Kestrel Group Ltd 10-Q

Item 1. Financial Statements KESTREL GROUP LTD CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands of U.S. dollars, except share and per share data) June 30, 2026 December 31, 2025 ASSETS (Unaudited) (Audited) Investments: Fixed maturities: available-for-sale, at fair value (Amortized cost: 2026: $ 144,533 ; 2025: $ 168,991 ) $ 144,624 $ 169,665 Equity securities: at fair value (Cost: 2026: $ 11,145 ; 2025: $ 11,145 ) 11,748 11,748 Equity method investments 33,413 33,532 Other investments 173,280 173,358 Total investments 363,065 388,303 Cash and cash equivalents 16,062 20,044 Restricted cash and cash equivalents 10,216 9,146 Accrued investment income 4,900 5,063 Reinsurance balances receivable, net (includes $ 0 and $ 2 from related parties in 2026 and 2025, respectively. Allowance for expected credit losses: 2026 - $ 14 ; 2025 - $ 14 ) 5,590 724 Reinsurance recoverable on unpaid losses: (Allowance for expected credit losses: 2026: $ 1,613 ; 2025: $ 1,740 ) 412,121 461,197 Net loan receivable from related party 69,443 86,883 Intangible assets 7,676 9,347 Funds withheld receivable: (Allowance for expected credit losses: 2026: $ 2 ; 2025: $ 2 ) 6,417 10,956 Other assets 24,116 18,292 Total assets $ 919,606 $ 1,009,955 LIABILITIES Reserve for loss and loss adjustment expenses (includes $ 478,831 and $ 554,507 from related parties in 2026 and 2025, respectively) $ 554,341 $ 637,169 Unearned premiums (includes $ 14,835 and $ 17,227 from related parties in 2026 and 2025, respectively) 14,837 17,406 Accrued expenses and other liabilities (includes $ 25,163 and $ 16,443 from related parties in 2026 and 2025, respectively) 61,419 52,694 Senior notes - principal amount 262,361 262,361 Less: unamortized fair value adjustment 87,312 87,959 Senior notes, net 175,049 174,402 Total liabilities 805,646 881,671 Commitments and Contingencies EQUITY Common shares ($ 0.01 par value; 2026: 10,108,600 and 2025: 9,979,477 shares issued; 2026: 7,824,030 and 2025: 7,741,943 shares outstanding) 101 100 Additional paid-in capital 180,153 177,534 Accumulated other comprehensive (loss) income ( 29 ) 916 (Accumulated deficit) retained earnings ( 14,316 ) 1,197 Treasury shares, at cost (2026: 2,284,570 shares, 2025: 2,237,534 shares) ( 51,949 ) ( 51,463 ) Total shareholders’ equity 113,960 128,284 Total liabilities and equity $ 919,606 $ 1,009,955 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 3 KESTREL GROUP LTD CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands of U.S. dollars, except per share data) For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Revenues Gross premiums written $ 1,435 $ 1,096 $ 4,090 $ 1,096 Net premiums written $ 1,436 $ 1,095 $ 4,090 $ 1,095 Change in unearned premiums 2,038 1,327 2,541 1,327 Net premiums earned 3,474 2,422 6,631 2,422 Fee revenue 3,742 544 6,862 1,351 Net investment income 2,454 1,542 5,062 1,576 Net realized and unrealized investment (losses) gains ( 2,984 ) 1,058 ( 1,645 ) 1,058 Total revenues 6,686 5,566 16,910 6,407 Expenses Net loss and loss adjustment expenses 1,515 ( 5,961 ) 3,770 ( 5,961 ) Commission and other acquisition expenses 983 394 2,456 394 General and administrative expenses 10,493 5,493 22,737 6,636 Interest and amortization expenses 4,177 1,519 8,073 1,519 Change in fair value of earn out liability — 2,679 — 2,679 Gain on bargain purchase — ( 73,590 ) — ( 73,590 ) Foreign exchange and other (gains) losses ( 2,278 ) 5,102 ( 4,498 ) 5,102 Total expenses 14,890 ( 64,364 ) 32,538 ( 63,221 ) Net (loss) income before income taxes ( 8,204 ) 69,930 ( 15,628 ) 69,628 Less: income tax (benefit) expense ( 112 ) 3 ( 106 ) 95 Interest in income of equity method investments 10 — 9 — Net (loss) income $ ( 8,082 ) $ 69,927 $ ( 15,513 ) $ 69,533 Basic and diluted (loss) earnings per share attributable to Kestrel common shareholders $ ( 1.03 ) $ 15.05 $ ( 1.99 ) $ 18.80 Weighted average number of common shares - basic and diluted 7,824,030 4,635,406 7,788,420 3,692,701 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 4 KESTREL GROUP LTD CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) (in thousands of U.S. dollars) For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Net (loss) income $ ( 8,082 ) $ 69,927 $ ( 15,513 ) $ 69,533 Other comprehensive (loss) income Net unrealized holdings (losses) gains on AFS fixed maturities ( 147 ) 485 ( 759 ) 485 Adjustment for reclassification of net realized losses recognized in net loss 226 — 218 — Foreign currency translation adjustment ( 645 ) 74 ( 404 ) 74 Other comprehensive (loss) income, after tax ( 566 ) 559 ( 945 ) 559 Comprehensive (loss) income $ ( 8,648 ) $ 70,486 $ ( 16,458 ) $ 70,092 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 5 KESTREL GROUP LTD CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (in thousands of U.S. dollars) For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Common shares Beginning balance $ 101 $ 27 $ 100 $ 27 Shares issued on Combination Agreement — 72 — 72 Issuance of common shares from vesting of stock based compensation — — 1 — Ending balance 101 99 101 99 Additional paid-in capital Beginning balance 178,982 10,122 177,534 10,107 Issuance of common shares from vesting of stock based compensation — — ( 1 ) — Share-based compensation expense 1,171 224 2,620 239 Shares issued as consideration for Combination — 166,539 — 166,539 Ending balance 180,153 176,885 180,153 176,885 Accumulated other comprehensive (loss) income Beginning balance 537 — 916 — Change in net unrealized investment gains (losses) 79 485 ( 541 ) 485 Foreign currency translation adjustment ( 645 ) 74 ( 404 ) 74 Ending balance ( 29 ) 559 ( 29 ) 559 Accumulated deficit Beginning balance ( 6,234 ) ( 5,922 ) 1,197 ( 5,528 ) Net (loss) income ( 8,082 ) 69,927 ( 15,513 ) 69,533 Distribution to shareholders — ( 40,000 ) — ( 40,000 ) Ending balance ( 14,316 ) 24,005 ( 14,316 ) 24,005 Treasury shares Beginning balance ( 51,949 ) — ( 51,463 ) — Shares issued to Maiden Reinsurance — ( 51,463 ) — ( 51,463 ) Shares repurchased — — ( 486 ) — Ending balance ( 51,949 ) ( 51,463 ) ( 51,949 ) ( 51,463 ) Total shareholders' equity $ 113,960 $ 150,085 $ 113,960 $ 150,085 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 6 KESTREL GROUP LTD CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of U.S. dollars) For the Six Months Ended June 30, 2026 2025 Cash flows from operating activities Net (loss) income $ ( 15,513 ) $ 69,533 Adjustments to reconcile net (loss) income to net cash flows from operating activities: Other non-cash (income) expenses including credit losses, depreciation, amortization, leases ( 427 ) 2,768 Gain on bargain purchase — ( 73,590 ) Interest in income of equity method investments ( 9 ) — Net realized and unrealized investment (losses) gains 1,645 ( 1,058 ) Share-based compensation expense 2,620 239 Foreign exchange and other (gains) losses ( 4,498 ) 5,102 Changes in assets – (increase) decrease: Reinsurance balances receivable, net ( 4,921 ) 93 Reinsurance recoverable on unpaid losses 5,019 ( 3,586 ) Accrued investment income 161 ( 789 ) Funds withheld receivable 3,324 ( 668 ) Other assets ( 3,477 ) 4 Changes in liabilities – increase (decrease): Reserve for loss and loss adjustment expenses ( 31,398 ) ( 25,090 ) Unearned premiums ( 2,566 ) ( 1,327 ) Accrued expenses and other liabilities 9,089 7,631 Net cash used in operating activities ( 40,951 ) ( 20,738 ) Cash flows from investing activities: Purchases of fixed maturities ( 75,658 ) ( 23,889 ) Purchases of other investments ( 3,463 ) ( 1,380 ) Purchases of equity method investments ( 1,023 ) ( 490 ) Proceeds from sales of fixed maturities 48,482 7,312 Proceeds from maturities, paydowns and calls of fixed maturities 49,484 26,670 Proceeds from sale and redemption of other investments 1,779 141 Proceeds from sale and redemption of equity method investments — 163 Cash acquired from purchase of business — 93,515 Net loan receivable from related party 19,567 — Others, net ( 14 ) ( 1 ) Net cash provided by investing activities 39,154 102,041 Cash flows from financing activities: Repurchase of common shares ( 486 ) — Dividends paid – Kestrel equityholders — ( 40,000 ) Net cash used in financing activities ( 486 ) ( 40,000 ) Effect of exchange rate changes on foreign currency cash, restricted cash and cash equivalents ( 629 ) 661 Net (decrease) increase in cash, restricted cash and cash equivalents ( 2,912 ) 41,964 Cash, restricted cash and cash equivalents, beginning of period 29,190 4,286 Cash, restricted cash and cash equivalents, end of period 26,278 46,250 Reconciliation of cash and restricted cash reported within Condensed Consolidated Balance Sheets: Cash and cash equivalents, end of period $ 16,062 $ 31,533 Restricted cash and cash equivalents, end of period 10,216 14,717 Total cash, restricted cash and cash equivalents, end of period $ 26,278 $ 46,250 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 7 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 1. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Kestrel Group Ltd ("Parent Company" or "Kestrel Group") and its subsidiaries (the "Company" or "Kestrel"). They have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and therefore the following notes should be read in conjunction with those disclosed in the Company's Annual Report on Form 10-K for December 31, 2025. All significant intercompany transactions and accounts have been eliminated. These interim unaudited Condensed Consolidated Financial Statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim period and all such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative, if annualized, of those to be expected for the full year. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Kestrel Group transitioned from Article 5 to Article 7 of Regulation S-X as promulgated by the SEC since its core business fundamentally shifted from a general commercial operation to primarily functioning as an insurance company under its recent business combination as discussed further below. This change in SEC filing status necessitated significant adjustments to how the Company presents its balance sheet, income statement and other financial statements, to align with the specific requirements of Article 7 for insurance companies. As a result, the Company's assets, liabilities, and equity accounts have been reclassified to fit the new presentation requirements under Article 7. Certain prior year comparatives have been reclassified to conform to current period presentation. The effect of these reclassifications had no impact on previously reported shareholders' equity or net income, except the 2024 Kestrel equity was recast to conform with the 2025 number of common shares issued to Kestrel equityholders and revised equity structure. Please see section on Accounting Treatment for the Combination for further details. Introductory Note On May 27, 2025, Kestrel Group LLC (“Kestrel LLC”) and Maiden Holdings, Ltd. (“Maiden”) completed their previously announced combination agreement ("Combination"), forming a new, publicly listed specialty program company operating under the name Kestrel Group Ltd. The Combination, which had been previously announced on December 30, 2024, effectuated the transaction via the formation of a new Bermuda holding company, Bermuda Ranger Topco Ltd. ("Bermuda NewCo"). Both Kestrel LLC and Maiden completed a series of transactions to become indirect wholly owned subsidiaries of Bermuda NewCo, and upon the closing of the transactions, Bermuda NewCo was renamed “Kestrel Group Ltd” and rebranded as Kestrel Group and is the successor company to Maiden. Maiden shares ceased trading on the NASDAQ Capital Market ("Nasdaq") at close of market on May 27, 2025 and Kestrel Group shares began trading on the Nasdaq on May 28, 2025 under the ticker symbol “KG”. The Combination creates a capital light, fee-based insurance platform with the ability to selectively deploy underwriting capacity to optimize shareholder returns. As of June 30, 2026, Maiden Reinsurance Ltd. (“Maiden Reinsurance”) owns approximately 22.2 % of the Company's total issued and outstanding common shares, which is eliminated for accounting and financial reporting purposes in our condensed consolidated financial statements. The voting power of Maiden Reinsurance, with respect to its common shares, is no longer capped due to an approval by Maiden shareholders to remove the voting limitation prior to the Combination. Pursuant to the terms of the Combination, at the closing of the transaction on May 27, 2025, each issued and outstanding common share of Maiden, par value $ 0.01 per share, was automatically canceled and converted into the right to receive one-twentieth ( 0.05 ) of a common share in Kestrel Group. Please see Note 6. Shareholders' Equity for details of authorized share capital under the combined company. The equityholders of Kestrel LLC at the closing date received an aggregate of $ 40,000 in upfront cash and 2,749,996 common shares of the combined company. In addition, the former equityholders of Kestrel LLC remain entitled to receive contingent consideration up to the lesser of (x) $ 45,000 payable in common shares of Kestrel Group upon the achievement of certain financial milestones, and (y) 2,750,000 common shares of Kestrel Group. Following completion of the Combination, the board of directors of Kestrel Group consists of seven directors, made up of four directors selected by Kestrel Intermediate Ledbetter Holdings LLC, two of whom are independent under applicable securities laws and stock exchange rules, and three directors selected by AmTrust Financial Services, Inc. (“AmTrust”), two of whom are independent under applicable securities laws and stock exchange rules. Please see Note 10. Related Party Transactions for information regarding the Company's relationship with AmTrust. The Combination was completed with both parties in receipt of necessary regulatory approvals, including from the Vermont Department of Financial Regulation ("Vermont DFR") which included approval for the extraordinary dividend required to complete the transaction. Under the conditions stipulated in the Vermont DFR approval, Maiden Reinsurance is no longer permitted to include the intercompany loan receivable from Maiden (and related accrued interest) as an admitted asset for statutory capital and reporting purposes. As a result, Maiden Reinsurance's ratio of risk-based capital to total adjusted capital was significantly reduced, however the ratio remains sufficient to not only support the dividends related to the Combination with Kestrel and recurring quarterly dividends (and which require prior approval by the Vermont DFR) but the ability to selectively underwrite business in support of the Company's Program Services segment in the future. 8 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 1. Basis of Presentation (continued) Accounting Treatment for the Combination Maiden was the legal acquirer of Kestrel LLC. However, as a result of the terms of the Combination, for accounting purposes, the transaction is treated as a reverse acquisition and accounted for using the acquisition method in accordance with Accounting Standards Codification ("ASC") Topic 805, Business Combinations . This determination is primarily based on the following factors: 1) the former Kestrel LLC equityholders have the ability to nominate a majority of the members of the board of directors of the combined company and 2) subsequent to consummation of the transaction, when combined with common shares held by Maiden Reinsurance, of which Luke Ledbetter (acting in his capacity as President of Maiden Reinsurance) is authorized and has the discretion to vote on behalf of Maiden Reinsurance, the former Kestrel LLC equityholders have a majority of the voting rights of the combined company. As such, Maiden is treated as the acquired company for accounting purposes. Accordingly, for financial reporting purposes, the net assets of Kestrel LLC are stated at historical carrying values and its condensed consolidated financial statements are presented as the predecessor to the combined company in the historical financial statements following consummation of the transaction on May 27, 2025. The assets and liabilities of Maiden are recorded at their fair values measured as of the acquisition date. Any excess of the estimated fair values of the net assets acquired over the purchase price is recorded as a gain on bargain purchase. Based on final fair values of the assets acquired and liabilities assumed, a bargain purchase gain of $ 68,306 was recognized in this transaction. The operating results of Maiden are only presented within the consolidated results of Kestrel from the date of acquisition going forward. Please refer to Note 14. Business Combination for additional details regarding the accounting treatment for the Combination. Program Service Operations Kestrel specializes in providing fronting services to insurance program managers, managing general agents (MGAs), reinsurers, and reinsurance brokers. Kestrel facilitates insurance transactions utilizing its exclusive management contracts with four insurance carriers, all of which are rated A- “Excellent” by A.M. Best. These contracts enable Kestrel LLC to offer both admitted and surplus lines in all U.S. states. Kestrel LLC generally does not assume significant underwriting risk and produces lines of business such as casualty, workers’ compensation, catastrophe-exposed property, and non-catastrophe-exposed property, with diverse risk durations, sizes, and product types. As noted, Kestrel continues to write business through its exclusive use of four A.M. Best A- FSC XV insurance carriers, Sierra Specialty Insurance Company, Rochdale Insurance Company, Park National Insurance Company and Republic Fire and Casualty Insurance Company (collectively, “AmTrust Insurance Companies”), all subsidiaries of AmTrust. Pursuant to the terms of the Combination Agreement, Kestrel retains the option to acquire the AmTrust Insurance Companies from AmTrust for a period of up to three years after closing of the Combination. AmTrust is a significant shareholder of Kestrel Group. Please see Note 10. Related Party Transactions for further information regarding the Company's relationship with AmTrust. Legacy Reinsurance Operations The Company does not presently underwrite prospective reinsurance risks but may consider selectively deploying underwriting capacity in support of the Company's program services operations to optimize shareholder returns. The Company has various historic reinsurance programs underwritten by Maiden Reinsurance which are in run-off, including liabilities associated with AmTrust reinsurance agreements which were terminated in 2019 as discussed in Note 10. Related Party Transactions . In addition, the Company has a retroactive reinsurance agreement and a commutation agreement that further reduces its exposure and limits the potential volatility related to AmTrust liabilities, as further discussed in Note 8. Reinsurance . The Company is also running off certain business related to its Genesis Legacy Solutions ("GLS") platform. In November 2020, Maiden formed its indirect wholly owned subsidiary GLS, which specialized in providing a full range of legacy services to small insurance entities, particularly those in run-off or with blocks of reserves that are no longer core to those companies' operations, working with clients to develop and implement finality solutions including acquiring entire companies. Having completed the capital commitment made to GLS in November 2020, Maiden did not commit any additional capital to new opportunities and continues to run-off the existing accounts underwritten by GLS. GLS continues to wind down the remaining open accounts, with one reinsurance agreement remaining open and one entity completing its run-off. Short-term income protection business was written on a primary basis by our wholly owned subsidiaries Maiden Life Försäkrings AB ("Maiden LF") and Maiden General Försäkrings AB ("Maiden GF") in the Scandinavian and Northern European markets. On November 29, 2024, Maiden entered into an agreement to sell Maiden LF and Maiden GF to a group of international insurance and reinsurance companies headquartered in the United Kingdom. Maiden GF and Maiden LF were the principal operating subsidiaries of the Company’s International Insurance Services (“IIS”) platform. The transaction was subject to customary regulatory approvals. In June 2025, the Swedish Financial Supervisory Authority (“SFSA”) declined to approve the sale of Maiden GF and Maiden LF. The proposed acquirer whose application was denied by the SFSA and Maiden subsequently entered into an amended sale agreement for the acquisition of Maiden GF at the previously agreed valuation. In the wake of the June 2025 decision by the SFSA, management further evaluated strategic alternatives for Maiden LF and on April 7, 2026 the Company decided to proceed with the managed run-off of Maiden LF. On May 20, 2026, the pending sale of Maiden GF was again rejected by the SFSA, thus the held for sale classification is no longer met. The held-for-sale assets and liabilities of Maiden LF and Maiden GF as reported at December 31, 2025 have been reclassified to held and used in light of these recent regulatory decisions. The Company presently expects to proceed with a managed run-off of Maiden GF. The net loss from discontinued operations for the three and six months ended June 30, 2026 would have been $ 1,125 and $ 2,038 had Maiden LF and Maiden GF remained held-for-sale at June 30, 2026 compared to $ 495 in the three and six months ended June 30, 2025 , respectively. 