Kestrel Group Ltd 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this "Form 10-Q" or this "Report"). References in this Form 10-Q to the terms "we", "us", "our", "the Company", "Kestrel" or other similar terms mean the consolidated operations of Kestrel Group Ltd and its subsidiaries, unless the context requires otherwise. References in this Form 10-Q to the term "Kestrel Group" means Kestrel Group Ltd only. Certain reclassifications have been made for 2024 to conform to the 2025 presentation and have no impact on consolidated net income and total equity previously reported. Note on Forward-Looking Statements This Quarterly Report on Form 10-Q includes anticipated benefits of the business combination and integration of Maiden Holdings Ltd. and Kestrel Group LLC, projections concerning financial information and statements concerning future economic performance and events, plans and objectives relating to management, operations, products and services, and assumptions underlying these projections and statements. These projections and statements are forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 and are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These projections and statements may address, among other things, our strategy for growth, product development, financial results and reserves. Our actual results and financial condition may differ, possibly materially, from these projections and statements and therefore you should not place undue reliance on them. Factors that could cause our actual results and financial condition to differ, possibly materially, from those in the specific projections and statements are discussed throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations and in "Risk Factors" included under Part II. Other Information included within this filing, however, these factors should not be construed as exhaustive. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by law. 52 Overview Introductory Note On May 27, 2025, Kestrel Group LLC (“Kestrel LLC”) and Maiden Holdings, Ltd. (“Maiden”) completed their previously announced combination ("Combination"), forming a new, publicly listed specialty program group operating under the name Kestrel Group Ltd (“Kestrel Group”). The Combination was previously announced on December 30, 2024. Maiden shares ceased trading on the NASDAQ Capital Market ("Nasdaq") at close of market on May 27, 2025. Kestrel Group shares began trading on the Nasdaq at open of market on May 28, 2025 under the ticker symbol “KG”. Upon the closing of the Transactions (the “Closing”), Maiden and Kestrel LLC are now wholly owned subsidiaries of the Company, which was rebranded as Kestrel Group and renamed “Kestrel Group Ltd” ("Kestrel Group"). The Combination creates a capital light, fee-based insurance platform with the ability to selectively deploy underwriting capacity to optimize shareholder returns, with a commitment to innovation, client service and long-term relationships. Kestrel Group specializes in providing fronting services to insurance program managers, managing general agencies (MGAs), reinsurers, and reinsurance brokers. Kestrel Group 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 Group 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. Kestrel Group continues to write business through its exclusive use of 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 Financial Services, Inc. (“AmTrust”). Kestrel Group currently retains an option to acquire the AmTrust Insurance Companies for a period of up to three years after closing from AmTrust. 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. As of June 30, 2025, Maiden Reinsurance owns approximately 22.4% of the Company's total outstanding common shares which is eliminated for accounting and financial reporting purposes on the Company's condensed consolidated financial statements. On April 29, 2025, former Maiden shareholders approved the proposal to remove the 9.5% voting limitation at the Company's special general meeting of its shareholders (the "Special Meeting"). The ownership of the common shares by Maiden Reinsurance was made in compliance with Maiden Reinsurance's investment policy and approved by the Vermont Department of Financial Regulation ("Vermont DFR"). Current Operations Our business consists of two reportable segments: Program Services and Legacy Reinsurance. Our Program Services segment consists of a cohesive suite of products and services offered by Kestrel that are integrated and interdependent. Kestrel’s revenue is highly concentrated because of the 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 segment consists of primarily reinsurance business previously produced by Maiden, which had been segregated into two reportable segments: AmTrust Reinsurance and Diversified Reinsurance. Business formerly classified in the AmTrust Reinsurance segment is now described as "AmTrust Reinsurance Legacy Business" while business formerly classified in the Diversified Reinsurance segment is referred to as "Diversified Reinsurance Legacy Business" within this new segment. AmTrust Reinsurance Legacy Business 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, AEL and AIU DAC, both of which are in run-off effective as of January 1, 2019, as discussed in Note 10. Related Party Transactions of the Notes to Condensed Consolidated Financial Statements included in Part I Item 1. "Financial Information" . 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, which are discussed in Note 8. Reinsurance of the Notes to Condensed Consolidated Financial Statements included in Part I Item 1. "Financial Information" . Diversified Reinsurance legacy business comprises a run-off portfolio of predominantly property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies located primarily in Europe, as well as transactions entered into by GLS as described in Note 1. Basis of Presentation under Maiden Legacy Operations. The Company does not presently underwrite prospective reinsurance risks but may consider selectively deploying underwriting capacity to optimize shareholder returns in support of the Company's Program Services operations. 53 Business Strategy Our strategic focus centers on growing the fee income component of our program services business, which will increase our earnings before interest, taxes, depreciation and amortization ("EBITDA") while effectively managing the continuing run-off of the legacy Maiden alternative asset and reinsurance portfolios. Our focus on growing our fee business may include but may consider selectively deploying underwriting capacity to optimize shareholder returns in support of this business. We believe this will create the greatest risk-adjusted shareholder returns in order to increase EBITDA and book value for our common shareholders, both near and long-term. Our assessment is that these areas of strategic focus would enhance our profitability through increased returns, which would also increase the likelihood of fully utilizing the significant net operating loss ("NOL") carryforwards, as described further below, which would increase both GAAP book value and create additional common shareholder value. The recognition of the deferred tax asset on our balance sheet remains a leading priority for the Company to increase its GAAP book value. As a result of the Combination, as of June 30, 2025 , we invested $206.5 million into alternative investments which include equity securities, equity method investments and other investments in a wide variety of asset classes. Please refer to the "Liquidity and Capital Resources" section on " Other Investments, Equity Method Investments and Equity Investments" for further information on these alternative asset classes and a detailed discussion of their investment returns. Recent developments and trends in financial markets, particularly the ongoing volatility in interest rates and the associated economic uncertainty as a result of those and other fiscal and monetary policy changes, indicate that it may take longer than expected to achieve those returns and we expect that to factor into future capital allocation decisions. Prior to the Combination, Maiden had determined that this asset management strategy did not serve its longer-term strategic goals, which had shifted to a focus on developing or acquiring fee income oriented insurance operations and had ceased making commitments to these alternative asset classes and had begun to dispose of these investments. Subsequent to the Combination, we have continued to pursue this objective and seek to find appropriate opportunities to dispose of these assets and believe this is a high priority in support of focusing our efforts on growing our program services business. Accordingly, we expect our alternative investment portfolio to be reduced in future periods as we believe it is critical to reposition our balance sheet and increase our liquidity in support of the current initiatives being pursued. While we believe that the Combination with Maiden will increase the likelihood of achieving our stated objectives, there can be no assurance that the run-off of its insurance liabilities will run-off at levels that will allow us to achieve those goals. As a result, we continue to pursue finality solutions to resolve the AmTrust liabilities not covered by the LPT/ADC Agreement, including through third-parties. There can be no guarantee that we will execute such finality solutions and these solutions could involve significant charges to execute and we are actively evaluating the potential costs and benefits of such solutions, to the extent they are available to the Company. NOL Carryforwards We believe the Combination will create opportunities to utilize Maiden's NOL carryforwards of $454.8 million at June 30, 2025. Approximately $374.2 million of these NOL carryforwards expire in various years beginning in 2029. As of June 30, 2025, $80.6 million or 17.7% of the Company's NOL carryforwards have no expiry date under the relevant U.S. tax law. The NOL carryforwards combined with additional net deferred tax assets ("DTA") primarily related to Maiden's insurance liabilities result in net U.S. DTA (before valuation allowance) of $126.5 million or $16.34 per common share at June 30, 2025. Maiden's net U.S. DTA of $126.5 million is not presently recognized on the Company's condensed consolidated balance sheets as a full valuation allowance is carried against it. Additionally, Kestrel's DTA of $7.5 million, which relates to tax basis intangibles, is not presently recognized on the Company's condensed consolidated balance sheets as a full valuation allowance is carried against it. At this time, the Company believes it is necessary to maintain a full valuation allowance against both net DTA's as more evidence is needed regarding the utilization of these losses. As circumstances further develop, we will continuously evaluate the amount of the valuation allowance held against the net DTA. For further details on the NOL carryforwards, please see " Note 13 — Income Taxes " included under Part 1 Item 1 " Financial Information " of the Quarterly Report on Form 10–Q for the six months ended June 30, 2025. 54 Three and Six Months Ended June 30, 2025 and 2024 Financial Highlights For the Three Months Ended June 30, 2025 2024 Change Summary Consolidated Statement of Income Data (unaudited): ($ in thousands except per share data) Net income from continuing operations $ 70,422 $ (547) $ 70,969 Net loss from discontinued operations (495) — (495) Net income (loss) 69,927 (547) 70,474 Basic and diluted earnings (loss) per common share: Net income attributable to common shareholders (2) 15.05 (0.20) 15.25 Gross premiums written 1,096 — 1,096 Net premiums earned 2,422 — 2,422 Underwriting and fee income (3) 6,059 (12) 6,071 Net investment results (9) 2,589 54 2,535 Non-GAAP measures: Non-GAAP operating earnings (loss) (1) 3,462 (547) 4,009 Non-GAAP basic and diluted operating earnings (loss) per common share (1) 0.71 (0.20) 0.91 Annualized non-GAAP operating return on average shareholders' equity (1) 18.0 % (42.4) % 60.4 For the Six Months Ended June 30, 2025 2024 Change Summary Consolidated Statement of Income Data (unaudited): ($ in thousands except per share data) Net income from continuing operations $ 70,028 $ (924) $ 70,952 Loss from discontinued operations, net of income tax (495) — (495) Net income 69,533 (924) 70,457 Basic and diluted earnings (loss) per common share: Net income attributable to Kestrel common shareholders (2) 18.80 (0.34) 19.14 Gross premiums written 1,096 — 1,096 Net premiums earned 2,422 — 2,422 Underwriting and fee income (3) 6,295 357 5,938 Net investment results (9) 2,623 118 2,505 Non-GAAP measures: Non-GAAP operating earnings (loss) (1) 3,068 (924) 3,992 Non-GAAP basic and diluted operating earnings (loss) per common share (1) 0.80 (0.34) 1.14 Annualized non-GAAP operating return on average shareholders' equity (1) 8.0 % (34.6) % 42.6 55 June 30, 2025 December 31, 2024 Change Consolidated Financial Condition ($ in thousands except per share data) Total investments and cash and cash equivalents (4) $ 445,938 $ 4,286 $ 441,652 Total assets 1,159,411 5,510 1,153,901 Reserve for loss and LAE 723,432 — 723,432 Senior notes - principal amount 262,361 — 262,361 Common shareholders' equity 150,085 4,606 145,479 Total capital resources (5) 412,446 4,606 407,840 Ratio of debt to total capital resources (8) 63.6 % — % 63.6 Book Value calculations: Book value per common share (6) $ 19.39 $ 1.67 $ 17.72 Diluted book value per common share (7) 19.31 1.67 17.64 (1) Non-GAAP operating earnings (loss), non-GAAP operating earnings (loss) per common share, and annualized non-GAAP operating return on average common shareholders' equity are non-GAAP financial measures. See " Key Financial Measures " for additional information. (2) Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 12. Earnings per Common Share " for the calculation of basic and diluted income (loss) per common share. (3) Underwriting and fee income or loss is a non-GAAP measure and is calculated as net premiums earned plus fee revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. See " Key Financial Measures " for additional information. (4) Total investments and cash and cash equivalents includes both restricted and unrestricted. (5) Total capital resources is the sum of the Company's principal amount of debt and shareholders' equity. See " Key Financial Measures " for additional information. (6) Book value per common share is calculated using shareholders’ equity divided by the number of common shares outstanding. See " Key Financial Measures " for additional information. (7) Diluted book value per common share is calculated by dividing shareholders' equity, adjusted for assumed proceeds from the exercise of dilutive options, by the number of outstanding common shares plus dilutive options and restricted shares (assuming exercise of all dilutive share based awards). See " Key Financial Measures " for additional information. (8) Ratio of debt to total capital resources is calculated using the total principal amount of debt divided by the sum of total capital resources. (9) Net investment results include the sum of net investment income, net realized and unrealized gains (losses), and interest in income (loss) of equity method investments. 