EIG

You should read the following discussion and analysis in conjunction with our consolidated financial statements and the related notes thereto included in Item 1 of Part I. Unless otherwise indicated, all references to "we," "us," "our," "the Company," or similar terms refer to EHI, together with its subsidiaries. In this Quarterly Report on Form 10-Q, the Company and its management discuss and make statements based on currently available information regarding their intentions, beliefs, current expectations, and projections of, among other things, the Company's future performance, economic or market conditions, including current or future levels of inflation, potential implications of tariffs, changes in interest rates, labor market expectations, catastrophic events or geopolitical conditions, legislative or regulatory actions or court decisions, business growth, retention rates, loss costs, claim trends and the impact of key business initiatives, future technologies and planned investments. Certain of these statements may constitute "forward-looking" statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are often identified by words such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "target," "project," "intend," "believe," "estimate," "predict," "potential," "pro forma," "seek," "likely," or "continue," or other comparable terminology and their negatives. The Company and its management caution investors that such forward-looking statements are not guarantees of future performance. Risks and uncertainties are inherent in the Company’s future performance. Factors that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements include, among other things, those discussed or identified from time to time in the Company’s public filings with the SEC, including the risks detailed in the Company's Annual Reports on Form 10-K and in the Company's subsequent Quarterly Reports on Form 10-Q. Except as required by applicable securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. 29 General We are a Nevada holding company with insurance subsidiaries that are specialty providers of workers’ compensation insurance and related services. Workers’ compensation insurance is provided under a statutory system wherein most employers are required to provide coverage for their employees’ medical, disability, vocational rehabilitation, and/or death benefit costs for work-related injuries or illnesses. We provide workers’ compensation insurance throughout most of the United States, with a concentration in California, where 47% of our trailing twelve month gross written premiums, excluding adjustments, are generated. In February 2026, we launched a new excess workers’ compensation product focused on self-insured enterprises in several jurisdictions across the United States. We wrote our first excess workers’ compensation policy in June 2026. Our revenues primarily consist of net premiums earned, net investment income, and net realized and unrealized gains and losses on investments. The insurance industry is highly competitive based on price and quality of services. We compete with other specialty workers’ compensation carriers, state agencies, multi-line insurance companies, professional employer organizations, self-insurance funds, and state insurance pools. For guaranteed cost workers’ compensation, we believe we can price our policies at levels that are competitive and profitable over the long term given our expertise in underwriting and claims handling and our decades of data and experience. We target small to mid-sized businesses, as we believe this market is traditionally characterized by higher profitability and longer retention. Our distribution strategy consists of establishing and maintaining strong, long-term relationships with traditional and specialty insurance agencies, developing alternative distribution channels, and offering direct-to-consumer workers’ compensation through our website. For excess workers’ compensation, our approach is to deliver a flexible, data-driven solution that goes beyond traditional excess coverage by incorporating value-added services. We believe these services, resulting in improved organizational performance and reduced long-term loss costs for our policyholders, will serve as a key competitive advantage in the self-insured market, differentiating us from carriers that offer coverage alone. We believe we have a cost-effective and scalable information technology infrastructure that complements our geographic reach and business model. We continue to invest in technology to automate business processes and further develop our data analytics and artificial intelligence capabilities, which we believe will enable us to reduce our operating costs over the long-term and support our future needs. We believe our technology is a strategic advantage that saves our distribution partners and policyholders considerable time and maintains our competitiveness in our target markets. We continue to execute ongoing business initiatives focused on achieving process excellence and efficiency, as well as delivering self-service options to policyholders, agents, and injured workers. We are also actively pursuing strategies to diversify our risk exposure across geographies and economic sectors, expand our risk appetite, and broaden our product offerings. Overview Summary Financial Results Our net income was $29.1 million and $39.2 million for the three and six months ended June 30, 2026, compared to $29.7 million and $42.5 million for the corresponding periods of 2025. The key factors that affected our financial performance during the three and six months ended June 30, 2026, compared to the same periods of 2025, included: •Gross premiums written decreased 19.6% and 17.1%; •Net premiums earned decreased 12.2% and 6.9%; •Net investment income increased 1.1% and decreased 5.9%; •Net realized and unrealized gains on investments of $18.7 million and $17.0 million compared to $20.9 million and $8.1 million; •Losses and LAE decreased 12.7% and 3.6%; •Commission expense decreased 14.9% and 6.5%; •Underwriting expenses decreased 7.9% and 6.3%; and •Underwriting loss of $10.1 million and $23.0 million compared to $11.0 million and $14.6 million. Three and Six Months Ended June 30, 2026 Our 2026 underwriting results reflect lower net premiums earned, partially offset by reductions in losses and LAE, commission expenses, and underwriting expenses. Our investment results were primarily impacted by favorable net realized and unrealized gains on investments as net investment income was slightly higher for the quarter, but lower in the first half of 2026, as compared to prior year periods. 