6 unchanged sentences
Factors, such as business revenue, economic conditions, the volatility and strength of the capital markets, inflation and public health emergencies, can affect the business and economic environment.
−Removed: For example, in recent years, the global economic environment was characterized by persistent inflation, rising interest rates, volatility in global financial markets (leading to, among other things, a decline in equity prices), continued supply chain complications, recessionary fears, and geopolitical uncertainty, including the war between Russia and Ukraine and the war between Israel and Hamas, and these wars’ impacts on global security and markets.
−Removed: The demand for P&C generally rises as the overall level of household income increases and generally falls as household income decreases, affecting both the commissions and fees generated by our business.
−Removed: The economic activity that impacts P&C is most closely correlated with employment levels, corporate revenue and asset values.
−Removed: Additionally, insurance carrier losses from inflation, rising interest rates and natural or man-made disasters could impact our contingent income, which is primarily driven by insurance carrier underwriting results and, to a lesser extent, the volume of business we place with them, as determined by the loss ratios determined by the insurance carriers.
−Removed: For example, carrier underwriting losses attributable to hurricanes, wildfires, and other catastrophes in 2024 may result in the Company receiving lower contingent income in the future.
−Removed: In addition, an increase in consumer preference for car- and ride-sharing services, as opposed to automobile ownership, may result in a long-term reduction in the number of vehicles per capita, and consequently the automobile insurance industry.
−Removed: Downward fluctuations in the year-over-year insurance premium charged by insurance carriers to protect against the same risk, referred to in the industry as softening of the insurance market, could adversely affect our business as a significant portion of the commissions and fees we earn is paid as a percentage of premium charged to our Clients.
−Removed: Insolvencies and consolidations associated with an economic downturn, especially insolvencies in the insurance industry, could adversely affect our brokerage business through the loss of Clients by hampering our ability to place insurance business.
−Removed: Also, some of our Clients may experience liquidity problems or other financial difficulties in the event of a prolonged deterioration in the economy, which could have an adverse effect on our collectability of receivables or our Clients may have less need for insurance coverage, cancel existing insurance policies, modify their coverage or not renew the policies they hold with us.
−Removed: In addition, E&O claims against us may increase in economic downturns, also adversely affecting our brokerage business.
−Removed: A decline in economic activity could have a material adverse effect on our business, financial condition and results of operations.
+Added: For example, in recent years, the global economic environment was characterized by persistent inflation, rising interest rates, volatility in global financial markets (leading to, among other things, a decline in equity prices), continued supply chain complications, recessionary fears, and geopolitical uncertainty, including ongoing wars and military conflicts and their impacts on global security and markets.
+Added: Demand for P&C insurance generally correlates with household income, employment levels, corporate revenue, and asset values, and declines during economic downturns, which can reduce our commissions and fees.
+Added: Insurance carrier losses from inflation, rising interest rates, or catastrophes may lower our contingent income, which depends on carrier underwriting results and premium volume.
+Added: Softening of the insurance market, carrier insolvencies, or consolidations could adversely affect our ability to place business and reduce revenues.
+Added: Additionally, economic deterioration or recessionary pressures may cause Clients to reduce coverage, cancel policies, or experience liquidity issues, impacting receivables, while E&O claims against us may increase.
+Added: A prolonged decline in economic activity could materially adversely affect our business, financial condition, and results of operations.
Furthermore, a portion of our operating expenses refers to employee compensation and benefits, which are sensitive to inflation.
7 unchanged sentences
Any changes in U.S.
−Removed: trade policy, including new and existing tariffs as well as other trade measures, could result in reduced economic activity, increased costs in operating our business, reduced demand and/or changes in purchasing behaviors for new homes or autos, material changes in the pricing of new homes or autos, limits on trade with the United States or other potentially adverse economic outcomes.
+Added: trade policy, including new and existing tariffs as well as other trade measures, could result in reduced economic activity, increased costs in operating our business, reduced demand and/or changes in purchasing behaviors for new homes or autos, material changes in the pricing of new homes or autos, limits on trade with the U.S.
+Added: or other potentially adverse economic outcomes.
Further, such changes in U.S.
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Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability.
−Removed: We derive most of our revenue from commissions and fees.
−Removed: We do not determine the insurance premiums on which our commissions are generally based.
−Removed: Moreover, insurance premiums are cyclical in nature and may vary widely based on market conditions.
−Removed: Because of market cycles for insurance product pricing, which we cannot predict or control, our commission revenues and profitability can be volatile or remain depressed for significant periods of time.
−Removed: In addition, there have been and may continue to be various trends in the insurance industry toward alternative insurance markets including, among other considerations, greater levels of self-insurance, captives, rent-a-captives, risk retention groups and non-insurance capital markets-based solutions to traditional insurance.
−Removed: As traditional risk-bearing insurance carriers continue to outsource the production of premium revenue to non-affiliated brokers or agents, those insurance carriers may seek to further minimize their expenses by reducing the commission rates payable to insurance agents or brokers.
−Removed: The reduction of these commission rates, along with general volatility or declines in premiums, may significantly affect our revenues and, therefore, our profitability.
−Removed: Because we do not determine the timing or extent of premium pricing changes, it is difficult to precisely forecast our commission revenues, including whether they will significantly decline.
−Removed: As a result, we may have to adjust our budgets for future acquisitions, capital expenditures, dividend payments, loan repayments and other expenditures to account for unexpected changes in revenues, and any decreases in premium rates may adversely affect our business, financial condition and results of operations.
−Removed: Because the revenue we earn on the sale of certain insurance products is based on premiums and commission rates set by insurance carriers, any decreases in these premiums or commission rates, or actions by insurance carriers seeking repayment of commissions, could result in revenue decreases or expenses to us.
−Removed: Insurance carriers or their affiliates may under certain circumstances seek the chargeback or repayment of commissions as a result of a policy lapse, surrender, cancellation, rescission, default, or upon other specified circumstances.
−Removed: As a result of the chargeback or required repayment of commissions, we may incur an expense in a particular period related to revenue previously recognized in a prior period and reflected in our financial statements.
+Added: We derive most of our revenue from commissions and fees, which are based on insurance premiums we do not control.
