Exzeo Group, Inc. (XZO) Risk Factors

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all of the other information contained in this Report on Form 10-K, before deciding to invest in our common stock. Our business, financial condition, results of operations, and prospects could be materially and adversely affected by any of these risks or uncertainties, as well as by risks or uncertainties not currently known to us, or that we do not currently believe are material. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Summary Risk Factors

There are a number of risks that you should understand before making an investment decision regarding our Company. These risks are discussed more fully below. If any of these risks actually occur, our business, financial condition, or results of operations would likely be materially and adversely affected. In such case, the trading price of our common stock may decline, and you may lose all or part of your investment. These risks include, but are not limited to, the following:

Risks Related to our Business and Industry

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We may not maintain profitability in the future.

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We expect a number of factors to cause our operations to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance.

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We may lose our existing customers and/or fail to acquire new customers. We continue to rely on a relatively small number of customers for a substantial portion of our revenue.

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Our success depends on the continuous development and improvement of our proprietary IaaS platform of products and services, including the development and implementation of new features and analytical models.

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We face intense competition in our industry, which could negatively impact our business, results of operations, and financial condition and cause our market share to decline.

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Natural catastrophes and environmental risks may have significant adverse effects on our customers' property and casualty insurance business, which may prevent us from maintaining or expanding our customer base and increasing our revenue.

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Our estimates and forecasts, including forward-looking financial information, are subject to inherent uncertainties and may differ materially from actual results.

Risks Related to Intellectual Property, Data Privacy, and Cybersecurity

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Our intellectual property and proprietary rights are valuable, and any inability to obtain, maintain, protect, defend, and enforce them could reduce the value of our products and brand.

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An unauthorized disclosure or loss of customer, employee, or other sensitive information, whether through cyber-attack, security breach, or noncompliance with federal or state privacy laws could result in remediation expenses, liability, investigations, and litigation and could adversely affect our business, cash flows, financial condition, and results of operations.

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Our information technology systems may fail or be disrupted or subject to errors, bugs, vulnerabilities, or defects, which could adversely affect our business.

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Any disruption of our internet connections, including with third-party cloud providers that host our websites or web-based services, could affect the performance of our IaaS platform and our business.

Risks Related to Regulation of our Business

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We operate in a highly regulated environment, and any failure to comply with applicable insurance, data privacy, or other regulatory requirements could materially and adversely affect our business, financial condition, and results of operations.

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Regulatory scrutiny of delegated authority and claims administration functions may increase our regulatory compliance costs, limit our flexibility, and adversely affect our business.

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We are subject to stringent fiduciary duties with respect to insurance premium funds, and noncompliance could result in regulatory enforcement or reputational harm.

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We are subject to extensive and evolving data privacy and cybersecurity regulation, which could increase our compliance burden on exposure to liability.

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Our international operations in India expose use to regulatory risks under Indian law and cross-border compliance obligations.

Risks Related to our Relationship with HCI

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HCI controls the direction of our business, and the concentrated ownership of our common stock will prevent you and other shareholders from influencing significant decisions.

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If HCI sells a controlling interest in us to a third party in a private transaction, you may not realize any change of control premium on shares of our common stock, and we may become subject to the control of an currently unknown third party.

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HCI's interests may conflict with our interests and the interests of our other stockholders.

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Our CEO and Chairman of our Board of Directors may have actual or potential conflicts of interests because of his financial interests or positions with HCI.

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We have, and expect to continue to have, significant customer concentration, and substantially all of our revenues to date are from customers who are affiliated with our controlling stockholder, HCI.

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As a standalone public company, we may be unable to achieve some or all of the anticipated benefits of operating independently from HCI.

Risks Related to our Common Stock and the Securities Markets

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Although our common stock is publicly traded, an active or liquid trading market by not be sustained.

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The market price of our common stock may be highly volatile, and you many not be able to resell your shares at or above the current market price.

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Holders of our common stock may be diluted and our stock price may decline due to equity issuances.

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We are an emerging growth company, and the information we provide shareholders may differ from that provided by other public companies, which may result in a less active trading market for our common stock and greater volatility.

Risks Related to Our Business and Industry

We may not maintain profitability in the future.

We may incur significant losses in the future for a number of reasons, including insufficient growth in the number of new customers, a failure to retain our existing customers, and increasing competition, as well as other risks described in this "Risk Factors" section, and we may encounter unforeseen expenses, difficulties, complications and delays, and other unknown factors. We expect to continue to make investments in the development and expansion of our business, which may not result in increased or sufficient revenue or growth, and as a result we may not be able to maintain profitability in the future.

We expect a number of factors to cause our results of operations to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance.

Our revenue and results of operations could vary significantly from quarter to quarter and year to year and may fail to match periodic expectations as a result of a variety of factors, many of which are outside of our control. Our results may vary from period to period as a result of fluctuations in the number of customers purchasing our insurance technology and operations solutions as well as fluctuations in the timing and amount of our expenses. In addition, the P&C insurance industry we serve is subject to its own cyclical trends and uncertainties, including periods of intense pricing competition due to excessive underwriting capacity, periods when shortages of underwriting capacity permit more favorable underwriting profits as well as extreme weather which is often seasonal and may result in volatility in claims reporting and payment patterns. Fluctuations and variability across the industry may also affect our revenue. As a result, comparing our results of operations on a period-to-period basis may not be meaningful, and the results of any one period should not be relied on as an indication of future performance. Our results of operations may not meet the expectations of investors or public market analysts who follow us, which may adversely affect our stock price.

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In addition to other risk factors discussed in this "Risk Factors" section, factors that may contribute to the variability of our quarterly and annual results include:

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our ability to attract and retain new customers and retain our existing customers, including in a cost-effective manner;

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our ability to accurately forecast revenue and losses and appropriately plan our expenses;

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the effects of increased competition on our business;

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our ability to successfully expand our business in existing markets and successfully enter new markets;

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our ability to obtain, maintain, protect, defend, and enforce our existing intellectual property and to create or otherwise acquire new intellectual property;

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our ability to grow our business and effectively manage that growth;

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our ability to keep pace with technology changes in the insurance technology industry and the P&C insurance industry;

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the success of our sales and marketing efforts;

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costs associated with defending claims, including intellectual property infringement, misappropriation, or other claims and related judgments or settlements;

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the impact of, and changes in, governmental or other regulations affecting our business;

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the attraction and retention of qualified employees and key personnel;

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the effectiveness of our internal controls; and

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changes in our tax rates or exposure to additional tax liabilities.

We may lose our existing customers and/or fail to acquire new customers.

Our future operating results will depend, in part, on the rate at which we acquire new customers and on our ability to maintain our relationships with existing customers as measured by the amount of managed premium on our IaaS platform. Our ability to support this expansion depends on the performance of our customer, onboarding, and support teams, which are critical to ensuring high customer satisfaction, adoption, and retention.

We believe that growth of our business and revenue depends upon our ability to expand our business in the geographic markets that we currently serve by retaining our existing customers and adding new customers and to expand our business into new geographic markets across the nation. Expanding into new geographic markets takes time, requires us to navigate and comply with new regulations, and may occur more slowly than we expect. If we lose our existing customers, our value will diminish, materially and adversely impacting our business, operating results and financial condition, our ability to implement our business plan, and, unless we have acquired significant new customers, our ability to continue to operate. In addition, the loss of future customers could lead to diminished revenue, which would adversely impact our profitability. If we fail to remain competitive on customer experience, pricing, and service options, our ability to grow our business may also be adversely affected.

Further, our ability to attract new customers may be adversely affected by the fact that we are majority-owned by HCI, who competes with certain potential customers. Prospective customers who view HCI as a competitor may be reluctant to engage with us, or may elect to seek products and services from other providers, which could materially and adversely impact our growth prospects and results of operations. In addition, customers who compete with HCI may be hesitant to share sensitive business information or data with us, out of concern that such information or data could be accessible to, or used by, HCI to the detriment of the customer, which may further inhibit our ability to win new business.

While a key part of our business strategy is to retain and add customers in our existing markets, we also intend to expand our operations into new markets. In doing so, we may incur losses or otherwise fail to enter new markets successfully. Our expansion into new markets may place us in unfamiliar competitive environments and involve various risks, including competition, government regulation, the need to invest significant resources, and the possibility that returns on such investments will not be achieved for several years or at all.

There are many factors that could negatively affect our ability to grow our customer base, including if:

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our proprietary IaaS platform of products and services fails to achieve market acceptance;

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competing platforms, solutions, products, and services that serve as substitutes for, or represent an improvement over, our platform, solutions, products, and services are introduced and gain market share;

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we lose customers to new market entrants and/or existing competitors;

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we do not obtain regulatory approvals necessary for expansion into new markets;

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we fail to effectively market and advertise;

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we suffer reputational harm to our brand including from negative publicity, whether accurate or inaccurate;

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we fail to provide effective updates to our existing platform, solutions, products, and services or to keep pace with technological improvements in our industry;

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technical or other problems frustrate the policyholder experience, particularly if those problems prevent us from processing and paying claims in a fast and reliable manner, or affect the functionality of the policy administration and underwriting systems; or

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we fail to obtain, maintain, protect, defend, and enforce our intellectual property and proprietary rights.

Our inability to overcome these challenges could impair our ability to attract and retain new customers and retain our existing customers and could have a material adverse effect on our business, operating results, and financial condition.

In addition, if the market for our platform, solutions, products, and services grows more slowly than anticipated, or if demand for our platform, solutions, products, and services does not grow as quickly as anticipated, whether as a result of competition, pricing sensitivities, product obsolescence, technological change, unfavorable economic conditions, uncertain geopolitical environment, budgetary constraints of our customers, or other factors, our business, results of operations, and financial condition would be adversely affected.

We have relied on a small number of customers, the majority of which are affiliated with HCI, for substantially all of our revenue, and we expect to continue to rely on a relatively small number of customers (including our existing customers) for a significant portion of our revenue. The loss of any of these customers would significantly harm our business, results of operations, and financial condition.

We have and expect to continue to have, significant customer concentration. Substantially all of our revenue to dates has been generated from a small number of customers, all of which are affiliated with HCI, our controlling stockholder. Although we have customers that are not affiliated with HCI and may add additional customers over time, we did not generate meaningful revenue from Non-HCI affiliated customers in fiscal year 2025, and we expect that our revenue for the foreseeable future will continue to be heavily dependent on HCI affiliated customers and a relatively small numbers of customer overall. The loss of any of these customers, a reduction in the volume of services we provide to them, or any interruption in their business would significantly harm our business, results of operations and financial condition. In addition, if we fail to expand our customer base, if anticipated customers do not enter into agreements with us, or if existing customers reduce or terminate their use of our services, our revenue could decline and our quarterly and annual results may fluctuate significantly.

Our success will depend on the continuous development and improvement of our proprietary IaaS platform of products and services, including the development and implementation of new features and analytical models.

To date, our IaaS platform of products and services has mainly been utilized internally by affiliates of our company. Our future success will depend on the continuous development and improvement of our proprietary IaaS platform of products and services, including further refinements and enhancements to our data engine, analytical models, proprietary underwriting algorithms, and agent and customer interfaces. The success of our efforts to further develop and refine our IaaS platform depends on several factors, including the timely completion, introduction and effectiveness of such refinements and enhancements. We may not be successful in either developing these refinements and enhancements or in bringing them into use in a timely fashion. Our IaaS platform is expensive and complex, and its continuous development, maintenance and operation may entail unforeseen difficulties, including performance problems or undetected defects, errors, failures, bugs, or vulnerabilities. We may encounter technical obstacles, especially in implementing our platform for new third-party customers, and it is possible that we may discover additional problems that prevent our technology from operating properly. Any of these possibilities would result in a material adverse effect on our business, results of operations, and financial condition.

