Exzeo Group Q3 2026 profit rises to $22.3M
The August 2026 program permits open-market, block, privately negotiated and other repurchases, and may be suspended or canceled at any time.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Rhea-AI Filing Summary
Exzeo Group, Inc. reported third-quarter revenue of $55.186 million and net income of $22.345 million, compared with $55.166 million and $21.151 million a year earlier. For the first nine months of 2026, revenue was $168.507 million and net income was $66.020 million, versus $163.664 million and $60.765 million. Operating cash flow for the nine months was $72.611 million, compared with $89.017 million.
Through September 30, 2026, the company repurchased 303,163 shares for $4.980 million under its August 2026 program, excluding broker commissions and excise tax; approximately $20.020 million remained available for repurchases. Its May 2026 program was completed July 8, 2026, after repurchasing 834,250 shares for $12.000 million, excluding broker commissions and excise tax. HCI-affiliated customers represented 86.7% of third-quarter revenue; the company said reduced business from or loss of one or more such customers could materially adversely affect results. Cash and cash equivalents were $116.404 million at September 30, 2026, compared with $305.372 million at December 31, 2025. U.S. Treasury securities had a fair value of $233.779 million, with $9.417 million of gross unrealized losses attributed to interest-rate changes.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointNine-month net income was $66.020 million, versus $60.765 million in 2025.
Negative
- Major pointHCI-affiliated customers generated 86.7% of third-quarter revenue.
- Moderate pointNine-month operating cash flow was $72.611 million, versus $89.017 million in 2025.
Key Figures
Key Terms
Available-for-sale fixed-maturity securities financial
Remaining performance obligations financial
Contract liabilities financial
Two-class method financial
Level 1 financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What was XZO's net income in the third quarter of 2026?
AI-generated analysis. How Rhea-AI works. Not financial advice.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
Registrant's telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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 |
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Accelerated filer |
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☐ |
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☒ |
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Smaller reporting company |
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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
As of October 30, 2026, the registrant had
Table of Contents
Table of Contents
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Page |
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PART I. |
FINANCIAL INFORMATION |
4 |
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Item 1. |
Financial Statements (Unaudited) |
4 |
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Consolidated Balance Sheets |
4 |
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Consolidated Statements of Income |
5 |
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Consolidated Statements of Comprehensive Income |
6 |
|
Consolidated Statements of Shareholders' Equity |
7 |
|
Consolidated Statements of Cash Flows |
8 |
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Notes to Consolidated Financial Statements |
9 |
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Note 1. Nature of Operations |
9 |
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Note 2. Summary of Significant Accounting Policies |
9 |
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Note 3. Investments |
10 |
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Note 4. Fair Value Measurements |
11 |
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Note 5. Revenue |
12 |
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Note 6. Comprehensive Income |
14 |
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Note 7. Concentrations of Risk |
14 |
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Note 8. Related Party Transactions |
15 |
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Note 9. Leases |
17 |
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Note 10. Income Taxes |
18 |
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Note 11. Earnings Per Share |
18 |
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Note 12. Share-Based Compensation |
18 |
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Note 13. Shareholders' Equity |
21 |
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Note 14. Segment Information |
21 |
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Note 15. Accounts Payable and Accrued Liabilities |
22 |
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Note 16. Commitments and Contingencies |
22 |
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Note 17. Subsequent Events |
23 |
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
24 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
39 |
Item 4. |
Controls and Procedures |
39 |
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PART II. |
OTHER INFORMATION |
40 |
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Item 1. |
Legal Proceedings |
40 |
Item 1A. |
Risk Factors |
40 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
40 |
Item 3. |
Defaults Upon Senior Securities |
41 |
Item 4. |
Mine Safety Disclosures |
41 |
Item 5. |
Other Information |
41 |
Item 6. |
Exhibits |
42 |
Signatures |
43 |
|
In this report, for all periods presented, Exzeo Group, Inc. and its wholly-owned subsidiaries are referred to as "we," "us," "our," the "Company" and "Exzeo."
2
Table of Contents
Glossary
This report contains acronyms, abbreviations and other defined terms throughout this Quarterly Report on Form 10-Q. These terms are defined as follows:
Term |
|
Definition |
2021 Omnibus Plan |
|
2021 Omnibus Incentive Plan |
2025 Omnibus Plan |
|
2025 Omnibus Incentive Plan |
AFS securities |
|
Available-for-sale fixed-maturity securities |
AI |
|
Artificial Intelligence |
ARR |
|
Annual Recurring Revenue |
ASC 606 |
|
ASC Topic 606, Revenue from Contracts with Customers |
ASU |
|
Accounting Standards Update |
August 2026 Share Repurchase Program |
|
The program authorized by the Board of Directors that permits the repurchase of up to $25.0 million of Exzeo's common stock |
CEO |
|
Chief Executive Officer, who is our principal executive officer |
CFO |
|
Chief Financial Officer, who is our principal financial officer |
CODM |
|
Chief Operating Decision Maker |
CORE |
|
Condo Owners Reciprocal Exchange, a Florida reciprocal insurance exchange owned by its subscribers |
CRM |
|
Core Risk Managers, LLC, a Florida limited liability company and a direct wholly-owned subsidiary of HCI |
EGC |
|
Emerging Growth Company |
EIS |
|
Exzeo Insurance Services, Inc., a Florida corporation and a direct wholly-owned subsidiary of Exzeo Group, Inc. |
EPS |
|
Earnings Per Share |
Exchange Act |
|
Securities Exchange Act of 1934, as amended |
Exzeo Platform |
|
Exzeo's proprietary Insurance-as-a-Service platform and related software applications |
FASB |
|
Financial Accounting Standards Board |
GAAP |
|
Accounting principles generally accepted in the United States |
GCM |
|
Griston Claim Management, Inc., a Florida corporation and an indirect wholly-owned subsidiary of HCI |
HCI |
|
HCI Group, Inc., a Florida corporation and the controlling shareholder of Exzeo Group, Inc. |
HCM |
|
Homeowners Choice Managers, Inc., a Florida corporation and a direct wholly-owned subsidiary of HCI |
HCPCI |
|
Homeowners Choice Property & Casualty Insurance Company, Inc., a Florida corporation and a direct wholly-owned subsidiary of HCI |
IPO |
|
Initial Public Offering |
JOBS Act |
|
Jumpstart Our Business Startups Act |
May 2026 Share Repurchase Program |
|
The program authorized by the Board of Directors that permits the repurchase of up to $12.0 million of Exzeo's common stock |
MGA |
|
Managing General Agent |
MGA agreement |
|
Agreement under which the Company provides underwriting, policy administration, claims or related services as MGA |
NRR |
|
Net Dollar Retention Rate |
Omega |
|
Omega Insurance Agency, Inc., a Florida corporation and a direct wholly-owned subsidiary of HCI |
P&C |
|
Property and Casualty |
SEC |
|
Securities and Exchange Commission |
Sub-broker services |
|
Reinsurance placement and brokerage assistance services |
Tailrow |
|
Tailrow Insurance Exchange, a Florida reciprocal insurance exchange owned by its subscribers |
TRM |
|
Tailrow Risk Managers, LLC, a Florida limited liability company and a direct wholly-owned subsidiary of HCI |
TTIC |
|
TypTap Insurance Company, a Florida corporation and a direct wholly-owned subsidiary of HCI |
3
Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
EXZEO GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
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September 30, |
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December 31, |
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(in thousands, except share and per share amounts) |
|
2026 |
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2025 |
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Assets: |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable |
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Receivables from related parties |
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Prepaid expense |
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Current contract cost assets |
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Other current assets |
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Total current assets |
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Non-current assets: |
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Fixed-maturity securities, available-for-sale, at fair value (amortized cost: $ |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Non-current contract cost assets |
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Deferred income taxes, net |
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Other assets |
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Total non-current 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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Current liabilities: |
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Current contract liabilities |
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$ |
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$ |
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Commissions payable |
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Accounts payable and accrued liabilities |
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Operating lease liabilities |
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Income taxes payable |
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Payables to related parties |
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Total current liabilities |
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Non-current liabilities: |
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Non-current contract liabilities |
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Operating lease liabilities |
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Other liabilities |
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Total non-current liabilities |
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Total liabilities |
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Shareholders' equity: |
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Common stock ($ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
) |
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Total shareholders' equity |
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||
Total liabilities and shareholders' equity |
|
$ |
|
|
$ |
|
||
See accompanying Notes to Consolidated Financial Statements (Unaudited).
4
Table of Contents
EXZEO GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
|
|
Three Months Ended |
|
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Nine Months Ended |
|
|
||||||||||
|
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September 30, |
|
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September 30, |
|
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||||||||||
(in thousands, except per share amounts) |
|
2026 |
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2025 |
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2026 |
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2025 |
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|
||||
Revenue (1) |
|
$ |
|
|
$ |
|
|
$ |
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$ |
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|
||||
Cost of revenue (2) |
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Gross profit |
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Operating expenses: |
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Selling, general and administrative |
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Research and development |
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Depreciation and amortization |
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Total operating expenses |
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Operating income |
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Interest income |
|
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Other income, net |
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Income before income taxes |
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||||
Income tax expense |
|
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|
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|
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|
|
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||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Basic and diluted earnings per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
See accompanying Notes to Consolidated Financial Statements (Unaudited).
5
Table of Contents
EXZEO GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
||||||||||
(in thousands) |
|
2026 |
|
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2025 |
|
|
2026 |
|
|
2025 |
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Other comprehensive loss, net of income taxes: |
|
|
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||||
Available-for-sale fixed-maturity securities |
|
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( |
) |
|
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|
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|
( |
) |
|
|
|
|
||
Other comprehensive loss, net of income taxes |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
||
Comprehensive income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
See accompanying Notes to Consolidated Financial Statements (Unaudited).
6
Table of Contents
EXZEO GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Unaudited)
|
|
Common Stock |
|
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Additional |
|
|
Retained |
|
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Accumulated |
|
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Total |
|
|||||||||
(in thousands, except share amounts) |
|
Shares |
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|
Amount |
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Capital |
|
|
Earnings |
|
|
Loss |
|
|
Equity |
|
||||||
Balance as of June 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Other comprehensive loss, net of income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Non-cash capital contributions from parent |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Issuance of restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Forfeiture of restricted stock |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Repurchase and retirement of common stock |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance as of September 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
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|
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||||||
|
|
Common Stock |
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Additional |
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Retained |
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Accumulated |
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Total |
|
|||||||||
(in thousands, except share amounts) |
|
Shares |
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Amount |
|
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Capital |
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|
Deficit) |
|
|
Loss |
|
|
Equity |
|
||||||
Balance as of June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Non-cash capital contributions from parent |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Issuance of restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Forfeiture of restricted stock |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance as of September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Common Stock |
|
|
Additional |
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|
Retained |
|
|
Accumulated |
|
|
Total |
|
|||||||||
(in thousands, except share amounts) |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
Loss |
|
|
Equity |
|
||||||
Balance as of December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Other comprehensive loss, net of income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Non-cash capital contributions from parent |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Issuance of restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Forfeiture of restricted stock |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Repurchase and retirement of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance as of September 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Common Stock |
|
|
Additional |
|
|
Retained |
|
|
Accumulated |
|
|
Total |
|
|||||||||
(in thousands, except share amounts) |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit) |
|
|
Loss |
|
|
Equity |
|
||||||
Balance as of December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Non-cash capital contributions from parent |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Issuance of restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Forfeiture of restricted stock |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance as of September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
See accompanying Notes to Consolidated Financial Statements (Unaudited).
7
Table of Contents
EXZEO GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
|
|
Nine Months Ended September 30, |
|
|||||
(in thousands) |
|
2026 |
|
|
2025 |
|
||
Operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
|
||
Share-based compensation |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
( |
) |
|
Amortization of premium and accretion of discount on available-for-sale fixed-maturity securities, net |
|
|
( |
) |
|
|
|
|
Foreign currency remeasurement loss |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Related party receivables and payables |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses |
|
|
( |
) |
|
|
( |
) |
Contract cost assets |
|
|
|
|
|
|
||
Income taxes payable |
|
|
( |
) |
|
|
|
|
Contract liabilities |
|
|
|
|
|
|
||
Commissions payable |
|
|
( |
) |
|
|
( |
) |
Accounts payable and accrued liabilities |
|
|
|
|
|
|
||
Other liabilities |
|
|
( |
) |
|
|
( |
) |
Other assets |
|
|
( |
) |
|
|
( |
) |
Operating leases, net |
|
|
|
|
|
|
||
Cash provided by operating activities |
|
|
|
|
|
|
||
Investing activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Purchase of available-for-sale fixed-maturity securities |
|
|
( |
) |
|
|
|
|
Cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing activities: |
|
|
|
|
|
|
||
Payment of issuance costs |
|
|
( |
) |
|
|
|
|
Repurchase of common stock |
|
|
( |
) |
|
|
|
|
Cash used in financing activities |
|
|
( |
) |
|
|
|
|
Effect of exchange rate changes on cash |
|
|
( |
) |
|
|
( |
) |
Net (decrease) increase in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
Non-cash financing activities: |
|
|
|
|
|
|
||
Capital contribution from parent |
|
$ |
|
|
$ |
|
||
Payable related to share repurchases |
|
$ |
|
|
$ |
|
||
See accompanying Notes to Consolidated Financial Statements (Unaudited).