56 Key Financial Measures In addition to our key financial measures presented in accordance with GAAP in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Income and Comprehensive Income, management uses certain non-GAAP financial measures to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that these measures, which may be defined differently by other companies, explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. The non-GAAP measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. The calculation of these key financial measures including the reconciliation of non-GAAP measures to the nearest GAAP measure and relevant discussions are found within Item 2 - "Management's Discussion and Analysis of Financial Condition - Results of Operations and Non-GAAP Measures" and are summarized as follows: Non-GAAP operating earnings (loss) and non-GAAP diluted operating earnings (loss) per common share : Management believes that the use of non-GAAP operating earnings and non-GAAP diluted operating earnings per common share enables investors and other users of the Company’s financial information to analyze its performance in a manner similar to how management analyzes performance. Management also believes that these measures generally follow industry practice therefore allowing the users of financial information to compare the Company’s performance with its industry peer group, and that the equity analysts and certain rating agencies which follow the Company, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. Non-GAAP operating earnings should not be viewed as a substitute for U.S. GAAP net income. Non-GAAP operating earnings (loss) is an internal performance measure used by management as these measures focus on the underlying fundamentals of the Company's operations by excluding, on a recurring basis: (1) net realized investment gains (losses); (2) foreign exchange and other gains (losses); and (3) interest in income (loss) of equity method investments. It also excludes on a non-recurring basis: (1) loss from discontinued operations, net of income tax and; (2) the bargain purchase gain resulting from the Combination Agreement, and (3) the change in the fair value of the earn out liability. We excluded net realized investment gains (losses), interest in income (loss) of equity method investments and foreign exchange and other gains (losses) as we believe these are influenced by market opportunities and other factors. We do not believe the net loss from our discontinued operations, the bargain purchase gain on the Combination Agreement, and the change in fair value of the earn out liability are representative of our ongoing and future business.We believe all of these amounts are substantially independent of our business and any potential future underwriting process, therefore their inclusion would distort the analysis of underlying trends in our operations. Underwriting and fee income is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. For purposes of these non-GAAP operating measures, the fee-generating business which is included in our Program Services segment, is considered part of the underwriting operations of the Company. Management believes that this measure is important in evaluating the underwriting performance of the Company and its segments. This measure is also a useful tool to measure the profitability of the Company separately from the investment results and is also a widely used performance indicator in the insurance industry. A reconciliation of the Company's underwriting results can be found in the Condensed Consolidated Financial Statements in the " Notes to Condensed Consolidated Financial Statements (unaudited) Note 3. Segment Information " included under Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q. The Company does not present certain non-GAAP measures such as combined ratio and its related components in this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2025, as it believes that as the run-off of our reinsurance portfolios progresses, such ratios are increasingly not meaningful and of little value to readers as they evaluate the financial results of the Company. While an important metric of success, underwriting and fee income does not reflect all components of profitability, as it does not recognize the impact of investment income earned on premiums between the time premiums are received and the time loss payments are ultimately paid to clients. Because we do not manage our cash and investments by segment, investment income and interest expense are not allocated to the reportable segments. Certain general and administrative expenses are generally allocated to segments based on actual costs incurred. Non-GAAP Operating Return on Average Shareholders' Equity ("Non-GAAP Operating ROACE"): Management uses non-GAAP operating return on average shareholders' equity as a measure of profitability that focuses on the return to common shareholders. It is calculated using non-GAAP operating earnings (loss) available to common shareholders (as defined above) divided by average shareholders' equity. Book Value per Common Share and Diluted Book Value per Common Share: Book value per common share and diluted book value per common share are non-GAAP measures. Management uses growth in both of these metrics as a prime measure of the value we are generating for our common shareholders, because management believes that growth in each metric ultimately results in growth in the Company’s common share price. These metrics are impacted by the Company’s net income and external factors, such as interest rates, which can drive changes in unrealized gains or losses on our fixed income investment portfolio, as well as common share repurchases. Ratio of Debt to Total Capital Resources: Management uses this non-GAAP measure to monitor the financial leverage of the Company. This measure is calculated using the total principal amount of debt divided by the sum of total capital resources. Alternative investments is the total of the Company's holdings of equity securities, other investments and equity method investments as reported on the Company's Condensed Consolidated Balance Sheets. Critical Accounting Policies and Estimates The critical accounting policies and estimates should be read in conjunction with " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) Note 2. Significant Accounting Policies " included in this Form 10-Q. 57 Results of Operations The following table sets forth our selected unaudited Condensed Consolidated Statement of Income data for the three and six months ended June 30, 2025 and 2024: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2025 2024 2025 2024 Gross premiums written $ 1,096 $ — $ 1,096 $ — Net premiums written $ 1,095 $ — $ 1,095 $ — Net premiums earned $ 2,422 $ — $ 2,422 $ — Fee revenue 544 577 1,351 1,757 Net loss and LAE 5,961 — 5,961 — Commission and other acquisition expenses (394) — (394) — General and administrative expenses (1) (2,474) (589) (3,045) (1,400) Underwriting & fee income (2) 6,059 (12) 6,295 357 Other general and administrative expenses (1) (2,606) (589) (3,178) (1,399) Net investment income 1,531 54 1,565 118 Net realized and unrealized investment gains 1,058 — 1,058 — Change in fair value of earn out liability (2,679) — (2,679) — Gain on bargain purchase 73,590 — 73,590 — Foreign exchange and other losses (5,009) — (5,009) — Interest and amortization expenses (1,519) — (1,519) — Income tax expense (3) — (95) — Net income (loss) from continuing operations 70,422 (547) 70,028 (924) Loss from discontinued operations, net of income tax (495) — (495) — Net income (loss) $ 69,927 $ (547) $ 69,533 $ (924) (1) Underwriting and fee income related general and administrative expenses is a non-GAAP measure. Please refer to "General and Administrative Expenses" below for additional information related to these corporate expenses and the reconciliation to those presented in our unaudited Condensed Consolidated Statements of Income. (2) Underwriting and fee income is a non-GAAP measure and is calculated as net premiums earned plus fee revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. (3) The Company does not present certain non-GAAP measures such as combined ratio and its related components in its results of operation, as it believes that as the run-off of its reinsurance portfolios progresses, such ratios are increasingly not meaningful and of less value to readers as they evaluate our financial results. Net income (loss) As a result of the completion of the Combination Agreement on May 27, 2025, the Company acquired Maiden's operations, which includes significant underwriting and investment activities, along with operating expenses and interest expense associated with Maiden's debt. Maiden's results of operations are reported herein for the period May 28, 2025 to June 30, 2025 and significantly impact the comparisons between periods for both the three and six months ended in 2024. Because the prior year period results of operations do not include the operations of Maiden, the year-over-year comparisons are generally not directly comparable. Results for the three months ended June 30, 2025 Net income for the three months ended June 30, 2025 was $69.9 million compared to a net loss of $0.5 million for the same respective period in 2024. Net income for the three months ended June 30, 2025 was substantially the result of the gain on bargain purchase of $73.6 million which was related to the completion of the Combination on May 27, 2025 as discussed in Note 15. Business Combination included in Part 1. Item 1. Financial Information. Excluding the gain on bargain purchase, net loss was $3.7 million for the three months ended June 30, 2025 compared to net loss of $0.5 million for the same period in 2024. Increases in underwriting and fee income as well as investment income were more than offset by higher operating and interest expense along with foreign exchange losses. The change in our financial results for the second quarter of 2025 compared to the second quarter of 2024 was primarily due to the following factors: • underwriting and fee income of $6.1 million for the three months ended June 30, 2025 compared to $0.0 million in the same period in 2024 largely due to: • favorable prior year loss development ("PPD") in our Legacy Reinsurance segment of $7.8 million in the second quarter of 2025 compared to adverse PPD of $0.0 million during the same period in 2024, detailed as follows: 58 • Our AmTrust Reinsurance Legacy business experienced favorable PPD of $7.9 million in the second quarter of 2025. • Our Diversified Reinsurance Legacy business experienced adverse PPD of $0.1 million in the second quarter of 2025. • On a current accident year basis, underwriting loss for the Legacy Reinsurance segment was $1.5 million for the three months ended June 30, 2025. • Program Services segment produced a loss of $0.2 million for the three months ended June 30, 2025 compared to loss of $12.0 thousand for the same period in 2024. Fee revenue decreased to $0.5 million for the three months ended June 30, 2025 compared to $0.6 million for the same period in 2024. • combined income from investment activities totaled $2.6 million for the three months ended June 30, 2025 compared to $0.1 million for the same period in 2024 primarily due to the following: • net investment income increased to $1.5 million for the three months ended June 30, 2025 compared to $0.1 million that was earned for the same respective period in 2024; and • realized and unrealized investment gains of $1.1 million for the three months ended June 30, 2025 compared to losses of $— million for the same respective period in 2024. • corporate general and administrative expenses increased to $2.6 million for the three months ended June 30, 2025 compared to $0.6 million for the same period in 2024. Corporate expenses increased primarily due to $1.7 million of non-recurring employee separation costs; and • foreign exchange and other losses of $5.0 million for the three months ended June 30, 2025, compared to foreign exchange and other losses of $0.0 million for the same period in 