Estimates of market opportunity may prove to be inaccurate.

Market opportunity estimates, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of potential customers covered by our market opportunity estimates will purchase our insurance technology and operations solutions at all or generate any particular level of revenue for us. Any expansion of our business depends on a number of factors, including the cost, performance, and perceived value associated with our platform, solutions, products, and services and those offered by our competitors.

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We face intense competition in our industry, which could negatively impact our business, results of operations and financial condition and cause our market share to decline.

The market for our insurance technology and operations solutions is intensely competitive and fragmented. This market is subject to changing technology, shifting customer needs, and introductions of new products, solutions, and services. Competitors vary in size and in the breadth and scope of the products, solutions, and services offered. In addition, the competitors we face in any particular state may change depending on, among other things, the breadth and scope of the products, solutions, and services being sold, the geography in which we are operating, and the size of the insurance carrier to which we are selling. The principal competitive factors in our industry include total cost of ownership, product functionality, flexibility, and performance, customer references, and in-depth knowledge of the P&C insurance industry. Competitors may also compete on the basis of the time and cost required for implementation of the applicable products, solutions, and services and/or unique features or functions.

Additionally, we believe that many of our prospective customers operate firmly entrenched legacy systems, some of which have been in operation for decades. We expect that our implementation cycles will be lengthy and variable and will require the investment of significant time and expense. These expenses and associated operating risks attendant on any significant process of technology implementation may cause prospective customers to prefer maintaining their legacy systems. Also, maintaining legacy systems may be so time consuming and costly for prospective customers that they do not have adequate resources to devote to the purchase and implementation of our insurance technology and operations solutions. We also expect to compete against technology consulting firms that either helped create such legacy systems or may own, in full or in part, subsidiaries that develop software and systems for the P&C insurance industry. As we work to expand our business and begin to market our insurance technology and operations solutions to new customers who are not affiliates of HCI, we will also begin to compete with software and service providers we have not competed against previously. Such potential competitors offer data and analytics tools that may, in time, become more competitive with our offerings. In addition, instead of purchasing P&C insurance technology and operations solutions from a third party, including one of our direct competitors, our customers may decide to internally develop their own systems.

We expect the intensity of competition to remain high in the future. In addition to existing competitors in this market, we believe investment in emerging insurance technology or InsurTech companies, which seek to innovate and disrupt the insurance industry, is growing rapidly and could produce new competitive threats. Continuing intense competition could result in increased pricing pressure, increased sales and marketing expenses, and greater investments in research and development, each of which could negatively impact our profitability. In addition, the failure to increase or the loss of market share would harm our business, results of operations, financial condition, and/or future prospects.

Current and potential competitors have longer operating histories, greater name recognition, and greater financial, technical, sales, marketing and other resources than we do, as well as larger customer bases. As a result, such competitors may be able to devote greater resources to the development, promotion and sale of their solutions, products, and/or services than we can devote to ours, which could allow them to respond more quickly than we can to new or emerging technologies and changes in customer needs, thus leading to their wider market acceptance. To the extent any competitor has existing relationships with potential customers for other applications, those customers may be unwilling to purchase our solutions because such existing relationships create customer "stickiness." For instance, if a potential customer uses one product or solution from a competitor that is key to the customer’s day-to-day operations, they may be more likely to turn to such competitor in the future to the extent they require further products or solutions, rather than purchasing products or solutions from us. We may not be able to compete effectively and competitive pressures may prevent us from acquiring and maintaining the customer base necessary for us to increase our revenue and profitability.

In addition, our industry is evolving rapidly, and we anticipate the market for products, solutions, and services like those we provide will become increasingly competitive. New competitors may emerge that offer products, solutions, and services either comparable to ours or better suited than ours to address the demand for such products, solutions, and services, which could reduce demand for our offerings. To compete effectively, we will likely be required to increase our investment in product development and technology, as well as the personnel and third-party services required to improve reliability and lower the cost of delivery of our solutions. This may increase our costs more than we anticipate and may adversely impact our results of operations.

Current and potential competitors may also establish cooperative relationships among themselves or with third parties to further enhance their resources and offerings. Current or potential competitors may be acquired by other vendors or third parties with greater available resources. As a result of such acquisitions, current or potential competitors might be more able than we are to adapt quickly to new technologies and customer needs, to devote greater resources to the promotion or sale of their solutions, products, and services, to initiate or withstand substantial price competition, or to take advantage of emerging opportunities by developing and expanding their offerings more quickly than we can. Additionally, they may hold larger portfolios of patents and other intellectual property rights as a result of such relationships or acquisitions. If we are unable to compete effectively with these evolving competitors for market share, our business, results of operations, and financial condition would be materially and adversely affected.

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Natural catastrophes and environmental risks may have significant adverse effects on our customers’ P&C insurance businesses, which may prevent us from maintaining or expanding our customer base and increasing our revenue.

Our customers are P&C insurers that have experienced, and will continue to experience in the future, losses from catastrophes that have adversely impacted and may in the future adversely impact their businesses. Catastrophes can be caused by various events, including, without limitation, hurricanes, tsunamis, floods, windstorms, earthquakes, hail, tornadoes, explosions, volcanic eruptions, severe weather, excessive heat, epidemics, pandemics, and fires. Climate change and other environmental factors are contributing to an increase in erratic weather patterns globally and intensifying the impact of certain types of catastrophes. The risks associated with natural catastrophes are inherently unpredictable, and it is difficult to forecast the timing of such events or estimate the amount of losses they will generate. Recently, for example, various parts of the United States have suffered extensive damage due to hurricanes, droughts, floods, severe heat and cold events, fires, and other natural disasters. The combined and expected effect of those losses on insurance carriers is significant. Such losses and losses due to future events may adversely impact our existing and potential customers, which may prevent us from maintaining or expanding our customer base and increasing our revenue, as such events may cause customers to postpone new service engagements, discontinue or reduce existing service engagements, or, in severe cases, cease operations entirely. The failure of our existing or one or more potential customers due to these external pressures could result in the loss of those customers or otherwise negatively affect our revenue and growth.

Our preliminary financial information represents management’s current estimates and are subject to change.

The preliminary financial information that we may disclose from time to time represents management’s current estimates based on information available as of the date such information is prepared. These estimates are subject to change and should not be viewed as a substitute for our actual financial results. Our actual results for any period are not available until we complete the preparation of our financial statements for that period. Final results may differ materially from preliminary estimates due to the completion of accounting adjustments, the review of our financial statements by our independent registered public accounting firm, and any other developments that may arise before our financial results are finalized.

Any preliminary financial information we release has not been audited, reviewed, compiled, or subjected to agreed‑upon procedures by our independent registered public accounting firm, and therefore they do not express an opinion or any form of assurance on such information.

There may be consolidation in the insurance industry, which could reduce the use of our platform, solutions, products, and services and adversely affect our revenues.

Mergers or consolidations among our customers could reduce our number of existing customers and potential customers. This could adversely affect our revenues even if these events do not reduce the aggregate number of customers or the activities of the consolidated entities. If our existing customers or future customers merge with or are acquired by other entities that are not our customers, or that purchase more limited solutions, products, and services from us, they may discontinue or reduce the scope of solutions, products, and services we provide to them. Any of these developments could materially and adversely affect our business, results of operations, and financial condition.

Large potential customers may have substantial negotiating leverage, which may require that we agree to terms and conditions that result in increased cost of sales, decreased revenue, and lower average selling prices and gross margins, all of which could harm our results of operations.

Our target market for potential customers includes large P&C insurers. These customers may have significant bargaining power when negotiating new agreements with us and have the ability to buy similar products, solutions, and services from other companies or to develop such products, solutions, and services internally. These customers may have and may continue to seek advantageous pricing and other commercial and performance terms that may require us to develop additional features in the products we utilize in providing services to them or add complexity to our customer agreements. These customers may also delay making payments under agreements, or at renewal, in an attempt to obtain more favorable terms from us. We may be required to reduce the average price of our products, solutions, and services in response to these pressures. If we are unable to avoid reducing our average prices, our results of operations could be harmed.

We may fail to set the optimal pricing and packaging of our insurance technology and operations solutions, which could negatively impact our growth strategy and ability to effectively compete in the market.

We may face challenges in selling our insurance technology and operations solutions to insurers that have internally developed their own proprietary software, and we face competition from emerging and established vendors. As a result, these companies may offer lower prices, additional solutions, products, or services, or other incentives that may impact our ability to maintain our prices.

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The market for our insurance technology and operations solutions is constantly evolving, and our pricing and packaging decisions are made based on the best information available at the time, but may change significantly in the future from our expectations. We expect that we will continually analyze and refine our pricing and packaging models to adapt to this dynamic environment. For example, we may need to change our pricing in future periods in response to market demands, the inflation and interest rate environment, or increased costs. Our contracts are generally multi-year in duration and unforeseen changes could impact the profitability of certain contracts. Further, as competitors introduce new solutions, products, and services that compete with ours or reduce their prices, we may be unable to attract new customers or retain existing customers based on our historical pricing. In addition, if our mix or bundle of solutions, products, and services sold changes, then we may need to, or choose to, revise our pricing. As a result, we may be required or choose to reduce our prices or change our pricing model, which could harm our business, results of operations, and financial condition. In addition, we cannot predict whether our current or prospective customers, or the market in general, will accept these changes. If these adjustments do not gain acceptance, our business and operational results could be adversely affected. Failure to identify an optimal pricing and packaging strategy may harm our business and operational outcomes. Should customers reject our new or modified pricing plans, we may face increasing challenges in attracting new customers and retaining existing ones, particularly if we attempt to apply new pricing models to current customers.

Because the business conducted by our customers is highly concentrated in Florida and other coastal states, adverse economic conditions, natural disasters, or regulatory changes in these states could adversely affect our customers’ and, in turn, our financial condition, results of operations, and cash flows.

A significant portion of the business conducted by our customers is concentrated in Florida and other coastal states. The insurance business is primarily a state-regulated industry, and therefore, state legislatures may enact laws that adversely affect the insurance industry. Because the business conducted by our customers is concentrated in Florida and other coastal states, both we and our customers face greater exposure to unfavorable changes in regulatory conditions in those states than companies whose operations are more diversified through a greater number of states. In addition, the occurrence of adverse economic conditions, natural or other disasters, or other circumstances specific to or otherwise significantly impacting these states could adversely affect the financial condition, results of operations, and cash flows of our customers, which could, in turn, adversely affect our financial condition, results of operations, and cash flows in the event that our customers are unable to pay us in accordance with the terms of our agreements with them.

We expect that our sales cycles may be lengthy and variable, may depend upon factors outside our control, and may cause us to expend significant time and resources.

The sales cycle for our IaaS platform of products and services may be lengthy and unpredictable, require extensive pre-purchase evaluation by potential new customers, involve a significant operational decision by potential new customers, and be affected by factors outside of our control. Our sales efforts will involve educating potential new customers about the use and benefits of our platform, including the technical capabilities of our platform, the potential cost savings achievable by organizations deploying our platform, and the benefits and risks associated with cloud-based products. Customers may undertake a significant evaluation process, involving not only our platform of products and services, but also those of our competitors. We expect to spend substantial time, effort, and money in our sales efforts without any assurance that our efforts will produce sales, and our customers have significant negotiating power during the sales process which may result in a lengthy sales cycle and significant contractual complexity. Additionally, we may be unable to predict the size and terms of the initial contract with a potential customer until late in the sales cycle, which would affect our ability to accurately forecast revenue. In addition, if we commit to include specific features in our platform at the request of a customer or group of customers, we may be unable to recognize revenue until the specific features have been delivered as part of our platform of products and services. Providing this additional functionality may be time consuming and may involve factors that are outside of our control. Potential future customers may also insist that we commit to certain time frames in which our platform of products and services will be operational or that, once operational, our platform of products and services will be able to meet certain operational requirements. Our ability to meet such timeframes and requirements may involve factors that are outside of our control, and failure to meet such timeframes and requirements could result in us failing to attract and/or retain new customers, incurring penalties and costs, and/or making additional resource commitments, which would adversely affect our business and results of operations.

