Presurance Holdings, Inc.

1. Summary of Significant Accounting Policies

Basis of Presentation and Management Representation

On September 30, 2025, Conifer Holdings, Inc. changed its name to Presurance Holdings, Inc. On August 21, 2025, Conifer Insurance Company changed its name to Triassic Insurance Company.

The condensed consolidated financial statements include accounts, after elimination of intercompany accounts and transactions, of Presurance Holdings, Inc. (the “Company” or “Presurance” or "PHI"), its wholly owned subsidiaries, Triassic Insurance Company ("TIC"), White Pine Insurance Company ("WPIC"), Red Cedar Insurance Company ("RCIC"), and VSRM, Inc. ("VSRM"). VSRM owned a 50% non-controlling interest in Sycamore Specialty Underwriters, LLC ("SSU" or "Affiliate") until August 30, 2024, when VSRM sold its interest in SSU.

TIC, WPIC, and RCIC are collectively referred to as the "Insurance Company Subsidiaries." On a stand-alone basis, Presurance Holdings, Inc. is referred to as the "Parent Company." Prior to the sale of Conifer Insurance Services ("CIS") the condensed consolidated financial statements also included CIS which is presented under discontinued operations. CIS contained substantially all of the Wholesale Agency segment and was sold on August 30, 2024.

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which differ from statutory accounting practices prescribed or permitted for insurance companies by regulatory authorities. The Company has applied the rules and regulations of the United States Securities and Exchange Commission (“SEC”) regarding interim financial reporting and therefore the condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments, consisting of items of a normal recurring nature, necessary for a fair presentation of the condensed consolidated interim financial statements, have been included.

These condensed consolidated financial statements and the notes thereto should be read in conjunction with the Company's audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC.

The results of operations for the nine months ended September 30, 2025, are not necessarily indicative of the results expected for the year ended December 31, 2025.

Business

Historically, the Company was engaged in the sale of property and casualty insurance products and organized its principal operations into three types of insurance businesses: commercial lines, personal lines, and agency business. The Company no longer has the agency business following the sales of both CIS and SSU in August 2024. The Company used to underwrite a variety of specialty commercial insurance products, including commercial property, general liability, liquor liability and commercial automobile, of which substantially all of these programs are in run-off. While this business is no longer written by the Company, the historical business contributes significantly to our exposure to loss reserve development.

As of September 30, 2025, the Company is only writing a small amount of commercial business and continues to write specialty homeowners business in Texas, Illinois and Indiana. The Company’s corporate headquarters are located in Troy, Michigan.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While management believes the amounts included in the condensed consolidated financial statements reflect management's best estimates and assumptions, actual results may differ from these estimates.

Cash, Cash Equivalents, and Short-term Investments

Cash consists of cash deposits in banks, generally in operating accounts. Cash equivalents consist of money-market funds that are specifically used as overnight investments tied to cash deposit accounts. Short-term investments, consisting of money market funds, are classified as investments in the condensed consolidated balance sheets as they relate to the Company’s investment activities.

Funds-Withheld Obligations

Funds-withheld obligations under reinsurance agreements with risk exposures that are not clearly and closely related to the host contract are considered an embedded derivative. A gain or loss on such derivative instruments is recognized in earnings.

Accounting Guidance Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). ASU 2023-09 requires public business entities to disclose additional information with respect to the reconciliation of the effective tax rate to the statutory rate. Additionally, public business entities will need to disaggregate federal, state and foreign taxes paid in their financial statements. ASU 2023-09 is effective for public business entities for fiscal years, beginning after December 15, 2024, and can be applied on a prospective or retrospective basis. The Company plans to adopt this guidance for the year ended December 31, 2025, and is in the process of assessing the impact on our disclosures.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which will require disclosure of additional information about specific expense categories in the notes to financial statements for all public business entities. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

Company Liquidity

At September 30, 2025, the Company had $62.3 million in cash, cash equivalents and short-term investments. Our principal sources of funds are insurance premiums, investment income and proceeds from maturities and sales of invested assets. These funds are primarily used to pay claims, commissions, employee compensation, taxes and other operating expenses, and service debt and mandatorily redeemable preferred stock.

