TWFG Inc

Previous wording

The following discussion contains commentary on the financial results derived from the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 of our predecessor TWFG Holding Company, LLC and its subsidiaries.

Current wording

The following discussion contains commentary on the financial results derived from the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024 and 2023 of TWFG, Inc.

Previous wording

In 2023, we completed five asset acquisitions in excess of $0.5 million in annual revenue for a total purchase price of $19.4 million and acquisition-related expenses of $0.2 million.

Current wording

In 2023, we completed five asset acquisitions with annual revenue in excess of $0.5 million for a total purchase price of $19.4 million and acquisition-related expenses of $0.2 million.

Previous wording

Cost of being a public company. To operate as a public company, we will be required to continue to implement changes in certain aspects of our business and develop, manage, and train management level and other employees to comply with ongoing public company requirements. We will also incur new expenses as a public company, including public reporting obligations, proxy statements, stockholder meetings, stock exchange fees, transfer agent fees, SEC and FINRA filing fees, and offering expenses.

Current wording

Cost of being a public company. To operate as a public company, we are required to continue to implement changes in certain aspects of our business and develop, manage, and train management level and other employees to comply with ongoing public company requirements. We will also incur new expenses as a public company, including public reporting obligations, proxy statements, stockholder meetings, stock exchange fees, transfer agent fees, SEC and FINRA filing fees, and offering expenses.

Previous wording

TWFG, Inc. was incorporated on January 8, 2024 for the purpose of completing the IPO. TWFG, Inc. is a holding company and its sole material asset is a controlling ownership interest in TWFG Holding Company, LLC. All of our business is conducted through TWFG Holding Company, LLC and its consolidated subsidiaries, and the financial results of TWFG Holding Company, LLC and its consolidated subsidiaries are included in the unaudited condensed consolidated financial statements of TWFG, Inc.

Current wording

TWFG, Inc. was incorporated on January 8, 2024 for the purpose of completing the IPO and other related reorganization transactions (the “Reorganization Transactions”) that were completed on July 19, 2024. Following a reorganization into a holding company structure as part of the Reorganization Transactions, TWFG, Inc. is a holding company and its sole material asset is a controlling ownership interest in TWFG Holding Company, LLC. All of our business is conducted through TWFG Holding Company, LLC and its consolidated subsidiaries, and the financial results of TWFG Holding Company, LLC and its consolidated subsidiaries are included in the unaudited condensed consolidated financial statements of TWFG, Inc.

Previous wording

In addition to tax expenses, we also will incur expenses related to our operations and we will be required to make payments under the Tax Receivable Agreement entered into in connection with the IPO (the “TRA”). We intend to cause TWFG Holding Company, LLC to make distributions in an amount sufficient to allow us to pay our tax obligations and operating expenses, including distributions to fund any ordinary course payments due under the TRA.

Current wording

In addition to tax expenses, we also incur expenses related to our operations and we are required to make payments under the Tax Receivable Agreement entered into in connection with the IPO (the “TRA”). We intend to cause TWFG Holding Company, LLC to make distributions in an amount sufficient to allow us to pay our tax obligations and operating expenses, including distributions to fund any ordinary course payments due under the TRA. See “—Tax Receivable Agreement” for additional information regarding this arrangement.

Previous wording

Other income. Other income is comprised primarily of income earned for facilitating premium financing arrangements, fees assessed for agent conventions, interest income and other miscellaneous income.

Current wording

Other income. Other income is comprised primarily of interest income, income earned for facilitating premium financing arrangements, fees assessed for agent conventions and other miscellaneous income.

Previous wording

Total revenues for the three months ended June 30, 2024 increased by $7.9 million, or 17.4%, compared to the same period in the prior year. The increase was primarily due to a $6.9 million, or 16.5%, increase in commission income driven primarily by higher premium rates, business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period. Also contributing to the increase in total revenues were the $0.5 million, or 21.8%, increase in fee income, $0.3 million, or 25.4%, increase in contingent income, and $0.3 million, or 66.8%, increase in other income. See discussions below for additional information about the changes in our revenues.

