Kestrel Group Ltd

Previous wording

Factors that could cause our actual results and financial condition to differ, possibly materially, from those in the specific projections and statements are discussed throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations and in "Risk Factors" included under Part II. Other Information included within this filing, however, these factors should not be construed as exhaustive. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by law.

Current wording

Factors that could cause our actual results and financial condition to differ, possibly materially, from those in the specific projections and statements are discussed throughout the Management's Discussion and Analysis of Financial Condition and Results of Operations and in "Risk Factors"in Item 1A. of Part II of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2025 that was filed with the U.S. Securities and Exchange Commission ("SEC") on August 15, 2025, however, those factors should not be construed as exhaustive. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by law.

Previous wording

As of June 30, 2025, Maiden Reinsurance owns approximately 22.4% of the Company's total outstanding common shares which is eliminated for accounting and financial reporting purposes on the Company's condensed consolidated financial statements. On April 29, 2025, former Maiden shareholders approved the proposal to remove the 9.5% voting limitation at the Company's special general meeting of its shareholders (the "Special Meeting"). The ownership of the common shares by Maiden Reinsurance was made in compliance with Maiden Reinsurance's investment policy and approved by the Vermont Department of Financial Regulation ("Vermont DFR").

Current wording

As of September 30, 2025, Maiden Reinsurance owns 22.4% of the Company's total outstanding common shares which is eliminated for accounting and financial reporting purposes on the Company's condensed consolidated financial statements. On April 29, 2025, former Maiden shareholders approved the proposal to remove the 9.5% voting limitation at the Company's special general meeting of its shareholders (the "Special Meeting"). The ownership of common shares by Maiden Reinsurance was made in compliance with Maiden Reinsurance's investment policy and approved by the Vermont Department of Financial Regulation ("Vermont DFR").

Previous wording

Our strategic focus centers on growing the fee income component of our program services business, which will increase our earnings before interest, taxes, depreciation and amortization ("EBITDA") while effectively managing the continuing run-off of the legacy Maiden alternative asset and reinsurance portfolios. Our focus on growing our fee business may include but may consider selectively deploying underwriting capacity to optimize shareholder returns in support of this business.

Current wording

Our strategic focus centers on growing the fee income component of our program services business, which will increase our earnings before interest, taxes, depreciation and amortization ("EBITDA") while effectively managing the continuing run-off of the legacy Maiden alternative asset and reinsurance portfolios. Our focus on growing our fee business may include but may consider selectively deploying underwriting capacity to optimize shareholder returns in support of this business. We continue to actively pursue with our existing partners reinsurance mechanisms that would selectively deploy the Company’s underwriting capacity and facilitate and accelerate the growth of our Program Services segment.

Previous wording

As a result of the Combination, as of June 30, 2025, we invested $206.5 million into alternative investments which include equity securities, equity method investments and other investments in a wide variety of asset classes. Please refer to the "Liquidity and Capital Resources" section on "Other Investments, Equity Method Investments and Equity Investments" for further information on these alternative asset classes and a detailed discussion of their investment returns. Recent developments and trends in financial markets, particularly the ongoing volatility in interest rates and the associated economic uncertainty as a result of those and other fiscal and monetary policy changes, indicate that it may take longer than expected to achieve those returns and we expect that to factor into future capital allocation decisions.

Current wording

As a result of the Combination, as of September 30, 2025, we invested $215.7 million into alternative investments which include equity securities, equity method investments and other investments in a wide variety of asset classes. Please refer to the "Liquidity and Capital Resources" section on "Other Investments, Equity Method Investments and Equity Investments" for further information on these alternative asset classes and a detailed discussion of their investment returns. Recent developments and trends in financial markets, particularly the ongoing volatility in interest rates and the associated economic uncertainty as a result of those and other fiscal and monetary policy changes, indicate that it may take longer than expected to achieve those returns and we expect that to factor into future capital allocation decisions.

