PRHI 10-Q
Presurance Holdings, Inc. (PRHI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the Quarterly Period Ended
OR
For the transition period from to
Commission file number
(Exact name of registrant as specified in its charter)
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
Accelerated filer ☐ |
Smaller reporting company |
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of outstanding shares of the registrant’s common stock, no par value, as of May 13, 2026, was
PRESURANCE HOLDINGS, INC. AND SUBSIDIARIES
Form 10-Q
INDEX
2
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PRESURANCE HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands)
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March 31, |
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December 31, |
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(Unaudited) |
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Assets |
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Investment securities: |
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Debt securities, at fair value (amortized cost of $ |
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$ |
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$ |
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Equity securities, at fair value (cost of $ |
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Short-term investments, at fair value |
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Total investments |
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Cash and cash equivalents |
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Premiums and agents' balances receivable, net |
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Reinsurance recoverables on unpaid losses |
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Reinsurance recoverables on paid losses |
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Prepaid reinsurance premiums |
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Deferred policy acquisition costs |
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Receivable from contingent considerations at fair value |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Shareholders' Equity |
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Liabilities: |
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Unpaid losses and loss adjustment expenses |
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$ |
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$ |
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Unearned premiums |
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Reinsurance premiums payable |
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Debt |
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Mandatorily redeemable preferred stock |
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Funds held under reinsurance agreements |
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Accounts payable and other liabilities |
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Total liabilities |
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Shareholders' equity: |
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Common stock, |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive income (loss) |
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( |
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( |
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
3
PRESURANCE HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(dollars in thousands, except per share data)
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Three Months Ended |
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2026 |
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2025 |
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Revenue and Other Income |
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Premiums |
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Gross earned premiums |
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$ |
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Ceded earned premiums |
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( |
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Net earned premiums |
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Net investment income |
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Net realized investment gains (losses) |
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Change in fair value of equity securities |
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Other income |
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Change in fair value of contingent considerations |
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Total revenue and other income |
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Expenses |
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Losses and loss adjustment expenses, net |
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Policy acquisition costs |
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Operating and other expenses |
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Interest expense |
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Total expenses |
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Income (loss) before income taxes |
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Income tax expense (benefit) |
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( |
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Net income (loss) |
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$ |
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$ |
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Earnings (loss) per common share, basic and diluted |
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$ |
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$ |
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Weighted average common shares outstanding, basic and diluted |
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The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
4
PRESURANCE HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(dollars in thousands)
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Three Months Ended |
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2026 |
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2025 |
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Net income (loss) |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Unrealized investment gains (losses): |
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Unrealized investment gains (losses) during the period |
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Income tax (benefit) expense |
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Unrealized investment gains (losses), net of tax |
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( |
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Less: reclassification adjustments to: |
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Net realized investment gains (losses) included in net income (loss) |
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( |
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Income tax expense (benefit) |
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Total reclassifications included in net income (loss), net of tax |
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( |
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Other comprehensive income (loss) |
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( |
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Total comprehensive income (loss) |
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$ |
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$ |
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The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
5
PRESURANCE HOLDINGS, INC. AND SUBSIDIARIES
(dollars in thousands)
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No Par, Common Stock |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Deficit |
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Income (Loss) |
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Equity |
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Balances at December 31, 2025 |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net income (loss) |
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— |
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— |
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— |
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Issuance of common stock |
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— |
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— |
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Common stock issuance costs |
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— |
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( |
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— |
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— |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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Other comprehensive income (loss) |
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— |
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— |
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— |
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( |
) |
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( |
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Balances at March 31, 2026 |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Balances at December 31, 2024 |
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$ |
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$ |
( |
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$ |
( |
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Net income (loss) |
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— |
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— |
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— |
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Issuance of warrants |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Other comprehensive income (loss) |
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— |
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— |
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— |
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Balances at March 31, 2025 |
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$ |
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$ |
( |
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$ |
( |
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$ |
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The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
6
PRESURANCE HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
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Three Months Ended March 31, |
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2026 |
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2025 |
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Cash Flows From Operating Activities |
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Net income (loss) from continuing operations |
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$ |
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$ |
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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Amortization of debt issuance costs |
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Accretion of Series B Preferred Stock |
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Amortization of bond premium and discount, net |
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( |
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( |
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Net realized investment (gains) losses |
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( |
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Change in fair value of equity securities |
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( |
) |
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Stock-based compensation expenses |
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Change in fair value of contingent considerations |
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( |
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( |
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Changes in operating assets and liabilities: |
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(Increase) decrease in: |
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Premiums and agents' balances and other receivables |
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( |
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Reinsurance recoverables |
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Prepaid reinsurance premiums |
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Deferred policy acquisition costs |
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( |
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( |
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Other assets |
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( |
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Increase (decrease) in: |
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Unpaid losses and loss adjustment expenses |
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( |
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( |
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Unearned premiums |
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( |
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Funds held under reinsurance agreements |
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( |
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( |
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Reinsurance premiums payable |
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Accounts payable and other liabilities |
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Net cash provided by (used in) operating activities |
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( |
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( |
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Cash Flows From Investing Activities |
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Purchase of investments |
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( |
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Proceeds from maturities and redemptions of investments |
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Proceeds from sales of investments |
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Net cash provided by (used in) investing activities |
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( |
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Cash Flows From Financing Activities |
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Issuance of Common Stock |
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Repayment of Series B Preferred Stock |
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( |
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Issuance of stock warrants |
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Issuance of Series B Preferred Stock |
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Common stock issuance costs |
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Net cash provided by (used in) financing activities |
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Net increase (decrease) in cash |
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Cash at beginning of period |
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Cash at end of period |
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Supplemental Disclosure of Cash Flow Information: |
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Interest paid |
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$ |
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$ |
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Income taxes paid (refunded), net |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
7
PRESURANCE HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation and Management Representation
On September 30, 2025, Conifer Holdings, Inc. changed its name to Presurance Holdings, Inc. On August 21, 2025, Conifer Insurance Company changed its name to Triassic Insurance Company.
The condensed consolidated financial statements include accounts, after elimination of intercompany accounts and transactions, of Presurance Holdings, Inc., its wholly owned subsidiaries, Triassic Insurance Company ("TIC"), White Pine Insurance Company ("WPIC"), Red Cedar Insurance Company ("RCIC"), and VSRM, Inc. ("VSRM"). TIC, WPIC and RCIC are collectively referred to as the "Insurance Company Subsidiaries." On a stand-alone basis, Presurance Holdings, Inc. is referred to as the "Parent Company" or "PHI." The consolidated entity is also referred to as the "Company."
