends are more favorable than initially anticipated, we

generally reduce our reserves for losses and LAE once we have sufficient data to confirm the validity of the favorable

trends. Even after such adjustments, the ultimate liability may exceed or be less than the revised estimates. Accordingly,

the ultimate settlement of losses and the related LAE may vary significantly from the estimate included in our condensed

consolidated financial statements.

Reserving for reported claims relies on a detailed assessment of individual risks, understanding the specifics of each claim,

and considering the insurance policy terms related to the particular type of loss. Reserving for unreported claims and LAE

involves utilizing historical data per line of insurance adjusted to present circumstances. Typically, the reserving process

implicitly considers inflation by analyzing costs, trends, and reviewing historical reserving outcomes across several years.

The process of estimating the reserves for losses and LAE requires a high degree of judgment and is subject to several

variables. Reserve estimates for our ultimate liability are derived using several different actuarial estimation methods,

depending on the type of loss:

• Loss development method: The loss development method uses actual loss data and the historical development

profiles on older underwriting years to project more recent, less developed years to their ultimate position.

• Frequency/severity methods: These methods are similar to the paid and case incurred loss development methods

except that estimates of ultimate claim counts (a measure of claim frequency) and ultimate average severity are

derived separately and then multiplied together to provide an estimate of ultimate loss.

• Incremental cost per closed claim method: This method is similar to the frequency/severity method except that

paid severities are selected for each incremental development period, and then are trending using selected short-

term and long-term trend factors.

• Bornhuetter-Ferguson method: The Bornhuetter-Ferguson method uses as a starting point an assumed initial

expected loss ratio and blends in the loss ratio, which is implied by the claims experience to date using benchmark

loss development patterns on paid claims data or reported claims data.

• IBNR-to-case outstanding method: This method requires the estimation of consistent paid and reported (case)

incurred loss development patterns and age-to-ultimate factors. These patterns imply a specific expected

relationship between IBNR, including both development or known claims (bulk reserve) and losses on a true late

reported claims, and reported case incurred losses.

• DCC development methods: When DCC data is evaluated separately from losses, historical paid and case incurred

DCC data may be arranged in a triangular format and projected to ultimate using the same technique as used for

losses (i.e., loss development methods). In addition, projections using triangles of ratios of paid DCC-to-paid loss

and ratios of paid DCC-to-case incurred losses can be made; those triangles can be constructed using ratios of

incremental (e.g. annual) amounts, or ratios of cumulative amounts. Indications that result from projecting these

ratios must be multiplied by the ultimate loss selections to arrive at ultimate DCC indications. Similarly, triangles

of ratios of paid DCC-to-closed or reported claim counts can be used. The results from projecting these ratios will

require multiplication by ultimate claim count selections to arrive at ultimate DCC indications.

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Each actuarial methodology requires the selection and application of various parameters and assumptions. The key

parameters and assumptions include:

1) Loss development factors – These factors are key assumptions in the loss development methods which assume

recent accident years will follow the development patterns of prior accident years.

2) Initial expected loss ratio selections – The initial expected loss ratio selection is the key assumption in the

Bornhuetter-Ferguson methods. The selection was made based on average of development methods loss ratios and

selected loss ratio trend.

3) Claim count decay ratios – The decay ratio is the key assumption in the projection of ultimate claim counts for

catastrophe and non-catastrophe storms.

4) Short-term and long-term projected severity trends – These severity trends are the key assumption in projecting

severities for accident years in their future development periods.

Our reserves are driven by several important factors, including litigation and regulatory trends, legislative activity, climate

change, social and economic patterns and claims inflation assumptions. Our reserve estimates reflect current inflation in

legal claims’ settlements and assume we will not be subject to losses from significant new legal liability theories. Our

reserve estimates assume that there will not be significant changes in the regulatory and legislative environment. The

impact of potential changes in the regulatory or legislative environment is difficult to quantify in the absence of specific,

significant new regulation or legislation. In the event of significant new regulation or legislation, we will attempt to

quantify its impact on our business, but no assurance can be given that our attempt to quantify such inputs will be accurate

or successful.