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Before our IaaS platform of products and services can be utilized by our customers, it must be integrated with our customers’ and/or third parties’ systems and customer and/or third-party data must be added to it. This process can be complex, time consuming, and expensive for our customers and can result in delays in the implementation and deployment of our platform of products and services. Failing to meet the expectations of our customers with respect to our platform of products and services could result in a loss of customers and negative publicity about us and our platform of products and services. Such failure could result from deficiencies in our platform’s capabilities, performance issues, or inadequate service by us. The consequences of such failure could include monetary credits, reduced fees for additional products or services or upon renewal of existing agreements for products and services, potential reversals of previously recognized revenue, renegotiating existing customers’ contractual terms, and a customer’s refusal to pay their contractually obligated fees and costs. In addition, time-consuming and delayed implementations may also increase the amount of services personnel we must allocate to the implementation for it to be successful, thereby increasing our costs and adversely affecting our business, results of operations, and financial condition.

We utilize models to provide services to our customers in key areas such as underwriting, reserving, risk management, reinsurance purchasing, and the evaluation of catastrophe risk, and our customers and our business could be adversely impacted if these models are inadequate or unfit for the purpose for which they are being used.

We employ various modeling techniques (for example, scenario, predictive, stochastic, and/or forecasting models) to analyze and estimate exposures and risks for our customers. We utilize modeled outputs and related analyses to assist us in providing services to our customers, for example, related to underwriting and pricing, reserving, risk management, reinsurance purchasing, and the evaluation of catastrophe risk through estimates of probable maximum losses. The modeled outputs and related analyses, both from proprietary and third-party models, are subject to various assumptions, professional judgment, uncertainties, and the inherent limitations of any statistical analysis, including the use and quality of historical internal and industry data. These models may turn out to be inadequate representations of the underlying subject matter, including as a result of inaccurate inputs or application thereof (whether due to data error, human error, or otherwise). Further, to the extent we incorporate automation and machine learning as part of our modeling process, this may lead to heightened risk. Consequently, actual losses from loss events, whether from individual components (for example, wind, flood, earthquake, etc.) or in the aggregate, may differ materially from modeled results. If, based upon these models or other factors, we misprice products or underestimate the frequency and/or severity of loss events, our results of operations, financial condition, and liquidity may be adversely affected. In addition, probable maximum losses are based on results of stochastic models that consider a wide range of possible events, their losses and probabilities. It is important to consider that stochastic events are not an exact representation of actual events. Thus, an actual event does not necessarily resemble one of the stochastic events, and the specific characteristics of the actual event can lead to substantial differences between actual and modeled losses.

With respect to the evaluation of catastrophe risk, our modeling utilizes a mix of historical data, scientific theory, and mathematical methods. Output from multiple commercially available vendor models serves as a key input in our PML estimation process. We believe that there is considerable inherent uncertainty in the data and parameter inputs for these vendor models. In that regard, there is no universal standard in the preparation of insured data for use in the models and the running of modeling software. In our view, the accuracy of the models depends heavily on the availability of detailed insured loss data from actual recent large catastrophes. Due to the limited number of events, there is significant potential for substantial differences between the modeled loss estimate and actual company experience for a single large catastrophe event. This potential difference could be even greater for perils with limited or no modeled annual frequency. We perform our own vendor model validation (including sensitivity analysis and backtesting, where possible) and supplement model output with historical loss information and analysis and management judgment. In addition, we derive our own estimates for non-modeled perils. Despite this, our PML estimates are subject to a high degree of uncertainty, and actual losses from catastrophe events may differ materially.

We rely on highly skilled and experienced personnel and if we are unable to attract, retain, or motivate key personnel or hire qualified personnel, our business may be seriously harmed. In addition, the loss of our CEO and Chairman, President, Chief Financial Officer or other key senior management personnel could harm our business and future prospects.

Our performance largely depends on the talents and efforts of highly-skilled and experienced individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate, and retain highly skilled and experienced personnel and, if we are unable to hire and train a sufficient number of qualified employees for any reason, we may not be able to maintain or implement our current business strategy or grow our business. Moreover, certain of our competitors in the insurance and insurance technology or InsurTech industries may seek to hire our existing employees, may compete with us in hiring new employees, and may have greater resources than we do. We cannot assure you that we will provide adequate incentives to attract, retain, and motivate employees in the future. If we do not succeed in attracting, retaining, and motivating highly qualified personnel, our business may be seriously harmed. Our operations are highly dependent on the efforts of our senior executive officers, particularly our CEO and Chairman

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of our board of directors, Paresh Patel, our President, Kevin Mitchell, and our Chief Financial Officer, Suela Bulku. The loss of Paresh Patel, architect of our proprietary policy administration and underwriting technology, Kevin Mitchell, or Suela Bulku could materially adversely impact our business, results of operations, and financial condition. Further, to the extent that our business grows, we will need to attract and retain additional qualified management personnel in a timely manner, and we may not be able to do so. Our future success depends on our continuing ability to identify, hire, develop, motivate, retain, and integrate highly skilled personnel in all areas of our organization.

We may not continue to grow at historical rates in the future.

Our limited operating history may make it difficult to evaluate our current business and our future prospects. While our revenue has grown in recent periods, this growth rate may not be sustainable and should not be considered indicative of future performance, and we may not realize sufficient revenue to maintain profitability in the future. As we focus on growing our business, we expect our revenue growth rates may slow in future periods for a number of reasons, which may include lack of a broader demand for our products, increasing competition, a decrease in the growth of our overall market, and our failure to capitalize on growth opportunities.

We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new platform features, solutions, products, and services or enhance our existing platform, solutions, products, and services, improve our operating infrastructure, or acquire complementary businesses and technologies. Many factors will affect our capital needs as well as their amount and timing, including our growth and profitability, regulatory requirements, market disruptions, and other developments. If our present capital is insufficient to meet our current or future operating requirements, we may need to raise additional funds through financings or curtail our growth. We expect to evaluate financing opportunities from time to time, and our ability to obtain financing in the future will depend, among other things, on our development efforts, business plans, and operating performance, as well as the condition of the capital markets at the time we seek financing. We cannot be certain that financing will be available to us on favorable terms, or at all.

If we raise funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. Moreover, any debt financing that we secure in the future could subject us to restrictive covenants relating to our capital raising activities, our ability to make certain types of investments or payments, and other financial and operational matters, which may increase our difficulty to obtain capital or to pursue business opportunities, including new platform, product, and service offerings and potential acquisitions. We may not be able to obtain financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be impaired, and our business, revenue, results of operations, and financial condition may be materially harmed.

Future acquisitions or investments contain inherent strategic, execution, and compliance risks that could disrupt our business and harm our financial condition.

We may pursue acquisitions or investments to grow our business in line with our strategic objectives. There is no guarantee that these acquisitions or investments (whether for internal technology or products used or for external uses) will achieve the desired return sought. Or, these acquisitions or investments could cause additional risk due to the liabilities or unforeseen expenses such acquisitions or investments may bring, such as higher than expected costs due to market competition for the acquisition/investment, regulatory approval requirements, delays in implementation, lost opportunities that could have been pursued with cash being used, litigation or regulatory enforcement post-acquisition or investment, contingent liabilities, implementation cost, misalignment of culture, loss of technology through theft or trade secrets exchanged, loss of key partners/vendors, timing within overall economic environment, carrying costs, and tax liabilities. Additionally, the risks from future acquisitions or investments could result in impairment charges against goodwill or increases in the liabilities on our Consolidated Balance Sheets, as well as missed earnings results.

Litigation and legal proceedings filed by or against us and our subsidiaries could have a material adverse effect on our business, results of operations and financial condition.

From time to time, we may be subject to allegations and may be party to litigation and other legal proceedings relating to our business operations. Litigation and other legal proceedings may include complaints from or litigation by customers related to alleged breaches of contract or otherwise.

We expect to face risks associated with litigation of various types arising in the normal course of our business operations, including, without limitation, general commercial, breach of contract, indemnification, and employment

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disputes. We cannot predict with any certainty what impact such litigation would have on our business. If we were to be involved in litigation and it was determined adversely, it could require us to pay significant damages or to change aspects of our operations, either of which could have a material adverse effect on our financial results. Even claims without merit can be time-consuming and costly to defend and may divert management’s attention and resources away from our business and adversely affect our business, results of operations, and financial condition. In addition to increasing costs, a significant volume of customer complaints or litigation could also adversely affect our brand and reputation, regardless of whether such allegations have merit or whether we are liable. We cannot predict with certainty the costs of defense, the costs of prosecution, insurance coverage, or the ultimate outcome of litigation or other legal proceedings filed by or against us, including remedies or damage awards, and adverse results in such litigation and other legal proceedings may harm our business and financial condition.

Our business may be materially adversely impacted by U.S. and global market and economic conditions adverse to the insurance industry.

We expect to continue to derive most of our revenue from the insurance technology and operations solutions we provide to the P&C insurance industry. Given the concentration of our business activities in this industry, we will be particularly exposed to certain economic downturns affecting the insurance industry, in particular the P&C insurance industry. U.S. and global market and economic conditions have been, and continue to be, disrupted and volatile. General business and economic conditions that could affect us and our customers include fluctuations in economic growth, debt and equity capital markets, liquidity of the global financial markets, the availability and cost of credit, investor and consumer confidence, inflation, and the strength of the economies in which our customers operate. A poor economic environment could result in significant decreases in demand for our insurance technology and operations solutions, including the delay, reduction in scope or duration or cancellation of current or anticipated agreements, or could present difficulties in collecting accounts receivables from our customers due to their deteriorating financial condition. In addition, customers may be acquired by or merged into other entities that use our competitors’ products, or they may decide to terminate their relationships with us for other reasons. As a result, our sales could decline if a customer is merged with or acquired by another company that has a poor economic outlook or is closed.

Our brand may not become as widely known or accepted as competitors’ brands or the brand may become tarnished.

Many of our competitors have brands that are well-recognized. As a new entrant into the broader insurance technology and services market, we expect to spend considerable amounts of money and other resources on creating brand awareness and building our reputation with potential customers. We may not be able to build brand awareness to levels matching our competitors, and our efforts at building, maintaining, and enhancing our reputation with customers could fail and/or may not be cost-effective. Complaints or negative publicity about our business practices, our marketing and advertising campaigns, our compliance with applicable laws, data privacy or security issues, and other aspects of our business, whether real or perceived, could diminish confidence in our brand, which could adversely affect our reputation and business. As we work to enter new markets, we will need to establish our reputation with new customers, and to the extent we are not successful in creating positive impressions, our business in these newer markets could be adversely affected. While we may choose to engage in a broader marketing campaign to further promote our brand, this effort may not be successful or cost effective. If we are unable to maintain or enhance our reputation or enhance customer awareness of our brand in a cost-effective manner, our business, results of operations, and financial condition could be materially adversely affected.