+Added: Moreover, insurance premiums are cyclical in nature and may vary based on market conditions, making our
+Added: commission revenues and profitability subject to volatility and prolonged periods of depression.
+Added: These fluctuations are difficult to predict, which limits our ability to accurately forecast revenues and plan for acquisitions, capital expenditures, dividends, and debt repayments.
+Added: In addition, there have been and may continue to be industry trends toward alternative insurance markets including, among other considerations, greater levels of self-insurance, captives, rent-a-captives, risk retention groups and non-insurance capital markets-based solutions to traditional insurance, which may further reduce premium volumes.
+Added: Any sustained decrease in premium rates or shift away from traditional insurance could adversely affect our business, financial condition, and results of operations.
+Added: Because the revenue we earn on the sale of certain insurance products is based on premiums and commission rates set by insurance carriers, any decreases in these premiums or commission rates, or actions by insurance carriers, including seeking repayment of commissions, could result in revenue decreases or expenses to us.
+Added: Insurance carriers or their affiliates may under certain circumstances seek the chargeback or repayment of commissions if policies lapse, are surrendered, cancelled, rescinded, defaulted, or upon other specified circumstances, which could result in an expense in periods after revenue was recognized.
Such an expense could have a material adverse effect on our results of operations and financial condition, particularly if the expense is greater than the amount of related revenue retained by us.
−Removed: The commission rates are set by insurance carriers and are based on the premiums that the insurance carriers charge.
−Removed: The potential for changes in premium rates is significant, due to pricing cyclicality in the insurance market.
+Added: The commission rates, set by insurance carriers are based on the premiums that the insurance carriers charge, which are subject to significant change due to pricing cyclicality in the insurance market, competitive pressures, and carriers’ efforts to reduce costs.
In addition, the insurance industry has been characterized by periods of intense price competition due to excessive underwriting capacity and periods of favorable premium levels due to shortages of capacity.
−Removed: Capacity could also be reduced by insurance carriers failing or withdrawing from writing certain coverages that we offer our Clients.
−Removed: Commission rates and premiums can change based on prevailing legislative, economic and competitive factors that affect insurance carriers.
−Removed: These factors, which are not within our control, include the capacity of insurance carriers to place new business, underwriting and non-underwriting profits of insurance carriers, consumer demand for insurance products, the availability of comparable products from other insurance carriers at a lower cost and the availability of alternative insurance products, such as government benefits and self-insurance products, to consumers.
+Added: Furthermore, carriers may reduce commission rates as they outsource premium production to non-affiliated brokers or agents.
+Added: Premium and commission variability is influenced by legislative, economic, and competitive factors beyond our control, including carrier capacity, profitability, consumer demand, and the availability of alternative products such as government programs or self-insurance.
We cannot predict the timing or extent of future changes in commission rates or premiums or the effect any of these changes will have on our business, financial condition and results of operations.
We derive a significant portion of our insurance carrier capacity from a limited number of insurance carriers.
−Removed: If one or more of these insurance carriers terminated their arrangement with us, it could result in less favorable arrangements with new insurance carriers and additional expense.
−Removed: For the year ended December 31, 2024 and 2023, five insurance carriers accounted fo r 44.2% and 43.1 %, respectively, of our Total Written Premium.
−Removed: For the year ended December 31, 2024, The Progressive Corporation accounted for 13% of our total revenues, and for the year ended December 31, 2023, The Progressive Corporation and The Travelers Companies, Inc.
−Removed: accounted for 11% and 10% of our total revenues, respectively.
−Removed: Should any of these insurance carriers seek to terminate their arrangement with us, we could be forced to move our business to another insurance carrier, which could result in less favorable arrangements and additional expense.
+Added: If one or more of these insurance carriers changes or terminates their arrangement with us, it could result in less favorable arrangements with new insurance carriers and additional expense.
+Added: For the years ended December 31, 2025 and 2024, five insurance carriers accounted for 40.1% and 44.2%, respectively, of our Total Written Premium.
+Added: For the years ended December 31, 2025 and 2024, The Progressive Corporation accounted for 11% and 13% of our total revenues, respectively.
+Added: Should any of these insurance carriers seek to change or terminate their arrangement with us, we could be forced to move our business to another insurance carrier, which could result in less favorable arrangements and additional expense.
Additionally, portions of our receivables are increasingly concentrated in certain businesses and geographies and the loss of significant insurance carrier relationships that serve such businesses or geographies could result in a more severe negative affect on our business, results or operations with respect to such businesses or geographies.
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It is very difficult to predict the severity, timing or duration of these cycles and the related responses of insurance carriers and regulators.
−Removed: If insurance intermediaries or insurance carriers experience liquidity problems, insolvency or other financial difficulties, or do not timely provide required information or payments to us, we could encounter delays in payments owed to us, the loss of insurance carrier appointments, E&O claims and difficulty collecting receivables owed to us by insurance carriers.
+Added: If insurance intermediaries or insurance carriers experience liquidity problems, insolvency or other financial difficulties, or do not provide required information or payments to us, we could encounter delays in payments owed to us, the loss of insurance carrier appointments, E&O claims and difficulty collecting receivables owed to us by insurance carriers.
These conditions may adversely affect our revenue and make it difficult for us to accurately predict our future results, which could harm our business, financial condition and results of our operations.
−Removed: Contingent commissions we receive from insurance carriers are less predictable than standard commissions, and any decrease in the amount of these kinds of commissions we receive could adversely affect our results of operations.
−Removed: Typically an average of approximately 3% of our total re venue consists of contingent commissions we receive from insurance carriers.
+Added: Contingent commissions we receive from insurance carriers are less predictable than standard commissions, and any decrease in the amount of contingent commissions we receive could adversely affect our results of operations.
+Added: Typically, an average of approximatel y 4% of our total revenue consists of contingent commissions we receive from insurance carriers.
Contingent commissions are paid by certain insurance carriers based upon the profitability, volume or growth of the business placed with those insurance carriers during the prior year.
1 unchanged sentence
Our international operations pose certain risks to our business that may be different from risks associated with our domestic operations.
−Removed: We have employees and other labor sources and operations in the Philippines, vendors (including third party technology providers) outside of the U.S., and we may in the future expand our operations to other countries.