We conduct our business operations primarily through our Insurance Company Subsidiaries. Our holding company's ability to service debt and mandatorily redeemable preferred stock, and pay administrative expenses is primarily reliant upon our intercompany service fees paid by the Insurance Company Subsidiaries to the holding company for management, administrative, and information technology services provided to the Insurance Company Subsidiaries by the Parent Company. Secondarily, the Parent Company may receive dividends from the Insurance Company Subsidiaries; however, this is not the primary means in which the holding company supports its funding as state insurance laws restrict the ability of our Insurance Company Subsidiaries to declare dividends to the Parent Company. Generally, the limitations are based on the greater of statutory net income for the preceding year or 10% of statutory surplus at the end of the preceding year. There wereno dividends paid from our Insurance Company Subsidiaries for thenine months ended September 30, 2025 and 2024. We do not anticipate any dividends being paid to the Parent Company from our insurance subsidiaries in the near term.

Due to significant losses in 2023 and 2024, much of which is attributable to strengthening reserves on the commercial liability lines of business (which are now all in run-off), our Insurance Company Subsidiaries lack sufficient capital to continue to underwrite the volume of business they have historically written. In particular, there was significant additional adverse development in TIC in the fourth quarter of 2024. This resulted in the need for PHI to contribute an additional $16.0 million into TIC in late 2024 and early 2025 in order for TIC to remain above the Regulatory Action Level of the Risk Based Capital (“RBC”). Even with these contributions, TIC fell within the Company Action Level with an RBC ratio of 156% as of December 31, 2024, and was required to submit a plan of remediation to its domiciliary regulator.

As an effort to support TIC and WPIC during 2024 and year-to-date 2025, the Parent Company received no intercompany service fees from the Insurance Company Subsidiaries and has relied significantly on proceeds from sales of assets and capital raises over the last two years in order to ensure its ability to meet its obligations as they became due.

To help support TIC’s RBC remediation plan, PHI contributed an additional $6.5 million to TIC in June 2025. TIC’s estimated RBC as of September 30, 2025, is now approximately 261%. As part of the plan to keep TIC’s RBC ratio above 200% in the near term, TIC is not expected to pay PHI any intercompany service fees for the duration of 2025 but is expected to resume such fees in 2026. TIC also entered into a quota share agreement with its homeowners book of business in June 2025 as a method of increasing the RBC ratio. It may take additional contributions to TIC to fully remediate TIC’s RBC position by December 31, 2025.

TIC is also subject to additional regulatory monitoring requirements as a result of the Company not being above the minimum required RBC levels as of December 31, 2024. WPIC no longer writes any business and TIC’s writings are significantly constrained by its diminished capital position.

If we do not remediate the regulatory deficiency the insurance regulator could suspend or terminate TIC’s authority to write business. Also, A.M. Best and Kroll downgraded the financial strength ratings of both companies and we terminated the rating relationship in early 2024. Therefore, neither company is currently rated by a nationally recognized statistical rating organization which can negatively impact their ability to market to policyholders. These circumstances could jeopardize the ability of the Company to generate insurance underwriting revenues.

PHI had $894,000 of cash as of September 30, 2025. PHI is required to make quarterly interest payments on its public debt of $412,000 and quarterly dividend payments of approximately $253,000, depending on changing interest rates, on its mandatorily redeemable preferred stock. PHI is also currently bearing much of the operating costs of the organization because no management fee is being paid by either insurance company during 2025. Absent any other action, PHI will require additional liquidity to continue its operations over the next twelve months. PHI’s cash obligations are expected to be funded with bridge loan financing from current investors, cash on hand, the expected receipt of a $10.0 million third earnout payment by September 2026 and the potential sale of available assets and additional short-term financing available from existing investors. PHI has received a letter of support from its largest shareholder confirming its commitment and ability to provide financial support to the Company to support the necessary liquidity for a year and a day from the date of the financial statements. Management believes its plans provide the Company the ability to meet its obligations as they become due over the next twelve months.

2. Investments

The Company analyzed its investment portfolio in accordance with its credit loss review policy and determined it did not need to record a credit loss for the three and nine months ended September 30, 2025, or for the year-ended December 31, 2024. The Company holds only investment grade securities from high credit quality issuers. The gross unrealized losses of $9.1 million as of September 30, 2025, from the Company's available-for-sale securities are due to market conditions and interest rate changes. Management believes it will not need to sell its available-for-sale securities at significant losses as it has the ability and intention to hold them until maturity or until their values improve.