8
Table of Contents
EXZEO GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts, unless otherwise stated)
(Unaudited)
Note 1. Nature of Operations
Exzeo Group, Inc. is a majority owned subsidiary of HCI. Together with its subsidiaries, Exzeo provides technology-enabled services to P&C insurance companies, including underwriting, policy management, claims processing management and related software solutions. The Company primarily operates through MGA agreements and technology service agreements. The Company is headquartered in the United States and all revenue generating activities are conducted domestically. The Company also maintains a wholly-owned subsidiary in India that provides product research and development and software enhancement services.
On November 6, 2025, the Company completed an IPO, pursuant to which it issued and sold shares of its common stock to the public and commenced trading on the New York Stock Exchange.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information. The unaudited interim Consolidated Financial Statements include the accounts of the Company's controlled subsidiaries and all intercompany balances and transactions have been eliminated.
Certain information and footnote disclosures normally included in annual audited Consolidated Financial Statements prepared in accordance with GAAP have been condensed or omitted in this interim presentation. In the opinion of management, the accompanying unaudited interim Consolidated Financial Statements reflect all normal, recurring adjustments necessary for a fair statement of the Company's financial position as of September 30, 2026, and the results of operations and cash flows for the interim periods presented. Operating results for the interim periods presented are not necessarily indicative of results expected for the fiscal year ending December 31, 2026. These unaudited interim Consolidated Financial Statements should be read in conjunction with the annual audited Consolidated Financial Statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 26, 2026. Except for the accounting policy related to investment securities described below, there have been no material changes to the Company's significant accounting policies from those described in the annual audited Consolidated Financial Statements. The policy described below became applicable during 2026 as the Company began investing in AFS securities.
In preparing these unaudited interim Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures as of the financial reporting date and for the periods presented. Certain estimates result from assumptions that can be subjective and complex and consequently actual results may differ from these estimates. Accounting policies specific to revenue recognition, income taxes and share-based compensation involve significant estimates and assumptions that are material to the Company's unaudited interim Consolidated Financial Statements.
Beginning with the quarter ended September 30, 2026, the Company reclassified the presentation of its Consolidated Statements of Income by renaming the investment income caption to interest income to better reflect the nature of the income. The presentation change had no effect on previously reported amounts.
Available-for-Sale Fixed-Maturity Securities
The Company's available-for-sale fixed-maturity securities consist of U.S. Treasury securities and are carried at fair value. Unrealized gains or losses, other than credit losses, are excluded from interest income and reported as a component of other comprehensive income, net of income taxes. Realized gains and losses from sales are recorded on the trade date using the first-in, first-out ("FIFO") method. Interest income consists of contractual interest, premium amortization and discount accretion, and is recognized using the effective interest method over the estimated remaining term of the security.
The Company reviews AFS securities for impairment on a quarterly basis, considering its ability and intent to hold the securities until recovery or maturity and whether it is more likely than not that the Company will be required to sell the securities prior to recovery or maturity. The unrealized losses are recognized as impairment losses in the Consolidated Statements of Income.
For AFS securities that the Company has the ability and intent to hold until recovery or maturity, the Company evaluates whether any unrealized losses are attributable to credit-related factors. Credit-related losses, if any, are recognized through the Consolidated Statements of Income, while unrealized losses attributable to non-credit factors, including changes in interest rates or market conditions, are recognized in accumulated other comprehensive loss. Refer to Note 3. Investments for additional details.
Recent Accounting Pronouncements
Accounting Standards Adopted in the Current Year
In July 2025, the FASB issued ASU No. 2025-05 - Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This update simplifies the estimation of current expected credit losses on current accounts
9
Table of Contents
receivable and current contract assets related to revenue from contracts with customers by allowing all entities to assume that current conditions as of the balance sheet date will not change for the remaining life of the current accounts receivable and current contract assets. This standard is effective for all entities for fiscal years and interim periods beginning after December 15, 2025, with early adoption permitted. The Company adopted the amendments on a prospective basis, effective January 1, 2026. The adoption of this standard did not have a material impact on the Company's Consolidated Financial Statements and related disclosures.
Accounting Standards Issued but Not Yet Adopted
In September 2025, the FASB issued ASU No. 2025-06 - Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This update enhances guidance on the capitalization of software development costs by eliminating project phase-based criteria and clarifying the conditions signifying significant development uncertainty used by entities to evaluate when the probable-to-complete recognition threshold is met. This standard is effective for fiscal years and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the potential impact of this update on its Consolidated Financial Statements and related disclosures.
In November 2024, the FASB issued ASU No. 2024-03 - Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendment requires additional disclosures of certain costs and expenses within the notes to the Consolidated Financial Statements. Additionally, in January 2025, the FASB issued ASU No. 2025-01 - Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified that the updates for this standard are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the potential impact of these updates on its Consolidated Financial Statements and related disclosures, as well as whether the Company will adopt the guidance on a prospective or retrospective basis.
Note 3. Investments
Available-for-Sale Fixed-Maturity Securities
During the first quarter of 2026, the Company began investing in U.S. Treasury securities, which are classified as available-for-sale fixed-maturity securities. The Company held no investment securities as of December 31, 2025.
|
|
Amortized |
|
|
Gross Unrealized Gains |
|
|
Gross |
|
|
Estimated |
|
||||||||
U.S. Treasury securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|||
Accrued interest receivable on AFS securities is recorded within other current assets in the Consolidated Balance Sheets. As of September 30, 2026 and December 31, 2025, was $
There were
Contractual Maturities of Available-for-Sale Fixed-Maturity Securities
The following table presents the amortized cost and estimated fair value of the Company's AFS securities by contractual maturity as of September 30, 2026:
|
|
Amortized Cost |
|
|
Estimated Fair Value |
|
||||
Within one year |
|
$ |
|
|
|
$ |
|
|
||
After one year through five years |
|
|
|
|
|
|
|
|
||
After five years through ten years |
|
|
|
|
|
|
|
|
||
After ten years |
|
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
|
$ |
|
|
||
As of September 30, 2026, the Company's U.S. Treasury securities classified as AFS securities were not subject to call or prepayment provisions. Accordingly, expected maturities were consistent with contractual maturities.
Gross Unrealized Losses for Available-for-Sale Fixed-Maturity Securities
AFS securities with gross unrealized loss positions as of September 30, 2026, aggregated by investment category and length of time the individual securities have been in a continuous loss position are as follows:
10
Table of Contents
|
|
|
Less Than Twelve Months |
|
|
|
Twelve Months or Longer |
|
||||||||||||
|
|
Gross |
|
|
Fair Value |
|
|
Gross |
|
|
Fair Value |
|
||||||||
U.S. Treasury securities |
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|||
As of September 30, 2026,
Allowance for Credit Losses of Available-for-Sale Fixed-Maturity Securities
The Company regularly reviews its individual investment securities for credit impairment. The Company considers a variety of factors in evaluating whether a decline in fair value is credit-related, including the issuer's financial condition and near-term prospects, the extent to which the security's fair value is below its amortized cost, general market conditions, industry or sector specific factors, any nonpayment of contractually due principal or interest, and the Company's intent and ability to hold the investment for a period of time sufficient to allow for recovery of its amortized cost.
The Company's available-for-sale fixed-maturity securities consist entirely of U.S. Treasury securities. The unrealized losses as of September 30, 2026 were attributable to changes in market interest rates since the date of purchase and are not indicative of credit deterioration. Because U.S. Treasury securities are backed by the full faith and credit of the U.S. Government, the risk of credit loss is generally considered remote. The Company has the intent and ability to hold these securities until recovery of the amortized cost or maturity. Accordingly, no allowance for credit losses was recorded.
Interest Income
Interest
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Available-for-sale fixed-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Note 4. Fair Value Measurements
The Company records and discloses certain financial assets at their estimated fair values. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:
The Company's financial assets measured at fair value on a recurring basis consist of cash and cash equivalents and available-for-sale fixed-maturity securities. Cash and cash equivalents, which consist primarily of money market funds, are classified as Level 1 due to the use of quoted prices in active markets. AFS securities consist of U.S. Treasury securities and are also classified as Level 1, as fair value is determined using quoted prices in active markets.
The fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value is as follows:
|
|
Fair Value Measurements Using |
|
|
|
|
||||||||||
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Total |
|
||||
As of September 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
U.S. Treasury securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
11
Table of Contents
Note 5. Revenue
The Company generates revenue from three primary sources: underwriting and management services, claim services and other technology services.
Revenue disaggregated by service type and the timing of recognition is as follows:
|
|
|
Three Months Ended September 30, 2026 |
|
|
|
Three Months Ended September 30, 2025 |
|
||||||||||||||||||||||
|
|
Point in Time |
|
|
Over Time |
|
|
Total |
|
|
Point in Time |
|
|
Over Time |
|
|
Total |
|
||||||||||||
Underwriting and management services |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||
Claim services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other technology services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
Nine Months Ended September 30, 2026 |
|
|
|
Nine Months Ended September 30, 2025 |
|
||||||||||||||||||||||
|
|
Point in Time |
|
|
Over Time |
|
|
Total |
|
|
Point in Time |
|
|
Over Time |
|
|
Total |
|
||||||||||||
Underwriting and management services |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||
Claim services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other technology services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||
The Company primarily derives revenue through insurance solutions services provided to customers. The Company provides services to certain of its affiliates under separate MGA, policy administration and technology agreements. Refer to Note 8. Related Party Transactions for additional details.
Underwriting and Management Services
The Company provides policy issuance and renewal services that result in executed insurance policies. In addition, the Company provides management services, including soliciting and negotiating reinsurance for authorized programs, managing and maintaining a policy administration system. The Company also provides administrative services, including maintaining policy records and printing policy-related documents.
The Company has identified three performance obligations within its underwriting and management services: 1) policy issuance and renewal, 2) management services, and 3) sub-broker services.
The transaction price allocated to the policy issuance and renewal performance obligation is determined based on the estimated standalone selling price of the service. This price is calculated as a proportion of direct written premiums, assumed written premiums, or both, plus related policy fees, and varies based on the specific terms of each agreement. The estimated standalone selling price is determined using the expected cost plus a margin approach. The transaction price is comprised of variable consideration because the Company is obligated to return a portion of the consideration if an underlying policy is canceled subsequent to issuance or renewal. Accordingly, the Company applies an estimate of constraint against the transaction price related to possible underlying policy cancellations in the future using the expected value method. Revenue related to the policy issuance and renewal performance obligation is recognized at the point in time when a policy is issued or renewed, as this marks the point at which the customer receives the economic benefits of the policy issuance or renewal, with the related services being substantially complete.
The transaction price allocated to the management services performance obligation is determined based on the estimated standalone selling price of the services. This price is calculated as a proportion of direct written premiums, assumed written premiums, or both, and varies based on the specific terms of each agreement. The estimated standalone selling price is determined using the expected cost plus a margin approach. Revenue for management services is deferred and recognized ratably over time as the services are provided.
Revenue from sub-broker services is recognized at a point in time when the Company fulfills its performance obligation by completing the services for the customer and is included within underwriting and management services. Due to the nature of the services, there are no significant financing components or variable consideration. The Company recognized revenue from sub-broker services for the nine months ended September 30, 2026, and 2025 of $
12
Table of Contents
Claim Services
The Company provides services for all reported and assigned claims on behalf of its customers, for which the Company will handle each claim, including investigating, evaluating, adjusting and settling the claim. While a variety of activities are performed, the overall nature of the obligation is to provide services for all reported and assigned claims, including catastrophe claims. The Company also provides "catastrophe services" in the form of claim services to handle and adjust the increased and extraordinary volume of claims attributable to a catastrophe.
The Company has identified two performance obligations within claim services: 1) claim services and 2) catastrophe services.
The transaction price allocated to the claim services performance obligation is determined based on the estimated standalone selling price of the services. This price is calculated as a proportion of direct and assumed written premiums and varies based on the specific terms of each agreement. The estimated standalone selling price is determined using the estimated cost plus a margin approach. Revenue related to claim services is recognized ratably over the policy term, typically over a twelve-month period. This method reflects the continuous transfer of services to the customer and aligns revenue recognition with the ongoing delivery of claims handling services.
The transaction price allocated to the catastrophe services performance obligation is determined based on the estimated standalone selling price, which includes per-claim fees and a percentage of indemnification costs, and varies by agreement. The transaction price involves variable consideration because the Company must estimate both the ultimate number of claims and the total indemnification expected to be paid. Accordingly, the Company applies a constraint to the transaction price related to possible overestimation of the transaction price using the expected value method. Revenue for this performance obligation is recognized over time using an output method that measures progress by comparing total claims paid to date against the total expected claims to be paid.
Other Technology Services
The Company's other technology services revenue is derived primarily from fees for providing services using various proprietary software, which includes functionality for policy administration, reporting and compliance, billing, and claims handling, to the customer through software service agreements.
The Company has identified two performance obligations related to software services: 1) policy administration software services and 2) catastrophe claims software services.
The transaction price of the policy administration software services performance obligation is based on the claims processed by the customer using a flat per-claim fee. The overall nature of the obligation is to provide customers with continuous access to the Company's hosted policy administration software platform through which the Company processes policy administration activities. Each of these arrangements represents a stand-ready obligation to perform these activities on an as-needed basis. As the Company has a right to invoice the customer at an amount that corresponds directly with the value of services delivered, the Company applies the as-invoiced practical expedient to recognize revenue.