9 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 2. Significant Accounting Policies There have been no material changes to the significant accounting policies as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 other than the following: Recently Adopted Accounting Standards Measurement of Credit Losses for Accounts Receivable and Contract Assets In July 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2025-05 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this ASU affect entities that apply the practical expedient and accounting policy election when estimating expected credit losses on current accounts receivable and/or current contract assets arising from transactions under Topic 606, including those assets acquired in a transaction accounted for under Topic 805, Business Combinations. The amendments in this ASU provide as follows: 1. A practical expedient. In developing reasonable and supportable forecasts as part of estimating expected credit losses, all entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. 2. Accounting policy election. An entity other than a public business entity that elects the practical expedient is permitted to make an accounting policy election to consider collection activity after the balance sheet date when estimating expected credit losses. The amendments were effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The Company adopted ASU 2025-05 on January 1, 2026, and did not experience significant changes to its previous method of estimating expected credit losses on accounts receivable upon adoption. Recently Issued Accounting Standards Not Yet Adopted Expense Disaggregation Disclosures In November 2024, FASB issued ASU 2024-03 "Expense Disaggregation Disclosures" an amendment of Income Statement - Reporting Comprehensive Income (Subtopic 220-40). The amendments in this Update improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods which is generally not presented in today's income statements. In particular, all public companies must disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, and (d) intangible asset amortization that is included in each relevant expense caption. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this Update or (2) retrospectively to any or all prior periods presented in the financial statements. The Company does not plan to early adopt ASU 2024-03 and will provide the required expense disclosures on a prospective basis. At this time, the Company anticipates that further expense information on employee compensation will be the primary requirement under this ASU. The Company already provides disclosures regarding intangible asset amortization in Note 14. Business Combination. 10 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information As a result of the Company's recently completed Combination, Kestrel has two reportable segments: Program Services segment and the Legacy Reinsurance segment. Our Program Services reportable segment consists of a cohesive suite of fronting services that are integrated and interdependent. This revenue stream is highly concentrated due to capacity distribution agreements with an individual customer. Capacity distribution fees are collected from program managers or MGAs for providing support services and granting contractual access to our insurance carrier network and are considered a single performance obligation. Support services provided for these insurance and reinsurance brokerage arrangements include compliance and regulatory reporting and administrative support which culminate in the placement of bound insurance coverage. Kestrel considers these arrangements a single revenue stream. Our Legacy Reinsurance reportable segment consists of the AmTrust Reinsurance and Diversified Reinsurance segments previously reported by Maiden prior to the Combination with Kestrel. The AmTrust portion of this reportable segment includes all business ceded to Maiden Reinsurance by AmTrust, primarily the quota share reinsurance agreement (“AmTrust Quota Share”) between Maiden Reinsurance and AmTrust’s wholly owned subsidiary, AmTrust International Insurance, Ltd. (“AII”) and the European hospital liability quota share reinsurance contract ("European Hospital Liability Quota Share") with AmTrust’s wholly owned subsidiaries, AmTrust Europe Limited ("AEL") and AmTrust International Underwriters DAC ("AIU DAC"), which are both in run-off effective January 1, 2019. Please refer to Note 10. Related Party Transactions for additional information regarding these agreements. The Diversified Reinsurance portion of this reportable segment consists of a run-off portfolio of predominantly third-party property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies located primarily in Europe, including business produced by Maiden LF and Maiden GF along with transactions entered into by GLS as described in Note 1. Basis of Presentation under Legacy Reinsurance Operations. The Company evaluates segment performance based on segment profit separately from results of our investment portfolio. Underwriting and fee income or loss is calculated as net premiums earned plus fee revenue less net loss and loss adjustment expenses ("LAE"), commission and other acquisition expenses. General and administrative expenses are allocated to the segments on an actual basis except salaries and benefits where management’s judgment is applied; however, general corporate expenses are not allocated to the reportable segments. In determining total assets by reportable segment, the Company identifies those assets that are attributable to a particular segment such as reinsurance balances receivable, reinsurance recoverable on unpaid losses, funds withheld receivable, net loan receivable from related party, intangible assets, certain other assets and restricted cash and investments. All remaining assets are allocated to Corporate. Kestrel’s chief operating decision maker ("CODM") is the Company's Chief Executive Officer, for both the Program Services segment and the Legacy Reinsurance segment. The significant segment expenses as reported in the computation of underwriting results in the tables below are used by the Company's CODM in assessing segment performance on a quarterly basis and supports their decision on how to allocate resources within the Company, primarily with regard to the Company's Program Services segment, which is the Company's active and most strategically important operating segment. 11 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information (continued) The following tables summarize the results of our reportable segments and the reconciliation of our reportable segments' results to the condensed consolidated net (loss) income for the three months ended June 30, 2026 and 2025, respectively: For the Three Months Ended June 30, 2026 Legacy Reinsurance Program Services Total Gross premiums written $ 1,435 $ — $ 1,435 Net premiums written $ 1,436 $ — $ 1,436 Net premiums earned $ 3,474 $ — $ 3,474 Fee revenue — 3,742 3,742 Net loss and LAE ( 1,515 ) — ( 1,515 ) Commission and other acquisition expenses ( 983 ) — ( 983 ) General and administrative expenses ( 2,322 ) ( 1,349 ) ( 3,671 ) Underwriting loss and fee income $ ( 1,346 ) $ 2,393 $ 1,047 Reconciliation to net loss Net investment income and net realized and unrealized investment losses ( 530 ) Interest and amortization expenses ( 4,177 ) Foreign exchange and other gains, net 2,278 Other general and administrative expenses ( 6,822 ) Income tax benefit 112 Interest in income of equity method investments 10 Net loss $ ( 8,082 ) For the Three Months Ended June 30, 2025 Legacy Reinsurance (1) Program Services Total Gross premiums written $ 1,096 $ — $ 1,096 Net premiums written $ 1,095 $ — $ 1,095 Net premiums earned $ 2,422 $ — $ 2,422 Fee revenue — 544 544 Net loss and LAE 5,961 — 5,961 Commission and other acquisition expenses ( 394 ) — ( 394 ) General and administrative expenses ( 2,156 ) ( 767 ) ( 2,923 ) Underwriting income and fee loss $ 5,833 $ ( 223 ) $ 5,610 Reconciliation to net income Net investment income and net realized and unrealized investment gains 2,600 Interest and amortization expenses ( 1,519 ) Change in fair value of earn out liability ( 2,679 ) Gain on bargain purchase 73,590 Foreign exchange and other losses, net ( 5,102 ) Other general and administrative expenses ( 2,570 ) Income tax expense ( 3 ) Net income $ 69,927 (1) Legacy Reinsurance underwriting results only include the post-combination period from May 27, 2025 to June 30, 2025. 12 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information (continued) The following tables summarize the results of our reportable segments and the reconciliation of our reportable segments' results to the condensed consolidated net (loss) income for the six months ended June 30, 2026 and 2025, respectively: For the Six Months Ended June 30, 2026 Legacy Reinsurance Program Services Total Gross premiums written $ 4,090 $ — $ 4,090 Net premiums written $ 4,090 $ — $ 4,090 Net premiums earned $ 6,631 $ — $ 6,631 Fee revenue — 6,862 6,862 Net loss and LAE ( 3,770 ) — ( 3,770 ) Commission and other acquisition expenses ( 2,456 ) — ( 2,456 ) General and administrative expenses ( 5,536 ) ( 2,861 ) ( 8,397 ) Underwriting loss and fee income $ ( 5,131 ) $ 4,001 $ ( 1,130 ) Reconciliation to net loss Net investment income and net realized and unrealized investment losses 3,417 Interest and amortization expenses ( 8,073 ) Foreign exchange and other gains, net 4,498 Other general and administrative expenses ( 14,340 ) Income tax benefit 106 Interest in income from equity method investments 9 Net loss $ ( 15,513 ) For the Six Months Ended June 30, 2025 Legacy Reinsurance (1) Program Services Total Gross premiums written $ 1,096 $ — $ 1,096 Net premiums written $ 1,095 $ — $ 1,095 Net premiums earned $ 2,422 $ — $ 2,422 Fee revenue — 1,351 1,351 Net loss and LAE 5,961 — 5,961 Commission and other acquisition expenses ( 394 ) — ( 394 ) General and administrative expenses ( 2,156 ) ( 1,339 ) ( 3,495 ) Underwriting income and fee income $ 5,833 $ 12 $ 5,845 Reconciliation to net income Net investment income and net realized and unrealized investment gains 2,634 Interest and amortization expenses ( 1,519 ) Change in earn out liability ( 2,679 ) Gain on bargain purchase 73,590 Foreign exchange and other losses, net ( 5,102 ) Other general and administrative expenses ( 3,141 ) Income tax expense ( 95 ) Net income $ 69,533 (1) Legacy Reinsurance underwriting results only include the post-combination period from May 27, 2025 to June 30, 2025. 13 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information (continued) The following tables summarize the financial position of the Company's reportable segments including a reconciliation to the Company's condensed consolidated total assets at June 30, 2026 and December 31, 2025: June 30, 2026 Legacy Reinsurance Program Services Total Reinsurance balances receivable, net $ 5,590 $ — $ 5,590 Reinsurance recoverable on unpaid losses 412,121 — 412,121 Net loan receivable from related party 69,443 — 69,443 Intangible assets 7,676 — 7,676 Cash and cash equivalents and investments (1) 147,527 1,955 149,482 Funds withheld receivable 6,417 — 6,417 Other assets (2) 1,401 3,922 5,323 Total assets - reportable segments 650,175 5,877 656,052 Corporate assets — — 263,554 Total Assets $ 650,175 $ 5,877 $ 919,606 December 31, 2025 Legacy Reinsurance Program Services Total Reinsurance balances receivable, net $ 724 $ — $ 724 Reinsurance recoverable on unpaid losses 461,197 — 461,197 Loan to related party 86,883 — 86,883 Intangible assets, net 9,347 — 9,347 Cash and cash equivalents and investments (1) 163,767 3,165 166,932 Funds withheld receivable 10,956 — 10,956 Other assets (2) 227 2,477 2,704 Total assets - reportable segments 733,101 5,642 738,743 Corporate assets — — 271,212 Total Assets $ 733,101 $ 5,642 $ 1,009,955 1. Cash & investments for the Legacy Reinsurance segment are restricted as discussed in Note 4(e). The Company is required to provide collateral for its reinsurance liabilities under various legacy reinsurance agreements and utilizes trust accounts to collateralize business with reinsurance counterparties. The assets in trust as collateral are primarily cash and highly rated fixed maturities. 2. Other assets for the Program Services segment is entirely comprised of Program fee receivables related to written premiums that are still unpaid at the reporting date. Unpaid amounts are generally paid with 30 - 60 days after inception of the policy unless the program allows for premiums to be paid on installments. Other assets also includes estimated amounts due from Programs when there is a contractual lag in reporting from the balance sheet date. 14 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information (continued) The financial information relating to net premiums written by major line of business within the Legacy Reinsurance segment for the three and six months ended June 30, 2026 and 2025 are detailed below: For the Three Months Ended June 30, 2026 2025 Net premiums written Total % of Total Total (1) % of Total Diversified Legacy Reinsurance $ 514 35.8 % $ 1,380 126.0 % AmTrust Legacy Reinsurance 922 64.2 % ( 285 ) ( 26.0 ) % Legacy Reinsurance Segment $ 1,436 100.0 % $ 1,095 100.0 % For the Six Months Ended June 30, 2026 2025 Net premiums written Total % of Total Total (1) % of Total Diversified Legacy Reinsurance $ 1,289 31.5 % $ 1,380 126.0 % AmTrust Legacy Reinsurance 2,801 68.5 % ( 285 ) ( 26.0 ) % Legacy Reinsurance Segment $ 4,090 100.0 % $ 1,095 100.0 % (1) Legacy Reinsurance underwriting results only include the post-combination period of May 28, 2025 to June 30, 2025. The financial information for net premiums earned by major line of business within the Legacy Reinsurance segment for the three and six months ended June 30, 2026 and 2025 are detailed below: For the Three Months Ended June 30, 2026 2025 Net premiums earned Total % of Total Total (1) % of Total Diversified Legacy Reinsurance $ 571 16.4 % $ 1,390 57.4 % AmTrust Legacy Reinsurance 2,903 83.6 % 1,032 42.6 % Legacy Reinsurance Segment $ 3,474 100.0 % $ 2,422 100.0 % For the Six Months Ended June 30, 2026 2025 Net premiums earned Total % of Total Total (1) % of Total Diversified Legacy Reinsurance $ 1,438 21.7 % $ 1,390 57.4 % AmTrust Legacy Reinsurance 5,193 78.3 % 1,032 42.6 % Legacy Reinsurance Segment $ 6,631 100.0 % $ 2,422 100.0 % (1) Legacy Reinsurance underwriting results only include the post-combination period of May 28, 2025 to June 30, 2025. 15 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments The Company holds: (i) available-for-sale ("AFS") portfolios of fixed maturity and equity securities, carried at fair value; (ii) other investments carried at fair value; (iii) equity method investments using equity method accounting; and (iv) funds held - directly managed. a) Fixed Maturities The amortized cost, gross unrealized gains and losses, and fair value of AFS fixed maturity investments at June 30, 2026 and December 31, 2025 are as follows: June 30, 2026 Original or amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. treasury bills $ 35,027 $ — $ ( 1 ) $ 35,026 U.S. agency bonds – mortgage-backed 20,002 350 ( 6 ) 20,346 Non-U.S. government bonds 53,023 2 ( 198 ) 52,827 Collateralized loan obligations 27,532 10 ( 24 ) 27,518 Corporate bonds 8,949 1 ( 43 ) 8,907 Total AFS fixed maturity investments $ 144,533 $ 363 $ ( 272 ) $ 144,624 December 31, 2025 Original or amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. treasury bills $ 43,662 $ 11 $ — $ 43,673 U.S. agency bonds – mortgage-backed 20,823 795 — 21,618 Non-U.S. government bonds 30,457 — ( 162 ) 30,295 Collateralized loan obligations 62,593 52 ( 21 ) 62,624 Corporate bonds 11,456 2 ( 3 ) 11,455 Total AFS fixed maturity investments $ 168,991 $ 860 $ ( 186 ) $ 169,665 The Company separately presents the accrued interest receivable balance on its AFS fixed maturity investments on the Condensed Consolidated Balance Sheets under accrued investment income. The amount of accrued interest receivable on AFS securities was $ 419 at June 30, 2026 (December 31, 2025: $ 778 ). The Company elected the practical expedient to exclude accrued interest from both the fair value and the amortized cost basis of the AFS fixed maturity securities for the purposes of identifying and measuring any impairments under the allowance for expected credit losses standard. Write-offs of accrued interest receivable balances are recognized in net investment gains and losses in the period in which they are deemed uncollectible. There was no write-off recognized on the accrued interest receivable for the three and six months ended June 30, 2026 and 2025. The contractual maturities of our fixed maturities at June 30, 2026 are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. June 30, 2026 Amortized cost Fair value Due in one year or less $ 81,169 $ 81,029 Due after one year through five years 15,330 15,230 Due after five years through ten years 500 501 96,999 96,760 U.S. agency bonds – mortgage-backed 20,002 20,346 Collateralized loan obligations 27,532 27,518 Total AFS fixed maturity investments $ 144,533 $ 144,624 16 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) The following tables summarize fixed maturities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position: Less than 12 Months 12 Months or More Total June 30, 2026 Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses U.S. treasury bills $ 35,026 $ ( 1 ) $ — $ — $ 35,026 $ ( 1 ) U.S. agency bonds – mortgage-backed 567 ( 6 ) — — 567 ( 6 ) Non-U.S. government bonds 49,427 ( 198 ) — — 49,427 ( 198 ) Collateralized loan obligations 20,842 ( 24 ) — — 20,842 ( 24 ) Corporate bonds 8,406 ( 43 ) — — 8,406 ( 43 ) Total temporarily impaired AFS fixed maturity investments $ 114,268 $ ( 272 ) $ — $ — $ 114,268 $ ( 272 ) At June 30, 2026, there were 30 securities in an unrealized loss position with a fair value of $ 114,268 and unrealized losses of $ 272 , all of which have been in an unrealized loss position for less than twelve months. Less than 12 Months 12 Months or More Total December 31, 2025 Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses Non-U.S. government bonds $ 30,295 $ ( 162 ) $ — $ — $ 30,295 $ ( 162 ) Collateralized loan obligations 36,370 ( 21 ) — — 36,370 ( 21 ) Corporate bonds 10,943 ( 3 ) — — 10,943 ( 3 ) Total temporarily impaired AFS fixed maturity investments $ 77,608 $ ( 186 ) $ — $ — $ 77,608 $ ( 186 ) At December 31, 2025, there were 20 securities in an unrealized loss position with a fair value of $ 77,608 and unrealized losses of $ 186 , all of which have been in an unrealized loss position for less than twelve months. Allowance for Expected Credit Losses & Non-Credit Related Impairment Costs The Company evaluates AFS securities for impairment when fair value is below amortized cost on a quarterly basis. If the Company intends to sell or will be required to sell the security before its anticipated recovery, the full amount of the impairment loss is charged to net income (loss) and included in net investment gains (losses). If the Company does not intend to sell or will not be required to sell the security before its anticipated recovery, an allowance for expected credit losses is established and the portion of the loss relating to credit factors is recorded in net income (loss). The non-credit impairment amount of the loss (which could be related to interest rates and/or market conditions) is recognized in other comprehensive income ("OCI"). To estimate the allowance for expected credit losses for most of the AFS securities, the Company analyzes projected cash flows which are primarily driven by assumptions regarding loss severity, probability of default and projected recovery rates. The Company's determination of default and loss severity rates are based on credit rating, credit analysis and macroeconomic forecasts. Unrealized losses on securities issued or backed, either explicitly or implicitly by the U.S. government are not analyzed for credit losses. The Company has concluded that any possibility of a credit loss on these securities is highly unlikely due to the explicit U.S. government guarantee related to certain securities (e.g., Government National Mortgage Association issuances) and the implicit guarantee related to other securities that has been validated by past actions (e.g., U.S. government bailout of Federal National Mortgage Association and Federal Home Loan Mortgage Corporation during the 2008 credit crisis). Although these securities are not analyzed for credit losses, they are evaluated for impairment based on the Company's intention to sell and likely requirement to sell. Based on the Company's analysis at June 30, 2026, net unrealized gains on the Company’s AFS fixed maturity securities were due to non-credit factors and were expected to be recovered as the related securities approach maturity. At June 30, 2026, the Company did not intend to sell the securities in an unrealized loss position and it is not more likely than not that the Company will be required to sell these securities before the anticipated recovery of their amortized costs. Therefore, no allowance was recorded for expected credit losses on the Company's portfolio of AFS fixed maturity securities for the three and six months ended June 30, 2026 and 2025, respectively. 