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which differ from statutory accounting practices prescribed or permitted for insurance companies by regulatory authorities. The Company has applied the rules and regulations of the United States Securities and Exchange Commission (“SEC”) regarding interim financial reporting and therefore the condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments, consisting of items of a normal recurring nature, necessary for a fair presentation of the condensed consolidated interim financial statements, have been included.
These condensed consolidated financial statements and the notes thereto should be read in conjunction with the Company's audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC.
The results of operations for the three months ended March 31, 2026, are not necessarily indicative of the results expected for the year ended December 31, 2026.
Business
The Company is engaged in the sale of property and casualty insurance products and has organized its business model around two classes of insurance businesses: commercial lines and personal lines business. Within these two businesses, the Company offers various insurance products to niche commercial businesses in the commercial lines reportable segment and homeowners in the personal lines reportable segment. All commercial lines business is in runoff. While this business is no longer written by the Company, the historical business contributes significantly to our exposure to loss reserve development and operating expenses.
As of March 31, 2026, the Company offers only homeowners insurance products in Texas, Illinois and Indiana. The Company’s corporate headquarters are located in Troy, Michigan.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While management believes the amounts included in the condensed consolidated financial statements reflect management's best estimates and assumptions, actual results may differ from these estimates.
Cash, Cash Equivalents, and Short-term Investments
Cash consists of cash deposits in banks, generally in operating accounts. Cash equivalents consist of money-market funds that are specifically used as overnight investments tied to cash deposit accounts. Short-term investments, consisting of money market funds, are classified as investments in the condensed consolidated balance sheets as they relate to the Company’s investment activities.
Funds-Withheld Obligations
8
Accounting Guidance Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which will require disclosure of additional information about specific expense categories in the notes to financial statements for all public business entities. ASU 2024-03 is effective for annual reporting beginning with the fiscal year ending December 31, 2027, and for interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
Company Liquidity
At March 31, 2026, the Company had $
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
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 $
To fund these additional contributions, PHI raised $
As an effort to support TIC and WPIC, PHI received no intercompany service fees from the Insurance Company Subsidiaries during 2025 and only $
With the anticipated go-forward revenue from TIC and the potential receipt of a $
2. Rights Offering
On February 27, 2026, the Company issued
3. Investments
The Company analyzed its investment portfolio in accordance with its credit loss review policy and determined it did not need to record a credit loss for the three months ended March 31, 2026, or for the year-ended December 31, 2025. The Company holds only investment grade securities from high credit quality issuers. The gross unrealized losses were $
9
and $
The cost or amortized cost, gross unrealized gains or losses, and estimated fair value of the investments in securities classified as available for sale as of March 31, 2026 and December 31, 2025 were as follows (dollars in thousands):
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March 31, 2026 |
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Cost or |
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Gross Unrealized |
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Estimated |
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Amortized Cost |
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Gains |
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Losses |
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Fair Value |
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Debt Securities: |
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U.S. Government |
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$ |
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$ |
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$ |
( |
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$ |
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State and local government |
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( |
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Corporate debt |
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( |
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Asset-backed securities |
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( |
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Mortgage-backed securities |
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( |
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Commercial mortgage-backed securities |
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( |
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Collateralized mortgage obligations |
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( |
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Total debt securities available for sale |
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$ |
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$ |
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$ |
( |
) |
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$ |
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December 31, 2025 |
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Cost or |
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Gross Unrealized |
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Estimated |
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Amortized Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
||||
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Government |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
State and local government |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Corporate debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Asset-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total debt securities available for sale |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
The following table summarizes the aggregate fair value and gross unrealized losses, by security type, of the available-for-sale securities in unrealized loss positions. The table segregates the holdings based on the length of time that individual securities have been in a continuous unrealized loss position (dollars in thousands):
|
|
March 31, 2026 |
|
|||||||||||||||||||||||||||||||||
|
|
Less than 12 months |
|
|
Greater than 12 months |
|
|
Total |
|
|||||||||||||||||||||||||||
|
|
No. of |
|
|
Fair Value of |
|
|
Gross |
|
|
No. of |
|
|
Fair Value of |
|
|
Gross |
|
|
No. of |
|
|
Fair Value of |
|
|
Gross |
|
|||||||||
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
U.S. Government |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
|
|
$ |
( |
) |
||||||
State and local government |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Corporate debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Asset-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||||||
Total debt securities available for sale |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
|
|
$ |
( |
) |
||||||
10
|
|
December 31, 2025 |
|
|||||||||||||||||||||||||||||||||
|
|
Less than 12 months |
|
|
Greater than 12 months |
|
|
Total |
|
|||||||||||||||||||||||||||
|
|
No. of |
|
|
Fair Value of |
|
|
Gross |
|
|
No. of |
|
|
Fair Value of |
|
|
Gross |
|
|
No. of |
|
|
Fair Value of |
|
|
Gross |
|
|||||||||
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
U.S. Government |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
|
|
$ |
( |
) |
|||||||
State and local government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||||||
Corporate debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||||||
Asset-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||||||
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||||||
Total debt securities available for sale |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
|
|
$ |
( |
) |
||||||
11
The Company’s sources of net investment income and losses are as follows (dollars in thousands):
|
|
Three Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Debt securities |
|
$ |
|
|
$ |
|
||
Equity securities |
|
|
|
|
|
|
||
Cash, cash equivalents and short-term investments |
|
|
|
|
|
|
||
Total investment income |
|
|
|
|
|
|
||
Investment expenses |
|
|
( |
) |
|
|
( |
) |
Net investment income |
|
$ |
|
|
$ |
|
||
The following table summarizes the gross realized gains and losses from sales or maturities of available-for-sale debt and equity securities, as follows (dollars in thousands):
|
|
Three Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Debt securities: |
|
|
|
|
|
|
||
Gross realized gains |
|
$ |
|
|
$ |
|
||
Gross realized losses |
|
|
( |
) |
|
|
( |
) |
Total debt securities |
|
|
( |
) |
|
|
|
|
Equity securities: |
|
|
