American Integrity Insurance Group, Inc.

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

The following table summarizes our results of operations for the three months ended March 31, 2025 and the three months ended March 31, 2024.

Revenues

Gross premiums written are the amount received or to be received for insurance policies written or assumed by us during a specific period of time, in each case prior to amounts ceded to reinsurers. We utilize gross premiums written to assess the growth of our business excluding the effects of ceded reinsurance.

Gross premiums written is generally impacted by:

For the three months ended March 31, 2025, gross premiums written increased by $64.7 million, or 43.9%, to $212.2 million, compared to $147.5 million for the three months ended March 31, 2024. This increase was due largely to an increase in assumed written premiums related to our strategic participation in the Citizens take-out program, and to premium from new policies written through the Voluntary Market.

Policiesin-force were 383,332 as of March 31, 2025, an increase of 42.9% compared to policiesin-force of 268,326 as of March 31, 2024, and an increase of 7.6% compared to policiesin-force of 356,108 as of December 31, 2024. The increase in our policiesin-force was primarily due to new policies written through the Voluntary Market and first quarter 2025 Citizens take-outs. During the three months ended March 31, 2025, we wrote 24,554 policies in the Voluntary Market, which was an increase from 14,843 policies in the Voluntary Market during the three months ended March 31, 2024. We experienced policy retention rates of 78.1% during the first quarter of 2025, which represents a positive trend.

Policiesin-force represents the number of active insurance policies with coverage in effect as of the end of the period referenced. We utilize the change in the number of policies in force to assess the trajectories of our operations.

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

The following table shows the policiesin-force andin-force premiums by product as of March 31, 2025 and March 31, 2024:

The following table shows the policiesin-force andin-force premiums by county in Florida as of March 31, 2025 and March 31, 2024:

Gross premiums earned represent the earned portion of our gross premiums written, adjusted by the change in gross unearned premium. Premiums associated with written, and assumed policies are earned ratably over the remaining term of the policy, respectively, which is typically one year.

Gross premiums earned increased to $210.2 million for the three months ended March 31, 2025 from $156.9 million for the three months ended March 31, 2024. The $53.3 million, or 33.9%, increase was due largely to our increase in gross premiums written related to the Citizens take-outs.

Ceded premiums written represent the gross premiums written that are ceded to reinsurers under our reinsurance treaties. We enter into reinsurance contracts to limit our exposure to potential large catastrophe losses and severenon-catastrophe losses, and in the case of our quota share, to provide additional capacity for growth. Ceded premiums written are impacted by the level of our gross premiums written and decisions we make from time to time to adjust our net retention levels, quota share terms, facultative reinsurance terms, property per risk terms and catastrophe excess of loss terms and capacity, as well as the pricing and availability of reinsurance generally.

Ceded premiums earned represent the earned portion of our ceded premiums written, adjusted by the change in ceded unearned premiums. We recognize the cost of our reinsurance program and ceded premiums earned ratably over the 12-month term of the arrangements.

Ceded premiums earned increased $27.1 million, or 23.0%, to $144.8 million for the three months ended March 31, 2025 from $117.6 million for the three months ended March 31, 2024. The increase in ceded premiums earned was due to growth in our gross premiums earned.

Net premiums written reflect gross premiums written, less ceded premiums written.

Net premiums earned reflect gross premiums earned, less ceded premiums earned.

Net premiums earned grew by $26.1 million, or 66.5%, reaching $65.4 million for the three months ended March 31, 2025, up from $39.3 million for the three months ended March 31, 2024. This increase was due largely to the increase in gross premiums earned without a proportionate increase in ceded premiums earned, both driven largely by our participation the Citizens take-out program.

Policy fees represent various upfront policy fees paid by policyholders on new and renewal insurance policies. In accordance with ASC 606, policy fees are recognized and earned upon collection as they are not subject to refund, and our service obligation is fulfilled when the policy is issued.

Policy fees increased $0.6 million, or 41.8%, to $2.2 million for the three months ended March 31, 2025 from $1.6 million for the three months ended March 31, 2024. The increase in voluntary policies written during the three months ended March 31, 2025 contributed to the increase in policy fees.

Net investment income includes interest earned from cash, cash equivalents, fixed maturity securities and short-term investments. Our invested assets primarily consist of cash and fixed-maturity securities. The primary factors affecting net investment income include the size of our investment portfolio and the yield generated by the underlying securities held in the portfolio.