2024, primarily due to significant weakening of the U.S dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in the British pound and euro. Results for the six months ended June 30, 2025 Net income for the six months ended June 30, 2025 was $69.9 million compared to net loss of $0.9 million in 2024. Net income for the six months ended June 30, 2025 was substantially the result of the gain on bargain purchase of $73.6 million which was related to the completion of the Combination on May 27, 2025. Excluding the gain on bargain purchase, net loss was $4.1 million for the six months ended June 30, 2025 compared to a net loss of $0.9 million for the same period in 2024. Increases in underwriting and fee income as well as investment income were more than offset by higher operating and interest expense along with foreign exchange losses. The change in our financial results for the six months ended June 30, 2025 compared to 2024 was primarily due to: • underwriting and fee income of $6.3 million in the year ended June 30, 2025 compared to an underwriting and fee income of $0.4 million in 2024 largely due to: • favorable PPD of $7.8 million in our Legacy Reinsurance segment for the six months ended June 30, 2025. AmTrust Reinsurance Legacy business had favorable PPD of $7.9 million in 2025; Diversified Reinsurance Legacy business had adverse PPD of $0.1 million in 2025. • on a current accident year basis, the underwriting loss for the Legacy Reinsurance segment was $1.5 million for the six months ended June 30, 2025. • Program Services segment results decreased by $0.3 million, primarily due to reduced capacity permitted on certain programs and specific lines of business. This was due to lower fee revenue of $1.4 million for the six months ended June 30, 2025 compared to $1.8 million for the same period in 2024. Fee revenue decreased by $0.4 million. • combined income from investment activities of $2.6 million for the six months ended June 30, 2025 compared to $0.1 million in 2024 primarily due to the following: • net investment income increased to $1.6 million for the six months ended June 30, 2025 compared to $0.1 million that was earned in 2024; and • realized and unrealized investment gains of $1.1 million for the six months ended June 30, 2025 compared to losses of $0.0 million in 2024. • corporate general and administrative expenses increased to $3.2 million for the six months ended June 30, 2025 compared to $1.4 million in 2024. Corporate expenses increased primarily due to $1.7 million of non-recurring employee separation costs; and • foreign exchange and other losses of $5.0 million for the six months ended June 30, 2025 compared to foreign exchange and other losses of $0.0 million earned in 2024, largely due to significant weakening of the U.S dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in the British pound and euro. 59 Net Premiums Written Net premiums written by our reportable segment, reconciled to the total consolidated net premiums written for the three and six months ended June 30, 2025 and 2024 are detailed below: For the Three and Six Months Ended June 30, 2025 2024 Change in ($ in thousands) Total Total $ Diversified Legacy Business $ 1,380 $ — $ 1,380 AmTrust Reinsurance Legacy Business (285) — (285) Total Legacy Reinsurance Segment (1) $ 1,095 $ — $ 1,095 (1) Legacy Reinsurance segment results only include the post-combination period of May 28 to June 30, 2025. Net premiums written for the three and six months ended June 30, 2025 increased to $1.1 million: • Premiums written in the Diversified Reinsurance legacy business was $1.4 million for the three and six months ended June 30, 2025. As discussed in Note 14. Assets Held for Sale of the Notes to Condensed Consolidated Financial Statements in Part I Item 1. "Financial Information", Maiden LF and Maiden GF are no longer writing new business and their non-underwriting related assets and liabilities are presented as held-for-sale in our condensed consolidated financial statements. • Negative premiums written in the AmTrust Reinsurance legacy business were $0.3 million for the three and six months ended June 30, 2025. The cessation of active reinsurance underwriting on prospective risks included the termination of the AmTrust Quota Share and European Hospital Liability Quota Share effective January 1, 2019. Please refer to the analysis below of our Diversified Reinsurance and AmTrust Reinsurance Legacy Business in the Legacy Reinsurance segment for further details. Net Premiums Earned Net premiums earned were $2.4 million for the three and six months ended June 30, 2025. Net premiums earned by our reportable segment, reconciled to the total consolidated net premiums earned, for the three and six months ended June 30, 2025 are detailed as follows: For the Three and Six Months Ended June 30, 2025 2024 Change in ($ in thousands) Total Total $ Diversified Reinsurance Legacy Business $ 1,390 $ — $ 1,390 AmTrust Reinsurance Legacy Business 1,032 — 1,032 Total Legacy Reinsurance Segment (1) $ 2,422 $ — $ 2,422 (1) Legacy Reinsurance segment results only include the post-combination period of May 28, 2025 to June 30, 2025. Net premiums earned under Diversified Reinsurance reinsurance business for the three and six months ended June 30, 2025 was $1.4 million. Please note that Maiden LF and Maiden GF are no longer writing new business and their non-underwriting related assets and liabilities are represented as held-for-sale in our condensed consolidated financial statements as discussed above. Net premiums earned under AmTrust Reinsurance reinsurance business for the three and six months ended June 30, 2025 was $1.0 million. Please refer to the analysis below of our Diversified Reinsurance and AmTrust Reinsurance in the Maiden Legacy segment for further details. Fee Revenue Fee Revenue is primarily produced by our Program Services segment. Revenue is measured as the amount of consideration Kestrel expects to receive in exchange for providing services to its customer and is generally governed by its managed service agreement. This agreement outlines the structure of the Authorized Program for which Kestrel oversees the placement of effective insurance policies in exchange for a fee. These agreements may also include other provisions, such as minimum fee arrangements or cancellation provisions, which may impact revenue recognition. Capacity distribution fees are collected from program managers or MGAs for the placement of effective insurance policies on behalf of our customer, which is 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. Fee revenue was $0.5 million and $1.4 million for the three and six months ended June 30, 2025, respectively, compared to $0.6 million and $1.8 million for the same respective periods in 2024. Fee revenue decreased by $33.0 thousand and $0.4 million due to a reduction in permitted capacity for certain programs and lines of business. Net Investment Income Net investment income increased by $1.5 million for the three and six months ended June 30, 2025, compared to the same respective periods in 2024 due to the inclusion of Maiden's AFS fixed income portfolio and alternative investment portfolios in connection with the Combination. 60 Annualized average book yields decreased to 3.2% for the three and six months ended June 30, 2025, compared to 4.4% for the same respective periods in 2024. Net loan receivable from related party interest income was $0.7 million for the three and six months ended June 30, 2025. The net loan carried a weighted average interest rate on a balance of $107.5 million of 5.8% for the three and six months ended June 30, 2025. Floating rate investments comprised 49.0% of our fixed income investments at June 30, 2025 compared to 0.0% at June 30, 2024. The following table details our average aggregate fixed income assets (at cost) and annualized investment book yield for the three and six months ended June 30, 2025 and 2024: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2025 2024 2025 2024 Average aggregate fixed income assets, at cost (1) $ 180,988 $ 4,943 $ 181,426 $ 5,270 Annualized investment book yield 3.2 % 4.4 % 1.6 % 4.5 % (1) Fixed income assets include available-for-sale ("AFS") securities, cash and restricted cash, funds withheld receivable, and loan receivable from related party. These amounts are an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. Net Realized and Unrealized Investment Gains Net realized and unrealized investment gains of $1.1 million were recognized for the three and six months ended June 30, 2025. Net realized and unrealized investment gains for the three and six months ended June 30, 2025 are summarized in the table below by investment category: For the Three and Six Months Ended June 30, 2025 Net realized gains (losses): Fixed maturity securities $ 764 Total net realized losses 764 Net unrealized gains (losses): Other investments 248 Equity securities 46 Total net unrealized gains 294 Net realized and unrealized investment gains $ 1,058 Net Loss and LAE Net loss and LAE was $6.0 million for the three and six months ended June 30, 2025. Net losses were impacted by net favorable PPD of $7.8 million for the three and six months ended June 30, 2025. Excluding PPD, current year losses were $1.8 million for the three and six months ended June 30, 2025. The cessation of active reinsurance underwriting on prospective risks included the termination of the AmTrust Quota Share and European Hospital Liability Quota Share effective January 1, 2019. The net loss development is discussed in greater detail in the Legacy Reinsurance segment discussion and analysis and entirely associated with run-off of unearned premium for terminated reinsurance contracts in the legacy reinsurance operations. Commission and Other Acquisition Expenses Commission and other acquisition expenses were $0.4 million for the three and six months ended June 30, 2025. Please see the Legacy Reinsurance segment analysis below for further information. General and Administrative Expenses General and administrative expenses include both segment and corporate expenses segregated for analytical purposes as a component of underwriting income. Total general and administrative expenses increased by $3.9 million and $3.4 million for the three and six months ended June 30, 2025, compared to the same periods in 2024, primarily due to the inclusion of Maiden's general and administrative expenses as a result of the Combination subsequent to May 27, 2025. Corporate expenses increased primarily due to $1.7 million in non-recurring employee separation costs. Excluding these non-recurring expenses, our adjusted operating expenses increased by $2.2 million and increased by $1.7 million for the three and six months ended June 30, 2025, compared to the same periods in 2024. Corporate expenses also included vesting of certain stock-based awards which were $0.2 million for the six months ended June 30, 2025 compared to $0.0 million for the same period in 2024. 61 General and administrative expenses for the three and six months ended June 30, 2025 and 2024 were comprised of: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2025 2024 2025 2024 General and administrative expenses – segments $ 2,474 $ 589 $ 3,045 $ 1,400 General and administrative expenses – corporate 2,606 589 3,178 1,399 Total general and administrative expenses $ 5,080 $ 1,178 $ 6,223 $ 2,799 Interest and Amortization Expenses Total interest and amortization expenses were $1.5 million and $0.0 million for the three and six months ended June 30, 2025 and 2024, respectively. This included $1.8 million of interest expense on the outstanding senior notes issued by Maiden in 2016 and Maiden Holdings North America, Ltd. ("Maiden NA") in 2013 ("Senior Notes") in the three and six months ended June 30, 2025, respectively, that were acquired upon completion of the merger. 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 $0.1 million for the three and six months ended June 30, 2025 Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 7. Long Term Debt " for further details on the Senior Notes. The weighted average effective interest rate for the Senior Notes was 11.7% for the three and six months ended June 30, 2025, respectively. Gain on Bargain Purchase and Change in Earn out Liability As discussed in Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) and "Note 15. Business Combination" included in this Form 10-Q, the gain on bargain purchase of $73.6 million is the differential between the fair value of net assets of Maiden acquired on May 27, 2025 as a result of the Combination and the consideration effectively transferred to Kestrel shareholders on that date. Pursuant to terms of the Combination, former Kestrel shareholders are eligible to earn additional contingent consideration up to the lesser of (x) 2.75 million common shares of Kestrel Group and (y) $45.0 million payable in common shares of Kestrel Group, subject to the achievement of certain EBITDA milestones by the businesses that Kestrel conducted immediately prior to the closing and any extensions of such businesses or related or ancillary businesses existing thereafter subsequent to completion of the transaction through May 31, 2028 ("Performance Period"). During the three and six months ended June 30, 2025, the earn out liability increased by $2.7 million based upon current estimates of the Kestrel business for the Performance Period, including the performance of the program services business through June 30, 2025. Foreign Exchange and Other Losses Foreign currency fluctuations are primarily driven by exposures to euro, British pound and other non-USD denominated net loss reserves and insurance related liabilities in excess of foreign currency assets in our Legacy Reinsurance segment. Net foreign exchange and other losses of $5.0 million were realized for the three and six months ended June 30, 2025 compared to net foreign exchange and other losses of $0.0 million for the same period in 2024. For the three and six months ended June 30, 2025, net foreign exchange losses of $5.1 million were attributable to significant weakening of the U.S. dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in the British pound and euro. Our non-USD denominated liabilities at June 30, 2025 included net loss reserves of $341.3 million. Our foreign currency asset exposures at June 30, 2025 included $139.4 million of fixed maturity securities managed by our investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy, $33.2 million of real estate investments denominated in Canadian dollars, as well as $12.1 million of funds withheld receivable. Underwriting Results by Reportable Segment Program Services Segment The segment results for our Program Services segment for the three and six months ended June 30, 2025 were as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2025 2024 2025 2024 Fee revenue $ 544 $ 577 $ 1,351 $ 1,757 General and administrative expenses (768) (589) (1,339) (1,400) Segment (loss) income $ (224) $ (12) $ 12 $ 357 Program Services segment results decreased by $0.2 million and $0.3 million for the three and six months ended June 30, 2025 compared to the same respective periods in 2024. Fee revenue from our Program Services segment was $0.5 million and $1.4 million for the three and six months ended June 30, 2025 compared to $0.6 million and $1.8 million for the same respective periods in 2024. Fee revenue decreased by $33.0 thousand and $0.4 million due to a reduction in permitted capacity for certain programs and lines of business. 