|
|
|
|
||
Gross realized gains |
|
$ |
|
|
$ |
|
||
Gross realized losses |
|
|
( |
) |
|
|
|
|
Total equity securities |
|
|
( |
) |
|
|
|
|
Total net realized investment gains (losses) |
|
$ |
( |
) |
|
$ |
|
|
Proceeds from the sales of available-for-sale securities were $
The gross realized gains from sales of available-for-sale securities for the three months ended March 31, 2026 and 2025 were $
As of March 31, 2026 and December 31, 2025, there were $
The Company's gross unrealized gains related to its equity investments were $
Proceeds from sales of short-term investments were $
The Company also carries other equity investments that do not have a readily determinable fair value and are recorded at cost, less impairment or observable changes in price. We review these investments for impairment during each reporting period. There was
The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at March 31, 2026. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands):
12
|
|
Amortized |
|
|
Estimated |
|
||
Due in one year or less |
|
$ |
|
|
$ |
|
||
Due after one year through five years |
|
|
|
|
|
|
||
Due after five years through ten years |
|
|
|
|
|
|
||
Due after ten years |
|
|
|
|
|
|
||
Securities with contractual maturities |
|
|
|
|
|
|
||
Asset-backed securities |
|
|
|
|
|
|
||
Mortgage-backed securities |
|
|
|
|
|
|
||
Commercial mortgage-backed securities |
|
|
|
|
|
|
||
Collateralized mortgage obligations |
|
|
|
|
|
|
||
Total debt securities |
|
$ |
|
|
$ |
|
||
At March 31, 2026 and December 31, 2025, the Insurance Companies Subsidiaries had an aggregate of $
13
4. Fair Value Measurements
The Company’s financial instruments include assets carried at fair value, as well as debt carried at face value, net of unamortized debt issuance costs, and are disclosed at fair value in this note. All fair values disclosed in this note are determined on a recurring basis other than the debt which is a non-recurring fair value measure. Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal most advantageous market for the asset or liability in an orderly transaction between market participants. In determining fair value, the Company applies the market approach, which uses prices and other relevant data based on market transactions involving identical or comparable assets and liabilities. The inputs to valuation techniques used to measure fair value are prioritized into a three-level hierarchy. The hierarchy gives the highest priority to quoted prices from sources independent of the reporting entity (“observable inputs”) and the lowest priority to prices determined by the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (“unobservable inputs”). The fair value hierarchy is as follows:
Level 1 - Valuations that are based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Valuations that are based on observable inputs (other than Level 1 prices) such as quoted prices for similar
assets or liabilities at the measurement date; quoted prices in markets that are not active; or other inputs that are observable,
either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 - Unobservable inputs that are supported by little or no market activity. The unobservable inputs represent the
Company’s best assumption of how market participants would price the assets or liabilities.
Net Asset Value (NAV) - The fair values of investment company limited partnership investments and mutual funds are
based on the capital account balances reported by the investment funds subject to their management review and adjustment.
These capital account balances reflect the fair value of the investment funds.
The following tables present the Company’s assets and liabilities measured at fair value, classified by the valuation hierarchy as of March 31, 2026 and December 31, 2025 (dollars in thousands):
|
|
March 31, 2026 |
|
|||||||||||||
|
|
Fair Value Measurements |
|
|||||||||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Government |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
State and local government |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total marketable investments measured at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments measured at NAV: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total investments measured at fair value |
|
$ |
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent considerations from CIS Sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets measured at fair value |
|
$ |
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Funds-withheld obligation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Liabilities fair value measure |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
14
|
|
December 31, 2025 |
|
|||||||||||||
|
|
Fair Value Measurements |
|
|||||||||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Government |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
State and local government |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total marketable investments measured at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments measured at NAV: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total investments measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent considerations from CIS Sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets measured at fair value |
|
$ |
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Funds-withheld obligation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Liabilities fair value measure |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Level 1 investments consist of equity securities traded in an active exchange market. The Company uses unadjusted quoted prices for identical instruments to measure fair value. Level 1 also includes money market funds and other interest-bearing deposits at banks, which are reported as short-term investments. The fair value measurements that were based on Level 1 inputs comprise
Level 2 investments include debt securities and equity securities, which consist of U.S. government agency securities, state and local municipal bonds (including those held as restricted securities), corporate debt securities, mortgage-backed and asset-backed securities. The fair value of securities included in the Level 2 category were based on the market values obtained from a third-party pricing service that were evaluated using pricing models that vary by asset class and incorporate available trade, bid and other observable market information. The third-party pricing service monitors market indicators, as well as industry and economic events. The fair value measurements that were based on Level 2 inputs comprise
The Company obtains pricing for each security from independent pricing services, investment managers or consultants to assist in determining fair value for its Level 2 investments. To validate that these quoted prices are reasonable estimates of fair value, the Company performs various quantitative and qualitative procedures, such as (i) evaluation of the underlying methodologies, (ii) analysis of recent sales activity, (iii) analytical review of our fair values against current market prices and (iv) comparison of the pricing services’ fair value to other pricing services’ fair value for the same investment. No markets for the investments were determined to be inactive at period-ends. Based on these procedures, the Company did not adjust the prices or quotes provided from independent pricing services, investment managers or consultants.
As of March 31, 2026, the Company had an asset for its contingent consideration related to the CIS Sale. The fair value measurement of the contingent considerations asset was determined using Level 3 inputs. The Company determined the fair value of the third contingent payment to be $
15
|
|
Contingent Consideration |
|
|
|
|
|
|
|
Discount rate |
|
|
% |
|
Gross revenue risk adjustment |
|
|
% |
|
Gross revenue volatility |
|
|
% |
|
Weighted average risk-free rate |
|
|
% |
|
Weighted average cost of capital |
|
|
% |
|
As of December 31, 2025, the Company had an asset for contingent consideration related to the CIS Sale. The fair value measurement of the contingent considerations asset was determined using Level 3 inputs. The Company determined the fair value of the third contingent payment to be $
|
|
Contingent Consideration |
|
|
|
|
|
|
|
Discount rate |
|
|
% |
|
Gross revenue risk adjustment |
|
|
% |
|
Gross revenue volatility |
|
|
% |
|
Risk-free rate |
|
|
% |
|
Weighted average cost of capital |
|
|
% |
|
The Company's policy on recognizing transfers between hierarchies is applied at the end of each reporting period. The tables below show a roll forward of Level 3 assets and liabilities held at fair value during the three months ended March 31, 2026 (dollars in thousands):
|
|
Balance as of |
|
|
Additions into Level 3 |
|
|
Subtractions |
|
|
Change in Fair Value |
|
|
Balance as of |
|
|||||
Contingent considerations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Total recurring Level 3 assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
5. Deferred Policy Acquisition Costs
The Company defers costs incurred which are incremental and directly related to the successful acquisition of new or renewal insurance business, net of corresponding amounts of ceded reinsurance commissions. Net deferred policy acquisition costs are amortized and charged to expense in proportion to premium earned over the estimated policy term. The Company anticipates that its deferred policy acquisition costs will be fully recoverable and there were no premium deficiencies for the three months ended March 31, 2026 and 2025.