17 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) The following tables summarize the credit ratings of our fixed maturities as at June 30, 2026 and December 31, 2025: June 30, 2026 Amortized cost Fair value % of Total fair value U.S. treasury bills $ 35,027 $ 35,026 24.2 % U.S. agency bonds – mortgage-backed 20,002 20,346 14.1 % AAA 37,002 36,955 25.5 % AA+, AA, AA- 17,899 17,873 12.4 % A+, A, A- 34,103 33,923 23.5 % BBB+, BBB, BBB- 500 501 0.3 % Total fixed maturities (1) $ 144,533 $ 144,624 100.0 % December 31, 2025 Amortized cost Fair value % of Total fair value U.S. treasury bills $ 43,662 $ 43,673 25.8 % U.S. agency bonds – mortgage-backed 20,823 21,618 12.7 % AAA 64,404 64,436 38.0 % AA+, AA, AA- 13,305 13,288 7.8 % A+, A, A- 26,288 26,139 15.4 % BBB+, BBB, BBB- 509 511 0.3 % Total fixed maturities (1) $ 168,991 $ 169,665 100.0 % (1) Ratings above are based on Standard & Poor’s ("S&P"), or equivalent, ratings . b) Other Investments, Equity Securities and Equity Method Investments Certain of the Company's other investments and equity method investments are subject to restrictions on redemptions and sales that are determined by the governing documents, which could limit our ability to liquidate those investments. These restrictions may include lock-ups, redemption gates, restricted share classes, restrictions on the frequency of redemption and notice periods. A gate is the ability to deny or delay a redemption request. Certain other investments and equity method investments may not have any restrictions governing their sale, but there is no active market and no assurance that the Company will be able to execute a sale in a timely manner. In addition, even if certain other investments and equity method investments are not eligible for redemption or sales are restricted, we may still receive income distributions from those investments. The collateralized investments in direct lending entities of $ 53,127 at June 30, 2026 (December 31, 2025: $ 53,275 ) are carried at fair market value. ASC 825-10: Financial Instruments provides a measurement basis election for most financial instruments using a choice of either historical cost or fair value, including other investments, allowing reporting entities to mitigate potential mismatches that arise under the current mixed measurement attribute model. The Company has elected the fair value option for its investments in direct lending entities, and these investments are reported at fair value as of June 30, 2026 and December 31, 2025. Please see Note 5(d). Fair Value Measurements for information regarding this investment. Other investments The table shows the composition of the Company's other investments at fair value as of June 30, 2026 and December 31, 2025: June 30, 2026 December 31, 2025 Fair value % of Total Fair Value % of Total Private equity funds (1) $ 33,491 19.3 % $ 31,732 18.3 % Privately held equity investments (1) 9,485 5.5 % 9,248 5.4 % Private credit investments (1) 307 0.2 % 192 0.1 % Equity method investments with fair value option elected 76,870 44.3 % 78,911 45.5 % Investments in direct lending entities 53,127 30.7 % 53,275 30.7 % Total other investments at fair value $ 173,280 100.0 % $ 173,358 100.0 % (1) Private equity funds, private credit investments, and one privately held equity investment are measured at fair value using the NAV practical expedient. Please see Note 5. Fair Value Measurements for further details. 18 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) Equity Securities Equity securities include privately held equity investments in common and preferred stocks. The Company's privately held equity investments in common and preferred stocks are direct investments in companies that the Company believes offer attractive risk adjusted returns or offer other strategic advantages. Each investment may have its own unique terms and conditions and there may be restrictions on disposals. There is no active market for these investments. The following table provides the cost and fair values of the equity securities held at June 30, 2026 and December 31, 2025: June 30, 2026 December 31, 2025 Cost Fair Value Cost Fair Value Privately held common stocks $ 5,135 $ 4,838 $ 5,135 $ 4,838 Privately held preferred stocks 6,010 6,910 6,010 6,910 Total equity securities $ 11,145 $ 11,748 $ 11,145 $ 11,748 All privately held securities held at June 30, 2026 are subject to contractual sale restrictions. Each of these investments are subject to agreements that restrict the transfer, sale, and indemnification of these privately held investments indefinitely. The Company must hold these shares indefinitely unless the investee's shares are registered with the SEC and qualified by state authorities, or until an exemption from such registration and qualification requirements may become available. Fair Value Remaining duration of restrictions Nature of contractual sale restrictions Circumstances that could cause a lapse in restrictions Privately held common stocks $ 4,838 Indefinite The Purchaser must hold the restricted shares indefinitely Registration of securities with the SEC or if exemption is available Privately held preferred stocks 6,910 Indefinite The Purchaser must hold the restricted shares indefinitely Registration of securities with the SEC or if exemption is available Total equity securities subject to contractual sale restrictions $ 11,748 Equity Method Investments The equity method investments include real estate investments accounted for under the equity method and other investments measured at fair value. The equity method investments include limited partnerships which are variable interests issued by variable interest entities ("VIEs"). The Company is not the primary beneficiary of these VIEs as it does not have the power to direct the activities that are most significant to the economic performance of these VIEs. T he Company is deemed to have limited influence over the operating and financial policies of the investee and accordingly, these investments are reported under the equity method of accounting. In applying the equity method of accounting, the investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the investee's net income or loss. Generally, the maximum exposure to loss on these interests is limited to the amount of commitment made by the Company as more fully described in "Note 11 - Commitments, Contingencies and Guarantees" in these condensed consolidated financial statements. The table below shows the total value of the Company's equity method investments as of June 30, 2026 and December 31, 2025 including those classified as other investments under the fair value option: June 30, 2026 December 31, 2025 Carrying Value % of Total Carrying Value % of Total Real estate investments at equity method $ 33,413 30.3 % $ 33,532 29.8 % Real estate investments at fair value option elected 51,000 46.2 % 51,000 45.4 % Other equity method investments at fair value option elected 25,870 23.5 % 27,911 24.8 % Total equity method investments with fair value option 76,870 69.7 % 78,911 70.2 % Total equity method investments $ 110,283 100.0 % $ 112,443 100.0 % 19 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) The table below shows the carrying/fair values and beneficial ownership percentage of the Company's equity method investments, including those measured using the fair value option and reported in other investments, as of June 30, 2026, the summarized financial data of each equity method investment at March 31, 2026 and the Company's realized and unrealized gains (losses) or interest in income (loss) of equity method investments on these investments for the six months ended June 30, 2026: June 30, 2026 For the Three Months Ended March 31, 2026 For the Six Months Ended June 30, 2026 Carrying Value Beneficial Ownership Investee Revenue (1) Investee net income (loss) (1) Realized and unrealized gains (losses) (2)(3) Silverstone Venture 1 $ 943 90.0 % $ 3,933 $ 1,484 $ ( 1,366 ) Silverstone Venture 2 4,342 86.8 % 70 68 ( 85 ) Silverstone Venture 3 20,585 70.2 % 85 60 142 Extell Hudson Waterfront Holdings 51,000 25.0 % 440 ( 24 ) — Seiden LP & Seiden MGMT LP (3) 33,413 100.0 % 147 10 9 Total equity method investments $ 110,283 $ ( 1,300 ) 1. The Company inclu ded summarized financial data of its equity method investees as reported at March 31, 2026 as this period represents the most recent audited financial statements available at the time of filing the Company's Form 10-Q for the three and six months ended June 30, 2026. 2. Fair value adjustments have been recorded under realized and unrealized gains (losses) for those equity method investments reported at fair value. 3. Seiden LP and Seiden MGMT LP are measured using equity method accounting at June 30, 2026. The interest in income of equity method investments has been recorded on its own line item on the statements of operations instead of through realized and unrealized gains (losses). c) Net Investment Income Net investment income was derived from the following sources for the three and six months ended June 30, 2026 and 2025: For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Fixed maturities $ 827 $ 616 $ 1,712 $ 616 Income on funds withheld 27 20 55 20 Interest income from net loan receivable from AmTrust 1,015 659 2,152 659 Other investments 331 84 492 84 Cash and cash equivalents 268 166 718 200 2,468 1,545 5,129 1,579 Investment expenses ( 14 ) ( 3 ) ( 67 ) ( 3 ) Net investment income $ 2,454 $ 1,542 $ 5,062 $ 1,576 20 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) d) Net Realized and Unrealized Investment Gains (Losses) Realized gains or losses on the sale of investments are determined on the basis of the specific identification method. The following tables show the net realized and unrealized investment gains (losses) included in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026 and 2025: For the Three Months Ended June 30, 2026 Gross gains Gross losses Net Fixed maturities $ 145 $ ( 80 ) $ 65 Other investments 662 ( 3,711 ) ( 3,049 ) Net realized and unrealized investment gains (losses) $ 807 $ ( 3,791 ) $ ( 2,984 ) For the Three Months Ended June 30, 2025 Gross gains Gross losses Net Fixed maturities $ 875 $ ( 111 ) $ 764 Equity securities 46 — 46 Other investments 512 ( 264 ) 248 Net realized and unrealized investment gains (losses) $ 1,433 $ ( 375 ) $ 1,058 For the Six Months Ended June 30, 2026 Gross gains Gross losses Net Fixed maturities $ 215 $ ( 98 ) $ 117 Other investments 4,321 ( 6,083 ) ( 1,762 ) Net realized and unrealized investment gains (losses) $ 4,536 $ ( 6,181 ) $ ( 1,645 ) For the Six Months Ended June 30, 2025 Gross gains Gross losses Net Fixed maturities $ 875 $ ( 111 ) $ 764 Equity securities 46 — 46 Other investments 512 ( 264 ) 248 Net realized and unrealized investment gains (losses) $ 1,433 $ ( 375 ) $ 1,058 Realized and unrealized investment gains and losses from equity securities detailed in the table above include realized gains from sales and distributions of equity securities and unrealized gains and losses coming from fair value changes. Net unrealized gains recognized for equity securities held at reporting date of June 30, 2026 and 2025 were as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Net gains recognized for equity securities $ — $ 46 $ — $ 46 Net gains recognized for equity securities divested — — — — Net unrealized gains recognized for equity securities still held at the reporting date $ — $ 46 $ — $ 46 Proceeds from sales of AFS fixed maturity investments were $ 10,365 and $ 48,482 for the three and six months ended June 30, 2026 (2025: $ 7,312 for both respective periods). Net unrealized gains included in accumulated other comprehensive income ("AOCI") at June 30, 2026 and December 31, 2025 were as follows: June 30, 2026 December 31, 2025 Net unrealized gains on fixed maturity investments $ 138 $ 679 Deferred income tax — — Net unrealized gains, net of deferred income tax $ 138 $ 679 Change, net of deferred income tax $ ( 541 ) $ 679 21 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) e) Restricted Cash and Cash Equivalents and Investments The Company is required to provide collateral for its reinsurance liabilities under various reinsurance agreements and utilizes trust accounts to collateralize business with reinsurance counterparties. The assets in trust as collateral are primarily cash and highly rated fixed maturities. The fair values of the Company's restricted assets at June 30, 2026 and December 31, 2025 are as follows: June 30, 2026 December 31, 2025 Restricted cash – third party agreements $ 7,155 $ 7,767 Restricted cash – related party agreements 3,061 1,379 Total restricted cash 10,216 9,146 Restricted investments – in trust for third party agreements at fair value (amortized cost 2026: $ 48,323 ; 2025: $ 51,927 ) 48,535 52,350 Restricted investments – in trust for related party agreements at fair value (amortized cost 2026: $ 88,413 ; 2025: $ 102,313 ) 88,280 102,368 Restricted investments – receivable for investments sold under related party agreements 566 — Total restricted investments 137,381 154,718 Total restricted cash and investments $ 147,597 $ 163,864 22 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (a) Fair Values of Financial Instruments Fair Value Measurements — Accounting Standards Codification Topic 820, "Fair Value Measurements and Disclosures" ("ASC 820") defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between open market participants at the measurement date. Additionally, ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of inputs: • Level 1 — Valuations based on unadjusted quoted market prices for identical assets or liabilities that we have the ability to access. Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Examples of assets and liabilities utilizing Level 1 inputs include: U.S. Treasury bonds, U.S. Treasury bills; and publicly traded equity securities; • Level 2 — Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severity, etc.) or can be corroborated by observable market data. Examples of assets and liabilities utilizing Level 2 inputs include: U.S. government-sponsored agency securities; non-U.S. government and supranational obligations; commercial mortgage-backed securities ("CMBS"); collateralized loan obligations ("CLO"); corporate and municipal bonds; and • Level 3 — Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company's own assumptions about assumptions that market participants would use developed on the basis of the best information available in the particular circumstances. Examples of assets and liabilities utilizing Level 3 inputs include: an investment in preference shares of a start-up insurance producer. The availability of observable inputs can vary and is affected by a wide variety of factors, including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in the Level 3 hierarchy. The Company uses prices and inputs that are current as at the measurement date. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified between hierarchy levels. For investments that have quoted market prices in active markets, the Company uses the quoted market prices as fair value and includes these in the Level 1 hierarchy. The Company receives the quoted market prices from a third party nationally recognized provider ("the Pricing Service"). When quoted market prices are unavailable, the Company utilizes the Pricing Service to determine an estimate of fair value. The fair value estimates are included in the Level 2 hierarchy. The Company will challenge any prices for its investments which are considered not to be representative of fair value. If quoted market prices and an estimate from the Pricing Service are unavailable, the Company produces an estimate of fair value based on dealer quotations for recent activity in positions with the same or similar characteristics to that being valued. The Company determines whether the fair value estimate is in the Level 2 or Level 3 hierarchy depending on the level of observable inputs available when estimating the fair value. The Company bases its estimates of fair values for assets on the bid price as it represents what a third party market participant would be willing to pay in an orderly transaction. ASC 825, "Disclosure About Fair Value of Financial Instruments" , requires all entities to disclose the fair value of their financial instruments for assets and liabilities recognized and not recognized in the balance sheet, for which it is practicable to estimate fair value. The following describes the valuation techniques used by the Company to determine the fair value of financial instruments that are measured at fair value on a recurring basis held at June 30, 2026. U.S. government and U.S. agency bonds: Bonds issued by the U.S. Treasury, the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation, Government National Mortgage Association, Federal National Mortgage Association and the Federal Farm Credit Banks Funding Corporation. The fair values of U.S. treasury bonds are based on quoted market prices in active markets, and are included in the Level 1 fair value hierarchy. We believe the market for U.S. treasury bonds is an actively traded market given the high level of daily trading volume. The fair values of U.S. agency bonds are determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. agency bonds are included in the Level 2 fair value hierarchy. Non-U.S. government bonds: These securities are generally priced by independent pricing services. The Pricing Service may use current market trades for securities with similar quality, maturity and coupon. If no such trades are available, the Pricing Service typically uses analytical models which may incorporate spreads, interest rate data and market/sector news. As the significant inputs used to price non-U.S. government bonds are observable market inputs, the fair values of non-U.S. government bonds are included in the Level 2 fair value hierarchy. 