What changed in Heritage Insurance Holdings, Inc.'s 10-K — 2024 vs 2025
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Paragraph-level year-over-year comparison of Heritage Insurance Holdings, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.
+805 added−71 removedSource: 10-K (2026-03-12) vs 10-K (2025-03-13)
Top changes in Heritage Insurance Holdings, Inc.'s 2025 10-K
805 paragraphs added · 71 removed · 58 edited across 1 sections
- Item 1A. Risk Factors+805 / −71 · 58 edited
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
58 edited+747 added−13 removed156 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
58 edited+747 added−13 removed156 unchanged
2024 filing
2025 filing
Biggest changeAny of these breaches could impact our policyholders and our business, resulting in a loss of customers, suppliers, or revenue, including interruptions to our operations or damage to our reputation, regulatory enforcement actions, substantial 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.
Biggest changeAny of these breaches could impact our policyholders and our business, resulting in a loss of customers, suppliers, or revenue, including interruptions to our operations or damage to our reputation, regulatory enforcement actions, substantial 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. 31 Table of Contents We have implemented security controls to protect our information technology systems, but experienced programmers or hackers may be able to penetrate our security controls, and develop and deploy viruses, worms and other malicious software programs that compromise our confidential information or that of third parties and cause a disruption or failure of our information technology systems.
In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group owning 15% or more of the corporation’s voting stock for a period of three years 24 following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner.
In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group owning 15% or more of the corporation’s voting stock for a period of three years following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner.
If our products, pricing and commissions do not remain competitive, we may find it more difficult to attract business from existing or new independent agents to sell our products. 18 The failure of our claims department to effectively manage or remediate claims could adversely affect our insurance business, financial results and capital requirements.
If our products, pricing and commissions do not remain competitive, we may find it more difficult to attract business from existing or new independent agents to sell our products. The failure of our claims department to effectively manage or remediate claims could adversely affect our insurance business, financial results and capital requirements.
In addition to these considerations, changes in the frequency and severity of losses suffered by insureds and insurers, including changes resulting from multiple and/or catastrophic weather events, may affect the cycles of the insurance business significantly. 15 We cannot predict whether market conditions will improve, remain constant or deteriorate.
In addition to these considerations, changes in the frequency and severity of losses suffered by insureds and insurers, including changes resulting from multiple and/or catastrophic weather events, may affect the cycles of the insurance business significantly. We cannot predict whether market conditions will improve, remain constant or deteriorate.
Compared to recent history, interest rates have been above historical levels, which may decrease our net income and cash flows. 23 Our credit agreement contains restrictions that can limit our flexibility in operating our business. The agreement governing our credit facilities contains various covenants that limit our ability to engage in certain transactions.
Compared to recent history, interest rates have been above historical levels, which may decrease our net income and cash flows. Our credit agreement contains restrictions that can limit our flexibility in operating our business. The agreement governing our credit facilities contains various covenants that limit our ability to engage in certain transactions.
Although we have paid dividends on our common stock in the past, the declaration and payment of dividends will be at the discretion of our board of directors and will depend on our profits, financial requirements and other factors, such as restrictions under our credit facilities, which limit our ability to pay dividends, and other legal and regulatory restrictions on the payment of dividends, our overall business condition and other elements our board of directors considers relevant.
Although we have paid dividends on our common stock in the past, the declaration and payment of dividends are at the discretion of our board of directors and will depend on our profits, financial requirements and other factors, such as restrictions under our credit facilities, which limit our ability to pay dividends, and other legal and regulatory restrictions on the payment of dividends, our overall business condition and other elements our board of directors considers relevant.
In some instances, these changes may not become apparent until sometime after we have issued insurance policies that are 20 affected by the changes.
In some instances, these changes may not become apparent until sometime after we have issued insurance policies that are affected by the changes.
Item 1A. Risk Factors Set forth below are certain risk factors that could harm our business, results of operations and financial condition. You should carefully read the following risk factors, together with the financial statements, related notes and other information contained in this Annual Report on Form 10-K.