The transaction price of the catastrophe claims software service performance obligation is calculated as a percentage of the amount incurred for each catastrophe claim handled. The nature of the performance obligation is that the Company will provide the service of allowing the customer access to its software systems. This catastrophe claims software services revenue is recognized over time as the performance obligation is satisfied, generally ratably over the period of to
Remaining Performance Obligations
As of September 30, 2026, the aggregate transaction price allocated to remaining performance obligations that are unsatisfied or partially unsatisfied was $
The Company's remaining performance obligations primarily consist of contractual fees under multi-year underwriting management agreements and technology service agreements. The Company expects to recognize revenue on the current portion of the remaining performance obligations within the next 12 months. The non-current portion relates primarily to multi-year catastrophe software claim service agreements that the Company expects to recognize revenue ratably over the period in which it expects to satisfy the related performance obligations, which is generally estimated to be four to five years.
Contract Balances
The Company receives payments from customers based on billing terms established in contractual agreements. Accounts receivable are recognized when the right to consideration becomes unconditional and only the passage of time is required before payment of consideration is due. The timing of revenue recognition may differ from the timing of invoicing. Receivables related to these services are classified within accounts receivable and receivables from related parties in the Consolidated Balance Sheets. These receivables are typically collected within 15 to 30 days after month-end or invoice date, as applicable, and substantially all cash collections are completed within one year, consistent with the annual term of insurance policies. As of September 30, 2026 and December 31, 2025, the Company reported $
The portion of revenue not yet earned is recorded as a contract liability in the Consolidated Balance Sheets. Contract liabilities are recorded when the Company has received consideration or has an unconditional right to payment but has not yet transferred the related
13
Table of Contents
services. This represents the portion of revenue that will be recognized over the term of the respective agreements. The over time performance obligations fall in this category given the Company recognizes revenue over the non-cancelable term of the underlying contracts.
The changes in contract liabilities during the three and nine months ended September 30, 2026 resulted from normal business activity and were not materially affected by unusual or nonrecurring items. During the three and nine months ended September 30, 2026, the Company recognized revenue of $
Note 6. Comprehensive Income
Comprehensive income consists of net income and other comprehensive income (loss), which reflects valuation changes in AFS securities carried at fair value, net of income taxes.
The components of other comprehensive income (loss) are as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Unrealized changes on fixed-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at the beginning of the period |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Unrealized losses on available-for-sale fixed-maturity securities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Deferred income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other comprehensive loss, net of income taxes |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Balance at the end of the period |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Note 7. Concentrations of Risk
The Company is exposed to certain concentrations of risk that could reasonably be expected to have a material impact on its business, financial condition, and results of operations, including customer concentration risk, related party concentration risk and cash concentration risk.
Customer Concentration
A customer is considered significant if it represents 10% or more of total revenue or total receivables for the applicable period.
For the three months ended September 30, 2026, the Company had
As of September 30, 2026, receivables from related party customers that individually accounted for more than
For the three months ended September 30, 2025, the Company had
As of December 31, 2025, receivables from related party customers that individually accounted for more than 10% of total receivables totaled approximately $
Related Party Concentration
A significant portion of the Company's revenue is generated from customers affiliated with the Company's controlling shareholder, HCI. For the three and nine months ended September 30, 2026, customers that individually represented more than 10% collectively accounted for
Cash Concentration
The Company maintains cash balances at large financial institutions that exceed Federal Deposit Insurance Corporation ("FDIC") insurance coverage limits. The Company monitors the credit ratings and financial condition of these institutions on an ongoing basis
14
Table of Contents
and has not experienced any losses on such deposits. The Company believes the credit risk associated with these institutions is not material.
Management Fee Revenue from Insurance Carriers
The following table presents underwriting and management services, as well as claim services revenue, recognized under agreements with related parties:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
Counterparty |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
TTIC (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
CRM (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
TRM (3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
HCM (4) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total related party management fee revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Unearned revenue related to these agreements was recorded within contract liabilities in the Consolidated Balance Sheets and is presented as follows:
|
|
September 30, |
|
|
December 31, |
|
||
Counterparty |
|
2026 |
|
|
2025 |
|
||
TTIC |
|
$ |
|
|
$ |
|
||
CRM |
|
|
|
|
|
|
||
TRM |
|
|
|
|
|
|
||
HCM |
|
|
|
|
|
|
||
Total related party unearned revenue for management fee revenue |
|
$ |
|
|
$ |
|
||
Receivables from related parties related to these agreements are as follows:
|
|
September 30, |
|
|
December 31, |
|
||
Counterparty |
|
2026 |
|
|
2025 |
|
||
TTIC |
|
$ |
|
|
$ |
|
||
CRM |
|
|
|
|
|
|
||
TRM |
|
|
|
|
|
|
||
HCM |
|
|
|
|
|
|
||
Total related party receivables for management fee revenue (1) |
|
$ |
|
|
$ |
|
||
Other Technology Services
The following table presents policy administration software services revenue and catastrophe claims software services revenue recognized from related parties:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
Service Type |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Policy administration software services (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Catastrophe claims software services (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total related party other technology services |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Unearned revenue and receivables from related parties related to catastrophe claims software services are as follows:
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Related party unearned revenue for other technology services (1) |
|
$ |
|
|
$ |
|
||
Related party receivables for other technology services (2) |
|
$ |
|
|
$ |
|
||
15
Table of Contents
Policy Administration Services
The Company charges HCM a service fee for each new and renewed HCPCI flood policy issued outside of Florida. Policy administration services revenue and the related accounts receivable were immaterial for all periods presented. Such fees are typically settled within two weeks following the invoice date.
Related Party Service Agreements - Expenses
Agent Commissions
Under an agent commission agreement with Omega, a subsidiary of HCI, the Company pays commissions on premiums received in cash for policies issued by specific customers during the term of the agreement. Commission expenses pursuant to the agent commission agreement with Omega were $
Claim Services
The Company receives field adjuster services from Griston Claim Services, Inc., a subsidiary of HCI, and generally pays a flat fee per claim handled. The Company also engages GCM to provide claims management services. Fees paid to GCM vary by program and claim type. For TTIC, Tailrow and CORE homeowners claims, the Company pays a per-claim fee for non-catastrophe claims, and a per-claim fee plus a percentage of incurred loss for catastrophe claims, including litigated claims. For CORE commercial claims, the Company pays a per-claim fee plus a percentage of the amounts expended for indemnification for both catastrophe and non-catastrophe claims, including litigated claims.
Expenses related to claim services are as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Field adjuster services expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Claim management services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total claim services expenses (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of September 30, 2026 and December 31, 2025, accounts payable related to claim services were $
Office Leases
The Company leases office space in Tampa, Florida, from Century Park Holdings, LLC, a subsidiary of HCI, under an agreement that commenced on January 1, 2023 and expires on
For each of the three and nine months ended September 30, 2026 and 2025, lease expense related to these agreements was $
As of September 30, 2026 and December 31, 2025, there were
Corporate Cost Allocation
The Company provided corporate services to TTIC under a cost allocation agreement between Exzeo and its affiliates, amended effective July 1, 2025, to remove TTIC from the scope of the agreement. Following this amendment, the Company ceased providing corporate services to TTIC under the cost allocation agreement.
16
Table of Contents
Non-cash Capital Contributions
For the three and nine months ended September 30, 2026, the Company recognized compensation expense related to HCI restricted stock held by certain Company employees of $
Note 9. Leases
Right-of-use assets and operating lease liabilities are as follows:
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Assets: |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
$ |
|
|
$ |
|
||
Liabilities: |
|
|
|
|
|
|
||
Operating lease liabilities - current |
|
$ |
|
|
$ |
|
||
Operating lease liabilities - non-current |
|
|
|
|
|
|
||
Total operating lease liabilities |
|
$ |
|
|
$ |
|
||
Weighted-average lease term and discount rate are as follows:
|
|
September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Weighted-average remaining lease term (in years) |
|
|
|
|
|
|
||
Weighted-average discount rate |
|
|
% |
|
|
% |
||
The Company has entered into lease agreements with both affiliates and third parties. Refer to Note 8. Related Party Transactions for additional details.
Class of Assets |
|
Initial Term |
|
Renewal Option |
|
Other Terms and Conditions |
Office space |
|
|
|
(1), (2) |
||
Office equipment |
|
|
Not applicable |
|
Not applicable |
As of September 30, 2026, maturities of operating lease liabilities are as follows:
Due in 12 months following September 30, |
|
Operating Leases |
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total undiscounted liabilities |
|
|
|
|
Less: Imputed interest |
|
|
|
|
Total operating lease liabilities |
|
$ |
|
|
Quantitative information regarding the components of lease cost and cash payments related to operating leases for the periods presented is as follows:
|
|
|
Three Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||||||||||||
|
|
|
2026 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
2025 |
|
||||
Operating lease cost (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating cash flows – operating leases |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
||||
17
Table of Contents
Note 10. Income Taxes
Income tax expense was $
The Company evaluates the realizability of deferred tax assets on a quarterly basis and records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, management considers all positive and negative evidence, including recent operating results, available tax planning strategies and forecasted future taxable income. The Company maintained a valuation allowance of $
Basic EPS is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding during the period. The Company applies the two-class method in calculating basic EPS because certain unvested restricted stock awards are considered participating securities, as the holders have non-forfeitable dividend rights. Under this method, earnings are allocated between common shareholders and participating securities based on their respective rights to receive dividends and undistributed earnings.
Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Potentially dilutive securities are excluded from diluted EPS when their effect would be anti-dilutive. For the periods presented, weighted-average diluted shares outstanding were the same as weighted-average basic shares outstanding.
The calculation of basic and diluted earnings per share for the periods presented is as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||
(in thousands, except per share amounts) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Less: Income attributable to participating securities |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Income attributable to common shareholders |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average basic shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average diluted shares outstanding (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted earnings per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Share-based compensation cost is measured at the grant date fair value of the award and recognized over the requisite service period. Compensation expense is recorded within cost of revenue, selling, general and administrative, and research and development expenses in the Consolidated Statements of Income. Forfeitures are accounted for as they occur.
Omnibus Incentive Plans
The Company's 2021 Omnibus Plan authorized the issuance of shares of common stock for equity-based compensation awards to employees, directors and consultants. On November 4, 2025, the Company terminated the 2021 Omnibus Plan and adopted the 2025 Omnibus Plan, which authorized the issuance of up to
18
Table of Contents
Stock Options
Stock options generally vest based on service conditions, typically over
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
||||
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
||||
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
|
Aggregate |
|
||||
|
|
Number of |
|
|
|
Exercise |
|
|
Contractual |
|
|
|
Intrinsic |
|
||||
(in thousands, except per share amounts and options) |
|
Options |
|
|
|
Price |
|
|
Term (in years) |
|
|
|
Value (1) |
|
||||
Outstanding as of January 1, 2026 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding as of March 31, 2026 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding as of June 30, 2026 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding as of September 30, 2026 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
||||
Exercisable as of September 30, 2026 (2) |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding as of January 1, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding as of March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding as of June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding as of September 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
||||
Exercisable as of September 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
||||
As of September 30, 2026, all outstanding stock options were vested and exercisable, subject to the approval requirement described above for certain awards. For the three and nine months ended September 30, 2026, there was
19
Table of Contents
Restricted Stock Awards
Nonvested restricted stock award activity during the three and nine months ended September 30, 2026 and 2025 is as follows:
|
|
Number of |
|
|
|
Weighted |
|
||
|
|
Restricted |
|
|
|
Average |
|
||
|
|
Stock |
|
|
|
Grant Date |
|
||
|
|
Awards |
|
|
|
Fair Value |
|
||
Nonvested as of January 1, 2026 |
|
|
|
|
$ |
|
|
||
Granted |
|
|
|
|
$ |
|
|
||
Vested |
|
|
— |
|
|
$ |
|
— |
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
Nonvested as of March 31, 2026 |
|
|
|
|
$ |
|
|
||
Granted |
|
|
|
|
$ |
|
|
||
Vested |
|
|
— |
|
|
$ |
|
— |
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
Nonvested as of June 30, 2026 |
|
|
|
|
$ |
|
|
||
Granted |
|
|
|
|
$ |
|
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
Nonvested as of September 30, 2026 |
|
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
||
Nonvested as of January 1, 2025 |
|
|
|
|
$ |
|
|
||
Granted |
|
|
— |
|
|
$ |
|
— |
|
Vested |
|
|
( |
) |
|
$ |
|
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
Nonvested as of March 31, 2025 |
|
|
|
|
$ |
|
|
||
Granted |
|
|
— |
|
|
$ |
|
— |
|
Vested |
|
|
— |
|
|
$ |
|
— |
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
Nonvested as of June 30, 2025 |
|
|
|
|
$ |
|
|
||
Granted |
|
|
|
|
$ |
|
|
||
Vested |
|
|
— |
|
|
$ |
|
— |
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
Nonvested as of September 30, 2025 |
|
|
|
|
$ |
|
|
||
Share-based compensation expenses related to restricted stock awards are as follows:
|
|
|
Three Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||||||||||||
|
|
|
2026 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
2025 |
|
||||
Share-based compensation expense (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Deferred tax benefit (2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
As of September 30, 2026 and December 31, 2025, there was approximately $
HCI Equity Incentive Plan
HCI maintains an incentive plan that provides restricted stock awards to employees of HCI and its subsidiaries. The terms of the restricted stock awards include service and market conditions, and the awards generally vest over a period of four years. In December 2024, certain employees of HCI and its subsidiaries were transferred to the Company. The Company recognizes share-based compensation expense for those employees' nonvested shares based on the fair value determined by HCI at the original grant date and the same vesting terms established at the grant date. The awards are not remeasured following the transfer.