23 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (continued) Collateralized loan obligations ("CLO"): These asset backed securities are originated by a variety of financial institutions that on acquisition are rated BBB-/Baa3 or higher. These securities are priced by independent pricing services and brokers. The pricing provider applies dealer quotes and other available trade information, prepayment speeds, yield curves and credit spreads to the valuation. As the significant inputs used to price the CLO are observable market inputs, the fair values are included in the Level 2 fair value hierarchy. Commercial mortgage-backed securities ("CMBS"): These asset backed securities are originated by a variety of financial institutions that on acquisition are rated BBB-/Baa3 or higher. These securities are priced by independent pricing services and brokers. The pricing provider applies dealer quotes and other available trade information, prepayment speeds, yield curves and credit spreads to the valuation. As the significant inputs used to price the CMBS are observable market inputs, the fair values are included in the Level 2 fair value hierarchy. Corporate and municipal bonds: Bonds issued by corporations, U.S. state and municipality entities or agencies that on acquisition are rated BBB-/Baa3 or higher. These securities are generally priced by independent pricing services. The credit spreads are sourced from broker/dealers, trade prices and new issue market. Where pricing is unavailable from pricing services, custodian pricing or non-binding quotes are obtained from broker-dealers to estimate fair values. As significant inputs used to price corporate and municipal bonds are observable market inputs, fair values are included in the Level 2 fair value hierarchy. Equity securities: Equity securities can include both publicly traded and privately held common and preferred stocks. The fair value of publicly traded common and preferred stocks is primarily priced by pricing services, reflecting the closing price quoted for the final trading day of the period. These investments are carried at fair value using observable market pricing data and are included in the Level 1 fair value hierarchy. Any unrealized gains or losses on the investment is recorded in net income in the reporting period in which it occurs. Privately held common and preferred stocks are valued using significant inputs that are either observable using quoted prices for identical or similar assets in markets that are not active, or unobservable where there is little or no market activity. For those investments where significant observable inputs are used in valuation such as unadjusted third party pricing sources, they are classified as Level 2 in the fair value hierarchy. Where management's assumptions and internal valuation models may be used to determine the fair values, these investments are classified as Level 3 in the fair value hierarchy. For investments without a readily determinable fair value, the measurement alternative can be elected to report the qualifying investment at cost, less impairment if any, plus or minus observable price changes in orderly transactions for an identical or similar investment of the same issuer. Other investments: Includes unquoted investments comprised of the following types of investments: • Privately held equity investments: These are direct equity investments in common and preferred stock of privately held entities. The fair values are estimated using quarterly financial statements and/or recent private market transactions and thus are included under Level 3 of the fair value hierarchy due to unobservable market data used for valuation. • Private credit funds: These are privately held equity investments in common stock of entities that lend money valued using the most recently available or quarterly net asset value ("NAV") statements as provided by the external fund manager or third-party administrator and therefore measured using the NAV as a practical expedient. • Private equity funds: These are comprised of private equity funds, private equity co-investments with sponsoring entities and investments in real estate limited partnerships and joint ventures . The fair value is estimated based on the most recently available NAV as advised by the external fund manager or third-party administrator. The fair values are therefore measured using the NAV as a practical expedient. • Investments in direct lending entities: These investments are carried at their fair market value with any changes in fair value reported in realized and unrealized gains (losses) during the period. These investments are included in Level 3 of the fair value hierarchy due to unobservable market data used for valuation. • Due to a lag in the valuations of certain funds reported by the investment managers, the Company may record changes in valuation with up to a three-month lag. The Company regularly reviews and discusses fund performance with the investment managers or sponsors to corroborate the reasonableness of the reported NAV and to assess whether any events have occurred within the lag period that would affect the valuation of the investments. • Equity method investments: The Company elected the fair value option for certain of its equity method investments, and these investments are reported at their fair values with any changes in fair value reported in realized and unrealized gains (losses) during the period. These are included in Level 3 of the fair value hierarchy due to unobservable market data used for valuation. Contingent Receivables - The Company holds a contingent receivable related to a prior private equity investment in the insurance distribution industry. Pursuant to the terms of the asset purchase agreement, the Company will receive a series of distributions. The Company uses unobservable inputs to estimate the net present value of these potential distributions and the expected proceeds are classified as a receivable and reported in Other Assets on the Consolidated Balance Sheet. Under ASC 805, the earn out consideration for this receivable is adjusted to fair value at each reporting period with any changes in fair value reported immediately in income through foreign exchange and other gains (losses) on the condensed consolidated statement of operations. 24 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (continued) Derivative Instruments: The Company has a reinsurance contract that is accounted for as a derivative. This reinsurance contract provides indemnification to an insured or cedant as a result of a change in a variable as opposed to an identifiable insurable event. The Company considers this contract to be part of its underwriting operations. This derivative was initially valued at cost which approximates fair value. In subsequent measurement periods, the fair value of this derivative was determined using internally developed discounted cash flow models using appropriate discount rates. The selection of an appropriate discount rate is judgmental and is the most significant unobservable input used in the valuation of this derivative. The derivative liability on retroactive reinsurance is presented as part of accrued expenses and other liabilities. A significant increase (decrease) in this input in isolation may result in a significantly lower (higher) fair value measurement for the derivative contract. As the significant inputs used to price these derivatives are unobservable, the fair values of this contract is classified as Level 3 in the fair value hierarchy. 25 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (continued) (b) Fair Value Hierarchy The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in ASC 820. The framework is based on the inputs used in valuation and gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuation methodology whenever available. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active trading markets and the lowest priority to unobservable inputs that reflect significant market assumptions. At June 30, 2026 and December 31, 2025, the Company classified its financial instruments measured at fair value on a recurring basis in the following valuation hierarchy: June 30, 2026 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value Based on NAV Practical Expedient Total Fair Value Fixed maturities U.S. treasury bills $ 35,026 $ — $ — $ — $ 35,026 U.S. agency bonds – mortgage-backed — 20,346 — — 20,346 Non-U.S. government bonds — 52,827 — — 52,827 Collateralized loan obligations — 27,518 — — 27,518 Corporate bonds — 8,907 — — 8,907 Equity securities — 4,838 6,910 — 11,748 Contingent Receivable — — 11,923 — 11,923 Other investments — — 132,829 40,451 173,280 Total investments $ 35,026 $ 114,436 $ 151,662 $ 40,451 $ 341,575 As a percentage of total assets 3.8 % 12.4 % 16.5 % 4.4 % 37.1 % Underwriting-related derivative liability $ — $ — $ 9,236 $ — $ 9,236 December 31, 2025 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value Based on NAV Practical Expedient Total Fair Value Fixed maturities U.S. treasury bills $ 43,673 $ — $ — $ — $ 43,673 U.S. agency bonds – mortgage-backed — 21,618 — — 21,618 Non-U.S. government bonds — 30,295 — — 30,295 Collateralized loan obligations — 62,624 — — 62,624 Corporate bonds — 11,455 — — 11,455 Equity securities — 4,838 6,910 — 11,748 Contingent Receivable — — 9,955 — 9,955 Other investments — — 135,018 38,340 173,358 Total investments $ 43,673 $ 130,830 $ 151,883 $ 38,340 $ 364,726 As a percentage of total assets 4.3 % 13.0 % 15.0 % 3.8 % 36.1 % Underwriting-related derivative liability $ — $ — $ 3,984 $ — $ 3,984 The Company utilizes the Pricing Service to assist in determining the fair value of its investments; however, management is ultimately responsible for all fair values presented in the Company’s consolidated financial statements. This includes responsibility for monitoring the fair value process, ensuring objective and reliable valuation practices, and pricing of assets and liabilities and use of pricing sources. The Company analyzes and reviews the information and prices received from the Pricing Service to ensure that the prices provided represent a reasonable estimate of fair value. The Pricing Service was utilized to estimate fair value measurements for 100.0 % of our fixed maturities at June 30, 2026 and December 31, 2025, respectively. The Pricing Service utilizes market quotations for fixed maturity securities that have quoted market prices in active markets. 26 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (continued) Since fixed maturities other than U.S. treasury bonds and U.S. treasury bills generally do not trade actively on a daily basis, the Pricing Service prepares estimates of fair value measurements using relevant market data, benchmark curves, sector groupings and matrix pricing and these have been classified as Level 2 within the fair value hierarchy. At June 30, 2026 and December 31, 2025, no securities in our fixed maturity investment portfolio were priced using a non-binding quotation from a broker and/or custodian as opposed to the Pricing Service. At June 30, 2026 and December 31, 2025, the Company did not adjust any pricing provided to it based on the review performed by its investment managers. There were no transfers to or from Level 3 during the three and six months ended June 30, 2026. (c) Level 3 Financial Instruments At June 30, 2026, the Company holds Level 3 financial assets of $ 151,662 (December 31, 2025: $ 151,883 ); and Level 3 financial liabilities of $ 9,236 (December 31, 2025: $ 3,984 ). The Level 3 financial assets include collateralized investments in direct lending entities of $ 53,127 at June 30, 2026 (December 31, 2025: $ 53,275 ) which are carried at fair market value using significant unobservable inputs. These direct loans are illiquid and require long-term capital commitments, and so significant judgment was used in its valuation using discounted cash flows. However, collateral is held in excess of the fair value of this investment. Due to significant unobservable inputs required in its valuation, investments in direct lending entities are classified as Level 3 in the fair value hierarchy. The Level 3 financial assets include privately held equity investments of $ 9,742 at June 30, 2026 (December 31, 2025: $ 9,742 ) and their fair values are estimated using quarterly unaudited capital and financial statements provided by the investee, option pricing models or market comparable transactions where applicable. Any changes to the financial information provided by the investee could result in a significantly higher or lower valuation at the reporting date. Due to significant unobservable inputs in these valuations, the fair values of these assets are classified as Level 3 in the fair value hierarchy . The Company elected the fair value option for certain of its equity method investments at the acquisition date. The fair values of these equity method investments were $ 76,870 at June 30, 2026 (December 31, 2025: $ 78,911 ) and are presented in other investments and estimated using quarterly unaudited capital and financial statements provided by the investee, discounted cash flows and option pricing models, where applicable. Any changes to the financial information provided by the investee could result in a significantly higher or lower valuation at the reporting date. Due to significant unobservable inputs in valuations, the fair values of these assets are classified as Level 3 in the fair value hierarchy. The Level 3 financial assets include a contingent receivable related to a prior private equity investment in the insurance distribution industry where the Company will receive a series of distributions under terms of the asset purchase agreement. The net present value of potential distributions is $ 11,923 at June 30, 2026 (December 31, 2025: $ 9,955 ) which was reported in Other Assets on the Condensed Consolidated Balance Sheets. Under ASC 805, the earn out consideration for this receivable is adjusted to fair value using discounted cash flows at each reporting period with any changes in fair value reported immediately in net income. Due to significant unobservable inputs in its valuation, the fair values of these assets are classified as Level 3 in the fair value hierarchy. The Level 3 financial liability includes an underwriting-related derivative liability of $ 9,236 at June 30, 2026 (December 31, 2025: $ 3,984 ) for a reinsurance contract written by GLS which is included in accrued expenses and other liabilities as discussed in Note 11. Commitments and Contingencies. Its fair value was determined using a discounted cash flow model in which the Company examines current market conditions, historical results as well as contract specific information that may impact future cash flows in order to assess the reasonableness of inputs used in the valuation model . Due to significant unobservable inputs in these valuations, the fair values are classified as Level 3 in the fair value hierarchy . The following table shows the reconciliation of beginning and ending balances for investments measured at fair value on a recurring basis using Level 3 inputs for the three and six months ended June 30, 2026 and 2025. The Company includes any related interest and dividend income in net investment income and thus are excluded from the reconciliation in the table below: For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Balance - beginning of period $ 152,840 $ — $ 151,883 $ — Acquired Level 3 investments — 137,188 — 137,188 Purchases 860 1,723 1,886 1,723 Sales ( 505 ) ( 163 ) ( 1,723 ) ( 163 ) Net realized and unrealized losses during the period ( 1,533 ) 171 ( 384 ) 171 Total Level 3 investments - end of period $ 151,662 $ 138,919 $ 151,662 $ 138,919 27 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value Measurements (continued) The following table provides a summary of quantitative information regarding the significant unobservable inputs used in determining the fair value of other investments measured at fair value on a recurring basis under the Level 3 classification at June 30, 2026: Financial Instrument Fair Value Valuation Technique Significant Unobservable Valuation Inputs Range of Unobservable Inputs (Low/High/Weighted Average) Impact of Increases in Inputs Private equity investments - preferred shares $ 4,578 Market comparable companies & Option Pricing Models Value Change - Market/Industry Factors ( 3.0 )% 5.0 % ( 0.3 )% Higher fair value Private equity investments - preferred shares 2,332 Value Change - Company Performance 10.0 % 10.0 % 10.0 % Higher fair value Term to Exit 3.0 years 3.0 years 3.0 years Lower fair value Equity Volatility 40.0 % 65.0 % 56.6 % Lower fair value Private equity investments - preferred shares 1,559 Market comparable companies & Option Pricing Models Value Change - Market/Industry Factors ( 3.0 )% 7.5 % 1.7 % Higher fair value Private equity investments - preferred shares 1,273 Value Change - Company Performance 10.0 % 10.0 % 10.0 % Higher fair value Term to Exit 2.5 years 3.0 years 2.7 years Lower fair value Equity Volatility 65.0 % 92.5 % 80.1 % Lower fair value Investment in direct lending entities 53,127 Discounted cash flows Discount rate 22.0 % 22.0 % 22.0 % Lower fair value — Discounted cash flows Discount Rate 10.0 % 25.0 % 18.0 % Lower fair value Silverstone Ventures 25,870 Term to Exit 3.0 years 9.0 years 3.6 years Lower fair value Extell Hudson Waterfront Holdings Discounted cash flows & option pricing models Discount Rate 6.8 % 6.8 % 6.8 % Lower fair value Exit Cap Rate 5.5 % 5.5 % 5.5 % Lower fair value 51,000 Equity Volatility 37.4 % 37.4 % 37.4 % Lower fair value Term to Exit 5.7 years 5.7 years 5.7 years Lower fair value Discount for Lack of Marketability - OPM 15.0 % 18.0 % 16.5 % Lower fair value Discount for Lack of Marketability 10.0 % 10.0 % 10.0 % Lower fair value Total Level 3 Investments $ 139,739 Contingent Receivable $ 11,923 Discounted cash flows & Option pricing models EBITDA & Commission Discount Rate 9.2 % 9.2 % 9.2 % Lower fair value EBITDA & Commission Equity Volatility Rate 25.0 % 25.0 % 25.0 % Lower fair value Underwriting-related derivative liability $ 9,236 Discounted cash flows Duration matched discount rates & arbitration decision 5.5 % 5.5 % 5.5 % Lower fair value 28 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value Measurements (continued) (d) Financial Instruments Disclosed, But Not Carried, at Fair Value The fair value of financial instruments accounting guidance also applies to financial instruments disclosed, but not carried, at fair value, except for certain financial instruments related to insurance contracts . At June 30, 2026, the carrying values of cash equivalents (including restricted amounts), accrued investment income, reinsurance balances receivable and certain other assets and liabilities approximate fair values due to their inherent short duration. As these financial instruments are not actively traded, the fair values of these financial instruments are classified as Level 2 in the fair value hierarchy. At June 30, 2026, the carrying value of the net loan receivable from related party approximates fair value. The fair value of the net loan receivable is primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar loans with similar credit risk. As the net loan receivable from related party is not actively traded, its fair value is classified as Level 3 in the fair value hierarchy. The fair values of the Company's outstanding Senior Notes (as defined in Note 7. Long-Term Debt ) are based on indicative market pricing obtained from a third-party pricing service which uses observable market inputs, and therefore the fair values of these liabilities are classified as Level 2 in the fair value hierarchy. The following table presents the respective principal amount and fair values for the Senior Notes as at June 30, 2026 and December 31, 2025: June 30, 2026 December 31, 2025 Principal Amount Fair Value Principal Amount Fair Value Senior Notes - MHLA – 6.625 % $ 110,000 $ 49,148 $ 110,000 $ 57,200 Senior Notes - MHNC – 7.75 % 152,361 71,610 152,361 96,292 Total Senior Notes $ 262,361 $ 120,758 $ 262,361 $ 153,492 29 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 6. Shareholders' Equity a) Common Shares As discussed in Note 1. Basis of Presentation , pursuant to the terms of the Combination, at the closing of the transaction on May 27, 2025, each issued and outstanding common share of Maiden, par value $ 0.01 per share, was automatically canceled and converted into the right to receive one-twentieth ( 0.05 ) of a common share in Kestrel Group. The equityholders of Kestrel LLC at the closing date received 2,749,996 common shares of the Kestrel Group. Fractional shares for both Maiden and Kestrel LLC were paid out in cash at the closing date. The Company’s authorized share capital after the Combination consists of 42,500,000 common shares. The Company's common shares have a par value of $ 0.01 per share. Kestrel Group common shareholders are entitled to receive dividends. For the three and six months ended June 30, 2026, the Company's Board of Directors did not declare any dividends to common shareholders. Holders of Kestrel Group common shares have no pre-emptive, redemption, conversion or sinking fund rights. Holders of Kestrel Group common shares are entitled to one vote per share on all matters submitted to a vote of holders of Kestrel Group common shares. Most matters to be approved by holders of Kestrel Group common shares require approval by a simple majority vote. Under the Kestrel Group bye-laws, the holders of at least a majority of the Kestrel Group common shares voting in person or by proxy at a meeting must approve any merger, amalgamation, business combination or similar transaction with another company. At June 30, 2026, the aggregate authorized share capital of the Company is 42,500,000 shares of which 10,108,600 common shares were issued. This includes 7,824,030 common shares outstanding, and 2,284,570 treasury shares as discussed further below. The remaining 32,391,400 shares are undesignated at June 30, 2026 which include 737,943 common shares that will be issued and outstanding upon vesting of restricted shares and performance shares. b) Common Shares issuable under Incentive Plans On June 3, 2025, a Registration Statement on Form S-8 was filed by Kestrel Group for the purpose of registering 1,411,600 common shares, par value $ 0.01 per share, of the Company which include: • 206,600 common shares are issuable in respect of outstanding awards under the Maiden Holdings, Ltd. 2019 Omnibus Incentive Plan (“Legacy Plan”) and any such additional shares granted under the Legacy Plan that were forfeited, cancelled, exchanged or surrendered, including in connection with the termination or expiration of an award, that then become available under the Legacy Plan in accordance with its terms. The Legacy Plan was assigned to and assumed by the Company at the effective time of the mergers. Such aggregate number of common shares issuable under the Legacy Plan reflects the conversion required by the terms of the Combination Agreement; and • 1,205,000 common shares are issuable under the Kestrel Group Ltd 2025 Equity Incentive Plan (“Kestrel Group Plan”). During the three and six months ended June 30, 2026, a total of 61,753 and 710,322 restricted share awards were granted to employees under the Kestrel Group Plan (2025: 51,209 ). During the three and six months ended June 30, 2026, a total of 184,764 performance awards ("Performance Award") were issued to senior officers of the Company on May 13, 2026 for fiscal year 2026 pursuant to the Kestrel Group Plan. The Performance Award is subject to a one-year performance period beginning on January 1, 2026 and ending on December 31, 2026, during which the designated performance goal must be achieved. The performance goal for this performance period will be based upon the EBITDA of the Company's Program Services segment. If the threshold level of performance is not met, the Performance Award will be forfeited immediately upon certification by the Committee. c) Treasury Shares Treasury shares include 2,237,534 common