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Employers Holdings, Inc. (EIG)

CIK: 0001379041. SIC: 6331 Fire, Marine & Casualty Insurance. Latest 10-K as of: 2026-02-26.

SIC breadcrumb: Finance, Insurance, And Real Estate > Insurance Carriers > SIC 6331 Fire, Marine & Casualty Insurance

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1379041. Latest filing source: 0001379041-26-000011.

Selected Fundamentals

MetricValueUnitFYFiled
Revenue858,700,000USD20252026-02-26
Net income10,800,000USD20252026-02-26
Assets3,436,600,000USD20252026-02-26

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-26. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001379041.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Metric2016201720182019202020212022202320242025
Revenue779,800,000801,400,000800,400,000835,900,000711,400,000703,100,000713,500,000850,900,000880,700,000858,700,000
Net income106,700,000101,200,000141,300,000157,100,000119,800,000119,300,00048,400,000118,100,000118,600,00010,800,000
Diluted EPS3.243.064.244.833.974.171.754.454.710.46
Assets3,773,400,0003,840,100,0003,919,200,0004,004,100,0003,922,600,0003,783,200,0003,716,700,0003,550,400,0003,541,300,0003,436,600,000
Liabilities2,932,800,0002,892,400,0002,901,000,0002,838,300,0002,709,800,0002,570,100,0002,772,500,0002,536,500,0002,472,600,0002,480,900,000
Stockholders' equity840,600,000947,700,0001,018,200,0001,165,800,0001,212,800,0001,213,100,000944,200,0001,013,900,0001,068,700,000955,700,000
Cash and cash equivalents67,200,00073,300,000101,400,000154,900,000160,400,00075,100,00089,200,000226,400,00068,300,000159,800,000
Net margin13.68%12.63%17.65%18.79%16.84%16.97%6.78%13.88%13.47%1.26%

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-01. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001379041.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

QuarterEnd DateRevenueNet IncomeDiluted EPSMethod
2022-Q12022-03-31-0.08reported discrete quarter
2022-Q22022-06-30-0.56reported discrete quarter
2022-Q32022-09-300.70reported discrete quarter
2023-Q12023-03-31206,500,00023,600,0000.86reported discrete quarter
2023-Q22023-06-30215,200,00034,900,0001.30reported discrete quarter
2023-Q32023-09-30203,500,00014,000,0000.54reported discrete quarter
2023-Q42023-12-31225,700,00045,600,000derived Q4 = FY annual - nine-month YTD
2024-Q12024-06-30217,000,00031,700,0001.25reported discrete quarter
2024-Q32024-09-30224,000,00030,300,0001.21reported discrete quarter
2024-Q42024-12-31216,600,00028,300,000derived Q4 = FY annual - nine-month YTD
2025-Q12025-03-31202,600,00012,800,0000.52reported discrete quarter
2025-Q22025-06-30246,300,00029,700,0001.23reported discrete quarter
2025-Q32025-09-30239,300,000-8,300,000-0.36reported discrete quarter
2025-Q42025-12-31170,500,000-23,400,000derived Q4 = FY annual - nine-month YTD
2026-Q12026-03-31207,600,00010,200,0000.52reported discrete quarter

Quarterly Charts

Macro Cross-References

Latest quarter (10-Q)

Latest 10-Q source: 0001379041-26-000023.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-05-01. Report date: 2026-03-31.

Item 2.  Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations

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 increased tariffs, changes in interest rates, labor market expectations, catastrophic events or geo-political 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.

25

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 46% of our trailing twelve month gross written premiums, excluding adjustments, are generated. In February 2026, we launched a new excess workers’ compensation product that will be offered to self-insured enterprises in several jurisdictions across the United States. 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 including improved organizational performance and reduced long-term loss costs 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 $10.2 million for the three months ended March 31, 2026, compared to $12.8 million for the corresponding period of 2025. The key factors that affected our financial performance during the three months ended March 31, 2026, compared to the same period of 2025, included:

•Gross premiums written decreased 14.8%;

•Net premiums earned decreased 1.1%;

•Net investment income decreased 11.8%;

•Net realized and unrealized losses on investments of $1.7 million compared to $12.8 million;

•Losses and LAE increased 7.0%;

•Commission expense increased 3.0%;

•Underwriting expenses decreased 4.7%; and

•Underwriting loss of $12.8 million compared to $3.6 million.

Three Months Ended March 31, 2026

Our 2026 underwriting results reflect lower net premiums earned and higher losses and LAE expenses, combined with a slight increase in commission expense, partially offset by a reduction in underwriting expenses. Our investment results were impacted by lower returns from our investments in private equity limited partnerships and net realized and unrealized losses on investments.

26

Three Months Ended March 31, 2025

Our 2025 underwriting results reflect lower net premiums earned and higher losses and LAE expenses offset by reductions in commission and underwriting expenses. Our investment results benefited from strong net investment income partially offset by net realized and unrealized losses.

Our consolidated financial results of operations for the three months ended March 31, 2026 and 2025 are as follows:

Three Months Ended

March 31,

2026

2025

(in millions)

Gross premiums written

$

180.8 

$

212.1 

Net premiums written

$

179.4 

$

210.3 

Net premiums earned

$

180.9 

$

183.0 

Net investment income

28.3 

32.1 

Net realized and unrealized losses on investments

(1.7)

(12.8)

Other income

0.1 

0.3 

Total revenues

207.6 

202.6 

Underwriting expenses:

Losses and LAE

129.1 

120.7 

Commission expense

23.7 

23.0 

Underwriting expenses

40.9 

42.9 

Non-underwriting expenses:

Interest and financing expenses

1.1 

0.1 

Total expenses

194.8 

186.7 

Net income before income taxes

12.8 

15.9 

Income tax expense

2.6 

3.1 

Net income

$

10.2 

$

12.8 

27

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 months ended March 31, 2026 and 2025 are as follows:

Three Months Ended

March 31,

2026

2025

(in millions)

Gross premiums written

$

180.8 

$

212.1 

Net premiums written

$

179.4 

$

210.3 

Net premiums earned

$

180.9 

$

183.0 

Losses and LAE

129.1 

120.7 

Commission expense

23.7 

23.0 

Underwriting expenses

40.9 

42.9 

Total underwriting expenses

193.7 

186.6 

Underwriting loss

$

(12.8)

$

(3.6)

Total impact of the LPT

(1.2)

(1.6)

Underwriting loss excluding LPT(1)

$

(14.0)

$

(5.2)

Loss and LAE ratio

71.4 

%

66.0 

%

Commission expense ratio

13.1 

12.6 

Underwriting expense ratio

22.6 

23.4 

Combined ratio

107.1 

%

102.0 

%

Total impact of the LPT

0.6 

%

0.8 

%

Combined ratio excluding LPT(1)

107.7 

%

102.8 

%

(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 $180.8 million for the three months ended March 31, 2026, compared to $212.1 million for the corresponding period of 2025. For the three months ended March 31, 2026, the decrease in gross premiums written was largely driven by declines in both new and renewal business premiums driven predominately by our pricing and underwriting actions taken in 2025 to return to historical underwriting margins. Total in-force policies at March 31, 2026 were 130,321 compared to 133,121 in-force policies at March 31, 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 $179.4 million for the three months ended March 31, 2026, compared to $210.3 million for the corresponding period of 2025. Reinsurance premiums ceded were $1.4 million for the three months ended March 31, 2026, compared to $1.8 million for the corresponding period of 2025.

Net Premiums Earned

Net premiums earned are primarily a function of the amount and timing of net premiums previously written.

Net premiums earned were $180.9 million for the three months ended March 31, 2026, compared to $183.0 million for the corresponding period of 2025.

28

Losses and LAE, Commission Expenses, and Underwriting Expenses

The following table presents our calendar year combined ratios.