|
|
Three Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Deferred policy acquisition costs |
|
|
|
|
|
|
||
Amortization of policy acquisition costs |
|
|
( |
) |
|
|
( |
) |
Net change |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Balance at end of period |
|
$ |
|
|
$ |
|
||
6. Unpaid Losses and Loss Adjustment Expenses
The Company establishes reserves for unpaid losses and loss adjustment expenses ("LAE") which represent the estimated ultimate cost of all losses incurred that were both reported and unreported (i.e., incurred but not yet reported losses; or “IBNR”) and LAE incurred that remain unpaid at the balance sheet date. The Company’s reserving process takes into account known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs,
16
product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions. In the normal course of business, the Company may also supplement its claims processes by utilizing third-party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims. The effects of inflation are implicitly considered in the reserving process.
Reserves are estimates of unpaid portions of losses that have occurred, including IBNR losses; therefore, the establishment of appropriate reserves is an inherently uncertain and complex process. The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates. The highest degree of uncertainty is associated with reserves for losses incurred in the current reporting period as it contains the greatest proportion of losses that have not been reported or settled. The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in reserve estimates, which may be material, are reported in the results of operations in the period such changes are determined to be needed and recorded.
Management believes that the reserve for losses and LAE is appropriately established in the aggregate and adequate to cover the ultimate net cost of reported and unreported claims arising from losses which had occurred by the date of the condensed consolidated financial statements based on available facts and in accordance with applicable laws and regulations.
The table below provides the changes in the reserves for losses and LAE, net of reinsurance recoverables, for the periods indicated as follows (dollars in thousands):
|
|
Three months ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Gross reserves - beginning of period |
|
$ |
|
|
$ |
|
||
Less: reinsurance recoverables on unpaid losses |
|
|
( |
) |
|
|
( |
) |
Net reserves - beginning of period |
|
|
|
|
|
|
||
Add: incurred losses and LAE, net of reinsurance: |
|
|
|
|
|
|
||
Current period |
|
|
|
|
|
|
||
Prior period |
|
|
( |
) |
|
|
|
|
Total net incurred losses and LAE |
|
|
|
|
|
|
||
Deduct: loss and LAE payments, net of reinsurance: |
|
|
|
|
|
|
||
Current period |
|
|
|
|
|
|
||
Prior period |
|
|
|
|
|
|
||
Total net loss and LAE payments |
|
|
|
|
|
|
||
Net reserves - end of period |
|
|
|
|
|
|
||
Plus: reinsurance recoverables on unpaid losses |
|
|
|
|
|
|
||
Gross reserves - end of period |
|
$ |
|
|
$ |
|
||
Net losses and LAE decreased by $
7. Reinsurance
In the normal course of business, the Company participates in reinsurance agreements in order to limit losses that may arise from catastrophes or other individually severe events.
Effective June 1, 2025, the Company was party to a new quota share reinsurance agreement wherein it cedes
Effective June 1, 2025, the Company was party to a property catastrophe reinsurance treaty for aggregate losses up to $
The Company no longer writes commercial lines business and thus has
17
homeowners quota share effectively reduces the net retention of the specific loss coverage from $
Reinsurance does not discharge the direct insurer from liability to its policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors the concentration of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. To date, the Company has not experienced any significant difficulties in collecting reinsurance recoverables, other than the loss portfolio transfer discussed below.
On November 1, 2022, the Company entered into a loss portfolio transfer (“LPT”) reinsurance agreement. The LPT provides adverse reserve development coverage of up to $
As of March 31, 2026, the Condensed Consolidated Balance Sheets included $
The following table presents the effects of reinsurance and assumption transactions on written premiums, earned premiums and losses and LAE (dollars in thousands):
|
|
Three Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Written premiums: |
|
|
|
|
|
|
||
Direct |
|
$ |
|
|
$ |
|
||
Assumed |
|
|
|
|
|
( |
) |
|
Ceded |
|
|
( |
) |
|
|
( |
) |
Net written premiums |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Earned premiums: |
|
|
|
|
|
|
||
Direct |
|
$ |
|
|
$ |
|
||
Assumed |
|
|
|
|
|
( |
) |
|
Ceded |
|
|
( |
) |
|
|
( |
) |
Net earned premiums |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Losses and LAE: |
|
|
|
|
|
|
||
Direct |
|
$ |
|
|
$ |
|
||
Assumed |
|
|
|
|
|
|
||
Ceded |
|
|
( |
) |
|
|
( |
) |
Net Losses and LAE |
|
$ |
|
|
$ |
|
||
8. Debt
The Company has $
|
|
As of March 31, 2026 |
|
|
As of December 31, 2025 |
|
||||||||||||||||||
|
|
Gross Debt |
|
|
Unamortized |
|
|
Net Debt |
|
|
Gross Debt |
|
|
Unamortized |
|
|
Net Debt |
|
||||||
Senior unsecured notes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Senior Unsecured Notes
18
The notes bear an
Financial Debt Covenants
The Company was not subject to any restrictive financial debt covenants as of March 31, 2026.
Scheduled Principal Payments
The scheduled principal payment of the Parent Company's debt as of March 31, 2026 is $
Funds-Withheld Obligation
9. Mandatorily Redeemable Preferred Stock
Series C Preferred Stock
On December 23, 2025, the Company issued a total of $
The Series C Preferred Stock requires quarterly dividend payments at a dividend rate of
Series B Preferred Stock
On February 27, 2026, the Company redeemed the $
On February 27, 2025 and March 3, 2025, the Company issued a total of $
The Warrants entitle the Purchaser to purchase up to
The Series B Preferred Stock was sold to Clarkston 91 West LLC (the "Purchaser"), an entity affiliated with Gerald and Jeffrey Hakala, who were both at such time members of the Board of Directors of the Company. The Company used the proceeds for working capital and general corporate purposes. The Series B Preferred Shares may be redeemed early at the Company's option at a price equal to the Series B face value.