62 Legacy Reinsurance Segment The following details the results for the two components of the Legacy Reinsurance segment which is comprised of Diversified Reinsurance Legacy Business and the AmTrust Reinsurance Legacy Business. The underwriting results for our Legacy Reinsurance segment for the three and six months ended June 30, 2025 were as follows: For the Three and Six Months Ended June 30, 2025 Gross premiums written $ 1,096 Net premiums written $ 1,095 Net premiums earned $ 2,422 Net loss and LAE 5,961 Commission and other acquisition expenses (394) General and administrative expenses (1,706) Underwriting loss $ 6,283 Diversified Reinsurance Legacy Business: The underwriting results for Diversified Reinsurance legacy business for the three and six months ended June 30, 2025 were as follows: For the Three and Six Months Ended June 30, 2025 Gross premiums written $ 1,381 Net premiums written $ 1,380 Net premiums earned $ 1,390 Net loss and LAE (839) Commission and other acquisition expenses (378) General and administrative expenses (1,251) Underwriting loss $ (1,078) Underwriting loss by business unit is detailed in the table below for Diversified Reinsurance business during the three and six months ended June 30, 2025: For the Three and Six Months Ended June 30, 2025 International $ (738) GLS (321) Other run-off lines (19) Underwriting loss $ (1,078) Premiums — As discussed in the "Overview" section, Maiden LF and Maiden GF are not writing any new business and have entered into the AmTrust Renewal Rights Agreements which cover certain programs of Maiden LF and Maiden GF's primary business written in Sweden, Norway, other Nordic countries, the United Kingdom and Ireland. Maiden LF and Maiden GF are presently the principal operating subsidiaries of the Company’s IIS platform; therefore we will continue to experience limited premium written for 2025 in the Diversified Reinsurance Legacy Business. Please refer to Note 14. Assets Held for Sale of the Notes to Condensed Consolidated Financial Statements under Part I Item 1. "Financial Information" for more details. Net Loss and LAE — Net loss and LAE were $0.8 million for the three and six months ended June 30, 2025. The net loss and LAE was impacted by net adverse PPD of $0.1 million for the three and six months ended June 30, 2025, respectively. Commission and Other Acquisition Expenses — Commission and other acquisition expenses were $0.4 million for the three and six months ended June 30, 2025. This is driven by lower premiums written and earned by Maiden LF and GF as they are not writing any new business having entered into the AmTrust Renewal Rights Agreements in 2024. General and Administrative Expenses — General and administrative expenses were $1.3 million for the three and six months ended June 30, 2025. 63 AmTrust Reinsurance Legacy Business: The underwriting results for AmTrust Reinsurance Legacy business for the three and six months ended June 30, 2025 were as follows: For the Three and Six Months Ended June 30, 2025 Gross premiums written $ (285) Net premiums written $ (285) Net premiums earned $ 1,032 Net loss and LAE 6,800 Commission and other acquisition expenses (16) General and administrative expenses (455) Underwriting income $ 7,361 The negative written premiums for the three and six months ended June 30, 2025 reflect the termination of the AmTrust Quota Share and the European Hospital Liability Quota Share as of January 1, 2019 which has resulted in no new business written under these contracts since 2018. The table below provides detail on net premiums earned in the three and six months ended June 30, 2025: For the Three and Six Months Ended June 30, 2025 ($ in thousands) Total Net Premiums Earned Small Commercial Business $ (7) Specialty Risk and Extended Warranty 1,039 Total AmTrust Reinsurance $ 1,032 Net Loss and LAE — Net loss and LAE expenses of $6.8 million for the three and six months ended June 30, 2025 was largely due to favorable PPD of $7.9 million. The table below shows PPD for the AmTrust Reinsurance Legacy business for the three and six months ended June 30, 2025: For the Three and Six Months Ended June 30, 2025 Prior Year Loss Development adverse (favorable) ($ in thousands) AmTrust Quota Share $ (4,200) LPT/ADC Agreement (3,718) European Hospital Liability Quota Share 5 Total AmTrust Prior Year Development $ (7,913) Net favorable PPD for the three and six months ended June 30, 2025 was $7.9 million which was largely due to foreign exchange fluctuations on loss reserves denominated in non-USD. Commission and Other Acquisition Expenses — Commission and other acquisition expenses were negative $0.0 million for the three and six months ended June 30, 2025. General and Administrative Expenses — General and administrative expenses were $0.5 million for the three and six months ended June 30, 2025. 64 Liquidity and Capital Resources Liquidity Kestrel Group is a holding company and transacts no business of its own. We therefore rely on cash flows in the form of dividends, advances, loans and other permitted distributions from our subsidiary companies to pay expenses and make dividend payments on our common shares. The jurisdictions in which our operating subsidiaries are licensed to write business impose regulations requiring companies to maintain or meet statutory solvency and liquidity requirements and also place restrictions on the declaration and payment of dividends and other distributions. As a result of the completion of the Combination on May 27, 2025, the Company has acquired significant investable assets and additional sources of investment income as discussed in Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) "Note 4. Investments " and "Note 15. Business Combination" included in this Form 10-Q. As of June 30, 2025, the Company had investable assets of $565.5 million compared to $4.3 million as of December 31, 2024. Investable assets include the combined total of our fixed maturity securities and other investments, cash and restricted cash including cash equivalents, net loan receivable from a related party and funds withheld receivable. Maiden Reinsurance re-domesticated from Bermuda to Vermont on March 16, 2020. We are actively engaged with the Vermont DFR regarding Maiden Reinsurance's longer term business plan, including its investment policy, changes to which require prior regulatory approval as stipulated by Vermont law or the Vermont DFR for active underwriting, capital management or other strategic initiatives, including our Combination Agreement with Kestrel. Maiden Reinsurance has received all necessary approvals required to date by the Vermont DFR in respect of its business plan, including GLS activities and investment policy amendments in 2021. Maiden Reinsurance's Investment Policy, as approved and as amended by the Vermont DFR in the second quarter 2025, maintains our established investment management and governance practices. The amended Investment Policy however includes significant modifications to this policy as follows: 1) Maiden Reinsurance will not purchase any additional affiliated securities, including common shares of the Company or senior notes issued by Maiden Holdings or Maiden NA; and 2) Maiden Reinsurance will make no new commitments for alternative assets, consistent with the practice it had already adopted ahead of this policy amendment. Maiden Reinsurance expects to fulfill its remaining commitments to existing investments, which totals $38,441 in unfunded commitments as of June 30, 2025. In May 2025, the Vermont DFR approved: 1) an annual dividend program to be paid by Maiden Reinsurance to Maiden NA, with notification to the Vermont DFR as dividends are paid; and 2) an extraordinary dividend of $40.0 million and this dividend formed the basis for the consideration received by the Company's shareholders pursuant to the terms of the Combination Agreement. During the six months ended June 30, 2025, Maiden Reinsurance paid dividends of $13.8 million to Maiden NA as part of the approved annual dividend program. During the six months ended June 30, 2025, Maiden NA did not pay any dividends to Maiden Holdings. We may experience continued volatility in our results of operations which could negatively impact our financial condition and create a reduction in the amount of available distribution or dividend capacity from our regulated reinsurance subsidiaries, which would also reduce liquidity. Further, we and our insurance subsidiaries may need additional capital to maintain compliance with regulatory capital requirements and/or be required to post additional collateral under existing reinsurance arrangements, which could reduce our liquidity. Operating, investing and financing cash flows Our sources of funds historically have consisted of premium receipts net of commissions and brokerage, investment income, net proceeds from capital raising activities, and proceeds from sales, maturities, pay downs and redemption of investments. Cash is currently used primarily to pay loss and LAE, ceded reinsurance premium, general and administrative expenses, and interest expense, with the remainder in excess of our operating requirements made available to our investment managers for investment in accordance with our investment policy as well as for capital management such as repurchasing our shares. During the six months ended June 30, 2025, we experienced negative operating cash flows as we run off the AmTrust Reinsurance Legacy Business reserves as shown in the cash flows table further below. We currently expect a trend of positive investing cash flows through 2025, and we will use funds from cash and investment portfolios, fee revenue premiums, investment income and proceeds from investment sales and redemptions to meet our expected claims payments and operational expenses. Claim payments will be principally from the run-off of existing reserves for loss and LAE. A significant portion of those liabilities are collateralized and claim payments will be funded by using this collateral which should provide sufficient funding to fulfill those obligations. The Company’s management believes our current sources of liquidity are adequate to meet its cash requirements for the next twelve months as we generally expect operating cash flows to be sufficiently offset by investing cash flows. The consideration and related significant expenses associated with completing the combination has utilized substantial amounts of Maiden's current liquidity. While we continue to expect our cash flows to be sufficient to meet our cash requirements and to operate our business, as our reinsurance liabilities continue to run-off our balance sheet increasingly consists of more illiquid securities which we are seeking to dispose of for more liquid assets. Our inability to monetize these illiquid assets on a timely basis while fulfilling our ongoing obligations may restrain our liquidity further and we may need to consider measures to ensure we continue to fulfill those obligations. Further, while no new alternative asset commitments have been or will be made, Maiden's historical asset management strategy which was part of the Combination can be impacted by both investment specific and broader financial market conditions and may not produce the expected liquidity and cash flows these investments are designed to achieve, or the timing thereof may also be impacted by those factors. 