−Removed: While these arrangements may lower operating costs, they also subject us to the uncertain political climates, including political unrest and uncertainty, and potential disruptions in international trade, economic sanctions, as well as import and export controls and any amendments to those laws, as well as potentially increased data security and privacy risks and local economic, fluctuations in the value of currency and inflation and labor conditions.
−Removed: Our oversight aimed at ensuring adherence to applicable quality and compliance standards may be more difficult with employees, labor sources, operations or vendors located outside of the United States and may both make it more difficult for us to achieve our operational objectives and expose us to additional liability.
−Removed: Countries outside of the United States may be subject to relatively higher degrees of political, financial and social instability and may lack the infrastructure to withstand political unrest or natural disasters.
−Removed: The occurrence of natural disasters, pandemics or political or economic instability in these countries or regions could interfere with work performed by these labor sources and vendors or could result in our having to replace or reduce these labor sources or vendors.
−Removed: Our operations or vendors in other countries could potentially shut down suddenly for any reason, including financial problems or personnel issues.
+Added: We have employees and other labor sources and operations in the Philippines, vendors (including technology providers) outside of the U.S., and we may expand our operations to other countries.
+Added: While these arrangements may lower operating costs, they also expose us to political unrest, trade disruptions, sanctions, as well as import/export controls, data security and privacy risks, currency fluctuations, inflation and labor conditions.
+Added: Our oversight aimed at ensuring adherence to applicable quality and compliance standards may be more difficult with offshore employees, labor sources, operations or vendors, which may hinder our operational objectives and may expose us to additional liability.
+Added: Countries outside of the U.S.
+Added: may be subject to relatively higher degrees of political, financial and social instability and may lack the infrastructure to withstand political unrest or natural disasters, which could disrupt offshore work or force us to replace vendors or shut down suddenly due to financial or personnel issues.
Such disruptions could decrease efficiency, increase our costs, and have an adverse effect on our business and results of operations.
−Removed: The practice of utilizing labor based in foreign countries has come under increased scrutiny in the United States.
−Removed: Governmental authorities could seek to impose financial costs or restrictions on foreign companies providing services to clients or companies in the United States.
+Added: The practice of utilizing labor based in foreign countries has come under increased scrutiny in the U.S..
+Added: Governmental authorities could seek to impose financial costs or restrictions on foreign companies providing services to clients or companies in the U.S.
Governmental authorities may attempt to prohibit or otherwise discourage us from sourcing services from offshore labor.
−Removed: In addition, insurance carriers may require us to use labor based in the United States for regulatory or other reasons.
−Removed: To the extent that we are required to use labor based in the United States, we may face increased costs as a result of higher-priced U.S.-based labor.
+Added: In addition, insurance carriers may require us to use U.S.-based labor for regulatory or other reasons, which could increase costs.
Compliance with U.S.
−Removed: and applicable foreign laws and regulations, such as economic sanctions, import and export controls, anti-corruption laws, tax laws, foreign exchange controls, data privacy and data localization requirements, labor laws, and anti-competition regulations, increases the costs of operating in foreign jurisdictions.
−Removed: We cannot predict how these laws or their interpretation, administration and enforcement will change over time.
−Removed: Although we have implemented policies and procedures to c omply with these laws and regulations, a violation by our employees, labor sources, or vendors, or related to our operations, co uld nevertheless occur.
−Removed: In some cases, compliance with the laws and regulations of one country could violate the laws and regulations of another country.
−Removed: Violations of these laws and regulations could result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of operations in certain jurisdictions, and could materially adversely affect our brand, growth efforts and business.
−Removed: Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.
−Removed: Furthermore, if the U.S.
−Removed: dollar were to weaken in relation to the currencies used in these foreign countries, that may also reduce the savings achievable through our strategy of contracting out certain services and could have an adverse effect on our business, financial condition and results of operations.
−Removed: Our failure to successfully manage our international operations and the associated risks effectively could limit the future growth of our business.
+Added: and foreign laws, including sanctions, anti-corruption, tax, data privacy, labor, and competition regulations, increases our operating costs and exposes us to risks.
+Added: Despite our compliance policies, violations may occur and, in some cases, complying with one jurisdiction’s laws may conflict with another’s.
+Added: Any violation could result in significant fines, penalties, operational restrictions, and reputational harm, and investigations and enforcement actions can be costly and divert management’s attention, materially adversely affecting our business.
+Added: Furthermore, a weakening U.S.
+Added: dollar could reduce the cost savings from outsourcing certain services and adversely affect our business, financial condition, and results of operations.
+Added: In addition, failure to effectively manage international operations and related risks could limit our future growth.
The occurrence of natural or man-made disasters could result in declines in business and increases in claims that could adversely affect our financial condition, results of operations and cash flows.
2 unchanged sentences
The continued threat of terrorism and ongoing military actions may cause significant volatility in global financial markets, and a natural or man-made disaster could trigger an economic downturn in the areas directly or indirectly affected by the disaster.
−Removed: These consequences could, among other impacts, result in a decline in business and increased claims from those areas.
They could also result in reduced underwriting capacity of our insurance carriers, making it more difficult for our agents to place business.
8 unchanged sentences
Our inability to successfully recover should we experience a disaster or other business continuity problem, could materially interrupt our business operations and cause material financial loss, loss of human capital, regulatory actions, reputational harm, damaged Client relationships, or legal liability.
−Removed: Our insurance coverage with
−Removed: respect to natural disasters is limited and is subject to deductibles and coverage limits.
+Added: Our insurance coverage with respect to natural disasters is limited and is subject to deductibles and coverage limits.
Such coverage may not be adequate, or may not continue to be available at commercially reasonable rates and terms.
Climate risks, including the risk of an economic crisis, risks associated with the physical effects of climate change and disruptions caused by the transition to a low-carbon economy, could adversely affect our business, results of operations and financial condition.
−Removed: The effects of climate change continue to create an alarming level of concern for the state of the global environment.
−Removed: As a result, the global business community has increased its political and social awareness surrounding the issue.
Though the federal government has recently issued policies to reverse climate-related regulatory trends, international, state, and local agencies continue to propose numerous initiatives to supplement the global effort to combat climate change.
1 unchanged sentence
In addition, the U.S.
−Removed: Federal Reserve has identified climate change as a systemic risk to the economy.