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Risks Related to Intellectual Property, Data Privacy, and Cybersecurity

Our intellectual property and proprietary rights are valuable, and any inability to obtain, maintain, protect, defend, and enforce them could reduce the value of our products and brand.

Our trade secrets, trademarks, copyrights, and other intellectual property rights are important assets for us. Our ability to compete effectively will be dependent in part on our ability to obtain, maintain, protect, defend, and enforce our intellectual property and other proprietary rights, including our proprietary technology. We rely on, and expect to continue to rely on, various agreements with our employees, independent contractors, consultants, and other third parties with whom we have relationships, as well as trademark, trade dress, domain name, copyright, and trade secret laws and regulations, to protect our brand and other intellectual property rights. Such agreements, laws, and regulations may not effectively prevent unauthorized use or disclosure of our confidential information, intellectual property, or technology and may not provide an adequate remedy in the event of unauthorized use or disclosure of our confidential information, intellectual property, or technology, and we may fail to consistently obtain, police, and enforce such agreements. Additionally, various factors outside our control pose a threat to our intellectual property rights, as well as to our products and technologies. For example, we may fail to obtain effective intellectual property protection. Also, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective in all cases. For example, governmental entities that grant intellectual property rights may deny our applications for such rights despite our best efforts. Additionally, granted intellectual property rights are subject to challenge. Successful challenges may result in such rights being narrowed in scope or declared invalid or unenforceable. Despite our efforts to obtain and protect broad intellectual property rights, there can be no assurance our intellectual property rights will be sufficient to protect against others offering platforms and solutions that are substantially similar to ours and compete with our business, and unauthorized parties may attempt to copy aspects of our technology and use information that we consider proprietary. Competitors or other third parties may also attempt to circumvent or design around our intellectual property rights. In each case, our ability to compete could be significantly impaired.

We have filed, and may continue in the future to file, applications to protect certain of our innovations and intellectual property. We have not applied for any patents and cannot give assurances that any patent applications will be made by us or that, if they are made, they will be granted. We do not know whether any of our applications will result in the issuance of a trademark or copyright, as applicable, or whether the examination process will require us to narrow our claims or otherwise limit the scope of such intellectual property. In addition, we may not receive competitive advantages from the rights granted under our intellectual property. Our existing intellectual property, and any intellectual property granted to us or that we otherwise acquire in the future, may be contested, circumvented, or invalidated, and we may not be able to prevent third parties from infringing our intellectual property rights. Therefore, the exact effect of the protection of this intellectual property cannot be predicted with certainty. Because obtaining patent protection requires disclosing our inventions to the public, such disclosure may facilitate our competitors developing improvements to our innovations. Given this risk, we have chosen not to, and in the future may sometimes choose not to seek patent protection for certain innovations and instead rely on trade secret protection. Any failure to adequately obtain such patent protection, or other intellectual property protection, could later prove to adversely impact our business.

We currently hold various domain names relating to our brand, including Exzeo.com. Failure to protect our domain names could adversely affect our reputation and brand and make it more difficult for users to find our website. We may be unable, without significant cost or at all, to prevent third parties from acquiring domain names that are similar to, infringe upon, or otherwise decrease the value of our trademarks and other proprietary rights.

In addition to registered intellectual property rights such as trademark and domain name registrations, we rely on non-registered proprietary information and technology, such as trade secrets, confidential information, know-how, and technical information. Certain information or technology that we endeavor to protect as trade secrets may not be eligible for trade secret protection in all jurisdictions, or the measures we undertake to establish and maintain such trade secret protection may be inadequate. In order to protect our proprietary information and technology, we rely in part on agreements with our employees, independent contractors, consultants, and other third parties that place restrictions on the use and disclosure of this intellectual property and confidential information. In some cases, these agreements may not adequately protect our trade secrets or confidential information, these agreements may be breached, or this intellectual property, including trade secrets, may otherwise be disclosed or become known to our competitors, which could cause us to lose a competitive advantage resulting from this intellectual property. However, our employees, independent contractors, consultants, or other third parties with whom we do business may nonetheless use intellectual property owned by others in their work for us, and disputes may arise as to the rights in related or resulting know-how and inventions. Current or future legal requirements may require us to disclose certain proprietary information or technology, such as our proprietary algorithms to regulators or other third parties, including our competitors, which could impair or result in the loss of trade secret protection for such information or technology. In addition, any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection of our trade secrets or other proprietary information could harm our business, results of operations, and competitive position.

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We may be required to spend significant resources in order to monitor and protect our intellectual property rights, and some violations may be difficult or impossible to detect. To prevent substantial unauthorized use of our intellectual property and proprietary rights, it may be necessary to prosecute actions for infringement, misappropriation, or other violations of our intellectual property and proprietary rights against third parties. In addition, third parties may seek to challenge, invalidate, or circumvent our trademarks, copyrights, trade secrets, or other intellectual property and proprietary rights, or any applications for any of the foregoing, including through administrative processes such as re-examination or interference, or litigation. The legal standards relating to the validity, enforceability, and scope of protection of intellectual property and proprietary rights are uncertain and still evolving. The value of our intellectual property and proprietary rights could also diminish if others assert rights therein or ownership thereof, and we may be unable to successfully resolve any such conflicts in our favor or to our satisfaction. Litigation to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management and could result in the impairment or loss of portions of our intellectual property. There can be no assurance that we will be successful in such action, even when our rights have been infringed, misappropriated, or otherwise violated. Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights or asserting that we infringe third-party intellectual property rights, and if such defenses, counterclaims, or countersuits are successful, we could lose valuable intellectual property and proprietary rights. The unauthorized copying or use of our proprietary technology, as well as any costly litigation or diversion of our management’s attention and resources, could impair the functionality of our platform, delay introductions of enhancements to our platform, result in our substituting inferior or more costly technologies into our platform, or harm our reputation or brand. In addition, we may be required to license additional technology from third parties to develop and market new offerings or platform features, which may not be on commercially reasonable terms or at all and could adversely affect our ability to compete.

While we take precautions designed to protect our intellectual property, it may still be possible for competitors and other unauthorized third parties to copy our technology and use our proprietary brand, content, and information to create or enhance competing products, which could adversely affect our competitive position in our rapidly evolving and highly competitive industry. Some license provisions that protect against unauthorized use, copying, transfer, and disclosure of our technology may be unenforceable under the laws of certain jurisdictions and foreign countries. While we enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with our third-party providers and strategic partners, we cannot guarantee that we have entered into such agreements with each party that has or may have had access to our proprietary information, know-how, and trade secrets or that has developed intellectual property on our behalf, and these agreements may be insufficient to protect us, especially if breached. Further, no assurance can be given that these agreements will be effective in controlling access to, and use, distribution, misuse, misappropriation, reverse engineering, or disclosure of, our technology, platform, products, and proprietary information. Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our offerings. Moreover, these agreements may not provide an adequate remedy for breaches or in the event of unauthorized use or disclosure of our confidential information or technology, or infringement of our intellectual property. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret or know-how is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, trade secrets and know-how can be difficult to protect and some courts inside and outside the United States are less willing or unwilling to protect trade secrets and know-how. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us, and our competitive position would be materially and adversely harmed. Additionally, individuals not subject to invention assignment agreements may make adverse ownership claims to our current and future intellectual property, and, to the extent that our employees, independent contractors, consultants, or other third parties with whom we do business use intellectual property owned by others, as to the rights in related or resulting know-how and inventions.

Changes to existing laws or regulations or new laws or regulations could impede our use of our confidential information, intellectual property, or technology, or require that we disclose our confidential information, intellectual property, or technology to our competitors, which could impair our competitive position and could have a material adverse effect on our business, operating results, and financial condition.

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We use open source software in our proprietary IaaS platform, which may pose particular risks in a manner that could have a negative effect on our business.

We use open source software in our proprietary IaaS platform and anticipate continuing to use open source software in the future. Some open source software licenses require those who distribute open source software as part of their own software product to publicly disclose all or part of the source code of such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost, and we may be subject to such terms. The terms of certain open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide our platform of products and services. Additionally, we could face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we develop using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license, or cease offering the implicated products and services unless and until we can re-engineer such source code to eliminate use of such open source software. This re-engineering process could require us to expend significant additional research and development resources, and we may not be able to complete the re-engineering process successfully. We may also incur significant legal expenses defending such allegations or be subject to significant damages. If we are required by the terms of any open source license to release our proprietary source code, it could allow our competitors to create similar software with lower development effort and time and ultimately could result in a loss of customers for us.

In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties, assurance of title, or controls on the origin or operation of the open source software, which are risks that cannot be eliminated, and could, if not properly addressed, negatively affect our business. There is typically no support available for open source software, and we cannot ensure that the authors of open source software will implement or push updates to address security risks or will not abandon further development and maintenance. We have established processes to help alleviate these risks, including a review process for screening requests from our development teams for the use of open source software, but we cannot be sure that all of our use of open source software is in a manner that is consistent with our current policies and procedures, or will not subject us to liability. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have a negative effect on our business, financial condition and operating results.

Claims by others that we infringe, misappropriate, or otherwise violate, or have infringed, misappropriated, or otherwise violated, their proprietary technology or other intellectual property rights could harm our business.

From time to time, third parties may assert claims of infringement, misappropriation, or other violations of intellectual property rights against us. As we become more well known and face increasing competition, the possibility of receiving a larger number of intellectual property claims against us grows. In addition, various "nonpracticing entities" and other intellectual property rights holders may attempt to assert intellectual property claims against us or seek to monetize intellectual property rights they own to extract value through licensing or other settlements. Although we may have meritorious defenses, there can be no assurance that we will be successful in defending against these allegations or in reaching a business resolution that is satisfactory to us. Many potential litigants, including some of our competitors, have the ability to dedicate substantial resources to the assertion of their intellectual property rights. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim, could distract our management from our business, and could require us to cease use of such intellectual property.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, we risk compromising our confidential and proprietary information during this type of litigation. We may be required to pay substantial damages, royalties, or other fees in connection with a claimant securing a judgment against us, we may be subject to an injunction or other restrictions that prevent us from using or licensing our intellectual property, or from operating under our brand, or we may agree to a settlement that prevents us from using, selling, or licensing certain portions of our insurance technology and operations solutions, which could adversely affect our business, results of operations, and financial condition. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Our use of third-party software, data, and other intellectual property rights also may be subject to claims of infringement or misappropriation. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that such personnel have divulged proprietary or other confidential information to us. Further, we may be unaware of intellectual property rights or proprietary rights of others that may cover some or all of our insurance technology and operations solutions.

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With respect to any intellectual property rights claim, we may have to seek out a license to continue operations found or alleged to violate such rights, which may not be available, or if available, may not be available on favorable or commercially reasonable terms and may significantly increase our operating expenses. Some licenses may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us. If a third party does not offer us a license to its intellectual property on reasonable terms, or at all, we may be required to develop alternative, non-infringing technology, which could require significant time (during which we would be unable to continue to use, sell, or license the affected part of our insurance technology and operations solutions), effort, and expense and may ultimately not be successful. Any of these events could adversely affect our business, results of operations, and financial condition.

Our business and IaaS platform make extensive use of third-party data.

We utilize third-party data to support and develop our IaaS platform of products and services. We anticipate that we will continue to rely on this third-party data in the future. We cannot ensure that this third-party data will continue to be available to us on commercially reasonable terms, if at all. Any defects or errors in the third-party data could adversely affect the operation of our IaaS platform. Many of the risks associated with the use of third-party data cannot be eliminated, and these risks could negatively affect our brand and business.