Previous wording

Accordingly, we expect our alternative investment portfolio to be reduced in future periods as we believe it is critical to reposition our balance sheet and increase our liquidity in support of the current initiatives being pursued.

Current wording

Accordingly, we expect our alternative investment portfolio to be reduced in future periods as we believe it is critical to reposition our balance sheet and increase our liquidity in support of the current initiatives being pursued. We have not made, and do not expect to make any such additional commitments to alternative investments at this time.

Previous wording

We believe the Combination will create opportunities to utilize Maiden's NOL carryforwards of $454.8 million at June 30, 2025. Approximately $374.2 million of these NOL carryforwards expire in various years beginning in 2029. As of June 30, 2025,$80.6 million or 17.7% of the Company's NOL carryforwards have no expiry date under the relevant U.S. tax law. The NOL carryforwards combined with additional net deferred tax assets ("DTA") primarily related to Maiden's insurance liabilities result in net U.S. DTA (before valuation allowance) of$126.5 million or $16.34 per common share at June 30, 2025.

Current wording

We believe the Combination and our ability to increease EBITDA will create opportunities to utilize Maiden's NOL carryforwards of $446.6 million at September 30, 2025. Approximately $365.3 million of NOL carryforwards expire in various years beginning in 2029. As of September 30, 2025,$81.3 million or 18.2% of the Company's NOL carryforwards have no expiry date under the relevant U.S. tax law. The NOL carryforwards combined with additional net deferred tax assets ("DTA") primarily related to Maiden's insurance liabilities result in net U.S. DTA (before valuation allowance) of$126.5 million or $16.34 per common share at September 30, 2025.

Previous wording

Maiden's net U.S. DTA of $126.5 million is not presently recognized on the Company's condensed consolidated balance sheets as a full valuation allowance is carried against it. Additionally, Kestrel's DTA of $7.5 million, which relates to tax basis intangibles, is not presently recognized on the Company's condensed consolidated balance sheets as a full valuation allowance is carried against it. At this time, the Company believes it is necessary to maintain a full valuation allowance against both net DTA's as more evidence is needed regarding the utilization of these losses. As circumstances further develop, we will continuously evaluate the amount of the valuation allowance held against the net DTA.

Current wording

Maiden's net U.S. DTA of $126.5 million is not presently recognized on the Company's condensed consolidated balance sheets as a full valuation allowance is carried against it. Additionally, Kestrel's DTA of $7.5 million, which relates to tax basis intangibles, is not presently recognized on the Company's condensed consolidated balance sheets as a full valuation allowance is carried against it. At this time, the Company believes it is necessary to maintain a full valuation allowance against both net DTA balances as more evidence is needed regarding the utilization of these losses. As circumstances further develop, we will continuously evaluate the amount of the valuation allowance held against the net DTA.

Previous wording

For further details on the NOL carryforwards, please see "Note 13 — Income Taxes" included under Part 1 Item 1 "Financial Information" of the Quarterly Report on Form 10–Q for the six months ended June 30, 2025.

Current wording

For further details on the NOL carryforwards, please see "Note 13 — Income Taxes" included under Part 1 Item 1 "Financial Information" of the Quarterly Report on Form 10–Q for the nine months ended September 30, 2025.

Previous wording

Three and Six Months Ended June 30, 2025 and 2024 Financial Highlights

Current wording

Three and Nine Months Ended September 30, 2025 and 2024 Financial Highlights

Previous wording

(4)Total investments and cash and cash equivalents includes both restricted and unrestricted.

Current wording

(4)Total investments and cash and cash equivalents includes both restricted and unrestricted amounts of these assets.

Previous wording

Underwriting and fee income is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. For purposes of these non-GAAP operating measures, the fee-generating business which is included in our Program Services segment, is considered part of the underwriting operations of the Company. Management believes that this measure is important in evaluating the underwriting performance of the Company and its segments. This measure is also a useful tool to measure the profitability of the Company separately from the investment results and is also a widely used performance indicator in the insurance industry. A reconciliation of the Company's underwriting results can be found in the Condensed Consolidated Financial Statements in the "Notes to Condensed Consolidated Financial Statements (unaudited) Note 3. Segment Information" included under Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q.