Three Months Ended

March 31,

2026

2025

Loss and LAE ratio excluding LPT

72.0 

%

66.8 

%

Loss and LAE ratio - LPT

(0.6)

(0.8)

Commission expense ratio

13.1 

12.6 

Underwriting expense ratio

22.6 

23.4 

Combined ratio

107.1 

%

102.0 

%

Combined ratio excluding LPT

107.7 

%

102.8 

%

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, whic

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-26. Report date: 2025-12-31.

Item 7.  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 the consolidated financial statements, the accompanying notes thereto, and the financial statement schedules included in Item 8 and Item 15 of this report. In addition to historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties and other factors described in Item 1A of this report. Our actual results in future periods may differ from those referred to herein due to several factors, including the risks described in the sections entitled "Risk Factors" and "Forward-Looking Statements" elsewhere in this report.

General

We are a Nevada holding company. Through our insurance subsidiaries, we provide workers' compensation insurance coverage to small and mid-sized businesses engaged in lower hazard industries. 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 46% of our 2025 gross written premiums were generated. 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, and there is significant competition in the national workers' compensation industry that is 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.

We target small to mid-sized businesses, as we believe that this market is traditionally characterized by higher profitability and stronger persistency when compared to the U.S. workers' compensation insurance industry in general. 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 in this market segment. Our underwriting approach is to consistently underwrite small to mid-sized business accounts at appropriate and competitive prices without sacrificing long-term profitability and stability for short-term revenue growth.

Overview

Summary Financial Results

Our net income was $10.8 million, $118.6 million, and $118.1 million in 2025, 2024, and 2023, respectively. The key factors that affected our financial performance during those years included:

•Gross premiums written decreased 2.6% in 2025 and increased 1.1% in 2024, each compared to the previous year;

•Net premiums earned increased 1.7% in 2025 and 3.8% in 2024, each compared to the previous year;

•Net investment income increased 9.1% in 2025 and 0.5% in 2024, each compared to the previous year;

•Net realized and unrealized (losses) gains on investments were $(20.4) million, $24.1 million, and $22.7 million in 2025, 2024, and 2023, respectively;

•Losses and LAE increased 27.5% in 2025 and 12.4% in 2024, each compared to the previous year;

•Commission expense decreased 3.3% in 2025 and increased 1.2% in 2024, each compared to the previous year;

•Underwriting expenses decreased 6.3% in 2025 and 1.9% in 2024, each compared to the previous year;

•Underwriting (loss) income was $(83.2) million, $15.6 million, and $36.2 million in 2025, 2024, and 2023, respectively; and

•Other non-recurring expenses were $1.1 million in 2025 and $11.0 million 2023. We did not incur any such expenses in 2024.

29

Summary of Year Ended December 31, 2025

Our underwriting results for the year ended December 31, 2025 reflect moderate growth in net premiums earned, driven by growth in renewal business premiums, along with reductions in both commission expense and underwriting expenses. These improvements were offset by higher losses and LAE compared to 2024, as well as other non-recurring expenses incurred in 2025. Our 2025 net investment income benefited from increased yields on our fixed maturity investment portfolio and returns from our private equity investments.

Summary of Year Ended December 31, 2024

Our underwriting results for the year ended December 31, 2024 reflect increases in net premiums earned from higher new and renewal business premiums, and lower underwriting expenses, partially offset by lower final audit premiums and endorsements, a decrease in favorable prior year loss reserve development, and a higher current accident year loss and LAE ratio. Our investment results benefited from continued strong net investment income and net realized and unrealized gains.

Summary of Year Ended December 31, 2023

Our underwriting results for the year ended December 31, 2023 reflect increases in net premiums earned from higher new and renewal business premiums, strong final audit premiums, and significant net favorable prior year loss reserve development. Our investment results benefited from a sharp increase in net investment income due to higher bond yields and net realized and unrealized gains. Our non-underwriting expenses in 2023 included the cost of the early lease termination of our former corporate headquarters and a write-off of previously capitalized cloud computing costs associated with a former policy management system.

Our consolidated financial results of operations for the three year period ending December 31, 2025 are as follows:

Years Ended December 31,

2025

2024

2023

(in millions)

Gross premiums written

$

756.1 

$

776.3 

$

767.7 

Net premiums written

$

750.1 

$

769.5 

$

760.6 

Net premiums earned

$

761.9 

$

749.5 

$

721.9 

Net investment income

116.7 

107.0 

106.5 

Net realized and unrealized (losses) gains on investments

(20.4)

24.1 

22.7 

Other income (loss)

0.5 

0.1 

(0.2)

Total revenues

858.7 

880.7 

850.9 

Underwriting expenses:

Losses and LAE

581.8 

456.2 

405.7 

Commission expense

97.9 

101.2 

100.0 

Underwriting expenses

165.4 

176.5 

180.0 

Non-underwriting expenses:

Interest and financing expenses

0.5 

0.1 

5.8 

Other non-recurring expenses

1.1 

— 

11.0 

Total expenses

846.7 

734.0 

702.5 

Net income before income taxes

12.0 

146.7 

148.4 

Income tax expense

1.2 

28.1 

30.3 

Net income

$

10.8 

$

118.6 

$

118.1 

A primary measure of our financial strength and performance is our ability to increase Adjusted stockholders' equity and Adjusted stockholders' equity per share over the long-term. We believe that these non-GAAP measures are important to our investors, analysts, and other interested parties who benefit from having an objective and consistent basis for comparison with other companies within our industry. Further, the change in our adjusted stockholders' equity per share (after taking into account stockholder dividends declared) serves as the performance measure associated with our 2025, 2024, and 2023 performance share unit awards. The following table shows a reconciliation of our Stockholders' equity on a GAAP basis to our Adjusted stockholders' equity.

30

Years Ended December 31,

2025

2024

(in millions, except share and per share data)

GAAP stockholders' equity

$

955.7 

$

1,068.7 

Deferred Gain - LPT agreement

88.0 

94.0 

Accumulated other comprehensive (income) loss, net of tax

(7.3)

82.5 

Adjusted stockholders' equity(1)

$

1,036.4 

$

1,245.2 

Ending common shares outstanding

20,342,135

24,556,706

Adjusted stockholders' equity per share

$

50.95 

$

50.71 

(1) Adjusted stockholders' equity is a non-GAAP measure consisting of total GAAP stockholders' equity plus the Deferred Gain, minus Accumulated other comprehensive income (loss), net of tax.

During 2025, our Adjusted stockholders’ equity declined by $(208.8) million, primarily due to returning $217.2 million to stockholders through share repurchases and dividends declared on common stock and eligible plan awards, while our Adjusted stockholders' equity per share increased by $0.24 per share due to the accretive nature of the share repurchases. During 2024, we grew our Adjusted stockholders’ equity by $46.1 million (or $3.45 per share), despite returning $71.7 million to stockholders through share repurchases and dividends declared on common stock and eligible plan awards.