Item 1A. Risk Factor s Set forth below are certain risk factors that could harm our business, results of operations and financial condition. You should carefully read the following risk factors, together with the financial statements, related notes and other information contained in this Annual Report on Form 10-K.
There can be no assurance that this legislation will further reduce the future impact of AOB or litigated claims practices and legislative changes could be reversed in whole or in party in the future. Many legal actions and proceedings have been brought on behalf of classes of complainants, which can increase the size of judgments.
There can be no assurance that this legislation will further reduce the future impact of AOB or litigated claims practices and legislative changes could be reversed in whole or in part in the future. Many legal actions and proceedings have been brought on behalf of classes of complainants, which can increase the size of judgments.
Such volatility may be affected by various factors and events, such as: • our operating results, including a shortfall in revenues or operating performance from that expected by securities analysts and investors; • recognition of large unanticipated accounting charges, such as impairment charges; • changes in securities analysts’ estimates of our financial performance or the financial performance of our competitors or companies in our industry generally; • a downgrade of our Demotech or KBRA rating; • the announcement of a material event or anticipated event involving us or our industry or the markets in which we operate; and • the other risk factors described in this Annual Report.
Such volatility may be affected by various factors and events, such as: • our operating results, including a shortfall in revenues or operating performance from that expected by securities analysts and investors; • recognition of large unanticipated accounting charges, such as impairment charges; 30 Table of Contents • changes in securities analysts’ estimates of our financial performance or the financial performance of our competitors or companies in our industry generally; • a downgrade of our Demotech or KBRA rating; • the announcement of a material event or anticipated event involving us or our industry or the markets in which we operate; and • the other risk factors described in this Annual Report.
As of December 31, 2024, our insurance subsidiaries each maintained a risk-based capital ratio of over 300% and complied with the requirement of our state regulators. Our subsidiary, Heritage P&C, has agreed to continue to maintain a risk-based capital ratio of at least 300%. Our subsidiary, NBIC, has agreed to maintain a risk-based capital ratio requirement of 325%.
As of December 31, 2025, our insurance subsidiaries each maintained a risk-based capital ratio of over 300% and complied with the requirement of our state regulators. Our subsidiary, Heritage P&C, has agreed to continue to maintain a risk-based capital ratio of at least 300%. Our subsidiary, NBIC, has agreed to maintain a risk-based capital ratio requirement of 325%.
Future acquisitions could also result in accounting charges, potentially dilutive issuances of equity securities and increased debt and contingent liabilities, including liabilities related to unknown or undisclosed circumstances, any of which could have a material adverse effect on our business and the market price of our common stock. We may not be able to effectively execute our business diversification strategy.
Future acquisitions could also result in accounting charges, potentially dilutive issuances of equity securities and increased debt and contingent liabilities, including liabilities related to unknown or undisclosed circumstances, any of which could have a material adverse effect on our business and the market price of our common stock. 21 Table of Contents We may not be able to effectively execute our business diversification strategy.
In total, for the period from June 1, 2024 through May 31, 2025, we have purchased an aggregate limit of $3.3 billion of catastrophe reinsurance coverage for Heritage P&C, Zephyr, and NBIC, for multiple catastrophic events. Our ability to access this coverage, however, is subject to the severity and frequency of such events.
In total, for the period from June 1, 2025 through May 31, 2026, we have purchased an aggregate limit of $3.75 billion of catastrophe reinsurance coverage for Heritage P&C, Zephyr, and NBIC, for multiple catastrophic events. Our ability to access this coverage, however, is subject to the severity and frequency of such events.
We currently hold all of our cash in accounts with eight financial institutions and, as a result of this concentration, a portion of the balances in such accounts exceeds the Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
We currently hold all of our cash in accounts with twelve financial institutions and, as a result of this concentration, a portion of the balances in such accounts exceeds the Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
As a result, the full extent of liability under our insurance policies may not be known at the time such policies are issued or renewed, and our financial position and results of operations may be adversely affected. The failure of the risk mitigation strategies we utilize could have a material adverse effect on our financial condition or results of operations.