30 Three and Six Months Ended June 30, 2025 Our 2025 underwriting results reflect moderate increases in net premiums earned offset by higher losses and LAE. Commission expense and underwriting expenses were higher in the second quarter, but lower in the first half of 2025 compared to the same periods of 2024. Our 2025 investment results benefited from strong net investment income and favorable net realized and unrealized gains. Our consolidated financial results of operations for the three and six months ended June 30, 2026 and 2025 are as follows: Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 (in millions) Gross premiums written $ 163.4 $ 203.3 $ 344.2 $ 415.4 Net premiums written $ 162.0 $ 201.5 $ 341.4 $ 411.8 Net premiums earned $ 174.1 $ 198.3 $ 355.0 $ 381.3 Net investment income 27.4 27.1 55.7 59.2 Net realized and unrealized gains on investments 18.7 20.9 17.0 8.1 Other income — — 0.1 0.3 Total revenues 220.2 246.3 427.8 448.9 Underwriting expenses: Losses and LAE 122.3 140.1 251.5 260.8 Commission expense 22.2 26.1 45.9 49.1 Underwriting expenses 39.7 43.1 80.6 86.0 Non-underwriting expenses: Interest and financing expenses 1.3 — 2.4 0.1 Total expenses 185.5 209.3 380.4 396.0 Net income before income taxes 34.7 37.0 47.4 52.9 Income tax expense 5.6 7.3 8.2 10.4 Net income $ 29.1 $ 29.7 $ 39.2 $ 42.5 31 I.Review of Underwriting Results Underwriting income or loss is determined by deducting losses and LAE, commission expense, and underwriting expenses from net premiums earned. Our underwriting results for the three and six months ended June 30, 2026 and 2025 are as follows: Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 (in millions) Gross premiums written $ 163.4 $ 203.3 $ 344.2 $ 415.4 Net premiums written $ 162.0 $ 201.5 $ 341.4 $ 411.8 Net premiums earned $ 174.1 $ 198.3 $ 355.0 $ 381.3 Losses and LAE 122.3 140.1 251.5 260.8 Commission expense 22.2 26.1 45.9 49.1 Underwriting expenses 39.7 43.1 80.6 86.0 Total underwriting expenses 184.2 209.3 378.0 395.9 Underwriting loss $ (10.1) $ (11.0) $ (23.0) $ (14.6) Total impact of the LPT (1.5) (1.7) (2.7) (3.3) Underwriting loss excluding LPT(1) $ (11.6) $ (12.7) $ (25.7) $ (17.9) Loss and LAE ratio 70.2 % 70.7 % 70.8 % 68.4 % Commission expense ratio 12.8 13.2 12.9 12.9 Underwriting expense ratio 22.8 21.7 22.7 22.6 Combined ratio 105.8 % 105.6 % 106.4 % 103.9 % Total impact of the LPT 0.9 % 0.8 % 0.8 % 0.9 % Combined ratio excluding LPT(1) 106.7 % 106.4 % 107.2 % 104.8 % (1) The LPT Agreement is a non-recurring transaction that no longer provides us with any ongoing cash benefits. We provide our underwriting income and combined ratios excluding the effects of the LPT because we believe that these measures are useful in providing investors, analysts, and other interested parties a meaningful understanding of our ongoing underwriting performance and provides them with a consistent basis for comparison with other companies in our industry. In addition, we believe that these non-GAAP measures, as presented, are helpful to our management in identifying trends in our performance because the LPT has limited significance to our current and ongoing operations. Gross Premiums Written Gross premiums written were $163.4 million and $344.2 million for the three and six months ended June 30, 2026, respectively, compared to $203.3 million and $415.4 million for the corresponding periods of 2025, respectively. For the three and six months ended June 30, 2026, decreases in gross premiums written were largely driven by declines in both new and renewal business premiums, primarily reflecting our pricing and underwriting actions, which commenced in 2025 and continue in 2026, taken to return to historical underwriting margins. These decreases were partially offset by increases in our ending final audit premium accruals and a premium restitution of $2.5 million from a former policyholder reflected in both periods. Additionally, during the second quarter of 2026, we bound our first excess workers' compensation policy. Total in-force policies at June 30, 2026 were 127,601 compared to 134,421 in-force policies at June 30, 2025. Net Premiums Written Net premiums written are gross premiums written less reinsurance premiums ceded. For each of the periods presented, the reinsurance premiums ceded related to our annual reinsurance program as further described herein. Net premiums written were $162.0 million and $341.4 million for the three and six months ended June 30, 2026, respectively, compared to $201.5 million and $411.8 million for the corresponding periods of 2025, respectively. Reinsurance premiums ceded were $1.4 million and $2.8 million for the three and six months ended June 30, 2026, respectively, compared to $1.8 million and $3.6 million for the corresponding period of 2025, respectively. Net Premiums Earned Net premiums earned are primarily a function of the amount and timing of net premiums previously written. Net premiums earned were $174.1 million and $355.0 million for the three and six months ended June 30, 2026, respectively, compared to $198.3 million and $381.3 million for the corresponding periods of 2025, respectively. 32 Losses and LAE, Commission Expenses, and Underwriting Expenses The following table presents our calendar year combined ratios. Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 Loss and LAE ratio excluding LPT 71.1 % 71.5 % 71.6 % 69.3 % Loss and LAE ratio - LPT (0.9) (0.8) (0.8) (0.9) Commission expense ratio 12.8 13.2 12.9 12.9 Underwriting expense ratio 22.8 21.7 22.7 22.6 Combined ratio 105.8 % 105.6 % 106.4 % 103.9 % Combined ratio excluding LPT 106.7 % 106.4 % 107.2 % 104.8 % Losses and LAE Losses and LAE represents our largest expense item and includes claim payments made, amortization of the Deferred Gain, estimates for future claim payments and changes in those estimates for current and prior accident years, and costs associated with investigating, defending, and adjusting claims. The accuracy of our financial reporting depends in large part on determining our losses and LAE reserves, which are inherently uncertain as they are estimates of the ultimate cost of individual claims based on actuarial estimation techniques. We believe that our loss estimates are adequate; however, ultimate losses will not be known with any certainty for many years. We analyze our loss and LAE ratios on both a calendar year and accident year basis. The calendar year loss and LAE ratio is calculated by dividing the losses and LAE recorded during the calendar year, regardless of when the underlying insured event occurred, by the net premiums earned during that calendar year. The calendar year loss and LAE ratio reflects changes made during the calendar year in reserves for losses and LAE established for insured events occurring in the current and prior years. The calendar year loss and LAE ratio for a particular year will not change in future periods. The accident year loss and LAE ratio is calculated by dividing cumulative losses and LAE that occurred during a particular year by the net premiums earned for that year. The accident year loss and LAE ratio for a particular year can decrease or increase when recalculated in subsequent periods as the reserves established for insured events occurring during that year fluctuate. Our current accident year loss and LAE ratios continue to reflect the impact of key business initiatives, including: an emphasis on accelerated settlements of open claims; further diversifying risk exposure across geographic markets, when appropriate; and leveraging data-driven strategies to target, underwrite, and price profitable classes of business across all of our markets. Our calendar year loss and LAE ratio is analyzed to measure profitability in a particular year and to evaluate the adequacy of premium rates charged in a particular year to cover expected losses and LAE from all periods, including development (whether favorable or adverse) of reserves established in prior periods. In contrast, our accident year loss and LAE ratios are analyzed to evaluate underwriting performance and the adequacy of the premium rates charged in a particular year in relation to ultimate losses and LAE from insured events occurring during that year. The loss and LAE ratios provided in this report are on a calendar year basis, except where they are expressly identified as accident year loss and LAE ratios. 33 The table below reflects current and prior accident year loss and LAE reserve adjustments, the impact of the LPT, and the resulting impact to our loss ratio. Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 (dollars in millions) Current accident year losses and LAE - excluding LPT $ 124.1 $ 141.5 $ 254.6 $ 262.5 Prior accident year (favorable) adverse loss reserve development, net (0.3) 0.3 (0.4) 1.6 Impact of LPT (1.5) (1.7) (2.7) (3.3) Calendar year losses and LAE $ 122.3 $ 140.1 $ 251.5 $ 260.8 Current accident year loss and LAE ratio - excluding LPT 71.3 % 71.4 % 71.7 % 68.8 % Calendar year loss and LAE ratio - excluding LPT 71.1 % 71.5 % 71.6 % 69.3 % Calendar year loss and LAE ratio 70.2 % 70.7 % 70.8 % 68.4 % The decrease in our calendar year losses and LAE during the three months ended June 30, 2026, as compared to the same period of 2025, was primarily due to lower earned premiums as our current accident year loss and LAE estimate remains consistent. The decrease in our calendar year losses and LAE during the six months ended June 30, 2026, as compared to the same period of 2025, was primarily due to lower earned premiums, partially offset by a higher current accident year loss and LAE estimate due to increased cumulative trauma (CT) claim frequency in California. Prior accident year net favorable loss reserve development on our assigned risk business totaled $0.3 million during the three months ended June 30, 2026. Prior accident year net adverse loss reserve development on our assigned risk business totaled $0.3 million during the three months ended June 30, 2025. Prior accident year net favorable loss reserve development totaled $0.4 million on our assigned risk business during the six months ended June 30, 2026. Prior accident year adverse loss reserve development totaled $1.6 million during the six months ended June 30, 2025, which included $0.7 million net adverse loss reserve development on our voluntary risk business and $0.9 million net adverse loss reserve development on our assigned risk business. Our current accident year loss and LAE ratio excluding LPT related to our voluntary business was 72.0% for both the three and six months ended June 30, 2026 and consistent with the same ratio recorded for accident year 2025. The $2.5 million premium restitution referenced above reduced the current accident year loss and LAE ratios excluding LPT listed above by approximately 1.0 percentage point and 0.5 percentage point for the three and six months ended June 30, 2026, respectively. The table below reflects the impact of the LPT on Losses and LAE, which are recorded as a reduction to Losses and LAE incurred on our Consolidated Statements of Comprehensive Income (Loss). Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 (in millions) Amortization of the Deferred Gain - losses $ 1.5 $ 1.7 $ 2.7 $ 3.3 Total impact of the LPT $ 1.5 $ 1.7 $ 2.7 $ 3.3 Commission Expense Commission expense includes direct commissions to our agents and brokers, including our partnerships and alliances, for the premiums that they produce for us, as well as agency incentive payments, other marketing costs, and fees. Our commission expense ratio was 12.8% and 12.9% for the three and six months ended June 30, 2026, respectively, compared to 13.2% and 12.9% for the corresponding periods of 2025, respectively, and our commission expense was $22.2 million and $45.9 million for the three and six months ended June 30, 2026, respectively, compared to $26.1 million and $49.1 million for the corresponding periods of 2025, respectively. The decrease in our commission expense ratio and our commission expense for the three months ended June 30, 2026 was primarily driven by lower agency incentive accruals, which are specific to individual contracts and vary with