−Removed: It also reported that a gradual change in investor sentiment regarding climate risk introduces the possibility of abrupt tipping points or significant swings in sentiment, which could create unpredictable follow-on effects in financial markets, and we may be negatively impacted by a general economic decline.
+Added: Federal Reserve has in the past identified climate change as a potential risk to the economic stability of the financial system.
+Added: It also reported that a gradual change in investor sentiment regarding climate risk introduces the possibility of abrupt tipping points or significant swings in sentiment, which could create unpredictable follow-on effects in financial markets.
+Added: If this occurred, not only would we be negatively impacted by the general economic decline but a drop in the stock market affecting our stock price could negatively impact our ability to grow through mergers and acquisitions financed using our Class A Common Stock.
While the U.S.
−Removed: Federal Reserve withdrew from the Network of Central Banks and Supervisors for Greening the Financial System on January 17, 2025, potentially signaling a reversal of climate change policies, these risks remain and international, state, and local agencies continue to propose numerous initiatives to supplement the global effort to combat climate change.
+Added: Federal Reserve withdrew from the Network of Central Banks and Supervisors for Greening the Financial System on January 17, 2025, signaling a reversal of climate change policies, these risks remain.
Moreover, if our insurance carriers fail or withdraw from offering certain lines of coverage because of large payouts related to climate change, overall risk-taking capital capacity could be negatively affected, which could reduce our ability to place certain lines of coverage and, as a result, reduce our revenues and profitability.
4 unchanged sentences
The risks associated with these matters often may be difficult to assess or quantify and the existence and magnitude of potential claims often remain unknown for substantial periods of time.
−Removed: While we have insurance coverage for some of these potential claims, others may not be covered by insurance, insurance carriers may dispute coverage or any ultimate liabilities may exceed our coverage.
+Added: We may face claims that are not covered by insurance, where coverage is disputed, or where liabilities exceed available limits.
We may be subject to actions and claims relating to the sale of insurance, including the suitability of such products and services.
4 unchanged sentences
The insurance industry has been subject to a significant level of scrutiny by various regulatory bodies, including state attorneys general and insurance departments, concerning certain practices within the insurance industry, as well as those regulating international trade such as economic sanctions, anti-money laundering and counter-terrorism financing.
−Removed: From time-to-time, we receive informational requests from governmental authorities.
−Removed: We have cooperated and will continue to cooperate fully with all governmental agencies.
−Removed: There have been a number of revisions to existing, or proposals to modify or enact new laws and regulations regarding insurance agents and brokers.
−Removed: These actions have imposed or could impose additional obligations on us with respect to our products sold.
+Added: There have been a number of revisions to existing laws and regulations, or proposals to modify or enact new laws and regulations regarding insurance agents and brokers.
+Added: These actions have imposed or could impose additional obligations on us with respect to products we sell.
Some insurance carriers have agreed with regulatory authorities to end the payment of contingent commissions on insurance products, which could impact our commissions that are based on the volume, consistency and profitability of business generated by us.
−Removed: We cannot predict the impact that any new laws, rules or regulations may have on our business and financial results, particularly in light of potential changes implemented by the new Trump administration.
−Removed: Given the current regulatory environment and the number of Branches operating in local markets throughout the country, it is
−Removed: possible that we will become subject to further governmental inquiries and subpoenas and have lawsuits filed against us.
+Added: We cannot predict the impact that any new laws, rules or regulations may have on our business and financial results, particularly in light of potential changes implemented by the Trump administration.
+Added: Given the current regulatory environment and the number of Branches operating in local markets throughout the country, it is possible that we will become subject to further governmental inquiries and subpoenas and have lawsuits filed against us.
Regulators may raise issues during investigations, examinations or audits that could, if determined adversely, have a material impact on us.
−Removed: The interpretations of regulations by regulators may change and statutes may be enacted with retroactive impact.
We could also be materially adversely affected by any new industry-wide regulations or practices that may result from these proceedings.
3 unchanged sentences
We have significant insurance agency and brokerage operations, and are subject to claims and litigation in the ordinary course of business resulting from alleged and actual errors and omissions in placing insurance and rendering coverage advice.
−Removed: These activities, if any, could involve substantial amounts of money.
Since E&O claims against us may allege our liability for all or part of the amounts in question, claimants may seek large damage awards.
1 unchanged sentence
Errors and omissions could include failure, whether negligently or intentionally, to place coverage on behalf of Clients, to provide insurance carriers with complete and accurate information relating to the risks being insured, or to appropriately apply funds that we hold in trust.
−Removed: It is not always possible to prevent or detect errors and omissions, and the precautions we take may not be effective in all cases.
Given the unpredictability of E&O claims and of litigation that could flow from them, it is possible that an adverse outcome in a particular matter could have a material adverse effect on our results of operations, financial condition or cash flow in a given quarterly or annual period.
6 unchanged sentences
To the extent that the financial services industry experiences further consolidation, we may experience increased competition from insurance carriers and the financial services industry, as a growing number of larger financial institutions increasingly, and aggressively, offer a wider variety of financial services, including insurance intermediary services.
−Removed: We compete for Clients on the basis of reputation, Client service, program and product offerings and our ability to tailor products and services to meet the specific needs of a Client.
−Removed: We actively compete with numerous integrated financial services organizations and technology companies as well as insurance carriers and brokers, producer groups, individual insurance agents, investment management firms, independent financial planners and broker-dealers.
+Added: We actively compete with numerous integrated financial services organizations and technology companies as well as insurance carriers and brokers, producer groups, individual insurance agents, investment management firms,
+Added: independent financial planners and broker-dealers.
Competition may reduce the fees that we can obtain for services provided, which would have an adverse effect on revenue and margins.
Many of our competitors have greater financial and marketing resources than we do and may be able to offer products and services that we do not currently offer and may not offer in the future.
−Removed: In addition, in recent years, private equity sponsors have invested tens of billions of dollars into the insurance sector, transforming existing players and creating new ones to compete with large brokers.
+Added: In recent years, private equity sponsors have invested tens of billions of dollars into the insurance sector, transforming existing players and creating new ones to compete with large brokers.