shares owned by Maiden Reinsurance which are not treated as outstanding common shares on the Condensed Consolidated Balance Sheets at June 30, 2026 and December 31, 2025, respectively. During the six months ended June 30, 2026, the Company repurchased 47,036 common shares at an average price of $ 10.32 per share from employees, which represent tax withholding in respect of tax obligations on the vesting of non-performance-based restricted shares. There were no share repurchases from employees during the three months ended June 30, 2026 and during the three and six months ended June 30, 2025. The table below includes the total number of treasury shares outstanding at June 30, 2026 and December 31, 2025: June 30, 2026 December 31, 2025 Number of common shares held by Maiden Reinsurance treated as treasury shares 2,237,534 2,237,534 Number of treasury shares due to common share repurchases by Kestrel Group 47,036 — Total number of treasury shares at the end of the reporting period 2,284,570 $ 2,237,534 30 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 6. Shareholders' Equity (continued) d) AOCI The following table sets forth financial information regarding the changes in the balances of each component of AOCI: For the Three Months Ended June 30, 2026 Change in net unrealized gains on investment Foreign currency translation Total Beginning balance $ 59 $ 478 $ 537 Other comprehensive loss before reclassifications ( 147 ) ( 645 ) ( 792 ) Amounts reclassified from AOCI to net loss, net of tax 226 — 226 Net current period other comprehensive income (loss) 79 ( 645 ) ( 566 ) Ending balance, Kestrel shareholders $ 138 $ ( 167 ) $ ( 29 ) For the Three Months Ended June 30, 2025 Change in net unrealized gains on investment Foreign currency translation Total Beginning balance $ — $ — $ — Other comprehensive income before reclassifications 485 74 559 Net current period other comprehensive income 485 74 559 Ending balance, Kestrel shareholders $ 485 $ 74 $ 559 For the Six Months Ended June 30, 2026 Change in net unrealized gains on investment Foreign currency translation Total Beginning balance $ 679 $ 237 $ 916 Other comprehensive loss before reclassifications ( 759 ) ( 404 ) ( 1,163 ) Amounts reclassified from AOCI to net loss, net of tax 218 — 218 Net current period other comprehensive loss ( 541 ) ( 404 ) ( 945 ) Ending balance, Kestrel shareholders $ 138 $ ( 167 ) $ ( 29 ) For the Six Months Ended June 30, 2025 Change in net unrealized gains on investment Foreign currency translation Total Beginning balance $ — $ — $ — Other comprehensive income before reclassifications 485 74 559 Net current period other comprehensive income 485 74 559 Ending balance, Kestrel shareholders $ 485 $ 74 $ 559 31 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 7. Long-Term Debt Senior Notes At June 30, 2026, Kestrel Group had outstanding publicly-traded senior notes which were issued in 2016 ("2016 Senior Notes") by its now wholly owned subsidiary Maiden and outstanding publicly-traded senior notes which were issued in 2013 ("2013 Senior Notes") by its now wholly owned subsidiary, Maiden Holdings North America, Ltd. ("Maiden NA"). These are collectively referred to as the Company's outstanding senior notes ("Senior Notes"). The Senior Notes are unsecured and unsubordinated obligations of the Company. On May 27, 2025 in connection with the Combination, (i) Maiden, as issuer, the Company, as guarantor, and Wilmington Trust, National Association, as trustee, entered into a second supplemental indenture (the “Second Supplemental Indenture”) to that certain indenture dated as of June 14, 2016, providing that the Company will fully and unconditionally guarantee Maiden’s 6.625 % Senior Notes due 2046 and (ii) Maiden NA, as issuer, the Company, as guarantor, and Wilmington Trust Company, as trustee, entered into a fourth supplemental indenture (together with the Second Supplemental Indenture, the “Supplemental Indentures”) to that certain indenture dated as of June 24, 2011, providing that the Company will fully and unconditionally guarantee MHNA’s 7.75 % Senior Notes due 2043. The following tables detail the issuances of Senior Notes outstanding at June 30, 2026 and December 31, 2025: June 30, 2026 2016 Senior Notes 2013 Senior Notes Total Principal amount $ 110,000 $ 152,361 $ 262,361 Less: unamortized fair value adjustment 43,361 43,951 87,312 Carrying value $ 66,639 $ 108,410 $ 175,049 December 31, 2025 2016 Senior Notes 2013 Senior Notes Total Principal amount $ 110,000 $ 152,361 $ 262,361 Less: unamortized issuance costs 43,627 44,332 87,959 Carrying value $ 66,373 $ 108,029 $ 174,402 Original fair value adjustment at acquisition date $ 43,928 $ 44,764 Maturity date June 14, 2046 December 1, 2043 Earliest redeemable date (for cash) June 14, 2021 December 1, 2018 Coupon rate 6.625 % 7.75 % Effective interest rate 11.77 % 11.63 % Total interest and amortization expense incurred on the Senior Notes for the three and six months ended June 30, 2026 was $ 5,104 and $ 10,200 , respectively, compared to $ 1,899 for the three and six months ended June 30, 2025, respectively. Accrued interest payable was $ 1,342 at June 30, 2026 and December 31, 2025, respectively. Under the Combination, the Senior Notes were acquired at their respective fair market values on May 27, 2025, therefore the difference between the principal amount of the acquired debt and the fair market value of the acquired debt is being amortized over the remaining life of the Senior Notes up to par value. The amortization for the fair value adjustment was $ 327 and $ 647 for the three and six months ended June 30, 2026, respectively, compared to $ 114 for the three and six months ended June 30, 2025, respectively. Under the terms of the 2013 Senior Notes, the 2013 Senior Notes can be redeemed, in whole or in part, at Maiden NA's option at any time and from time to time, until maturity at a redemption price equal to 100 % of the principal amount of the notes to be redeemed plus accrued but unpaid interest on the principal amount being redeemed to, but not including, the redemption date. Maiden NA is required to give at least thirty days and not more than sixty days notice prior to the redemption date. Please refer to Note 11. Commitments, Contingencies and Guarantees for ongoing litigation regarding the 2013 Senior Notes. Under the terms of the 2016 Senior Notes, the 2016 Senior Notes can be redeemed, in whole or in part, at Maiden's option at any time and from time to time, until maturity at a redemption price equal to 100 % of the principal amount of the notes to be redeemed plus accrued but unpaid interest on the principal amount being redeemed to, but not including, the redemption date. Maiden is required to give at least thirty days and not more than sixty days notice prior to the redemption date. 32 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 8. Reinsurance The Company uses reinsurance and retrocessional agreements ("ceded reinsurance") to mitigate volatility, reduce its exposure to certain risks and provide capital support. Ceded reinsurance provides for the recovery of a portion of loss and LAE under certain circumstances without relieving the Company of its obligations to the policyholders. The Company remains liable to the extent that any of its reinsurers or retrocessionaires fails to meet their obligations. Loss and LAE incurred and premiums earned are reported after deduction for ceded reinsurance. In the event that one or more of our reinsurers or retrocessionaires are unable to meet their obligations under these agreements, the Company would not realize the full value of the reinsurance recoverable balances. The effect of ceded reinsurance on net premiums written and earned and on net loss and LAE for the six months ended June 30, 2026 and 2025 was as follows: For the Six Months Ended June 30, 2026 2025 Premiums written Direct $ 1,287 $ 1,379 Assumed 2,804 ( 283 ) Ceded ( 1 ) ( 1 ) Net $ 4,090 $ 1,095 Premiums earned Direct $ 1,466 $ 1,384 Assumed 5,195 1,039 Ceded ( 30 ) ( 1 ) Net $ 6,631 $ 2,422 Loss and LAE Gross loss and LAE $ 3,811 $ ( 6,171 ) Loss and LAE ceded ( 41 ) 210 Net $ 3,770 $ ( 5,961 ) The Company's reinsurance recoverable on unpaid losses balance as at June 30, 2026 was $ 412,121 (December 31, 2025: $ 461,197 ) presented in the Condensed Consolidated Balance Sheets. As of June 30, 2026, the Company's total allowance for expected credit losses on its reinsurance recoverable balance was $ 1,613 (December 31, 2025: $ 1,740 ). The following table provides a reconciliation of the beginning and ending balances of the allowance for expected credit losses on reinsurance recoverable for the three and six months ended June 30, 2026 and 2025, respectively: For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Allowance for expected credit losses on reinsurance recoverable, beginning of period $ 1,930 $ — $ 1,740 $ — Expected credit losses on acquired recoverables under the Combination — 1,655 — 1,655 Decrease in allowance for expected credit losses on reinsurance recoverable where credit losses were previously recognized ( 317 ) — ( 127 ) — Allowance for expected credit losses on reinsurance recoverable, end of period $ 1,613 $ 1,655 $ 1,613 $ 1,655 On December 27, 2018, Cavello Bay Reinsurance Limited ("Cavello") and Maiden Reinsurance entered into a retrocession agreement pursuant to which certain assets and liabilities associated with the U.S. treaty reinsurance business held by Maiden Reinsurance were 100.0 % retroceded to Cavello in exchange for a ceding commission. The reinsurance recoverable on unpaid losses due from Cavello under this retrocession agreement was $ 31,521 at June 30, 2026 (December 31, 2025: $ 32,791 ). The recoverable due from Cavello is net of an allowance for expected credit losses of $ 710 as at June 30, 2026 (December 31, 2025: $ 689 ). On July 31, 2019, Maiden Reinsurance and Cavello entered into a Loss Portfolio Transfer and Adverse Development Cover Agreement ("LPT/ADC Agreement") pursuant to which Cavello assumed the loss reserves as of December 31, 2018 associated with the AmTrust Quota Share in excess of a $ 2,178,535 retention up to $ 600,000 , in exchange for a retrocession premium of $ 445,000 . The $ 2,178,535 retention is subject to adjustment for paid losses subsequent to December 31, 2018. 33 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 8. Reinsurance (continued) The LPT/ADC Agreement provides Maiden Reinsurance with $ 155,000 in adverse development cover over its carried AmTrust Quota Share loss reserves at December 31, 2018. The LPT/ADC Agreement meets the criteria for risk transfer and is thus accounted for as retroactive reinsurance. As of June 30, 2026, the reinsurance recoverable on unpaid losses under the LPT/ADC Agreement was $ 379,391 (December 31, 2025: $ 427,013 ) which was net of an allowance for expected credit losses of $ 901 as at June 30, 2026 (December 31, 2025: $ 1,048 ). Cavello provided collateral in the form of a letter of credit in the amount of $ 445,000 to AmTrust under the LPT/ADC Agreement. Cavello is subject to additional collateral funding requirements as explained in Note 10. Related Party Transactions. As of June 30, 2026, the amount of collateral required was $ 351,466 (December 31, 2025: $ 362,501 ). Under the terms of the LPT/ADC Agreement, covered losses associated with the Commutation and Release Agreement with AmTrust are eligible to be covered but recoverable only when such losses are paid or settled by AII or its affiliates, provided such losses and other related amounts shall not exceed $ 312,786 . Cavello's parent company, Enstar Group Limited, has credit ratings of BBB+ from both Standard & Poor's and Fitch Ratings at June 30, 2026. On February 13, 2026, S&P Global Ratings affirmed the BBB+ issuer credit rating on Enstar, and affirmed the A issuer credit and financial strength ratings on its operating subsidiary, Cavello. On July 18, 2025, the Company received correspondence from Cavello disputing the dates of loss assigned by Maiden Reinsurance’s cedant in the underlying reinsurance contract to a significant number of claims regarding certain coverage. In that correspondence, Cavello asserts that $ 46,700 in identified claims and approximately $ 25,000 in potential additional claims would fall outside the applicable coverage and reserves all of its rights under the applicable agreements if these matters are not resolved. This correspondence and the asserted amounts resulted from an audit requested by Cavello in December 2024 pursuant to its rights under the LPT/ADC Agreement. The Company is continuing to discuss and exchange information with Cavello on these matters and believes the terms of the LPT/ADC Agreement support both the Company’s position on the dates of loss and the current reinsurance recoverable Maiden Reinsurance has recognized for these claims. At this time, the Company cannot predict the outcome of these issues. 34 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 9. Reserve for Loss and Loss Adjustment Expenses The Company uses both historical experience and industry-wide loss development factors to provide a reasonable basis for estimating future losses. In the future, certain events may be beyond the control of management, such as changes in law, judicial interpretations of law, and rates of inflation, which may favorably or unfavorably impact the ultimate settlement of the Company’s loss and LAE reserves. The anticipated effect of inflation is implicitly considered when estimating liabilities for loss and LAE. While anticipated changes in claim costs due to inflation are considered in estimating the ultimate claim costs, changes in the average severity of claims are caused by a number of factors that vary with the individual type of policy written. Ultimate losses are projected based on historical trends adjusted for implemented changes in underwriting standards, claims handling, policy provisions, and general economic trends. Those anticipated trends are monitored based on actual development and are modified if necessary. The reserving process begins with the collection and analysis of paid losses and incurred claims data for each of the Company's contracts. While reserves are mostly reviewed on a contract by contract basis, paid loss and incurred claims data is also aggregated into reserving segments. The segmental data is disaggregated by reserving class and further disaggregated by either accident year (i.e. the year in which the loss event occurred) or by underwriting year (i.e. the inception year in which the contract generating the premium and losses incepted). In cases where the Company uses underwriting year information, reserves are subsequently allocated to the respective accident year. The reserve for loss and LAE consists of: June 30, 2026 December 31, 2025 Reserve for reported loss and LAE $ 269,146 $ 312,567 Reserve for losses incurred but not reported ("IBNR") 285,195 324,602 Reserve for loss and LAE $ 554,341 $ 637,169 The following table represents a reconciliation of our beginning and ending gross and net loss and LAE reserves: For the Six Months Ended June 30, 2026 2025 Gross loss and LAE reserves, January 1 $ 637,169 $ — Less: reinsurance recoverable on unpaid losses, January 1 461,197 — Net loss and LAE reserves, January 1 175,972 — Net incurred losses related to: Current year 1,562 1,827 Prior years 2,208 ( 7,788 ) 3,770 ( 5,961 ) Net paid losses related to: Current year ( 134 ) ( 391 ) Prior years ( 31,611 ) ( 22,115 ) ( 31,745 ) ( 22,506 ) Net Maiden Legacy run-off business acquired — 221,109 Effect of foreign exchange rate movements ( 5,777 ) 10,270 Net loss and LAE reserves, June 30 142,220 202,912 Reinsurance recoverable on unpaid losses, June 30 412,121 520,520 Gross loss and LAE reserves, June 30 $ 554,341 $ 723,432 Actuarial Methods Used to Estimate Loss and LAE Reserves The Company utilizes a variety of standard actuarial methods in its analysis of loss reserves. The selections from these various methods are based on the loss development characteristics of the specific line of business and significant actuarial judgment. The actuarial methods utilized include: The Expected Loss Ratio ("ELR") method is a technique that is multiplicative and applies an expected loss ratio to premium earned to yield the estimated ultimate losses. The ELR assumption is generally derived from pricing information and historical experience of the business. This method is frequently used for the purpose of stability in the early valuations of an underwriting year with large and uncertain loss development factors. The ELR technique does not take into account actual loss emergence for the underwriting year being projected. As an underwriting year matures and actual loss experience becomes more credible, other methods may be applied in determining the estimated ultimate losses. 35 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 9. Reserve for Loss and Loss Adjustment Expenses (continued) The Loss Development ("LD") method is a reserving method in which ultimate losses are estimated by applying a loss development factor to actual reported (or paid) loss experience. This method fully utilizes actual experience. Multiplication of underwriting year actual reported (or paid) losses by its respective development factor produces the estimated ultimate losses. The LD method is based upon the assumption that the relative change in a given underwriting year’s losses from one evaluation point to the next is similar to the relative change in prior underwriting years’ losses at similar evaluation points. In addition, this method is based on the assumption that the reserving and payment patterns as well as the claim handling procedures have not changed substantially over time. In the case where changes to the payment patterns or the claim handling procedures are identified, historical losses are adjusted to the current basis, and development factors are selected based on the relative change of the adjusted losses (the Berquist Sherman method is one example of this approach). When a company has a sufficiently reliable loss development history, a development pattern based on the company’s historical indications may be used to develop losses to ultimate values. The Bornhuetter-Ferguson ("BF") reserving technique is used for long-tailed or lower frequency, more volatile lines. It is also useful in situations where the reported loss experience is relatively immature and/or lacks sufficient credibility for the application of methods that are more heavily reliant on emerged experience. The BF method is an additive IBNR method that combines the ELR and LD techniques by splitting the expected loss into two pieces - expected reported (or paid) losses and expected unreported (or unpaid) losses. Expected unreported (unpaid) losses, estimated by the use of loss development factors, are added to the current actual reported (or paid) losses to produce an estimate of ultimate losses by underwriting year. The BF method introduces an element of stability that moderates the impact of inconsistent changes in paid and reported losses. The average frequency and severity ("FS") reserving technique is used for lines where claim count is available, and the estimate of loss development factors is more difficult due to volatility in historical data. The available data for such lines is usually more volatile in the estimation of future losses using the LD and BF reserving methods. The FS method uses historical data to estimate the average number of ultimate claims (frequency) and the average costs of closed claims (severity). The estimate of ultimate losses by underwriting year is the result of the multiplication of the ultimate number of claims and the average cost of a claim. With the guidance of the methods above, actuarial judgment is applied in the determination of ultimate losses. In general, the Company’s lines of business have varying levels of seasoning with which the Company has direct experience and as a result, differing methods are utilized to estimate loss and LAE reserves in each line of business. For the Diversified Reinsurance legacy business, the Company utilizes the ELR approach at the onset of reserving an account, the BF method for business with less but maturing loss experience, and as the experience matures the LD method. For proportional or pro-rata business, the Company typically relies heavily on the actual historical contract experience to estimate reserving parameters such as loss development factors, whereas for excess of loss business there will be more usage of industry and/or Company benchmark assumptions. Maiden Reinsurance underwrote the AmTrust Reinsurance legacy business from July 1, 2007 until January 30, 2019, when Maiden Reinsurance and AII agreed to terminate the remaining business subject to the AmTrust Quota Share on a run-off basis effective as of January 1, 2019, and Maiden Reinsurance, AEL and AIU DAC agreed to terminate the European Hospital Liability Quota Share on a run-off basis effective as of January 1, 2019. A large proportion of the exposure in the underlying book of business has significant seasoning, and allows for a significant amount of credibility in using parameters derived from historical experience to calculate reserve estimates. Some