agency targets, and lower new business premiums written. Our commission expense ratio was flat and the decrease in our commission expense 34 for the six months ended June 30, 2026 was primarily driven by lower agency incentive accruals, which are specific to individual contracts and vary with agency targets, lower premiums written, and release of commissions payable associated with non-performing policies sent to collections. Underwriting Expenses Underwriting expenses represent those costs required to run the business, including costs incurred to underwrite and maintain the insurance policies we issue, excluding commissions. Variable underwriting expenses, such as premium taxes, policyholder dividends, and other expenses that vary directly with the production of new or renewal business, are recognized as the associated written premiums are earned. Fixed underwriting expenses, such as the operating expenses of EHI and its subsidiaries, do not vary directly with the production of new or renewal business and are recognized as incurred. Our underwriting expense ratio was 22.8% and 22.7% for the three and six months ended June 30, 2026, respectively, compared to 21.7% and 22.6% for the corresponding periods of 2025, respectively, and our underwriting expenses were $39.7 million and $80.6 million for the three and six months ended June 30, 2026, respectively, compared to $43.1 million and $86.0 million for the corresponding periods of 2025, respectively. Despite the reduction in our underwriting expenses, our underwriting expense ratio for the three and six months ended June 30, 2026 increased due to lower premiums earned. As highlighted below, we continue our disciplined focus on expense reductions. The decrease in underwriting expenses for the three months ended June 30, 2026 was primarily the result of lower policyholder dividends of $1.4 million, net CECL provision on premiums receivable of $1.1 million, compensation-related expenses of $1.0 million, and premium taxes and assessments of $0.7 million. These decreases were partially offset by lower internal AO and other expense allocations of $0.8 million, each compared to the same period of 2025. The decrease in underwriting expenses for the six months ended June 30, 2026 was primarily the result of lower compensation-related expenses of $3.6 million, policyholder dividends of $3.1 million, and premium taxes and assessments of $1.1 million. These decreases were partially offset by lower internal AO and other expense allocations of $2.9 million, each compared to the same period of 2025. II. Review of Non-Underwriting Results Net Investment Income and Net Realized and Unrealized Gains and Losses on Investments We invest in fixed maturity securities, equity securities, other invested assets, short-term investments, and cash equivalents. Net investment income includes interest and dividends earned on our invested assets and amortization of premiums and discounts on our fixed maturity securities, less bank service charges and custodial and portfolio management fees. Net investment income increased 1.1% and decreased 5.9% during the three and six months ended June 30, 2026, respectively, compared to the same periods of 2025. The increase for the three months ended June 30, 2026 was primarily related to higher yield on fixed maturity securities. The decrease for the six months ended June 30, 2026 was primarily attributable to reduced distributions from our investments in private equity limited partnerships, which were elevated in the prior period, and lower invested balances, partially offset by higher yields on fixed maturity securities resulting from our investment rebalancing activity in 2025. Net realized and unrealized gains and losses on our investments are reported separately from our net investment income. Net realized gains and losses on investments include the gain or loss on a security at the time of sale compared to its original or adjusted cost (equity securities) or amortized cost (fixed maturity securities). Realized losses are also recognized for adverse changes in our CECL allowance or when securities are written down because of an other-than-temporary impairment. Changes in the fair value of equity securities and other invested assets are also included in Net realized and unrealized losses on investments on our Consolidated Statements of Comprehensive Income (Loss). Net realized and unrealized gains on investments were $18.7 million and $17.0 million for the three and six months ended June 30, 2026, respectively, compared to $20.9 million and $8.1 million for the corresponding periods of 2025, respectively. The net realized and unrealized gains on investments for the three months ended June 30, 2026 and 2025 included $19.2 million and $21.0 million of net realized and unrealized gains on equity securities and other investments, respectively, and $0.5 million and $0.1 million of net realized losses on fixed maturity securities, respectively. The net realized and unrealized gains on investments for the six months ended June 30, 2026 and 2025 included $18.0 million and $9.1 million of net realized and unrealized gains on equity securities and other investments, respectively, and $1.0 million of net realized losses on fixed maturity securities in each period. The net investment gains on our equity securities during the three and six months ended June 30, 2026 were largely consistent with the performance of the U.S. equity markets. The net investment gains on our other investments during the three and six months ended June 30, 2026 resulted from an increase in the underlying value of the private equity limited partnership interests we own. The net realized investment losses on our fixed maturity securities during the three and six months ended June 30, 2026 included a $0.4 million and $0.7 million increase in our allowance for CECL. 35 The net investment gains on our equity securities during the three and six months ended June 30, 2025 were largely consistent with the performance of the U.S. equity markets. The net investment gains on our other investments during the three months ended June 30, 2025 resulted primarily from an increase in the underlying value of the private equity limited partnership interests we own. The net investment losses on our