Net investment income increased $0.9 million, or 26.3%, to $4.1 million for the three months ended March 31, 2025 from $3.2 million for the three months ended March 31, 2024. The increase in net investment income was due to an increase in invested assets primarily driven by an increase in cash and cash equivalents and fixed-maturity securities.

Net realized gains (losses) on investments reflect the differences between the amount received by us upon the sale of a security and the amortized cost of the security, as well as allowances for credit losses recognized in earnings, if any.

We continuously seek to optimize our investment portfolio. Sales ofavailable-for-sale debt securities resulted in net realized investment gains of $15,518 for the three months ended March 31, 2025 and net realized investment gains of $6,112 for the three months ended March 31, 2024.

Other income represents installment fees earned by us when policyholders elect to pay their premium over time as opposed to in full at inception of the policy and other miscellaneous items.

Other income decreased by $56,703, or 26.1%, to $160,672 for the three months ended March 31, 2025 from $217,375 for the three months ended March 31, 2024.

Expenses

Losses and loss adjustment expenses reflect losses and expenses paid to resolve claims, such as fees paid to claims adjusters, attorneys and investigators, and changes in our reserves for unpaid losses and LAE during the fiscal period, in each case net of losses and LAE ceded to reinsurers. Losses and LAE include a provision for claims that have occurred but have not yet been reported to us. These expenses are a function of the amount and type of insurance contracts we write, and the loss experience associated with the underlying coverage. Additionally, losses and LAE include the financial benefit from the management of claims, by American Integrity Claims Services, LLC, ourin-house third-party administrator that earns fees for managing certain policies we issue, including claim fees ceded to reinsurers, which is an offset (contra expense) to LAE. Our losses and LAE are generally affected by:

Losses and LAE increased $0.5 million, or 2.4%, to $20.9 million for the three months ended March 31, 2025 from $20.4 million for the three months ended March 31, 2024. The increase in losses and LAE was driven primarily by gross premiums earned.

Policy acquisition expenses are costs we incur in connection with the acquisition of an insurance policy including commissions paid to distribution partners at the time of policy issuance, policy administration fees paid to third-party administrators at the time of policy issuance, premium taxes, and inspection fees. These policy acquisition expenses are partially offset by ceding commission we receive from third-party reinsurers participating on our net quota share program in connection with us ceding a portion of our gross premiums written. We recognize policy acquisition expenses and ceding commissions ratably over the term of the underlying policies. Ceding commissions are reported as a reduction to policy acquisition costs and general and administrative expenses and allocated to each based upon the proportion these costs bear to production of new business.

Policy acquisition expenses decreased $2.2 million, or 42.0%, to $3.1 million for the three months ended March 31, 2025 from $5.4 million for the three months ended March 31, 2024. The decrease was due primarily to an increase innon-catastrophe ceded commissions and the lack of acquisition costs on the Citizens policies assumed during the fourth quarter of 2024 and first quarter of 2025 before they are renewed.

General and administrative expenses consist of expenses of our operations including employee compensation and benefits, technology costs, facilities costs and professional services fees, including legal, accounting and actuarial fees, as well as general corporate overhead expenses. As noted above, a certain portion of our ceding commissions are allocated to general and administrative expenses.

General and administrative expenses were $5.0 million for the three months ended March 31, 2025, consistent with $5.3 million for the three months ended March 31, 2024.

Income tax expense relates to federal and state income taxes. 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.

Income tax expense was $4.8 million and $1.2 million for the three months ended March 31, 2025 and 2024, respectively. Our effective tax rate for the three months March 31, 2025 and 2024 was 11.2% and 9.0%, respectively. The increase was primarily due to a greater amount of taxable income.

Key Business Metrics and Ratios

Loss ratio, expressed as a percentage, 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 decreased by 19 percentage points for the three months ended March 31, 2025, to 30.9%, compared to 49.9% for the three months ended March 31, 2024. The decrease in the loss ratio was primarily due to the increase in net premiums earned driven largely by our recent participation in the Citizens take-out program.

Expense ratio, expressed as a percentage, is the ratio of policy acquisition expenses and general and administrative expenses to net premiums earned plus policy fees. Our expense ratio improved by 14% to 12.0% for the three months ended March 31, 2025 compared to 26.0% for the three months ended March 31, 2024 were due to the increase in net premiums earned driven largely by our recent participation in the Citizens take-out program.