The Series B Preferred Stock required quarterly dividend payments at a rate equal to the prime rate of Waterford Bank, N.A. plus 600 basis points, or
The $
19
stock was determined using a trinomial lattice model. The model was selected in consideration of the Company's optional redemption rights.
|
|
Mandatorily Redeemable Preferred Stock |
|
|
|
|
|
|
|
Yield Volatility |
|
|
% |
|
Risk-free Rate |
|
|
% |
|
Selected Credit Spread |
|
|
% |
|
Term |
|
|
||
The total liability recorded for the Preferred Stock was $
10. Shareholders' Equity
On February 27, 2026, the Company issued
As of March 31, 2026 and December 31, 2025, the Company had
On December 5, 2018, the Company's Board authorized a stock repurchase program, under which the Company may repurchase up to
11. Earnings Per Share
Basic and diluted earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period.
|
|
Three Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Net income (loss) |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Weighted average common shares outstanding, basic and diluted |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Earnings (loss) per common share, basic and diluted |
|
$ |
|
|
$ |
|
||
* There were
20
12. Stock-based Compensation
On March 8, 2022 the Company issued options to purchase
On June 30, 2020, the Company issued options to purchase
The Company recorded $
13. Commitments and Contingencies
Legal Proceedings
The Company and its subsidiaries are subject at times to various claims, lawsuits and proceedings relating principally to alleged errors or omissions in the placement of insurance, claims administration, and other business transactions arising in the ordinary course of business. Where appropriate, the Company vigorously defends such claims, lawsuits and proceedings. Some of these claims, lawsuits and proceedings seek damages, including consequential, exemplary or punitive damages, in amounts that could, if awarded, be significant. Most of the claims, lawsuits and proceedings arising in the ordinary course of business are covered by the insurance policy at issue. We account for such activity through the establishment of unpaid losses and LAE reserves. In accordance with accounting guidance, if it is probable that a liability has been incurred as of the date of the financial statements and the amount of loss is reasonably estimable; then an accrual for the costs to resolve these claims is recorded by the Company in the accompanying condensed consolidated financial statements. Periodic expenses related to the defense of such claims are included in the accompanying condensed consolidated statements of operations. On the basis of current information, the Company does not believe that there is a reasonable possibility that any material loss exceeding amounts already accrued, if any, will result from any of the claims, lawsuits and proceedings to which the Company is subject to, either individually or in the aggregate.
On February 10, 2026, James Petcoff, a shareholder of the Company, filed a complaint against the Company, current and former directors of the Company, the Company’s Chief Executive Officer and Clarkston 91 West (“Clarkston 91”), which purchased preferred shares and warrants from the Company. The complaint alleges, among other things, breaches of fiduciary duties and Michigan law with respect to the sale by the Company of Series B Preferred Stock and Warrants to Clarkston 91 in February and March 2025 and the sale by the Company of Series C Preferred Stock to an affiliate of Clarkston 91 in December 2025. On March 10, 2026, Mr. Petcoff filed an amended complaint. The Company is reviewing the amended complaint and intends to vigorously defend the matter.
Payment of Contingent Considerations
As of March 31, 2026, the Company recorded $
At the time of the CIS Sale, the Company entered into a bonus agreement with three of its employees that conveyed with the transaction. Under the agreement the Company would pay a bonus once the third payment of the contingent consideration was received. The total bonus is $
21
14. Segment Information
The Company is engaged in the sale of property and casualty insurance products and has organized its business model around
The Company defines its operating segments as components of the business where separate financial information is available and used by the chief operating decision maker in deciding how to allocate resources to its segments and in assessing its performance.
In addition to the reportable segments, the Company maintains a Corporate category to reconcile segment results to the consolidated totals. The Corporate category includes: (i) corporate operating expenses such as salaries and related benefits of the Company’s executive management team, some finance and information technology personnel, and other corporate headquarters expenses, (ii) interest expense on the Company’s debt obligations and (iii) all investment income activity. All investment income activity is reported within net investment income, net realized investment gains (losses), and change in fair value of equity securities on the consolidated statements of operations. The Company’s assets on the consolidated balance sheet are not allocated to the reportable segments.
22
The following tables present information by reportable segment (dollars in thousands):
Three months ended |
|
Personal |
|
|
Commercial Lines |
|
|
Corporate |
|
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross written premiums |
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net written premiums |
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earned premiums |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Segment revenue |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Losses and LAE, net |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
||
Policy acquisition costs |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment gain (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net realized investment gains (losses) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Change in fair value of equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of contingent considerations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) before income taxes |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
Three months ended |
|
Personal |
|
|
Commercial |
|
|
Corporate |
|
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross written premiums |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net written premiums |
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earned premiums |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Other income |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Segment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Losses and LAE, net |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Policy acquisition costs |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment gain (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net realized investment gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of equity securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Change in fair value of contingent considerations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) before income taxes |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||
23
15. Subsequent Events
On May 11, 2026, pursuant to the Exchange Agreement, dated May 11, 2026, by and between the Company and Clarkston Companies, Inc., the Company issued
The Company performed an evaluation of subsequent events through the date the financial statements were issued and determined there were no additional recognized or unrecognized subsequent events that would require an adjustment or additional disclosure in the condensed consolidated financial statements as of March 31, 2026.
24
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the Periods Ended March 31, 2026 and 2025
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements (Unaudited), related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K, filed on March 27, 2026 with the U. S. Securities and Exchange Commission.
Forward-Looking Statements
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.
The forward-looking statements contained in this report are based on management’s good-faith belief and reasonable judgment based on current information. The forward-looking statements are qualified by important factors, risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in the forward-looking statements, including those described in our Form 10-K (“Item 1A Risk Factors”) filed with the SEC on March 27, 2026 and included herein, and subsequent reports filed with or furnished to the SEC. Any forward-looking statement made by us in this report speaks only as of the date hereof or as of the date specified herein. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable laws or regulations.