Current wording

Total revenues for the three months ended September 30, 2024 increased by $6.9 million, or 14.5%, compared to the same period in the prior year. The increase was primarily due to a $4.2 million, or 9.7%, increase in commission income driven primarily by higher premium rates, new business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period. Also contributing to the increase in total revenues were the $0.8 million, or 37.2%, increase in fee income, $0.3 million, or 33.6%, increase in contingent income, and $1.6 million, or 269.9%, increase in other income. See discussions below for additional information about the changes in our revenues.

Previous wording

Commission income for the three months ended June 30, 2024 increased by $6.9 million, or 16.5%, compared to the same period in the prior year. Higher premium rates, business growth, and continued rollout of commission income from our Book of Business acquisitions in 2023 into the current period were the primary drivers of the increase in our commission income.

Current wording

Commission income for the three months ended September 30, 2024 increased by $4.2 million, or 9.7%, compared to the same period in the prior year. Higher premium rates, new business growth, and continued rollout of commission income from our Book of Business acquisitions in 2023 into the current period were the primary drivers of the increase in our commission income.

Previous wording

Commission income for Insurance Services grew by $6.3 million, or 17.9%, for the three months ended June 30, 2024 compared to the same period in the prior year. However, during the current period the components shifted between Agency-in-a-Box and Corporate Branches. Agency-in-a-Box commission income for the three months ended June 30, 2024 decreased by $1.5 million, or 4.5%, compared to the same period in the prior year. The decrease was mainly attributable to our acquisition of nine of our independent branches (which were previously operated as Agencies-in-a-Box) and their subsequent conversion to Corporate Branches in January 2024. The branch conversions resulted in a $6.0 million decrease in the Agency-in-a-Box commission income during the second quarter of 2024.

Current wording

Commission income for Insurance Services grew by $4.8 million, or 13.4%, for the three months ended September 30, 2024 compared to the same period in the prior year. However, during the current period the components shifted between Agency-in-a-Box and Corporate Branches. Agency-in-a-Box commission income for the three months ended September 30, 2024 decreased by $2.7 million, or 7.9%, compared to the same period in the prior year. The decrease was mainly attributable to our acquisition of nine of our independent branches (which were previously operated as Agencies-in-a-Box) and their subsequent conversion to Corporate Branches in January 2024. The branch conversions resulted in a $5.9 million decrease in the Agency-in-a-Box commission income during the third quarter of 2024.

Previous wording

Insurance Services Corporate Branches commission income for the three months ended June 30, 2024 increased by $7.8 million, or 501.0%, compared to the same period in the prior year. The increase was primarily driven by the aforementioned branch conversions. In addition, Corporate Branches commission income for the three months ended June 30, 2024 included increases from our Book of Business acquisitions in 2023, while the same period in the prior year did not reflect the impact of the acquisitions completed in the second half of 2023.

Current wording

Insurance Services Corporate Branches commission income for the three months ended September 30, 2024 increased by $7.5 million, or 425.4%, compared to the same period in the prior year. The increase was primarily driven by the aforementioned branch conversions. In addition, Corporate Branches commission income for the three months ended September 30, 2024 included increases from our Book of Business acquisitions in 2023, while the same period in the prior year did not reflect the impact of the acquisitions completed in the fourth quarter of 2023.

Previous wording

TWFG MGA commission income for the three months ended June 30, 2024 increased by $0.6 million, or 8.9%, compared to the same period in the prior year. The increase was primarily due to higher new business written premiums in our TWFG MGA offering driven by market activities, which created opportunities for us to gain new business. The increase was partially offset by the amendment to the MGA agreement with one of our insurance carriers. Effective January 1, 2024, the MGA agreement with one of our insurance carriers was renegotiated and amended, which shifted our volume based commission to a flat monthly fee. The switch capped the income we earned at a maximum monthly amount. See “—Key Performance Indicators” below for additional information related to our written premiums.