In addition, we leverage data, technology, and proprietary underwriting algorithms to enhance risk management. For instance, we leverage dynamic data sources obtained through various sources and apply advanced statistical methods to model that data into our pricing algorithm. We expect to improve our ability to manage risk and price risk accurately over time as we incorporate new external data sources and utilize the experience gained over time with our own customer base. These enhancements are expected to lead to better underwriting, lower loss frequency, and lower loss ratios over time – after adjusting for weather-related events. Our success in this area depends on our ability to continuously incorporate new data sources as they become available and effectively apply them to improve our ability to accurately and competitively price risk.

An unauthorized disclosure or loss of customer or employee data or information or other sensitive, confidential, or personal information, including by cyber-attack or other security breach, or a suspected or actual violation of federal or state data privacy or protection laws, regulations, or other obligations, could cause a loss of data or information, give rise to remediation or other expenses, expose us to liability under federal and state laws, and subject us to litigation and investigations, which could have an adverse effect on our business, cash flows, financial condition, and results of operations.

As part of our normal operations, we collect, retain, use, store, transmit, and otherwise process certain sensitive and confidential information, including personal information. We are subject to various federal and state privacy laws, rules and regulations, and contractual obligations regarding the use, storage, sharing, disclosure, protection, and other processing of certain sensitive or confidential information, including the Gramm-Leach-Bliley Act and its state-law progeny. For example, we may currently be, or may become, subject to certain state and federal privacy laws that require enhanced protection of certain types of data or new obligations with regard to data retention, transfer, disclosure, or other processing, all of which may significantly impact our business. Given the rapid development of data protection, privacy, and security laws and regulations, we expect to encounter inconsistent interpretation and enforcement of these laws and regulations.

Our facilities and systems, and those of our third-party service providers and vendors, may be vulnerable to cyber-attacks, security breaches, ransomware, unauthorized activity and access, malicious code, acts of vandalism, computer viruses, theft of data, misplaced or lost data, fraud, misconduct or misuse, social engineering attacks and denial of service attacks, phishing attacks, programming or human errors, physical break-ins, or other disruptions, any of which could result in the loss or disclosure of confidential or personal policyholder or employee information or our own proprietary information, software, methodologies, and business secrets. Our information security risks have increased recently in part because of new technologies, the use of the internet and telecommunications technologies (including mobile and other connected devices) to conduct financial and other business transactions, and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists, and others. In addition to cyber-attacks or other security breaches involving the theft of sensitive, confidential, or personal information, we and our third-party service providers now also face threats from sophisticated hackers who engage in attacks against organizations that are designed to disrupt key business services.

We rely on service providers and vendors to provide certain technology, systems, and services that we use in connection with various functions of our business, including Payment Card Industry Standard compliant credit card processing, and we may entrust them with confidential or personal information. The information systems of our third-party service providers and vendors are also vulnerable to an increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt to gain access to these systems or our information through fraud or other means of deceiving our associates, third-party service providers, or vendors. Hardware, software, or applications we obtain from third parties may contain defects in design or manufacture or other problems that could unexpectedly

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compromise information security. The methods used to obtain unauthorized access, disable or degrade service, or sabotage systems are also constantly changing and evolving and may be difficult to anticipate or detect for long periods of time. Ever-evolving threats mean our third-party service providers and vendors must continually evaluate and adapt their own respective systems and processes, and there is no assurance that they will be adequate to safeguard against all data security breaches or misuses of data. Any future significant compromise or breach of our data security via a third-party service provider or vendor could result in additional significant costs, lost revenues, fines, lawsuits, and damage to our reputation.

Notwithstanding our efforts to create security barriers to such threats, it is virtually impossible for us to entirely mitigate these risks, and we cannot ensure that we will be able to identify, prevent, or contain the effects of possible cyber-attacks or other cybersecurity risks in the future that may bypass our security measures or disrupt our information technology systems or business. While we have implemented safeguards and processes to thwart unwanted intrusions and to protect the data in our platform and computer systems, whether housed internally or externally by third parties, such safeguards and the cybersecurity measures taken by our third-party service providers may be unable to anticipate or detect these techniques or implement adequate preventative measures quickly enough to prevent all attempts to compromise our platform. Additionally, our remediation efforts may not be successful or timely. Further, notwithstanding any contractual rights or remedies we may have, because we do not control our third-party service providers, including their security measures and the processing of data by our third-party service providers, we cannot ensure the integrity or security of measures they take to protect customer information and prevent data loss.

Noncompliance or perceived noncompliance with any privacy or security laws, rules, regulations, or contractual obligations, or our privacy policies, or any security breach, cyber-attack, or cybersecurity breach, and any incident involving the misappropriation, loss, or other unauthorized disclosure or use of, or access to, sensitive, confidential, or personal information, could require us to expend significant capital and other resources to continue to modify or enhance our protective measures and to remediate any damage caused by such breaches or violations. In addition, this could result in interruptions to our operations and damage to our reputation, misappropriation of confidential or personal information, or regulatory enforcement actions or investigations, material fines and penalties, litigation, or other liability or actions which could have a material adverse effect on our business, cash flows, financial condition, and results of operations. As the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs.

We make public statements about our use and disclosure of personal information through our privacy policies, information provided on our website and/or press statements. Although we endeavor to comply with our public statements and documentation, we may at times fail to do so or be alleged to have failed to do so. The publication of our privacy policies and other statements that provide promises and assurances about data privacy and security can subject us to potential government or legal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices. Moreover, from time to time, concerns may be expressed about whether our platform, products, solutions, and services compromise the privacy of customers and others. Any concerns about our data privacy and security practices, even if unfounded, could damage the reputation of our business, discourage potential customers from using our platform, products, solutions, and services, and have a material adverse effect on our business.

In addition, our insurance coverage may not be adequate to cover costs, expenses, and losses associated with such events, and in any case, such insurance may not cover all of the types of costs, expenses, and losses we could incur to respond to and remediate a security breach. Any incidents may result in loss of, or increased costs of, our cybersecurity insurance. We also cannot ensure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims related to a security incident or breach, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or coinsurance requirements, could adversely affect our reputation and our business, financial condition, and results of operations. In addition to costs associated with investigating and fully disclosing a data breach, we could be subject to regulatory proceedings or private claims by affected individuals resulting in substantial monetary fines or damages, and our reputation would likely be harmed.

Our information technology systems may fail or be disrupted or subject to errors, bugs, vulnerabilities, or defects, which could adversely affect our business.

Our business and our IaaS platform of products and services are highly dependent upon the successful and uninterrupted functioning of our computer and data processing systems. Our information technology systems are complex, and therefore undetected errors, failures, bugs, vulnerabilities, or defects may be present in our products and services or occur in the future in our products and services, our technology or software, or technology or software we license in from third parties, including open source software, especially when updates or new products are released. The failure or disruption of these systems could interrupt our operations and result in a material adverse effect on our business.

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The growth of our business is dependent upon the successful development and implementation of advanced computer and data processing systems as well as the development and deployment of new information technologies to streamline our operations, including our policy administration, underwriting, and data analytics services. The failure of these systems to function as planned could slow our growth and adversely affect our future business volume and results of operations. Real or perceived errors, failures, bugs, vulnerabilities, or defects in our information technology systems could result in negative publicity, loss of or delay in market acceptance of our products and services, harm to our brand, and weakening of our competitive position. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend significant additional resources in order to help correct the problem. Any real or perceived errors, failures, bugs, vulnerabilities, or defects in our information technology systems could also impair our ability to attract new customers, retain existing customers, or expand their use of our products and services, which would adversely affect our business, results of operations, and financial condition. Additionally, our computer and data processing systems could become obsolete or could cease to provide a competitive advantage which could negatively affect our future results of operations. We may also be subject to liability claims for damages related to real or perceived errors, failures, bugs, vulnerabilities, or defects in our information technology systems. A material liability claim may harm our business and results of operations.

We conduct our business primarily from offices located in Tampa, Florida, where tropical storms could damage our facilities or interrupt our power supply. The loss or significant impairment of functionality in these facilities for any reason could have a material adverse effect on our business, although we believe we have sufficient redundancies to replace our facilities if functionality is impaired. In the event of a disaster causing a complete loss of functionality at our Tampa location, we plan to temporarily use our secondary office in Ocala, Florida to continue our operations.

Any disruption of our Internet connections, including to any third-party cloud providers that host any of our websites or web-based services, could affect the success of our IaaS platform of products and services and our business.

Any system failure, including network, software, or hardware failure, that causes an interruption in our network or a decrease in the responsiveness of our website or our IaaS platform could result in reduced revenue and potential breaches of our customer contracts. Continued growth in Internet usage could cause a decrease in the quality of Internet connection service. Websites have experienced service interruptions as a result of outages and other delays occurring throughout the worldwide Internet network infrastructure. In addition, there have been several incidents in which individuals have intentionally caused service disruptions of websites. If these outages, delays, or service disruptions frequently occur in the future, usage of our web-based services and our IaaS platform could grow more slowly than anticipated or decline and we may lose revenue and customers.

If the third-party cloud providers that host any of our websites or web-based services were to experience a system failure, the performance of our websites and web-based services, including our IaaS platform, would be harmed. Currently, we rely on two third-party cloud providers to host our websites and web-based services. As a result, it may take significant resources if we need to switch to another cloud provider for any reason. Any disruption of or interference with our use of these third-party cloud providers could impair our ability to deliver our insurance technology and operations solutions to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers, and harm to our operations and our business. In general, third-party cloud providers are vulnerable to damage from fire, floods, earthquakes, acts of terrorism, power loss, telecommunications failures, break-ins, and similar events. The controls implemented by our current or future third-party cloud providers may not prevent or timely detect such system failures, and we do not control the operation of third-party cloud providers that we use. Our current or future third-party cloud providers could decide to close their facilities without adequate notice. In addition, any financial difficulties, such as bankruptcy, faced by our current or future third-party cloud providers, or any of the service providers with whom we or they contract, may have negative effects on our business. If our current or future third-party cloud providers are unable to keep up with our growing needs for capacity or any spikes in customer demand, it could have an adverse effect on our business. Any changes in service levels by our current or future third-party cloud providers could result in loss or damage to our customers’ stored information and any service interruptions at these third-party cloud providers could hurt our reputation, cause us to lose customers, harm our ability to attract new customers, or subject us to potential liability. Our property and business interruption insurance coverage may not be adequate to fully compensate us for losses that may occur. Additionally, our systems are not fully redundant, and we have not yet implemented a complete disaster recovery plan or business continuity plan. Although the redundancies we do have in place will permit us to respond, at least to some degree, to service outages, our current or future third-party cloud providers that host our IaaS platform are vulnerable in the event of failure. We do not yet have adequate structure or systems in place to recover from a third-party cloud provider’s severe impairment or total destruction, and recovery from the total destruction or severe impairment of any of our third-party cloud providers could be difficult and may not be possible at all.

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In addition, our customers depend on Internet service providers, online service providers, and other website operators for access to our website and IaaS platform. These providers could experience outages, delays and other difficulties due to system failures unrelated to our systems. Any of these events could seriously harm our business, results of operations, and financial condition.

The increasing adoption by states of cybersecurity regulations could impose additional compliance burdens on us and expose us to additional liability.

In response to the growing threat of cyber-attacks, certain jurisdictions have begun to consider new cybersecurity measures, including the adoption of cybersecurity regulations. Some jurisdictions have enacted more generalized data privacy and security laws, rules, and regulations that apply to certain data that we process. Although we take steps to comply with financial industry cybersecurity regulations and other data privacy and security laws, our failure to comply with new or existing cybersecurity laws, rules, and regulations could result in material regulatory actions, litigation, fines, reputational harm, and other penalties. In addition, efforts to comply with new or existing cybersecurity or privacy laws, rules, and regulations could impose significant costs on our business, which could materially and adversely affect our business, financial condition, and results of operations.