65 At June 30, 2025, unrestricted cash, cash equivalents and fixed maturity investments were $28.0 million compared to $4.3 million held at December 31, 2024, an increase of $23.7 million during the six months ended June 30, 2025. Please see the related discussion on investing and financing cash flows below. The table below summarizes our operating, investing and financing cash flows for the six months ended June 30, 2025 and 2024: For the Six Months Ended June 30, 2025 2024 ($ in thousands) Operating activities $ (20,738) $ (566) Investing activities 88,333 — Financing activities (40,000) — Effect of exchange rate changes on foreign currency cash 661 — Total increase (decrease) in cash, restricted cash and cash equivalents $ 28,256 $ (566) Cash Flows used in Operating Activities Cash flows used in operating activities for the six months ended June 30, 2025 was $20.7 million compared to cash flows used in operating activities of $0.6 million for the six months ended June 30, 2024. The increase in cash used in operating activities for the six months ended June 30, 2025 was due to claim payments for ongoing runoff of reinsurance liabilities. Cash Flows provided by Investing Activities Cash provided by investing activities was $88.3 million for the six months ended June 30, 2025 compared to net cash used in investing activities of $0.0 million for the same period in 2024. Cash flows provided by investing activities for the six months ended June 30, 2025 was primarily due to $79.8 million of cash acquired from the purchase of Maiden business due to the Combination which closed on May 27, 2025. For the six months ended June 30, 2025, the proceeds from the sales, maturities and calls exceeded the purchases of fixed maturity securities by $10.1 million. The size of the fixed income investment portfolio will diminish as claims payments continued to be made in the runoff of existing loss reserves for the terminated AmTrust Quota Share and the European Hospital Liability Quota Share contracts. For the six months ended June 30, 2025 and 2024, investing cash flows included purchases of alternative investments which exceeded proceeds from the sales and redemptions. There were net purchases of $1.6 million for alternative investments during the six months ended June 30, 2025 compared to net purchases of alternative investments of $0.0 million for the same period in 2024. These net purchases were mainly due to pre-existing commitments for private equity fund investments for the six months ended June 30, 2025. Cash Flows used in Financing Activities Cash flows used in financing activities were $40.0 million for the six months ended June 30, 2025 compared to $0.0 million for the same period in 2024. This was due to cash dividends paid to Kestrel equityholders pursuant to the terms of the Combination Agreement which was completed on May 27, 2025. No dividends on common shares were paid during the six months ended June 30, 2025 and 2024. Restrictions, Collateral and Specific Requirements As previously noted, as a result of the completion of the Combination with Maiden on May 27, 2025, the Company has acquired significant investable assets and additional sources of investment income in addition to considerable loss reserves and unearned premiums under legacy reinsurance contracts as discussed in Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) "Note 4. Investments ", "Note 9. Reserve for Loss and Loss Adjustment Expenses" and "Note 15. Business Combination" included in this Form 10-Q. Pursuant to the terms of the underlying reinsurance contracts associated with these liabilities, Maiden Reinsurance is required in certain instances to provide collateral in various forms as security against performance to satisfy those obligations. Those collateral obligations remain with Maiden Reinsurance after completion of the Combination. The Company's restrictions, collateral and specific requirements are discussed in " Management's Discussion and Analysis of Financial Condition and Results of Operations " section. Please also refer to " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) included in this Form 10-Q for details of fair values for collateral requirements and restricted assets at June 30, 2025 particularly in these notes: Note 4.(e) Restricted Cash, Cash Equivalents and Investments; Note 8. Reinsurance; and Note 10. Related Party Transactions. At June 30, 2025 and December 31, 2024, restricted cash and cash equivalents and fixed maturity investments used as collateral were $211.4 million and $0.0 million, respectively. This collateral represents 88.3% and 0.0% of the fair value of total fixed maturity investments, cash, restricted cash and cash equivalents at June 30, 2025 and December 31, 2024, respectively. 66 Cash and Investments As a result of the completion of the Combination on May 27, 2025, the Company has acquired significant investable assets and additional sources of investment income as discussed in Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) "Note 4. Investments " and "Note 15. Business Combination" included in this Form 10-Q. As a result, the substantial majority of our current investments are held by Maiden Reinsurance, whose amended investment policy was recently approved by the Vermont DFR, as noted. As of June 30, 2025, Maiden Reinsurance owned approximately 22.4% of our total outstanding common shares which is eliminated for accounting and financial reporting purposes on our condensed consolidated financial statements. The voting power of Maiden Reinsurance, with respect to its common shares, was previously capped at 9.5% pursuant to the Maiden's bye-laws; however Maiden's shareholders approved the proposal to remove the 9.5% voting limitation on all shareholders at its Special Meeting on April 29, 2025. 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 Sheet at June 30, 2025. The market value of our common shares held by Maiden Reinsurance was $59.3 million at June 30, 2025. Accordingly, our fixed income investment portfolio is invested in liquid, investment-grade fixed maturity securities which are all designated as AFS at June 30, 2025. Further, as Maiden's insurance liabilities continue to run-off and the required capital to operate its business for regulatory purposes decreased, Maiden expanded Maiden Reinsurance’s investment policy which has been approved by the Vermont DFR. Under this investment policy, Maiden expanded the range of asset classes it invested in to enhance the income and total returns its investment portfolio produces. We categorize these investments as alternative investments which include " Other Investments " and "Equity Securities" on our Condensed Consolidated Balance Sheets. As of June 30, 2025 and December 31, 2024, our cash and investments consisted of: June 30, 2025 December 31, 2024 ($ in thousands) Fixed maturities, available-for-sale, at fair value $ 205,801 $ — Equity securities, at fair value 11,191 — Equity method investments 33,173 — Other investments 162,105 — Total investments 412,270 — Cash and cash equivalents 18,951 4,286 Restricted cash and cash equivalents 14,717 — Total Investments and Cash and Cash Equivalents $ 445,938 $ 4,286 In addition to the discussion on Cash and Cash Equivalents and Fixed Maturities that follows herein, please see the " Notes to Condensed Consolidated Financial Statements (unaudited) Note 4. Investments " included under Part I Item 1 " Financial Information" of this Form 10-Q for further discussion on our AFS fixed income securities. The net purchases of other investments for the six months ended June 30, 2025 were due to securities transactions executed after the completion of the Combination. Other than purchases due to pre-existing commitments for private equity funds, we will not be making new commitments to alternative investments in the foreseeable future. Under Maiden Reinsurance's then applicable investment policy, alternative investments could include, but are not limited to, privately held investments, private equities, private credit lending funds, fixed-income funds, hedge funds, equity funds, real estate (including joint ventures and limited partnerships) and other non-fixed-income investments. For further details on our alternative investments, in addition to the discussion of the investments herein, please see " Notes to Condensed Consolidated Financial Statements (unaudited) Note 4(b). Other Investments, Equity Securities and Equity Method Investments included under Part I Item 1 " Financial Information " of this Form 10-Q. Our investment performance is subject to a variety of risks, including risks related to general economic conditions, market volatility, interest rate fluctuations, foreign exchange risk, liquidity risk and credit and default risk. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. An increase in interest rates could result in significant losses, realized or unrealized, in the value of our investment portfolio. A portion of our portfolio consists of alternative investments that subject us to restrictions on redemption, which may limit our ability to withdraw funds for some period of time after the initial investment. The values of, and returns on, such investments may also be more volatile. We believe the Maiden alternative investment portfolio assumed in the Combination provides diversification against our fixed-income investments and an opportunity for improved risk-adjusted return. However, we believe this portfolio is not suitable for our plans to grow our Program Services segment and in addition to the changes in our investment policy as described above, we are actively looking to dispose of these assets to further improve our liquidity position and strengthen our ability to grow. Further, the returns of these investments may be more volatile and we may experience significant unrealized gains or losses in any particular quarter or year. While we believe the returns produced by these investments will exceed our cost of capital, in particular our cost of debt capital, it is too soon to determine if the actual returns will achieve this objective and it may be an extended period of time before that determination can be made. 67 We may utilize and pay fees to various companies to provide investment advisory and/or management services related to these investments. These fees, which would be predominantly based upon the amount of assets under management, would be included in net investment income. In addition, costs associated with evaluating, analyzing and monitoring these investments may require additional expenditures than traditional marketable securities. Cash & Cash Equivalents At June 30, 2025, we consider the levels of cash and cash equivalents held to be within our targeted ranges. During periods when interest rates experience greater volatility, we have periodically maintained more cash and cash equivalents to better assess current market conditions and opportunities within our defined risk appetite, and may do so in future periods. Fixed Maturity Investments The average yield and average duration of our fixed maturities, by asset class, and our cash and cash equivalents (restricted and unrestricted) are as follows at June 30, 2025 and December 31, 2024: June 30, 2025 Original or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Average yield (1) Average duration (2) ($ in thousands) U.S. treasury bonds $ 43,911 $ — $ — $ 43,911 4.3 % 0.1 U.S. agency bonds – mortgage-backed 21,963 506 (2) 22,467 5.3 % 5.7 Non-U.S. government bonds 54,005 2 (31) 53,976 1.9 % 0.8 Collateralized loan obligations 68,684 7 (5) 68,686 3.3 % 0.3 Corporate bonds 16,760 4 (3) 16,761 2.5 % 1.5 Total fixed maturities 205,323 519 (41) 205,801 3.3 % 1.0 Cash and cash equivalents 33,668 — — 33,668 1.3 % 0.0 Total $ 238,991 $ 519 $ (41) $ 239,469 3.0 % 0.9 December 31, 2024 Original or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Average yield (1) Average duration (2) ($ in thousands) Cash and cash equivalents $ 4,286 $ — $ — $ 4,286 4.3 % 0.0 Total $ 4,286 $ — $ — $ 4,286 4.3 % 0.0 (1) Average yield is calculated by dividing annualized investment income for each sub-component of fixed maturity securities and cash and cash equivalents (including amortization of premium or discount) by amortized cost. (2) Average duration in years. During the six months ended June 30, 2025, the yield on the 10-year U.S. Treasury bond decreased by 34 basis points to 4.24%. The 10-year U.S. Treasury rate is the key risk-free determinant in the fair value of many of the fixed maturity securities in our portfolio. The decrease in risk-free rates during the six months ended June 30, 2025 generated net unrealized gains of $0.5 million on our fixed maturity investment portfolio which increased our book value per common share by $0.06 during the period. Current outlooks for global monetary policy have become more uncertain in recent months, as a combination of potential significant changes in U.S. fiscal and trade policy and the attendant uncertainty on the impacts of these policies on both U.S. and global economic outlooks and inflation appear to be causing central banks to either adopt a neutral stance or apply further tightening should data dictate such actions, particularly inflation and labor market data. Our investment portfolios, in particular our fixed maturity portfolio, may be adversely impacted by unfavorable market conditions caused by these measures, which could cause continued volatility in our results of operations and negatively impact our financial condition. Interest rate risk is the price sensitivity of a security to changes in interest rates. Credit spread risk is the price sensitivity of a security to changes in credit spreads. As noted, the fair value of our fixed maturity investments will fluctuate with changes in interest rates and credit spreads. We attempt to maintain adequate liquidity in our fixed maturity investments portfolio with a strategy designed to emphasize the preservation of our invested assets and provide sufficient liquidity for the prompt payment of claims and contract liabilities. Because we collateralize a significant portion of our insurance liabilities, unanticipated or large increases in interest rates could require us to utilize significant amounts of unrestricted cash and fixed maturity securities to provide additional collateral, which could impact our asset and capital management strategy described herein. We also monitor the duration and structure of our investment portfolio as discussed below. As of June 30, 2025, the aggregate hypothetical change in fair value from an immediate 100 basis points increase in interest rates, assuming credit spreads remain constant, in our fixed maturity investments portfolio would decrease the fair value of that portfolio by $3.7 million. Actual shifts in interest rates may not change by the same magnitude across the maturity spectrum or on an individual security and, as a result, the impact on the fair value of our fixed maturity securities may be materially different from the resulting change in value described above. To limit our exposure to unexpected interest rate increases which would reduce the value of our fixed income securities and reduce our shareholders' equity, we attempt to maintain the duration of our fixed maturity investment portfolio combined with our cash and cash equivalents, both restricted and unrestricted, within a reasonable range of the duration of our loss reserves. 