segments of the book are a result of recent acquisitions or newer markets for AmTrust. These segments require a greater level of assumptions and professional judgment in deriving ultimate losses, which inherently implies a wider range of reasonable estimates. As a result, the Company has tended to rely on a weighted approach which primarily employs the LD method for aspects of the segment with ample historical data, while also considering the ELR or the BF method for exposures with more limited or volatile historical data. The FS method is also considered for segments of the AmTrust Legacy Reinsurance book of business for which claim count information is available. Additional data detailing items such as class of business, state, claim counts, frequency and severity is available, further enhancing the reserve analysis. Prior period loss development ("PPD") arises from changes to loss estimates recognized in the current year that relate to loss reserves established in previous calendar years. The favorable or unfavorable PPD reflects changes in management's best estimate of ultimate losses under the relevant reinsurance policies after considerable review of changes in actuarial assessments. The following table summarizes total PPD for our Legacy Reinsurance segment for the three and six months ended June 30, 2026 and 2025: For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Prior Year Loss Development (favorable) adverse Diversified Reinsurance legacy business $ ( 359 ) $ 125 $ ( 633 ) $ 125 AmTrust Reinsurance legacy business 2,290 ( 7,913 ) 2,841 ( 7,913 ) Total PPD for Legacy Reinsurance Segment $ 1,931 $ ( 7,788 ) $ 2,208 $ ( 7,788 ) 36 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 9. Reserve for Loss and Loss Adjustment Expenses (continued) Legacy Reinsurance Segment: Diversified Business In the Diversified Reinsurance legacy operations, there was favorable PPD of $ 359 and $ 633 for the three and six months ended June 30, 2026, respectively, primarily driven by favorable loss development for international run-off business. This compared to the adverse PPD of $ 125 for the three and six months ended June 30, 2025 which was primarily driven by adverse development in GLS business. Legacy Reinsurance Segment: AmTrust Business The table below shows PPD for the AmTrust Reinsurance legacy operations for the three and six months ended June 30, 2026 and 2025: For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Prior Year Loss Development (favorable) adverse AmTrust Quota Share $ 1,340 $ ( 4,200 ) $ 1,710 $ ( 4,200 ) LPT/ADC Agreement ( 57 ) ( 3,718 ) 122 ( 3,718 ) European Hospital Liability Quota Share 1,007 5 1,009 5 Total AmTrust Reinsurance PPD $ 2,290 $ ( 7,913 ) $ 2,841 $ ( 7,913 ) In the AmTrust Legacy Reinsurance operations, adverse PPD of $ 2,290 and $ 2,841 was experienced during the three and six months ended June 30, 2026, respectively, compared to favorable PPD was $ 7,913 for the three and six months ended June 30, 2025. Net adverse PPD for the three and six months ended June 30, 2026 and net favorable PPD for the three and six months ended June 30, 2025 was primarily experienced due to foreign currency fluctuations on loss reserves denominated in non-USD currencies. The impact of adverse foreign exchange fluctuations was $ 2,310 for the three months ended June 30, 2026. 37 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 10. Related Party Transactions Kestrel Intermediate Ledbetter Holdings, LLC ("KILH") was the controlling shareholder of Kestrel. In addition, Terry Ledbetter, the Company's Executive Chairman of the Board of Directors and Luke Ledbetter, the Company's Chief Executive Officer were the founding shareholders of KILH. The Founding Shareholders of Maiden were Michael Karfunkel, George Karfunkel and Barry Zyskind. Leah Karfunkel (wife of the late Michael Karfunkel) and George Karfunkel are directors of AmTrust, and Barry Zyskind is the chief executive officer and chairman of AmTrust. Leah Karfunkel, George Karfunkel and Barry Zyskind own or control approximately 55.2 % of the ownership interests of Evergreen Parent, L.P., the ultimate parent of AmTrust. The following describes transactions that have transpired between and among the Company (including Maiden), KILH and AmTrust. KILH and AmTrust were Kestrel Equityholders, and received Common Shares at closing of the Combination in proportion to its equity interest in Kestrel prior to the closing. Barry Zyskind, George Karfunkel and Leah Karfunkel were individually shareholders of Maiden prior to closing of the Combination, and received common shares at the closing of the Combination in proportion to their respective equity interests in Maiden prior to the closing. The Kestrel equityholders at the closing date of the Combination received 2,749,996 common shares of the combined company. The proportionate interest in these shares include 1,811,764 Common Shares issued to KILH for the benefit of Terry Ledbetter and Luke Ledbetter, constituting 18.0 % of the Company's issued Common Shares at June 30, 2026, and 776,040 Common Shares issued to AmTrust, constituting 7.7 % of the Company's issued Common Shares at June 30, 2026. Barry Zyskind is the beneficial owner of 318,714 Common Shares, constituting 4.1 % of the Common Shares outstanding. George Karfunkel is the beneficial owner of 80,000 Common Shares, constituting 1.0 % of the Common Shares outstanding. Leah Karfunkel is the beneficial owner of 339,630 Common Shares, constituting 4.3 % of the Common Shares outstanding. By reason of his position as the chairman and chief executive officer of AmTrust and his equity interest in AmTrust, Barry Zyskind may be deemed to beneficially own the Common Shares owned by AmTrust. By reason of their membership on the board of directors of AmTrust and their equity interests in AmTrust, each of George Karfunkel and Leah Karfunkel may be also be deemed to beneficially own the Common Shares owned by AmTrust. Therefore, including the 776,040 Common Shares of owned by AmTrust, Barry Zyskind beneficially owns 1,094,754 Common Shares, constituting 14.0 % of the Common Shares outstanding; George Karfunkel beneficially owns 856,040 Common Shares, constituting 10.9 % of the Common Shares outstanding; and Leah Karfunkel beneficially owns 1,115,670 Common Shares, constituting 14.3 % of the Common Shares outstanding. Each of Barry Zyskind, George Karfunkel and Leah Karfunkel disclaim beneficial ownership of the Common Shares owned by AmTrust to the extent permitted by law. As discussed above, AmTrust holds approximately 7.7 % of the issued and outstanding Kestrel Group common shares and has the right to nominate (a) one non-independent director to the Kestrel Group Ltd board of directors for so long as AmTrust and its affiliates own at least 25 % of the shares of Kestrel Group issued to them at the closing of the Combination, and (b) two independent directors to the Kestrel Group board of directors for so long as AmTrust and its affiliates own at least 5 % of the shares of Kestrel Group and at least 25 % of the shares of Kestrel Group issued to them at the closing of the Combination. Kestrel Group writes its business on a fronting basis initially through the AmTrust Insurance Companies, and will cede up to 100 % of underwriting risk in exchange for a ceding fee based on gross premiums written. In addition, AmTrust provides additional services in relation to the AmTrust Insurance Companies pursuant to a management agreement with Kestrel Insurance Agency, including compliance, data reporting, data flow and information technology systems. As a result, Kestrel Group relies on its strategic partnership with AmTrust as a related party. At June 30, 2026, the shares previously owned by KILH are now held indirectly by Terry Ledbetter and Luke Ledbetter. Terry Lee Ledbetter beneficially owns 1,038,921 common shares ( 133,039 common shares held directly and 905,882 common shares held indirectly by Terry Lee Ledbetter together with Reta Laurie Ledbetter, through his or her role as co-trustee of Terry Lee Ledbetter and Reta Laurie Ledbetter 2000 Revocable Trust). Luke Ledbetter beneficially owns 1,038,921 common shares ( 133,039 common shares held directly and 905,882 common shares held indirectly through his role as trustee of each of the Bradford Luke Ledbetter 2006 Grantor Trust No. 2 and the Shari Ann Ledbetter Irrevocable 2019 Trust). Together, Terry Ledbetter, Luke Ledbetter, and these trusts hold approximately 20.6 % of total issued Kestrel Group common shares and through KILH hold the right to nominate (a) two non-independent directors to the Kestrel Group board of directors for so long as KILH and its affiliates own at least 25 % of the shares of Kestrel Group issued to them at the closing of the Combination, and (b) two independent directors to the Kestrel Group board of directors for so long as KILH and its affiliates own at least 5 % of the shares of Kestrel Group and at least 25 % of the shares of Kestrel Group issued to them at the closing of the Combination. Management Agreement with AmTrust As part of the July 26, 2022 Unit Purchase Agreement, AmTrust North America Inc. acquired a 30 % minority interest in Kestrel LLC with the option for Kestrel LLC to purchase certain insurance carriers owned by AmTrust North America Inc. Kestrel LLC also receives professional and administrative services through an expense reimbursement arrangement under the management agreement referenced below with AmTrust North America Inc. The Company incurred costs related to this agreement of $ 110 and $ 247 during the three and six months ended June 30, 2026, respectively, compared to $ 96 and $ 244 for the same periods in 2025. These amounts are presented in general and administrative expenses in the condensed consolidated statement of operations and include professional services such as statutory financial reporting, IT processing, legal contracting, and insurance company compliance functions. 38 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 10. Related Party Transactions (continued) Kestrel LLC also has an exclusive management contract with AmTrust North America Inc. to produce business through its use of A.M. Best A- FSC XV insurance carriers, including Sierra Specialty Insurance Company, Rochdale Insurance Company, Park National Insurance Company, and Republic Fire and Casualty Insurance Company, all subsidiaries of AmTrust. In connection with the Combination, Kestrel has the option to acquire these insurers from AmTrust for a period of up to three years after the closing date. All fee revenue earned during the three and six months ended June 30, 2026 and 2025 were based on the net premiums associated with this agreement. Board of Directors of the Company Following completion of the Combination, the board of directors of Kestrel Group consists of seven directors, made up of four directors selected by KILH, two of whom are independent under applicable securities laws and stock exchange rules, and three directors selected by AmTrust, two of whom are independent under applicable securities laws and stock exchange rules. The following describes the legacy reinsurance transactions that have transpired between Maiden and AmTrust: AmTrust Quota Share Effective July 1, 2007, Maiden and AmTrust entered into a master agreement, as amended ("Master Agreement"), by which they caused Maiden Reinsurance and AII to enter into the AmTrust Quota Share by which AII retroceded to Maiden Reinsurance an amount equal to 40 % of the premium written by subsidiaries of AmTrust, net of the cost of unaffiliated inuring reinsurance and 40 % of losses. The Master Agreement further provided that AII receive a ceding commission of 31 % of ceded written premiums. On June 11, 2008, Maiden Reinsurance and AII amended the AmTrust Quota Share to add Retail Commercial Package Business to the Covered Business (as defined in the AmTrust Quota Share). AII receives a ceding commission of 34.375 % on Retail Commercial Package Business. On July 1, 2016, the agreement was renewed through June 30, 2019. Effective July 1, 2018, the amount AEL ceded to Maiden Reinsurance was reduced to 20 %. Effective July 1, 2013, for the Specialty Program portion of Covered Business only, AII was responsible for ultimate net loss otherwise recoverable from Maiden Reinsurance to the extent that the loss ratio to Maiden Reinsurance, which shall be determined on an inception to date basis from July 1, 2007 through the date of calculation, is between 81.5 % and 95 % ("Loss Corridor"). Above and below the Loss Corridor, Maiden Reinsurance continued to reinsure losses at its proportional 40 % share of the AmTrust Quota Share. Effective July 31, 2019, the Loss Corridor was amended such that the maximum amount covered is $ 40,500 , the amount calculated by Maiden Reinsurance for the Loss Corridor coverage as of March 31, 2019. Any development above this maximum amount will be subject to the coverage of the LPT/ADC Agreement. Effective January 1, 2019, Maiden Reinsurance and AII entered into a partial termination amendment ("Partial Termination Amendment") which amended the AmTrust Quota Share. The Partial Termination Amendment provided for the cut-off of the ongoing and unearned premium of AmTrust’s Small Commercial Business and U.S. Specialty Risk and Extended Warranty ("Terminated Business") as of December 31, 2018. Under the Partial Termination Amendment, the ceding commission payable by Maiden Reinsurance for its remaining in-force business immediately prior to January 1, 2019 increased by five percentage points with respect to in-force remaining business (excluding Terminated Business) and related unearned premium as of January 1, 2019. Subsequently, on January 30, 2019, Maiden Reinsurance and AII agreed to terminate the remaining business subject to the AmTrust Quota Share on a run-off basis effective as of January 1, 2019. Effective July 31, 2019, Maiden Reinsurance and AII entered into a Commutation and Release Agreement which provided for AII to assume all reserves ceded by AII to Maiden Reinsurance with respect to its proportional 40 % share of the ultimate net loss under the AmTrust Quota Share related to the commuted business including: (a) all losses incurred in Accident Year 2017 and Accident Year 2018 under California workers' compensation policies and as defined in the AmTrust Quota Share ("Commuted California Business"); and (b) all losses incurred in Accident Year 2018 under New York workers' compensation policies ("Commuted New York Business"), and together with the Commuted California Business ("Commuted Business") in exchange for the release and full discharge of Maiden Reinsurance's obligations to AII with respect to the Commuted Business. The Commuted Business excludes any business classified by AII as Specialty Program or Specialty Risk business. AII and Maiden Reinsurance also agreed that as of July 31, 2019, the AmTrust Quota Share was deemed amended as applicable so that the Commuted Business is no longer included as part of Covered Business under the AmTrust Quota Share. On January 30, 2019, in connection with the termination of the reinsurance agreement described above, the Company and AmTrust entered into a second amendment to the Master Agreement between the parties, originally entered into on July 3, 2007, to remove the provisions requiring AmTrust to reinsure business with the Company. European Hospital Liability Quota Share Effective April 1, 2011, Maiden Reinsurance entered into the European Hospital Liability Quota Share with AEL and AIU DAC. Pursuant to the terms of the European Hospital Liability Quota Share, Maiden Reinsurance assumed 40 % of the premiums and losses related to policies classified as European Hospital Liability, including associated liability coverages and policies covering physician defense costs, written or renewed on or after April 1, 2011. The European Hospital Liability Quota Share also covers policies written or renewed on or before March 31, 2011, but only with respect to losses that occur, accrue or arise on or after April 1, 2011. The maximum limit of liability attaching shall be € 5,000 (€ 10,000 effective January 1, 2012) or currency equivalent (on a 100 % basis) per original claim for any one original policy. Maiden Reinsurance paid a ceding commission of 5 % on contracts assumed under the European Hospital Liability Quota Share. 39 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 10. Related Party Transactions (continued) Effective July 1, 2016, the European Hospital Liability Quota Share was amended such that Maiden Reinsurance assumes from AEL 32.5 % of the premiums and losses of all policies written or renewed on or after July 1, 2016 until June 30, 2017 and 20 % of all policies written or renewed on or after July 1, 2017. Thereafter, on January 30, 2019, Maiden Reinsurance, AEL and AIU DAC agreed to terminate the European Hospital Liability Quota Share on a run-off basis effective as of January 1, 2019. Effective July 1, 2022, Maiden Reinsurance and AIU DAC entered into an agreement ("Commutation Agreement") which provided for AIU DAC to assume all reserves ceded by AIU DAC to Maiden Reinsurance with respect to AIU DAC’s French Medical Malpractice exposures for underwriting years 2012 through 2018 reinsured by Maiden Reinsurance under the European Hospital Liability Quota Share. In accordance with the Commutation Agreement, Maiden Reinsurance paid $ 31,291 (€ 29,401 ) to AIU DAC, which is the sum of net ceded reserves of $ 27,625 (€ 25,956 ) and an agreed exit cost of $ 3,666 (€ 3,444 ). As a result of the Commutation Agreement, Maiden Reinsurance reduced its exposure to AmTrust's Hospital Liability business, but still has exposure to Italian medical malpractice liabilities under the European Hospital Liability Quota Share. The table below shows the effect of both of these quota share arrangements with AmTrust on the Company's Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2026 and 2025: For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Gross and net premiums written $ 922 $ ( 285 ) $ 2,801 $ ( 285 ) Net premiums earned 2,903 1,032 5,193 1,032 Net loss and LAE ( 1,935 ) 3,082 ( 4,313 ) 3,082 Commission and other acquisition expenses ( 531 ) ( 106 ) ( 1,277 ) ( 106 ) Collateral provided to AmTrust Pursuant to the terms of the LPT/ADC Agreement, Maiden Reinsurance, Cavello and AmTrust and certain of its affiliated companies entered into a Master Collateral Agreement (“MCA”) to define and enable the operation of collateral provided under the AmTrust Quota Share. Under the MCA, Cavello provided letters of credit on behalf of Maiden Reinsurance to AmTrust in an amount representing Cavello’s obligations under the LPT/ADC Agreement. Because these letters of credit replaced other collateral previously provided directly by Maiden Reinsurance to AmTrust, the MCA coordinates the collateral protection that will be provided to AmTrust to ensure that no gaps in collateral funding occur by operation of the LPT/ADC Agreement and related MCA. As a result of entering into both the LPT/ADC Agreement and the MCA, certain post-termination endorsements (“PTEs”) to the AmTrust Quota Share between AII and Maiden Reinsurance were required. Effective July 31, 2019, the PTEs: i) enable the operation of both the LPT/ADC Agreement and MCA by making provision for certain forms of collateral, including letters of credit provided by Cavello on Maiden Reinsurance’s behalf, and further defines the permitted use and return of collateral; and ii) increase the required funding percentage for Maiden Reinsurance under the collateral arrangements between the parties to 105 % of its obligations, subject to a minimum excess funding requirement of $ 54,000 , as may be mutually amended by the parties from time to time. Under certain defined conditions, Maiden Reinsurance may be required to increase this funding percentage to 110 %. Effective March 16, 2020, Maiden Reinsurance discontinued as a Bermuda company and completed its re-domestication to the State of Vermont. Bermuda is a Solvency II equivalent jurisdiction and the State of Vermont is not such a jurisdiction; therefore, the collateral provided under the respective agreements with AmTrust subsidiaries was strengthened to reflect the impact of the re-domestication concurrent with the date of Maiden Reinsurance’s re-domestication to Vermont. Maiden Reinsurance and AmTrust agreed to: 1) amend the AmTrust Quota Share pursuant to Post Termination Endorsement No. 2 effective March 16, 2020; and 2) amend the European Hospital Liability Quota Share pursuant to Post Termination Endorsement No. 1 effective March 16, 2020. Pursuant to the terms of Post Termination Endorsement No. 2 to the AmTrust Quota Share, Maiden Reinsurance strengthened the collateral protection provided by Maiden Reinsurance to AII by increasing the required funding percentage for Maiden Reinsurance under the collateral arrangements between the parties to 110 % of its obligations, subject to a minimum excess funding requirement of $ 54,000 , as may be mutually amended by the parties from time to time. Post Termination Endorsement No. 2 also sets forth conditions by which the funding percentage will be reduced and the sequence of how collateral will be utilized as obligations, as defined under the AmTrust Quota Share, are satisfied. Pursuant to the terms of Post Termination Endorsement No. 2, the funding percentage was reduced to 107.5 % during the first quarter of 2023. Pursuant to the terms of Post Termination Endorsement No. 3 to the AmTrust Quota Share, AmTrust has agreed to eliminate the minimum excess funding requirement of $ 54,000 in the AmTrust Quota Share between All and Maiden. Collateral on the AmTrust Quota Share is tied to a contractually agreed percentage and was reduced from a level of 107.5 % to 105 % during the third quarter of 2025 when its obligations declined below the $ 500,000 threshold. The terms of Post Termination Endorsement No. 3 was effective upon the execution and delivery of the AR Loan Agreement and the Premium Repayment Loan Agreement approved by the Vermont DFR on February 7, 2025. 