As a result, the full extent of liability under our insurance policies may not be known at the time such policies are issued or renewed, and our financial position and results of operations may be adversely affected. 24 Table of Contents The failure of the risk mitigation strategies we utilize could have a material adverse effect on our financial condition or results of operations.
The cost and operational consequences of implementing additional data protection measures either as a response to specific breaches or as a result of evolving changes in technology or risks, could be significant and negatively affect our business. 26 The development and implementation of new technologies will require an additional investment of our capital resources in the future.
The cost and operational consequences of implementing additional data protection measures either as a response to specific breaches or as a result of evolving changes in technology or risks, could be significant and negatively affect our income. The development and implementation of new technologies will require an additional investment of our capital resources in the future.
At December 31, 2024, approximately 99% of our total investments were invested in fixed-maturity securities. We may, under certain circumstances, be required to liquidate our investments in securities at prices below book value, which may adversely affect our financial results. This risk could be amplified in periods of rising interest rates.
At December 31, 2025, approximately 99.7% of our total investments were invested in fixed-maturity securities. We may, under certain circumstances, be required to liquidate our investments in securities at prices below book value, which may adversely affect our financial results. This risk could be amplified in periods of rising interest rates.
Changes in the regulation of our business may reduce our profitability, limit our growth or otherwise adversely affect our operations. Our insurance subsidiaries are subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action.
Changes in the regulation of our business may reduce our profitability, limit our growth or otherwise adversely affect our operations. 26 Table of Contents Our insurance subsidiaries are subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action.
We could also overprice risks, which could reduce the number of policies we write and our competitiveness. In either event, our profitability could be materially and adversely affected. Our results of operations may fluctuate significantly based on industry factors.
We could also overprice risks, which could reduce the number of policies we write and our competitiveness. In either event, our profitability could be materially and adversely affected. 18 Table of Contents Our results of operations may fluctuate significantly based on industry factors.
In the northeastern U.S., our three largest agency relationships represent approximately 15% of our annualized premiums, and approximately 51% of our Hawaiian independent agencies are affiliated with three large multi-producer agencies.
In the northeastern U.S., our three largest agency relationships represent approximately 15% of our annualized premiums, and approximately 52.0% of our Hawaiian independent agencies are affiliated with three large multi-producer agencies.
As a result, the impact of possible future assessments on our balance sheet, results of operations or cash flow are indeterminable at this time. Risks Relating to Financing Our variable rate indebtedness subjects us to interest rate risk, which could cause our annual debt service obligations to increase significantly.
As a result, the impact of possible future assessments on our balance sheet, results of operations or cash flow are indeterminable at this time. 28 Table of Contents Risks Related to Financing Our variable rate indebtedness subjects us to interest rate risk, which could cause our annual debt service obligations to increase significantly.
Competitive pressures coupled with market conditions may affect our rate of premium growth and financial results. In addition, industry developments could further increase competition in our industry.
Competitive pressures coupled with market conditions may affect our rate of premium growth and financial results. 20 Table of Contents In addition, industry developments could further increase competition in our industry.
The Florida legislature enacted several reform bills in the last several years with the intention to limit AOB and frivolous litigation. These legislative changes have positively impacted the Florida property insurance market by curtailing AOB and litigated claims abuses.
The Florida legislature enacted several reform bills in the last several years with the intention of limiting AOB and frivolous litigation. These legislative changes have positively impacted the Florida property insurance market by curtailing AOB and litigated claims abuses.
General Risk Factors Our information technology systems, or those of our key service providers, may fail or suffer a loss of security which could adversely affect our business. Our insurance business is highly dependent upon the successful and uninterrupted functioning of our computer and data processing systems.
Risks Related to our Information Technology Systems Our information technology systems, or those of our key service providers, may fail or suffer a loss of security which could adversely affect our business. Our insurance business is highly dependent upon the successful and uninterrupted functioning of our computer and data processing systems.
Regulation limiting rate increases and requiring us to participate in loss sharing may decrease our profitability. From time to time, political dispositions affect the insurance market, including efforts to effectively suppress rates at a level that may not allow us to reach targeted levels of profitability.