These new competitors, alliances among competitors or mergers of competitors could emerge and gain significant market share, and some of our competitors may have or may develop a lower cost structure, adopt more aggressive pricing policies or provide services that gain greater market acceptance than the services that we offer or develop.
−Removed: Competitors may be able to respond to the need for technological changes and innovate faster, or price their services more aggressively.
They may also compete for skilled professionals, finance acquisitions, fund internal growth and compete for market share more effectively than we do.
To respond to increased competition and pricing pressure, we may have to lower the cost of our services or decrease the level of service provided to Clients, which could have an adverse effect on our business, financial condition and results of operations.
−Removed: In addition, a number of insurance
−Removed: carriers are engaged in the direct sale of insurance, primarily to individuals, and do not pay commissions to brokers or other market intermediaries.
Furthermore, we compete with various other companies that provide risk-related services or alternatives to traditional insurance services, including insurtech start-up companies, which are focused on using technology and innovation, including artificial intelligence, digital platforms, data analytics, robotics and blockchain, to simplify and improve the Client experience, increase efficiencies, alter business models and effect other potentially disruptive changes in the industries in which we operate.
−Removed: Underwriting management and binding authority are dependent upon contracts between us and the insurance carriers.
−Removed: Those contracts can be terminated by the insurance carrier with little advance notice.
−Removed: Moreover, upon expiration of the contract term, insurance carriers may choose those agreements to lapse or request changes in the terms of the program, including the scope of our underwriting authority or the amount of commissions we receive, which could reduce our revenues from the program.
+Added: Our underwriting management and binding authority depend on contracts with insurance carriers that may be terminated with little advance notice or allowed to lapse at expiration, and carriers may seek to modify terms, including our underwriting authority or commission rates, which could reduce revenues.
+Added: Termination or changes to these programs could adversely affect our business, operating results, and contingent commission opportunities.
Poor risk selection, failure to maintain robust pricing models and failure to monitor claims activity could adversely affect our ability to renew contracts or to develop new products with new or existing insurance carriers.
The termination of the services of our specialties, or a change in the terms of any of these programs, could harm our business and operating results, including the opportunity to receive contingent commissions.
+Added: In addition, any litigation initiated by competitors, even if without merit, could be costly, time-consuming, divert management’s attention, and negatively impact our financial condition and results of operations.
Some of our competitors may be able to sustain the costs of litigation more effectively than we can because they have substantially greater resources.
7 unchanged sentences
• Federal and state governments establishing programs to provide property insurance in catastrophe-prone areas or other alternative market types of coverage that compete with, or completely replace, insurance products offered by insurance carriers;
−Removed: • Climate change regulation in the United States, individual states, or around the world moving us toward a low-carbon economy, which could create new competitive pressures around innovative insurance solutions;
+Added: • Climate change regulation in the U.S., individual states, or around the world moving us toward a low-carbon economy, which could create new competitive pressures around innovative insurance solutions;
• Increased competition from new market participants such as banks, accounting firms, consulting firms and Internet or other technology firms offering risk management or insurance brokerage services, or new distribution channels for insurance such as payroll firms.
6 unchanged sentences
To date, our business has not been materially affected by consolidation among retail insurance brokers.
−Removed: However, we cannot be assured that we will not be affected by industry consolidation that occurs in the future, particularly if any of our significant retail insurance brokerage Clients are acquired by retail insurance brokers with their own wholesale insurance brokerage operations or preferred relationships with wholesalers other than TWFG.
−Removed: Our failure to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies in the future could reduce our ability to compete successfully and harm our competitive position and results of operations.
+Added: However, we cannot be assured that we will not be affected by industry consolidation that occurs in the future.
+Added: Our failure to raise additional capital or generate cash flows necessary to expand our operations could reduce our ability to compete successfully and harm our competitive position and results of operations.
We may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms or at all.
14 unchanged sentences
Any such non-cash charges could have a material adverse effect on our financial condition and results of operations.
−Removed: Regulations affecting insurance carriers with which we place business affect how we conduct our operations.
+Added: Regulations affecting insurance carriers with which we place business may adversely affect how we conduct our operations.
Insurance carriers are also regulated by state insurance departments and are subject to reserve and other requirements.
3 unchanged sentences
A significant portion of our business is concentrated in Texas, California and Louisiana, representing 54.1%, 15.2% and 12.4%, respectively, of our Total Written Premiums in 2025.
−Removed: The insurance business is primarily a state-regulated industry, and therefore, state legislatures may enact laws that adversely affect the insurance industry.
−Removed: Because our b usiness is concentrated in the states identified above, we face greater exposure to unfavorable changes in regulatory conditions in those states than insurance intermediaries whose operations are more diversified through a greater number of states.
+Added: T he insurance business is primarily a state-
+Added: regulated industry, and therefore, state legislatures may enact laws that adversely affect the insurance industry.
+Added: As such, we face greater exposure to unfavorable changes in regulatory conditions in those states than insurance intermediaries whose operations are more diversified through a greater number of states.
In addition, the occurrence of adverse economic conditions, natural or other disasters, or other circumstances specific to or otherwise significantly impacting these states could adversely affect our financial condition, results of operations and cash flows.
−Removed: We are susceptible to losses and interruptions caused by hurricanes (particularly in Texas, where our headquarters and several offices are located), earthquakes, power shortages, telecommunications failures, water shortages, floods, fire, extreme weather conditions, geopolitical events such as terrorist acts and other natural or man-made disasters.
+Added: We are susceptible to losses and interruptions caused by hurricanes (particularly in Texas, where our headquarters and several Branches are located), earthquakes, power shortages, telecommunications failures, water shortages, floods, fire, extreme weather conditions, geopolitical events such as terrorist acts and other natural or man-made disasters.
Our insurance coverage with respect to natural disasters is limited and is subject to deductibles and coverage limits.
−Removed: Such coverage
−Removed: may not be adequate, or may not continue to be available at commercially reasonable rates and terms.
−Removed: For example, recent catastrophes, carrier underwriting losses, and regulatory actions in California may result in a significant decline in the availability of homeowners insurance products and carrier markets.
+Added: Such coverage may not be adequate, or may not continue to be available at commercially reasonable rates and terms.
Non-compliance with or changes in laws, regulations or licensing requirements applicable to us could restrict our ability to conduct our business.