Our financial status, reported outcomes, and liquidity are susceptible to shifts in critical assumptions determining our loss

reserves. While we do not anticipate changes in claim frequency to significantly impact our reserves, fluctuations in the

severity of claims could influence these reserves.

These amounts fell within the range of total reserves provided by our independent actuary. As of June 30, 2026, we

recorded $12.1 million in case reserves and an additional $242.1 million for IBNR reserves, totaling $254.2 million in

reserves, with an added $247.9 million attributable to reinsurance claims payable.

For further detail, see Note 8 – “Liability for Unpaid Losses and Loss Adjustment Expenses” in our notes to the condensed

consolidated financial statements.

Reinsurance

We follow industry standards by reinsuring a portion of our risks. Reinsurance involves transferring, or “ceding,” a share of

the risk exposure from the policies we write to another insurer, known as a reinsurer. If our reinsurers are unable to fulfill

their obligations under our reinsurance agreements, we remain accountable for the entire insured loss.

In cases where losses fall within our reinsurance coverage, we document recoverable amounts from our reinsurers for paid

losses and an estimation of recoverable amounts on unpaid losses. The reinsurance recoverables on unpaid losses are

estimated in a manner consistent with the Company’s estimate of unpaid losses and LAE associated with the insured

business, thus fluctuating with changes to our estimates of unpaid losses. The estimation of recoverable amounts from

reinsurers on unpaid losses may change in the future, and if there is a change, it could adversely affect the amounts stated

in our condensed consolidated financial statements.

We estimate uncollectible amounts receivable from reinsurers based on an assessment of factors including the

creditworthiness of the reinsurers and the adequacy of collateral obtained, where applicable.

Ceding Commission

A sliding scale ceding commission is a type of contingent fee paid in connection with a reinsurance treaty and is based on

the loss experience of the underlying insurance contract. At inception, the commission is estimated, and adjustments are

subsequently made as more information becomes available regarding actual loss experience.

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In connection with quota share reinsurance arrangements for non-catastrophe losses, the Company receives ceding

commissions from the reinsurers to reimburse its direct and indirect acquisition costs as well as other expenses.

The amount of ceding commissions ultimately received by the Company is contingent upon the amount of premium written

and earned and the commission rate is adjusted on a sliding scale based upon loss ratios of the ceded premium.

Accordingly, the Company develops estimates of ceding commissions based on an evaluation of historical experience and

available information, with subsequent adjustment for true-ups recorded prospectively.

Investments

The Company currently classifies all of its investments in debt securities and short-term investments as available-for-sale

and reports them at fair value. Short-term investments consist of investments in interest-bearing assets with original

maturities of 12 months or less. The Company records subsequent changes in value through the date of disposition as

unrealized holding gains and losses, net of taxes, and includes them as a component of accumulated other comprehensive

income until reclassified to earnings upon sale. Realized gains and losses on the sale of investments are determined using

the specific-identification method and included in earnings. The Company amortizes any premium or discount on fixed

maturities over the remaining maturity period of the related securities using the effective interest method and reports the

amortization in net investment income. The Company recognizes dividends and interest income when earned. We have a

financial stability rating of A, “Exceptional” from Demotech, an independent financial firm specializing in evaluating the

financial stability of regional and specialty insurers, and whose rating is accepted by major mortgage companies. We do not

have a rating from A.M. Best.

Fair Value

In our disclosure of the fair value of our investments, we utilize a hierarchy based on the quality of inputs used to measure

fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or

liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Adjustments to

transaction prices or quoted market prices may be required in illiquid or disorderly markets in order to estimate fair value.