The cost or amortized cost, gross unrealized gains or losses, and estimated fair value of the investments in securities classified as available for sale at September 30, 2025 and December 31, 2024 were as follows (dollars in thousands):

The following table summarizes the aggregate fair value and gross unrealized losses, by security type, of the available-for-sale securities in unrealized loss positions. The table segregates the holdings based on the length of time that individual securities have been in a continuous unrealized loss position (dollars in thousands):

The Company’s sources of net investment income and losses are as follows (dollars in thousands):

The following table summarizes the gross realized gains and losses from sales, calls and maturities of available-for-sale debt and equity securities (dollars in thousands):

There were $22.1 million and $13.8 million of proceeds from available-for-sale debt securities for thenine months ended September 30, 2025 and 2024, respectively.

There were $5,000 and $10,000 of gross realized gains from the sales, calls and maturities of available-for-sale debt securities for thethree and nine months ended September 30, 2025, respectively. There were $1,000 and $31,000 gross realized losses from the sales, calls and maturities of available-for-sale debt securities for thethree and nine months ended September 30, 2025, respectively.

There were $10,000 of gross realized gains from the sales, calls and maturities of available-for-sale debt securities for thethree and nine months ended September 30, 2024, respectively. There were $17,000 of gross realized losses from the sales, calls and maturities of available-for-sale debt securities for thethree and nine months ended September 30, 2024, respectively.

There were $15.9 million and $0 of payables from securities purchased as of September 30, 2025 and December 31, 2024, respectively. There wereno receivables from securities sold as of September 30, 2025 and December 31, 2024, respectively.

The Company's gross unrealized gains related to its equity investments were $98,000 and $350,000 as of September 30, 2025 and December 31, 2024, respectively. The Company’s gross unrealized losses related to its equity investments were $576,000 and $584,000 as of September 30, 2025 and December 31, 2024, respectively.

The Company also carries other equity investments that do not have a readily determinable fair value at cost, less impairment or observable changes in price. We review these investments for impairment during each reporting period. There wereno impairments or observable changes in price recorded for thethree and nine months ended September 30, 2025 and 2024, respectively, related to the Company's other equity investments. These investments are included in Other Assets in the Condensed Consolidated Balance Sheets and amounted to $250,000 as of September 30, 2025 and December 31, 2024.

The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at September 30, 2025. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands):

At September 30, 2025 and December 31, 2024, the Insurance Company Subsidiaries had $8.5 million and $8.3 million, respectively, on deposit in trust accounts to meet the deposit requirements of various state insurance departments. At September 30, 2025 and December 31, 2024, the Company had $103.4 million and $108.4 million, respectively, held in trust accounts to meet collateral requirements with other third-party insurers, relating to various fronting arrangements. At September 30, 2025, approximately $102.7 million of the trust account balances are for collateral of gross loss reserves of the fronted business on the security guard and installation industries and the quick service restaurant program. There are withdrawal and other restrictions on these deposits, including the type of investments that may be held, however, the Company may generally invest in high-grade bonds and short-term investments and earn interest on the funds. As the unearned premiums run off tozero and loss reserves are paid on these programs, the remaining trust balances will be released and available for general use. It is expected to take approximately seven years for a large majority of the balances to be released with approximately 50% being released in the next few years.

3. Fair Value Measurements

The Company’s financial instruments include assets carried at fair value, as well as debt carried at face value, net of unamortized debt issuance costs, and are disclosed at fair value in this note. All fair values disclosed in this note are determined on a recurring basis other than the debt which is a non-recurring fair value measure. Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal most advantageous market for the asset or liability in an orderly transaction between market participants. In determining fair value, the Company applies the market approach, which uses prices and other relevant data based on market transactions involving identical or comparable assets and liabilities. The inputs to valuation techniques used to measure fair value are prioritized into a three-level hierarchy. The hierarchy gives the highest priority to quoted prices from sources independent of the reporting entity (“observable inputs”) and the lowest priority to prices determined by the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (“unobservable inputs”). The fair value hierarchy is as follows:

Level 1 -Valuations that are based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 -Valuations that are based on observable inputs (other than Level 1 prices) such as quoted prices for similar

assets or liabilities at the measurement date; quoted prices in markets that are not active; or other inputs that are observable,

either directly or indirectly, for substantially the full term of the asset or liability.

Level 3- Unobservable inputs that are supported by little or no market activity. The unobservable inputs represent the

Company’s best assumption of how market participants would price the assets or liabilities.