I.Review of Underwriting Results

Underwriting income or loss is determined by deducting losses and LAE, commission expenses, and underwriting expenses from net premiums earned. Our underwriting results for the three year period ending December 31, 2025 are as follows:

Years Ended December 31,

2025

2024

2023

(in millions)

Gross premiums written

$

756.1 

$

776.3 

$

767.7 

Net premiums written

$

750.1 

$

769.5 

$

760.6 

Net premiums earned

$

761.9 

$

749.5 

$

721.9 

Losses and LAE

581.8 

456.2 

405.7 

Commission expense

97.9 

101.2 

100.0 

Underwriting expenses

165.4 

176.5 

180.0 

Total underwriting expenses

845.1 

733.9 

685.7 

Underwriting (loss) income

$

(83.2)

$

15.6 

$

36.2 

Total impact of the LPT

(6.0)

(5.6)

(7.2)

Underwriting (loss) income excluding LPT(1)

$

(89.2)

$

10.0 

$

29.0 

Loss and LAE ratio

76.4 

%

60.9 

%

56.2 

%

Commission expense ratio

12.8 

13.5 

13.9 

Underwriting expense ratio

21.7 

23.5 

24.9 

Combined ratio

110.9 

%

97.9 

%

95.0 

%

Total impact of the LPT

0.8 

%

0.7 

%

1.0 

%

Combined ratio excluding LPT(1)

111.7 

%

98.6 

%

96.0 

%

(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 $756.1 million, $776.3 million, and $767.7 million for the years ended December 31, 2025, 2024, and 2023, respectively. The modest reduction in our premiums written in 2025 was the result of higher renewal business

31

premiums, primarily driven by continued strong retention rates, offset by decreases in new business premiums, driven predominately by our pricing and underwriting actions taken to improve underwriting margins, and lower final audit premiums and endorsements. Our premiums written in 2025 were negatively impacted by a $14.7 million decrease to our ending final audit premium accrual, partially offset by $6.7 million of final audit premium pick-up. Lastly, we ended the year with higher policies in-force. Total in-force policies at December 31, 2025 were 133,605 compared to 130,767 in-force policies at December 31, 2024.

The modest growth in our premiums written in 2024 was the result of higher new and renewal business premiums, partially offset by lower final audit premiums and endorsements. The growth in new business premiums experienced in 2024 was the result of increases in new business submissions, quotes, and binds in a majority of the states in which we operate, which was being largely driven by our expansion in the classes of business that we offer. Our premiums written in 2024 were negatively impacted by a $16.5 million decrease to our ending final audit premium accrual, partially offset by $10.7 million of final audit premium pick-up. Further, our renewal premiums benefited from strong retention rates experienced throughout the year.

Net Premiums Written

Net premiums written are gross premiums written less reinsurance premiums ceded. For each of the years presented, the reinsurance premiums ceded are related to our July 1 - June 30 annual reinsurance programs as further described herein.

Net premiums written were $750.1 million, $769.5 million, and $760.6 million for the years ended December 31, 2025, 2024, and 2023, respectively, which included $6.0 million, $6.8 million, and $7.1 million of reinsurance premiums ceded, 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 $761.9 million, $749.5 million, and $721.9 million for the years ended December 31, 2025, 2024, and 2023, respectively.

Losses and LAE, Commission Expense, and Underwriting Expenses

The following table presents our calendar year combined ratios.

Years Ended December 31,

2025

2024

2023

Loss and LAE ratio excluding LPT

77.2 

%

61.6 

%

57.2 

%

Loss and LAE ratio - LPT

(0.8)

%

(0.7)

%

(1.0)

%

Commission expense ratio

12.8 

13.5 

13.9 

Underwriting expense ratio

21.7 

23.5 

24.9 

Combined ratio

110.9 

%

97.9 

%

95.0 

%

Combined ratio excluding LPT

111.7 

%

98.6 

%

96.0 

%

Losses and LAE

Losses and LAE represent our largest expense item and includes claim payments made, estimates for future claim payments and changes in those estimates for current and prior accident years, costs associated with investigating, defending, and adjusting claims, amortization of the Deferred Gain and Contingent Commission adjustments. 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, given the long-tail nature of workers' compensation claims, ultimate losses aren't typically known with any certainty for many years. Additional information regarding our reserves for losses and LAE is set forth under "–Critical Accounting Estimates –Reserves for Losses and LAE."

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 estimated ultimate losses for insured events occurring during that year fluctuate.

32

Our current accident year loss and LAE ratio continues 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.

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.

Years Ended December 31,

2025

2024

2023

(dollars in millions)

Current accident year losses and LAE - excluding LPT

$

548.2 

$

480.2 

$

457.8 

Prior accident year adverse (favorable) loss reserve development, net

39.6 

(18.4)

(44.9)

Impact of LPT

(6.0)

(5.6)

(7.2)

Calendar year losses and LAE

$

581.8 

$

456.2 

$

405.7 

Current accident year loss and LAE ratio

72.0 

%

64.1 

%

63.4 

%

Calendar year loss and LAE ratio

76.4 

%

60.9 

%

56.2 

%

Calendar year loss and LAE ratio - excluding LPT

77.2 

%

61.6 

%

57.2 

%

The increase in our calendar year losses and LAE from 2024 to 2025 was primarily due to a higher current accident year loss and LAE estimate and reserve strengthening related to prior accident years. During the year ended December 31, 2025, we increased the current accident year loss and LAE ratio to 72.0%, an approximate eight point increase from the 2024 loss and LAE ratio of 64.1%. The increase was attributable to increased cumulative trauma (CT) claim frequency in California.

Prior accident year adverse loss reserve development recognized in 2025 was $39.6 million, compared to net favorable prior year loss reserve development of $18.4 million in 2024. This resulted from reserve strengthening primarily related to accident years 2023 and 2024 being partially offset by net favorable development of loss and LAE estimates for accident years 2021 and prior. The increase in loss and LAE estimates for accident years 2023 and 2024 was due to the increased CT claim frequency in California and conservative modifications in our reserving approach across our complete book of business.

The increase in our calendar year losses and LAE from 2023 to 2024 was primarily due to higher earned premiums, a slightly higher current accident year loss and LAE estimate and less net favorable prior year loss reserve development. Net favorable prior year loss reserve development recognized in 2024 was $18.4 million versus $44.9 million recognized in 2023.

Prior accident year favorable loss reserve development recognized in 2024 resulted primarily from overall favorable loss experience, including decreasing medical paid loss trends in California, partially offset by unfavorable prior year loss experience in accident years 2023 and 2021 associated with certain large claims.

Prior accident year favorable loss reserve development recognized in 2023 was primarily the result of decreasing medical paid loss trends in California related to accident years 2020 and prior, partially offset by reserve strengthening related to accident year 2021. The rapid economic rebound following the COVID-19 pandemic led to large premium and payroll increases related to accident year 2021 that were recognized through policy audits in subsequent years. In response, we strengthened our reserves for accident year 2021 to reflect the potential for higher losses arising from the higher than expected premium exposure.

33

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).

Years Ended December 31,

2025

2024

2023

(in millions)

Amortization of the Deferred Gain - losses

$

6.0 

$

6.1 

$

6.3 

Amortization of the Deferred Gain - Contingent Commission

— 

0.8 

1.5 

Impact of LPT Reserve adjustments(1)

— 

(1.7)

(0.9)

Contingent Commission adjustments(2)

— 

0.4 

0.3 

Total impact of the LPT

$

6.0 

$

5.6 

$

7.2 

(1)LPT Reserve Adjustments result in a cumulative adjustment to the Deferred Gain, which is recognized in losses and LAE incurred on our Consolidated Statements of Comprehensive Income (Loss), such that the Deferred Gain reflects the balance that would have existed had the revised reserves been recognized at the inception of the LPT Agreement. (See Note 2 in the Notes to our Consolidated Financial Statements.)

(2)LPT Contingent Commission adjustments resulted in an adjustment to the Contingent commission receivable - LPT Agreement, which is recognized in losses and LAE incurred on our Consolidated Statements of Comprehensive Income (Loss). See Note 2 in the Notes to our Consolidated Financial Statements.

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.

We refined the presentation of certain expenses associated with our involuntary premium during the year ended December 31, 2024. This revision, which was immaterial, reduced our 2024 commission expenses and commission expense ratio by $2.4 million and 0.3 percentage points, respectively, and increased our 2024 underwriting expenses and underwriting expense ratio by the same amounts. This revision had no effect on our total expenses or net income.

Our commission expense ratio was 12.8%, 13.5%, and 13.9%, and our commission expenses were $97.9 million, $101.2 million, and $100.0 million for the years ended December 31, 2025, 2024, and 2023, respectively. The decrease in our commission expense from 2024 to 2025 was primarily related to lower agency incentive accruals, which are specific to individual contracts and vary with agency targets, lower gross premiums written, and a release of commissions payable associated with non-performing policies sent to collections. The increase in our commission expense from 2023 to 2024 was primarily due to higher earned premiums.