20
Table of Contents
For the three and nine months ended September 30, 2026, the Company recognized compensation expense related to HCI restricted stock of $
As of September 30, 2026, the Company was authorized to issue
August 2026 Share Repurchase Program
On August 14, 2026, the Company's Board of Directors authorized the August 2026 Share Repurchase Program to repurchase up to $
During the three and nine months ended September 30, 2026, the Company repurchased
As of September 30, 2026, the Company may repurchase up to approximately $
May 2026 Share Repurchase Program
On May 26, 2026, the Company's Board of Directors authorized the May 2026 Share Repurchase Program to repurchase up to $
The Company completed the May 2026 Share Repurchase Program on July 8, 2026. During the three and nine months ended September 30, 2026, the Company repurchased
Note 14. Segment Information
Operating segments are defined as components of an entity for which discrete financial information is available and that are regularly reviewed by the CODM for the purpose of allocating resources and assessing performance. The Company's serves as the CODM.
Geographic Information
All of the Company's revenues are generated in the United States, and substantially all of its long-lived assets are located in the United States. As a result, no geographic information by country is presented. Refer to Note 7. Concentrations of Risk for additional details.
21
Table of Contents
The consolidated revenue, net income and significant expense categories regularly reviewed by the CODM for the periods indicated are as follows:
|
|
|
Three Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||||||||||||
|
|
|
2026 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
2025 |
|
||||
Revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Policy commission and related expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outsourced claims fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct personnel expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Personnel cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Note 15. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist primarily of accrued compensation and employee benefits, amounts owed to vendors and service providers, taxes and other operating accruals. These obligations are expected to be settled within twelve months of the balance sheet date and are classified as current liabilities in the Consolidated Balance Sheets.
Accounts payable and accrued liabilities were comprised of the following:
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Accrued employee compensation |
|
$ |
|
|
$ |
|
||
Other accrued and accounts payable |
|
|
|
|
|
|
||
Total accounts payable and accrued liabilities |
|
$ |
|
|
$ |
|
||
Note 16. Commitments and Contingencies
Legal Matters
From time to time, the Company may be involved in legal and regulatory proceedings arising in the ordinary course of business. The Company accrues a liability for loss contingencies when a loss is both probable and reasonably estimable.
As of September 30, 2026 and December 31, 2025, the Company was not a party to any legal proceedings, nor is the Company aware of any matters that, individually or in the aggregate, are expected to have a material adverse effect on its financial position, results of operations, or cash flows, and no related liabilities were recorded.
Lease Commitments
The Company leases office space and certain equipment under non-cancelable operating lease agreements with initial terms ranging from to
Indemnification Obligations
The Company provides indemnification obligations under certain customer agreements, which may require the Company to defend against claims arising from breaches of contractual obligations. These indemnification provisions do not specify a maximum potential payment amount.
As of September 30, 2026 and December 31, 2025, the Company had
22
Table of Contents
Regulatory Matters
The Company is subject to various federal and state regulatory requirements applicable to its operations.
Note 17. Subsequent Events
Between October 1, 2026 and November 3, 2026, the Company, under its August 2026 Share Repurchase Program, repurchased an additional
23
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC on February 26, 2026 ("2025 Annual Report"). This section is intended to provide management’s perspective on our financial performance, material events, trends and uncertainties that may affect our business, financial condition, results of operations and cash flows.
Special Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws. All statements contained in this Quarterly Report, other than statements of historical fact, including statements regarding our future results of operations, financial position, market opportunity, business strategy, plans, objectives and factors affecting our performance are forward-looking statements. In some cases, forward-looking statements can be identified by words such as "may," "will," "should," "expect," "plan," "anticipate," "could," "intend," "target," "project," "contemplate," "believe," "estimate," "predict," "potential," or "continue" or the negative of these terms or other similar expressions.
These forward-looking statements are based on management's current expectations, assumptions, estimates and projections. While we believe these expectations and assumptions are reasonable, forward-looking statements are inherently predictive in nature and involve known and unknown risks and uncertainties, many of which are beyond our control. Actual results, performance or achievements may differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including those discussed in Part II, Item 1A "Risk Factors" in this Quarterly Report, in our 2025 Annual Report and in other reports we file with the SEC.
Factors that could cause actual results or events to differ materially include, among others, our ability to maintain profitability and manage fluctuations in operating results on a quarterly or annual basis; our dependence on a limited number of customers for a substantial portion of our revenue; our ability to retain existing customers and attract new customers; and our continued reliance on affiliated customers. Our future performance also depends on the successful development, enhancement and scalability of the Exzeo Platform, including the introduction of new features, analytical models and services, as well as the accuracy of estimates regarding market size and growth opportunities.
In addition, we operate in a highly competitive and regulated environment. Competitive pressures, consolidation within the insurance industry, regulatory scrutiny of delegated authority and claims administration functions, and evolving data privacy and cybersecurity requirements could adversely affect our business, financial condition and results of operations. Natural catastrophes, environmental risks and climate-related events, such as hurricanes and other severe weather, may significantly impact our customers’ P&C insurance operations, particularly in Florida, where a substantial majority of our managed premiums are concentrated, which could in turn affect demand for our products and services. Our business also depends on the reliability and security of our information systems and third-party cloud infrastructure, and any system failures, security breaches or unauthorized disclosures of sensitive data could result in operational disruptions, regulatory action, litigation or reputational harm.
Our ownership structure further presents additional risks. HCI controls the direction of our business through its ownership interests, and this concentrated ownership limits the ability of other shareholders to influence significant corporate decisions. Potential conflicts of interest may arise between HCI and us, including those involving our executive officers and directors who hold positions or financial interests. In addition, if HCI were to sell a controlling interest of the Company in a private transaction, shareholders may not receive a change-of-control premium, and we could become subject to control by an unknown third party. We may continue to incur significant costs and devote substantial management resources to operating as a public company, which could adversely affect our business, financial condition and results of operations.
For further discussion of certain of these factors, see the risk factors disclosed in the section entitled "Risk Factors" in this Quarterly Report and in the 2025 Annual Report.
You are cautioned not to place undue reliance on such forward-looking statements, which are not guarantees of future performance, and our actual results of operations, financial condition, liquidity and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this Quarterly Report. Any forward-looking statement in this Quarterly Report speaks only as of the date of such statement, and except as required by applicable securities laws, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report.
Company Overview
Exzeo Group, Inc. is a majority owned subsidiary of HCI. Together with its subsidiaries, Exzeo provides turnkey insurance technology and operations solutions to insurance carriers and their agents (collectively referred to as Exzeo's "customers") through a proprietary platform of internally developed software and data analytics applications designed specifically for the P&C insurance market.
24
Table of Contents
The Exzeo Platform is an integrated suite of configurable insurance applications purpose-built to support the entire P&C value chain. The Exzeo Platform delivers integrated technology solutions that streamline operational and administrative functions for insurance carriers, MGAs, reciprocal exchanges, program administrators, and their distribution partners, enabling organizations to modernize operations, improve efficiency and scale through a single configurable platform which includes quoting and underwriting, policy administration, claims management, data reporting and financial reporting. Through these capabilities, the Exzeo Platform streamlines and automates insurance operational workflows across carriers, agents and policyholders.
The Exzeo business was established in 2012 as the technology and innovation division of HCI Group, Inc., a leading underwriter of homeowners insurance in Florida that now writes policies in 12 additional states. In 2020, Exzeo became an independent business entity and completed its IPO in November 2025. Since inception, Exzeo has been led by experienced technology and insurance professionals with deep domain expertise focused on developing advanced data analytics algorithms and software tools that enable carriers to maximize system efficiency, optimize underwriting outcomes and serve their customers more effectively.
The Exzeo Platform is a proprietary suite of software, analytics and visualization tools capable of supporting, enhancing or replacing legacy operational systems commonly used in the insurance industry. We enter into MGA or policy administration services agreements with our P&C insurance industry customers under which we serve as an MGA of an insurance carrier or provide services to a carrier's MGA in exchange for fees largely based on a percentage of managed premiums. Under these agreements, we utilize the Exzeo Platform to provide policy issuance and renewal services, as well as management services such as soliciting and negotiating reinsurance for authorized programs, managing and maintaining policy administration, and providing claims management.
Recent Events
On August 6, 2026, Exzeo announced the formation of Exzeo Ventures, a new division dedicated to the development of AI-native products, services and businesses. Exzeo Ventures will initially focus on opportunities within the insurance industry, including agentic AI for catastrophe claims, underwriting and risk transfer solutions, and distribution automation.
Key Factors and Trends Affecting Results of Operations
We believe our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section entitled Item 1A. Risk Factors, included in our 2025 Annual Report.
25
Table of Contents
Presentation of Financial Information
Unless otherwise indicated, all dollar amounts presented in this Management's Discussion and Analysis of Financial Condition and Results of Operations are stated in thousands. Percentages, ratios and per policy figures are based on the underlying whole dollar amount.
Key Performance Metrics
We review a number of key operating metrics, which we use as we make strategic decisions, measure our performance, evaluate our business, and identify trends in our business. These operational measures are presented as follows:
|
|
As of September 30, |
|
|||||||
(in thousands, except percentages, counts and per policy figures) |
|
2026 |
|
|
2025 |
|
||||
Managed Premium |
|
$ |
|
1,365,708 |
|
|
$ |
|
1,201,597 |
|
Managed Policies |
|
|
|
316,762 |
|
|
|
|
263,753 |
|
Premium Per Policy |
|
$ |
|
4,311 |
|
|
$ |
|
4,556 |
|
Gross Dollar Retention Rate |
|
|
|
88.2 |
% |
|
|
|
87.9 |
% |
Net Dollar Retention Rate |
|
|
|
113.7 |
% |
|
|
|
242.1 |
% |
Annual Recurring Revenue |
|
$ |
|
205,772 |
|
|
$ |
|
192,410 |
|
Managed Premium
Managed premium is defined as the aggregate gross dollar value of in-force premiums that are processed, managed or administered by our software solutions as of the period end date. This excludes any applicable policy fee income associated with managed policies. Premium pricing may vary by state due to a combination of factors including regulatory requirements; however, the majority of the policies are written in the state of Florida. Revenue is primarily derived from usage-based pricing models, which are structured based on the amount of managed premiums processed, in most cases. We view managed premium as an important metric because it is an indicator of the overall size of the Exzeo Platform. However, managed premium is an operational metric and should not be considered a substitute for revenue or other financial results.
Managed premiums attributable to insurance policies written in Florida represented 91.6% and 89.9% of total managed premiums as of September 30, 2026 and 2025, respectively.
Managed Policies
Managed policies are defined as the number of currently active policies managed by us on our platform as of the period end date. We consider managed policies a key metric for evaluating our financial performance, as growth in the number of managed policies not only
26
Table of Contents
drives revenue growth, but we also believe that an increase in managed policies may reflect broader brand awareness and deeper market penetration of our Exzeo Platform.
Premium Per Policy
Premium per policy is defined as the managed premium divided by managed policies. We view premium per policy as an important metric which provides information as to the average size of our customers' policyholder relationships. Growth in the metric can be indicative of increased coverages offered to our customers.
Gross Dollar Retention Rate
Gross dollar retention rate measures the percentage of managed premium retained from our customers' existing policyholders. We calculate gross dollar retention rate by measuring the managed premium attributable to policyholders who remained active as of the end of the current period and dividing this amount by the managed premium attributable to those same policyholders as of the end of the corresponding prior-year period (i.e., twelve months earlier). We believe the gross dollar retention rate is a valuable indicator of platform engagement among existing policyholders and provides insight into our ability to retain and sustain premium volume over time through our services.
As of September 30, 2026 and 2025, managed premiums attributable to policyholders active from the end of the prior year period used in the gross dollar retention rate calculation were $1,055,537 and $436,427, respectively.
Net Dollar Retention Rate
We use NRR as a key performance metric to measure the success of our carrier customer relationships and the growth of our revenue from new and existing carrier customers. To calculate NRR, we divide the amount of managed premium from new and existing policyholders of our customers at the end of the current period, by the amount of managed premium attributable to the policyholders active as of the respective prior-year period (i.e., twelve months earlier).
Our NRR is influenced by both the growth of existing carrier customers on the platform as well as the addition of new carrier customers. We believe that maintaining a high NRR is critical to achieving sustained long-term growth and reflects the strength of our value proposition to existing as well as future customers.
Annual Recurring Revenue
We use ARR as a key operational metric to assess the scale of our recurring revenue generated from managed premium. ARR is defined as the sum of each customer's managed premiums, multiplied by their respective contractual fee rates, plus any applicable policy fee income associated with managed policies as of the period end date. ARR excludes revenue from nonrecurring sources, such as catastrophe services.