Regulation limiting rate increases may decrease our profitability. From time to time, political dispositions affect the insurance market, including efforts to effectively suppress rates at a level that may not allow us to reach targeted levels of profitability.
We rely on these systems to perform actuarial and other modeling functions necessary for writing business, as well as to handle our policy and claims administration process (i.e., handling and adjusting claims, the billing, printing and mailing of our policies, endorsements, renewal notices, etc.). The successful operation of our systems depends on a continuous supply of electricity.
We rely on these systems to perform actuarial and other modeling functions necessary for writing business, as well as to handle our policy and claims administration process (i.e., handling and adjusting claims, the billing, printing and mailing of our policies, endorsements, renewal notices, etc.).
While we believe FHCF currently has adequate capital and financing capacity to meet its reinsurance obligations, there can be no assurance that it will be able to meet its obligations in the future, and any failure to do so could have a material adverse effect on our liquidity, financial condition and results of operations. 16 We carry a significant amount of intangible assets on our consolidated balance sheets.
While we believe FHCF currently has adequate capital and financing capacity to meet its reinsurance obligations, there can be no assurance that it will be able to meet its obligations in the future, and any failure to do so could have a material adverse effect on our liquidity, financial condition and results of operations.
Risks Related to Regulation of Our Insurance Operations We are subject to extensive regulation which may reduce our profitability or limit our growth. Moreover, if we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition and results of operations. We are subject to extensive state regulation.
Moreover, if we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition and results of operations. We are subject to extensive state regulation.
Earnings for future periods may be impacted by impairment charges for intangible assets. We have a significant amount of intangible assets that could be subject to impairment.
We carry a significant amount of intangible assets on our consolidated balance sheets. Earnings for future periods may be impacted by impairment charges for intangible assets. We have a significant amount of intangible assets that could be subject to impairment.
Many factors could affect the ability of our claims department to effectively manage claims by our policyholders, including: • the accuracy of our adjusters as they make their assessments and submit their estimates of damages; • the training, background and experience of our claim’s representatives; • the ability of our claims department to ensure consistent claims handling; • the ability of our claims department to translate the information provided by adjusters into acceptable claims resolutions; • the availability and timing of information from, and the overall degree of cooperation or lack thereof by, policyholders and their representatives; and • the ability of our claims department to maintain and update its claims handling procedures and systems as they evolve over time based on claims and geographical trends in claims reporting.
Many factors could affect the ability of our claims department to effectively manage claims by our policyholders, including: • the accuracy of our adjusters as they make their assessments and submit their estimates of damages; • the training, background and experience of our claim’s representatives; • the ability of our claims department to ensure consistent claims handling; • the ability of our claims department to translate the information provided by adjusters into acceptable claims resolutions; • the availability and timing of information from, and the overall degree of cooperation or lack thereof by, policyholders and their representatives; and • the ability of our claims department to maintain and update its claims handling procedures and systems as they evolve over time based on claims and geographical trends in claims reporting. 22 Table of Contents Any failure to effectively manage the claims adjustment process, including failure to pay claims accurately, could lead to material litigation, undermine our reputation in the marketplace, impair our corporate image and negatively affect our financial results.
Any changes in existing risk-based capital requirements, minimum statutory capital requirements, or applicable writings ratios may require us to increase our statutory capital levels, which we may be unable to do. 22 Litigation or regulatory actions could have a material adverse impact on us. From time to time, we are subject to civil or administrative actions and litigation.
Any changes in existing risk-based capital requirements, minimum statutory capital requirements, or applicable writings ratios may require us to increase our statutory capital levels, which we may be unable to do. 27 Table of Contents Litigation or regulatory actions could have a material adverse impact on us.
Our future success depends on the efforts of our leadership team and workforce. If any other member of senior management dies or becomes incapacitated, or leaves the company to pursue employment opportunities elsewhere, we would be solely responsible for locating an adequate replacement for such senior management and for bearing any related cost.