Current wording

TWFG MGA commission income for the three months ended September 30, 2024 decreased by $0.6 million, or 7.2%, compared to the same period in the prior year. A decrease of $1.0 million, or 65.6%, was due to the amendment to the MGA agreement with one of our insurance carriers. Effective January 1, 2024, the MGA agreement with one of our insurance carriers was renegotiated and amended, which shifted our volume-based commission to a flat monthly fee. The switch capped the income we earned at a maximum monthly amount. The decrease was partially offset by an increase in commission income of $0.4 million, or 5.9%, driven by higher new business written premiums in our TWFG MGA offering driven by market activities, which created opportunities for us to gain new business. See “—Key Performance Indicators” below for additional information related to our written premiums.

Previous wording

Contingent income for the three months ended June 30, 2024 was $1.3 million, reflecting a $0.3 million, or 25.4%, increase compared to the same period in the prior year. The increase in contingent income was primarily due to underlying carrier profitability and growth in our business. Contingent income is unpredictable and dependent upon the target financial and performance metrics established by the insurance carriers.

Current wording

Contingent income for the three months ended September 30, 2024 was $1.4 million, reflecting a $0.3 million, or 33.6%, increase compared to the same period in the prior year. The increase in contingent income was primarily due to underlying carrier profitability and growth in our business. Contingent income is unpredictable and dependent upon the target financial and performance metrics established by the insurance carriers.

Previous wording

Fee income for the three months ended June 30, 2024 increased by $0.5 million, or 21.8%, compared to the same period in the prior year. Changes to individual components of fee income are discussed in detail below:

Current wording

Fee income for the three months ended September 30, 2024 increased by $0.8 million, or 37.2%, compared to the same period in the prior year. Changes to individual components of fee income are discussed in detail below:

Previous wording

•Policy fees for the six months ended June 30, 2024 increased by $0.4 million, or 34.4%, compared to the same period in the prior year. The increase in policy fees was primarily due to higher policy count in our TWFG MGA offering. The increase in policy count was driven primarily by market activities, which created opportunities for us to gain new business.

Current wording

•Policy fees for the three months ended September 30, 2024 increased by $0.5 million, or 83.4%, compared to the same period in the prior year. The increase in policy fees was primarily due to higher policy count in our TWFG MGA offering. The increase in policy count was driven primarily by new business growth.

Previous wording

•License fees for the three months ended June 30, 2024 decreased by $0.2 million, or 32.7%, compared to the same period in the prior year. The decrease in license fees was primarily due to the distribution of the EVO equity interests as previously discussed. As a result, license fees earned for the current period excluded revenues from EVO’s operation, while license fees earned for the prior period included one month of EVO’s revenues. In addition, effective January 1, 2024, the licensing agreement with one of our customers was amended to switch from usage-based fees to fixed monthly fees. The switch capped the fees we earned at a maximum monthly amount.

Current wording

•License fees for the three months ended September 30, 2024 decreased by $0.1 million, or 10.8%, compared to the same period in the prior year. The decrease in license fees was primarily due to the amendment to the licensing agreement with one of our customers effective January 1, 2024 to switch from usage-based fees to fixed monthly fees. The switch capped the fees we earned at a maximum monthly amount.

Previous wording

Other income for the three months ended June 30, 2024 was $0.7 million compared to $0.4 million in the same period in the prior year, reflecting an increase of $0.3 million, or 66.8%. The increase in other income was primarily due to an increase in interest income on bank deposits, and gains on asset disposals.

Current wording

Other income for the three months ended September 30, 2024 was $2.1 million compared to $0.6 million in the same period in the prior year, reflecting an increase of $1.6 million, or 269.9%. The increase in other income was primarily due to an increase in interest income on bank deposits, including the $192.9 million of net proceeds received from the IPO.

Previous wording

Commission expense for the three months ended June 30, 2024 increased by $1.1 million, or 3.5%, compared to the same period in the prior year. The increase was primarily due to higher commission expenses driven by increased business in our TWFG MGA offering, partially offset by lower commission expenses in Insurance Services driven by the previously discussed branch conversions. See commission income discussion above for additional information regarding the driver of changes.

Current wording

Commission expense for the three months ended September 30, 2024 decreased by $1.7 million, or 5.2%, compared to the same period in the prior year. The decrease was primarily due to the lower commission expenses in Insurance Services of $1.1 million, or 3.4%, of the total decrease, driven by the previously discussed branch conversions and a decrease in our TWFG MGA offering of $0.6 million, or 1.8%, of the total decrease in commission expense. See commission income discussion above for additional information regarding the driver of changes.