Net Asset Value (NAV) -The fair values of investment company limited partnership investments and mutual funds are

based on the capital account balances reported by the investment funds subject to their management review and adjustment.

These capital account balances reflect the fair value of the investment funds.

The following tables present the Company’s assets and liabilities measured at fair value, classified by the valuation hierarchy as of September 30, 2025 and December 31, 2024 (dollars in thousands):

Level 1 investments consist of equity securities traded in an active exchange market. The Company uses unadjusted quoted prices for identical instruments to measure fair value. Level 1 also includes money market funds and other interest-bearing deposits at banks, which are reported as short-term investments. The fair value measurements that were based on Level 1 inputs comprise 37% and 17% of the fair value of the total marketable investments measured at fair value as of September 30, 2025 and December 31, 2024, respectively.

Level 2 investments include debt securities and equity securities, which consist of U.S. government agency securities, state and local municipal bonds (including those held as restricted securities), corporate debt securities, mortgage-backed and asset-backed securities. The fair value of securities included in the Level 2 category were based on the market values obtained from a third-party pricing service that were evaluated using pricing models that vary by asset class and incorporate available trade, bid and other observable market information. The third-party pricing service monitors market indicators, as well as industry and economic events. The fair value measurements that were based on Level 2 inputs comprise 63% and 83% of the fair value of the total marketable investments measured at fair value as of September 30, 2025 and December 31, 2024, respectively.

The Company obtains pricing for each security from independent pricing services, investment managers or consultants to assist in determining fair value for its Level 2 investments. To validate that these quoted prices are reasonable estimates of fair value, the Company performs various quantitative and qualitative procedures, such as (i) evaluation of the underlying methodologies, (ii) analysis of recent sales activity, (iii) analytical review of our fair values against current market prices and (iv) comparison of the pricing services’ fair value to other pricing services’ fair value for the same investment. No markets for the investments were determined to be inactive at period-ends. Based on these procedures, the Company did not adjust the prices or quotes provided from independent pricing services, investment managers or consultants.

As of September 30, 2025, the Company had an asset for its contingent consideration related to the CIS Sale. The fair value measurement of the contingent considerations asset was determined using Level 3 inputs. At the time of the fair value analysis, the third contingent payment, equaling $10.0 million, is expected to be paid by September 2026, but is still subject to uncertainty. The Company determined the fair value of the third contingent payment to be $6.3 million, as of September 30,

2025. The fair value was calculated based on the average of 20,000 simulations of a Monte Carlo analysis performed using Geometric Brownian Motion. Key assumptions in the analysis included the following as of September 30, 2025:

As of December 31, 2024, the Company had an asset for contingent consideration related to the CIS Sale. The fair value measurement of the contingent consideration asset was determined using Level 3 inputs. At the time of the fair value analysis, the second and third $10.0 million contingent payments were not expected to be earned until the end of 2025 or later, if at all. The Company determined the combined fair value of the second and third contingent payments to be $8.1 million, as of December 31, 2024. The fair value was calculated based on the average of 20,000 simulations of a Monte Carlo analysis performed using Geometric Brownian Motion. Key assumptions in the analysis included the following as of December 31, 2024:

The Company's policy on recognizing transfers between hierarchies is applied at the end of each reporting period. The tables below show a roll forward of Level 3 assets and liabilities held at fair value during thethree and nine months ended September 30, 2025 (dollars in thousands):

Fair Value of Financial Instruments Not Measured at Fair Value on the Condensed Consolidated Balance Sheets

The fair value of our long-term debt is based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities. The carrying value and estimated fair value of our long-term debt as of September 30, 2025 was approximately $12.1 million and $8.8 million, respectively. The carrying value and estimated fair value of our long-term debt as of December 31, 2024 was approximately $11.9 million and $10.8 million, respectively.

As of September 30, 2025, the Company has a Level 3 liability for its mandatorily redeemable preferred stock that was issued during the first quarter of 2025. The fair value measurement of the mandatorily redeemable preferred stock was determined using a trinomial lattice. This model was selected in consideration of the Company's optional redemption rights. The carrying value and estimated fair value of our the mandatorily redeemable preferred stock as of September 30, 2025 was approximately $6.1 million and $6.0 million, respectively.