Components of Operating Results
Revenue
We generate revenue from three primary sources: underwriting and management services, claim services and other technology services. Underwriting and management services include policy issuance and renewal, reinsurance placement and administrative support, with fees tied to a percentage of premiums written or assumed, as well as related policy fees. Claim services involve investigating, adjusting, and settling claims, including catastrophe-related claims, with pricing based on a combination of a percentage of premiums written or assumed, per-claim fees or a percentage of indemnity payments. Other technology services are primarily derived from proprietary software solutions offered through Software-as-a-Service agreements, with fees based on a combination of policy or claim volumes, fixed charges, or percentages of indemnity payments associated with claims handled.
Cost of Revenue
Our cost of revenue consists of expenses directly attributable to providing our services, including personnel-related costs for employees engaged in underwriting, management, administrative and claim services. For certain customers, we are responsible for compensating agents supporting underwriting services and recognize related agent commission expenses. In addition, cost of revenue includes amortization of capitalized internal-use software and other intangible assets used to provide services, information technology expenses supporting policy underwriting, administrative functions, allocated overhead expenses and claim handling expenses. Claim handling expenses consist of costs incurred in connection with claim adjustment, investigation, defense, recording and payment activities. Personnel-related costs include salaries, discretionary pay, stock-based compensation and benefits.
Gross Profit
Gross profit represents revenue less cost of revenue. Recent increases in gross profit have been primarily driven by growth in managed premium, which allows us to leverage our relatively fixed cost structure. As we continue to scale our business and achieve operational efficiencies, we expect gross margins to benefit over time, although there can be no assurance that such improvements will be achieved.
27
Table of Contents
Selling, General and Administrative Expenses
Selling, general and administrative expenses represent costs associated with supporting operations and primarily consist of personnel-related costs for our finance, IT, sales and marketing, human resources, legal and general management functions, as well as facilities and professional services. Personnel-related costs include salaries, discretionary pay, stock-based compensation and benefits.
Research and Development
Our research and development costs consist primarily of personnel-related costs, information technology expenses, facilities, and related overhead costs for employees engaged in the design and development of our technology offerings and other internally developed systems and applications. Personnel-related costs include salaries, discretionary pay, stock-based compensation and benefits.
Depreciation and Amortization
Depreciation and amortization expense reflects the expenses associated with the ongoing use of our tangible long-lived assets, including computer hardware, office furniture and equipment, and leasehold improvements.
Interest Income
Interest income consists of interest earned on our cash and cash equivalents, and on our short-term and long-term investments, which consist primarily of fixed-maturity securities. Interest income is primarily influenced by the size, composition of our cash and investment balances and by the prevailing interest rates and yields of the investment portfolio.
Other Income, Net
Other income, net consists primarily of non-operating gains and losses that are not separately presented in the Consolidated Statements of Operations.
Income Tax Expense
Income tax expense primarily consists of domestic corporate federal and state income taxes related to the sale of our services. The effective tax rate can be affected by many factors, including changes in tax laws, states in which we operate, regulations or rates, new interpretations of existing laws or regulations, and changes in our overall levels of income before income taxes.
Results of Operations
Three Months Ended September 30, 2026 and 2025
Selected financial information for the three months ended September 30, 2026 and 2025, including amounts expressed as a percentage of total revenue and the year-over-year change, is presented as follows:
|
|
Three Months Ended September 30, |
|
|
Percentage of Revenue |
|
|
|
Change |
|
||||||||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
|
($) |
|
(%) |
|
|||||||
Revenue |
|
$ |
|
55,186 |
|
|
$ |
|
55,166 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
$ |
|
20 |
|
|
0.0 |
% |
Cost of revenue |
|
|
|
20,940 |
|
|
|
|
21,393 |
|
|
|
37.9 |
% |
|
|
38.8 |
% |
|
|
|
(453 |
) |
|
(2.1 |
)% |
Gross profit |
|
|
|
34,246 |
|
|
|
|
33,773 |
|
|
|
62.1 |
% |
|
|
61.2 |
% |
|
|
|
473 |
|
|
1.4 |
% |
Selling, general and administrative |
|
|
|
5,564 |
|
|
|
|
3,900 |
|
|
|
10.1 |
% |
|
|
7.1 |
% |
|
|
|
1,664 |
|
|
42.7 |
% |
Research and development |
|
|
|
2,383 |
|
|
|
|
2,494 |
|
|
|
4.3 |
% |
|
|
4.5 |
% |
|
|
|
(111 |
) |
|
(4.5 |
)% |
Depreciation and amortization |
|
|
|
149 |
|
|
|
|
127 |
|
|
|
0.3 |
% |
|
|
0.2 |
% |
|
|
|
22 |
|
|
17.3 |
% |
Total operating expenses |
|
|
|
8,096 |
|
|
|
|
6,521 |
|
|
|
14.7 |
% |
|
|
11.8 |
% |
|
|
|
1,575 |
|
|
24.2 |
% |
Operating income |
|
|
|
26,150 |
|
|
|
|
27,252 |
|
|
|
47.4 |
% |
|
|
49.4 |
% |
|
|
|
(1,102 |
) |
|
(4.0 |
)% |
Interest income |
|
|
|
3,340 |
|
|
|
|
1,102 |
|
|
|
6.1 |
% |
|
|
2.0 |
% |
|
|
|
2,238 |
|
|
203.1 |
% |
Other income, net |
|
|
|
340 |
|
|
|
|
— |
|
|
|
0.6 |
% |
|
|
0.0 |
% |
|
|
|
340 |
|
|
100.0 |
% |
Income before income taxes |
|
$ |
|
29,830 |
|
|
$ |
|
28,354 |
|
|
|
54.1 |
% |
|
|
51.4 |
% |
|
$ |
|
1,476 |
|
|
5.2 |
% |
Income tax expense |
|
|
|
7,485 |
|
|
|
|
7,203 |
|
|
|
13.6 |
% |
|
|
13.1 |
% |
|
|
|
282 |
|
|
3.9 |
% |
Net income |
|
$ |
|
22,345 |
|
|
$ |
|
21,151 |
|
|
|
40.5 |
% |
|
|
38.3 |
% |
|
$ |
|
1,194 |
|
|
5.6 |
% |
28
Table of Contents
Comparison of the Three Months Ended September 30, 2026 and 2025
Revenue
|
|
Three Months Ended September 30, |
|
|
Change |
|
||||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||||
Underwriting and management services |
|
$ |
|
45,859 |
|
|
$ |
|
44,879 |
|
|
|
980 |
|
|
|
2.2 |
% |
Claim services (1) |
|
|
|
6,611 |
|
|
|
|
8,030 |
|
|
|
(1,419 |
) |
|
|
(17.7 |
)% |
Other technology services |
|
|
|
2,716 |
|
|
|
|
2,257 |
|
|
|
459 |
|
|
|
20.3 |
% |
Total revenue |
|
$ |
|
55,186 |
|
|
$ |
|
55,166 |
|
|
|
20 |
|
|
|
0.0 |
% |
Revenue increased by $20, to $55,186 for the three months ended September 30, 2026, compared to $55,166 for the same period in 2025. The increase was primarily attributable to growth in underwriting and management services and other technology services revenue, offset by lower claim services revenue.
Underwriting and management services revenue increased by $980, or 2.2%, to $45,859 for the three months ended September 30, 2026, compared to $44,879 for the same period in 2025, representing 83.1% and 81.4% of total revenue, respectively. The increase was primarily driven by higher managed premiums generated from customers onboarded in late 2025 as these customers contributed revenue throughout 2026 compared to no revenue contribution during the corresponding prior-year period. The fee rate charged as a percentage of managed premiums was modestly lower in 2026 compared to 2025, reflecting changes in service mix.
Claim services revenue decreased by $1,419, or 17.7%, to $6,611 for the three months ended September 30, 2026, compared to $8,030 for the same period in 2025, representing 12.0% and 14.6% of total revenue, respectively. The decrease was primarily due to a $1,508 decrease from services delivered through our outsourced claims arrangement, the majority of which was attributable to lower catastrophe-related claim activity, during the current period compared to the same period in 2025. Claim services revenue in future periods will continue to be influenced by the level of managed premiums and the timing and severity of weather events.
Other technology services revenue increased by $459, or 20.3%, to $2,716 for the three months ended September 30, 2026, compared to $2,257 for the same period in 2025, representing 4.9% and 4.1% of total revenue, respectively. The increase was primarily driven by higher catastrophe software service revenue associated with the progression of certain catastrophe events, including Hurricane Ian, in the current period. The current period results reflect the impact of additional revenue recognized as a result of refined claims estimates in the prior year. Because catastrophe-related software activity is event driven, revenue from these services may vary between periods.
Cost of Revenue
|
|
Three Months Ended September 30, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Policy commission and related expenses |
|
$ |
9,797 |
|
|
$ |
10,071 |
|
|
$ |
(274 |
) |
|
|
(2.7 |
)% |
Outsourced claims fees |
|
|
1,301 |
|
|
|
2,809 |
|
|
|
(1,508 |
) |
|
|
(53.7 |
)% |
Direct personnel expense |
|
|
5,410 |
|
|
|
5,086 |
|
|
|
324 |
|
|
|
6.4 |
% |
Other operating expenses |
|
|
3,835 |
|
|
|
2,805 |
|
|
|
1,030 |
|
|
|
36.7 |
% |
Depreciation and amortization |
|
|
597 |
|
|
|
622 |
|
|
|
(25 |
) |
|
|
(4.0 |
)% |
Total cost of revenue |
|
$ |
20,940 |
|
|
$ |
21,393 |
|
|
$ |
(453 |
) |
|
|
(2.1 |
)% |
Cost of revenue decreased by $453, or 2.1%, to $20,940 for the three months ended September 30, 2026, compared to $21,393 for the same period in 2025, representing 37.9% and 38.8% of total revenue, respectively. The decrease in the cost of revenue as a percentage of total revenue was primarily driven by a significant reduction in outsourced claims fees, partially offset by higher other operating expenses and direct personnel expense.
Policy commission and related expenses decreased by $274, or 2.7%, to $9,797 for the three months ended September 30, 2026, compared to $10,071 for the same period in 2025, representing 17.7% and 18.3% of total revenue, respectively. The decrease primarily reflected fluctuations in business activity and was not material to the overall change in cost of revenue.
Outsourced claims fees decreased by $1,508, or 53.7%, to $1,301 for the three months ended September 30, 2026, compared to $2,809 for the same period in 2025, representing 2.4% and 5.1% of total revenue, respectively. The decrease was primarily due to lower catastrophe claims handling and associated litigation-related activities in 2026 compared with 2025, when claims handling and related litigation costs were elevated due to activity associated with storms that occurred in late 2024 along with other historical storm events. Catastrophe-related activity is inherently volatile and may fluctuate significantly from period to period.
29
Table of Contents
Direct personnel expense increased by $324, or 6.4%, to $5,410 for the three months ended September 30, 2026, compared to $5,086 for the same period in 2025, representing 9.8% and 9.2% of total revenue, respectively. The increase was primarily driven by higher headcount to support continued business growth. These increases were partially offset by lower discretionary compensation costs recognized in cost of revenue due to allocation of such costs compared to the prior year period.
Other operating expenses increased by $1,030, or 36.7%, to $3,835 for the three months ended September 30, 2026, compared to $2,805 for the same period in 2025, representing 6.9% and 5.1% of total revenue, respectively. The increase was driven by higher policy administration expenses, including postage and supplies, resulting from higher policy volumes and increased claims management activity, as well as continued investment in systems and technology.
Depreciation and amortization remained relatively flat at $597 for the three months ended September 30, 2026, compared to $622 for the same period in 2025, representing 1.1% of total revenue in both periods. As a result, depreciation and amortization did not materially impact the period-over-period change in cost of revenue.
Operating Expenses
|
|
Three Months Ended September 30, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Selling, general and administrative |
|
$ |
5,564 |
|
|
$ |
3,900 |
|
|
$ |
1,664 |
|
|
|
42.7 |
% |
Research and development |
|
|
2,383 |
|
|
|
2,494 |
|
|
|
(111 |
) |
|
|
(4.5 |
)% |
Depreciation and amortization |
|
|
149 |
|
|
|
127 |
|
|
|
22 |
|
|
|
17.3 |
% |
Total operating expenses |
|
$ |
8,096 |
|
|
$ |
6,521 |
|
|
$ |
1,575 |
|
|
|
24.2 |
% |
Operating expenses increased by $1,575, or 24.2%, to $8,096 for the three months ended September 30, 2026, compared to $6,521 for the same period in 2025, representing 14.7% and 11.8% of total revenue, respectively. The increase was primarily driven by higher selling, general and administrative expenses.
Selling, general and administrative expenses increased by $1,664, or 42.7%, to $5,564 for the three months ended September 30, 2026, compared to $3,900 for the same period in 2025, representing 10.1% and 7.1% of total revenue, respectively. Employee-related costs accounted for approximately half of the increase, primarily reflecting a higher allocation of discretionary compensation costs, as well as higher salary and wage expenses resulting from increased headcount to support continued business growth. In addition, the increase reflected lower overhead allocations to TTIC following its sale to HCI in July 2024, as shared corporate services previously provided to TTIC ended on July 1, 2025. The remaining increase reflected higher operating costs associated with being a publicly traded company and continued business growth.
Research and development expenses remained relatively flat at $2,383 for the three months ended September 30, 2026, compared to $2,494 for the same period in 2025, representing 4.3% and 4.5% of total revenue. Research and development expenses did not fluctuate materially year over year and were not a significant factor in the overall change in operating expenses.