The reduction in our commission expense ratio from 2024 to 2025 was primarily related to an increase in the proportion of renewal premiums, which are subject to a lower commission rate, a release of commissions payable associated with non-performing policies sent to collections, and lower agency incentive accruals. The reduction in our commission expense ratio from 2023 to 2024 was primarily related to the expense revision we made in 2024 associated with our involuntary premium.

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 21.7%, 23.5%, and 24.9%, and our underwriting expenses were $165.4 million, $176.5 million, and $180.0 million for the years ended December 31, 2025, 2024, and 2023, respectively.

During 2025, the decrease in our underwriting expenses was primarily the result of reductions in (i) compensation-related expenses of $10.2 million, of which $5.8 million related to incentives; (ii) net CECL provision on premiums receivable of $3.6 million; (iii) policyholder dividends of $2.7 million; and (iv) depreciation and amortization of $2.5 million. These decreases were partially offset by lower internal AO and other expense allocations of $9.0 million.

During 2024, the decrease in our underwriting expenses was primarily the result of reductions in (i) depreciation and amortization of $4.8 million; (ii) professional fees of $2.8 million; and (iii) advertising and marketing expenses of $2.2 million. The decreases in our fixed underwriting expenses were, in large part, the result of our Cerity integration plan that was undertaken in the fourth quarter of 2023, partially offset by the expense revision we made in 2024 associated with our

34

involuntary premium. These decreases were partially offset by increases in our variable expenses related to net CECL provision on premiums receivable of $7.4 million and premium taxes and assessments of $1.6 million.

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 was $116.7 million, $107.0 million, and $106.5 million for the years ended December 31, 2025, 2024, and 2023, respectively. The increase in net investment income in 2025 was primarily the result of returns from our investments in private equity limited partnerships, along with higher book yields on our fixed maturity securities. The consistent level of net investment income in 2024 was due to higher investment yields being partially offset by a lower average invested balance of fixed maturity securities, short-term investments, and cash and cash equivalents, as measured by amortized cost. The lower average invested balances in 2024 resulted primarily from the unwinding of our former Federal Home Loan Bank of San Francisco (FHLB) leveraged investment strategy, which was in effect from the first quarter of 2022 to the fourth quarter of 2023. Pursuant to that strategy, certain of our insurance subsidiaries had received aggregate advances under the FHLB Standard Credit Program, the proceeds from which were used to purchase an equivalent amount of high-quality collateralized loan obligation securities. The average pre-tax ending book yield on our invested assets was 4.9%, 4.5%, and 4.3% at December 31, 2025, 2024, and 2023, respectively.

Realized and unrealized gains and losses on our investments are reported separately from our net investment income. 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) gains on investments on our Consolidated Statements of Comprehensive Income (Loss).

Net realized and unrealized (losses) gains on investments were $(20.4) million, $24.1 million, and $22.7 million for the years ended December 31, 2025, 2024, and 2023, respectively.

Net realized and unrealized (losses) gains on investments in 2025 included $32.9 million of net realized and unrealized gains on equity securities, $(54.7) million of net realized losses on fixed maturity securities, and $1.4 million of unrealized gains on other invested assets. The net investment gains on our equity securities and the net investment losses on our fixed maturity securities were primarily the result of the fourth quarter 2025 investment rebalancing, partially offset by a decrease of $0.7 million in our allowance for CECL. The net investment gains on our other invested assets resulted primarily from an increase in the underlying value of the private equity limited partnership interests we own.

Net realized and unrealized (losses) gains on investments in 2024 included $26.2 million of net realized and unrealized gains on equity securities, $(8.8) million of net realized losses on fixed maturity securities, and $6.7 million of unrealized gains on other invested assets. The net investments gains on our equity securities were largely consistent with the performance of U.S. equity markets. The net investment losses on our fixed maturity securities were primarily the result of sales associated with the rebalancing of our fixed maturity investment portfolio, partially offset by a decrease of $1.6 million in our allowance for CECL. The net investment gains on our other invested assets resulted primarily from an increase in the underlying value of the private equity limited partnership interests we own.

Net realized and unrealized (losses) gains on investments in 2023 included $27.0 million of net realized and unrealized losses on equity securities, $(8.0) million of net realized losses on fixed maturity securities, and $3.7 million of unrealized gains on other invested assets. The net investment losses on our equity securities were largely consistent with the performance of U.S. equity markets. The net investment losses on our fixed maturity securities were largely concentrated in certain holdings in the financial and banking sectors and were partially offset by a decrease of $1.8 million in our allowance for CECL. The net investment gains on our other invested assets resulted primarily from an increase in the underlying value of the private equity limited partnership interests we own.

Additional information regarding our Investments is set forth under "–Liquidity and Capital Resources–Investments" and Note 5 in the Notes to our Consolidated Financial Statements.

Other Income (Loss)

Other income (loss) consists of net gains and losses on fixed assets, non-investment interest, and other miscellaneous income and expense items. Other income (loss) was $0.5 million, $0.1 million, and $(0.2) million for the years ended December 31, 2025, 2024, and 2023, respectively.

35

Interest and Financing Expenses

Interest and financing expenses include fees and interest associated with our credit facilities, fees and interest associated with our various credit arrangements with the FHLB, finance lease interest, and other financing fees.

Interest and financing expenses were $0.5 million, $0.1 million, and $5.8 million for the years ended December 31, 2025, 2024, and 2023, respectively.

The increase in interest and financing expenses in 2025, versus those of 2024, resulted primarily from fees and interest associated with our credit facility and our credit arrangement with the FHLB.

The decrease in interest and financing expenses in 2024, versus those of 2023, resulted primarily from the unwinding of our former FHLB leveraged investment strategy, which was in effect from the first quarter of 2022 to the fourth quarter of 2023.

Other Non-recurring Expenses

In 2025, we recorded charges of $1.3 million of employee severance costs in connection with a 2025 reorganization, which was undertaken to better align our resources with our business objectives. These charges were offset by other miscellaneous one-time items.

In 2023, we wrote-off $1.6 million of previously capitalized cloud computing costs associated with a policy management system as part of a continual evaluation of our ongoing technology initiatives. Additionally, we recorded a non-recurring charge in connection with the early termination of the lease associated with our former corporate headquarters in Reno, Nevada. This charge included a one-time lease termination payment of $7.6 million, a write-off related to remaining leasehold improvements and furniture and equipment of $2.6 million, and estimated miscellaneous expenses associated with exiting the property of $0.2 million. We also recognized a related lease termination gain pertaining to the elimination of the lease liability, net of an associated right-of-use asset (ROU asset) of $1.0 million, which was included in Other non-recurring expenses on our Consolidated Statements of Comprehensive Income (Loss). The decision to terminate the former Reno operating lease was undertaken as part of an ongoing review of our facility needs.

Income Tax Expense

Income tax expense was $1.2 million, $28.1 million, and $30.3 million for the years ended December 31, 2025, 2024, and 2023, respectively, representing effective tax rates of 10.1%, 19.2%, and 20.4% for the years ended December 31, 2025, 2024, and 2023, respectively.

On January 1, 2000, EICN assumed the assets, liabilities, and operations of the Fund pursuant to legislation passed in the 1999 Nevada Legislature (the Privatization). Prior to the Privatization, the Fund was part of the State of Nevada and therefore was not subject to federal income tax. Accordingly, any pre-Privatization loss and LAE reserve adjustments, LPT Reserve Adjustments and Deferred Gain amortization impact our net income but do not change our taxable income.

Tax-advantaged investment income, pre-Privatization loss and LAE reserve adjustments, LPT adjustments, Deferred Gain amortization, certain other adjustments and tax credits utilized reduced our income tax expense computed at a statutory rate of 21% by $1.3 million, $2.7 million, and $0.9 million for the years ended December 31, 2025, 2024, and 2023, respectively.