Current wording

Underwriting and fee income is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. For purposes of these non-GAAP operating measures, the fee-generating business which is included in our Program Services segment, is considered part of the underwriting operations of the Company. Management believes that this measure is important in evaluating the underwriting performance of the Company and its segments. This measure is also a useful tool to measure the profitability of the Company separately from the investment results and is also a widely used performance indicator in the insurance industry. A reconciliation of the Company's underwriting results can be found in the Condensed Consolidated Financial Statements in the "Notes to Condensed Consolidated Financial Statements (unaudited) Note 3. Segment Information" under Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q.

Previous wording

The Company does not present certain non-GAAP measures such as combined ratio and its related components in this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2025, as it believes that as the run-off of our reinsurance portfolios progresses, such ratios are increasingly not meaningful and of little value to readers as they evaluate the financial results of the Company. While an important metric of success, underwriting and fee income does not reflect all components of profitability, as it does not recognize the impact of investment income earned on premiums between the time premiums are received and the time loss payments are ultimately paid to clients. Because we do not manage our cash and investments by segment, investment income and interest expense are not allocated to the reportable segments. Certain general and administrative expenses are generally allocated to segments based on actual costs incurred.

Current wording

The Company does not present certain non-GAAP measures such as combined ratio and its related components in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2025, as it believes that as the run-off of our reinsurance portfolios progresses, such ratios are increasingly not meaningful and of little value to readers as they evaluate the financial results of the Company. While an important metric of success, underwriting and fee income does not reflect all components of profitability, as it does not recognize the impact of investment income earned on premiums between the time premiums are received and the time loss payments are ultimately paid to clients. Because we do not manage our cash and investments by segment, investment income and interest expense are not allocated to the reportable segments. Certain general and administrative expenses are generally allocated to segments based on actual costs incurred.

Previous wording

The following table sets forth our selected unaudited Condensed Consolidated Statement of Income data for the three and six months ended June 30, 2025 and 2024:

Current wording

The following table sets forth our selected unaudited Condensed Consolidated Statement of Income data for the three and nine months ended September 30, 2025 and 2024:

Previous wording

As a result of the completion of the Combination Agreement on May 27, 2025, the Company acquired Maiden's operations, which includes significant underwriting and investment activities, along with operating expenses and interest expense associated with Maiden's debt. Maiden's results of operations are reported herein for the period May 28, 2025 to June 30, 2025 and significantly impact the comparisons between periods for both the three and six months ended in 2024. Because the prior year period results of operations do not include the operations of Maiden, the year-over-year comparisons are generally not directly comparable.

Current wording

As a result of the completion of the Combination Agreement on May 27, 2025, the Company acquired Maiden's operations, which includes significant underwriting and investment activities, along with operating expenses and interest expense associated with Maiden's debt. Maiden's results of operations are reported herein for the period May 28, 2025 to September 30, 2025 and significantly impact the comparisons to operating results in the three and nine months ended September 30, 2024. Because the prior year period results of operations do not include the operations of Maiden, the year-over-year comparisons are generally not directly comparable.

Previous wording

•favorable prior year loss development ("PPD") in our Legacy Reinsurance segment of $7.8 million in the second quarter of 2025 compared to adverse PPD of $0.0 million during the same period in 2024, detailed as follows:

Current wording

•Our Legacy Reinsurance segment experienced adverse prior year loss development ("PPD") of $6.6 million in the third quarter of 2025, detailed as follows:

Previous wording

•Our Diversified Reinsurance Legacy business experienced adverse PPD of $0.1 million in the second quarter of 2025.

Current wording

•Our AmTrust Reinsurance Legacy business experienced adverse PPD of $6.9 million in the third quarter of 2025.

Previous wording

•On a current accident year basis, underwriting loss for the Legacy Reinsurance segment was $1.5 million for the three months ended June 30, 2025.

