Presurance Holdings, Inc.

Previous wording

Certain statements contained in this Quarterly Report on Form 10-Q, which are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, as Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek” and similar terms and phrases, or the negative thereof, may be used to identify forward-looking statements.

Current wording

Certain statements contained in this Quarterly Report on Form 10-Q, which are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek” and similar terms and phrases, or the negative thereof, may be used to identify forward-looking statements.

Previous wording

We are an insurance holding company that markets and services our product offerings through specialty commercial and specialty personal insurance business lines. Currently, we are authorized to write insurance as an excess and surplus lines carrier in 44 states, including the District of Columbia. We are licensed to write insurance as an admitted carrier in 42 states, including the District of Columbia. As of September 30, 2025, we offer insurance products primarily in Texas, Illinois and Indiana, for homeowners lines and Nevada and Michigan for other lines. However, we expect the Nevada and Michigan business to go into run-off in the near term.

Current wording

We are an insurance holding company that markets and services our product offerings through specialty commercial and specialty personal insurance business lines. Currently, we are authorized to write insurance as an excess and surplus lines carrier in 44 states, plus the District of Columbia. We are licensed to write insurance as an admitted carrier in 42 states, plus the District of Columbia. As of March 31, 2026, we offer only homeowners insurance products primarily in Texas, Illinois and Indiana.

Previous wording

Our expenses consist primarily of losses and loss adjustment expenses, agents’ commissions, and other underwriting and administrative expenses. Historically, we have organized our operations in three insurance businesses: commercial insurance lines, personal lines, and agency business prior to the CIS Sale. Together, the commercial and personal lines refer to “underwriting” operations that take insurance risk, and the agency business refers to non-risk insurance business.

Current wording

Our expenses consist primarily of losses and loss adjustment expenses, agents’ commissions, reinsurance premiums and other underwriting and administrative expenses.

Previous wording

Through our personal insurance lines, we offer homeowners insurance and dwelling fire insurance products to individuals in several states. Our specialty homeowners insurance product line is primarily comprised of low-value dwelling insurance tailored for owners of lower valued homes, which we offer in Illinois, Indiana and Texas.

Current wording

Through our personal insurance lines, we offer homeowners insurance and dwelling fire insurance products to individuals in several states. Our specialty homeowners insurance product line is primarily comprised of low-value dwelling insurance tailored for owners of lower valued homes, which we offer in Texas, Illinois and Indiana. Our commercial lines business is in runoff.

Previous wording

In certain circumstances, we are required to make estimates and assumptions that affect amounts reported in our condensed consolidated financial statements and related footnotes. We evaluate these estimates and assumptions periodically on an on-going basis based on a variety of factors. There can be no assurance, however, that actual results will not be materially different than our estimates and assumptions, and that reported results of operations will not be affected by accounting adjustments needed to reflect changes in these estimates and assumptions. During the nine months ended September 30, 2025, there were no material changes to our critical accounting policies and estimating methodologies, which are disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2025.

Current wording

In certain circumstances, we are required to make estimates and assumptions that affect amounts reported in our condensed consolidated financial statements and related footnotes. We evaluate these estimates and assumptions periodically on an on-going basis based on a variety of factors. There can be no assurance, however, that actual results will not be materially different than our estimates and assumptions, and that reported results of operations will not be affected by accounting adjustments needed to reflect changes in these estimates and assumptions. During the three months ended March 31, 2026, there were no material changes to our critical accounting policies and estimating methodologies, which are disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2026.

Previous wording

Our underwriting combined ratio was 141.2% and 143.1% for the three months ended September 30, 2025 and 2024, respectively.

Current wording

Our underwriting combined ratio was 105.7% and 140.5% for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Net written premiums decreased $5.7 million, or 51.4%, to $5.4 million for the three months ended September 30, 2025, as compared to $11.2 million for the same period in 2024. The decline in net written premiums during the quarter was primarily due to the $4.1 million of premiums ceded under a new 50% quota share agreement for our homeowners book of business effective June 1, 2025. At inception, we also ceded 50% of the homeowners unearned premiums. In addition, there was continued reduction of the commercial lines business as it is substantially all in run-off.