Risks Related to Regulation of Our Business

We operate in a highly regulated environment, and any failure to comply with applicable insurance, data privacy, or other regulatory requirements could materially and adversely affect our business, financial condition, and results of operations.

Our business operates within a complex, evolving, and highly regulated legal environment across federal, state, and international jurisdictions. We provide IaaS solutions to P&C insurers, and as such, we are subject to a wide array of regulatory obligations relating to insurance operations, consumer protection, data privacy, cybersecurity, and compensation practices. While we do not underwrite insurance risk or issue policies in our own name, we perform delegated functions such as policy administration, claims handling, premium collection, and underwriting support on behalf of licensed insurers. These services subject us to various state laws and regulations, including licensing and registration requirements, fiduciary responsibilities, and financial oversight. Noncompliance, even if inadvertent, could lead to enforcement actions, monetary penalties, license suspension or revocation, reputational harm, or restrictions on our ability to operate in certain markets.

Our customers upload to and store their customer and other data in our cloud-based platform. We must monitor and comply with a wide variety of laws and regulations regarding the data stored and processed on our cloud-based platform as well as in the operation of our business. Non-compliance with these laws could result in penalties or significant legal liability.

The legal environment of cloud-based technology businesses is evolving, and we are subject to a variety of laws and regulations that involve matters central to our business. Many of these laws and regulations are still evolving and being tested in courts and could be interpreted in ways that could harm our business. These may involve privacy, data protection and personal information, content, intellectual property, data security, and data retention and deletion. In particular, we are subject to federal and state laws regarding privacy and protection of data. Federal and state laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the evolving industry in which we operate, and may be interpreted and applied inconsistently from state to state and inconsistently with our current policies and practices.

Regulatory scrutiny of delegated authority and claims administration functions may increase our regulatory compliance costs, limit our flexibility, and adversely affect our business.

Our business depends on the ability to act under delegated authority from licensed insurance entities. State regulators, guided in part by the NAIC, are increasingly scrutinizing the use of MGAs and third-party administrators, especially where such entities perform core insurance functions. Several states require that MGA and third-party administrator agreements be submitted for review or approval and impose restrictions on the scope of delegated authority.

In connection with our delegated claims administration functions, we are also subject to fair claims practices laws that prohibit, among other things, misrepresentations of coverage, unreasonable delays, or unfair settlement practices. In some states, claims adjusters must be licensed and comply with continuing education and conduct requirements. Any failure by us or by third-party adjusters we oversee, to comply with these standards may expose us to administrative actions, penalties, or litigation.

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Emerging regulatory initiatives could impose additional burdens on companies like ours, including mandatory disclosures, expanded fiduciary requirements, governance standards, and oversight obligations. These changes may require us to renegotiate customer contracts, enhance internal compliance infrastructure, or limit the services we are permitted to perform, all of which could adversely affect our business operations and profitability.

Failure to maintain required licenses in one or more jurisdictions could disrupt our business and impair our ability to grow.

We are required to maintain a variety of licenses across jurisdictions, including insurance agency, MGA, and claims adjuster licenses, as well as registrations in states where we perform regulated functions. Licensing requirements vary by jurisdiction and often include background checks, disclosures of ownership and key personnel, continuing education, and annual renewals.

A lapse in any required license, whether due to administrative oversight, changes in state law, or increased regulatory scrutiny, could result in our inability to service existing customers or enter new markets. In certain cases, losing a license in one jurisdiction could result in negative publicity that affects our relationships with insurance carriers and MGAs.

We are subject to stringent fiduciary duties with respect to insurance premium funds, and noncompliance could result in regulatory enforcement or reputational harm.

In many jurisdictions, insurance premiums collected and held by MGAs or third-party administrators are considered fiduciary assets. We may be required to maintain premium trust accounts, implement reconciliation and segregation protocols, and ensure the timely remittance of funds to insurers. Failure to adhere to these fiduciary responsibilities, whether due to internal error, systems failure, or fraud, could lead to state enforcement actions, fines, and possible revocation of licensure. Any such incident could also damage our reputation with customers and regulators and undermine our credibility as a reliable insurance services provider.

We are subject to extensive and evolving data privacy and cybersecurity regulation, which could increase our compliance burden and exposure to liability.

Our operations involve the collection, storage, and processing of significant volumes of sensitive personal and financial data, including information from insurance policyholders, applicants, and claims. We are subject to a growing body of federal and state data privacy and cybersecurity laws, such as the NAIC Insurance Data Security Model Law (adopted in several states). These laws require the implementation of comprehensive data protection programs, security risk assessments, breach notification protocols, and vendor oversight processes. Although we take steps to comply with applicable cybersecurity regulations, our failure to comply with new or existing cybersecurity regulations could result in regulatory actions and other penalties. In addition, efforts to comply with new or existing cybersecurity regulations could impose significant costs on our business.

Regulatory frameworks governing data privacy and cybersecurity are rapidly evolving. Future regulations could require us to modify or restrict the use of certain technologies, increase governance and disclosure requirements, or impose additional compliance costs. Noncompliance with data privacy or cybersecurity regulations could result in investigations, enforcement actions, litigation, or reputational damage.

Our relationships with insurance carriers are subject to regulatory oversight and third-party risk.

The insurance companies with which we do business are themselves subject to regulation by state departments of insurance, including solvency and reserve requirements. We cannot guarantee that all of our insurance company partners are in compliance with all applicable regulations. If any of these partners face regulatory action, insolvency, or are otherwise adversely impacted, we may be required to expend resources addressing related inquiries or disruptions to our operations. This could divert management attention and negatively affect our results of operations.

Our international operations in India expose us to regulatory risks under Indian law and cross-border compliance obligations.

Our proprietary technology platform is developed and maintained by our subsidiary in India. These international operations expose us to a range of regulatory obligations under Indian law, including employment, tax, data protection, and cybersecurity requirements. In particular, India’s Digital Personal Data Protection Act, enacted in 2023, and related implementing regulations expected to be operational in 2025, is a new legal framework designed to protect individuals’ personal data and introduces obligations related to consent management, data handling, breach notification, and cross-border data transfers that may affect how we conduct business.

We may also be affected by restrictions on data localization, changes to labor laws, or new corporate compliance mandates in India. Additionally, our cross-border operations must comply with anti-corruption laws such as the U.S. Foreign Corrupt Practices Act, which imposes obligations relating to internal controls, recordkeeping, and the prohibition of bribery of foreign officials.

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Failure to comply with applicable Indian or U.S. regulations could result in fines, sanctions, reputational harm, or disruption to our technology development. Although policies and procedures are designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, or agents will not violate our policies. Geopolitical instability, policy shifts, or infrastructure disruptions in India could also interfere with our technology operations, potentially impairing our ability to deliver services to customers.

Changes in state insurance laws or regulations, or new interpretations of existing laws, could impose significant additional compliance costs or impede our ability to operate certain aspects of our business.

Insurance regulation continues to evolve in response to market innovation, increased use of technology, and heightened consumer protection concerns. State regulators and the NAIC are increasingly focused on governance of delegated authority arrangements and third-party risk management, particularly where core insurance functions are outsourced. New legislation or regulatory guidance, such as model acts adopted by individual states, could impose more stringent operational, financial, or governance obligations on us.

Any such changes could require us to modify our business practices, increase investment in compliance infrastructure, or limit our ability to offer certain services, any of which could adversely affect our business and results of operations.

Federal regulation of the insurance industry is evolving and may increase our compliance obligations and costs.

The U.S. federal government generally has not directly regulated the insurance industry. However, the federal government has undertaken initiatives or considered legislation in several areas that may affect the insurance industry. The Dodd-Frank Act also established the Federal Insurance Office, which is authorized to study, monitor, and report to Congress on the insurance industry and to recommend that the Financial Stability Oversight Council designate an insurer as an entity posing risks to U.S. financial stability in the event of the insurer’s material financial distress or failure. Any additional regulations established as a result of the Dodd-Frank Act or actions in response to the Federal Insurance Office could increase our costs of compliance or lead to disciplinary action. In addition, legislation has been introduced from time to time that, if enacted, could result in the federal government assuming a more direct role in the regulation of the insurance industry, including federal licensing in addition to or in lieu of state licensing and reinsurance for natural catastrophes. We cannot predict whether future federal laws or regulations will be enacted, nor how existing federal initiatives may evolve. However, any expansion of federal regulation could increase our compliance costs, lead to duplicative or conflicting requirements, or require changes to our business practices, which could adversely affect our business, financial condition, and results of operations.

Risks Related to Our Relationship with HCI

As our controlling stockholder, HCI has significant control over the direction of our business, and the concentrated ownership of our common stock will prevent you and other stockholders from influencing significant decisions.

HCI currently owns a controlling interest in our outstanding common stock, which represents a majority of our total outstanding shares of common stock and voting power. As long as HCI continues to control shares representing a majority of our voting power, it will generally be able to determine the outcome of all corporate actions requiring stockholder approval (unless supermajority approval of such matter is required), including the election of directors. Even if HCI were to control less than a majority of our voting power, HCI may be able to influence the outcome of corporate actions so long as it owns a significant portion of our voting power. If HCI does not dispose of its shares of our common stock, HCI could retain control over us for an extended period of time or indefinitely.

Other stockholders may not be able to affect the outcome of any stockholder vote while HCI controls the majority of our voting power. Due to its ownership and rights under our amended and restated articles of incorporation and bylaws, HCI is able to control, subject to applicable law, the composition of our board of directors, which in turn is able to control all matters affecting us, including, among other things

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any determination with respect to our business direction and policies, including the appointment and removal of officers and, in the event of a vacancy on our board of directors, additional or replacement directors;

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any determinations with respect to mergers, business combinations or dispositions of assets;

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determination of our management policies;

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determination of the composition of the committees on our board of directors;

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our financing policy;

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our compensation and benefit programs and other human resources policy decisions;

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•
termination of, changes to, or determinations under our agreements with HCI;

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changes to any other agreements that may adversely affect us;

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our dividend policy; and

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determinations with respect to our tax returns.

Because HCI’s interests may differ from ours or from those of our other stockholders, actions that HCI takes with respect to us, as our controlling stockholder, may not be favorable to us or our other stockholders.

If HCI sells a controlling interest in us to a third party in a private transaction, you may not realize any change-of-control premium on shares of our common stock, and we may become subject to the control of a currently unknown third party.

HCI holds a majority of our voting power. HCI has the ability, should it choose to do so, to sell some or all of its shares of our common stock in a privately negotiated transaction, which, if sufficient in size, could result in a change-of-control of us.

The ability of HCI to privately sell its shares of our common stock, with no requirement for a concurrent offer to be made to acquire all of our publicly traded shares, could prevent other stockholders from realizing any change‑of‑control premium on their shares of our common stock that may otherwise accrue to HCI on its private sale of the shares of our common stock it holds. Additionally, if HCI privately sells shares representing a significant portion of our common stock, we may become subject to the control of a presently unknown third party. Such third party may have conflicts of interest with other stockholders.

HCI’s interests may conflict with our interests and the interests of our other stockholders. Conflicts of interest between HCI and us could be resolved in a manner unfavorable to us and our other stockholders.