Current wording

•On a current accident year basis, the underwriting loss for the Legacy Reinsurance segment was $2.4 million for the three months ended September 30, 2025.

Previous wording

•combined income from investment activities totaled $2.6 million for the three months ended June 30, 2025 compared to $0.1 million for the same period in 2024 primarily due to the following:

Current wording

•combined income from investment activities totaled $9.0 million for the three months ended September 30, 2025 compared to $0.1 million for the same period in 2024 primarily due to the following:

Previous wording

•net investment income increased to $1.5 million for the three months ended June 30, 2025 compared to $0.1 million that was earned for the same respective period in 2024; and

Current wording

•net investment income increased to $3.5 million for the three months ended September 30, 2025 compared to $0.1 million that was earned for the same respective period in 2024;

Previous wording

Net income for the three months ended June 30, 2025 was $69.9 million compared to a net loss of $0.5 million for the same respective period in 2024. Net income for the three months ended June 30, 2025 was substantially the result of the gain on bargain purchase of $73.6 million which was related to the completion of the Combination on May 27, 2025 as discussed in Note 15. Business Combination included in Part 1. Item 1. Financial Information.

Current wording

Net income for the nine months ended September 30, 2025 was $64.5 million compared to net loss of $1.4 million in 2024. Net income for the nine months ended September 30, 2025 was substantially the result of the gain on bargain purchase of $73.6 million from the completion of the Combination on May 27, 2025 as discussed in Note 15. Business Combination included in Part 1. Item 1. Financial Information.

Previous wording

Excluding the gain on bargain purchase, net loss was $4.1 million for the six months ended June 30, 2025 compared to a net loss of $0.9 million for the same period in 2024. Increases in underwriting and fee income as well as investment income were more than offset by higher operating and interest expense along with foreign exchange losses. The change in our financial results for the six months ended June 30, 2025 compared to 2024 was primarily due to:

Current wording

Excluding the gain on bargain purchase, net loss was $9.1 million for the nine months ended September 30, 2025 compared to a net loss of $1.4 million for the same period in 2024. An underwriting loss from the Legacy Reinsurance segment as well as higher operating and interest expenses and foreign exchange losses was partially offset by Program Services fee income, and investment income and gains from investment activities.

Previous wording

Excluding the gain on bargain purchase, net loss was $3.7 million for the three months ended June 30, 2025 compared to net loss of $0.5 million for the same period in 2024. Increases in underwriting and fee income as well as investment income were more than offset by higher operating and interest expense along with foreign exchange losses. The change in our financial results for the second quarter of 2025 compared to the second quarter of 2024 was primarily due to the following factors:

Current wording

The change in our financial results for the nine months ended September 30, 2025 compared to 2024 consisted of:

Previous wording

•on a current accident year basis, the underwriting loss for the Legacy Reinsurance segment was $1.5 million for the six months ended June 30, 2025.

Current wording

•On a current accident year basis, the underwriting loss for the Legacy Reinsurance segment was $3.9 million for the nine months ended September 30, 2025.

Previous wording

•combined income from investment activities of $2.6 million for the six months ended June 30, 2025 compared to $0.1 million in 2024 primarily due to the following:

Current wording

•combined income from investment activities of $11.6 million for the nine months ended September 30, 2025 compared to $0.2 million in 2024 primarily due to the following:

Previous wording

•net investment income increased to $1.6 million for the six months ended June 30, 2025 compared to $0.1 million that was earned in 2024; and

Current wording

•net investment income increased to $5.1 million for the nine months ended September 30, 2025 compared to $0.2 million that was earned in 2024;

Previous wording

•realized and unrealized investment gains of $1.1 million for the six months ended June 30, 2025 compared to losses of $0.0 million in 2024.

Current wording

•realized and unrealized investment gains of $6.6 million for the nine months ended September 30, 2025 compared to losses of $0.0 million in 2024; and

Previous wording

•foreign exchange and other losses of $5.0 million for the six months ended June 30, 2025 compared to foreign exchange and other losses of $0.0 million earned in 2024, largely due to significant weakening of the U.S dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in the British pound and euro.