4. Deferred Policy Acquisition Costs

The Company defers costs incurred which are incremental and directly related to the successful acquisition of new or renewal insurance business, net of corresponding amounts of ceded reinsurance commissions. Net deferred policy acquisition costs are amortized and charged to expense in proportion to premium earned over the estimated policy term. The Company anticipates that its deferred policy acquisition costs will be fully recoverable and there were no premium deficiencies for the nine months ended September 30, 2025 and 2024. The activity in deferred policy acquisition costs, net of reinsurance transactions, is as follows (dollars in thousands):

5. Unpaid Losses and Loss Adjustment Expenses

The Company establishes reserves for unpaid losses and loss adjustment expenses ("LAE") which represent the estimated ultimate cost of all losses incurred that were both reported and unreported (i.e., incurred but not yet reported losses; or “IBNR”) and LAE incurred that remain unpaid at the balance sheet date. The Company’s reserving process takes into account known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions. In the normal course of business, the Company may also supplement its claims processes by utilizing third-party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims. The effects of inflation are implicitly considered in the reserving process.

Reserves are estimates of unpaid portions of losses that have occurred, including IBNR losses; therefore, the establishment of appropriate reserves is an inherently uncertain and complex process. The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates. The highest degree of uncertainty is associated with reserves for losses incurred in the current reporting period as it contains the greatest proportion of losses that have not been reported or settled. The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in reserve estimates, which may be material, are reported in the results of operations in the period such changes are determined to be needed and recorded.

Management believes that the reserve for losses and LAE is appropriately established in the aggregate and adequate to cover the ultimate net cost of reported and unreported claims arising from losses which had occurred by the date of the condensed consolidated financial statements based on available facts and in accordance with applicable laws and regulations.

The table below provides the changes in the reserves for losses and LAE, net of reinsurance recoverables, for the periods indicated as follows (dollars in thousands):

Net losses and LAE decreased by $8.8 million, or 57.8%, to $6.4 million during the third quarter of 2025, compared to $15.2 million for the same period in 2024. The $3.8 million decrease in current accident year losses during the third quarter of 2025, compared to the same period in 2024, was mostly due to a significant reduction in net earned premiums as commercial lines business is in runoff and we focus on the specialty homeowners business.

6. Reinsurance

In the normal course of business, the Company participates in reinsurance agreements in order to limit losses that may arise from catastrophes or other individually severe events.

Effective June 1, 2025, the Company was party to a new quota share reinsurance agreement wherein it cedes 50% of written premiums, and unearned premiums as of the effective date, on substantially all of its homeowners business. This agreement generated $4.1 million of ceded written premiums for the quarter. The agreement allows for a 36.2% ceding commission, which is subject to adjustment based on the performance of the underlying business.

Effective June 1, 2025, the Company was party to a property catastrophe reinsurance treaty for aggregate losses up to $56.0 million in excess of a $4.0 million retention.

The Company ceded primarily all specific commercial property and liability risks in excess of $400,000 in 2025 and 2024. The Company ceded homeowners specific risks in excess of $500,000 and $400,000 in 2025 and 2024, respectively. The homeowners quota share effectively reduces the net retention of the specific loss coverage from $500,000 to $250,000, and reduces the retention of the catastrophe reinsurance coverage from $4.0 million to $2.0 million.

Reinsurance does not discharge the direct insurer from liability to its policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors the concentration of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. To date, the Company has not experienced any significant difficulties in collecting reinsurance recoverables.

On November 1, 2022, the Company entered into a loss portfolio transfer (“LPT”) reinsurance agreement. The LPT provides adverse reserve development coverage of up to $20.0 million for accident years 2019 and prior. As of September 30, 2025, the Company ceded an aggregate of $18.4 million of losses to the LPT, leaving $1.6 million of coverage. As of December 31, 2024, the Company ceded an aggregate of $14.0 million of losses to the LPT, leaving $6.0 million of coverage.

As of September 30, 2025, the Condensed Consolidated Balance Sheets included $3.7 million and $9.0 million of reinsurance recoverables on paid and unpaid losses related to the LPT, respectively. As of December 31, 2024, the Consolidated Balance Sheets included $3.4 million and $10.6 million of reinsurance recoverables on paid and unpaid losses related to the LPT, respectively.

The following table presents the effects of reinsurance and assumption transactions on written premiums, earned premiums and losses and LAE (dollars in thousands):

7. Debt

The Company has $16.9 million of senior unsecured notes (the "notes") outstanding as of September 30, 2025. TIC owns $4.0 million of the $16.9 million notes. The $4.0 million is eliminated upon consolidation.