other investments during the six months ended June 30, 2025 was primarily driven by the reduction in net asset value due to distributed investment returns from our investments in private equity limited partnerships. The net realized investment losses on our fixed maturity securities during the three and six months ended June 30, 2025 were primarily the result of sales associated with the rebalancing of our fixed maturity investment portfolio. Additional information regarding our Investments is set forth under “—Liquidity and Capital Resources—Investments.” Other Income Other income consists of net gains and losses on fixed assets, non-investment interest, and other miscellaneous income and expense items. Interest and Financing Expenses Interest and financing expenses include fees and interest associated with borrowings under the credit facility and advances and other credit arrangements with the Federal Home Loan Bank of San Francisco (FHLB). Interest and financing expenses were $1.3 million and $2.4 million for the three and six months ended June 30, 2026, respectively, compared to less than $0.1 million and $0.1 million for the three and six months ended June 30, 2025. The increase for the three and six months ended June 30, 2026, resulted primarily from interest expense associated with our various advances with the FHLB. Income Tax Expense Income tax expense was $5.6 million and $8.2 million for the three and six months ended June 30, 2026, respectively, compared to $7.3 million and $10.4 million for the corresponding periods of 2025, respectively. The effective tax rate was 16.1% and 17.3% for the three and six months ended June 30, 2026, compared to 19.7% for each of the corresponding periods of 2025, respectively. The effective rates during each of the periods presented deviate favorably from the statutory rate of 21.0% due to, in part, income tax benefits and exclusions associated with tax-advantaged investment income, LPT adjustments, Deferred Gain amortization and related adjustments, income adjustments related to the Fund, and tax credits utilized. Liquidity and Capital Resources We believe that our total capital position remains strong and that the liquidity available to EHI and its subsidiaries remains adequate and will be sufficient for our financing needs in the next 12 months and in the longer-term period thereafter. As a result, we do not currently foresee a need to: (i) suspend dividends at either EHI or its insurance subsidiaries; (ii) forego repurchases of EHI's common stock; (iii) seek additional required capital; or (iv) seek any material non-investment asset sales, though we may decide to pursue those or other options if our financial circumstances change or if we deem it strategically advantageous to do so. EHI Liquidity EHI is a holding company and its ability to fund its operations is contingent upon its existing capital, the ability of its subsidiaries to pay it dividends, and the availability of loan capacity through its intercompany loan agreements with its insurance subsidiaries and credit facility. Any payments of dividends by our insurance subsidiaries are restricted by state insurance laws and regulations, including laws establishing minimum solvency and liquidity thresholds. EHI requires cash to pay dividends to its stockholders, repurchase its common stock, provide additional surplus to its insurance subsidiaries, and fund its operating expenses. EHI's insurance subsidiaries’ ability to pay dividends and distributions is based on their reported capital, surplus, and dividends paid within the prior twelve months. During the first quarter of 2026, EICN made a $10.8 million dividend payment to EGI, which in turn distributed that amount to EHI. As a result of that dividend payment, EICN cannot pay dividends for the remainder of 2026 without prior regulatory approval. During the first quarter of 2026, ECIC made a $20.4 million dividend payment to EGI, which in turn distributed that amount to EHI. As a result of that dividend payment, ECIC cannot pay dividends for the remainder of 2026 without prior regulatory approval. Total cash and investments at the holding company were $34.2 million at June 30, 2026, consisting of $30.5 million of cash and cash equivalents, $3.2 million of fixed maturity securities, and $0.5 million of equity securities. 36 In November 2025, EHI entered into two three-year intercompany loan agreements with its insurance subsidiaries: one with EICN (the "EICN Agreement") and one jointly with EAC, ECIC, EPIC, and CIC (the "Omnibus Agreement"). Together, the agreements provide approximately $200.0 million of lending capacity, with individual advances bearing interest at the prevailing rate published by the FHLB for advances of comparable duration. As of June 30, 2026, $160.0 million is outstanding under these intercompany loan agreements, which were primarily utilized to fund our recapitalization plan. On May 28, 2024, EHI entered into a Credit Agreement (as amended, the Credit Agreement) which provides for a $25.0 million, unsecured, three-year revolving credit facility and is guaranteed by EGI and CGI. On July 29, 2026, EHI and Wells Fargo Bank, National Association, entered into Amendment No. 1 to the Credit Agreement. The Credit Agreement provides for a $35.0 million, unsecured, three-year revolving credit facility and remains guaranteed by EGI and CGI. Borrowings under the Credit Agreement may be used for working capital and general corporate purposes of EHI and its subsidiaries. The interest rates applicable to loans under the Credit Agreement are generally based on, at EHI's option: (i) a base rate, defined as the higher of the Prime Rate, the Federal Funds Rate plus 0.50% and the Adjusted Term SOFR for a one-month tenor plus 1.00%, or (ii) an Adjusted Term SOFR, defined as the applicable Adjusted Term SOFR plus 1.50%. Interest paid and/or fees incurred pursuant to the Credit Agreement, as applicable, was $0.3 million and less than $0.1 million for the three months ended June 30, 2026 and 2025, respectively, and $0.4 million and $0.1 million for the six months ended June 30, 2026 and 2025, respectively. The Credit Agreement contains covenants that require EHI and its consolidated subsidiaries to maintain: (i) a minimum consolidated net worth, defined