Previous wording

Insurance Services Agency-in-a-Box commission expense for the three months ended June 30, 2024 decreased by $1.2 million, or 4.5%, compared to the same period in the prior year. The decrease was primarily due to the branch conversions resulting in a decrease of $0.9 million in commission expense. The expenses of our Branches are primarily commission expense, which is determined as a percentage of commission income. The profitability of our Branches, as determined by the difference between commission income and commission expense, is consistent.

Current wording

Insurance Services Agency-in-a-Box commission expense for the three months ended September 30, 2024 decreased by $2.2 million, or 8.1%, compared to the same period in the prior year. The decrease was primarily due to the branch conversions resulting in a decrease of $4.8 million offset by an increase in commission expense related to the growth of the business of $2.6 million. The expenses of our Branches are primarily commission expense, which is determined as a percentage of commission income. The profitability of our Branches, as determined by the difference between commission income and commission expense, is consistent.

Previous wording

Insurance Services Corporate Branches commission expense for the three months ended June 30, 2024 increased by $1.1 million, or 564.6%, compared to the same period in the prior year. The increase was primarily due to the branch conversions, as previously discussed, and the Book of Business acquisitions in 2023. The expenses of our Corporate Branches are mainly salaries and benefits, and are primarily fixed expenses, which are not directly related to commission income. The profitability of our Corporate Branches varies mainly based on changes in commission income. In addition, since the commission expense of our Corporate Branches represents a smaller percentage of their operating expenses, we expect revenue growth, both organic and through future acquisitions, to positively impact our operating income in the future.

Current wording

Insurance Services Corporate Branches commission expense for the three months ended September 30, 2024 increased by $1.1 million, or 523.9%, compared to the same period in the prior year. The increase was primarily due to the branch conversions, as previously discussed, and the Book of Business acquisitions in 2023. The expenses of our Corporate Branches are mainly salaries and benefits, and are primarily fixed expenses, which are not directly related to commission income. The profitability of our Corporate Branches varies mainly based on changes in commission income. In addition, since the commission expense of our Corporate Branches represents a smaller percentage of their operating expenses, we expect revenue growth, both organic and through future acquisitions, to positively impact our operating income in the future.

Previous wording

TWFG MGA commission expense for the six months ended June 30, 2024 increased by $1.3 million, or 17.1%, compared to the same period in the prior year. The increase was primarily due to higher new business written premiums, as previously discussed. The higher percentage increase in TWFG MGA commission expense compared to the percentage increase in the related commission income was primarily driven by the shift in the business mix. As discussed above, TWFG MGA commission income was impacted by the renegotiation of the MGA agreement with one of our insurance carriers. Such renegotiation reduced commission income in the current period but did not result in a corresponding reduction in commission expense.

Current wording

TWFG MGA commission expense for the three months ended September 30, 2024 decreased by $0.6 million, or 12.0%, compared to the same period in the prior year. The higher percentage decrease in TWFG MGA commission expense compared to the percentage decrease in the related commission income was primarily driven by the shift in the business mix. As discussed above, TWFG MGA commission income was impacted by the renegotiation of the MGA agreement with one of our insurance carriers. Such renegotiation reduced commission income in the current period but did not result in a corresponding reduction in commission expense.

Previous wording

Salaries and employee benefits for the three months ended June 30, 2024 was $6.8 million compared to $3.4 million in the same period in the prior year, reflecting an increase of $3.4 million, or 102.3%. The increase was primarily due to the branch conversions contributing an increase of approximately $2.2 million, and a $1.0 million increase from the asset acquisitions in 2023.

Current wording

Salaries and employee benefits for the three months ended September 30, 2024 was $8.3 million compared to $3.4 million in the same period in the prior year, reflecting an increase of $4.9 million, or 145.8%. The increase was primarily due to the branch conversions contributing an increase of approximately $2.4 million, and a $1.0 million increase from the asset acquisitions in 2023, a $1.0 million increase in stock-based compensation from the issuance of restricted stock units in July 2024, and a $0.5 million increase due to our continued growth and new roles created in connection with our IPO.