68 At June 30, 2025, these respective durations in years were as follows: June 30, 2025 Fixed maturities and cash and cash equivalents 0.9 Reserve for loss and LAE - gross of LPT/ADC Agreement reserves 5.7 Reserve for loss and LAE - net of LPT/ADC Agreement reserves 3.2 During the six months ended June 30, 2025, the weighted average duration of our fixed maturity investment portfolio was 0.9 year while the duration for gross reserve for loss and LAE was 5.7 years. The differential in duration between these assets and liabilities may fluctuate over time and in the case of fixed maturities, historically has been affected by factors such as market conditions, changes in asset mix and prepayment speeds in the case of both our U.S. agency mortgage-backed securities ("Agency MBS") and commercial mortgage-backed securities held. At June 30, 2025, the duration of our loss reserves net of the LPT/ADC Agreement was higher than the duration of our fixed maturity investment portfolio. To limit our exposure to unexpected interest rate increases that could reduce the value of our fixed maturity securities and reduce our shareholders' equity, the Company holds floating rate securities whose fair values are less sensitive to interest rates. At June 30, 2025, 49.0% of our fixed income investments were comprised of floating rate securities which are detailed in the table below: June 30, 2025 December 31, 2024 ($ in thousands) Fair Value % of Total Fair Value % of Total Floating rate securities Collateralized loan obligations $ 68,686 19.1 % $ — — % Total floating rate AFS fixed maturities at fair value 68,686 19.1 % — — % Loan to related party 107,490 29.9 % — — % Total floating rate securities $ 176,176 49.0 % $ — — % Total fixed income investments at fair value (1) $ 359,044 $ 4,286 (1) Total fixed income investments at fair value include AFS fixed maturities, cash and restricted cash, funds withheld receivable, and net loan receivable from related party. At June 30, 2025, 100.0% of the Company’s U.S. agency bond holdings are mortgage-backed. Total U.S. agency MBS comprise 10.9% of our fixed maturity investment portfolio at June 30, 2025. Given their relative size to our total investments, if faster prepayment patterns were to occur over an extended period of time, this could potentially limit the growth in our investment income in certain circumstances or reduce the total amount of investment income we earn. The fair value of our U.S. Agency MBS holdings at June 30, 2025 were as follows: June 30, 2025 ($ in thousands) Fair Value % of Total FNMA – fixed rate $ 12,950 57.7 % FHLMC – fixed rate 7,489 33.3 % GNMA – variable rate 2,028 9.0 % Total U.S. Agency MBS $ 22,467 100.0 % At June 30, 2025, 100.0% of our fixed maturity investments consisted of investment grade securities. We define a security as being below investment grade if it has an S&P credit rating of BB+ or equivalent, or less. Please see Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) Note 4. Investments for additional information on the credit rating of our fixed income investment portfolio. Credit ratings below are assigned by S&P, or an equivalent rating agency. The security holdings by sector and financial strength rating of our corporate bond holdings at June 30, 2025 were as follows: Ratings June 30, 2025 A+, A, A- BBB+, BBB, BBB- Fair Value % of Corporate bonds portfolio Corporate bonds ($ in thousands) Basic Materials — % 35.0 % $ 5,865 35.0 % Consumer 17.5 % — % 2,937 17.5 % Financial Institutions 44.5 % 3.0 % 7,959 47.5 % Total 62.0 % 38.0 % $ 16,761 100.0 % 69 Ratings (1) The table below includes the Company’s four largest corporate holdings at fair value and as a percentage of all fixed income securities held as at June 30, 2025. The Company's four largest corporate holdings are 100.0% euro denominated, with 17.5% in the Consumer Sector and 47.5% in the Financial Institutions sector. June 30, 2025 Fair Value % of Holdings Rating (1) ($ in thousands) Chubb Ina Holdings Inc., 1.55%, Due 3/15/2028 $ 7,454 3.6 % A PPG Industries Inc., 0.875%, Due 11/3/2025 5,865 2.9 % BBB+ McKesson Corp., 1.5% Due 11/17/2025 2,937 1.4 % A- American Tower Corp, 1.0%, Due 1/15/2032 505 0.2 % BBB Total $ 16,761 8.1 % (1) Ratings as assigned by S&P, or equivalent At June 30, 2025, we held the following types of non-U.S. dollar denominated securities: June 30, 2025 ($ in thousands) Fair Value % of Total Non-USD denominated collateralized loan obligations $ 68,686 49.3 % Non-USD denominated corporate bonds 16,761 12.0 % Non-U.S. government bonds 53,976 38.7 % Total non-U.S. dollar denominated securities $ 139,423 100.0 % At June 30, 2025, 100.0% of non-U.S. dollar denominated securities were invested in euro denominated bonds. At June 30, 2025, the non-U.S. government issuers all have a rating of A+ or higher by Fitch Ratings. We do not employ any credit default protection against any of the fixed maturities held in non-U.S. dollar denominated currencies at June 30, 2025. For our non-U.S. dollar denominated corporate bonds, the following table summarizes the composition of the fair value of our fixed maturity investments at the dates indicated by ratings at June 30, 2025: Ratings (1) June 30, 2025 ($ in thousands) Fair Value % of Total A+, A, A- $ 10,391 62.0 % BBB+, BBB, BBB- 6,370 38.0 % Total non-U.S. dollar denominated corporate bonds $ 16,761 100.0 % (1) Ratings as assigned by S&P, or equivalent 70 Other Investments , Equity Securities and Equity Method Investments The Company's alternative investments are categorized as other investments, equity securities and equity method investments as reported on our condensed consolidated balance sheets. These include private equity funds, private credit funds, investments in limited partnerships, as well as investments in direct lending entities and investments in technology-oriented insurance related businesses known as insurtechs. Private equity investments consist of direct investments in privately held entities, investments in private equity funds and private equity co-investments with sponsoring entities. Private credit investments consist of loans and other debt securities of privately held entities or investment sponsors. Our alternative investments as of June 30, 2025 consisted of the following asset categories: June 30, 2025 ($ in thousands) Carrying Value % of Total Privately held common stocks $ 5,181 2.5 % Privately held preferred stocks 6,010 2.9 % Total equity securities $ 11,191 5.4 % Real estate investments 33,173 16.1 % Total equity method investments $ 33,173 16.1 % Private equity funds $ 27,127 13.1 % Private credit investments 1,666 0.8 % Privately held equity investments 10,315 5.0 % Equity method investments with fair value option elected 73,019 35.4 % Investments in direct lending entities 49,978 24.2 % Total other investments $ 162,105 78.5 % Total alternative investments $ 206,469 100.0 % Our allocation to alternative investments increased to 46.3% of our total cash and investments held as of June 30, 2025, reflecting assets assumed in the Combination. In addition to the categories described above, we also evaluate our alternative investments by the following asset classes: June 30, 2025 ($ in thousands) Carrying Value % of Total Private Equity $ 14,941 7.2 % Private Credit 1,666 0.8 % Alternatives 78,679 38.1 % Venture Capital 26,426 12.8 % Real Estate 84,757 41.1 % Total alternative investments $ 206,469 100.0 % For further details on these alternative investments, see " Notes to Condensed Consolidated Financial Statements: Note 4(b) Other Investments, Equity Securities and Equity Method Investments" included under Part I Item 1. "Financial Information" of this Report on Form 10-Q. Within these asset classes, our portfolio broadly consists of the following types of investments: • Private Equity – this asset class consists of both fund investments with leading private equity sponsors and direct equity investments in private companies, sometimes in conjunction with our private equity fund sponsors. As of June 30, 2025, $2.7 million or 17.7% of investments in the private equity asset class consisted of investments in private equity funds and $12.3 million or 82.3% consisted of direct equity investments in private companies. • Private Credit - this asset class consists of both fund investments with leading private credit sponsors and direct credit investments in private companies, sometimes in conjunction with our private credit fund sponsors. Private credit investments in both funds and on a direct basis will typically be secured lending arrangements with non-rated entities, often with additional protective provisions to enhance the security and returns of these investments. As of June 30, 2025, $1.7 million or 100.0% of the private credit asset class consisted of direct investments in debt securities of private companies. 71 • Alternatives – this asset class consists of structured financing arrangements which typically have incentive features to enhance the Company’s returns. As part of these arrangements, the Company requires collateral or bankruptcy-remote structures to protect its investments. As of June 30, 2025, $77.0 million or 97.9% of investments in the alternatives asset class were direct investments and $1.7 million or 2.1% of the alternatives asset class were invested in funds. One investment in a collateralized direct lending entity of $50.0 million represents 63.5% of this asset class and is discussed further in "Note 4 — Investments" included in Part I Item 1. "Financial Information" in this Quarterly Report on Form 10-Q for the six months ended June 30, 2025. Prior to the Combination, Maiden had carried the investment in a collateralized direct lending entity at cost less an allowance for expected credit losses. • Venture Capital – this asset class consists of both fund investments with venture capital firms focused primarily on “insurtech” or “fintech” early-stage investments as well as direct investments in start-up companies in this sector, including equity investments in individual companies made in conjunction with our venture capital fund sponsors. As of June 30, 2025, $12.5 million or 47.2% of investments in the venture capital asset class consisted of investments in funds and $13.9 million or 52.8% consisted of direct equity investments in start-up companies. As of June 30, 2025, $14.7 million or 55.5% of our venture capital investments were invested in funds or companies that would be considered “insurtech” investments. • Real Estate – this asset class consists of long-term equity investments in three real estate projects. Two are multi-family residential development projects near major urban centers where workforce housing demand continues to be strong. One investment is a minority stake as a limited partner with a leading property developer with a highly successful track record, where the Company will earn returns from both operating income from rentals and future sales of properties. As of June 30, 2025, the Company has $46.0 million invested in this project and expects investment returns to commence in earnest in 2026 and beyond. The second multi-family residential investment is a majority stake with general partner rights wherein the Company is providing the capital backing to an experienced and successful developer in the subject market, while also taking minority equity stakes in individual projects. To date, this development project has secured five properties in attractive locations and is currently in the zoning and planning stages. As of June 30, 2025, the Company has $33.2 million invested in this project and has commenced earning limited amounts of fee income from this project. As part of its investment, the Company has also provided certain loan guarantees which are discussed in more detail in Note 11 — Commitments, Contingencies and Guarantees included in Part I Item 1. "Financial Information" . We expect fee and operating income and gains from future sales of properties to commence in earnest in 2027 and beyond. Finally, the Company has a minority equity stake in an iconic office building in a major city in the U.S., with an attractive and growing tenant roll. As of June 30, 2025, the Company has $5.6 million invested in this project and to date has earned preferred returns and received certain distributions. In addition to preferred returns, the Company expects to receive future distributions of operating income from this investment. C ertain 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. For further details on these financial