If any member of senior management retires, dies or becomes incapacitated, or leaves the company to pursue employment opportunities elsewhere, we would be solely responsible for locating an adequate replacement for such senior management and for bearing any related cost.
Insurance companies currently pass these assessments on to holders of insurance policies in the form of a policy surcharge and reflect the collection of these assessments as fully earned credits to operations in the period collected. The collection of these fees, however, may adversely affect our overall marketing strategy due to the competitive landscape of our business.
Insurance companies currently pass these assessments on to holders of insurance policies in the form of a policy surcharge and reflect the collection of these assessments as liability for future payment to the entities levying the assessments. The collection of these fees, however, may adversely affect our overall marketing strategy due to the competitive landscape of our business.
The loss or significant impairment of functionality in these facilities for any reason could have a material adverse effect on our business, as we do not have significant redundancies to replace our facilities if functionality is impaired.
The loss or significant impairment of functionality in these facilities for any reason could have a material adverse effect on our business, as we do not have significant redundancies to replace our facilities if functionality is impaired. Our disaster recovery and business continuity plans involve arrangements with our off-site, secure data centers.
If such services are not performed properly, we may face liability. Although we maintain professional liability insurance to cover losses arising from our repair and remediation services, there can be no assurances that such coverage is adequate.
Additionally, as a component of the claims process, we leverage CAN’s vendor network to provide remediation services to the policyholder. If such services are not performed properly, we may face liability. Although we maintain professional liability insurance to cover losses arising from our repair and remediation services, there can be no assurances that such coverage is adequate.
In addition, changes in technology typically outpace corresponding regulations, which may lead to periods of uncertainty in the permissible uses of certain technology and to differences or even inconsistencies in the regulatory approaches across jurisdictions. The absence of regulations or conflicts in regulations may further limit our ability to implement new technology in an effective and timely manner.
In addition, changes in technology typically outpace corresponding regulations, which may lead to periods of uncertainty in the permissible uses of certain technology and to differences or even inconsistencies in the regulatory approaches across jurisdictions.
Civil litigation frequently results when we do not pay insurance claims in the amounts or at the times demanded by policyholders or their representatives. We also may be subject to litigation or administrative actions arising from the conduct of our business and the regulatory authority of state insurance departments.
From time to time, we are subject to civil or administrative actions and litigation. Civil litigation frequently results when we do not pay insurance claims in the amounts or at the times demanded by policyholders or their representatives.
Unexpected catastrophic events in our coverage areas, such as hurricanes, may result in greater claims losses than anticipated, which could require us to limit or halt our growth while we redeploy our capital to pay these unanticipated claims unless we are able to raise additional capital.
Unexpected catastrophic events in our coverage areas, such as hurricanes, may result in greater claims losses than anticipated, which could require us to limit or halt our growth while we redeploy our capital to pay these unanticipated claims unless we are able to raise additional capital. 23 Table of Contents To the extent that our present capital is insufficient to meet future operating requirements or to cover losses, we may need to raise additional funds through financing or curtail our growth.
Our total cost of obtaining reinsurance over the last few years has increased, both on an absolute basis and as a percentage of premiums-in-force, and could increase in the future. We cannot be assured that reinsurance will remain continuously available to us in the amounts we consider sufficient and at prices acceptable to us.
Our total cost of obtaining reinsurance could increase in the future. We cannot be assured that reinsurance will remain continuously available to us in the amounts we consider sufficient and at prices acceptable to us.
Further, we are subject to other types of litigation inherent in operating our businesses, employing personnel, contracting with vendors and otherwise carrying out our affairs.
We also may be subject to litigation or administrative actions arising from the conduct of our business and the regulatory authority of state insurance departments. Further, we are subject to other types of litigation inherent in operating our businesses, employing personnel, contracting with vendors and otherwise carrying out our affairs.
Moreover, we cannot be certain that we would be able to replace these systems without slowing our underwriting or claims handling response time. A major defect or failure in our internal controls or information technology systems could result in management distraction, harm to our reputation, a loss or delay of revenues or increased expense.