as EHI’s total stockholders’ equity excluding any accumulated other comprehensive income or loss, of no less than $800.0 million; and (ii) a debt to total capitalization ratio of no more than 35%, in each case as determined in accordance with the Credit Agreement. As of June 30, 2026, EHI has remained in compliance with all of the covenants associated with the Credit Agreement since its inception. On February 17, 2026, EHI borrowed $20.0 million under the Credit Agreement as part of our recapitalization plan. The advance bears interest at a rate of 5.15% based on the three-month Adjusted Term SOFR, with a reset date of August 18, 2026. As of June 30, 2026, $20.0 million was outstanding under the Credit Agreement. The outstanding balance is classified as long-term debt as the amended Credit Agreement expires on July 29, 2029. Advances can be repaid at any time without prepayment penalties or additional fees. Operating Subsidiaries’ Liquidity The primary sources of cash for our operating subsidiaries, which include our insurance and other operating subsidiaries, are premium collections, investment income, sales and maturities of investments, and reinsurance recoveries. The primary uses of cash for our operating subsidiaries are payments of losses and LAE, commission expense, underwriting expenses, ceded reinsurance, investment purchases, and dividends paid to their parent. Total cash and investments held by our operating subsidiaries was $2,415.2 million at June 30, 2026, consisting of $83.0 million of cash and cash equivalents, and restricted cash, $2,034.7 million of fixed maturity securities, $179.7 million of equity securities, $96.1 million of other invested assets, and $21.7 million of short-term investments. Sources of immediate and unencumbered liquidity at our operating subsidiaries as of June 30, 2026 consisted of $82.8 million of cash and cash equivalents, $170.9 million of publicly traded equity securities whose proceeds are available within two business days, and $787.2 million of highly liquid fixed maturity securities whose proceeds are also available within two business days. We believe that our subsidiaries’ liquidity needs over the next 12 months and for the longer-term period thereafter will be met with cash from operations, investment income, and maturing investments. Each of our insurance subsidiaries are members of the FHLB. Membership allows our subsidiaries access to collateralized advances, which may be used to support and enhance liquidity management. The amount of advances that may be taken is dependent on our statutory admitted assets on a per company basis. The following table summarizes the terms and maturities of the advances outstanding at June 30, 2026. 37 Date of Advance Borrower Amount Interest Rate Maturity Date (in millions) November 17, 2025 EICN $ 19.0 3.84 % May 31, 2029 February 5, 2026(1) EICN 16.0 3.79 May 31, 2029 January 2, 2026 ECIC 17.0 3.77 May 31, 2029 January 8, 2026 EAC 22.0 3.78 May 31, 2029 January 16, 2026 EPIC 28.0 3.87 May 31, 2029 February 5, 2026 CIC 3.0 3.74 February 5, 2029 Total $ 105.0 (1) On February 5, 2026, the terms of this advance were revised from an interest rate of 3.70% and a maturity date of December 21, 2026, to an interest rate of 3.79% and a maturity date of May 31, 2029. These advances were assumed by EHI through the intercompany loan agreements as described above and executed as part of the Company’s recapitalization plan. Interest incurred and paid on these borrowings during the three and six months ended June 30, 2026 was $1.0 million and $1.9 million, respectively. FHLB membership also allows our insurance subsidiaries access to standby Letter of Credit Agreements. Letter of Credit Agreements we currently have in effect will expire March 31, 2027 and must be fully secured with eligible collateral at all times (See Note 10). Various state laws and regulations require us to hold investment securities or letters of credit on deposit with certain states in which we do business. Securities having a fair value of $585.3 million and $587.4 million were on deposit at June 30, 2026 and December 31, 2025, respectively. These laws and regulations govern both the amount and types of investment securities that are eligible for deposit. Additionally, standby letters of credit from the FHLB have been issued in lieu of $170.0 million of securities on deposit at both June 30, 2026 and December 31, 2025. We purchase reinsurance annually to protect us against the costs of severe claims and certain catastrophic events. On July 1, 2026, we entered into a new reinsurance program that is effective through June 30, 2027. The reinsurance program consists of one treaty covering excess of loss and catastrophic loss events in four layers of coverage. Our reinsurance coverage is $190.0 million in excess of our $10.0 million retention on a per occurrence basis; including a maximum any one life limit of $20.0 million, subject to certain exclusions. Our previous reinsurance program consisted of one treaty covering excess of loss and catastrophic loss events in four layers of coverage, which included a 10% co-participation share within each layer of coverage retained by us. The reinsurance coverage was $190.0 million ($171.0 million net of our co-participation) in excess of our $10.0 million retention on a per occurrence basis, including a maximum any one life limit of $20.0 million, subject to certain exclusions. We believe that our reinsurance program currently meets our needs. Certain reinsurance contracts require funds owned by us to be held in trust for the benefit of the ceding reinsurer to secure the outstanding liabilities we have assumed. The fair value of fixed maturity securities held in trust for the benefit of our ceding reinsurers was $3.0 million and $3.1 million at June 30, 2026 and December 31, 2025, respectively. Sources of Liquidity We monitor the cash flows of each of our subsidiaries individually, as well as collectively as a consolidated group. We use trend and variance analyses to project future cash needs, making adjustments to our cash forecasts as appropriate. The table below shows our net cash flows: Six Months Ended June 30, 2026 2025 (in millions) Cash, cash equivalents, and restricted cash (used in) provided by: Operating activities $ (8.1) $ 14.6 Investing activities (5.2) 46.2 Financing activities (33.2) (60.0) (Decrease) increase in cash, cash equivalents, and restricted cash $ (46.5) $ 0.8 38 For additional information regarding our cash flows, see Item 1, Consolidated Statements of Cash Flows. Operating Activities Net cash used in operating activities for the six months ended June 30, 2026 included net claims payments of $279.9 million, underwriting expenses paid of $75.5 million, commissions paid of $48.4 million, interest paid of $2.4 million and federal income taxes paid of $1.4 million. The cash outflows used in these activities were partially offset by net premiums received of $345.9 million and investment income received of $53.6 million. Net cash provided by operating activities for the six months ended June 30, 2025 included net premiums received of $385.4 million and investment income received of $58.1 million. The cash provided by these operating activities were partially offset by net claims payments of $274.9 million, underwriting expenses paid of $92.1 million, commissions paid of $50.2 million, and federal income taxes paid of $11.6 million. Investing Activities Net cash used in investing activities for the six months ended June 30, 2026 related primarily to investments of premiums received and the reinvestment of funds from investment sales, maturities, redemptions, and interest income. The cash outflows used in these activities were partially offset by investment sales, maturities, and redemptions whose proceeds were used to fund claims payments, underwriting expenses, stockholder dividend payments, and common stock repurchases. Net cash provided by investing activities for the six months ended June 30, 2025 related primarily to returns from our investments, investment sales, maturities, and redemptions whose proceeds were used to fund claims payments, underwriting expenses, stockholder dividend payments, and common stock repurchases. Those investing cash inflows were partially offset by investments of premiums received and the reinvestment of funds from investment sales, maturities, redemptions, and interest income. Financing Activities Net cash used in financing activities for the six months ended June 30, 2026 related primarily to stockholder dividend payments and common stock repurchases offset by FHLB advances and borrowings on the Credit Agreement. Net cash used in financing activities for the six months ended June 30, 2025 related primarily to stockholder dividend payments and common stock repurchases. Dividends We paid $12.6 million and $15.4 million in dividends to our stockholders and eligible equity plan award holders for the six months ended June 30, 2026 and 2025, respectively. The declaration and payment of future dividends to our stockholders, including any special dividends, will be at the discretion of our Board of Directors (Board) and will depend upon many factors including our financial position, capital requirements of our operating subsidiaries, legal and regulatory requirements, and any other factors that our Board deems relevant. On July 29, 2026, the Board declared a quarterly dividend per share of $0.34, which is payable August 26, 2026 to stockholders of record on August 12, 2026. Stock Repurchases We repurchased 651,752 shares of our common stock for $27.7 million during the three months ended June 30, 2026 and we repurchased 2,464,081 shares of our common stock for $104.5 million during the six months ended June 30, 2026. We have $113.0 million repurchase authorization remaining under the 2026 Program. Future repurchases of our common stock will be at the discretion of our Board and will depend upon many factors, including our financial position, capital requirements of our operating subsidiaries, general business and socioeconomic conditions, legal, tax, regulatory, and/or contractual restrictions, and any other factors that our Board deems relevant. Capital Resources As of June 30, 2026, the capital resources available to us consisted of $858.8 million of stockholders’ equity and the $85.3 million Deferred Gain. 39 Contractual Obligations and Commitments Other than operating expenses, our current and long-term cash requirements include the following contractual obligations and commitments as of June 30, 2026: Debt We obtained advances from the FHLB totaling $105.0 million, bearing interest rates ranging from 3.74% to 3.87%, of which none are payable within 12 months. Additionally, we had $20.0 million outstanding under our Credit Agreement, of which none is payable within 12 months based on the amended Credit Agreement's expiration date of July 29, 2029. Leases We have entered into lease arrangements for certain equipment and facilities. As of June 30, 2026, we had lease payment obligations totaling $4.1 million, of which $0.8 million is payable within 12 months. Other Purchase Obligations We have other purchase obligations that primarily consist of non-cancellable obligations to acquire capital assets, commitments for information technology and related services, software acquisition and license commitments, and other legally binding agreements to purchase services that are to be used in our operations. As of June 30, 2026, we had other purchase obligations totaling $6.2 million, of which $3.8 million is payable within 12 months. Unfunded Investment Commitments As of June 30, 2026, we had private equity limited partnerships with unfunded investment commitments totaling $9.7 million that can be called at any time. Unpaid Losses and LAE Expenses We have developed unpaid losses and LAE expense payment patterns that are computed based on historical information. Our calculation of loss and LAE expense payments by period is subject to the same uncertainties associated with determining the level of reserves and to the additional uncertainties arising from the difficulty of predicting when claims (including claims that have not yet been reported to us) will be paid. Actual payments of losses and LAE by period will vary, perhaps materially, to the extent that current estimates of losses and LAE expense vary from actual ultimate claims amounts due to variations between expected and actual payment patterns. As of June 30, 2026, we had unpaid losses and LAE reserves totaling $1,775.2 