guarantees, please see " Notes to Condensed Consolidated Financial Statements: Note 11 - Commitments, Contingencies and Guarantees" included under Part I Item 1. "Financial Information" of this Report on Form 10-Q. 72 Investment Results Our investment portfolio returns included in earnings increased to $2.6 million for the three and six months ended June 30, 2025, compared to $0.1 million for the same respective periods in 2024, largely due to the acquisition of Maiden's AFS and alternative investment portfolios in connection with the Combination. The Company earned unrealized gains on the alternative investment portfolio, as well as interest income on the net loan receivable from related party and the AFS fixed income portfolio. The following table summarizes our investment results for the three and six months ended June 30, 2025 and 2024: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2025 2024 2025 2024 Net investment income: Fixed income investments (1) $ 1,293 $ — $ 1,293 $ — Cash and restricted cash 156 54 190 118 Other investments, including equities (4) 84 — 84 — Investment expenses (2) — (2) — Total net investment income 1,531 54 1,565 118 Net realized losses: Fixed income assets (1) 764 — 764 — Total net realized losses 764 — 764 — Net unrealized gains: Other investments, including equities (4) 294 — 294 — Total net unrealized gains 294 — 294 — Total investment return included in earnings (A) $ 2,589 $ 54 $ 2,623 $ 118 Other comprehensive income: Unrealized gains on AFS fixed maturity securities (B) $ 478 $ — $ 478 $ — Total investment return = (A) + (B) $ 3,067 $ 54 $ 3,101 $ 118 Annualized income from fixed income assets (2) $ 5,796 $ 216 $ 2,966 $ 236 Average aggregate fixed income assets, at cost (2) 180,988 4,943 181,426 5,270 Annualized investment book yield 3.2 % 4.4 % 1.6 % 4.5 % Average aggregate invested assets, at fair value (3) $ 284,462 $ 4,943 $ 284,900 $ 5,270 Investment return included in net earnings 0.9 % 1.1 % 0.9 % 2.2 % Total investment return 1.1 % 1.1 % 1.1 % 2.2 % 1. Fixed income investments include AFS securities as well as funds withheld receivable, and net loan receivable from related party. Gross and net investment returns for these assets only include the post-Combination period of May 28, 2025 to June 30, 2025. 2. Average aggregate fixed income assets include AFS portfolio, cash and restricted cash, funds withheld receivable, and loan to related party and is computed as an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. 3. Average aggregate invested assets include all investments (AFS and alternative investments), cash and restricted cash, loan to related party and funds withheld receivable and is computed as an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. 4. Gross and net investment returns for other investments, including equities, only include the post-Combination period of May 28, 2025 to June 30, 2025. 73 The following table details total investment returns for our fixed income investments for the three and six months ended June 30, 2025 and 2024: Fixed Income Investments (1) For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2025 2024 2025 2024 Gross investment income $ 1,449 $ 54 $ 1,483 $ 118 Net realized gains 764 — 764 — Change in AOCI (3) 478 — 478 — Gross investment returns $ 2,691 $ 54 $ 2,725 $ 118 Average invested assets, at fair value (4) $ 181,228 $ 4,943 $ 181,665 $ 5,270 Gross Investment Returns 1.5 % 1.1 % 1.5 % 2.2 % Less: Investment expenses $ 2 $ — $ 2 $ — Net investment returns $ 2,689 $ 54 $ 2,723 $ 118 Net Investment Returns 1.5 % 1.1 % 1.5 % 2.2 % Our net investment returns increased to 1.5% for the three and six months ended June 30, 2025, compared to 1.1% and 2.2% for the respective periods in 2024. The floating rate investments comprise 49.0% of our fixed income investments at June 30, 2025. The net loan receivable from related party had an outstanding net balance of $107.5 million at June 30, 2025 and the average yield on the loan was 5.8% for the three and six months ended June 30, 2025. Please refer to " Notes to Condensed Consolidated Financial Statements - Note 4 — Investments " included under Part I, Item 1 " Financial Information" of this Quarterly Report on Form 10-Q for further detail on investment returns from fixed income investments held by the Company at June 30, 2025 and 2024. The following table details total investment returns for our alternative investments for the three and six months ended June 30, 2025, respectively: Alternative Investments (2) For the Three and Six Months Ended June 30, ($ in thousands) 2025 Gross investment income $ 84 Net unrealized gains 294 Gross investment returns (5) $ 378 Average invested assets, at fair value (4) $ 103,235 Gross Investment Returns (5) 0.4 % Less: Investment expenses $ — Net investment returns $ 378 Net Investment Returns (5) 0.4 % 1. Fixed income investments includes AFS securities as well as cash, restricted cash, funds withheld receivable, and loan to related party. 2. Alternative investments includes other investments, equity securities, and equity method investments. 3. Change in accumulated other comprehensive income ("AOCI") excludes unrealized foreign exchange gains and losses. 4. Average invested assets is the average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. 5. Gross and net investment returns for alternative investments only include the post-Combination period of May 28, 2025 to June 30, 2025. 74 The following table details total investment returns for alternative investments by asset class at June 30, 2025: June 30, 2025 Private Equity Private Credit Alternative Assets Venture Capital Real Estate Total ($ in thousands) Gross investment income $ — $ — $ — $ — $ 84 $ 84 Net realized and unrealized gains 121 — 147 26 — 294 Total Investment Return $ 121 $ — $ 147 $ 26 $ 84 $ 378 Average Investments $7,471 $833 $ 39,340 $ 13,213 $ 42,379 $ 103,235 Gross Investment Returns 1.6 % — % 0.4 % 0.2 % 0.2 % 0.4 % Other Balance Sheet Changes The following table summarizes other material balance sheet changes at June 30, 2025 compared to December 31, 2024. Substantially all of the increases in the balance sheet items below relate to the completion of the Combination with Maiden on May 27, 2025, as discussed in Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) "Note 4. Investments " and "Note 15. Business Combination" included in this Form 10-Q: ($ in thousands) June 30, 2025 December 31, 2024 Change in $ Reinsurance balances receivable, net $ 10,397 $ — $ 10,397 Reinsurance recoverable on unpaid losses 520,520 — 520,520 Net loan receivable from related party 107,490 — 107,490 Intangible assets 11,438 — 11,438 Funds withheld receivable 12,085 — 12,085 Other assets 26,784 1,224 25,560 Reserve for loss and LAE 723,432 — 723,432 Unearned premiums 22,597 — 22,597 Earn out liability 2,679 — 2,679 Liability for investments purchased 7,006 — 7,006 Accrued expenses and other liabilities 79,263 904 78,359 Senior Notes, net 173,783 — 173,783 75 Capital Resources During the six months ended June 30, 2025, book value per common share increased to $19.39 and diluted book value per common share increased to $19.31, compared to $1.67 at December 31, 2024. This was largely due to the Combination completed on May 27, 2025, which produced substantially all of the increase in shareholders' equity for the six months ended June 30, 2025 as described in discussed in Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) "Note 1. Basis of Presentation " and "Note 15. Business Combination" included in this Form 10-Q. Capital resources consist of funds deployed in support of our operations. The following table shows the movement in our capital resources at June 30, 2025 and December 31, 2024: June 30, 2025 December 31, 2024 Change in $ ($ in thousands) Common shares at par value $ 99 $ 27 $ 72 Additional paid-in capital 176,885 10,107 166,778 Accumulated other comprehensive income 559 — 559 Retained earnings (accumulated deficit) 24,005 (5,528) 29,533 Treasury shares, at cost (51,463) — (51,463) Total Kestrel shareholders' equity 150,085 4,606 145,479 Senior Notes - carrying value 262,361 — 262,361 Total capital resources $ 412,446 $ 4,606 $ 407,840 Total capital resources increased by $407.8 million compared to December 31, 2024 due to the following items: • retained earnings increased by $29.5 million due to the net income of $69.5 million reported for the six months ended June 30, 2025 partly offset by a $40.0 million cash distribution to shareholders at closing of the Combination; • net increase in additional paid-in capital of $166.8 million largely due to shares issued as consideration for the combination pursuant to the terms of the Combination Agreement of $166.5 million as well as stock based compensation expense of $0.2 million; • net increase in AOCI of $0.6 million due to: (1) net unrealized gains of $0.5 million on our AFS investment portfolio due to market price movements in the six months ended June 30, 2025, and (2) an increase in foreign currency translation adjustment of $0.1 million in the six months ended June 30, 2025 due to the impact of depreciation of the U.S. dollar on the re-measurement of net assets denominated in British pound and euro; and • treasury shares increased by $51.5 million due to the common shares issued to Maiden Reinsurance in respect of the Combination which is not treated as outstanding on the Condensed Consolidated Balance Sheet. Please refer to " Notes to Consolidated Financial Statements Note 6. Shareholders' Equity " included under Part I Item 1. " Financial Information" of this Quarterly Report on Form 10-Q for a discussion of the equity instruments issued by the Company. Book value and diluted book value per common share at June 30, 2025 and December 31, 2024 were as follows: ($ in thousands except share and per share data) June 30, 2025 December 31, 2024 Ending common shareholders’ equity $ 150,085 $ 4,606 Proceeds from assumed conversion of dilutive options — — Numerator for diluted book value per common share calculation $ 150,085 $ 4,606 Common shares outstanding 7,741,943 2,749,996 Shares issued from assumed conversion of dilutive options and restricted shares 31,929 — Denominator for diluted book value per common share calculation 7,773,872 2,749,996 Book value per common share $ 19.39 $ 1.67 Diluted book value per common share 19.31 1.67 Senior Notes At June 30, 2025, 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 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 76 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 Company did not enter into any short-term borrowing arrangements during the six months ended June 30, 2025. Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 7. Long Term Debt " included under Part I Item 1. " Financial Information" of this Form 10-Q for a discussion of the Company’s Senior Notes. Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 11. Commitments, Contingencies and Guarantees " included under Part I Item 1. " Financial Information" of this Form 10-Q for recent litigation regarding the 2013 Senior Notes. Maiden does not have any significant operations or assets other than ownership of the shares of our subsidiaries. The dividends and other permitted distributions from Maiden NA (and its subsidiaries) will be our sole source of funds to meet ongoing cash requirements, including debt service payments. Factors that may affect payments to holders of the 2013 Senior Notes include restrictions on the payments of dividends by Maiden Reinsurance to Maiden NA which provides the sole source of income for interest payments on the 2013 Senior Notes. In 2023 and 2024, the Vermont DFR approved an annual dividend program from Maiden Reinsurance to Maiden NA, with notification to the Vermont DFR as dividends are paid. In 2025, the Vermont DFR approved an annual dividend program from Maiden Reinsurance to Maiden NA, but required prior approval of quarterly dividends before payment. Subsequent to those approvals, plus the approval for the $40.0 million extraordinary dividend to provide for consideration to the Kestrel shareholders pursuant to the terms of the Combination Agreement, Maiden Reinsurance has paid total dividends of $122.5 million to Maiden NA as of June 30, 2025. The summarized financial information below has been presented on a combined basis for the issuer Maiden NA and the guarantor Maiden, excluding all other subsidiaries. Intercompany balances and transactions between Maiden NA and Maiden, whose information is presented above on a combined basis, were eliminated. Any investment by Maiden NA or Maiden in subsidiaries that are not issuers or guarantors is not presented in the financial information below. Intercompany balances with subsidiaries that are not issuers or guarantors and any related party transactions were separately disclosed below and are not included in the total assets and total liabilities presented for Maiden NA and Maiden. The net loss for Maiden NA and Maiden was due to interest and amortization expenses on the Senior Notes as well as general and administrative expenses. The net loss in Maiden NA also reflects income tax expense incurred for the respective period. Summarized financial information of Maiden NA and Maiden as of June 30, 2025 and for the three and six months ended June 30, 2025 were as follows: Maiden NA Maiden Holdings ($ in thousands) Total assets $ 5,706 $ 5,453 Total liabilities 151,290 125,418 Amounts due from subsidiaries (not included in total assets above) 27 2,688 Amounts due to subsidiaries (not included in total liabilities above) 12,796 2,977 Related party loan payable (not included in total liabilities above) — 321,472 Total revenue for the quarter-to-date period 14 — Net loss for the quarter-to-date period (1,125) (3,872) With respect to the related party loan payable for Maiden above, under the conditions stipulated in the Vermont DFR approval for the Combination Agreement, Maiden Reinsurance (as the lender) is no longer permitted to include the corresponding related party loan receivable from Maiden Holdings (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, which remains sufficient to not only support the dividends related to the Combination and recurring annual dividends (which require prior approval by the Vermont DFR) but our ability to selectively underwrite business in support of our Program Services segment in the future. The ratio of Debt to Total Capital Resources at June 30, 2025 and December 31, 2024 was computed as follows: ($ in thousands) June 30, 2025 December 31, 2024 Senior notes - principal amount $ 262,361 $ — Shareholders’ equity 150,085 4,606 Total capital resources $ 412,446 $ 4,606 Ratio of debt to total capital resources 63.6 % — % 77 Off-Balance Sheet Arrangements C ertain 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 ce rtain parties such that it may be required to make payments now or in the future as further described in the " Notes to Condensed Consolidated Financial Statements (unaudited) Note 11. Commitments, Contingencies and Guarantees " included under Part I Item 1 " Financial Information" of this Form 10-Q. 