A major defect or failure in our internal controls or information technology systems could result in management distraction, harm to our reputation, a loss or delay of revenues or increased expense.
While we have established infrastructure and geographic redundancy for our critical systems, our ability to utilize these redundant systems requires further testing and we cannot be assured that such systems are fully functional. We are dependent on our executives, key employees and the ability to hire and retain a qualified workforce.
While we have established infrastructure and geographic redundancy for our critical systems, our ability to utilize these redundant systems requires further testing and we cannot be assured that such systems are fully functional. Most of our information technology systems are currently outsourced to third party vendors.
We contract with a third-party vendor to maintain complete daily backups of our systems; however, we have not fully tested our plan to recover data in the event of a disaster. Furthermore, our disaster recovery and business continuity plans involve arrangements with our off-site, secure data centers.
Not all of our systems are fully redundant, and our disaster recovery planning may not be sufficient, despite our testing, to meet our business needs in the event of a material disruption We contract with a third-party vendor to maintain complete daily backups of our systems; however, we have not fully tested our plan to recover data in the event of a disaster.
All residential insurance companies that write admitted business in Florida, including Heritage P&C, are required to obtain reinsurance through the FHCF, and this coverage comprises a substantial portion of the Heritage P&C reinsurance program for our Florida insured properties.
Any failure on the part of any one reinsurance company to meet its obligations to us could have a material adverse effect on our financial condition or results of operations. 19 Table of Contents All residential insurance companies that write admitted business in Florida, including Heritage P&C, are required to obtain reinsurance through the FHCF, and this coverage comprises a significant portion of the Heritage P&C reinsurance program for our Florida insured properties.
If the funds we receive from our subsidiaries, some of which are subject to regulatory restrictions on the payment of distributions, are insufficient to meet our debt obligations, we may be required to raise funds through the issuance of additional debt or equity securities, reduce or suspend dividend payments, or sell assets.
If the funds we receive from our subsidiaries, some of which are subject to regulatory restrictions on the payment of distributions, are insufficient to meet our debt obligations, we may be required to raise funds through the issuance of additional debt or equity securities, reduce or suspend dividend payments, or sell assets. 29 Table of Contents Risks Related to Ownership of Our Common Stock Certain provisions of our certificate of incorporation and our bylaws may make it difficult for stockholders to change the composition of our board of directors and may discourage hostile takeover attempts that some of our stockholders may consider to be beneficial.
If competition limits our ability to write new business at adequate rates, our future results of operations would be adversely affected. We may not be able to effectively integrate newly acquired businesses or achieve expected profitability from acquisitions. We have in the past and may in the future expand through the acquisition of complementary businesses.
We may not be able to effectively integrate newly acquired businesses or achieve expected profitability from acquisitions. We have in the past and may in the future expand through the acquisition of complementary businesses. This could occur through an acquisition of a company or a portion of a company’s business.
We have engaged service providers to provide us with policy and other administration services for certain policies and we intend to continue to utilize third party systems. The failure of any of these systems to function as planned could adversely affect our future business volume service levels and results of operations.
The failure of any of these systems to function as planned could adversely affect our future business volume service levels and results of operations. In addition, we have licensed certain systems and data from third parties.
Currently these entities and organizations include, but are not limited to, state guaranty funds, state joint underwriting associations, fair plans, wind pools, or the FHCF.
We operate in a regulatory environment where certain entities and organizations have the authority to require us to participate in assessments. Currently these entities and organizations include, but are not limited to, state guaranty funds, state joint underwriting associations, fair plans, wind pools, or the FHCF. Additionally, we are required to participate in guaranty funds for insolvent insurance companies.
These and other aspects of the political environment in jurisdictions where we operate may reduce our profitability, limit our growth, or otherwise adversely affect our operations. 21 Various regulatory and legislative bodies have adopted or proposed new laws, regulations or orders to address the cyclical nature of the insurance industry, catastrophic events and insurance capacity and pricing.
Various regulatory and legislative bodies have adopted or proposed new laws, regulations or orders to address the cyclical nature of the insurance industry, catastrophic events and insurance capacity and pricing.