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. Overall, our combined ratio improved to 42.9% for the three months ended March 31, 2025 from 75.9% for the three months ended March 31, 2024. This improvement was due largely to our recent participation in the Citizens take-out program, which resulted in a financial benefit by reducing our expense ratio and loss ratio and resulted in a disproportionate increase in net earned premiums due to the ability to defer the purchase of additional catastrophe excess of loss reinsurance purchases on the newly assumed policies until the June 1, 2025 treaty year. We expect this benefit to decrease in future quarters as policies assumed in Citizens take-outs renew or are not renewed on their renewal date.

Annualized Return on equity is defined as net income, annualized, divided by the average beginning and ending members’ equity during the applicable period. Our annualized return on equity increased to 92.9% for the three months ended March 31, 2025 from 39.5% for the three months ended March 31, 2024. The increase in our annualized return on equity ratio was due to the financial benefits related to our recent participation in the Citizens take-out program, primarily due to an increase in net income during the period.

Key Business Metrics and Non-GAAP Financial Measures

We utilize thesenon-GAAP financial measures to analyze our business and provide useful information about our financial performance. Thenon-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 thenon-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 thesenon-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 differentgo-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 andnon-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 followingnon-GAAP measure, their most directly comparable GAAP measure, and key business metrics:

Underwriting income (loss)

Underwriting income (loss) is anon-GAAP financial measure defined as income (loss) before income taxes, excluding net investment income, net realized gains and losses on investments, interest expense, other income and stock-based compensation expense. 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 (loss) increased $28.8 million, or 74.5%, to $38.6 million for the three months ended March 31,

2025 from $9.8 million for the three months ended March 31, 2024. The increase was due largely to the financial benefits of our recent participation in the Citizens take-out program.

Underwriting income for the three months ended March 31, 2025 and 2024 reconciles to income before taxes as follows:

Adjusted net income (loss)

Adjusted net income (loss) is anon-GAAP financial measure defined as net income excluding net realized gains or losses on investments and excludes expenses incurred in connection with our IPO, net of tax impact. 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, 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.

Adjusted net income (loss) increased $26.0 million, or 214.7%, to $38.1 million for the three months ended March 31, 2025 from $12.1 million for the three months ended March 31, 2024. The increase was due largely to the financial benefits of our recent participation in the Citizens take-out program.

Adjusted net income (loss) for the three months ended March 31, 2025 and 2024 reconciles to net income as follows:

Annualized adjusted return on equity

Annualized adjusted return on equity is anon-GAAP financial measure defined as adjusted net income for the period on an annualized basis divided by the average of beginning and ending members’ equity during the applicable period. We use annualized 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. Annualized adjusted return on equity should not be viewed as a substitute for any metrics calculated in accordance with GAAP, and other companies may define annualized adjusted return on equity differently.

Annualized adjusted return on equity increased by 53.4 percentage points, to 92.9% for the three months ended March 31, 2025 from 39.5% for the year ended March 31, 2024. The increase in annualized adjusted return on equity over the prior period end balance was primarily due to results from operations and an increase in net income derived from the financial benefits of our recent participation in the Citizens take-out program.

Annualized adjusted return on equity for the three months ended March 31, 2025 and 2024 reconciles to annualized return on equity as follows:

Underlying loss and loss adjustment expense ratio

Underlying loss and loss adjustment expense ratio is anon-GAAP measure. We calculate the 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 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 net loss and LAE ratio. The 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.

We experienced unfavorable net prior year reserve development of $0.6 million for the three months ended March 31, 2025 and $0.5 million for the three months ended March 31, 2024. We experienced no catastrophe losses for the three months ended March, 31, 2025. For the three months ended March 31, 2024 we experienced $2.3 million of catastrophe losses related to PCS coded storm activity during the period.

The underlying loss and loss adjustment expense ratio decreased to 30.0% for the three months ended March 31, 2025 from 43.1% for the three months ended March 31, 2024, primarily due to improvements in thenon-catastrophe loss environment and lower claims litigation trends and the disproportionate increase in net earned premium resulting from our recent participation in the Citizens take-out program.