million, of which $327.0 million is estimated to be payable within 12 months. The unpaid losses and LAE expense payment patterns are gross of reinsurance recoverables for unpaid losses. As of June 30, 2026, we had reinsurance recoverables on unpaid losses and LAE totaling $380.1 million, of which $27.1 million is currently expected to be received within 12 months. Investments Our investment portfolio is structured to support our need for: (i) optimizing our risk-adjusted total returns; (ii) providing adequate liquidity; (iii) facilitating financial strength and stability; and (iv) ensuring regulatory and legal compliance. These investments provide a steady source of income. As of June 30, 2026, our investment portfolio consisted of 89% fixed maturity securities with a duration of 4.5, which is measured by their sensitivity to changes in interest rates. Our investment strategy balances consideration of duration, yield, and credit risk. Our investment guidelines require that the minimum weighted average quality of our fixed maturity securities portfolio be “A,” using ratings assigned by Standard & Poor’s (S&P) or an equivalent rating assigned by another nationally recognized statistical rating agency. Our fixed maturity portfolio had a weighted average quality of “A+” as of June 30, 2026. Our investment portfolio also contains equity securities. We strive to limit the exposure to equity price risk associated with publicly traded equity securities by diversifying our holdings across several industry sectors. These equity securities had a fair value of $171.5 million at June 30, 2026, which represented 7% of our investment portfolio at that time. We also have an $8.7 million investment in FHLB stock which we record at cost. We receive periodic dividends from the FHLB for this investment, when declared, which can vary from period to period. Our investment portfolio also contains certain other investments, which made up 4% of our investment portfolio at June 30, 2026, and include private equity limited partnerships. Our investments in private equity limited partnerships totaled $96.1 million at June 30, 2026 and are generally not redeemable by the investees and cannot be sold without prior approval of the general partner. These investments have a fund term of 3 to 12 years, subject to two or three one-year extensions at the general partner’s discretion. We periodically receive distributions of proceeds from dividends and interest from fund investments, as well as from any dispositions of fund investments, during the full course of the fund term. As of June 30, 2026, we had unfunded commitments to these private equity limited partnerships totaling $9.7 million. 40 We believe that our current asset allocation meets our strategy to preserve capital for claims and policy liabilities and to provide sufficient capital resources to support and grow our ongoing insurance operations. The following table shows the estimated fair value, the percentage of the fair value to total invested assets, and the average ending book yield (which is calculated based on the amortized cost of the associated invested assets) as of June 30, 2026. Category Estimated Fair Value Percentage ofTotal Investments Measured at Fair Value Book Yield (in millions, except percentages) U.S. Treasuries $ 80.9 3.6 % 3.9 % States and municipalities 151.7 6.8 4.8 Corporate securities 702.8 31.5 4.7 Residential mortgage-backed securities 748.2 33.5 5.1 Commercial mortgage-backed securities 30.0 1.3 5.6 Asset-backed securities 166.3 7.5 5.5 Collateralized loan obligations 2.5 0.1 5.8 Foreign government securities 2.0 0.1 6.2 Other securities 153.5 6.9 6.2 Equity securities 171.5 7.7 2.3 Short-term investments 21.7 1.0 3.9 Total investments at fair value $ 2,231.1 100.0 % Weighted average book yield 4.9 % The following table shows the percentage of total estimated fair value of our fixed maturity securities as of June 30, 2026 by credit rating category, using the lower of the ratings assigned by Moody’s Investors Service or S&P. Rating Percentage of Total Estimated Fair Value “AAA” 8.2 % “AA” 46.1 “A” 32.3 “BBB” 5.2 Below Investment Grade 8.2 Total 100.0 % Investments that we currently own could be subject to default by the issuer. We regularly assess individual securities as part of our ongoing portfolio management, including the identification of credit-related losses. Our assessment includes reviewing the extent of declines in the fair value of investments below amortized cost, historical and projected financial performance and near-term prospects of the issuer, the outlook for industry sectors, credit rating, and macro-economic changes. We also make a determination as to whether it is not more likely than not that we will be required to sell the security before its fair value recovers to above cost, or maturity. In addition to recognizing realized gains and losses upon the disposition of an investment security, we also record provisions and recoveries for changes in CECL allowance on AFS investments as realized gains and losses. As of June 30, 2026, we maintained a CECL allowance of $1.1 million on AFS investments. During the six months ended June 30, 2026, we recognized a net $0.7 million increase to our allowance for CECL on AFS investments. The remaining fixed maturity securities whose total fair value was less than amortized cost at June 30, 2026, were those in which we had no intent, need, or requirement to sell at an amount less than their amortized cost. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. Critical Accounting Estimates The unaudited interim consolidated financial statements included in this quarterly report include amounts based on the use of estimates and judgments of management for those transactions that are not yet complete. We believe that the estimates and judgments that were most critical to the preparation of the consolidated financial statements involved the reserves for losses and LAE and reinsurance recoverables. These estimates and judgments require the use of assumptions about matters that are highly 41 uncertain and therefore are subject to change as facts and circumstances develop. Our accounting policies are discussed under "Critical Accounting Estimates" in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report.