In addition, we have licensed certain systems and data from third parties. We cannot be certain that we will have access to these, or comparable systems, or that our technology or applications will continue to operate as intended.
We cannot be certain that we will have access to these, or comparable systems, or that our technology or applications will continue to operate as intended. Moreover, we cannot be certain that we would be able to replace these systems without slowing our underwriting or claims handling response time.
We conduct our business primarily from offices located in Florida, Hawaii, and Rhode Island where catastrophic weather events could damage our facilities or interrupt our power supply.
Our systems are vulnerable to damage from a number of sources, including energy blackouts, natural disasters and other catastrophic events, terrorism, war, telecommunication failures and malicious software programs or cyber security attacks. We conduct our business primarily from offices located in Florida, Hawaii, and Rhode Island where catastrophic weather events could damage our facilities or interrupt our power supply.
A downgrade in any of these ratings could have a material adverse effect on our competitive position, the marketability of our product offerings and our ability to grow in the marketplace. 19 If we are unable to expand our business because our capital must be used to pay greater than anticipated claims, our financial results may suffer.
All ratings are subject to continuous review; therefore, the retention of these ratings cannot be assured. A downgrade in any of these ratings could have a material adverse effect on our competitive position, the marketability of our product offerings and our ability to grow in the marketplace.
Further, we may require additional capital in the future which may not be available or may only be available on unfavorable terms.
If we are unable to expand our business because our capital must be used to pay greater than anticipated claims, our financial results may suffer. Further, we may require additional capital in the future which may not be available or may only be available on unfavorable terms.
The unexpected loss of key employees could have a material adverse impact on our business because of the loss of such skills, knowledge of our products and years of industry experience. Item 1B. Unresolved Staff Comments None
The unexpected loss of key employees could have a material adverse impact on our business because of the loss of such skills, knowledge of our products and years of industry experience. 25 Table of Contents Risks Related to Regulation of Our Insurance Operations We are subject to extensive regulation which may reduce our profitability or limit our growth.
As of December 31, 2024, nearly all of our premium in force related to business in coastal states, which are especially subject to adverse weather conditions such as hurricanes, tropical storms, earthquakes, and winter storms. We also have in-force premiums from policies in the State of California, which has been impacted by wildfires.
The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected and the severity of the event. 17 Table of Contents As of December 31, 2025, nearly all of our premium in force related to business in coastal states, which are especially subject to adverse weather conditions such as hurricanes, tropical storms, and winter storms.
Moreover, when state regulations allow us to implement rate changes while filings are pending, we risk having to refund premiums if the implemented changes are greater than those ultimately approved. Additionally, we are required to participate in guaranty funds for insolvent insurance companies. The funds periodically assess losses against all insurance companies doing business in the state.
Moreover, when state regulations allow us to implement rate changes while filings are pending, we risk having to refund premiums if the implemented changes are greater than those ultimately approved. Our revenues and operating performance will fluctuate due to statutorily approved assessments that support property and casualty insurance pools and associations.
To the extent that our present capital is insufficient to meet future operating requirements or to cover losses, we may need to raise additional funds through financing or curtail our growth. Based on our current operating plan, we believe that our current capital together with our anticipated retained income will support our operations.
Based on our current operating plan, we believe that our current capital together with our anticipated retained income will support our operations.
Florida lawmakers may impact the rates of Citizens Property Insurance through legislation, which may impact the private insurance market.
Florida lawmakers may impact the rates of Citizens Property Insurance through legislation, which may impact the private insurance market. These and other aspects of the political environment in jurisdictions where we operate may reduce our profitability, limit our growth, or otherwise adversely affect our operations.
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The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected and the severity of the event.
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We also have in-force premiums from policies in the State of California, which was impacted by wildfires during the first quarter of 2025 for which our incurred losses of reinsurance approximated $32.0 million for the calendar year 2025.
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For example, we expect to incur approximately $35.0-$40.0 million of pre-tax catastrophe losses, net of reinsurance, associated with the 14 wildfires that affected Southern California during the first quarter of 2025.