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We are subject to regulation and supervision both federally and in each applicable local jurisdiction.
−Removed: In general, these regulations are designed to protect Clients, insurance carriers and other parties and to protect the integrity of the financial markets, rather than to protect stockholders or creditors.
Our ability to conduct business in these jurisdictions depends on our compliance with the rules and regulations promulgated by federal regulatory bodies and other regulatory authorities.
−Removed: Failure to comply with regulatory requirements, or changes in regulatory requirements or interpretations, could result in actions by regulators, potentially leading to fines and penalties, adverse publicity and damage to our reputation in the marketplace.
−Removed: There can be no assurance that we will be able to adapt effectively to any changes in law.
−Removed: In extreme cases, revocation of our or a subsidiary’s authority to do business in one or more jurisdictions could result from failure to comply with regulatory requirements.
+Added: Failure to comply with regulatory requirements, or changes in regulatory requirements or interpretations, could result in actions by regulators, potentially leading to fines and penalties, adverse publicity and damage to our reputation in the marketplace and, in extreme cases, revocation of our or our subsidiary’s authority to do business in one or more jurisdictions.
In addition, we could face lawsuits by Clients, insurance carriers and other parties for alleged violations of certain of these laws and regulations.
−Removed: It is difficult to predict whether changes resulting from new laws and regulations, as well as changes in interpretation of current laws and regulations, will affect the industry or our business and, if so, to what degree.
TWFG Agencies and employees who engage in the solicitation, negotiation or sale of insurance, or provide certain other insurance services, generally are required to be licensed individually.
2 unchanged sentences
However, should any regulatory agency take a contrary position and prevail, we will be required to change the manner in which we pay fees to such employees or principals or require entities receiving such payments to become registered or licensed.
−Removed: State insurance laws grant supervisory agencies, including state insurance departments, broad administrative authority.
−Removed: State insurance regulators and the National Association of Insurance Commissioners continually review existing laws and regulations, some of which affect our business.
−Removed: These supervisory agencies regulate many aspects of the insurance business, including the licensing of insurance brokers and agents and other insurance intermediaries, the handling of third-party funds held in trust, and trade practices, such as marketing, advertising and compensation arrangements entered into by insurance brokers and agents.
+Added: State insurance laws grant supervisory agencies, including state insurance departments, broad administrative authority to regulate many aspects of the insurance business.
This legal and regulatory oversight could reduce our profitability or limit our growth by increasing the costs of legal and regulatory compliance, and by limiting or restricting the products or services we sell, the markets we serve or enter, the methods by which we sell our products and services, and the form of compensation we can accept from our Clients, insurance carriers and third parties.
−Removed: Moreover, in response to perceived excessive cost or inadequacy of available insurance, states have from time to time created state insurance funds and assigned risk pools, which compete directly, on a subsidized basis, with private insurance providers.
−Removed: In the United States, the California Consumer Privacy Act (the “CCPA”) came into effect in January 2020 and introduced several new concepts to local privacy requirements, including increased transparency and rights such as access and deletion and an ability to opt out of the “sale” of personal information.
−Removed: Following the passage of the CCPA, multiple other U.S.
−Removed: states have introduced similar bills, some more comprehensive than the CCPA.
−Removed: This, along with a growing number of other U.S.
−Removed: states that are proposing new privacy laws, has created the need for multi-state compliance.
−Removed: We continue to monitor and adapt to this evolving privacy landscape.
−Removed: On November 3, 2020, Californians voted to approve Proposition 24, a ballot measure that creates the California Privacy Rights Act (“CPRA”).
−Removed: Most of the CPRA’s substantive provisions took effect on January 1, 2023.
−Removed: The CPRA amends and expands the rights and obligations under the CCPA and adds new requirements with which businesses must comply, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.
+Added: privacy laws are rapidly evolving.
+Added: The California Consumer Privacy Act (“CCPA”), effective January 2020, introduced new consumer rights and transparency requirements, and was later expanded by the California Privacy Rights Act (“CPRA”), effective January 2023, which added stricter obligations, new consumer rights, and created a dedicated enforcement agency.
The CPRA also created the California Privacy Protection Agency, a California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.
−Removed: New regulations under the CPRA are expected to impose more specific requirements under the law.
−Removed: At the federal level, we are subject to, among other laws, rules and regulations, the Gramm-Leach-Bliley Act (“GLBA”), which requires financial institutions, including insurance carriers, to, among other things, periodically disclose their privacy policies and practices relating to sharing personal information and, in some cases, enables retail clients to opt out of the sharing of certain personal information with unaffiliated third parties.
−Removed: The GLBA also
−Removed: requires financial institutions to implement an information security program that includes administrative, technical and physical safeguards to ensure the security and confidentiality of client records and information.
−Removed: We are also subject to the rules and regulations promulgated under the authority of the Federal Trade Commission (“FTC”), which regulates unfair or deceptive acts or practices, including with respect to data privacy and cybersecurity.
−Removed: Moreover, the U.S.
−Removed: Congress has recently considered, and is currently considering, various proposals for more comprehensive data privacy and cybersecurity legislation, to which we may be subject if passed.
−Removed: There is also continued legislative interest in passing a federal privacy law.
−Removed: In addition to data protection laws, foreign countries and U.S.
−Removed: states have enacted and continue to consider enacting cybersecurity laws and regulations.
−Removed: For example, the New York State Department of Financial Services issued in 2023 cybersecurity regulations which imposed an array of detailed security measures on covered entities.
−Removed: A number of states have also adopted laws covering data collected by insurance licensees that include security and breach notification requirements.
−Removed: The existing privacy-related laws and regulations are subject to potentially differing interpretations.
−Removed: All of these evolving compliance and operational requirements impose significant costs that are likely to increase over time, may divert resources from other initiatives and projects and could restrict the way services involving data are offered, all of which may adversely affect our results of operations.
−Removed: Our acquisitions of new businesses and our continued operational changes and entry into new jurisdictions and new service offerings increase our legal and regulatory compliance complexity, as well as the type of governmental oversight to which we may be subject.
−Removed: Furthermore, our online privacy policy and website make certain statements regarding our privacy, information security, and data security practices with regard to information collected from participants.