Current wording

Net written premiums decreased $4.8 million, or 44.0%, to $6.1 million in the first quarter of 2026, compared to $10.8 million for the same period in 2025. The decline in net written premiums during the quarter was primarily due to the $4.2 million of premiums ceded under a new 50% quota share agreement for our homeowners book of business effective June 1, 2025. At inception, we also ceded 50% of the homeowners unearned premiums. Our commercial lines business is in runoff, which also contributed to the decrease in net written premiums during the period.

Previous wording

Net earned premiums decreased $7.8 million, or 53.3%, to $6.8 million for the three months ended September 30, 2025, as compared to $14.6 million for the same period in 2024. This decrease was consistent with the decrease in net written premiums for during the quarter.

Current wording

Net earned premiums decreased $4.4 million, or 42.6%, to $5.9 million during the first quarter of 2026, compared to $10.3 million for the same period in 2025. This decrease was consistent with the decrease in net written premiums during the quarter.

Previous wording

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.

Current wording

Net losses and LAE decreased by $6.0 million, or 64.1%, to $3.3 million during the first quarter of 2026, compared to $9.3 million for the same period in 2025. The decrease was mostly due to a significant reduction in net earned premiums as the commercial lines business is in runoff and we focus on the specialty homeowners business.

Previous wording

Our expense ratio is a measure of the efficiency and performance of the commercial and personal lines of business (our risk-bearing underwriting operations). It is calculated by dividing the sum of policy acquisition costs and other underwriting expenses by the sum of net earned premiums and other income of the underwriting business. Costs that cannot be readily identifiable as a direct cost of a segment or product line remain in Corporate for segment reporting purposes. The expense ratio excludes Corporate expenses. Due to the run-off nature of the commercial lines segment, with revenues being very small, the expense ratios for commercial lines are not deemed to be meaningful.

Current wording

Our expense ratio is a measure of the efficiency and performance of the commercial and personal lines of business (our risk-bearing underwriting operations). It is calculated by dividing the sum of policy acquisition costs and other underwriting expenses by the sum of net earned premiums and other income of the underwriting business. Costs that cannot be readily identifiable as a direct cost of a segment or product line remain in Corporate for segment reporting purposes. The expense ratio excludes Corporate expenses. Due to the commercial lines business being in runoff, the expense ratios for commercial lines are not deemed to be meaningful.

Previous wording

Policy acquisition costs are costs we incur to issue policies, which include commissions, premium taxes and underwriting reports. The Company offsets direct commissions with ceding commissions from reinsurers. The percentage of policy acquisition costs to net earned premiums and other income increased by 5.6% during the third quarter of 2025 to 27.8%, compared to 22.2% during the same period in 2024. The increase was primarily related to the increased commission rates under new producer agreements concurrent with the sale of CIS and SSU. SSU, which is producing substantially all go-forward business, now manages the policy issuance, premium collections and systems of the homeowners book of business.

Current wording

Policy acquisition costs are costs we incur to issue policies, which include commissions, premium taxes and underwriting reports. The Company offsets direct commissions with ceding commissions from reinsurers. The percentage of policy acquisition costs to net earned premiums and other income increased by 0.4% during the first quarter of 2026 to 26.3%, compared to 25.9% during the same period in 2025. Sycamore Specialty Underwriters, LLC ("SSU"), which is producing substantially all go-forward business, manages the policy issuance, premium collections and systems of the homeowners book of business. The reduction was partially due to a 1.0% reduction in the commission rate paid to SSU beginning on September 1, 2025.

Previous wording

Operating expenses consist primarily of employee compensation, information technology and occupancy costs, such as rent and utilities. Operating expenses as a percent of net earned premiums and other underwriting income increased by 2.6% during the third quarter of 2025 to 19.7%, compared to 17.1% for the same period in 2024. The increase in the ratio was mostly due to significantly lower net earned premiums, while legacy operational costs related to the run-off books of business still exist. Such legacy costs are expected to reduce over the next year.

Current wording

Operating expenses consist primarily of employee compensation, information technology and occupancy costs, such as rent and utilities. Operating expenses as a percent of net earned premiums and other income decreased by 1.7% during the first quarter of 2026 to 23.2%, compared to 24.9% for the same period in 2025. The decrease in the ratio was mostly due to improved administrative cost efficiency.