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These developments and others could make the property and casualty insurance marketplace more competitive by increasing the supply of insurance available. If competition limits our ability to write new business at adequate rates, our future results of operations would be adversely affected.
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Any failure on the part of any one reinsurance company to meet its obligations to us could have a material adverse effect on our financial condition or results of operations.
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Our ability to operate efficiently and remain competitive may depend in part on our ability to adapt to technological innovation in our industry. Our industry is experiencing increased adoption of AI technologies, including applications used to automate underwriting, assess risk, run actuarial and other modeling functions, accelerate claims processing, and detect fraud.
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For example, our competitive position could be impacted if we are unable to effectively deploy technology such as AI and machine learning that collects and analyzes a wide variety of data points to make underwriting or other decisions, or if our competitors collect and use data we do not have the ability to access or use.
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We use, and expect to continue to evaluate and deploy, AI‑enabled tools to support various operational and strategic decision‑making. While AI is not the sole driver of our business performance, our ability to operate efficiently and remain competitive may depend in part on the effective implementation and use of such technologies.
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In addition, telematics and other usage-based methods of determining premiums can impact product design and pricing and are becoming an increasingly important competitive factor. Furthermore, state insurance regulators could have input on usage of AI and machine learning. 17 These developments and others could make the property and casualty insurance marketplace more competitive by increasing the supply of insurance available.
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The adoption and use of AI involves challenges and risks. AI systems can be complex to develop, integrate, and maintain, and may require substantial investment, high‑quality data, ongoing monitoring, and specialized expertise.
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This could occur through an acquisition of a company or a portion of a company’s business.
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AI‑enabled tools may produce inaccurate, incomplete, or misleading outputs due to data limitations, model assumptions, or changing conditions, which could result in operational errors, service disruptions, regulatory or contractual non‑compliance, increased costs, or reputational harm. In addition, the use of AI may increase our exposure to cybersecurity, data privacy, and third‑party vendor risks.
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Any failure to effectively manage the claims adjustment process, including failure to pay claims accurately, could lead to material litigation, undermine our reputation in the marketplace, impair our corporate image and negatively affect our financial results. Additionally, as a component of the claims process, we leverage CAN’s vendor network to provide remediation services to the policyholder.
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We are dependent on our executives, key employees and the ability to hire and retain a qualified workforce. Our future success depends on the efforts of our leadership team and workforce.
Removed
All ratings are subject to continuous review; therefore, the retention of these ratings cannot be assured.
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The funds periodically assess losses against all insurance companies doing business in the state. Our operating results and financial condition could be adversely affected by any of these factors.
Removed
Our operating results and financial condition could be adversely affected by any of these factors. Our revenues and operating performance will fluctuate due to statutorily approved assessments that support property and casualty insurance pools and associations. We operate in a regulatory environment where certain entities and organizations have the authority to require us to participate in assessments.
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The successful operation of our systems depends on both internal and external factors, such as internal system security protocols operating properly, a continuous supply of electrical power and compliant use of the systems by employees and any third parties. The failure of these systems could interrupt our operations and result in a material adverse effect on our business.
Removed
Risks Relating to Ownership of Our Common Stock Certain provisions of our certificate of incorporation and our bylaws may make it difficult for stockholders to change the composition of our board of directors and may discourage hostile takeover attempts that some of our stockholders may consider to be beneficial.
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The development and expansion of our insurance business is dependent upon the successful development and implementation of advanced technology, including modeling, underwriting and information technology systems. We have engaged service providers to provide us with policy and other administration services for certain policies and we intend to continue to utilize third party systems.
Removed
The failure of these systems or disruption in the supply of electricity could interrupt our operations and result in a material adverse effect on our business. 25 The development and expansion of our insurance business is dependent upon the successful development and implementation of advanced technology, including modeling, underwriting and information technology systems.
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The absence of regulations or conflicts in regulations may further limit our ability to implement new technology in an effective and timely manner. 32 Table of Contents We do not have significant redundancy in our operations.
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