On August 30, 2024, the Company paid off all of its $9.3 million of outstanding senior secured notes with the proceeds from the CIS Sale. The Company incurred a $753,000 call premium from the paydown of the senior secured notes. The Company amortized through interest expense $771,000 of debt issuance costs related to the paydown of the senior secured notes.

A summary of the Company's outstanding debt is as follows (dollars in thousands):

Senior Unsecured Notes

The Company has $16.9 million of notes outstanding as of September 30, 2025. The notes bear aninterest rate of 9.75% per annum, payable quarterly at the end of March, June, September and December and mature on September 30, 2028. The Company may redeem the notes, in whole or in part, at face value at any time after September 30, 2025.

Financial Debt Covenants

The Company was not subject to any restrictive financial debt covenants as of September 30, 2025, as a result of its paydown of the senior secured notes on August 30, 2024.

Scheduled Principal Payments

The scheduled principal payment of the Company's debt as of September 30, 2025 is $16.9 million due on September 30, 2028, of which $4.0 million will be paid to TIC.

Funds-Withheld Obligation

Included in Funds held under reinsurance agreements in the Condensed Consolidated Balance Sheets are $21.3 million and $25.8 million as of September 30, 2025, and December 31, 2024, respectively, of a funds-withheld obligation relating to one reinsurance agreement which is accounted for as an embedded derivative. Changes to the funds-withheld obligation due to fair value changes of the underlying asset portfolio are included in Operating and other expenses on the Condensed Consolidated Statements of Operation. The change in the fair value of the underlying asset portfolio was $332,000 and $0 for thethree months ended September 30, 2025 and 2024, respectively, and $958,000 and $0 for thenine months ended September 30, 2025 and 2024, respectively.

8. Mandatorily Redeemable Preferred Stock

Series B Preferred Stock

On February 27, 2025 and March 3, 2025, the Company issued a total of $7.5 million of its newly designated non-convertible mandatorily redeemable Series B Preferred Stock, no par value, through a private placement of 1,500 preferred shares priced at $5,000 per share that matures on December 31, 2026, and issued the Purchaser (as defined below) common stock purchase warrants (the "Warrants") to purchase 4,000,000 shares at an exercise price of $1.50 per share.

The Warrants entitle the Purchaser to purchase up to 4,000,000 shares of the Company’s common stock at an exercise price of $1.50 per share. The Warrants will expire on January 31, 2027.

The Series B Preferred Stock was sold to Clarkston 91 West LLC (the "Purchaser"), an entity affiliated with Gerald and Jeffrey Hakala, who were both at such time members of the Board of Directors of the Company. The Company used the proceeds for working capital and general corporate purposes. The Series B Preferred Shares may be redeemed early at the Company's option at a price equal to the Series B face value. Each share of the Series B Preferred Stock entitles the Holder to 3,000 votes on each matter properly submitted to the Company's shareholders for their vote, however the aggregate voting power of all outstanding shares of the Series B Preferred Stock shall not exceed 19.99% of the aggregate voting power of all voting securities.

The Series B Preferred Stock requires quarterly dividend payments at a rate equal to the prime rate of Waterford Bank, N.A. plus 600 basis points, or 12.0%, whichever is higher. As of September 30, 2025, this equated to an annualized rate of 13.5%. The Company recorded $253,000 and $594,000 of interest expense for thethree and nine months ended September 30, 2025, respectively, related to the dividends from the Series B Preferred Stock.

The $7.5 million of Series B Preferred Stock, and the Warrants issued contemporaneously, were both fair valued as of the issuance date. The Warrants were valued at $2.0 million and the Preferred Stock was valued at $5.5 million. The fair value of the Warrants was recorded as additional paid-in capital. The fair value measurement of the mandatorily redeemable preferred stock was determined using a trinomial lattice model. The model was selected in consideration of the Company's optional redemption rights. Key assumptions in the analysis included the following as of the date of issuance:

The total liability recorded for the Preferred Stock was $5.5 million. The Preferred Stock liability will be accreted to its maximum redemption value over the term maturing on December 31, 2026, using the effective interest method. The increases in the redemption amount are recorded with corresponding adjustments to the interest expense. The Series B Preferred Stock accreted by $243,000 and $552,000 for thethree and nine months ended September 30, 2025, respectively.