Previous wording

Other administrative expenses for the six months ended June 30, 2024 was $6.9 million, compared to $5.2 million in the same period in the prior year, reflecting an increase of $1.6 million, or 31.4%. This increase was primarily attributable to a $0.9 million increase in IT costs, a $0.3 million increase in underwriting expenses, and a $0.4 million increase in other expenses. The increase in our IT costs was primarily due to additional cloud computing costs, and 2024 included fees paid to EVO, while in 2023, fees paid to EVO were eliminated upon consolidation. The increase in our underwriting expenses was driven primarily by the increased business in our MGA offering. The increase in other expenses was due primarily to higher rent and office expenses driven by our Book of Business acquisitions in 2023 and branch conversions in 2024 and higher professional fees attributable to the increased ongoing costs of becoming a public company, partially offset by a reduction in administrative expenses related to the previously discussed distribution of our equity interest in EVO.

Current wording

Other administrative expenses for the three months ended September 30, 2024 was $4.8 million compared to $2.8 million in the same period in the prior year, reflecting an increase of $2.0 million, or 71.2%. The increase was primarily due to a $0.7 million increase in consultant and professional fees, a $0.3 million increase in IT costs, a $0.4 million increase in underwriting expenses, and a $0.6 million increase in other expenses. The increase in consultant and professional fees was primarily attributable to the increased ongoing costs of becoming a public company. The increase in our IT costs was primarily due to additional cloud computing costs. The increase in our underwriting expenses was driven primarily by higher policy count in our TWFG MGA offering. The increase in other expenses was due primarily to higher rent and office expenses driven by our Book of Business acquisitions in 2023 and branch conversions in 2024.

Previous wording

Depreciation and amortization for the three months ended June 30, 2024 was $3.0 million compared to $1.1 million in the same period in the prior year, reflecting an increase of $1.9 million, or 161.7%. The increase was primarily due to the amortization of intangible assets from our recent asset acquisitions and branch conversions.

Current wording

Depreciation and amortization for the three months ended September 30, 2024 was $3.0 million compared to $1.1 million in the same period in the prior year, reflecting an increase of $1.9 million, or 160.7%. The increase was primarily due to the amortization of intangible assets from our recent asset acquisitions and branch conversions.

Previous wording

Total revenues for the six months ended June 30, 2024 increased by $14.3 million, or 16.8%, compared to the same period in the prior year. The increase was primarily due to a $12.7 million, or 16.2%, increase in commission income driven primarily by higher premium rates, business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period. Also contributing to the increase in total revenues were the $0.7 million, or 16.2%, increase in fee income, $0.3 million, or 17.4%, increase in contingent income, and $0.6 million, or 103.1%, increase in other income. See discussions below for additional information about the changes in our revenues.

Current wording

Total revenues for the nine months ended September 30, 2024 increased by $21.3 million, or 16.0%, compared to the same period in the prior year. The increase was primarily due to a $17.0 million, or 13.9%, increase in commission income driven primarily by higher premium rates, new business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period. Also contributing to the increase in total revenues were the $1.5 million, or 23.1%, increase in fee income, $0.7 million, or 23.0%, increase in contingent income, and $2.1 million, or 188.4%, increase in other income. See discussions below for additional information about the changes in our revenues.

Previous wording

Commission income for the six months ended June 30, 2024 increased by $12.7 million, or 16.2%, compared to the same period in the prior year. The increase was primarily due to higher premium rates, business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period. See “—Key Performance Indicators—Total Written Premium” for additional information related to our written premiums.

Current wording

Commission income for the nine months ended September 30, 2024 increased by $17.0 million, or 13.9%, compared to the same period in the prior year. The increase was primarily due to higher premium rates, new business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period. See “—Key Performance Indicators—Total Written Premium” for additional information related to our written premiums.