Previous wording

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.

Current wording

At March 31, 2026, the Company had $57.9 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.

Previous wording

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 were no dividends paid from our Insurance Company Subsidiaries for the nine months ended September 30, 2025 and 2024. We do not anticipate any dividends being paid to us from our insurance subsidiaries in the near term.

Current wording

We conduct our business operations primarily through our Insurance Company Subsidiaries. Our Parent 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 Parent 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 Parent 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 were no dividends paid from our Insurance Company Subsidiaries for the three months ended March 31, 2026 and 2025. We do not anticipate any dividends being paid to the Parent Company from our insurance subsidiaries in the near term.

Previous wording

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% and was required to submit a plan of remediation to its domiciliary regulator.

Current wording

Due to significant losses in 2025, much of which is attributable to the legacy commercial liability lines of business (which are now all in runoff), both Insurance Company Subsidiaries lacked sufficient capital to continue to underwrite the volume of business they have historically written. Accordingly, PHI contributed $17.5 million into TIC during 2025 and the first quarter of 2026. In addition, PHI contributed all of its $7.6 million ownership interest in WPIC to TIC effective December 31, 2025. Even with these contributions, TIC fell within the Company Action Level of the Risk Based Capital ("RBC") with an RBC ratio of 236% as of December 31, 2025, and was required to submit an updated plan of remediation to its domiciliary regulator. 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, 2025.

Previous wording

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.

Current wording

As an effort to support TIC and WPIC, PHI received no intercompany service fees from the Insurance Company Subsidiaries during 2025 and only $500,000 in the first quarter of 2026. PHI 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.

Previous wording

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.

Current wording

With the anticipated go-forward revenue from TIC and the potential receipt of a $10.0 million third earnout payment, management believes the Company has the ability to meet its obligations as they become due over the next twelve months.

Previous wording

Operating Activities. Cash used in operating activities for the nine months ended September 30, 2025 was $18.7 million, compared to $12.7 million of cash used in operating activities for the same period in 2024. The $6.0 million increase in cash used in operating activities was primarily due a $6.9 million decrease in net premiums collected plus a $9.1 million increase in net losses paid during the first nine months of 2025, compared to the same period in 2024. This was partially offset by a $6.3 million decrease in compensation expense paid.

Current wording

Operating Activities. Cash used in operating activities for the three months ended March 31, 2026 was $8.3 million, compared to $15.3 million of cash used in operating activities for the same period in 2025. The $7.0 million decrease in cash used in operating activities was primarily due to a $13.6 million decrease in net losses paid during the first quarter of 2026, compared to the same period in 2025. This decrease was offset by a $6.8 million decrease in net premiums collected during the first quarter of 2026, compared to the same period in 2025.

Previous wording

Investing Activities. Cash used in investing activities for the nine months ended September 30, 2025 was $9.0 million, compared to $50.5 million of cash provided by investing activities for the same period in 2024. The $59.5 million increase in cash used by investing activities was driven by a $97.9 million increase in purchases of investments during the first nine months of 2025, compared to the same period in 2024. Additionally, the Company received $0 in proceeds from the CIS Sale during the first nine months of 2025, compared to $43.0 million for the same period in 2024. These amounts were offset by a $65.1 million increase in proceeds from the sale of investments during the first nine months of 2025, compared to the same period in 2024. These amounts were further offset by the Company receiving $10.0 million from a contingent consideration from the CIS Sale during the first nine months of 2025, compared to $0 for the same period in 2024.

Current wording

Investing Activities. Cash provided by investing activities for the three months ended March 31, 2026 was $168,000, compared to $9.6 million of cash used in investing activities for the same period in 2025. The $9.8 million increase in cash provided by investing activities was primarily due to a $20.5 million increase in proceeds from maturities and redemptions of investments during the first quarter of 2026, compared to the same period in 2025. This was offset by a $3.4 million increase of cash used in purchases of investments during the first quarter of 2026, compared to the same period in 2025. Further, there was a $7.3 million decrease in proceeds from sales of investments in the first quarter of 2026, compared to the same period in 2025.