Additionally, we recognize deferred tax assets when we determine that such assets are more-likely-than-not to be realized in future periods. In making such a determination, we consider all available evidence, including future reversals of existing taxable temporary differences, tax-planning strategies, projected future taxable income, projected future tax rates, and results of recent operations. If it is determined that it is not more-likely-than-not that we could fully realize our deferred tax assets in future periods, we would establish a deferred tax asset valuation allowance that would increase our provision for income taxes. As of December 31, 2025, we did not require a deferred tax asset valuation allowance.

For additional information regarding our income tax expense see Note 8 in the Notes to our Consolidated Financial Statements.

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 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 and the ability of its subsidiaries to pay it dividends. Any payments of dividends by our insurance subsidiaries are restricted by state insurance laws

36

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.

Total cash and investments at the holding company were $8.9 million at December 31, 2025, consisting of $3.1 million of cash and cash equivalents, $5.3 million of fixed maturity securities and $0.5 million of equity securities.

Credit Agreement

On May 28, 2024, EHI entered into a Credit Agreement (the Credit Agreement) with Wells Fargo Bank National Association, as both administrative agent and issuing lender. The Credit Agreement provides for a $25.0 million, unsecured, three-year revolving credit facility and is guaranteed by certain of EHI's wholly owned subsidiaries, Employers Group, Inc. (EGI) and Cerity Group, Inc. (CGI). Borrowings under the Credit Agreement may be used for working capital and general corporate purposes of EHI and its subsidiaries. Pursuant to the terms of the Credit Agreement, EHI has an option to request an increase of the credit available under the facility up to a maximum facility amount of $35.0 million, subject to the consent of the lender(s) and the satisfaction of certain conditions.

The interest rates applicable to loans under the Credit Agreement are generally based on either, at EHI's option: (i) a base rate, defined as the higher of the Prime Rate, the Federal Funds Rate plus 1.25% and the Adjusted Term Secured Overnight Financing Rate (SOFR) for a one-month tenor plus 1.75%, or (ii) an Adjusted Term SOFR Rate, defined as the applicable Adjusted Term SOFR Rate plus 1.75%. In addition, EHI is subject to a fee on the lender’s unused commitment, ranging from 0.30% to 0.55%. The applicable margin and the amount of such commitment fee vary based upon the financial strength rating of EHI’s insurance subsidiaries as most recently announced by AM Best or EHI’s debt to total capitalization ratio if such financial strength rating is not available. Total interest paid and/or fees incurred pursuant to the Credit Agreement was $0.2 million and $0.1 million for the years ended December 31, 2025 and 2024, 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 December 31, 2025, EHI has remained in compliance with all of the covenants associated with the Credit Agreement since its inception.

On January 21, 2026, AM Best reaffirmed its “A” (Excellent) financial strength ratings of EHI’s insurance subsidiaries, originally upgraded in January 2025. Following the January 2025 upgrade, our Credit Agreement terms improved as follows: (i) the applicable margin with respect to SOFR loans was reduced from 1.75% to 1.50%; (ii) the applicable margin with respect to base rate loans was reduced from 0.75% to 0.50%; and (iii) the annual commitment fee on the unused portion of the facility was reduced from 0.35% to 0.30%.

Former Credit Agreement

On December 15, 2020, EHI entered into a Credit Agreement (the former Credit Agreement) with a syndicate of financial institutions. The former Credit Agreement provided EHI with a $75.0 million three-year revolving credit facility and was guaranteed by EHI's wholly owned subsidiaries, EGI and CGI. Borrowings under the former Credit Agreement could be used for working capital and general corporate purposes.

The interest rates applicable to loans under the former Credit Agreement were generally based on, at EHI's option, a base rate plus a specified margin, ranging from 0.25% to 1.25%, or the Adjusted Term SOFR rate, plus a specified margin, ranging from 1.25% to 2.25%. In addition, EHI paid a fee on each lender's unused commitment, ranging from 0.20% to 0.50%. Interest paid and/or fees incurred pursuant to the former Credit Agreement was $0.5 million for the year ended December 31, 2023.

The former Credit Agreement contained covenants that required EHI and its consolidated subsidiaries to maintain: (i) a minimum consolidated net worth; and (ii) a debt to total capitalization ratio of no more than 35%. EHI was in compliance with all the covenants associated with the former Credit Agreement from its inception to its expiration on December 15, 2023.

Dividend and Distribution Ability

Our insurance subsidiaries' ability to pay dividends and distributions is based on their reported capital, surplus, and the amount of dividends paid to their immediate holding company within the prior twelve months. Throughout 2026, EICN, ECIC, EPIC and EAC can pay up to an aggregate of $72.4 million in ordinary dividends to EGI, and CIC can pay up to $5.4 million of ordinary dividends to CGI. Upon receipt of such dividends and upon approval by their respective Boards, EGI and CGI may then, in turn, dividend those amounts to EHI.

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

37

cash for our operating subsidiaries are payments of losses and LAE, commission expenses, underwriting expenses, ceded reinsurance, investment purchases and dividends paid to their parent.

Total cash and investments held by our operating subsidiaries was $2,489.9 million at December 31, 2025, consisting of $156.9 million of cash and cash equivalents, and restricted cash, $2,035.4 million of fixed maturity securities, $191.0 million of equity securities, $10.1 million of short-term investments, and $96.5 million of other invested assets. Sources of immediate and unencumbered liquidity at our operating subsidiaries as of December 31, 2025 consisted of $156.7 million of cash and cash equivalents, $183.5 million of publicly-traded equity securities whose proceeds are available within two business days, and $749.2 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.

On November 17, 2025, EICN obtained a $19.0 million advance from the FHLB at an interest rate of 3.84%, maturing on May 31, 2029. On December 19, 2025, EICN obtained an additional $16.0 million advance from the FHLB at an interest rate of 3.70%, maturing on December 21, 2026. On February 5, 2026, the terms of the $16.0 million advance were revised to an interest rate of 3.79%, maturing on May 31, 2029. These advances were assumed by EHI through an intercompany loan agreement and executed as part of our recently announced recapitalization plan. Interest incurred and paid on these advances during the year ended December 31, 2025 was $0.2 million.

During 2022, our insurance subsidiaries, with the exception of CIC, received aggregate advances of $182.5 million under the FHLB Standard Credit Program. These advances could be repaid at any time without penalty and were collateralized by eligible investment securities. In 2023, our insurance subsidiaries repaid all of its advances under the FHLB Standard Credit Program.

FHLB membership also allows our insurance subsidiaries access to standby Letter of Credit Agreements. Throughout 2022 and 2023, EAC, ECIC, and EPIC had $25.0 million, $35.0 million, and $10.0 million of Letter of Credit Agreements in effect, respectively. On October 9, 2024, EPIC amended its existing Letter of Credit Agreement to increase its capacity to $110.0 million. The Letter of Credit Agreements in effect will expire on March 31, 2026 and may only be used to satisfy, in whole or in part, insurance deposit requirements with the State of California and must be fully secured with eligible collateral at all times (See Note 11 in the Notes to our Consolidated Financial Statements).

We purchase reinsurance annually to protect us against the costs of severe claims and certain catastrophic events. On July 1, 2025, we entered into a new reinsurance program that is effective through June 30, 2026. The reinsurance program consists of one treaty covering excess of loss and catastrophic loss events in four layers of coverage, which includes a 10% co-participation share within each layer of coverage retained by us. Our reinsurance coverage is $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.