Previous wording

Commission income for Insurance Services grew by $12.3 million, or 18.6%, for the six months ended June 30, 2024 compared to the same period in the prior year. However, during the current period the components shifted between Agency-in-a-Box and Corporate Branches. Agency-in-a-Box commission income for the six months ended June 30, 2024 decreased by $1.8 million, or 2.9%, compared to the same period in the prior year. The decrease was mainly attributable to the acquisition of the assets of nine of our independent branches (which were previously operated as Agencies-in-a-Box) and their conversion to Corporate Branches in January 2024. The branch conversions resulted in a $10.4 million decrease in the Agency-in-a-Box commission income during the second quarter of 2024.

Current wording

Commission income for Insurance Services grew by $17.2 million, or 16.7%, for the nine months ended September 30, 2024 compared to the same period in the prior year. However, during the current period the components shifted between Agency-in-a-Box and Corporate Branches. Agency-in-a-Box commission income for the nine months ended September 30, 2024 decreased by $4.5 million, or 4.6%, compared to the same period in the prior year. The decrease was mainly attributable to the acquisition of the assets of nine of our independent branches

Previous wording

Insurance Services Corporate Branches commission income for the six months ended June 30, 2024 increased by $14.2 million, or 570.5%, compared to the same period in the prior year. The increase was primarily driven by the branch conversions as previously described. In addition, Corporate Branches commission income for the six months ended June 30, 2024 included the full period increases from the Book of Business acquisitions in 2023, while the same period in the prior year reflected partial period increases.

Current wording

Insurance Services Corporate Branches commission income for the nine months ended September 30, 2024 increased by $21.7 million, or 510.2%, compared to the same period in the prior year. The increase was primarily driven by the branch conversions as previously described. In addition, Corporate Branches commission income for the nine months ended September 30, 2024 included the full period increases from the Book of Business acquisitions in 2023, while the same period in the prior year reflected partial period increases.

Previous wording

TWFG MGA commission income for the six months ended June 30, 2024 increased by $0.4 million, or 3.4%, compared to the same period in the prior year. The increase was primarily due to higher new business written premiums in our TWFG MGA offering, partially offset by reduced retention and the amendment to the MGA agreement with one of our insurance carriers, as previously discussed.

Current wording

TWFG MGA commission income for the nine months ended September 30, 2024 decreased by $0.2 million, or 0.8%, compared to the same period in the prior year. A decrease of $2.2 million, or 59.2%, was due to the amendment to the MGA agreement with one of our insurance carriers, as previously discussed, offset by an increase in commission income of $2.0 million or 12.4% by higher new business written premiums in our TWFG MGA offering.

Previous wording

Contingent income increased by $0.3 million, or 17.4%, to $2.3 million for the six months ended June 30, 2024 from $2.0 million in the same period in the prior year. The increase in contingent income was driven by underlying carrier profitability and growth in our business. Changes in contingent income are unpredictable and dependent upon the target financial and performance metrics established by the insurance carriers.

Current wording

Contingent income increased by $0.7 million, or 23.0%, to $3.7 million for the nine months ended September 30, 2024 from $3.0 million in the same period in the prior year. The increase in contingent income was driven by underlying carrier profitability and growth in our business. Changes in contingent income are unpredictable and dependent upon the target financial and performance metrics established by the insurance carriers.

Previous wording

Fee income for the six months ended June 30, 2024 increased $0.7 million, or 16.2% compared to the same period in the prior year. Changes to individual components of fee income are discussed in detail below:

Current wording

Fee income for the nine months ended September 30, 2024 increased $1.5 million, or 23.1% compared to the same period in the prior year. Changes to individual components of fee income are discussed in detail below:

Previous wording

•Policy fees for the three months ended June 30, 2024 increased by $0.4 million, or 79.1%, compared to the same period in the prior year. The increase in policy fees was primarily due to higher policy count in our TWFG MGA offering. The increase in policy count was driven primarily by market activities, which created opportunities for us to gain new business.

Current wording

•Policy fees for the nine months ended September 30, 2024 increased by $0.9 million, or 51.6%, compared to the same period in the prior year. The increase in policy fees was primarily due to higher policy count in our TWFG MGA offering. The increase in policy count was driven primarily by market activities, which created opportunities for us to gain new business.