Depreciation and amortization remained relatively flat at $149 for the three months ended September 30, 2026, compared to $127 for the same period in 2025, representing 0.3% and 0.2% of total revenue, respectively. As a result, depreciation and amortization did not materially impact the period-over-period change in operating expenses.
Other Non-Operating Income
|
|
Three Months Ended September 30, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Interest income |
|
$ |
3,340 |
|
|
$ |
1,102 |
|
|
$ |
2,238 |
|
|
|
203.1 |
% |
Other income, net |
|
$ |
340 |
|
|
$ |
— |
|
|
$ |
340 |
|
|
|
100.0 |
% |
Interest income increased by $2,238, or 203.1%, to $3,340 for the three months ended September 30, 2026, compared to $1,102 for the same period in 2025. The increase was primarily attributable to interest income earned on AFS securities, which contributed $2,382 during the current period, with no comparable activity in the prior-year period. The increase also reflects $958 of income earned on cash and cash equivalents during the current period compared to $1,102 in the prior-year period. The increase in interest income reflects the deployment of a portion of the proceeds from our November 2025 IPO into U.S. Treasury securities during 2026. Interest income may fluctuate in future periods based on cash levels, the timing of cash deployment, prevailing interest rates and market conditions.
Other income, net was $340 for the three months ended September 30, 2026, compared to $0 for the same period in 2025, primarily reflecting realized gains from investment activity initiated in 2026.
30
Table of Contents
Income Tax
|
|
Three Months Ended September 30, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Income before income taxes |
|
$ |
29,830 |
|
|
$ |
28,354 |
|
|
$ |
1,476 |
|
|
|
5.2 |
% |
Income tax expense |
|
$ |
7,485 |
|
|
$ |
7,203 |
|
|
$ |
282 |
|
|
|
3.9 |
% |
Effective tax rate |
|
|
25.1 |
% |
|
|
25.4 |
% |
|
|
|
|
|
|
||
Income tax expense increased by $282, or 3.9%, to $7,485 for the three months ended September 30, 2026, compared to $7,203 for the same period in 2025. Our effective tax rate was 25.1% for the three months ended September 30, 2026, compared to 25.4% for the same period in 2025.
Our effective tax rate for both periods differed from the U.S. federal statutory rate of 21.0% primarily due to state and foreign income taxes, net of federal tax benefits, and other immaterial nondeductible expenses. We expect our effective tax rate to continue to vary from the statutory rate principally as a result of state income taxes, permanent differences, and state tax obligations. There were no material changes in our income tax estimation methodologies during the periods presented, and the year-over-year change in our effective tax rate was not material. The year-over-year increase in income tax expense was primarily driven by higher income before income taxes.
Nine Months Ended September 30, 2026 and 2025
Selected financial information for the nine months ended September 30, 2026 and 2025, including amounts expressed as a percentage of total revenue and the year-over-year change, is presented as follows:
|
|
|
Nine Months Ended September 30, |
|
|
Percentage of Revenue |
|
|
|
Change |
|
|||||||||||||||
(Unaudited, in thousands, except percentages) |
|
|
2026 |
|
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|
|
($) |
|
(%) |
|
||||||
Revenue |
|
$ |
|
168,507 |
|
|
$ |
|
163,664 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
$ |
|
4,843 |
|
|
3.0 |
% |
Cost of revenue |
|
|
|
64,680 |
|
|
|
|
67,515 |
|
|
|
38.4 |
% |
|
|
41.3 |
% |
|
|
|
(2,835 |
) |
|
(4.2 |
)% |
Gross profit |
|
|
|
103,827 |
|
|
|
|
96,149 |
|
|
|
61.6 |
% |
|
|
58.7 |
% |
|
|
|
7,678 |
|
|
8.0 |
% |
Selling, general and administrative |
|
|
|
16,568 |
|
|
|
|
9,566 |
|
|
|
9.8 |
% |
|
|
5.8 |
% |
|
|
|
7,002 |
|
|
73.2 |
% |
Research and development |
|
|
|
7,129 |
|
|
|
|
7,069 |
|
|
|
4.2 |
% |
|
|
4.3 |
% |
|
|
|
60 |
|
|
0.8 |
% |
Depreciation and amortization |
|
|
|
442 |
|
|
|
|
338 |
|
|
|
0.3 |
% |
|
|
0.2 |
% |
|
|
|
104 |
|
|
30.8 |
% |
Total operating expenses |
|
|
|
24,139 |
|
|
|
|
16,973 |
|
|
|
14.3 |
% |
|
|
10.4 |
% |
|
|
|
7,166 |
|
|
42.2 |
% |
Operating income |
|
|
|
79,688 |
|
|
|
|
79,176 |
|
|
|
47.3 |
% |
|
|
48.4 |
% |
|
|
|
512 |
|
|
0.6 |
% |
Interest income |
|
|
|
8,815 |
|
|
|
|
2,263 |
|
|
|
5.2 |
% |
|
|
1.4 |
% |
|
|
|
6,552 |
|
|
289.5 |
% |
Other income, net |
|
|
|
340 |
|
|
|
|
— |
|
|
|
0.2 |
% |
|
|
0.0 |
% |
|
|
|
340 |
|
|
100.0 |
% |
Income before income taxes |
|
$ |
|
88,843 |
|
|
$ |
|
81,439 |
|
|
|
52.7 |
% |
|
|
49.8 |
% |
|
$ |
|
7,404 |
|
|
9.1 |
% |
Income tax expense |
|
|
|
22,823 |
|
|
|
|
20,674 |
|
|
|
13.5 |
% |
|
|
12.6 |
% |
|
|
|
2,149 |
|
|
10.4 |
% |
Net income |
|
$ |
|
66,020 |
|
|
$ |
|
60,765 |
|
|
|
39.2 |
% |
|
|
37.1 |
% |
|
$ |
|
5,255 |
|
|
8.6 |
% |
Comparison of the Nine Months Ended September 30, 2026 and 2025
Revenue
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||||
Underwriting and management services |
|
$ |
|
140,129 |
|
|
$ |
|
133,424 |
|
|
|
6,705 |
|
|
|
5.0 |
% |
Claim services (1) |
|
|
|
20,246 |
|
|
|
|
23,482 |
|
|
|
(3,236 |
) |
|
|
(13.8 |
)% |
Other technology services |
|
|
|
8,132 |
|
|
|
|
6,758 |
|
|
|
1,374 |
|
|
|
20.3 |
% |
Total revenue |
|
$ |
|
168,507 |
|
|
$ |
|
163,664 |
|
|
|
4,843 |
|
|
|
3.0 |
% |
Revenue increased by $4,843, or 3.0%, to $168,507 for the nine months ended September 30, 2026, compared to $163,664 for the same period in 2025. The increase was primarily attributable to growth in underwriting and management services and other technology services revenue, offset by lower claim services revenue.
31
Table of Contents
Underwriting and management services revenue increased by $6,705, or 5.0%, to $140,129 for the nine months ended September 30, 2026, compared to $133,424 for the same period in 2025, representing 83.2% and 81.5% of total revenue, respectively. The increase was primarily driven by higher managed premiums generated from customers onboarded in late 2025 as these customers contributed revenue throughout 2026 compared to no revenue contribution during the corresponding prior-year period. The increase was also driven by higher managed premiums from certain existing customers. The fee rate charged as a percentage of managed premiums was modestly lower in 2026 compared to 2025, reflecting changes in service mix.
Claim services revenue decreased by $3,236, or 13.8%, to $20,246 for the nine months ended September 30, 2026, compared to $23,482 for the same period in 2025, representing 12.0% and 14.3% of total revenue, respectively. The decrease was primarily due to a $4,571 decrease from services delivered through our outsourced claims arrangement, the majority of which was attributable to lower catastrophe-related claim activity in the current period compared to the same period in 2025. Claim services revenue was elevated in 2025 due to higher volumes of catastrophe claims arising from prior storm events, including Hurricanes Ian, Milton, and Helene. As claims associated with these events progressed toward resolution and related claim volumes normalized, claim services revenue decreased from the prior year elevated levels. The decrease was partially offset by higher managed premiums from existing customers, which increased related claims volume and associated service fees. Claim services revenue in future periods will continue to be influenced by the level of managed premiums and the timing and severity of weather events.
Other technology services revenue increased by $1,374, or 20.3%, to $8,132 for the nine months ended September 30, 2026, compared to $6,758 for the same period in 2025, representing 4.8% and 4.1% of total revenue, respectively. The increase was primarily driven by higher catastrophe software service revenue associated with the progression of certain catastrophe events, including Hurricane Ian, in the current period. The current period results reflect the impact of additional revenue recognized as a result of refined claims estimates in the prior year. Because catastrophe-related software activity is event driven, revenue from these services may vary between periods.
Cost of Revenue
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Policy commission and related expenses |
|
$ |
32,009 |
|
|
$ |
32,812 |
|
|
$ |
(803 |
) |
|
|
(2.4 |
)% |
Outsourced claims fees |
|
|
4,324 |
|
|
|
8,895 |
|
|
|
(4,571 |
) |
|
|
(51.4 |
)% |
Direct personnel expense |
|
|
15,781 |
|
|
|
15,165 |
|
|
|
616 |
|
|
|
4.1 |
% |
Other operating expenses |
|
|
10,820 |
|
|
|
8,816 |
|
|
|
2,004 |
|
|
|
22.7 |
% |
Depreciation and amortization |
|
|
1,746 |
|
|
|
1,827 |
|
|
|
(81 |
) |
|
|
(4.4 |
)% |
Total cost of revenue |
|
$ |
64,680 |
|
|
$ |
67,515 |
|
|
$ |
(2,835 |
) |
|
|
(4.2 |
)% |
Cost of revenue decreased by $2,835, or 4.2%, to $64,680 for the nine months ended September 30, 2026, compared to $67,515 for the same period in 2025, representing 38.4% and 41.3% of total revenue, respectively. The decrease in the cost of revenue as a percentage of total revenue was primarily driven by a significant reduction in outsourced claims fees, partially offset by higher other operating expenses and direct personnel expense.
Policy commission and related expenses decreased by $803, or 2.4%, to $32,009 for the nine months ended September 30, 2026, compared to $32,812 for the same period in 2025, representing 19.0% and 20.0% of total revenue, respectively. The decrease was primarily due to lower written premiums associated with the carrier for which we provide policy commission services. The weighted average commission rate was relatively consistent at 8.9% for both 2026 and 2025.
Outsourced claims fees decreased by $4,571, or 51.4%, to $4,324 for the nine months ended September 30, 2026, compared to $8,895 for the same period in 2025, representing 2.6% and 5.4% of total revenue, respectively. The decrease was primarily due to lower catastrophe claims handling and associated litigation-related activity in 2026 compared with 2025, when claims handling and related litigation costs were elevated due to activity associated with storms that occurred in late 2024 along with other historical storm events. Catastrophe-related activity is inherently volatile and may fluctuate significantly between periods.
Direct personnel expense increased by $616, or 4.1%, to $15,781 for the nine months ended September 30, 2026, compared to $15,165 for the same period in 2025, representing 9.4% and 9.3% of total revenue, respectively. The increase was primarily driven by higher headcount to support continued business growth. These increases were partially offset by lower discretionary compensation costs recognized in cost of revenue due to allocation of such costs compared to the prior year period.
Other operating expenses increased by $2,004, or 22.7%, to $10,820 for the nine months ended September 30, 2026, compared to $8,816 for the same period in 2025, representing 6.4% and 5.4% of total revenue, respectively. The increase was driven by higher policy administration expenses, including postage and supplies, resulting from higher policy volumes and increased claims management activity, as well as continued investment in systems and technology. These increases were partially offset by lower bank fees from a system optimization initiative implemented in mid-2025.
Depreciation and amortization remained relatively flat at $1,746 for the nine months ended September 30, 2026, compared to $1,827 for the same period in 2025, representing 1.0% and 1.1% of total revenue, respectively. As a result, depreciation and amortization did not materially impact the period-over-period change in cost of revenue.
32
Table of Contents
Operating Expenses
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Selling, general and administrative |
|
$ |
16,568 |
|
|
$ |
9,566 |
|
|
$ |
7,002 |
|
|
|
73.2 |
% |
Research and development |
|
|
7,129 |
|
|
|
7,069 |
|
|
|
60 |
|
|
|
0.8 |
% |
Depreciation and amortization |
|
|
442 |
|
|
|
338 |
|
|
|
104 |
|
|
|
30.8 |
% |
Total operating expenses |
|
$ |
24,139 |
|
|
$ |
16,973 |
|
|
$ |
7,166 |
|
|
|
42.2 |
% |
Operating expenses increased by $7,166, or 42.2%, to $24,139 for the nine months ended September 30, 2026, compared to $16,973 for the same period in 2025, representing 14.3% and 10.4% of total revenue, respectively. The increase was primarily driven by higher selling, general and administrative expenses.
Selling, general and administrative expenses increased by $7,002, or 73.2%, to $16,568 for the nine months ended September 30, 2026, compared to $9,566 for the same period in 2025, representing 9.8% and 5.8% of total revenue, respectively. Employee-related costs accounted for approximately half of the increase, primarily reflecting a higher allocation of discretionary compensation costs, as well as higher salary and wage expenses resulting from increased headcount to support continued business growth. In addition, the increase reflected lower overhead allocations to TTIC following its sale to HCI in July 2024, as shared corporate services previously provided to TTIC ended on July 1, 2025. The remaining increase reflected higher operating costs associated with being a publicly traded company and continued business growth.