40 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 10. Related Party Transactions (continued) Pursuant to the terms of Post Termination Endorsement No. 1 to the European Hospital Liability Quota Share, Maiden Reinsurance strengthened the collateral protection provided by Maiden Reinsurance to AEL and AIU DAC by increasing the required funding percentage for Maiden Reinsurance under the collateral arrangements between the parties to the greater of 120 % of the Exposure (as defined therein) and the amount of security required to offset the increase in the Solvency Capital Requirement (“SCR”) that results from the changes in the SCR which arise out of Maiden Reinsurance's re-domestication as compared to the SCR calculation if Maiden Reinsurance had remained domesticated in a Solvency II equivalent jurisdiction with a solvency ratio above 100 % and provided collateral equivalent to 100 % of the Exposure. Pursuant to the terms of Post Termination Endorsement No. 2 to the European Hospital Liability Quota Share, AmTrust has also agreed to reduce the collateral funding percentage on the European Hospital Liability Quota Share from 120 % to 105 %, on the effective date of this endorsement, which was approved by the Vermont DFR on February 19, 2025. On December 31, 2025, Maiden Reinsurance and AmTrust entered into a Loan Agreement (the “Premium Repayment Loan Agreement”) by which Maiden Reinsurance will repay AII the principal amount of $ 24,259 representing settlement of a dispute over cessions of uncollectible ceded premiums written made by AII to Maiden Reinsurance, payable by Maiden Reinsurance in quarterly installments through the maturity date of December 31, 2032. This settlement is netted against the loan receivable from related party on the Condensed Consolidated Balance Sheets at June 30, 2026. AmTrust may offset any amount payable against any amount due and unpaid by Maiden Reinsurance, under any agreement between AmTrust or its affiliate and Maiden Reinsurance or its affiliate, including without limitation, the European Hospital Liability Quota Share, dated April 1, 2011, as amended. Interest is payable at a rate equivalent to the Fed Funds rate plus 150 basis points per annum under the terms of the Premium Repayment Loan Agreement. a) AmTrust Quota Share To provide AmTrust's U.S. insurance subsidiaries with credit for reinsurance on their statutory financial statements, AII, as the direct reinsurer of AmTrust's insurance subsidiaries, established trust accounts ("Trust Accounts") for their benefit. Maiden Reinsurance has provided appropriate collateral to secure its proportional share under the AmTrust Quota Share of AII's obligations to the AmTrust subsidiaries to whom AII is required to provide collateral which can include: (a) assets loaned by Maiden Reinsurance to AII for deposit into the Trust Accounts, pursuant to a loan agreement between those parties; (b) assets transferred by Maiden Reinsurance for deposit into the Trust Accounts; or (c) a letter of credit obtained by Maiden Reinsurance and delivered to an AmTrust subsidiary on AII's behalf. Maiden Reinsurance may provide any or a combination of these forms of collateral, provided that the aggregate value thereof equals Maiden Reinsurance's proportionate share of its obligations under the AmTrust Quota Share. The collateral requirements under the AmTrust Quota Share with AII are satisfied as follows: • On January 1, 2025, Maiden Reinsurance and AmTrust amended the terms of the loan agreement provided by Maiden Reinsurance to AII. Under the revised terms, an Amended and Restated Loan Agreement was entered into effective January 1, 2025 (the “AR Loan Agreement”), by which the principal amount of the collateral loan will be repaid (subject to funding of collateral requirements) on or before the revised maturity date of January 1, 2033 pursuant to a repayment schedule set forth in the AR Loan Agreement. The principal amount shall equal (a) $ 152,377 minus (b) the amount of payments and any prepayments made by or on behalf of AmTrust from time to time. Interest is payable at a rate equivalent to the Federal Funds Effective Rate ("Fed Funds") plus 150 basis points per annum under the terms of the AR Loan Agreement. • AmTrust may offset any amount payable against any amount due and unpaid by Maiden Reinsurance, under any agreement between AmTrust or its affiliate and Maiden Reinsurance or its affiliate, including without limitation, the AmTrust Quota Share and European Hospital Liability Quota Share dated April 1, 2011, as amended, between Maiden Reinsurance and AmTrust, any other reinsurance agreements between AmTrust or its affiliates and Maiden Reinsurance or its affiliates and the Premium Repayment Loan Agreement dated December 31, 2024 with respect to the settlement of certain ceded premium balances of $ 24,259 entered into between AII and Maiden Reinsurance. • The outstanding balances under the AR Loan Agreement and Premium Repayment Loan Agreement are presented on a net basis. The outstanding net loan receivable was $ 69,443 at June 30, 2026 (December 31, 2025: $ 86,883 ). There was no allowance for expected credit losses recognized on the loan receivable at June 30, 2026 and December 31, 2025. Net interest income on the net loan receivable was $ 1,015 and $ 2,152 for the three and six months ended June 30, 2026, respectively, with an effective yield of 5.5 % and 5.5 %, respectively. This compared to net interest income of $ 659 for the three and six months ended June 30, 2025 with an effective yield of 5.8 %. • The Company separately presents accrued interest on its net loan receivable on the Condensed Consolidated Balance Sheet under accrued investment income. The accrued interest receivable on the net loan receivable was $ 1,053 at June 30, 2026 (December 31, 2025: $ 1,310 ). The Company elected the practical expedient under Topic 326 to exclude accrued interest for purposes of identifying and measuring any impairments under the allowance for expected credit losses standard. b) European Hospital Liability Quota Share Collateral has been provided to both AEL and AIU DAC under the European Hospital Liability Quota Share. For AEL, the amount of the collateral held in reinsurance trust accounts at June 30, 2026 was $ 85,799 (December 31, 2025: $ 97,876 ) and the accrued interest was $ 350 (December 31, 2025: $ 668 ). 41 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 10. Related Party Transactions (continued) Asset Management Agreement Effective July 1, 2007, Maiden entered into an asset management agreement with AII Insurance Management Limited ("AIIM"), a wholly owned subsidiary of AmTrust, pursuant to which AIIM agreed to provide investment management services to the Company. Effective January 1, 2018, AIIM provides investment management services for a quarterly fee of 0.02125 % of the average value of the account. The agreement may be terminated upon 30 days written notice by either party. The Company recorded $ 34 and $ 71 of investment management fees for the three and six months ended June 30, 2026 under this agreement compared to $ 3 of investment management fees for the three and six months ended June 30, 2025. On September 9, 2020, Maiden Reinsurance, AmTrust and AIIM entered into a novation agreement, effective July 1, 2020, which provided for the novation of the asset management agreement, dated January 1, 2018 between Maiden Reinsurance and AIIM, and the release by Maiden Reinsurance of AIIM's obligations under the asset management agreement. The novation mandates that AmTrust is to be bound by the terms of the asset management agreement in place of AIIM and AmTrust agrees to perform any and all past, present and future obligations of AIIM under the asset management agreement. On November 13, 2020, Maiden LF, Maiden GF, AmTrust and AIIM entered into a novation agreement, effective July 1, 2020, which provided for the novation of the asset management agreement, dated January 1, 2018 between Maiden LF, Maiden GF and AIIM, and the release by Maiden LF and Maiden GF of AIIM's obligations under the asset management agreement. The novation mandates that AmTrust is to be bound by the terms of the asset management agreement in place of AIIM and AmTrust agrees to perform any and all past, present and future obligations of AIIM under the asset management agreement. Renewal Rights Transaction - IIS Business On May 3, 2024, Maiden LF and Maiden GF entered into a Renewal Rights and Asset Purchase Agreement with AmTrust Nordic AB, a Swedish unit of AmTrust, to cover certain programs of Maiden LF and Maiden GF's primary business written in Sweden, Norway and other Nordic countries. On June 20, 2024, Maiden LF and Maiden GF entered into a Renewal Rights and Asset Purchase Agreement with AEL and AIU DAC, both wholly owned subsidiaries of AmTrust, to cover certain programs of Maiden LF and Maiden GF's primary business written in the United Kingdom and Ireland. Under these agreements, the AmTrust subsidiaries in collaboration with existing Maiden LF and Maiden GF distribution partners, offered renewals to select policyholders in exchange for a fee at standard market terms for business successfully renewed. All programs written by Maiden LF and GF, including those covered by the agreements as described above, were cancelled in accordance with either their contractual terms or as applicable, the requirements of these agreements. At June 30, 2026, Maiden LF and Maiden GF had substantially completed all the main contractual obligations as per the respective agreements. 42 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 11. Commitments, Contingencies and Guarantees There are no material changes from the commitments, contingencies and concentrations previously disclosed in the Company’s Form 10-K for the year ended December 31, 2025. The following describes the Company's current commitments, contingencies and concentrations as of June 30, 2026: a) Concentrations of Credit Risk At June 30, 2026, the Company’s assets where significant concentrations of credit risk may exist include total investments, cash and cash equivalents, net loan receivable from related party, reinsurance balances receivable, reinsurance recoverable on paid and unpaid losses and funds withheld receivable. Please refer to Note 8. Reinsurance for additional information regarding the Company's credit risk exposure on its reinsurance counterparties including the impact of the LPT/ADC Agreement effective January 1, 2019. The Company requires its reinsurers to have adequate financial strength. As discussed in Note 3. Segment Information , the Company's Program Services segment consists of a cohesive suite of fronting services that are integrated and interdependent. For the three and six months ended June 30, 2026 and 2025, this revenue stream is highly concentrated with an individual customer. For the three and six months ended June 30, 2026, fee revenue from this client accounted for $ 3,210 or 85.8 % and $ 5,628 or 82.0 % of total fee revenue earned compared to $ 182 or 33.5 % and $ 534 or 39.5 % for the three and six months ended June 30, 2025, respectively. The Company evaluates the financial condition of its reinsurers, program managers and MGAs and monitors its concentration of credit risk on an ongoing basis. Provisions are made for amounts that are considered potentially uncollectible. Reinsurance receivable and recoverable balances, net loan receivable from related party, and the funds withheld receivable are reviewed for expected credit losses on a quarterly basis and are presented net of an allowance for expected credit losses. Letters of credit are provided by its reinsurers for material amounts recoverable as discussed in " Note 8. Reinsurance ". The Company manages the concentration of credit risk in its investment portfolio through issuer and sector exposure limitations. The Company believes it bears minimal credit risk in its cash on deposit. The Company also monitors the credit risk related to the net loan receivable from related party, reinsurance balances receivable and funds withheld receivable, within which the largest balances are due from AmTrust. AmTrust has a financial strength/credit rating of A- (Excellent) from A.M. Best at June 30, 2026. To mitigate credit risk, the Company generally has a contractual right of offset thereby allowing claims to be settled net of any premiums or loan receivable. The Company believes these balances as at June 30, 2026 will be fully collectible. b) Investment Commitments and Related Financial Guarantees The total unfunded commitments on other investments and equity method investments was $ 21,164 at June 30, 2026 (December 31, 2025: $ 24,840 ). The table below shows total unfunded commitments by type of investment as at June 30, 2026 and December 31, 2025, respectively: June 30, 2026 December 31, 2025 Fair Value % of Total Fair Value % of Total Total unfunded commitments on other investments $ 9,061 42.8 % $ 11,164 44.9 % Total unfunded commitments on equity method investments 12,103 57.2 % 13,676 55.1 % Total unfunded commitments on alternative investments $ 21,164 100.0 % $ 24,840 100.0 % Certain of the Company's investments in limited partnerships are related to real estate joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the ownership of income-producing properties. In certain of these joint ventures, the Company has provided certain indemnities, guarantees and commitments to certain parties such that it may be required to make payments now or in the future. Any loss for which the Company could be liable would be contingent on the default of a loan by the real estate joint venture entity for which the Company provided a financial guarantee to a lender. While the Company has committed to aggregate limits as to the amount of guarantees it will provide as part of its limited partnerships, guarantees are only provided on an individual transaction basis and are subject to the terms and conditions of each transaction mutually agreed by the parties involved. The Company is not bound to such guarantees without its express authorization. As discussed above, at June 30, 2026, guarantees of $ 70,739 (December 31, 2025: $ 73,170 ) were provided to lenders by the Company on behalf of real estate joint ventures, however, the likelihood of the Company incurring any losses pertaining to project level financing guarantees was determined to be remote. Therefore, no liability has been accrued under ASC 450-20. Other Contingent Commitments As a result of the Combination Agreement, Kestrel Equityholders are entitled to receive in contingent consideration up to the lesser of (x) an aggregate number of Kestrel Group common shares equal to $ 45,000 divided by certain volume weighted average prices of such shares, subject to the achievement of certain EBITDA milestones by the businesses that Kestrel conducted immediately prior to closing and any extensions of such businesses or related or ancillary businesses existing thereafter subsequent to May 27, 2025 through May 31, 2028 ("Performance Period"), and (y) 2,750,000 common shares of Kestrel Group. 43 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 11. Commitments, Contingencies and Guarantees (continued) On June 30, 2026 and December 31, 2025, the fair value of this contingent consideration was $ 0 as business subject to the earn out consideration computation was re-evaluated based upon current estimates of the Kestrel business for the Performance Period, including performance of the Program Services business through June 30, 2026. There was no change in the fair value of the earn out liability for the three and six months ended June 30, 2026, compared to an increase of $ 2,679 for the three and six months ended June 30, 2025, respectively, which was recorded in the condensed consolidated statement of operations. At June 30, 2026, the Company holds a contingent receivable in the insurance distribution industry. Pursuant to the terms of the asset purchase agreement, the Company will receive a series of distributions. The Company currently estimates that the net present value of these potential distributions is $ 11,923 which is classified as a receivable and reported in Other Assets on the Condensed Consolidated Balance Sheets at June 30, 2026 (December 31, 2025: $ 9,955 ). Under ASC 805, the earn out consideration for this receivable is adjusted to fair value at each reporting period with unrealized gains of $ 1,765 and $ 1,968 for the three and six months ended June 30, 2026, respectively, recorded in the condensed consolidated statement of operations through foreign exchange and other gains compared to $ 0 for the same respective periods in 2025. c) Operating Lease Commitments The Company leases office spaces and equipment under various operating leases expiring in various years through 2034. The Company's leases are currently classified as operating leases and none of them have non-lease components. For operating leases that have a lease term of more than twelve months, and whose operating lease payments are above a certain threshold, the Company recognizes a lease liability and a right-of-use asset in the Condensed Consolidated Balance Sheets at the present value of the remaining lease payments until expiration. The Company has made an accounting policy election not to include renewal, termination, or purchase options that are not reasonably certain of exercise when determining the term of the borrowing. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Kestrel leases office space for the corporate office in Austin, Texas, through Kestrel Service Corporation, that expires in December 2027. The Austin office is the Company's principal executive office since February 1, 2026. Lease payments have an escalating fee schedule, which range from a 3 % to 4 % increase each year. Termination of the lease is generally prohibited unless there is a violation under the lease agreement. The Company also leases office space in a building in New York City which Maiden has leased since April 2024; this created a right-of-use asset and lease liability upon completion of leasehold improvements for the ten-year operating lease. This lease comprises a majority of the lease liability and right-of-use asset recognized on the Condensed Consolidated Balance Sheets at June 30, 2026 and December 31, 2025. As the lease contracts generally do not provide an implicit discount rate, the Company used the weighted-average discount rate of 7.2 %, representing its secured incremental borrowing rate, in calculating the present value of the lease liability. At June 30, 2026, the Company's future lease obligations of $ 1,945 (December 31, 2025: $ 2,054 ) were calculated based on the present value of future annual rental commitments excluding taxes, insurance and other operating costs for non-cancellable operating leases discounted using its secured incremental borrowing rate. This amount has been recognized on the Condensed Consolidated Balance Sheet as a lease liability within accrued expenses and other liabilities with the right-of-use asset presented as part of other assets . At June 30, 2026, the Company's right-of-use lease asset was $ 1,915 (December 31, 2025: $ 2,029 ). The Company's weighted-average remaining lease term is approximately 7.8 years at June 30, 2026. Under Topic 842, Leases , the Company continues to recognize the related leasing expense on a straight-line basis over the lease term on the Condensed Consolidated Statements of Operations. The Company's total office lease expense was $ 155 and $ 284 for three and six months ended June 30, 2026, respectively (2025: $ 91 and $ 151 , respectively) recognized in general and administrative expenses consistent with prior accounting treatment under Topic 840. At June 30, 2026, the scheduled maturity of the Company's operating lease liabilities are expected to be as follows: June 30, 2026 2026 $ 182 2027 366 2028 277 2029 284 2030 305 Thereafter 1,144 Discount for present value ( 613 ) Total discounted operating lease liabilities $ 1,945 44 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 11. Commitments, Contingencies and Guarantees (continued) d) Legal Proceedings Except as noted below, the Company is not a party to any material legal proceedings. From time to time, the Company is subject to routine legal proceedings, including arbitration, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against the Company in the ordinary course of insurance or reinsurance operations. Based on the Company's opinion, the eventual outcome of these legal proceedings is not expected to have a material adverse effect on its financial condition or results of operations. A putative class action complaint was filed against Maiden Holdings, Ltd., Arturo M. Raschbaum, Karen L. Schmitt, and John M. Marshaleck in the United States District Court for the District of New Jersey on February 11, 2019. On February 19, 2020, the Court appointed lead plaintiffs, and on May 1, 2020, lead plaintiffs filed an amended class action complaint (the “Amended Complaint”). The Amended Complaint asserts violations of Section 10(b) of the Exchange Act and Rule 10b-5 (and Section 20(a) for control person liability) arising in large part from allegations that Maiden failed to take adequate loss reserves in connection with reinsurance provided to AmTrust. Plaintiffs further claim that certain of Maiden's representations concerning its business, underwriting and financial statements were rendered false by the allegedly inadequate loss reserves, that these misrepresentations inflated the price of Maiden's common stock, and that when the truth about the misrepresentations was revealed, Maiden's stock price fell, causing plaintiffs to incur losses. On September 11, 2020, a motion to dismiss was filed on behalf of all defendants. On August 6, 2021, the Court issued an order denying, in part, defendants’ motion to dismiss, ordering plaintiffs to file a shorter amended complaint no later than August 20, 2021, and permitting discovery to proceed on a limited basis. On February 7, 2023, the District Court denied plaintiffs’ motion for reconsideration of the District Court’s decision denying plaintiffs’ objection to the Magistrate Judge’s December 2021 ruling on discovery. On May 26, 2023, Maiden filed a Renewed Motion to Dismiss the Second Amended Complaint or, in the Alternative, for Summary Judgment. On December 19, 2023, the U.S. District Court for the District of New Jersey granted summary judgment on plaintiffs’ claim for securities fraud under Section 10(b) of the Securities Exchange Act to Maiden and individual defendants Arturo Raschbaum, Karen Schmitt, and John Marshaleck. The Court held that the factual record failed to support, as a matter of law, plaintiffs’ allegations that the defendants had made false statements regarding Maiden's loss reserves. The Court also dismissed plaintiffs’ claims that the individual defendants were liable as control persons under Section 20(a) of the Securities Exchange Act for any such alleged false statements. Plaintiffs appealed to the United States Court of Appeals for the Third Circuit. On August 20, 2025, the United States Court of Appeals for the Third Circuit vacated the U.S. District Court for the District of New Jersey’s order granting summary judgment to Maiden and individual defendants Arturo Raschbaum, Karen Schmitt, and John Marshaleck . The Third Circuit disagreed with the District Court’s holding that the current case record required judgment for Maiden, as a matter of law, on the issue of whether Maiden’s loss reserves were misleading. The Court explained further that it was not issuing a ruling on the element of scienter. The Third Circuit therefore vacated the opinion of the District Court and remanded the case to the District Court with instructions to permit plaintiffs to pursue discovery with respect to their claims for securities fraud under Section 10(b) of the Securities Exchange Act. The Third Circuit denied defendants' petition for rehearing on September 16, 2025. Discovery is now proceeding in the action. Maiden believes it has procedural and substantive defenses to the asserted claims, and it intends to oppose and defend against these claims . On December 26, 2024, WUSO Holding Corporation and 683 Capital Partners filed a lawsuit against Maiden NA and Maiden in the Supreme Court of the State of New York, County of New York, captioned WUSO Holding Corporation and 683 Capital Partners, LP v. Maiden Holdings North America, Ltd. and Maiden Holdings, Ltd., Index No. 659861/2024. The complaint alleges that Maiden’s sale of Maiden Reinsurance North America, Inc., which closed approximately six years before the date of the complaint, breached a sole provision of Maiden’s indenture governing its 2013 Senior Notes. Plaintiffs allege that principal and interest payable under the 2013 Senior Notes are due currently, rather than upon the stated maturity date of the 2013 Senior Notes. On June 17, 2025, the Supreme Court of the State of New York, County of New York, considered and granted Maiden’s motion to dismiss the complaint in its entirety. On August 6, 2025, plaintiffs filed a notice of appeal, triggering a six month deadline to perfect their appeal in the First Judicial Department of the New York Appellate Division. Plaintiffs subsequently requested extensions to perfect their appeal, which the court granted, setting a deadline of April 8, 2026. Plaintiffs filed their brief on the April 8, 2026 deadline and Maiden intends to file a brief in opposition. In addition to filing the notice of appeal, on August 12, 2025, plaintiffs filed a separate complaint against Maiden in the Supreme Court of the State of New York, County of New York. In the new complaint, plaintiffs allege that they have standing and authorization to bring suit, contending that they satisfied the no-action clause in the indenture because, on June 10, 2025, they requested, on behalf of holders of at least 25 % of the outstanding 2013 Senior Notes, that the indenture trustee commence a related action, accompanied by an offer to indemnify, and the indenture trustee did not institute such proceedings within 60 days of the request. On October 6, 2025, Maiden filed a motion to dismiss, and the Court held oral argument on the fully-briefed motion. On April 20, 2026, the Court issued an order denying the motion to dismiss and directing the defendants to submit an answer to the complaint by May 18, 2026. Defendants filed their answer to the complaint on the May 18, 2026 deadline. Discovery is now proceeding in the action. Both plaintiffs and defendants have made productions of documents and served deposition notices. Maiden believes it has substantial procedural and substantive defenses to the asserted claims, and it intends to vigorously defend against these claims. We believe all of the above claims are without merit and we intend to vigorously defend ourselves. It is possible that additional lawsuits will be filed against the Company, its subsidiaries and its respective officers due to the diminution in value of our securities as a result of our operating results and financial condition. It is currently uncertain as to the effect of such litigation on our business, operating results and financial condition. 45 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 11. Commitments, Contingencies and Guarantees (continued) GLS Arbitration Proceedings The Company most recently reported on an arbitration proceeding involving a subsidiary of GLS in the Current Report on Form 8-K filed on June 8, 2026 (“June 8-K”), which disclosure is incorporated herein by reference. Except as disclosed below, there have been no material changes to the proceeding as previously disclosed in the June 8-K. As a result of the final award issued by the arbitration panel on June 2, 2026 ("Final Award"), there were required adjustments to amounts previously paid by GLS under the subject reinsurance agreement, including repayment of $ 5,253 of the $ 10,805 previously paid by GLS related to the reinsurance premium protection (“RPP”) coverage, as well as required adjustments to amounts held in trust as security related to the adverse development coverage (“ADC”) of the subject reinsurance agreement. After effectuating implementation of the Final Award, the arbitration panel relinquished its jurisdiction during July 2026. At June 30, 2026, the Company recorded $ 5,253 under reinsurance balances receivable with an offsetting amount accrued in the Company's underwriting-related derivative liability under accrued expenses and other liabilities as a result of the Final Award. This amount was collected subsequent to June 30, 2026 and, along with amounts to be released from the trust supporting the ADC coverage, was settled pursuant to the terms of the Final Award and the panel decisions required in connection with its implementation. The Company remains subject to its continuing obligations under the reinsurance agreement and is therefore exposed to the full limits of coverage thereunder. At the end of certain periods specified in the Final Award, the billing, accounting, reserves and security are to be adjusted to reflect the actual amounts due and owing as set forth in the cedant's books and records. The Company is awaiting updated information from the cedant to evaluate its exposure that may be due and payable under the terms of the Final Award. Depending on its evaluation of information to be received from the cedant, it is possible that the Company may recognize additional losses which could be up to and including the full limits of its exposure, less amounts presently reserved. The amount and timing of any such financial statement impacts remain subject to completion of these evaluations. As of June 30, 2026, the maximum additional exposure to these losses is currently $ 28,230 . GLS expects to fully enforce its rights and remedies under the terms of the reinsurance agreement . 46 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 12. Earnings per Common Share The following shows a summary of the elements used in calculating basic and diluted earnings per common share for the three and six months ended June 30, 2026 and 2025, respectively: For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Numerator: Net (loss) income $ ( 8,082 ) $ 69,927 $ ( 15,513 ) $ 69,533 Amount allocated to participating common shareholders (1) — ( 185 ) — ( 115 ) Net (loss) income attributable to Kestrel common shareholders $ ( 8,082 ) $ 69,742 $ ( 15,513 ) $ 69,418 Denominator: Weighted average number of common shares – basic and diluted (1)(2) 7,824,030 4,635,406 7,788,420 3,692,701 Basic and diluted (loss) earnings per share attributable to Kestrel shareholders: $ ( 1.03 ) $ 15.05 $ ( 1.99 ) $ 18.80 (1) At June 30, 2026, there were 737,943 unvested restricted shares and performance shares and 3,375 stock options that may be potentially dilutive in periods where income is reported. These securities were not included in the loss per share calculations for the three and six months ended June 30, 2026. There were no potentially dilutive securities for the three and six months ended June 30, 2025. (2) For the three and six months ended June 30, 2025, the number of common shares outstanding decreased as a result of the reverse stock split, therefore the computations of basic and diluted EPS was adjusted retroactively for all periods presented to reflect that change in capital structure. As discussed in Note 1. Organization , pursuant to the terms of the Combination, at the closing of the transaction on May 27, 2025, each issued and outstanding common share of Maiden, par value $ 0.01 per share, was automatically canceled and converted into the right to receive one-twentieth ( 0.05 ) of a common share in Kestrel Group. The equityholders of Kestrel LLC at the closing date received 2,749,996 common shares of the Kestrel Group. 13. Income Taxes The Company recognized income tax benefit of $ 112 and $ 106 for the three and six months ended June 30, 2026 compared to income tax expense of $ 3 and $ 95 for the same respective periods in 2025. The effective tax rate on the Company's net loss differs from the statutory rate of zero percent under Bermuda law due to tax on foreign operations, primarily the U.S. A valuation allowance has been established against the net U.S. and International deferred tax assets which is primarily attributable to net operating losses in the respective regions. At this time, the Company believes it is necessary to establish a valuation allowance against the U.S. and International net deferred tax assets as more evidence is needed regarding the utilization of these losses. At June 30, 2026, the Company has available net operating loss ("NOL") carry-forwards of $ 471,645 (December 31, 2025: $ 473,094 ) for income tax purposes. Approximately $ 383,409 (December 31, 2025: $ 388,724 ) of NOL carryforwards expire in various years beginning in 2029. As of June 30, 2026, approximately $ 88,236 or 18.7 % of the Company's NOL carryforwards have no expiry date under the relevant U.S. tax law (December 31, 2025: $ 84,370 or 17.8 %). 47 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 14. Business Combination On May 27, 2025, Kestrel LLC completed the business combination with Maiden, pursuant to the terms of the Combination Agreement. The equityholders of Kestrel LLC at the closing date received an aggregate of $ 40,000 in upfront cash and 2,749,996 common shares of the combined company. In addition, the former equityholders of Kestrel LLC remain entitled to receive contingent consideration up to the lesser of (x) $ 45,000 payable in common shares of Kestrel Group upon the achievement of certain financial milestones during the Performance Period, and (y) 2,750,000 common shares of Kestrel Group. After the closing of the Combination Agreement, the group was rebranded as Kestrel Group and is the successor company to Maiden. The Company’s authorized share capital consists of 42,500,000 shares. The Combination was accounted for as a business combination in accordance with ASC 805, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair value. The Company also adopted ASU 2021-08, effective as of January 1, 2025, to record contract liabilities at their carrying value as of the acquisition date. Although Maiden was the legal acquirer, Kestrel LLC was determined to be the accounting acquirer and the legal acquiree. As a result, Kestrel LLC and its subsidiaries’ net assets were carried at historical value, acquired net assets of Maiden and its subsidiaries were measured at fair value except contract liabilities being recorded at carrying value at the acquisition date, and results of operations of Maiden and its subsidiaries were included in the Company’s Condensed Consolidated Financial Statements from May 27, 2025. Purchase Price and Purchase Price Allocation Management performed a fair valuation of Maiden and its subsidiaries' assets and liabilities as of May 27, 2025. The fair values of the assets and liabilities acquired were based on discussions with Maiden’s management, valuation studies, the transaction due diligence, and information presented in Maiden’s SEC filings. The final purchase price and purchase price allocation herein may be different than the information previously filed with the SEC, and such differences could be material. Purchase Price The final purchase price was based on the fair value of the issued and outstanding common shares at the closing of the Combination on May 27, 2025. The following table summarizes the final purchase price as of May 27, 2025: Kestrel Group Ltd shares issued at Closing 7,221,621 Kestrel Group Ltd share price $ 23.00 Gross equity portion of consideration transferred at Closing $ 166,097 Kestrel Group Ltd shares retained as treasury shares by Maiden Reinsurance at Closing ( 2,237,534 ) Kestrel Group Ltd share price $ 23.00 Equity portion of consideration transferred to Maiden Reinsurance $ ( 51,463 ) Net equity portion of consideration transferred at Closing $ 114,634 Cash consideration paid to shareholders at Closing for fractional shares 1 Portion of the Maiden awards attributable to pre-combination service 514 Intercompany settlement 388 Total consideration effectively transferred $ 115,537 At the closing date on May 27, 2025, the fair value of Maiden's net assets acquired were $ 183,843 which exceeded the consideration effectively transferred of $ 115,537 , resulting in a final bargain purchase gain of $ 68,306 as shown in the table on the next page, and recognized in the Company's Consolidated Statement of Operations in the year ended December 31, 2025. The gain on bargain purchase of $ 73,590 recognized in the three and six months ended June 30, 2025 was the differential between the estimated fair value of net assets of Maiden acquired on May 27, 2025 and the equity consideration effectively transferred to Maiden shareholders on that date based on the initial assessment of fair values acquired. As discussed in Part II, Item 8. Notes to Consolidated Financial Statements: Note 17. Business Combination included in the Company's Form 10-K filed on March 13, 2026, the fair value of net acquired assets of Maiden had a decrease of $5,284 from the provisional fair value on May 27, 2025 due to updated information for certain underlying investment assets and was recorded against the estimated gain on bargain purchase recognized for the year ended December 31, 2025. As discussed in Note 11. Commitments, Contingencies and Guarantees , Kestrel Equityholders are entitled to receive in contingent consideration up to the lesser of (x) an aggregate number of Kestrel Group common shares equal to $ 45,000 divided by certain volume weighted average prices of such shares, subject to the achievement of certain EBITDA milestones by the businesses that Kestrel conducted immediately prior to closing and any extensions of such businesses or related or ancillary businesses existing thereafter, subject to other terms and conditions as set forth in the combination agreement and (y) 2,750,000 common shares of Kestrel Group. 48 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 14. Business Combination (continued) On June 30, 2026, the fair value of this contingent consideration was $ 0 as business subject to the earn out consideration computation continues to be re-evaluated based upon current estimates of the Kestrel business for the Performance Period, including performance of the Program Services business through June 30, 2026. There was no change in the fair value of the earn out liability for the three and six months ended June 30, 2026, compared to an increase of $ 2,679 for the three and six months ended June 30, 2025, respectively, which was recorded in the condensed consolidated statement of operations. Final Purchase Price Allocation The following table summarizes final allocation of the purchase price to the assets acquired and liabilities assumed as of May 27, 2025: Fixed maturities, available-for-sale, at fair value $ 208,855 Equity securities, at fair value 11,144 Equity method investments 32,326 Other investments 160,439 Cash and cash equivalents 68,358 Restricted cash and cash equivalents 11,449 Accrued investment income 4,108 Reinsurance balances receivable, net 10,133 Reinsurance recoverable on unpaid losses 517,028 Net loan receivable from related party 107,110 Intangible assets 11,864 Funds withheld receivable 11,048 Other assets 14,592 Assets held for sale 20,698 Reserve for loss and loss adjustment expenses ( 738,137 ) Unearned premiums ( 23,903 ) Accrued expenses and other liabilities ( 68,453 ) Senior notes - at fair value ( 173,669 ) Liabilities held for sale ( 1,147 ) Net assets 183,843 Bargain purchase gain ( 68,306 ) Total consideration effectively transferred $ 115,537 In connection with the Combination on May 27, 2025, the assets and liabilities of Maiden were recorded at fair value measured as of the acquisition date. Therefore, the net reserves for losses and LAE were remeasured at fair value, and based on discounted cash flow valuation techniques, a discount to net loss reserves was required which was recorded in intangible assets. At the closing date of May 27, 2025, the intangible assets acquired also consist of the value of business acquired ("VOBA"). The following table presents the weighted average amortization period and other components of intangible assets acquired at May 27, 2025 and June 30, 2026. Accumulated amortization for the intangible assets was $ 4,188 at June 30, 2026: Weighted Average Amortization Period May 27, 2025 Accumulated Amortization at June 30, 2026 June 30, 2026 Value of Business Acquired 5.0 years $ 2,207 $ ( 806 ) $ 1,401 Fair value discount on net reserves acquired 32.0 years 9,657 ( 3,382 ) 6,275 Total Intangible Assets 27.3 years $ 11,864 $ ( 4,188 ) $ 7,676 The aggregate amortization expense for intangible assets was $ 833 and $ 1,671 for the three and six months ended June 30, 2026 (2025: $ 426 ). This included $ 646 and $ 1,445 of amortization for the fair value on net reserves acquired reported in general and administrative expenses (2025: $ 302 ) and $ 187 and $ 226 of amortization on the fair value of business acquired reported in commission and other acquisition expenses (2025: $ 124 ). 49 KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 14. Business Combination (continued) The following table presents the estimated aggregate amortization expense for the five succeeding fiscal years on intangible assets held at June 30, 2026: 2026 2027 2028 2029 2030 Amortization expense: VOBA $ 504 $ 476 $ 247 $ 102 $ 72 Amortization expense: fair value discount on net reserves acquired 753 1,413 1,243 1,066 632 Total amortization expense $ 1,257 $ 1,889 $ 1,490 $ 1,168 $ 704 50