Our insurance subsidiaries are required by law to maintain a certain minimum level of surplus on a statutory basis. Surplus is calculated by subtracting total liabilities from total admitted assets. The amount of capital in our insurance subsidiaries is maintained relative to standardized capital adequacy measures such as risk-based capital (RBC), as established by the National Association of Insurance Commissioners. The RBC standard was designed to provide a measure by which regulators can assess the adequacy of an insurance company's capital and surplus relative to its operations. An insurance company must maintain capital and surplus of at least 200% of RBC. Each of our insurance subsidiaries had total adjusted capital in excess of the minimum RBC requirements that correspond to any level of regulatory action at December 31, 2025.

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 $587.4 million and $630.9 million were on deposit at each of December 31, 2025 and 2024, 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 December 31, 2025 and 2024.

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 $3.1 million and $3.0 million at December 31, 2025 and 2024, 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.

38

The table below shows our net cash flows. For additional information regarding our cash flows, see Item 8, Consolidated Statements of Cash Flows.

Years Ended December 31,

2025

2024

2023

Cash, cash equivalents, and restricted cash provided by (used in):

(in millions)

Operating activities

$

44.7 

$

76.4 

$

49.4 

Investing activities

225.9 

(159.7)

377.3 

Financing activities

(179.1)

(74.8)

(289.5)

Increase (decrease) in cash, cash equivalents, and restricted cash

$

91.5 

$

(158.1)

$

137.2 

Operating Activities

Net cash provided by operating activities in 2025 included net premiums received of $773.2 million and investment income received of $114.3 million. These operating cash inflows were partially offset by net claims payments of $563.5 million, underwriting expenses paid of $163.0 million, commissions paid of $103.1 million, interest and financing fees paid of $0.5 million, other non-recurring expenses paid of $1.1 million, and federal income taxes paid of $11.6 million.

Net cash provided by operating activities in 2024 included net premiums received of $769.9 million, investment income received of $106.6 million and cash received of $14.6 million for the final payment of the Contingent Commission. These operating cash inflows were partially offset by net claims payments of $522.0 million, underwriting expenses paid of $160.7 million, commissions paid of $100.9 million, interest and financing fees paid of $0.1 million, and federal income taxes paid of $31.0 million.

Net cash provided by operating activities in 2023 included net premiums received of $703.4 million and investment income received of $111.6 million. These operating cash inflows were partially offset by net claims payments of $471.6 million, underwriting expenses paid of $157.3 million, commissions paid of $92.7 million, interest and financing fees paid of $5.8 million, lease termination and related disposal payments of $7.8 million, and federal income taxes paid of $30.4 million.

Investing Activities

Net cash provided by investing activities in 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. The cash inflows used in these activities were largely offset by investments of premiums and the reinvestment of funds from investment sales, maturities, redemptions, and interest income.

Net cash used in investing activities in 2024 related primarily to investments of premiums received, the receipt of the Contingent Commission, the reinvestment of funds from investment sales, maturities, redemptions, and interest income. The cash outflows used in these activities were largely 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 in 2023 related primarily to investment sales, maturities, and redemptions whose proceeds were used to fund claims payment, underwriting expenses, stockholder dividend payments, common stock repurchases, and to repay FHLB advances. The cash inflows provided by these activities were largely offset by investments of premiums received and reinvestment of funds from investment sales, maturities, redemptions, and interest income.

Financing Activities

Net cash used in financing activities in 2025 related primarily to stockholder dividend payments and common stock repurchases partially offset by advances received from the FHLB.

Net cash used in financing activities in 2024 related primarily to stockholder dividend payments and common stock repurchases.

Net cash used in financing activities in 2023 related primarily to stockholder dividend payments, common stock repurchases, and repayments of FHLB advances.

Dividends. We paid $29.9 million, $30.3 million, and $29.7 million in regular quarterly dividends to our stockholders and eligible equity plan award holders in 2025, 2024, and 2023, respectively. The declaration and payment of future dividends to our stockholders, including any special dividends, will be at the discretion of our 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 February 18, 2026, the Board declared a $0.32 quarterly dividend per share, payable March 18, 2026, to stockholders of record on March 4, 2026.

39

Repurchases of Common Stock. We repurchased $187.3 million, $41.7 million, and $77.1 million of our common stock in 2025, 2024, and 2023, respectively. On July 26, 2023, our Board authorized a new stock repurchase authorization for repurchases of up to $50.0 million of our common stock from July 31, 2023 through December 31, 2024 (the 2023 Program). On June 10, 2024, the Board authorized a $50.0 million addition to the 2023 Program, increasing our aggregate purchase authority to $100.0 million, and extended the repurchase authority pursuant to the 2023 Program through July 31, 2025. On April 30, 2025, the Board authorized the 2025 Program (the 2025 Program) for repurchases up to $125.0 million of our common stock from May 6, 2025 through December 31, 2026. The 2025 Program replaced the 2023 Program whose remaining repurchase authorization had been exhausted. On October 29, 2025, the Board authorized a $125.0 million addition to the 2025 Program, increasing the aggregate share repurchase authority to $250.0 million. 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 our Board deems relevant. As of December 31, 2025, we had a remaining common stock repurchase authorization of $92.8 million. See Item 5, Issuer Purchases of Equity Securities.

Capital Resources

As of December 31, 2025, the capital resources available to us consisted of $955.7 million of stockholders' equity and the $88.0 million Deferred Gain.

Stockholders' Equity. The following table summarizes our beginning and ending stockholders' equity balance and the changes thereto for each of the years ended December 31, 2025, 2024, and 2023:

December 31,

2025

2024

2023

(in millions)

Beginning Balance

$

1,068.7 

$

1,013.9 

$

944.2 

Stock-based obligations

5.0 

6.2 

6.1 

Stock options exercised

— 

— 

0.7 

Shares withheld to satisfy minimum tax withholdings for certain stock-based obligations

(1.4)

(1.8)

(1.6)

Acquisition of common stock

(187.3)

(41.7)

(77.1)

Dividends declared on common stock and eligible plan awards

(29.9)

(30.0)

(29.4)

Net income for the year

10.8 

118.6 

118.1 

Change in net unrealized gains (losses) on investments, net of taxes

89.8 

3.5 

52.9 

Ending Balance

$

955.7 

$

1,068.7 

$

1,013.9 

Deferred Gain. The Deferred Gain, which totaled $88.0 million and $94.0 million as of December 31, 2025 and 2024, respectively, reflects the unamortized gain from the LPT Agreement. See Note 2 in the Notes to our Consolidated Financial Statements.

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Contractual Obligations and Commitments

Other than operating expenses, our current and long-term cash requirements include the following contractual obligations and commitments as of December 31, 2025:

FHLB Advances

We obtained advances from the FHLB totaling $35.0 million, of which $16.0 million is payable within 12 months.

Leases

We have entered into lease arrangements for certain equipment and facilities. As of December 31, 2025, we had lease payment obligations totaling $4.5 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 December 31, 2025, we had other purchase obligations totaling $7.7 million, of which $3.4 million is payable within 12 months.

Unfunded Investment Commitments

As of December 31, 2025, we had private equity limited partnerships with unfunded investment commitments totaling $11.3 million that can be called at any time.

Unpaid Losses and LAE reserves

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 December 31, 2025, we had unpaid losses and LAE reserves totaling $1,805.8 million, of which $321.0 million is estimated to be payable within 12 months. For a discussion of our reserving process, see ''–Critical Accounting Estimates–Reserves for Losses and LAE.''

The unpaid losses and LAE expense payment patterns are gross of reinsurance recoverables for unpaid losses. As of December 31, 2025, we had reinsurance recoverables on unpaid losses and LAE totaling $386.5 million, of which $27.9 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.

Our Investment Managers follow our written investment guidelines, which are approved by the AFI Committee. Our asset allocation is reevaluated by management and reviewed by the AFI Committee on a quarterly basis. We also utilize our Investment Managers' investment advisory services to assist us in developing a tailored set of portfolio targets and objectives.

As of December 31, 2025, our investment portfolio consisted of 87% fixed maturity securities which had a duration of 4.4, as measured by their sensitivity to changes in interest rates. Our fixed maturity 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 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 December 31, 2025.