Previous wording

Financing Activities. Cash provided by financing activities for the nine months ended September 30, 2025 was $7.5 million compared to $16.6 million of cash used in financing activities for the same period in 2024. The $24.1 million increase in cash provided by financing activities was attributed to the $5.6 million of Series B Preferred Stock issued and the $1.9 million of stock warrants issued from the Series B Preferred Stock during the first nine months of 2025. The Company paid off $9.8 million of its long-term debt during the first nine months of 2024. The Company also paid off $6.0 million of its Series A Preferred Stock during the first nine months of 2024.

Current wording

Financing Activities. Cash provided by financing activities for the three months ended March 31, 2026 was $6.2 million compared to $7.5 million for the same period in 2025. The $1.3 million decrease in cash provided by financing activities was attributed to the $7.5 million repayment of the Series B Preferred Stock during the first quarter of 2026. This was offset by $14.0 million of common stock issued during the first quarter of 2026. The Company also paid $252,000 related to common stock issuance costs during the first quarter of 2026.

Previous wording

Our Insurance Company Subsidiaries are required to file quarterly and annual financial reports with state insurance regulators. These financial reports are prepared using statutory accounting practices promulgated by the Insurance Company Subsidiaries’ state of domiciliary, rather than GAAP. The Insurance Company Subsidiaries’ aggregate statutory capital and surplus (which is a statutory measure of equity) was $51.3 million and $41.1 million at September 30, 2025 and December 31, 2024, respectively.

Current wording

Our Insurance Company Subsidiaries are required to file quarterly and annual financial reports with state insurance regulators. These financial reports are prepared using statutory accounting practices promulgated by the Insurance Company Subsidiaries’ state of domiciliary, rather than GAAP. The Insurance Company Subsidiaries’ aggregate statutory capital and surplus (which is a statutory measure of equity) was $51.3 million and $42.6 million at March 31, 2026 and December 31, 2025, respectively.

Previous wording

Adjusted operating income or loss and adjusted operating income or loss per share are non-GAAP measures that represent net income or loss excluding net realized investment gains (losses), change in fair value of equity securities, change in fair value of contingent considerations, change in contingent consideration bonus expense and net income (loss) from discontinued operations. The most directly comparable financial GAAP measures to adjusted operating income and adjusted operating income per share are net income allocable to common shareholders and net income allocable to common shareholders per share, respectively. Adjusted operating income and adjusted operating income per share are intended as supplemental information and are not meant to replace net income allocable to common shareholders or net income allocable to common shareholders per share. Adjusted operating income and adjusted operating income per share should be read in conjunction with the GAAP financial results. Our definition of adjusted operating income may be different from that used by other companies. The following is a reconciliation of net income (loss) to adjusted operating income (loss) (dollars in thousands), as well as net income (loss) allocable to common shareholders per share to adjusted operating income (loss) per share:

Current wording

Adjusted operating income or loss and adjusted operating income or loss per share are non-GAAP measures that represent net income or loss excluding net realized investment gains (losses), change in fair value of equity securities and change in fair value of contingent considerations. The most directly comparable financial GAAP measures to adjusted operating income and adjusted operating income per share are net income allocable to common shareholders and net income allocable to common shareholders per share, respectively. Adjusted operating income and adjusted operating income per share are intended as supplemental information and are not meant to replace net income allocable to common shareholders or net income allocable to common shareholders per share. Adjusted operating income and adjusted operating income per share should be read in conjunction with the GAAP financial results. Our definition of adjusted operating income may be different from that used by other companies. The following is a reconciliation of net income (loss) to adjusted operating income (loss) (dollars in thousands), as well as net income (loss) allocable to common shareholders per share to adjusted operating income (loss) per share:

Previous wording

** The Company has recorded a full valuation allowance against its deferred tax assets as of September 30, 2025 and September 30, 2024, respectively. As a result, there were no taxable impacts to adjusted operating income from the adjustments to net income (loss) in the table above after taking into account the use of NOLs and the change in the valuation allowance.

Current wording

The Company has recorded a full valuation allowance against its deferred tax assets as of March 31, 2026 and March 31, 2025, respectively. As a result, there were no taxable impacts to adjusted operating income (loss) from the adjustments to net income (loss) in the table above after taking into account the use of net operating losses and the change in the valuation allowance.