Current wording

•foreign exchange and other losses of $2.2 million for the nine months ended September 30, 2025 compared to foreign exchange and other losses of $0.0 million earned in 2024, largely due to significant weakening of the U.S dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in the British pound and euro.

Previous wording

Net premiums written by our reportable segment, reconciled to the total consolidated net premiums written for the three and six months ended June 30, 2025 and 2024 are detailed below:

Current wording

Net premiums written by our reportable segment, reconciled to the total consolidated net premiums written for the three and nine months ended September 30, 2025 and 2024 are detailed below:

Previous wording

Net premiums written for the three and six months ended June 30, 2025 increased to $1.1 million:

Current wording

Net premiums written for the three and nine months ended September 30, 2025 increased to $3.9 million and $5.0 million, respectively, which was split as follows:

Previous wording

•Premiums written in the Diversified Reinsurance legacy business was $1.4 million for the three and six months ended June 30, 2025. As discussed in Note 14. Assets Held for Sale of the Notes to Condensed Consolidated Financial Statements in Part I Item 1."Financial Information", Maiden LF and Maiden GF are no longer writing new business and their non-underwriting related assets and liabilities are presented as held-for-sale in our condensed consolidated financial statements.

Current wording

•Premiums written in the Diversified Reinsurance legacy business were $3.6 million and $5.0 million for the three and nine months ended September 30, 2025, respectively. As discussed in Note 14. Assets Held for Sale of the Notes to Condensed Consolidated Financial Statements in Part I Item 1."Financial Information", Maiden LF and Maiden GF are no longer writing new business and their non-underwriting related assets and liabilities are presented as held-for-sale in our condensed consolidated financial statements.

Previous wording

•Negative premiums written in the AmTrust Reinsurance legacy business were $0.3 million for the three and six months ended June 30, 2025. The cessation of active reinsurance underwriting on prospective risks included the termination of the AmTrust Quota Share and European Hospital Liability Quota Share effective January 1, 2019.

Current wording

•Premiums written in the AmTrust Reinsurance legacy business were $0.3 million and $23.0 thousand for the three and nine months ended September 30, 2025, respectively, which emanated from premium adjustments to both the AmTrust Quota Share and European Hospital Liability Quota Share, which had been terminated effective January 1, 2019.

Previous wording

Net premiums earned were $2.4 million for the three and six months ended June 30, 2025. Net premiums earned by our reportable segment, reconciled to the total consolidated net premiums earned, for the three and six months ended June 30, 2025 are detailed as follows:

Current wording

Net premiums earned for the three and nine months ended September 30, 2025 were $6.8 million and $9.3 million, respectively. Net premiums earned by our reportable segment, reconciled to the total consolidated net premiums earned, for the three and nine months ended September 30, 2025 and 2024 are detailed as follows:

Previous wording

Net premiums earned under Diversified Reinsurance reinsurance business for the three and six months ended June 30, 2025 was $1.4 million. Please note that Maiden LF and Maiden GF are no longer writing new business and their non-underwriting related assets and liabilities are represented as held-for-sale in our condensed consolidated financial statements as discussed above. Net premiums earned under AmTrust Reinsurance reinsurance business for the three and six months ended June 30, 2025 was $1.0 million. Please refer to the analysis below of our Diversified Reinsurance and AmTrust Reinsurance in the Maiden Legacy segment for further details.

Current wording

Net premiums earned under Diversified Reinsurance legacy business for the three and nine months ended September 30, 2025 were $3.9 million and $5.3 million, respectively. Maiden LF and Maiden GF are no longer writing new business and their non-underwriting related assets and liabilities are represented as held-for-sale in our condensed consolidated financial statements as discussed above.

Previous wording

Net investment income increased by $1.5 million for the three and six months ended June 30, 2025, compared to the same respective periods in 2024 due to the inclusion of Maiden's AFS fixed income portfolio and alternative investment portfolios in connection with the Combination.