Various conflicts of interest between us and HCI could arise. HCI’s interests as our controlling stockholder may differ from our interests or those of our other stockholders. Additionally, ownership interests of our CEO and chairman of our board of directors, Paresh Patel, in our common stock and in the stock of HCI, or his service as a director and officer of both companies, could create or appear to create potential conflicts of interest when he is faced with decisions relating to us or our business. These decisions could include:

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corporate opportunities;

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the impact that operating decisions for our business may have on HCI’s Consolidated Financial Statements;

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differences in tax positions between HCI and us, particularly in light of the tax allocation agreement among HCI and its subsidiaries, including us;

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the impact that operating or capital decisions (including the incurrence of indebtedness) for our business may have on HCI’s current or future indebtedness or the covenants under that indebtedness;

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future, potential commercial arrangements between HCI (or its affiliates) and us or between HCI and third parties;

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business combinations involving us;

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our dividend policy;

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management stock ownership; and

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the intercompany agreements between HCI (or its affiliates) and us.

Furthermore, disputes may arise between HCI (or its affiliates) and us relating to our past and ongoing relationships and these potential conflicts of interest may make it more difficult for us to favorably resolve such disputes, including those related to:

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tax, employee benefits, indemnification, and other matters arising from our IPO;

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the nature, quality, and pricing of services HCI agrees to provide to us;

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the nature, quality, and pricing of services we agree to provide to HCI and/or its affiliates;

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sales or other disposals by HCI of all or a portion of its ownership interest in us; and

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business combinations involving us.

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We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable to us than if we were dealing with an unaffiliated party. While we are controlled by HCI, we may not have the leverage to negotiate amendments to our agreements with HCI and/or its affiliates, if required, on terms as favorable to us as those we would negotiate with an unaffiliated third party.

Our CEO and Chairman of our board of directors may have actual or potential conflicts of interest because of his financial interests in HCI or because of his positions with HCI.

Paresh Patel, our CEO and Chairman, serves as Chairman of the board of directors of HCI and as HCI’s CEO. Mr. Patel also owns HCI common stock, options to purchase HCI common stock, and other HCI equity awards. Mr. Patel’s position at HCI and his ownership of HCI equity and equity awards creates, or may create the appearance of, conflicts of interest when he is faced with decisions that could have different implications for HCI than the decisions have for us. Additionally, because of his positions with HCI, Mr. Patel owns equity interests in both us and HCI. Continuing ownership of HCI shares could create, or appear to create, potential conflicts of interest if we and HCI face decisions that could have implications for both us and HCI. Mr. Patel is our only director, officer or employee who serves as an officer or director of, or is otherwise employed by, HCI as of the date of this report. Potential conflicts of interest may also arise out of commercial arrangements that we currently have with HCI and its affiliates or that we and HCI or its affiliates may enter into in the future.

We may be unable to achieve some or all of the anticipated benefits of being a standalone public company.

We may be unable to achieve the full strategic and financial benefits expected as a result of being a standalone public company, or such benefits may be delayed or not occur at all. These anticipated benefits include the following:

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allowing investors to evaluate the distinct merits, performance and future prospects of our business, independent of HCI;

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enhancing our ability to focus on our own operating priorities, strategies, and specific market dynamics;

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improving our strategic and operational flexibility, allowing us to better target innovation and respond more effectively to different customer needs and the competitive environment for our business;

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allowing us to adopt a capital structure better suited to our financial profile and business needs, without competing for capital with HCI’s other businesses;

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creating an independent equity structure that will facilitate our ability to effect future acquisitions utilizing our capital stock;

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articulating a clear investment proposition and capital allocation policy to attract a long-term investor base aligned with our strategic goals; and

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enhancing employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives of our business.

We may be unable to achieve some or all of the benefits that we expect to achieve as a standalone public company in the time we expect, if at all, for a variety of reasons, including management distractions and potential operational disruptions during the transition; increased exposure to market volatility; and reduced business diversification compared to HCI. Failure to realize the expected benefits of becoming a standalone public company, or delays in doing so, could adversely affect our business, financial condition, cash flows, and results of operations.

We may not be able to effectively perform the administrative and back-office services that we previously received from HCI at the same levels and costs as were previously provided by HCI.

We have previously obtained, but no longer obtain, certain administrative and back-office services from HCI, as we have replicated, developed, or replaced functions and administrative services that we previously received from HCI.

We may not be able to perform these services, either internally or through third-party vendors, on terms and conditions, including cost, comparable to those that we previously received in the past from HCI. Additionally, we may be unable to sustain the services at the same levels or obtain the same benefits as when we were receiving such services and benefits from HCI. If we do not maintain our own adequate systems and business functions at the same levels and costs previously received from HCI, or if we are unable to obtain them from other providers at the same levels and costs previously received from HCI, we may not be able to operate our business effectively or at comparable costs, and our profitability may decline. In addition, we have historically received informal support from HCI and the level of this informal support could diminish or be eliminated in the future.

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Third parties may seek to hold us responsible for liabilities of HCI, which could result in a decrease in our income.

Third parties may seek to hold us responsible for HCI’s liabilities. If those liabilities are significant and we are ultimately held liable for them, we cannot assure that we will be able to recover the full amount of our losses from HCI.

We may be required to make cash payments to HCI for prior tax years under the Tax Allocation Agreement with HCI.

We are a party to a tax allocation agreement with HCI that requires that we pay to HCI the amount of U.S. federal income tax we would owe for each taxable year if we had filed a U.S. federal income tax return for such year as a separate company. If we incur a loss (or have unused tax credits) for a taxable year that can be carried back to prior years, HCI is required to pay us the amount of U.S. federal income tax refund we would be entitled to receive, computed on a separate company basis. If no carryback is allowed, however, HCI is obligated to pay us the amount of the reduction in the consolidated U.S. federal income taxes of HCI’s affiliated group that results from such group’s use of our losses or credits. The Tax Allocation Agreement will automatically terminate with respect to us if our membership in HCI’s affiliated group terminates, but certain rights and obligations arising under the Tax Allocation Agreement will survive termination. We may be required to make cash payments to HCI in respect of taxes for prior years under the Tax Allocation Agreement, which payments could harm our results of operations and financial condition.

We may incur substantial additional costs and experience temporary business interruptions as we continue to operate as an independent, publicly traded company, and we may not be adequately prepared to meet all regulatory and operational requirements in a timely or cost‑effective manner.

We previously operated as part of HCI and historically relied on HCI for certain corporate functions. As an independent public company, we are required to provide internally, or obtain from third‑party providers, the services that HCI previously provided. We may be unable to replace these services on terms as favorable as those provided by HCI or within the timelines necessary to support our operations.

To support our business functions—including accounting and financial reporting, human resources, legal and compliance, communications, engineering, and other operational areas, we have implemented new information technology systems and infrastructure. We may incur higher‑than‑expected costs as we transition from systems previously provided by HCI, and we may experience temporary operational disruptions if these systems do not function as intended, are not integrated effectively, or require additional remediation. Any delays or disruptions in implementing or operating our information technology infrastructure could adversely affect our business and results of operations.

As a public company, we incur significant legal, accounting, compliance, and other expenses. We are also subject to the reporting obligations of the Securities Exchange Act of 1934 and the listing requirements of the New York Stock Exchange. These obligations require substantial management attention and internal resources.

Beginning with our second Annual Report on Form 10‑K, we are required to comply with Section 404 of the Sarbanes‑Oxley Act, which includes annual management assessments of the effectiveness of our internal control over financial reporting. While we are an EGC, we are not required to obtain an attestation report from our independent registered public accounting firm. Nevertheless, we are required to maintain effective internal control over financial reporting and effective disclosure controls and procedures. Meeting these requirements may necessitate additional upgrades to our systems, the implementation of new controls, and the addition of accounting and finance personnel.

If we are unable to implement and maintain effective internal controls, financial reporting systems, information technology systems, or related procedures in a timely and effective manner, we may be unable to comply with our reporting obligations. Any failure to maintain effective internal control over financial reporting, or the identification of a material weakness, could adversely impact our business, financial condition, or results of operations.

Even if we determine, and our auditors concur, that our internal control over financial reporting is effective, inherent limitations in any control system may not prevent or detect all errors, fraud, or misstatements. Any failure of our internal controls could adversely affect the market price of our common stock and our ability to access the capital markets.

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We have a limited operating history as an independent, publicly traded company, and our historical consolidated financial information is not necessarily representative of the results we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.

The historical consolidated financial information included in this report was derived from HCI’s Consolidated Financial Statements and does not necessarily reflect the results of operations or financial position we would have achieved as an independent, publicly traded company during the periods presented, nor is it a reliable indicator of our future results. This is primarily due to the following factors:

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Operations within HCI. We historically operated as part of HCI, which performed various corporate functions for us. Our historical consolidated financial information reflects allocations of corporate expenses from HCI for these functions. These allocations may not reflect the costs we will incur for similar services in the future as an independent, publicly traded company.

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New arrangements with HCI. We have entered, and may in the future enter into transactions with HCI that did not exist prior to our initial public offering, including HCI’s provision of transition or other services, as well as new indemnification obligations. These arrangements have and will result in additional costs.

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Changes resulting from separation. Our historical consolidated financial information does not reflect changes we have experienced and expect to experience as a result of our separation from HCI, including changes in financing, cash management, operations, cost structure, and employee needs. As part of HCI, we benefited from its operating diversity, reputation, size, purchasing power, borrowing capacity, and access to capital. We may lose these advantages after the separation. As an independent entity, we may be unable to purchase goods, services, and technologies, obtain insurance, health care benefits, or software licenses, or access capital markets on terms as favorable as those available to us when we were part of HCI, which may adversely affect our results of operations.

We have also incurred and will continue to incur significant costs and demands on management’s time associated with being an independent, publicly traded company, including costs related to investor relations, public financial reporting, corporate governance, and board of director fees and expenses. For additional information regarding our historical financial performance and the basis of presentation of our Consolidated Financial Statements, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and the related notes included elsewhere in the Annual Report on Form 10-K.

Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

Upon becoming a public company, we became required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes‑Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and will require management to provide an annual management report on the effectiveness of our internal control over financial reporting. Although we are required to disclose changes in our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of internal control over financial reporting pursuant to Section 404 until the year following this first annual report required to be filed with the SEC.

As an EGC, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of (i) the year following our first annual report required to be filed with the SEC or (ii) the date we are no longer an EGC. At such time, our independent registered public accounting firm may issue an adverse opinion if it is not satisfied with the level at which our controls are documented, designed, or operating.

Prior to becoming an independent public company, we did not have our own independent internal audit function, as our internal audit activities have historically been performed by HCI’s audit function. To comply with public‑company requirements, we have undertaken and will need to undertake additional actions, including implementing numerous internal controls and procedures and hiring additional accounting or internal audit staff or consultants. Testing and maintaining internal control can divert management’s attention from other matters important to the operation of our business.

In evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet applicable deadlines under Section 404. If we identify any material weaknesses, are unable to comply with Section 404 in a timely manner, are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm, once required to do so, is unable to express an opinion on the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. We could also become subject to investigations by the SEC, the stock exchange on which our securities are listed, or other regulatory authorities, which could require additional financial and management resources. In addition, if we fail to remedy any material weakness, our financial statements could be inaccurate and we could face restricted access to capital markets.

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Risks Related to Our Common Stock and the Securities Markets

The market price of our common stock may be highly volatile, and stockholders may not be able to resell their shares at desired times or prices.

Although our common stock is listed on the NYSE, our common stock has a limited trading history and the market price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various factors, many of which are beyond our control. These fluctuations could cause investors to lose all or part of their investment, since they may be unable to sell their shares at or above the price they paid.