Recent Developments
Rights Offering
On February 27, 2026, the Company issued 14,000,000 shares of common stock at a purchase price of $1.00 per share pursuant to a rights offering backstopped by Clarkston Companies, Inc. A portion of the proceeds were used to redeem the $7.5 million of the Company's outstanding Series B Preferred Stock and to contribute $3.0 million to TIC in February 2026. The remaining proceeds are being used for working capital and general corporate purposes.
Redemption of Series B Preferred Stock
The Company redeemed the $7.5 million of Series B Preferred Stock on February 27, 2026.
Nasdaq Minimum Bid Price Compliance
As previously reported, on March 3, 2026, the Company received a letter (the “Notice”) from the Listing Qualifications Staff of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that because the closing bid price of the Company’s common stock was below $1.00 per share for the prior 30 consecutive business days, the Company is not in compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Marketplace Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).
In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), the Company has a period of 180 calendar days from March 3, 2026, or until August 31, 2026, to regain compliance with the Minimum Bid Price Requirement. If at any time before August 31, 2026, the closing bid price of the Company’s Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days (which number of days may be extended by Nasdaq), Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement, and the matter would be resolved.
The Notice also disclosed that in the event the Company does not regain compliance with the Minimum Bid Price Requirement by August 31, 2026, the Company may be eligible for additional time. To qualify for additional time, the Company would be required to meet the applicable market value of publicly held shares requirement for continued listing and all other applicable standards for initial listing on The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and would need to provide written notice of its intention to cure the deficiency during the second compliance period. If the Company meets these requirements, Nasdaq will inform the Company that it has been granted an additional 180
25
calendar days. However, if it appears to the Staff that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice that the Company’s securities will be subject to delisting.
The Company intends to continue actively monitoring the closing bid price for the Company’s Common Stock between now and August 31, 2026, and will consider available options to resolve the deficiency and regain compliance with the Minimum Bid Price Requirement. In June 2025, our shareholders approved an amendment to our articles of incorporation to effect a reverse stock split at a ratio between 1-for-2 and 1-for-12. Our board of directors has authority to select an exchange ratio within the approved range at any time prior to June 3, 2026. The Company’s board of directors intends to effect the reverse stock split only if it determines the reverse stock split to be in the best interests of our shareholders. Such a reverse stock split would likely put us in compliance with the Minimum Bid Price Requirement.
If the Company does not regain compliance within the allotted compliance period, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Company’s Common Stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. There can be no assurance that the Company will regain compliance with the Minimum Bid Price Requirement during the 180-day compliance period, secure a second period of 180 calendar days to regain compliance, or maintain compliance with the other Nasdaq listing requirements.
Business Overview
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.
Our revenues are primarily derived from premiums earned from our insurance operations. We also generate other revenues through investment income.
Our expenses consist primarily of losses and loss adjustment expenses, agents’ commissions, reinsurance premiums and other underwriting and administrative expenses.
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.
Critical Accounting Policies and Estimates
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.
Executive Overview
The Company's gross written premiums decreased $4.7 million, or 29.1%, to $11.5 million in the first quarter of 2026, compared to $16.2 million for the same period in 2025.
The Company's personal lines gross written premiums decreased $2.6 million, or 18.7%, to $11.5 million in the first quarter of 2026, compared to $14.1 million for the same period in 2025.
The Company reported net income of $2.6 million, or $0.15 per share in the first quarter of 2026, compared to net income of $522,000, or $0.04 per share for the same period in 2025.
Adjusted operating loss, a non-GAAP measure, was $2.8 million, or $0.16 per share during the first quarter of 2026, compared to $3.7 million, or $0.30 per share for the same period in 2025.
Our underwriting combined ratio was 105.7% and 140.5% for the three months ended March 31, 2026 and 2025, respectively.
26
Results of Operations for the Three Months Ended March 31, 2026 and 2025
The following table summarizes our operating results for the periods indicated (dollars in thousands):
Summary of Operating Results
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
Gross written premiums |
|
$ |
11,469 |
|
|
$ |
16,173 |
|
|
$ |
(4,704 |
) |
|
|
(29.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net written premiums |
|
$ |
6,075 |
|
|
$ |
10,840 |
|
|
$ |
(4,765 |
) |
|
|
(44.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earned premiums |
|
$ |
5,925 |
|
|
$ |
10,315 |
|
|
$ |
(4,390 |
) |
|
|
(42.6 |
)% |
Other income |
|
|
6 |
|
|
|
65 |
|
|
|
(59 |
) |
|
|
(90.8 |
%) |
Losses and loss adjustment expenses, net |
|
|
3,329 |
|
|
|
9,274 |
|
|
|
(5,945 |
) |
|
|
(64.1 |
)% |
Policy acquisition costs |
|
|
1,558 |
|
|
|
2,677 |
|
|
|
(1,119 |
) |
|
|
(41.8 |
)% |
Operating expenses |
|
|
2,100 |
|
|
|
2,861 |
|
|
|
(761 |
) |
|
|
(26.6 |
)% |
Underwriting gain (loss) |
|
|
(1,056 |
) |
|
|
(4,432 |
) |
|
|
3,376 |
|
|
|
(76.2 |
)% |
Net investment income |
|
|
1,110 |
|
|
|
1,289 |
|
|
|
(179 |
) |
|
|
(13.9 |
)% |
Net realized investment gains (losses) |
|
|
(14 |
) |
|
|
3 |
|
|
|
(17 |
) |
|
* |
|
|
Change in fair value of equity securities |
|
|
30 |
|
|
|
(192 |
) |
|
|
222 |
|
|
* |
|
|
Change in fair value of contingent considerations |
|
|
4,490 |
|
|
|
4,395 |
|
|
|
95 |
|
|
|
2.2 |
% |
Interest expense |
|
|
1,976 |
|
|
|
541 |
|
|
|
1,435 |
|
|
* |
|
|
Income (loss) before income taxes |
|
|
2,584 |
|
|
|
522 |
|
|
|
2,062 |
|
|
* |
|
|
Income tax expense (benefit) |
|
|
(38 |
) |
|
|
— |
|
|
|
(38 |
) |
|
* |
|
|
Net income (loss) |
|
$ |
2,622 |
|
|
$ |
522 |
|
|
$ |
2,100 |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Book value per common share outstanding |
|
$ |
0.96 |
|
|
$ |
2.09 |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Underwriting Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss ratio (1) |
|
|
56.2 |
% |
|
|
89.7 |
% |
|
|
|
|
|
|
||
Expense ratio (2) |
|
|
49.5 |
% |
|
|
50.8 |
% |
|
|
|
|
|
|
||
Combined ratio (3) |
|
|
105.7 |
% |
|
|
140.5 |
% |
|
|
|
|
|
|
||
* Percentage change is not meaningful.