Current wording

Net investment income for the three and nine months ended September 30, 2025 increased by $3.4 million and $4.9 million, respectively, compared to the same respective periods in 2024 due to inclusion of Maiden's legacy fixed income and alternative investment portfolios in connection with the Combination.

Previous wording

Annualized average book yields decreased to 3.2% for the three and six months ended June 30, 2025, compared to 4.4% for the same respective periods in 2024. Net loan receivable from related party interest income was $0.7 million for the three and six months ended June 30, 2025. The net loan carried a weighted average interest rate on a balance of$107.5 million of 5.8% for the three and six months ended June 30, 2025. Floating rate investments comprised 49.0% of our fixed income investments at June 30, 2025 compared to 0.0% at June 30, 2024.

Current wording

Annualized average book yields decreased to 3.7% and 3.6% for the three and nine months ended September 30, 2025, compared to 4.4% and 4.5% for the same respective periods in 2024. Net interest income from our loan receivable from related party was $1.6 million and $2.3 million for the three and nine months ended September 30, 2025, respectively. The net loan receivable from related party had an average balance of $104.6 million and carried a weighted average interest rate of 6.1% and 6.2% for the three and nine months ended September 30, 2025, respectively. Floating rate investments comprised 48.2% of our total fixed income investments at September 30, 2025 compared to 0.0% at September 30, 2024.

Previous wording

The following table details our average aggregate fixed income assets (at cost) and annualized investment book yield for the three and six months ended June 30, 2025 and 2024:

Current wording

The following table details our average aggregate fixed income assets (at cost) and annualized investment book yield for the three and nine months ended September 30, 2025 and 2024:

Previous wording

(1)Fixed income assets include available-for-sale ("AFS") securities, cash and restricted cash, funds withheld receivable, and loan receivable from related party. These amounts are an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements.

Current wording

(1)Fixed income assets include available-for-sale ("AFS") securities, cash and restricted cash, funds withheld receivable, and net loan receivable from related party. These amounts are an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements.

Previous wording

Net realized and unrealized investment gains of $1.1 million were recognized for the three and six months ended June 30, 2025. Net realized and unrealized investment gains for the three and six months ended June 30, 2025 are summarized in the table below by investment category:

Current wording

Net realized and unrealized investment gains of $5.5 million and gains of $6.6 million were recognized for the three and nine months ended September 30, 2025, respectively. Net realized and unrealized investment gains for the three and nine months ended September 30, 2025 are summarized in the table below by investment category:

Previous wording

Net loss and LAE was $6.0 million for the three and six months ended June 30, 2025. Net losses were impacted by net favorable PPD of $7.8 million for the three and six months ended June 30, 2025. Excluding PPD, current year losses were $1.8 million for the three and six months ended June 30, 2025.

Current wording

Net loss and LAE incurred for the three and nine months ended September 30, 2025 were $10.4 million and $4.4 million, respectively. Net incurred losses were impacted by net adverse PPD of $6.6 million and net favorable PPD of $1.2 million for the three and nine months ended September 30, 2025, respectively. Excluding the impact of PPD, current year losses were $3.8 million and $5.6 million for the three and nine months ended September 30, 2025, respectively.

Previous wording

The cessation of active reinsurance underwriting on prospective risks included the termination of the AmTrust Quota Share and European Hospital Liability Quota Share effective January 1, 2019. The net loss development is discussed in greater detail in the Legacy Reinsurance segment discussion and analysis and entirely associated with run-off of unearned premium for terminated reinsurance contracts in the legacy reinsurance operations.

Current wording

The cessation of active reinsurance underwriting on prospective risks included the termination of the AmTrust Quota Share and European Hospital Liability Quota Share effective January 1, 2019. The net prior year loss development is discussed in greater detail in the Legacy Reinsurance segment discussion and analysis and is entirely associated with the run-off of unearned premium for terminated reinsurance contracts in the legacy reinsurance operations.