The following table summarizes loss ratios and underlying loss and LAE ratios for the three months ended March 31, 2025 and 2024:

Ceded catastrophe excess of loss premiums ratio

Ceded catastrophe excess of loss premiums ratio is anon-GAAP measure and, expressed as percentage, 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 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 measure 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 5.1 percentage points, to 41.4% for the three months ended March 31, 2025 from 46.5% for the three months ended March 31, 2024, primarily as a result of the disproportionate increase in gross earned premium related to our recent participation in the Citizens take-out program, partially offset by the increase in reinsurance costs from the June 1, 2024 catastrophe excess of loss reinsurance renewal.

The calculation of our ceded excess of loss premiums ratio is shown in the table below:

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 portfolio, fluctuates from time to time. As of March 31, 2025, our liquidity totaled $447.0 million. A portion of that liquidity is not held at AIICFL. The total cash and cash equivalents not held at the insurance subsidiary is $33.6 million, as of March 31, 2025. 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 portfolio as a source of liquidity to service claims.

On May 9, 2025, we consummated our IPO and received net proceeds of approximately $81.5 million, after (i) deducting underwriting discounts and commissions totaling $7.0 million as well as $4.7 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:

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.

The principal source of liquidity at the Company is from its subsidiaries, including fees paid by the insurance subsidiary, AIICFL, and dividends paid by other subsidiaries generated from, among other things, income earned on policy fees and fees paid by AIICFL to American Integrity MGA, LLC (“AIMGA”) 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.

As discussed in Note 9 — “Regulatory Requirements and Restrictions” in our Notes to the Unaudited 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 9 — “Regulatory Requirements and Restrictions” in the Notes to our Unaudited Condensed Consolidated Financial Statements. Dividends from AIICFL 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 AIICFL 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 the date hereof, AIICFL has not declared dividends.

Liquidity for AIICFL 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 AIICFL consist of the revenue generated from the collection of written premiums and the collection of reinsurance recoverable.

Principal sources of liquidity for the Company include fees paid by our insurance subsidiary, AIICFL, and dividends paid by other subsidiaries generated from, among other things, income earned on policy fees and fees paid by AIICFL to AIMGA for general agency, inspections, agent commissions, general operating expenses and claims adjusting services.

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.

Our cash flows for the three months ended March 31, 2025 and 2024 were:

Cash provided by operating activities was $68.1 million for the three months ended March 31, 2025 compared to $(20.2) million used in operating activities for the three months ended March 31, 2024. The increase in cash provided by operating activities resulted from our strategic expansion through our Citizen’stake-out program.

Net cash provided by investing activities was $8.3 million for the three months ended March 31, 2025 compared to $(4.6) million used in investing activities for the three months ended March 31, 2024. The increase in net cash provided by investing activities was primarily attributable to the proceeds from sales and maturities of fixed income securities in excess of purchases of fixed maturity securities during the period.

Net cash used in financing activities was $(15.0) million for the three months ended March 31, 2025 compared to $(4.1) million used in financing activities for the three months ended March 31, 2024. The increase in net cash used in financing activities was primarily attributable to an increase in the distribution made to members to pay federal income tax and a discretionary distribution that was paid out to members. There was no capital raising activity for the three months ended March 31, 2025.

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 members’ equity, total long-term debt, total capital resources, debt-to-total capital ratio anddebt-to-equity ratio as of March 31, 2025, and December 31, 2024.

Thedebt-to-total capital ratio is calculated as total long-term debt divided by total capital resources, whereas thedebt-to-equity ratio is calculated as total long-term debt divided by members’ 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 Unaudited Condensed Consolidated Financial Statements. Our current critical accounting estimates are:

Liability for unpaid losses and loss adjustment expense

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 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 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:

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

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 March 31, 2025, we recorded $13.4 million in case reserves and an additional $418.2 million for IBNR reserves, totaling $431.6 million in reserves, with an added $439.7 million attributable to reinsurance claims payable.

For further detail, see Note 7 — “Liability for Unpaid Losses and Loss Adjustment Expense” in our Notes to the Unaudited 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 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.

Investments

The Company currently classifies all of its investments in debt securities and short-term investments asavailable-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:

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 source. 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 March 31, 2025 and December 31, 2024. Changes in interest rates subsequent to March 31, 2025 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 portfolio, 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 portfolio, 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 members’ equity.

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:

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 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 tonon-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 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 — “Summary of Significant Accounting Policies” in our Notes to the Unaudited Condensed Consolidated Financial Statements.