The value of the Warrants increased book value through additional paid-in capital by $0.16 per share. Over time, as the preferred stock liability increases to $7.5 million face value, the $0.16 per share of book value will decrease through retained earnings.

The scheduled principal payment of the Company's Series B Preferred Stock is $7.5 million due on December 31, 2026.

9. Shareholders' Equity

Series A Preferred Stock

On August 30, 2024, the Company redeemed all $6.0 million of its outstanding Series A Preferred Stock. The Company incurred a redemption premium of $397,000, and recorded the premium as additional dividends paid on the Series A Preferred Stock. The redemption premium reduced the Company's net income allocable to common shareholders.

The Series A Preferred Stock was originally issued on December 20, 2023, through a private placement of 1,000 shares priced at $6,000 per share that would have matured on June 30, 2026. The Series A Preferred Stock was sold to the Purchaser. The Series A Preferred Stock shareholders hadno voting rights and optional redemption was only in the control of the Company.

As of September 30, 2025 and December 31, 2024, the Company hadno issued or outstanding shares of the Series A Preferred Stock, respectively.

Common Stock

As of September 30, 2025 and December 31, 2024, the Company had 12,222,881 issued and outstanding shares of common stock, respectively. Holders of common stock are entitled toone vote per share and to receive dividends only when and if declared by the board of directors. The holders have no preemptive, conversion or subscription rights.

10. Earnings Per Share

Basic and diluted earnings (loss) per share are computed by dividing net income allocable to common shareholders by the weighted average number of common shares outstanding during the period. The dividends on the Series A Preferred Stock are deducted from the net income to arrive at net income allocable to common shareholders. The following table presents the calculation of basic and diluted earnings (loss) per common share, as follows (dollars in thousands, except per share and share amounts):

• There wereno unvested restricted stock units as of September 30, 2025. The 106,000 of non-vested shares of stock options and 4,000,000 of recently issued warrants were anti-dilutive as of September 30, 2025. The 10,000 of unvested restricted stock units were anti-dilutive as of September 30, 2024. The 159,000 of non-vested shares of stock options were anti-dilutive as of September 30, 2024. Therefore, the basic and diluted weighted average common shares are equal for the three and nine months ended September 30, 2025 and 2024.

11. Stock-based Compensation

On March 8, 2022 the Company issued options to purchase 630,000 shares of the Company's common stock to two named executive officers. The right to exercise the options vest over afive-year period on a straight-line basis. The options have a strike price of $4.53 per share and will expire on March 8, 2032. The estimated grant date fair value of these options is $612,000, which is being expensed ratably over the vesting period. A Black Scholes model was used to determine the fair value ofthe options at the time the options were issued, using the Company’s historical 5-year market price of its stock to determine volatility (equating to 65.04%), an estimated 5-year term to exercise the options, a 5-year risk-free rate of return of 1.8%, and the market price for the Company’s stock of $2.40 per share.

On June 30, 2020, the Company issued options to purchase 280,000 shares of the Company’s common stock, to certain executive officers and other employees. The right to exercise the options vest over afive-year period on a straight-line basis. The options have a strike price of $3.81 per share and expire on June 30, 2030. The estimated grant date fair value of these options is $290,000, which was fully expensed as of June 30, 2025.

The Company recorded $14,000 and $(8,000) of compensation expense for thethree months ended September 30, 2025 and 2024, respectively, related to the Company's stock options granted. The Company recorded $44,000 and $62,000 of compensation expense for thenine months ended September 30, 2025 and 2024. There were 106,000 options outstanding and unvested as of September 30, 2025, which will generate an estimated future expense of $73,000.

12. Commitments and Contingencies

Legal Proceedings

The Company and its subsidiaries are subject at times to various claims, lawsuits and proceedings relating principally to alleged errors or omissions in the placement of insurance, claims administration, and other business transactions arising in the ordinary course of business. Where appropriate, the Company vigorously defends such claims, lawsuits and proceedings. Some of these claims, lawsuits and proceedings seek damages, including consequential, exemplary or punitive damages, in amounts that could, if awarded, be significant. Most of the claims, lawsuits and proceedings arising in the ordinary course of business are covered by the insurance policy at issue. We account for such activity through the establishment of unpaid losses and LAE reserves. In accordance with accounting guidance, if it is probable that a liability has been incurred as of the date of the financial statements and the amount of loss is reasonably estimable; then an accrual for the costs to resolve these claims is recorded by the Company in the accompanying condensed consolidated financial statements. Periodic expenses related to the defense of such claims are included in the accompanying condensed consolidated statements of operations. On the basis of current information, the Company does not believe that there is a reasonable possibility that any material loss exceeding amounts already accrued, if any, will result from any of the claims, lawsuits and proceedings to which the Company is subject to, either individually or in the aggregate.