The three levels of the fair value hierarchy are described below:

• Level 1 – Valuations based on quoted prices in active markets for identical assets and liabilities;
• Level 2 – Valuations based on observable inputs that do not meet the criteria for Level 1, including quoted prices

in inactive markets and quoted prices in active markets for similar, but not identical instruments; and

• Level 3 – Valuations based on unobservable inputs, which are based upon the best available information when

external market data is limited or unavailable.

We estimate the fair value of our investments using the closing prices on the last business day of the reporting period,

obtained from active markets using independent pricing sources. For securities for which quoted prices in active markets

are unavailable, we use observable inputs such as quoted prices in inactive markets, quoted prices in active markets for

similar instruments, benchmark interest rates, broker quotes and other relevant inputs. Our estimates of fair value reflect the

interest rate environment that existed as of the close of business on June 30, 2026 and December 31, 2025. Changes in

interest rates subsequent to June 30, 2026 may affect the fair value of our investments.

Investment securities are subject to fluctuations in fair value due to changes in issuer-specific circumstances, such as credit

rating, and changes in industry-specific circumstances, such as movements in credit spreads based on the market’s

perception of industry risks. In addition, fixed maturities are subject to fluctuations in fair value due to changes in interest

rates as a result of governmental monetary policies, domestic and international economic and political conditions and other

factors beyond our control. A rise in interest rates would decrease the net unrealized holding gains of our investment

portfolios, offset by our ability to earn higher rates of return on funds reinvested. Conversely, a decline in interest rates

would increase the net unrealized holding gains of our investment portfolios, offset by lower rates of return on funds

reinvested. Unrealized gains and losses on our fixed maturity securities are included in accumulated other comprehensive

income as a separate component of total shareholders’ equity.

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Impairment

Quarterly, the Company performs an assessment of all investments to determine if any are impaired as the result of a credit

loss. An investment is impaired when the fair value of the investment declines to an amount less than the cost or amortized

cost of that investment. For each fixed-income security in an unrealized loss position, if the intent is to sell the security or if

it is more likely than not that the Company will be required to sell the security before recovering the cost or amortized cost

basis for reasons such as liquidity needs, contractual or regulatory requirements, the security’s entire decline in fair value is

recorded in earnings. If the intent is not to sell the security or it is not more likely than not that the Company will be

required to sell the security, the Company will evaluate whether any impairment is attributable to credit-related factors.

Such evaluation includes consideration of factors such as:

• Failure of the issuer of the security to make scheduled interest or principal payment;
• Downgrades in the security’s credit rating since acquisition by three or more notches;
• Adverse conditions specifically related to the security, an industry, or geographic area;
• Changes in the financial condition of the issuer of the security; and
• The payment structure of the security and the likelihood of the issuer being able to make payments that increase in

the future.

Upon determination of a credit-related impairment, an allowance for credit losses will be recognized and is measured as the

amount by which the security’s amortized cost basis exceeds the entity’s best estimate of the present value of cash flows

expected to be collected. The allowance is limited to the difference between the amortized cost basis and the security’s fair

value. Subsequent recovery of any previously recorded impairment will be recognized through reversal of the allowance

for credit losses.

Deferred income taxes

We account for taxes under the asset and liability method, under which we record deferred income taxes as assets or

liabilities on our balance sheet to reflect the net tax effect of the temporary differences between the carrying amount of

assets and liabilities for financial reporting purposes and their respective tax bases. We recognize deferred tax assets and

liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of

existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax

rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences.

Should a change in tax rates occur, we recognize the effect on deferred tax assets and liabilities in operations in the period

that includes the enactment date. Realization of our deferred income tax assets depends upon our generation of sufficient

future taxable income.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would

more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold,

the amount recognized in the condensed consolidated financial statements is the largest benefit that has a greater than 50%

likelihood of being realized upon ultimate settlement with the relevant taxing authority. The amount of income tax expense

or benefit recorded in future periods will depend on the jurisdictions in which we operate and the tax laws and regulations

in effect. The Company is subject to payment of U.S. federal and state income taxes as a corporation.