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, 2025, guarantees of $71.6 million have been provided to lenders by Maiden Reinsurance on behalf of the real estate joint venture, however, the likelihood of Maiden Reinsurance incurring any losses pertaining to project level financing guarantees was determined to be remote. Therefore, no liability has been accrued under ASC 450-20. 78 Non-GAAP Measures In addition to our key financial measures presented in accordance with GAAP in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Income and Comprehensive Income, management uses certain non-GAAP financial measures to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that these measures, which may be defined differently by other companies, explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. These non-GAAP financial measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP and are summarized below. Non-GAAP operating earnings (loss) and non-GAAP diluted operating earnings (loss) per common share : Management believes that the use of non-GAAP operating earnings and non-GAAP diluted operating earnings per common share enables investors and other users of the Company’s financial information to analyze its performance in a manner similar to how management analyzes performance. Management also believes that these measures generally follow industry practice therefore allowing the users of financial information to compare the Company’s performance with its industry peer group, and that the equity analysts and certain rating agencies which follow the Company, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. Non-GAAP operating earnings should not be viewed as a substitute for U.S. GAAP net income. Non-GAAP operating earnings (loss) is an internal performance measure used by management as these measures focus on the underlying fundamentals of the Company's operations by excluding, on a recurring basis: (1) net realized investment gains (losses); (2) foreign exchange and other gains (losses); and and (3) interest in income (loss) of equity method investments. It also excludes on a non-recurring basis: (1) loss from discontinued operations, net of income tax; (2) the bargain purchase gain resulting from the Combination Agreement; and (3) the change in the fair value of the earn out liability. We excluded net realized investment gains (losses), and foreign exchange and other gains (losses) as we believe these are influenced by market opportunities and other factors. We do not believe the net loss from discontinued operations, the bargain purchase gain on the Combination Agreement, and the change in the fair value of the earn out liability are representative of our ongoing and future business.We believe all of these amounts are substantially independent of our business and any potential future underwriting process, therefore their inclusion would distort the analysis of underlying trends in our operations. 79 As defined and described in the Key Financial Measures section , m anagement uses certain key financial measures, some of which are non-GAAP measures, to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that these measures, which may be defined differently by other companies, explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. The calculation, reconciliation to nearest GAAP measure and discussion of relevant non-GAAP measures used by management are as follows: For the Three Months Ended June 30, 2025 2024 ($ in thousands except per share data) Net income (loss) $ 69,927 $ (547) Add (subtract): Net realized and unrealized investment gains (1,058) — Foreign exchange and other losses 5,009 — Bargain purchase gain (73,590) — Net loss from discontinued operations 495 — Change in fair value of earn out consideration 2,679 — Non-GAAP operating earnings (loss) $ 3,462 $ (547) Diluted earnings (loss) per share attributable to common shareholders $ 15.05 $ (0.20) Add (subtract): Net realized and unrealized investment gains (0.23) — Foreign exchange and other losses 1.08 — Bargain purchase gain (15.88) — Loss from discontinued operations, net of income tax 0.11 — Change in fair value of earn out consideration 0.58 — Non-GAAP diluted operating earnings (loss) per share attributable to common shareholders $ 0.71 $ (0.20) For the Six Months Ended June 30, 2025 2024 ($ in thousands except per share data) Net income (loss) attributable to Kestrel common shareholders $ 69,533 $ (924) Add (subtract): Net realized and unrealized investment gains (1,058) — Foreign exchange and other losses 5,009 — Bargain purchase gain (73,590) — Net loss from discontinued operations 495 — Change in fair value of earn out consideration 2,679 — Non-GAAP operating earnings (loss) $ 3,068 $ (924) Diluted income (loss) per share attributable to common shareholders $ 18.80 $ (0.34) Add (subtract): Net realized and unrealized investment gains (0.29) — Foreign exchange and other losses 1.36 — Bargain purchase gain (19.93) — Net loss from discontinued operations 0.13 — Change in fair value of earn out consideration 0.73 — Non-GAAP diluted operating earnings (loss) per share attributable to common shareholders $ 0.80 $ (0.34) Non-GAAP operating earnings was $3.5 million for the three months ended June 30, 2025 compared to non-GAAP operating loss of $0.5 million for the same period in 2024. Non-GAAP operating earnings was $3.1 million for the six months ended June 30, 2025, compared to non-GAAP operating loss of $0.9 million for the six months ended June 30, 2024. 80 Non-GAAP Operating ROACE Non-GAAP Operating Return on Average Common Equity ("Non-GAAP Operating ROACE"): Management uses non-GAAP operating return on average common shareholders' equity as a measure of profitability that focuses on the return to common shareholders. It is calculated using non-GAAP operating earnings available to common shareholders (as defined above) divided by average common shareholders' equity. Non-GAAP Operating ROACE for the three and six months ended June 30, 2025 and 2024 was as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2025 2024 2025 2024 Non-GAAP operating earnings (loss) $ 3,462 $ (547) $ 3,068 $ (924) Opening adjusted shareholders’ equity 4,227 5,460 4,606 5,837 Ending adjusted shareholders’ equity 150,085 4,913 150,085 4,913 Average adjusted shareholders’ equity 77,156 5,187 77,346 5,375 Non-GAAP Operating ROACE 18.0 % (42.4) % 8.0 % (34.6) % 81 Currency and Foreign Exchange We conduct business in a variety of foreign (non-U.S.) currencies, exclusively in our Legacy Reinsurance sgement, the principal exposures being the euro and the British pound. Assets and liabilities denominated in foreign currencies are exposed to changes in currency exchange rates. Our reporting currency is the U.S. dollar, and exchange rate fluctuations relative to the U.S. dollar may materially impact our results and financial position. Our principal exposure to foreign currency risk is our obligation to settle claims in foreign currencies. In addition, in order to minimize this risk, we maintain and expect to continue to maintain a portion of our investment portfolio in investments denominated in currencies other than the U.S. dollar. We may employ various strategies (including hedging) to manage our exposure to foreign currency exchange risk. To the extent that these exposures are not fully hedged or the hedges are ineffective, our results of operations or equity may be adversely affected. At June 30, 2025, no such hedges or hedging strategies were in force or had been entered into. We measure monetary assets and liabilities denominated in foreign currencies at period end exchange rates, with the resulting foreign exchange gains and losses recognized in the unaudited Condensed Consolidated Statements of Income. Revenues and expenses in foreign currencies are converted at average exchange rates during the period. The effect of the translation adjustments for foreign operations is included in AOCI. Net foreign exchange losses of $5.1 million were generated during the three and six months ended June 30, 2025, compared to net foreign exchange losses of $0.0 million for the three and six months ended June 30, 2024. The foreign exchange losses for the three and six months ended June 30, 2025 were caused by significant depreciation in the value of the U.S. dollar relative to the euro and the British pound due to uncertainty around international trade and associated U.S. tariff policy. These losses were primarily unrealized and resulted from the effects of revaluation of our net insurance liabilities that are required to be settled in foreign currencies at each balance sheet date. At June 30, 2025, the increase in foreign currency translation adjustments of $0.1 million for the six months ended June 30, 2025 was primarily driven by exposures to euro, British pound and other non-USD denominated net loss reserves and insurance related liabilities in excess of foreign currency assets. Our non-USD denominated liabilities at June 30, 2025 included reserve for net loss and LAE on our Legacy Reinsurance segment of $341.3 million. Our foreign currency asset exposures at June 30, 2025 include $139.4 million of fixed maturity securities managed by our investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy, $33.2 million of real estate investments denominated in Canadian dollars, as well as $12.1 million of funds withheld receivable. Effects of Inflation The anticipated effects of inflation are considered explicitly in the pricing of the insured exposures, which are used as the initial estimates of reserves for loss and LAE. In addition, inflation is also implicitly accounted for in subsequent estimates of loss and LAE reserves, as the expected rate of emergence is in part predicated upon the historical levels of inflation that impact ultimate claim costs. To the extent inflation causes these costs, particularly medical treatments and litigation costs, to vary from the assumptions made in the pricing or reserving estimates, the Company will be required to change the reserve for loss and LAE with a corresponding change in its earnings in the period in which the variance is identified. The actual effects of inflation on the results of operations of the Company cannot be accurately known until claims are ultimately settled. We continue to monitor inflationary impacts resulting from recent government stimulus, sharp increases in demand, labor force and supply chain disruptions, among other factors, on our loss cost trends. Our reserves predominantly consist of workers’ compensation, general liability, and hospital liability business. These long tailed lines of business have been subject to the longer term trend of social inflation, but we have not observed significant impacts for the recently elevated levels of inflation. We proactively analyze available data and we incorporate trends into our loss reserving assumptions to ensure we are considerate of current and future economic conditions. Governmental policy responses to inflation have significantly increased interest rates which, in the short term, have contributed to unrealized gains on our fixed income investments, particularly on our fixed maturity securities. While general economic inflation has eased in recent quarters, there remains uncertainty around the rate and direction of inflation and interest rates and we continue to monitor our liquidity, capital and potential earnings impact of these changes but remain focused on our asset allocation decisions as described in our "Business Strategy" section of Item 2. " Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview ". Inflation may also result in increased wage pressures for our operating expenses, as we remain focused on being a competitive employer in our market. Currently, while salaries and incentive compensation costs comprise less than one-half of our total general and administrative expenses, continuing inflation and tight labor conditions could have a material impact on our net operating results. Off-Balance Sheet Arrangements At June 30, 2025, we did not have any off-balance sheet arrangements as defined by Item 303(a) (4) of Regulation S-K. Recent Accounting Pronouncements See " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) Note 2. Significant Accounting Policies " for a discussion on recently adopted accounting pronouncements. 82