Payment of Contingent Considerations

As of September 30, 2025, the Company recorded $6.3 million of contingent consideration receivable to reflect the fair value of potential additional contingent consideration related to the CIS Sale. The timing of such payment is contingent on the performance of CIS which is subject to variables outside of our control. We have until June 30, 2027 to earn the remaining contingent consideration.

At the time of the CIS Sale, the Company entered into a bonus agreement with three of its employees that conveyed with the transaction. Under the agreement the Company would pay a bonus once the third payment of the contingent consideration was received. The total bonus is $1.46 million. As the occurrence of the third contingent consideration payment is now deemed probable, we accrued $922,000 of bonus expense for thenine months ended September 30, 2025. The amount of the accrual was 63% of the total bonus which is consistent with the pro rata amount of the fair value of the contingent consideration of $6.3 million, as compared to the full amount of the third contingent consideration payment of $10.0 million.

13. Segment Information

The Company has historically been engaged in the sale of property and casualty insurance products and had organized its business model around three classes of insurance businesses: commercial lines, personal lines, and wholesale agency business. Within these three businesses, the Company offered various insurance products and insurance agency services. Such insurance businesses were engaged in underwriting and marketing insurance coverages, and administered claims processing for such policies. The Company viewed the commercial and personal lines segments as underwriting business (business that takes on insurance underwriting risk). The wholesale agency business provided non-risk bearing revenue through commissions and policy fees. The wholesale agency business increased the product options to the Company’s independent retail agents by offering both insurance products from the Insurance Company Subsidiaries as well as products offered by other insurers. As a result of the CIS Sale, the Company is no longer operating a wholesale agency business. The Company determined that the wholesale agency segment qualifies for discontinued operations reporting. All periods presented now exclude the wholesale agency segment as well as related eliminations from the segment information provided below.

The Company defines its operating segments as components of the business where separate financial information is available and used by the chief operating decision maker in deciding how to allocate resources to its segments and in assessing its performance. In assessing performance of its operating segments, the Company’s chief operating decision maker, the Chief Executive Officer, reviews a number of financial measures including gross written premiums, net earned premiums, losses and LAE, net of reinsurance recoveries, and other revenue and expenses. The primary measure used for making decisions about resources to be allocated to an operating segment and assessing its performance is segment underwriting gain or loss which is defined as segment revenues, consisting of net earned premiums and other income, less segment expenses, consisting of losses and LAE, policy acquisition costs and operating expenses of the operating segments. Operating expenses primarily include compensation and related benefits for personnel, policy issuance and claims systems, rent and utilities. The Company markets, distributes and sells its insurance products through the managing general agency, CIS. All of the Company’s insurance activities are conducted in the U.S. with a concentration of activity in Texas. In mid-2024, the Company exited the Oklahoma business. As part of the strategic shift described earlier, the Company has also significantly reduced its writings in commercial lines. For the nine months ended September 30, 2025 and 2024, gross written premiums attributable to Texas were 77.6% and 45.9%, respectively, of the Company’s total gross written premiums.

In addition to the reportable segments, the Company maintains a Corporate and Other category to reconcile segment results to the consolidated totals. The Corporate and Other category includes: (i) corporate operating expenses such as salaries and related benefits of the Company’s executive management team, some finance and information technology personnel, and other corporate headquarters expenses, (ii) interest expense on the Company’s debt obligations; (iii) depreciation and amortization on property and equipment, and (iv) all investment income activity. All investment income activity is reported within net investment income, net realized investment gains and losses, and change in fair value of equity securities on the condensed consolidated statements of operations. The Company’s assets on the condensed consolidated balance sheet are not allocated to the reportable segments.

The following tables present information by reportable operating segment (dollars in thousands):

14. Subsequent Events

The Company performed an evaluation of subsequent events through the date the financial statements were issued and determined there were no recognized or unrecognized subsequent events that would require an adjustment or additional disclosure in the condensed consolidated financial statements as of September 30, 2025.