−Removed: Failure to adhere to such practices may result in regulatory scrutiny, investigations and enforcement actions, complaints by affected participants or Clients, reputational damage and other harm to our business.
−Removed: Any failure, or perceived failure, by us or our third-party vendors to comply with posted privacy policies or with any FTC requirements or orders or other U.S.
−Removed: federal, state or international privacy or consumer protection-related laws, regulations or industry self-regulatory principles could result in claims, proceedings or actions against us by governmental entities or other third-parties, and could result in fines or other liabilities, which could adversely affect our business and reputation.
−Removed: In addition, a failure or perceived failure to comply with industry standards or with posted privacy policies and practices could result in a loss of customers and adversely affect our business and reputation.
−Removed: federal, state and international governmental authorities also continue to evaluate the privacy implications inherent in the use of web trackers, including the use of "cookies" for tracking and behavioral advertising.
−Removed: A failure by either us or the third-party service providers with whom we share personal information to address privacy or security concerns, even if unfounded, or to comply with applicable laws and regulations, could result in additional costs and liability, damage to our reputation, and harm to our business.
+Added: New or amended regulations under the CPRA may impose more specific requirements under the law.
+Added: Multiple other states have enacted or proposed similar laws, creating a need for multi-state compliance.
+Added: At the federal level, we are subject to the Gramm-Leach-Bliley Act (“GLBA”), which mandates privacy disclosures, opt-out rights, and robust information security programs, as well as Federal Trade Commission (“FTC”) regulations on data privacy and cybersecurity.
+Added: Congress continues to consider comprehensive federal privacy legislation.
+Added: Additionally, states and foreign jurisdictions are adopting cybersecurity regulations, such as New York’s 2023 amendment to the Department of Financial Services (NYDFS) Cybersecurity Regulation, which included rules imposing detailed security measures on covered entities.
+Added: In addition, a number of states have also adopted laws covering data collected by insurance licensees that include security and breach notification requirements.
+Added: These evolving and sometimes inconsistent requirements increase compliance costs, may divert resources, and could limit how we deliver data-driven services, potentially impacting our operations.
+Added: Evolving compliance and operational requirements impose significant costs that are likely to increase over time, may divert resources from other initiatives and projects and could restrict the way services involving data are offered, all of which may adversely affect our results of operations.
+Added: As such, our expansion increases our legal and regulatory complexity.
+Added: Our online privacy policy and website include statements regarding our data privacy and security practices.
+Added: Any actual or perceived failure by us or our third-party vendors to comply with these policies, FTC requirements, or applicable privacy laws could result in regulatory actions, fines, lawsuits, reputational harm, and customer loss.
+Added: Authorities continue to scrutinize web tracking technologies such as cookies, increasing compliance risks.
+Added: Failure to address privacy or security concerns or comply with applicable laws could lead to additional costs, liabilities, and adverse effects on our business.
Federal, state and other regulatory authorities have focused on, and continue to devote substantial attention to, the insurance industry as well as to the sale of products or services to seniors.
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Changes in tax laws or regulations that are applied adversely to us or our Clients may have a material adverse effect on our business, cash flow, financial condition or results of operations.
−Removed: We are subject to taxation at the federal, state and local levels in the United States and the Philippines.
+Added: We are subject to taxation at the federal, state and local levels in the U.S.
+Added: and the Philippines.
Our future effective tax rate and cash flows could be affected by changes in the composition of earnings in jurisdictions with differing tax rates, changes in statutory rates and other legislative changes, changes in the valuation of our deferred tax assets and liabilities, changes in determinations regarding the jurisdictions in which we are subject to tax, and our ability to repatriate earnings from foreign jurisdictions.
4 unchanged sentences
An unfavorable outcome from any tax audit could result in higher tax costs, penalties and interest, thereby adversely affecting our financial condition or results of operations.
−Removed: In addition, changes in tax laws in the United States could materially affect the amount of payments that we are obligated to make under the tax receivable agreement we entered into with the Pre-IPO LLC Members in connection with the IPO (the “Tax Receivable Agreement”).
+Added: In addition, changes in tax laws in the U.S.
+Added: could materially affect the amount of payments that we are obligated to make under the tax receivable agreement we entered into with the Pre-IPO LLC Members in connection with the IPO (the “Tax Receivable Agreement”).
In addition, we are directly and indirectly affected by new tax legislation and regulation and the interpretation of tax laws and regulations worldwide.
2 unchanged sentences
These rules, should they be implemented via domestic legislation of countries or via international treaties, could have a material impact on our effective tax rate or result in higher cash tax liabilities.
+Added: These rules, should they be implemented via domestic legislation of countries or via international treaties, could have a material impact on our effective tax rate or result in higher cash tax liabilities.
There can be no assurance that our tax payments, tax credits, or incentives will not be adversely affected by these or other initiatives.
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Our handling of Client funds and surplus lines taxes exposes us to complex fiduciary regulations.
−Removed: In certain cases, within our Insurance Services offering, we collect premiums from Clients of all of our agencies and, after deducting our commissions and fees, remit the premiums to insurance carriers.
−Removed: We also collect surplus line taxes for remittance to state taxing authorities.
−Removed: Additionally, within TWFG MGA, we have agreements with certain insurance carriers whereby we remit claim payments or premium refunds to the Clients on behalf of the insurance carriers.
−Removed: Consequently, at any given time, we may hold funds of our Clients, insurance carriers and taxes, and we are subject to various laws and regulations governing the holding, management, and investing of these Client and tax funds.
−Removed: Any loss, theft or misappropriation of these funds, caused by employee or third-party fraud, execution of unauthorized transactions, errors relating to transaction processing, or other events could subject us, in addition to claims brought forth by Clients, insurance carriers and insurance intermediaries, to fines, penalties and reputational risk as a result of fiduciary breach and adversely affect our results of operations.
−Removed: While we are in possession of Client and insurance carrier premiums and surplus line taxes, we may invest those funds in interest-bearing demand deposit accounts with banks.
−Removed: If the bank with which they are held experiences any illiquidity or insolvency event, we may not be able to access Client funds timely, if at all, which could significantly affect our results of operations and financial condition and expose us to additional legal and regulatory fines or sanctions.
−Removed: See also “—We could incur substantial losses from our cash and investment accounts if one of the financial institutions that we use fails or is taken over by the U.S.