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 $184.0 million at December 31, 2025, which represented 8% of our investment portfolio at that time. We also have a $7.5 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 December 31, 2025, and include private equity limited partnerships. Our investments in private equity limited partnerships totaled $96.5 million at December 31, 2025 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

41

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 December 31, 2025, we had unfunded commitments to these private equity limited partnerships totaling $11.3 million.

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 estimated fair value to total invested assets measured at fair value, and the average ending book yield (which is calculated based on the amortized cost of the associated invested assets) as of December 31, 2025.

Category

Estimated Fair Value

Percentage of Total Investments Measured at Fair Value

Book Yield

(in millions, except percentages)

U.S. Treasuries

$

80.1 

3.6 

%

3.8 

%

States and municipalities

159.9 

7.2 

4.7 

Corporate securities

655.3 

29.3 

4.7 

Residential mortgaged-backed securities

802.9 

35.8 

5.1 

Commercial mortgaged-backed securities

28.9 

1.3 

5.6 

Asset-backed securities

163.1 

7.3 

5.7 

Collateralized loan obligations

12.5 

0.6 

5.9 

Foreign government securities

2.0 

0.1 

6.2 

Other securities

136.0 

6.1 

6.4 

Equity securities

184.0 

8.2 

2.3 

Short-term investments

10.1 

0.5 

3.9 

Total investments at fair value

$

2,234.8 

100.0 

%

Weighted average ending yield

4.9 

%

The following table shows the percentage of total estimated fair value of our fixed maturity securities as of December 31, 2025 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”

9.6 

%

“AA”

48.7 

“A”

29.7 

“BBB”

4.5 

Below Investment Grade

7.5 

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 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 our CECL allowance on AFS investments as realized gains and losses. We maintained a CECL allowance of $0.4 million, $1.1 million, and $2.7 million on AFS investments as of December 31, 2025, 2024, and 2023, respectively. The decrease in our CECL allowance of $0.7 million in 2025 was due to the sale of securities that previously had an allowance and the stabilization in the financial markets, which decreased our CECL provision. The remaining fixed maturity securities whose total fair value was less than amortized cost at December 31, 2025, 2024, and 2023, were those in which we had no intent, need or requirement to sell at an amount less than their amortized cost.

For additional information regarding our investments, including the cost or amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of our investments, the amortized cost and estimated fair value of fixed maturity securities by contractual maturity, and net realized and unrealized gains and losses on investments, see Note 5 in the Notes to our Consolidated Financial Statements.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires both the use of estimates and judgment, relative to the application of appropriate accounting policies, which include the recognition of premium revenue, recoverability of deferred income taxes, and valuation of investments. Our accounting policies are described in Note 2 to our Consolidated Financial Statements, however, we believe that the following matters are particularly important to understand our financial statements because changes in these estimates or changes in the assumptions used to make them, could have a material impact on our results of operations, financial condition, and cash flows.

Reserves for Losses and LAE

Accounting for workers' compensation insurance requires us to estimate the liability for the expected ultimate cost of unpaid losses and LAE (loss reserves) as of a balance sheet date. Loss reserve estimates are inherently uncertain because the ultimate amount we pay for many of the claims we have incurred as of the balance sheet date will not be known for many years. Our estimate of loss reserves is intended to equal the difference between the expected ultimate losses and LAE of all claims that have occurred as of a balance sheet date and amounts already paid. We establish loss reserves based on our own analysis of emerging claims experience and environmental conditions in our markets and a review of the results of various actuarial projections. Our aggregate carried loss reserves is the sum of our loss and LAE reserves for each accident year and represents our best estimate of outstanding loss reserves.

The amount by which estimated losses in the aggregate differ from those previously estimated for a specific time period is known as reserve "development." Reserve strengthening is adverse when losses ultimately settle for more than the amount estimated or subsequent estimates indicate a basis for reserve increases, causing the previously estimated loss reserves to be ''deficient.'' Reserve development is favorable when estimates of ultimate losses indicate a decrease in established reserves, causing the previously estimated loss reserves to be ''redundant.'' Development and strengthening are reflected in our operating results through adjustments to incurred losses and LAE during the period in which they are recognized.

Although claims for which reserves are established may not be paid for several years or more, we do not discount loss reserves in our financial statements for the time value of money.

The three main components of our loss reserves are case reserves, incurred but not reported (IBNR) loss reserves, and LAE reserves.

When claims are reported to us, we establish individual estimates of the ultimate cost of each claim (case reserves). These case reserves are continually monitored and revised in response to new information and for amounts paid.

In addition to case reserves, we establish a provision for IBNR. IBNR is an actuarial estimate comprised of the following: (i) future payments on claims that are incurred but have not yet been reported to us; (ii) a reserve for the additional development on claims that have been reported to us; and (iii) a provision for additional payments on closed claims that might reopen. IBNR reserves apply to the entire body of claims arising from a specific time period, rather than a specific claim. Most of our IBNR reserves relate to estimated future claim payments on recorded open claims.

LAE reserves are our estimate of future expense payments to manage, investigate, administer, and settle claims that have occurred, and include legal expenses. LAE reserves are established in the aggregate, rather than on a claim-by-claim basis. LAE reserves are categorized between defense and cost containment, and adjusting and other.

We cede a portion of our obligations for losses and LAE to unaffiliated reinsurers. The amount of reinsurance that will be recoverable on our losses and LAE includes both the reinsurance recoverable from our excess of loss reinsurance contracts, as well as reinsurance recoverable under the terms of the LPT Agreement.

43

Our loss reserves (gross and net of reinsurance), including the main components of such reserves, were as follows:

As of December 31,

2025

2024

(in millions)

Case reserves

$

931.3 

$

938.1 

IBNR

618.4 

611.1 

LAE reserves

256.1 

259.0 

Gross unpaid losses and LAE reserves

1,805.8 

1,808.2 

Less reinsurance recoverable on unpaid losses and LAE, excluding CECL allowance

386.5 

412.4 

Net unpaid losses and LAE reserves

$

1,419.3 

$

1,395.8 

We use actuarial methods to analyze and estimate the aggregate amount of loss reserves. Management considers the results of various actuarial methods and their underlying assumptions, among other factors, in establishing loss reserves.

Judgment is required in the actuarial estimation of loss reserves, including the selection of various actuarial methodologies to project the ultimate cost of claims. Specifically, judgment is required in the following areas: the selection of parameters utilized in the various methodologies; the use of industry data and other benchmarks; and the weighting of differing reserve indications resulting from alternative methods and assumptions. The adequacy of our ultimate loss reserves is inherently uncertain and represents a significant risk to our business. We attempt to mitigate this risk through our claims management processes and by monitoring and reacting to statistics relating to the cost and duration of claims.

We compile and aggregate our claims data by grouping the claims according to the accident year in which the claim occurred when analyzing claim payment and emergence patterns and trends over time. Additionally, we aggregate and analyze claims data by claim type, benefits type, and by state, territory within state, or groups of states in which we do business.

We prepare reserve estimates for all accident years using our own historical claims data, industry data and many of the generally accepted actuarial methodologies for estimating loss reserves, such as paid loss development methods, incurred loss development methods, and Bornhuetter-Ferguson methods. These methods vary in their responsiveness to different information, characteristics, and dynamics in the data, and the results assist the actuary in considering these characteristics and dynamics in the historical data. The methods employed for each segment of claims data, and the relative weight accorded to each method, vary depending on the nature of the claims segment and on the age of the claims.

Each actuarial methodology requires the selection and application of various parameters and assumptions. The key parameters and assumptions include: the future payment and emergence patterns of our aggregate claims data; the magnitude and changes in claim settlement activity; the effects of legislative benefit changes and/or judicial decisions; and trends in the frequency and severity of claims.