Research and development expenses remained relatively flat at $7,129 for the nine months ended September 30, 2026, compared to $7,069 for the same period in 2025, representing 4.2% and 4.3% of total revenue, respectively. Research and development did not fluctuate materially year over year and were not a significant factor in the overall change in operating expenses.
Depreciation and amortization increased by $104, or 30.8%, to $442 for the nine months ended September 30, 2026, compared to $338 for the same period in 2025, representing 0.3% and 0.2% of total revenue, respectively. Despite the increase, depreciation and amortization remained a relatively small component of total operating expenses.
Other Non-Operating Income
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Interest income |
|
$ |
8,815 |
|
|
$ |
2,263 |
|
|
$ |
6,552 |
|
|
|
289.5 |
% |
Other income, net |
|
$ |
340 |
|
|
$ |
— |
|
|
$ |
340 |
|
|
|
100.0 |
% |
Interest income increased by $6,552, or 289.5%, to $8,815 for the nine months ended September 30, 2026, compared to $2,263 for the same period in 2025. The increase was primarily driven by interest income earned on AFS securities, which contributed $3,673 of interest income during the current year, with no comparable activity in the prior-year period. The increase also reflects $5,142 of income earned on cash and cash equivalents compared to $2,263 in the prior-year period. The increase in interest income reflects the deployment of a portion of the proceeds from our November 2025 IPO into U.S. Treasury securities during 2026. Interest income may fluctuate in future periods based on cash levels, the timing of cash deployment, prevailing interest rates and market conditions.
Other income, net was $340 for the nine months ended September 30, 2026, compared to $0 for the same period in 2025, primarily reflecting realized gains from investment activity initiated in 2026.
Income Tax
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
($) |
|
|
(%) |
|
||||
Income before income taxes |
|
$ |
88,843 |
|
|
$ |
81,439 |
|
|
$ |
7,404 |
|
|
|
9.1 |
% |
Income tax expense |
|
$ |
22,823 |
|
|
$ |
20,674 |
|
|
$ |
2,149 |
|
|
|
10.4 |
% |
Effective tax rate |
|
|
25.7 |
% |
|
|
25.4 |
% |
|
|
|
|
|
|
||
Income tax expense increased by $2,149, or 10.4%, to $22,823 for the nine months ended September 30, 2026, compared to $20,674 for the same period in 2025. Our effective tax rate was 25.7% for the nine months ended September 30, 2026, compared to 25.4% for the same period in 2025.
Our effective tax rate for both periods differed from the U.S. federal statutory rate of 21.0%, primarily due to state and foreign income taxes, net of federal tax benefits, and other nondeductible expenses. We expect our effective tax rate to continue to differ from the statutory rate due to state and foreign tax obligations and other permanent differences. There were no material changes in our income tax estimation methodologies during the periods presented, and the year-over-year change in our effective tax rate was not material. The year-over-year increase in income tax expense was primarily driven by higher income before income taxes.
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Table of Contents
Non-GAAP Financial Measures
In addition to results determined in accordance with GAAP, we use certain non-GAAP financial measures to evaluate our operating performance and make strategic decisions. These non-GAAP financial measures include Adjusted EBITDA, Adjusted Revenue, Adjusted EBITDA Margin and Free Cash Flow. Management believes these measures provide useful supplemental information for investors by facilitating comparisons of performance across reporting periods and with other companies in the industry, many of which use similar non-GAAP financial measures.
However, these non-GAAP financial measures are not prepared in accordance with GAAP, are not based on a standardized methodology and may not be comparable to similarly titled measures used by other companies. They should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. These measures exclude items that may be significant to an understanding of our financial condition and results of operations under GAAP. The use of non-GAAP financial measures involves management judgment regarding which items to exclude or include. Accordingly, these measures have limitations and should be viewed as a supplement to, not a replacement for, our GAAP results. Management urges investors to review the reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures included in this report and not to rely on any single financial measure to evaluate our business.
Adjusted EBITDA
We define Adjusted EBITDA as net income adjusted to exclude income tax expense, interest expense, interest income, other income, net, depreciation and amortization, and share-based compensation expense. Management uses Adjusted EBITDA as a key measure of operating performance to assess the results of the business excluding certain items that are not considered indicative of core operating results. Adjusted EBITDA should not be viewed in isolation or as a substitute for net income calculated in accordance with GAAP, and other companies may define Adjusted EBITDA differently.
The reconciliation of net income to Adjusted EBITDA for the periods presented is as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(Unaudited, in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net income |
|
$ |
22,345 |
|
|
$ |
21,151 |
|
|
$ |
66,020 |
|
|
$ |
60,765 |
|
Income tax expense |
|
|
7,485 |
|
|
|
7,203 |
|
|
|
22,823 |
|
|
|
20,674 |
|
Interest income |
|
|
(3,340 |
) |
|
|
(1,102 |
) |
|
|
(8,815 |
) |
|
|
(2,263 |
) |
Other income, net |
|
|
(340 |
) |
|
|
— |
|
|
|
(340 |
) |
|
|
— |
|
Depreciation and amortization |
|
|
746 |
|
|
|
749 |
|
|
|
2,188 |
|
|
|
2,165 |
|
Share-based compensation |
|
|
721 |
|
|
|
731 |
|
|
|
2,220 |
|
|
|
2,160 |
|
Adjusted EBITDA (1) |
|
$ |
27,617 |
|
|
$ |
28,732 |
|
|
$ |
84,096 |
|
|
$ |
83,501 |
|
Adjusted Revenue
We define Adjusted Revenue as the portion of revenue earned through services delivered directly via our proprietary platform technology. This metric excludes revenue associated with services primarily within claims management that are outsourced to a subsidiary of HCI. Although this revenue is recognized on a gross basis under GAAP because we are considered the principal in the transaction, the economics are largely neutral, as the related costs incurred from outsourced service providers closely match the revenue recognized. Management believes Adjusted Revenue provides investors with useful insight into the performance and scalability of our core platform services and reflects the revenue generated from internally delivered operations, excluding variability associated with outsourced service arrangements. This non-GAAP measure should not be considered in isolation or as a substitute for total revenue or any other performance measure calculated in accordance with GAAP.
The reconciliation of Adjusted Revenue for the periods presented is as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(Unaudited, in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Revenue |
|
$ |
55,186 |
|
|
$ |
55,166 |
|
|
$ |
168,507 |
|
|
$ |
163,664 |
|
Less: Outsourced claims fees |
|
|
1,301 |
|
|
|
2,809 |
|
|
|
4,324 |
|
|
|
8,895 |
|
Adjusted Revenue |
|
$ |
53,885 |
|
|
$ |
52,357 |
|
|
$ |
164,183 |
|
|
$ |
154,769 |
|
Adjusted EBITDA Margin
We define Adjusted EBITDA Margin as Adjusted EBITDA expressed as a percentage of Adjusted Revenue. This non-GAAP measure provides management and investors with additional insight into the Company's operating efficiency and the scalability of our business model, as it reflects our progress toward long-term profitability. The most directly comparable GAAP measure is net income margin, which is calculated as net income divided by GAAP revenue.
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Table of Contents
The calculation of Adjusted EBITDA Margin for the periods presented is as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(Unaudited, in thousands, except percentages) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Numerator: Adjusted EBITDA |
|
$ |
27,617 |
|
|
$ |
28,732 |
|
|
$ |
84,096 |
|
|
$ |
83,501 |
|
Denominator: Adjusted Revenue |
|
|
53,885 |
|
|
|
52,357 |
|
|
|
164,183 |
|
|
|
154,769 |
|
Adjusted EBITDA Margin (1) |
|
|
51.3 |
% |
|
|
54.9 |
% |
|
|
51.2 |
% |
|
|
54.0 |
% |
Free Cash Flow
We define Free Cash Flow as net cash provided by operating activities less capital expenditures during the period. We believe Free Cash Flow provides useful information to management and investors because it is an indicator of strength and performance of our business operations after funding capital expenditures. Capital expenditures consist of capitalized software development costs and costs related to property and equipment, such as computer hardware, office furniture and equipment, and leasehold improvements. Free Cash Flow should not be considered an alternative to net cash provided by operating activities, which is the most directly comparable GAAP measure, or as a measure of liquidity prepared in accordance with GAAP and may not be comparable to similar measures used by other companies.
The reconciliation of Free Cash Flow for the periods presented is as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(Unaudited, in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Cash provided by operating activities |
|
$ |
31,724 |
|
|
$ |
31,491 |
|
|
$ |
72,611 |
|
|
$ |
89,017 |
|
Less: Capital expenditures |
|
|
334 |
|
|
|
1,189 |
|
|
|
870 |
|
|
|
2,441 |
|
Free Cash Flow |
|
$ |
31,390 |
|
|
$ |
30,302 |
|
|
$ |
71,741 |
|
|
$ |
86,576 |
|
Liquidity and Capital Resources
General
Our principal sources of liquidity, consisting of cash and cash equivalents and cash generated from operations, are presented as follows:
|
|
September 30, |
|
|
December 31, |
|
||
(Unaudited, in thousands) |
|
2026 |
|
|
2025 |
|
||
Cash and cash equivalents |
|
$ |
116,404 |
|
|
$ |
305,372 |
|
Working capital |
|
$ |
50,150 |
|
|
$ |
241,432 |
|
Cash and cash equivalents decreased during the nine months ended September 30, 2026, primarily due to purchases of fixed-maturity securities classified as available-for-sale, partially offset by cash generated from operating activities. Working capital also decreased during the period, primarily reflecting the same investment activity, as the available-for-sale fixed-maturity securities were classified as non-current based on management's intent not to use the investments for current operating purposes.
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our liquidity, capital resources, or financial condition.
We believe that our existing cash and cash equivalents, together with expected operating cash flows, will be sufficient to meet working capital, capital expenditures, and other liquidity requirements for at least the next 12 months. We have no material long-term contractual obligations other than standard vendor agreements and lease commitments.
Our primary cash requirements include employee compensation and outsourced fees, cloud hosting and infrastructure costs, and ongoing investment in product development. At current operating levels, these requirements are expected to be supported by operating cash flows.
Based on our current financial position, we also believe that our liquidity sources will be adequate to meet our long-term needs beyond the next twelve months. Over the longer term, our liquidity will depend primarily on our ability to generate cash from operations as our managed premium base scales and we continue to expand our technology and service offerings.
Share Repurchases
In May 2026, the Board of Directors authorized the May 2026 Share Repurchase Program to repurchase up to $12,000 of our common stock. On July 8, 2026, we completed the May 2026 Share Repurchase Program, having repurchased a total of 834,250 shares of common
35
Table of Contents
stock for approximately $12,000, excluding broker commissions and excise tax. No additional shares remain authorized for repurchase under the May 2026 Share Repurchase Program.
In August 2026, the Board of Directors authorized the August 2026 Share Repurchase Program to repurchase up to $25,000 of our common stock. The August 2026 Share Repurchase Program permits us to repurchase shares periodically through open market purchases, block transactions, privately negotiated transactions or other means. During the three and nine months ended September 30, 2026, we used approximately $4,980 of cash to repurchase 303,163 shares of our common stock under the August 2026 Share Repurchase Program, excluding broker commissions and excise tax. As of September 30, 2026, approximately $20,020 remained available under the August 2026 Share Repurchase Program. The timing and amount of any share repurchases are discretionary and may vary based on the Company’s liquidity position, capital requirements, business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices and other considerations. The August 2026 Share Repurchase Program does not obligate us to repurchase any specific number of shares of common stock and may be suspended or discontinued at any time without notice.
Investments
The primary objective of our investment policy is to maximize our after-tax investment income with a reasonable level of risk given the current financial market. Our excess cash is invested primarily in money market accounts and AFS securities.
As of September 30, 2026, we had $233,779 of AFS securities, which are carried at fair value. Changes in the general interest rate environment affect the returns available on new AFS securities. While a rising interest rate environment enhances the returns available on new investments, it reduces the market value of existing AFS securities and thus the availability of gains on disposition. A decline in interest rates reduces the returns available on new AFS securities but increases the market value of existing AFS securities, creating the opportunity for realized investment gains on disposition.
Sources of Liquidity
Our capital requirements depend on several factors, including the volume of insurance policies managed on our platform, the level of claims related services we provide, operating expenses, investments in information technology systems, and the expansion of sales and marketing activities.
Our current liquidity sources consist primarily of existing cash and cash equivalents and cash generated from operations.
Cash Flow Summary
A summary of cash flows is as follows:
|
|
Nine Months Ended September 30, |
|
|||||
(Unaudited, in thousands) |
|
2026 |
|
|
2025 |
|
||
Net cash provided by (used in): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
72,611 |
|
|
$ |
89,017 |
|
Investing activities |
|
$ |
(243,925 |
) |
|
$ |
(2,441 |
) |
Financing activities |
|
$ |
(17,441 |
) |
|
$ |
— |
|
Operating Activities
Net cash provided by operating activities for the nine months ended September 30, 2026 was $72,611, a decrease of $16,406 from $89,017 for the same period in 2025. The decrease was primarily due to changes in the timing of business growth and associated cash collections, partially offset by higher net income. Operating cash flows may vary from period to period based on the timing of customer receipts, vendor payments, and other operating activities.
Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2026 was $243,925, compared to $2,441 for the same period in 2025, an increase in cash used of $241,484. The increase was primarily due to purchases of AFS securities during the 2026 period. Capital expenditures also continued in support of software development and infrastructure, consistent with our strategy to support and enhance core operations.
Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2026 was $17,441, compared to $0 for the same period in 2025. Net cash used in financing activities for 2026 was primarily driven by payments made under the May 2026 Share Repurchase Program and the August 2026 Share Repurchase Program, as well as payments of offering costs related to the Company’s November 2025 IPO. Certain IPO-related costs were paid in 2026 due to the timing of invoice receipt and settlement.
Critical Accounting Policies and Estimates
The preparation of our unaudited interim Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. These estimates are inherently uncertain and require significant judgment, particularly in areas that involve complex or subjective assumptions and often involve matters that are inherently unpredictable.
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Table of Contents
We regularly evaluate these estimates based on historical experience, current business conditions and other relevant factors, including inputs from third-party specialists where applicable. Our estimates are subject to change as new events occur, additional information becomes available, or operating environments evolve. Actual results could differ materially from those estimates, and such differences may have a material impact on our financial condition or results of operations.
We believe the following accounting policies involve significant judgment and estimates and are critical to an understanding of our financial condition and results of operations: revenue recognition, share-based compensation and income taxes.
The above and other accounting estimates and their related risks that we consider to be our critical accounting estimates are discussed further in our 2025 Annual Report, filed with the SEC on February 26, 2026. For the nine months ended September 30, 2026, there have been no other material changes with respect to any of our critical accounting policies.
Revenue Recognition
We recognize revenue from contracts with customers in accordance with ASC 606. We determine the appropriate amount of revenue to be recognized by applying the five-step model: (i) identifying the contract with customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations, and (v) recognizing revenue when, or as, the performance obligations are satisfied. Our revenue is primarily usage-based and derived from fees calculated as a percentage of premiums written by our insurance customers. The nature of our usage-based arrangements and related judgments did not change materially during the periods presented.
We allocate the transaction price to performance obligations based on their relative standalone selling prices. For most performance obligations, we estimate standalone selling prices using an expected cost-plus-margin approach, which requires significant judgment regarding forecasted fulfillment costs and appropriate market-based margins. Changes in these estimates, including changes in product or service mix, or revisions to our assessment of the market-based margins, could affect the standalone selling prices used to allocate consideration in new or renewal of existing contracts and thus result in the impact of the amount and timing of revenue recognized for each performance obligation. Our approach to determining standalone selling prices, including the underlying assumptions regarding fulfillment costs forecasts and margin estimates, remained consistent and did not change materially over the periods presented.
Because our fees are generally usage-based and tied to the underlying insurance policies written by our customers, the transaction price often includes variable consideration. While our customer contracts typically span multiple years, the underlying insurance policies can be canceled by policyholders without penalty. As a result, the uncertainty related to underlying policy volume, not termination of the MGA or customer agreement itself, drives our application of the ASC 606 constraint. We therefore constrain variable consideration to the amounts that are not probable of significant reversal. This assessment requires judgment and involves assumptions about policyholder behavior, seasonality, expected policy retention and inherent volatility of premiums written. We update these estimates quarterly based on the most recent available information. The assumptions used to evaluate and constrain variable consideration, including expected volume and retention behavior, were applied consistently and did not change materially during the periods presented.
Share-Based Compensation
We account for share-based compensation awards under our shareholder-approved incentive plans in accordance with the fair value recognition provisions of GAAP, recognizing expense based on grant-date fair value over the requisite service period. Our share-based awards primarily consist of restricted stock awards and stock options with service-based vesting conditions. Restricted stock awards are granted with time-based vesting conditions and are expensed over the requisite service period based on grant-date fair value.
For awards granted while we were a private company, we determined the fair value of our common stock using third-party valuations under Internal Revenue Code Section 409A. These valuations incorporated assumptions regarding future performance, market conditions and comparable company data. Inputs such as estimated stock price and expected price volatility used in these valuation methods were derived from analyses of public peer companies with similar characteristics. For awards granted after our IPO, the grant-date fair value of our common stock is based on the quoted market price of our common stock on the date of grant.
Income Taxes
We account for income taxes in accordance with GAAP, resulting in two components of income tax expense (benefit): current and deferred. The current income tax expense (benefit) reflects taxes payable or refundable for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues.
The realizability of deferred tax assets is evaluated quarterly, and judgment is required in assessing both positive and negative evidence, including recent financial performance, forecasted future earnings, and relevant tax planning strategies.
As a member of a consolidated U.S. federal income tax return with HCI, we are subject to the group's tax-sharing arrangements. Our estimate of tax expense is sensitive to changes in the effective rate applied to our standalone results, which may differ from statutory rates due to business mix or transaction-related effects.
JOBS Act
We are an EGC as defined under the JOBS Act. As an EGC, we may delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to not take advantage of the extended transition period that allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies,
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Table of Contents
which means that the financial statements included in this Quarterly Report on Form 10-Q, as well as financial statements we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies. Our election not to take advantage of the extended transition period is irrevocable.
We will remain an EGC until the earliest to occur of the following: (i) the last day of the fiscal year in which our total annual gross revenues first meet or exceed at least $1.235 billion (as adjusted for inflation), (ii) the date on which we have, during the prior three-year period, issued more than $1.00 billion in non-convertible debt, (iii) the last day of the fiscal year in which we (a) have an aggregate worldwide market value of common stock held by non-affiliates of $700.0 million or more (measured at the end of each fiscal year) as of the last business day of our most recently completed second fiscal quarter and (b) have been a reporting company under the Exchange Act for at least one year (and have filed at least one annual report under the Exchange Act), or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act of 1933, as amended.
New Accounting Guidance
Refer to Note 2. Summary of Significant Accounting Policies to the Consolidated Financial Statements for a discussion of new accounting standards.
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Table of Contents
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk primarily from changes in interest rates affecting our cash and cash equivalents and AFS securities. We had no outstanding debt as of September 30, 2026. Our primary investment objectives are capital preservation, liquidity and income generation.
Interest Rate Risk
Our AFS fixed-maturity securities are exposed to interest rate risk and may decline in fair value as interest rates increase. As of September 30, 2026, our investment portfolio included $233,779 of AFS securities consisting entirely of high-credit-quality U.S. Treasury securities carried at fair value. We manage this risk through active monitoring of duration, anticipated interest rate movements, market conditions and liquidity needs. As of September 30, 2026, a hypothetical 100-basis-point increase in interest rates would have decreased the fair value of our AFS securities by $9,352, or 4.0%. Conversely, a hypothetical 100-basis-point decrease in interest rates would have increased the fair value of our AFS securities by approximately $10,046, or 4.3%. Unrealized gains and losses on our AFS securities, other than credit losses, are recognized in other comprehensive income, net of applicable income taxes. Accordingly, changes in market interest rates may affect shareholders' equity.
Foreign Currency Risk
We conduct certain operations through our wholly-owned subsidiary in India, whose functional currency is the U.S. dollar. As a result, our foreign currency exposure has not been material, and we do not use hedging instruments.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, under the supervision and with the participation of our CEO (who is our principal executive officer) and CFO (who is our principal financial officer), management evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2026 at a reasonable level of assurance.
Changes in Internal Control Over Financial Reporting
Management, together with our CEO and CFO, evaluated changes in our internal control over financial reporting during the quarter ended September 30, 2026. There were no changes in our internal control over financial reporting during the quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
39
Table of Contents
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be subject to claims and legal actions arising in the ordinary course of business. Based on information currently available, we are not involved in any legal proceedings that, in our judgment, are likely to have a material adverse effect on our financial position, results of operations, or cash flows. Refer to Note 16. Commitments and Contingencies for additional details.
Item 1A. Risk Factors.
There have been no material changes in the risk factors previously disclosed in the section entitled "Risk Factors" in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2025, which was filed with the SEC on February 26, 2026, except for the additional risk factors set forth below.
Our investment in the development of artificial intelligence (AI)-native products, services and businesses is inherently risky, and could divert management attention and harm our business, financial condition, and operating results.
We have invested in the development of AI-native products, services and businesses and the integration of AI capabilities into existing products and services. The investments that we are making reinforce our commitment to innovation and to developing products and services that meet the evolving needs of our customers. Our investments ultimately may not be commercially viable or may not result in an adequate return of capital and, in pursuing new strategies, we may incur unanticipated liabilities. In addition, competitors and other third parties may incorporate AI into products and offerings more quickly or more successfully than we do, which could impair our ability to compete effectively and adversely affect our results of operations.
Innovations in our products and services could also result in changes to user and customer behavior and affect our revenue trends. These endeavors involve significant risks and uncertainties, including diversion of resources and management attention from current operations.
In addition to the AI investments and development activities that are occurring throughout our existing core operating business, we recently formed Exzeo Ventures as a new division of our company to focus on the development and use of agentic AI technologies for catastrophe claims, underwriting and risk transfer solutions, and distribution automation.
We use artificial intelligence in our business, and challenges with properly managing its use could result in legal liability or reputational harm.
We are using, and expect to continue to expand our use of, AI and machine learning in our product development processes, services and operations. The use of AI technologies carries inherent risks, and there can be no assurance that our use of AI will enhance our products or services or achieve any improvements in innovation or efficiency. If the content, analyses or recommendations that AI applications assist in producing are or are alleged to be inaccurate, deficient or biased, our business, financial condition and results of operations may be adversely affected. Furthermore, our services that integrate third-party AI models may rely on certain safeguards implemented by the third-party providers of the underlying AI models, including those related to the accuracy, bias and other variables of the data, and these safeguards may be insufficient. Legislation and regulations governing the development or use of AI and automated-decision making have been implemented or are under consideration in the U.S. at the state and local level, as well as internationally. Such legislation and regulations may impose obligations related to our development, offering and use of AI, particularly those use cases that are deemed by the law to be "high risk," and expose us to increased risk of regulatory enforcement and litigation. As a result, our ability to use AI and machine learning may be constrained by current or future laws, regulatory or self-regulatory requirements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
We did not sell or issue any unregistered equity securities during the three months ended September 30, 2026.
Our registration statement on Form S-1, as amended (File No. 333-290500), for our IPO offering became effective under Section 8(a) of the Securities Act of 1933, as amended, on November 4, 2025. On November 6, 2025, we completed the IPO offering of 8.0 million shares of our common stock at a public offering price of $21.00 for an aggregate offering price of $168.0 million. There has been no material change in the planned use of proceeds from our IPO offering as described in the prospectus filed on November 5, 2025, under Rule 424(b)(4) of the Securities Act of 1933, as amended.
The following table summarizes the Company's share repurchase activity for the three months ended September 30, 2026 and the approximate dollar value of shares that may yet be purchased under the applicable programs:
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Table of Contents
Issuer Purchases of Equity Securities |
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Approximate |
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Total Number of |
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Dollar Value of |
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Shares Purchased |
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Shares That May |
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Total Number |
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as Part of Publicly |
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Yet Be Purchased |
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of Shares |
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Average Price |
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Announced Plans |
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under the Plans |
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Period |
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Purchased |
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Paid Per Share (3) |
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or Programs |
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or Program |
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(in thousands) |
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July 1, 2026 - July 31, 2026 (1) |
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111,414 |
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$ |
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18.26 |
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107,422 |
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$ |
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— |
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August 1, 2026 - August 31, 2026 (2) |
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119,632 |
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$ |
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16.55 |
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119,632 |
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$ |
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23,020 |
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September 1, 2026 - September 30, 2026 (2) |
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183,531 |
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$ |
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16.35 |
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183,531 |
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$ |
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20,020 |
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Total |
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414,577 |
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410,585 |
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Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
Trading Arrangements Under Item 408 of Regulation S-K
During the three months ended September 30, 2026, no director or officer of the Company
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Table of Contents
Item 6. Exhibits.
Exhibit |
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Incorporated by Reference |
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Number |
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Description of Exhibit |
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Form |
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Exhibit |
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Filing Date |
3.1 |
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Fourth Amended and Restated Articles of Incorporation of Exzeo Group, Inc. |
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8-K |
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3.1 |
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11/6/2025 |
3.2 |
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Amended and Restated Bylaws of Exzeo Group, Inc. |
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8-K |
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3.2 |
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11/6/2025 |
31.1* |
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Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2* |
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Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1** |
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Certification of the Chief Executive Officer Pursuant to 18 U.S.C.ss 1350 |
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32.2** |
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Certification of the Chief Financial Officer Pursuant to 18 U.S.C.ss 1350 |
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101* |
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The materials from Exzeo Group, Inc.'s Quarterly Report on Form 10-Q for the period ended September 30, 2026 formatted in iXBRL (Inline eXtensible Business Reporting Language) include (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Shareholders' Equity, (v) the Consolidated Statements of Cash Flows and (vi) Notes to the Consolidated Financial Statements. |
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104* |
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Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
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* |
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Filed herewith |
** |
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Furnished herewith |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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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Exzeo Group, Inc. |
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Date: November 5, 2026 |
By: |
/s/ Paresh Patel |
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Paresh Patel |
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Chief Executive Officer |
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(Principal Executive Officer) |
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Date: November 5, 2026 |
By: |
/s/ Suela Bulku |
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Suela Bulku |
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Chief Financial Officer |
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(Principal Financial Officer and Principal Accounting Officer) |
43