Premiums
Premiums are earned ratably over the term of the policy, whereas written premiums are reflected on the effective date of the policy. Almost all commercial lines and homeowners products have annual policies, under which premiums are earned evenly over one year. The resulting net earned premiums are impacted by the gross and ceded written premiums, earned ratably over the terms of the policies.
27
Our premiums are presented below for the three months ended March 31, 2026 and 2025 (dollars in thousands):
Summary of Premium Revenue
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
Gross written premiums |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Personal lines |
|
$ |
11,487 |
|
|
$ |
14,126 |
|
|
$ |
(2,639 |
) |
|
|
(18.7 |
)% |
Commercial lines |
|
|
(18 |
) |
|
|
2,047 |
|
|
|
(2,065 |
) |
|
* |
|
|
Total |
|
$ |
11,469 |
|
|
$ |
16,173 |
|
|
$ |
(4,704 |
) |
|
|
(29.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net written premiums |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Personal lines |
|
$ |
6,091 |
|
|
$ |
12,444 |
|
|
$ |
(6,353 |
) |
|
|
(51.1 |
)% |
Commercial lines |
|
|
(16 |
) |
|
|
(1,604 |
) |
|
|
1,588 |
|
|
* |
|
|
Total |
|
$ |
6,075 |
|
|
$ |
10,840 |
|
|
$ |
(4,765 |
) |
|
|
(44.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earned premiums |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Personal lines |
|
$ |
5,792 |
|
|
$ |
8,984 |
|
|
$ |
(3,192 |
) |
|
|
(35.5 |
)% |
Commercial lines |
|
|
133 |
|
|
|
1,331 |
|
|
|
(1,198 |
) |
|
* |
|
|
Total |
|
$ |
5,925 |
|
|
$ |
10,315 |
|
|
$ |
(4,390 |
) |
|
|
(42.6 |
)% |
* Percentage change is not meaningful.
Gross written premiums decreased $4.7 million, or 29.1%, to $11.5 million for the three months ended March 31, 2026, compared to $16.2 million for the same period in 2025.
Personal lines gross written premiums decreased $2.6 million, or 18.7%, to $11.5 million in the first quarter of 2026, compared to $14.1 million for the same period in 2025. The decrease was due to underwriting changes that affected volume. Our main focus remains on prudent, steady growth in Texas.
Commercial lines gross written premiums were $(18,000) in the first quarter of 2026, compared to $2.0 million for the same period in 2025. The Company's commercial lines business is in runoff. The Company does not expect to write any commercial lines business in the near term.
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.
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.
Losses and Loss Adjustment Expenses
The tables below detail our losses and loss adjustment expenses and loss ratios in our underwriting business for the three months ended March 31, 2026 and 2025 (dollars in thousands):
Three months ended March 31, 2026 |
|
Personal |
|
|
Commercial |
|
|
Total |
|
|||
Accident year net losses and LAE |
|
$ |
3,482 |
|
|
$ |
26 |
|
|
$ |
3,508 |
|
Net (favorable) adverse development |
|
|
118 |
|
|
|
(297 |
) |
|
|
(179 |
) |
Calendar year net losses and LAE |
|
$ |
3,600 |
|
|
$ |
(271 |
) |
|
$ |
3,329 |
|
|
|
|
|
|
|
|
|
|
|
|||
Accident year loss ratio |
|
|
60.1 |
% |
|
* |
|
|
|
59.2 |
% |
|
Net (favorable) adverse development |
|
|
2.1 |
% |
|
* |
|
|
|
(3.0 |
)% |
|
Calendar year loss ratio |
|
|
62.2 |
% |
|
* |
|
|
|
56.2 |
% |
|
28
Three months ended March 31, 2025 |
|
Personal |
|
|
Commercial |
|
|
Total |
|
|||
Accident year net losses and LAE |
|
$ |
7,005 |
|
|
$ |
2,125 |
|
|
$ |
9,130 |
|
Net (favorable) adverse development |
|
|
764 |
|
|
|
(620 |
) |
|
|
144 |
|
Calendar year net losses and LAE |
|
$ |
7,769 |
|
|
$ |
1,505 |
|
|
$ |
9,274 |
|
|
|
|
|
|
|
|
|
|
|
|||
Accident year loss ratio |
|
|
77.7 |
% |
|
|
159.7 |
% |
|
|
88.3 |
% |
Net (favorable) adverse development |
|
|
8.6 |
% |
|
|
(46.6 |
)% |
|
|
1.4 |
% |
Calendar year loss ratio |
|
|
86.3 |
% |
|
|
113.1 |
% |
|
|
89.7 |
% |
* Percentage change is not meaningful.
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.
Expense Ratio
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.
The table below provides the expense ratio by major component.
|
|
Three Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Personal Lines |
|
|
|
|
|
|
||
Policy acquisition costs |
|
|
26.9 |
% |
|
|
30.2 |
% |
Operating expenses |
|
|
8.8 |
% |
|
|
24.4 |
% |
Total |
|
|
35.7 |
% |
|
|
54.6 |
% |
Commercial Lines |
|
|
|
|
|
|
||
Policy acquisition costs |
|
* |
|
|
|
(3.5 |
)% |
|
Operating expenses |
|
* |
|
|
|
28.8 |
% |
|
Total |
|
* |
|
|
|
25.3 |
% |
|
Total Underwriting |
|
|
|
|
|
|
||
Policy acquisition costs |
|
|
26.3 |
% |
|
|
25.9 |
% |
Operating expenses |
|
|
23.2 |
% |
|
|
24.9 |
% |
Total |
|
|
49.5 |
% |
|
|
50.8 |
% |
Our expense ratio decreased by 1.3% in the first quarter of 2026, to 49.5%, compared to 50.8% for the same period in 2025.
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.
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.