We analyze LAE and estimated unpaid LAE separately. These analyses rely primarily on examining the relationship between historical aggregate paid LAE and the volume of claims activity for the corresponding periods. The portion of unpaid LAE that will be recoverable from reinsurers is estimated based on the contractual reinsurance terms.

The ranges of estimates of loss reserves produced are intended to represent the range in which it is most likely that the ultimate losses will fall. These ranges are narrower than the range of indications produced by the individual methods applied because it is not likely that the high or low result will emerge for every claim segment and accident year. Each point estimate of loss reserves for each claim segment is based on a judgmental selection from within the range of results indicated by the different actuarial methods.

Management formally establishes loss reserves for financial statement purposes on a quarterly basis. In doing so, we make reference to the most current actuarial analyses, including a review of the assumptions and the results of the various actuarial methods used. Typically, we conduct comprehensive studies in the second and fourth quarters, and on the alternate quarters, update the results of the preceding quarter's studies for actual claim payment and case reserve activity. In 2025, we conducted a comprehensive study in the second, third, and fourth quarters.

The aggregate carried reserve calculated by management represents our best estimate of our outstanding unpaid losses and LAE. In establishing management's best estimate of unpaid losses and LAE at December 31 for the last two years, we reviewed and considered the following: (i) our actuaries' assumptions, point estimates, and ranges; and (ii) the inherent uncertainty of workers' compensation loss reserves. Management did not quantify a specific loss reserve increment for each uncertainty, but rather established an overall provision that represented management's best estimate of loss reserves in light of the historical data, actuarial assumptions, point estimate and range, and current facts and circumstances.

44

The table below provides the actuarial range of loss and LAE reserves, net of reinsurance, that management considered when selecting its best estimate and our carried reserves.

As of December 31,

2025

2024

(in millions)

Low end of actuarial range

$

1,294.5 

$

1,247.0 

Carried reserves

1,419.3 

1,395.8 

High end of actuarial range

1,538.6 

1,597.2 

As of December 31, 2025, California and Nevada loss reserves represented approximately 60% of our total net loss reserves on our Consolidated Balance Sheet.

In California, our recent loss experience has been impacted by an increase in CT claims frequency. Overall, on a wage-adjusted basis, both indemnity and medical severity have been relatively flat. Our indemnity claims frequency (the number of claims expressed as a percentage of on-leveled premium) has been generally decreasing for non-CT claims but is now showing increases due to the additional emergence of CT claim activity. We believe our claims practices, including our continued emphasis on accelerating claims settlements, as well as our various underwriting initiatives, have a positive impact on our results in California.

In Nevada, we have compiled a lengthy history of workers' compensation claims payment patterns based on the business of the Fund and EICN. The emergence of claims payments in recent years has generally been consistent with expectations which has resulted in relatively minor changes in reserve estimates. Nevada statutorily prohibits entering into full and final settlement of claims, therefore, paid losses largely reflect stable and consistent periodic payments, particularly for indemnity benefits.

Over 50% of our claims payments during the three years ended December 31, 2025 related to medical care for injured workers. The utilization and cost of medical services in the future is a significant source of uncertainty in the establishment of loss reserves for workers' compensation. However, because medical care may be provided to an injured worker over many years, and in some cases decades, the pace of medical claim cost inflation can have a significant impact on our ultimate claim payments. For example, if the rate of medical claim cost inflation increases by 1% above the inflation rate that is implicitly included in the loss reserves at December 31, 2025, we estimate that future medical costs over the lifetime of current claims would increase by approximately $51.0 million on a net-of-reinsurance basis. Under the current elevated inflationary environment, additional inflationary considerations were included in determining the level and adequacy of our reserves, and particular consideration was given to medical and hospital inflation rates as these inflation rates have historically exceeded general inflation rates.

Our reserve estimates reflect expected increases in the costs of contested claims, but do not assume any losses resulting from significant new legal liability theories. Our reserve estimates also assume that there will not be significant future changes in the regulatory and legislative environment. In the event of significant new legal liability theories or new regulation or legislation, we will attempt to quantify its impact on our business.

If the actual loss reserves were at the high or the low end of the actuarial range, the impact on our financial results would have been as follows:

December 31,

2025

2024

Increase (decrease) in reserves (1)

(in millions)

At low end of range

$

(124.8)

$

(148.8)

At high end of range

119.3 

201.4 

Increase (decrease) in stockholders' equity and net income

At low end of range

$

98.6 

$

117.6 

At high end of range

(94.2)

(159.1)

(1) The range of actuarial indications captures the range of reasonable estimates and is asymmetrical (e.g., not based on a normal distribution).

Actual losses are affected by a more complex combination of forces and dynamics than any one model or actuarial methodology can represent, and each methodology is an approximation of these complex forces and dynamics. None of the methods are designed or intended to produce an indication that is systematically higher or lower than the other methods. At any given evaluation date, some of the actuarial projection methods produce indications outside the actuary's selected range. Accordingly, we believe that the range of potential outcomes is considerably wider than the actuarially estimated range of the most likely outcomes. We have no basis for anticipating whether actual future payments of losses and LAE may be either greater than or less than the loss reserves currently on our Consolidated Balance Sheets.

45

Additionally, any adjustment to the estimated ceded reserves under the LPT Agreement results in a cumulative adjustment to the Deferred Gain, which is also included in losses and LAE incurred in the Consolidated Statements of Comprehensive Income (Loss), so that the Deferred Gain reflects the balance that would have existed had the revised reserves been recognized at the inception of the LPT Agreement. The table below provides the actuarial range of estimated liabilities for gross loss reserves under the LPT Agreement and our carried reserves.

As of December 31,

2025

(in millions)

Low end of actuarial range

$

253.9 

LPT carried reserves

259.6 

High end of actuarial range

265.0 

Reinsurance Recoverables

Reinsurance recoverables represent: (i) amounts currently due from reinsurers on paid losses and LAE; (ii) amounts recoverable from reinsurers on estimates of case reserves; and (iii) amounts recoverable from reinsurers on actuarial estimates of IBNR for losses and LAE. These recoverables are based on our current estimates of the underlying loss reserves and are reported on our Consolidated Balance Sheets separately as assets, as reinsurance does not relieve us of our legal liability to policyholders. We bear credit risk with respect to the reinsurers, which could be significant in the future, considering that some of the loss reserves remain outstanding for an extended period of time. Reinsurers may refuse or fail to pay losses that we cede to them, or they might delay payment. We are required to pay losses even if a reinsurer refuses or fails to meet its obligations under the applicable reinsurance agreement. We continually monitor the financial condition and financial strength ratings of our reinsurers. No material amounts related to ceded paid losses have been written-off as uncollectible since our inception in 2000, and in assessing future default, we evaluate the allowance for CECL under the ratings based method using the AM Best Average Cumulative Net Impairment Rates. Reinsurer ratings are also assessed through this process.

Under the LPT Agreement, the Fund initially ceded $1.5 billion in liabilities for the incurred but unpaid losses and LAE related to claims incurred prior to July 1, 1995 for consideration of $775.0 million in cash. The estimated unpaid losses and LAE ceded to the LPT Agreement was $259.6 million as of December 31, 2025. Losses and LAE paid with respect to the LPT Agreement totaled $913.1 million at December 31, 2025. We account for the LPT Agreement as retroactive reinsurance. Entry into the LPT Agreement resulted in a Deferred Gain that was recorded on our Consolidated Balance Sheets as a liability. The Deferred Gain is being amortized using the recovery method, whereby the amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries through the life of the LPT Agreement, and the amortization is reflected in losses and LAE. Changes in estimates of the reserves ceded under the LPT Agreement may significantly impact the Deferred Gain on our Consolidated Balance Sheets and losses and LAE on our Consolidated Statements of Comprehensive Income (Loss).

New Accounting Standards

See Note 3 in the Notes to our Consolidated Financial Statements for a summary of all recently issued and recently adopted accounting standards.