Recent Accounting Pronouncements

We currently qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the

JOBS Act. Accordingly, we are provided the option to adopt new or revised accounting guidance either (i) within the same

periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private

companies. We have elected to avail ourselves of this extended transition period and, as a result, we will not be required to

adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other

public companies.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which we have total

annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the

49

date of the completion of our IPO; (iii) the date on which we have issued more than $1 billion in nonconvertible debt

during the previous three years; and (iv) the date on which we are deemed to be a large accelerated filer under the rules of

the SEC.

See Note 2 – “Significant Accounting Policies” in our notes to the condensed consolidated financial statements.

Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the

result of changes in interest rates, duration, equity prices, foreign currency exchange rates, and commodity prices. The

primary components of market risk affecting us are interest rate risk, duration risk and credit risk. We do not have

significant exposure to equity risk, foreign currency exchange rate risk or commodity risk.

As of June 30, 2026, and December 31, 2025, our investment portfolios contained fixed-maturity securities. These

securities are not intended for trading or speculative purposes. Our primary aim is to maximize after-tax investment income

while ensuring sufficient liquidity to fulfill policyholder obligations. Additionally, we strive to minimize market risk,

which encompasses potential economic losses resulting from adverse fluctuations in securities’ prices.

In developing our investment strategies, we consider various factors such as credit ratings, investment concentrations,

regulatory requirements, expected interest rate fluctuations, durations, and prevailing market conditions. Our investment

portfolios are managed by Goldman Sachs Asset Management, overseen by our Board of Directors and an investment

committee appointed by AIIC’s Board of Directors.

Our investment portfolios are predominantly exposed to interest rate risk, duration risk and credit risk. We classify these

fixed-maturity securities as available-for-sale. Any unrealized gains or losses, adjusted for deferred income taxes, are

reported as part of other comprehensive income within our shareholders’ equity. Consequently, significant temporary

changes in their fair value could potentially affect the carrying value of our shareholders’ equity.

The effective weighted average duration of our fixed income portfolio at AIIC was 1.3 years and 2.37 years at June 30,

2026 and 2025, respectively, and 2.09 years at December 31, 2025. As of June 30, 2026, the estimated weighted-average

credit quality rating of the fixed income portfolio was AA. As of July 22, 2026, following the movement of $150 million of

cash into AIIC’s fixed income portfolio managed by Goldman Sachs, the average duration of the portfolio was 2.0 years

with an estimated weighted-average credit quality of the fixed income portfolio of AA-.

Interest Rate Risk

Interest rate risk is the risk that we will incur economic losses due to adverse changes in interest rates. When market

interest rates rise, the fair value of our fixed maturity securities decreases. Conversely, as interest rates fall, the fair value of

our fixed maturity securities increases.

Credit Risk

Credit risk is the potential loss resulting from adverse changes in an issuer’s ability to repay its debt obligations. We have

exposure to credit risk as a holder of fixed maturity investments. Credit risk can expose us to potential losses arising

principally from adverse changes in the financial condition of the issuers of our fixed maturity securities. We mitigate the

risk by primarily investing in fixed-maturity securities that are rated “BBB” (S&P) or higher and diversifying our

investment portfolios to avoid concentrations in any single issuer or business sector. Pursuant to our investment policy,

only $1.0 million may be invested in below investment grade bonds.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in the Exchange Act, Rule 13a-15(e)) that are designed to

assure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and

reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and

communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow

timely decisions regarding required disclosures.

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As required by Exchange Act Rule 13a-15(b) or Rule 15d-15(b), as of the end of the period covered by this Quarterly

Report, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we

evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer

and Chief Financial Officer concluded that, as of June 30, 2026, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that materially

affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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There were no material changes to the risk factors disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on

Form 10-K for the year ended December 31, 2025. For more information concerning our risk factors, please see Part I,