Previous wording

•Branch fees for the six months ended June 30, 2024 increased by $1.0 million, or 79.5%, compared to the same period in the prior year. The increase in branch fees was primarily due to increased branch fee rates and the impact of the distribution of our equity interest in EVO in May 2023 to our owners. Branch fees earned for the six months ended June 30, 2023 included the elimination of fees paid to EVO for the first four months of 2023, while the current period did not.

Current wording

•Branch fees for the nine months ended September 30, 2024 increased by $1.4 million, or 65.1%, compared to the same period in the prior year. The increase in branch fees was primarily due to increased branch fee rates and the impact of the distribution of our equity interest in Evolution Agency Management LLC (“EVO”) in May 2023 to our owners. Branch fees earned for the nine months ended September 30, 2023 included the elimination of fees paid to EVO for the first four months of 2023, while the current period did not.

Previous wording

•License fees for the six months ended June 30, 2024 decreased by $0.6 million, or 37.5%, compared to the same period in the prior year. The decrease in license fees was primarily due to the previously discussed distribution of EVO equity interests and the amendment to the licensing agreement. License fees earned for the current period excluded revenues from EVO’s operation, while license fees earned for the prior period included four months of EVO’s revenues. In addition, the amendment to the licensing agreement with one of our customers switched from usage-based fees to fixed monthly fees, which capped the fees we earned at a maximum monthly amount.

Current wording

•License fees for the nine months ended September 30, 2024 decreased by $0.6 million, or 30.4%, compared to the same period in the prior year. The decrease in license fees was primarily due to the previously discussed distribution of EVO equity interests and the amendment to the licensing agreement. License fees earned for the current period excluded revenues from EVO’s operation, while license fees earned for the prior period included four months of EVO’s revenues. In addition, the amendment to the licensing agreement with one of our customers switched from usage-based fees to fixed monthly fees, which capped the fees we earned at a maximum monthly amount.

Previous wording

•TPA fees for the three months ended June 30, 2024 decreased by $0.1 million, or 50.0%, compared to the same period in the prior year. The decrease in TPA fees was primarily due to a lower level of TPA services provided by the Company for the three months ended June 30, 2024 compared to the same period in the prior year.

Current wording

•TPA fees for the nine months ended September 30, 2024 decreased by $0.1 million, or 30.0%, compared to the same period in the prior year. The decrease in TPA fees was primarily due to a lower level of TPA services provided by the Company for the nine months ended September 30, 2024 compared to the same period in the prior year.

Previous wording

Other income for the six months ended June 30, 2024 was $1.1 million, compared to $0.6 million in the same period in the prior year, reflecting an increase of $0.5 million, or 103.1%. This increase was primarily due to an increase in interest income on bank deposits.

Current wording

Other income for the nine months ended September 30, 2024 was $3.2 million, compared to $1.1 million in the same period in the prior year, reflecting an increase of $2.1 million, or 188.4%. This increase was primarily due to an increase in interest income on bank deposits, including the $192.9 million of net proceeds received from the IPO.

Previous wording

Commission expense for the six months ended June 30, 2024 was comparable to the same period in the prior year. Insurance Services commission expense for the six months ended June 30, 2024 decreased by $1.3 million, or 2.5%, which was fully offset by a $1.3 million, or 17.1%, increase in the TWFG MGA commission expense. See “—Consolidated Results of Operations—Commission Income” for additional information regarding the driver of the changes.

Current wording

Commission expense for the nine months ended September 30, 2024 decreased by $1.7 million, or 1.9%, compared to the same period in the prior year. The decrease was primarily due to the lower commission expense in Insurance Services of $2.4 million, or 2.6%, of the total decrease driven by the previously discussed branch conversions, offset by an increase in our TWFG MGA offering of $0.7 million, or 0.7%, of the total decrease in commission expense. See “—Consolidated Results of Operations—Commission Income” for additional information regarding the driver of the changes.

Previous wording

Insurance Services Agency-in-a-Box commission expense for the six months ended June 30, 2024 decreased by $3.0 million, or 6.0%, compared to the same period in the prior year. The decrease was primarily due to the branch conversions resulting in a decrease of $1.5 million and the one-time favorable accrual adjustment related to the converted branches of $1.5 million. In January 2024, nine of our Branches converted to Corporate Branches. Upon conversion, agents of the newly converted Corporate Branches became employees and received salaries, employee benefits, and bonuses for services rendered instead of commissions. As result, we released a portion of the unpaid commissions related to the converted branches that we no longer are required to settle, which resulted in the aforementioned one-time favorable accrual adjustment.