The following factors, in addition to other factors described in this "Risk Factors" section and elsewhere in this report, may have a significant impact on the market price of our common stock:

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the occurrence of severe weather conditions and other catastrophes;

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our operating and financial performance, quarterly or annual earnings relative to similar companies;

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publication of research reports or news stories about us, our competitors or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;

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the public’s reaction to our press releases, our other public announcements, and our filings with the SEC;

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announcements by us or our competitors of acquisitions, business plans, or commercial relationships;

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any major change in our board of directors or senior management;

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additional sales of our common stock by us, our directors, executive officers or principal stockholders;

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adverse market reaction to any indebtedness we may incur or securities we may issue in the future;

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short sales, hedging, and other derivative transactions in our common stock;

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exposure to capital market risks related to changes in interest rates, realized investment losses, credit spreads, equity prices, foreign exchange rates, and performance of insurance-linked investments;

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our creditworthiness, financial condition, performance, and prospects;

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our dividend policy and whether dividends on our common stock have been, and are likely to be, declared and paid from time to time;

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perceptions of the investment opportunity associated with our common stock relative to other investment alternatives;

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regulatory or legal developments;

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changes in general market, economic, and political conditions;

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conditions or trends in our industry, geographies or customers;

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changes in accounting standards, policies, guidance, interpretations or principles; and

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threatened or actual litigation or government investigations.

In addition, broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance, and factors beyond our control may cause our stock price to decline rapidly and unexpectedly. In addition, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Any adverse determination in litigation could also subject us to significant liabilities.

We will evaluate whether to pay cash dividends on shares of our common stock in the future.

Our board of directors will evaluate whether to pay cash dividends to our stockholders from time to time. The timing, declaration, amount, and payment of any future dividends, if any, will be at the discretion of our board of directors. Decisions regarding the payment of dividends will depend on many factors, including our financial condition, earnings, sufficiency of distributable reserves, capital requirements, debt service obligations, legal requirements, regulatory constraints, opportunities to retain earnings to operate and grow our business, and any other factors our board of directors deems relevant.

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Future issuance of our common stock or other equity securities could result in dilution to existing stockholders.

We may issue additional shares of our common stock or other equity securities in the future for a variety of reasons, including to raise capital, fund acquisitions, compensate employees, or for other corporate purposes. Any such issuances could materially dilute the ownership interests of existing stockholders and may adversely affect the market price of our common stock.

In addition, if we issue equity securities at prices below the then‑current market price of our common stock, or below the prices paid by existing stockholders, those stockholders could experience further dilution. The issuance of additional equity securities, or the perception that such issuances may occur, could also adversely affect the trading price of our common stock.

Holders of our common stock may be diluted due to equity issuances.

Holders of our common stock may be diluted because of equity issuances for acquisitions, capital market transactions, or otherwise, including any equity awards that we will grant to our directors, officers, and employees. Such awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock. We also plan to issue additional stock-based awards, including annual awards, new hire awards, and periodic retention awards, as applicable, to our directors, officers, and other employees under our employee benefits plans as part of our ongoing equity compensation program.

We have broad discretion over the use of the net proceeds from any future offerings and it is possible that we will not use them effectively.

We may raise capital in the future through offerings of equity, debt, or other securities. Our management will have broad discretion over the use of any proceeds we receive in such transactions, and investors will not have the opportunity to evaluate the economic, financial, or strategic merits of how those proceeds are used. The actual use of any future proceeds may vary significantly from our currently expected plans due to a variety of factors, many of which are outside our control.

If our management does not apply any future proceeds effectively, our business, results of operations, and financial condition could be adversely affected. Pending their use, we may invest such proceeds in short‑term instruments or other investments that may not generate meaningful returns or could lose value, which may negatively impact the market price of our common stock.

A substantial portion of the outstanding shares of our common stock may become available for sale in the public market, which could depress the market price of our common stock.

Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could cause the market price of our common stock to decline. A significant portion of our outstanding shares are held by our directors, executive officers, and other large stockholders. These holders may sell their shares in the public market from time to time, subject to applicable securities laws, including Rule 144 under the Securities Act, and any internal policies or contractual restrictions.

As restrictions on resale expire or are no longer applicable, additional shares may become eligible for sale in the public market. Sales of these shares, or the expectation that these sales may occur, could result in increased volatility in the trading price of our common stock and could make it more difficult for us to raise capital through the sale of equity securities on favorable terms, or at all.

In addition, shares issued under our equity compensation plans, including shares issued upon the exercise or vesting of stock‑based awards, may become eligible for sale in the public market. The availability of these shares for sale could also adversely affect the market price of our common stock.

We are an EGC and the information we provide stockholders may be different from information provided by other public companies, which may result in a less active trading market for our common stock and higher volatility in our stock price.

We are an "EGC" as defined by the JOBS Act. We will continue to be an EGC until the earliest to occur of the following:

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the last day of the fiscal year in which our total annual gross revenues first meet or exceed $1.235 billion (as adjusted for inflation);

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the date on which we have, during the prior three-year period, issued more than $1.0 billion in non-convertible debt;

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the last day of the fiscal year in which we (i) have an aggregate worldwide market value of common stock held by non-affiliates of $700 million or more (measured at the end of each fiscal year) as of the last business day of our most recently completed second fiscal quarter and (ii) have been a reporting company under the Exchange Act for at least one year (and filed at least one annual report under the Exchange Act); or

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the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act.

For as long as we are an EGC, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGC, including, but not limited to:

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not being required to comply with the auditor attestation requirements of the assessment of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act;

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exemption from new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies;

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reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements, and registration statements; and

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exemptions from the requirement of holding a nonbinding advisory vote on executive compensation and stockholder approval on golden parachute compensation not previously approved.

We may choose to take advantage of some or all of these reduced burdens while we qualify as an EGC. We have taken advantage of some of these reduced burdens in this Annual Report on Form 10-K, and currently intend to do so in future filings while we qualify as an EGC. For as long as we take advantage of any reduced burdens, the information we provide stockholders may be different from information provided by other public companies. In addition, it is possible that some investors will find our common stock less attractive as a result of these elections, which may result in a less active trading market for our common stock and higher volatility in our stock price.

Some provisions of Florida law and our amended and restated articles of incorporation and bylaws may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.

As a Florida corporation, certain provisions of the FBCA, as well as our amended and restated articles of incorporation and bylaws, may discourage, delay, or prevent a change in control of our company even if such a change in control would be beneficial to our stockholders.

The control share acquisition statute, Section 607.0902 of the FBCA, generally provides that if a person acquires voting shares of a Florida public corporation in excess of 20% of the voting power of all outstanding shares, the acquired shares will not have voting rights unless such rights are restored by the affirmative vote of a majority of the disinterested voting shares of each class or series entitled to vote separately. This excludes shares held by the acquiring person and certain officers or employee‑directors. Certain acquisitions are exempt from these rules, such as shares acquired through interstate succession, gifts, testamentary transfers, mergers or share exchanges effected in compliance with the FBCA when the corporation is a party to the agreement, or acquisitions approved in advance by the board of directors.

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One hundred or more stockholders;

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Its principal place of business, its principal office, or substantial assets within Florida; and

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Either (i) more than 10% of its stockholders are resident in Florida; (ii) more than 10% of its shares are owned by residents of Florida; or (iii) one thousand stockholders are resident in Florida. The residence of a stockholder is presumed to be the address appearing in the corporate records of the company.

Shares held by banks (except as trustee or guardian), brokers, or nominees are disregarded for purposes of calculating these percentages or numbers.

The affiliated transaction (or so-called "business combination") statute, Section 607.0901 of the FBCA, provides that we may not engage in certain mergers, consolidations, sales of assets, issuances of stock, reclassifications, recapitalizations, and other affiliated transactions with any "interested stockholder" for a period of three years following the time that such stockholder became an interested stockholder, unless:

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Prior to the time that such stockholder became an interested stockholder, our board of directors approved either the affiliated transaction or the transaction which resulted in the stockholder becoming an interested stockholder; or

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Upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting shares outstanding at the time the transaction commenced; or

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At or subsequent to the time that such stockholder became an interested stockholder, the affiliated transaction is approved by our board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting shares which are not owned by the interested stockholder.

An "interested stockholder" is generally defined as any person who is the beneficial owner of more than 15% of our outstanding voting shares.

The voting requirements set forth above do not apply to a particular affiliated transaction if one or more conditions are met, including, but not limited to, the following: if the affiliated transaction has been approved by a majority of our disinterested directors; if we have not had more than 300 stockholders of record at any time during the three years preceding the date the affiliated transaction is announced; if the interested stockholder has been the beneficial owner of at least 80% of our outstanding voting shares for at least three years preceding the date the affiliated transaction is announced; if the interested stockholder is the beneficial owner of at least 90% of our outstanding voting shares, exclusive of shares acquired directly from the company in a transaction not approved by a majority of disinterested directors; or if the consideration to be paid to the holders of each class or series of voting shares in the affiliated transaction meets certain requirements of the statute with respect to form and amount, among other things.

Both the control share acquisition statute and the affiliated transactions statute may have the effect of discouraging or preventing certain change of control or takeover transactions involving us.

In addition, our amended and restated articles of incorporation and bylaws contain provisions that may make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions include:

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our board of directors is classified into three classes of directors with staggered three-year terms;

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nothing in our amended and restated articles of incorporation precludes future issuances without stockholder approval of the authorized but unissued shares of our common stock;

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advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders;

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our stockholders will only be able to take action at a meeting of stockholders and not by written consent;

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a special meeting of stockholders can only be called by our chairman of our board of directors, our CEO, our president (in the absence of a CEO), a majority of our board of directors or the holders of 10% or more of all of our votes entitled to be cast on any issue proposed to be considered at the special meeting of stockholders;

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no provision in our amended and restated articles of incorporation or bylaws provides for cumulative voting, which limits the ability of minority stockholders to elect director candidates;

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directors will only be able to be removed for cause;

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our amended and restated articles of incorporation authorize undesignated preferred stock, the terms of which may be established and shares of which may be issued, without the approval of the holders of our capital stock; and

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certain litigation against us can only be brought in Florida.

These provisions could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take corporate actions other than those you desire.

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Our bylaws designate the state courts located within the State of Florida as the exclusive forum for substantially all disputes between us and our stockholders and the federal district courts as the exclusive forum for Securities Act claims, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, or other employees to us or our stockholders, (iii) any action arising pursuant to any provision of the FBCA, our amended and restated articles of incorporation, or our bylaws, or (iv) any other action asserting a claim that is governed by the internal affairs doctrine shall be a state court located within the State of Florida (or, if a state court located within the State of Florida does not have jurisdiction, the federal district court for the Middle District of Florida); provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act, or to any claim for which the federal courts have exclusive jurisdiction. Our bylaws also provide that, unless we consent in writing to the selection of an alternative forum, the U.S. federal district courts shall be the exclusive forum for the resolution of any claims arising under the Securities Act. Under the Securities Act, federal and state courts have concurrent jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.

Our stockholders are deemed to have notice of and have consented to the provisions of our bylaws related to choice of forum. The choice of forum provisions in our bylaws may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. Additionally, the enforceability of choice of forum provisions in other companies’ governing documents has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our bylaws to be inapplicable or unenforceable in such action. If so, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.

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costs associated with defending claims, including intellectual property infringement, misappropriation, or other claims and related judgments or settlements;

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the impact of, and changes in, governmental or other regulations affecting our business;

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the attraction and retention of qualified employees and key personnel;

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the effectiveness of our internal controls; and

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changes in our tax rates or exposure to additional tax liabilities.