29
Segment Results
We measure the performance of our consolidated results, in part, based on our underwriting gain or loss. The following table provides the underwriting gain or loss for the three months ended March 31, 2026 and 2025 (dollars in thousands):
Segment Gain (Loss)
|
|
Three Months Ended |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|||
Personal Lines |
|
$ |
122 |
|
|
$ |
(3,678 |
) |
|
$ |
3,800 |
|
Commercial Lines |
|
|
(461 |
) |
|
|
(511 |
) |
|
|
50 |
|
Corporate |
|
|
(723 |
) |
|
|
(243 |
) |
|
|
(480 |
) |
Total segment gain (loss) |
|
$ |
(1,062 |
) |
|
$ |
(4,432 |
) |
|
$ |
3,370 |
|
Liquidity and Capital Resources
Sources and Uses of Funds
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.
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.
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.
To fund these additional contributions, PHI raised $7.5 million from the issuance of the Series B Preferred Stock in the first quarter of 2025, utilized proceeds from the second $10.0 million earnout from the CIS Sale, which were received in the second quarter of 2025 and raised $8.0 million from the issuance of the Series C Preferred Stock in December 2025. In February 2026, PHI completed a backstopped rights offering for $14.0 million utilizing a portion of the proceeds to redeem the $7.5 million Series B Preferred Stock and contribute the $3.0 million of cash to TIC in February 2026. WPIC no longer writes any business and TIC’s writings are significantly constrained by its diminished capital position.
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.
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.
30
Cash Flows
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.
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.
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.
31
Statutory Capital and Surplus
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.
Non-GAAP Financial Measures
Adjusted Operating Income and Adjusted Operating Income Per Share
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:
|
|
Three Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Net income (loss) |
|
$ |
2,622 |
|
|
$ |
522 |
|
Less: |
|
|
|
|
|
|
||
Net realized investment gains (losses) |
|
|
(14 |
) |
|
|
3 |
|
Change in fair value of equity securities |
|
|
30 |
|
|
|
(192 |
) |
Change in fair value of contingent considerations |
|
|
4,490 |
|
|
|
4,395 |
|
Additional accretion of Warrants from Series B Preferred Stock payoff |
|
|
946 |
|
|
|
— |
|
Impact of income tax expense (benefit) from adjustments * |
|
|
— |
|
|
|
— |
|
Adjusted operating income (loss) |
|
$ |
(2,830 |
) |
|
$ |
(3,684 |
) |
|
|
|
|
|
|
|
||
Weighted average common shares diluted |
|
|
17,200,659 |
|
|
|
12,222,881 |
|
Diluted income (loss) per common share: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
0.15 |
|
|
$ |
0.04 |
|
Less: |
|
|
|
|
|
|
||
Net realized investment gains (losses) |
|
|
— |
|
|
|
— |
|
Change in fair value of equity securities |
|
|
— |
|
|
|
(0.02 |
) |
Change in fair value of contingent considerations |
|
|
0.26 |
|
|
|
0.36 |
|
Additional accretion of Warrants from Series B Preferred Stock payoff |
|
|
0.05 |
|
|
|
— |
|
Impact of income tax expense (benefit) from adjustments * |
|
|
— |
|
|
|
— |
|
Adjusted operating income (loss) per share |
|
$ |
(0.16 |
) |
|
$ |
(0.30 |
) |
* 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.
We use adjusted operating income or loss and adjusted operating income or loss per share to assess our performance and to evaluate the results of our overall business. We believe these measures provide investors with valuable information relating to our ongoing performance that may be obscured by the net effect of realized gains and losses as a result of our market risk sensitive instruments, which primarily relate to debt securities that are available for sale and not held for trading purposes. The change in fair value of equity securities and realized gains and losses may vary significantly between periods and are generally driven by external economic developments, such as capital market conditions. Accordingly, adjusted operating income excludes the effect of items that tend to be highly variable from period to period and highlights the results from our ongoing
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business operations and the underlying results of our business. We believe that it is useful for investors to evaluate adjusted operating income and adjusted operating income per share, along with net income and net income per share, when reviewing and evaluating our performance.
Recent Accounting Pronouncements
Refer to Note 1 ~ Summary of Significant Accounting Policies – Accounting Guidance Not Yet Adopted of the Notes to the Condensed Consolidated Financial Statements for detailed information regarding recently issued accounting pronouncements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s management, including its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of March 31, 2026. Based on such evaluations, the Company's Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
For the three months ended March 31, 2026, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect the Company's internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information required by this item is included under Note 13 ~ Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements of the Company’s Form 10-Q for the three months ended March 31, 2026, which is hereby incorporated by reference.
ITEM 1A. RISK FACTORS
There were no material changes to the risk factors disclosed in our Annual Report on Form 10-K (“Item 1A Risk Factors”) filed with the SEC on March 27, 2026.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
ITEM 5. OTHER INFORMATION
During the three months ended March 31, 2026, none of the Company's directors or Section 16 officers
On May 11, 2026, pursuant to the Exchange Agreement, the Company issued 1,600 shares of the Company’s newly designated Series D Preferred Stock, no par value, to Clarkston Companies, Inc., an entity affiliated with Jeffrey Hakala, a member of the Board of Directors of the Company, in exchange for 1,600 shares of the Company’s Series C Preferred Stock. In connection with the exchange, on May 11, 2026, the Company filed a Certificate of Designation designating 1,600 shares of Series D Preferred Stock. The Series D Preferred Stock has the same terms as the Series C Preferred Stock but with a maturity date of April 2, 2028 instead of April 2, 2027. The exchange involved no cash consideration and was effected in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended. Following the exchange, 1,600 shares of Series D Preferred Stock were outstanding and no shares of Series C Preferred Stock were outstanding.
The foregoing descriptions of the Certificate of Designation and Exchange Agreement are summaries and are qualified in their entirety by the terms of the Certificate of Designation and Exchange Agreement, which are attached hereto as Exhibits 3.1and 10.1 respectively, and are incorporated herein by reference.
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ITEM 6. EXHIBITS
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3.1 |
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10.1 |
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31.1 |
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31.2 |
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32.1* |
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32.2* |
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101.INS |
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inline XBRL Instance Document |
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101.SCH |
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inline XBRL Taxonomy Extension Schema Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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* This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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PRESURANCE HOLDINGS, INC. |
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By: |
/s/ Harold J. Meloche |
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Harold J. Meloche |
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Chief Financial Officer, |
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Principal Financial Officer, |
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Principal Accounting Officer |
Dated: May 13, 2026
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