Current wording

Insurance Services Agency-in-a-Box commission expense for the nine months ended September 30, 2024 decreased by $5.2 million, or 6.7%, compared to the same period in the prior year. The decrease was primarily due to the branch conversions resulting in a decrease of $11.6 million, and the one-time favorable accrual adjustment related to the converted branches of $1.5 million, offset by an increase in commission expense related to the growth of the business of $7.9 million. In January 2024, nine of our Branches converted to Corporate Branches. Upon conversion, agents of the newly converted Corporate Branches became employees and received salaries, employee benefits, and bonuses for services rendered instead of commissions. As result, we released a portion of the unpaid commissions related to the converted branches that we no longer are required to settle, which resulted in the aforementioned one-time favorable accrual adjustment.

Previous wording

Insurance Services Corporate Branches commission expense for the six months ended June 30, 2024 increased by $1.8 million, or 488.3%, compared to the same period in the prior year. The increase was primarily due to the branch conversions, as previously discussed, and the Book of Business acquisitions in 2023.

Current wording

Insurance Services Corporate Branches commission expense for the nine months ended September 30, 2024 increased by $2.9 million, or 501.4%, compared to the same period in the prior year. The increase was primarily due to the branch conversions, as previously discussed, and the Book of Business acquisitions in 2023.

Previous wording

TWFG MGA commission expense for the three months ended June 30, 2024 increased by $1.2 million, or 30.5%, compared to the same period in the prior year. The increase was primarily due to higher new business written premiums, as previously discussed. The higher percentage increase in TWFG MGA commission expense compared to the percentage increase in the related commission income was primarily driven by the shift in the business mix. As discussed above, TWFG MGA commission income was impacted by the renegotiation of the MGA agreement with one of our insurance carriers. Such renegotiation reduced commission income in the current period but did not result in a corresponding reduction in commission expense.

Current wording

TWFG MGA commission expense for the nine months ended September 30, 2024 increased by $0.7 million, or 5.5%, compared to the same period in the prior year. The increase was primarily due to higher new business written premiums, as previously discussed. The higher percentage increase in TWFG MGA commission expense compared to the percentage decrease in the related commission income was primarily driven by the shift in the business mix. As discussed above, TWFG MGA commission income was impacted by the renegotiation of the MGA agreement with one of our insurance carriers. Such renegotiation reduced commission income in the current period but did not result in a corresponding reduction in commission expense.

Previous wording

Salaries and employee benefits for the six months ended June 30, 2024 was $13.1 million, compared to $6.7 million in the same period in the prior year, reflecting an increase of $6.4 million, or 94.9%. This increase was primarily attributable to the branch conversions contributing an increase of approximately $4.1 million, a $2.1 million increase from the asset acquisitions in 2023 and a $0.7 million increase due to our continued growth and new roles created in conjunction with our IPO. Partially offsetting these increases was a decrease driven by the distribution of our equity interest in EVO in May 2023 to our owners. Salaries and employee benefits for the six months ended June 30, 2023 included approximately $0.5 million compensation attributable to EVO’s operations, while the same period in 2024 did not.

Current wording

Salaries and employee benefits for the nine months ended September 30, 2024 was $21.4 million, compared to $10.1 million in the same period in the prior year, reflecting an increase of $11.3 million, or 112.0%. This increase was primarily attributable to the branch conversions contributing an increase of approximately $6.5 million, a $3.0 million increase from the asset acquisitions in 2023, a $1.0 million increase in stock-based compensation from the granting of restricted stock units in July 2024 and a $1.2 million increase due to our continued growth and new roles created in conjunction with our IPO. Partially offsetting these increases was a decrease driven by the distribution of our equity interest in EVO in May 2023 to our owners. Salaries and employee benefits for the nine months ended September 30, 2023 included approximately $0.5 million compensation attributable to EVO’s operations, while the same period in 2024 did not.