+Added: We collect and hold Client premiums, surplus lines taxes, and, in certain cases, remit claims or refunds on behalf of insurance carriers.
+Added: These activities subject us to complex fiduciary and regulatory requirements governing the custody and investment of such funds and are subject to licensing and oversight of insurance intermediaries and the handling of trust funds.
+Added: Any loss, theft, fraud, processing error, or unauthorized transaction could result in financial loss, legal claims, regulatory penalties, and reputational harm.
+Added: Additionally, we may invest these funds in bank accounts at a limited number of depository institutions in amounts that are significantly in excess of the limits insured by the U.S.
Federal Deposit Insurance Corporation (“FDIC”).
−Removed: Regulatory oversight generally also includes licensing of insurance brokers and agents, MGA or general underwriting operations, and the regulation of the handling and investment of Client, insurance carrier and tax funds held in trust.
+Added: If a bank becomes insolvent or illiquid or is
+Added: taken over by the FDIC, we may lose access to Client funds, adversely affecting our financial condition and exposing us to further regulatory risk.
Our results may be adversely affected by changes in the mode of compensation in the insurance industry.
−Removed: In the past, state regulators have scrutinized the manner in which insurance brokers are compensated.
−Removed: For example, the Attorney General of the State of New York brought charges against members of the insurance brokerage community.
+Added: In the past, state regulators have scrutinized the compensation practices of insurance brokers.
Given that the insurance brokerage industry has faced scrutiny from regulators in the past over its compensation practices, and the transparency and discourse to Clients regarding brokers’ compensation, it is possible that regulators may choose to revisit the same or other practices in the future.
If they do so, compliance with new regulations along with any sanctions that might be imposed for past practices deemed improper could have an adverse impact on our future results of operations and inflict significant reputational harm on our business.
−Removed: If we are unable to apply technology effectively in driving value for our Clients through technology-based solutions or gain internal efficiencies and effective internal controls through the application of
−Removed: technology and related tools, our operating results, Client relationships, growth and compliance programs could be adversely affected.
−Removed: Our future success depends, in part, on our ability to anticipate and respond effectively to the threat of digital disruption and other technology change.
−Removed: These may include new applications or insurance-related services based on artificial intelligence, machine learning, robotics, blockchain or new approaches to data mining.
−Removed: We may be exposed to competitive risks related to the adoption and application of new technologies by established market participants (for example, through disintermediation) or new entrants such as technology companies, insurtech start-up companies and others.
−Removed: We must also develop and implement technology solutions and technical expertise among our employees that anticipate and keep pace with rapid and continuing changes in technology, industry standards, Client preferences and internal control standards.
−Removed: We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis, and our ideas may not be accepted in the marketplace.
−Removed: Additionally, the effort to gain technological expertise and develop new technologies in our business requires us to incur significant expenses.
−Removed: If we cannot offer new technologies as quickly as our competitors, or if our competitors develop more cost-effective technologies or product offerings, we could experience a material adverse effect on our operating results, Client relationships, growth and compliance programs.
−Removed: In some cases, we depend on key vendors and other third parties to provide technology and other support for our strategic initiatives.
−Removed: If these third parties fail to perform their obligations or cease to work with us, our ability to execute on our strategic initiatives could be adversely affected.
Our business performance and growth plans could be negatively affected if we are not able to gain internal efficiencies through the application of technology or effectively apply technology in driving value for our Clients through innovation and technology-based solutions.
1 unchanged sentence
Our success depends, in part, on our ability to develop and implement technology-based solutions that anticipate or keep pace with rapid and continuing changes in technology, industry standards, and Client preferences.
−Removed: We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis.
+Added: These may include new applications or insurance-related services based on artificial intelligence, machine learning, robotics, blockchain or new approaches to data mining.
The effort to gain technological expertise, develop new technologies in our business, keep pace with technologies, and achieve internal efficiencies through technology require us to incur significant expenses and attract talent with the necessary skills.
1 unchanged sentence
In addition, there is no assurance that our technological investments will properly facilitate our operational needs, and any failure of technology and automated systems to function or perform as expected could harm our operations, business and financial condition.
−Removed: Additionally, if we cannot offer new technologies as quickly as our competitors, if our competitors develop more cost-effective technologies, or if our ideas are not accepted in the marketplace, it could have a material adverse effect on our ability to obtain and complete Client engagements.
−Removed: We are continually developing and investing in innovative and novel service offerings that we believe will address needs that we identify in the markets.
+Added: Additionally, we may be exposed to competitive risks related to the adoption and application of new technologies by established market participants (for example, through disintermediation) or new entrants such as technology companies, insurtech start-up companies and others.
+Added: If we cannot offer new technologies as quickly as our competitors, if our competitors develop more cost-effective technologies, or if our ideas are not accepted in the marketplace, it could have a material adverse effect on our ability to obtain and complete Client engagements.
+Added: We are continually developing and investing in innovative service offerings that we believe will address needs that we identify in the markets.
Nevertheless, for those efforts to produce meaningful value, we are reliant on a number of other factors, some of which are outside of our control.
−Removed: For example, starting each de novo MGA or insurance program takes a certain amount of investment before we are able to secure insurance carriers to support the underwriting, which is a precursor to entering the marketplace.
−Removed: Even after securing insurance carriers, we may not be able to compete effectively with other products in the marketplace on pricing, terms and conditions in order to be successful.
−Removed: The development and implementation of these offerings also may divert the attention of our management team.
+Added: The development and implementation of these offerings also may divert the attention of our management team, which may materially and adversely affect our business and operating results.
+Added: We may not be able to keep pace with new or emerging technological developments in our industry, including deployment and use of AI, and our use of AI or such other technologies may subject us to a number of risk and uncertainties.
+Added: Our industry is characterized by introduction of new products and services using new or emerging technologies.
+Added: As others use or develop such technologies, we may be placed at a competitive disadvantage or may be forced by competitive pressures to implement such technologies at substantial costs.
+Added: In addition, our competitors may have greater financial, technical and personnel resources that allow them to enjoy technological advantages and that may in the future allow them to implement Artificial Intelligence (“AI”) or other new or emerging technologies prior to us.
+Added: We may not be able to respond to these competitive pressures or implement such technologies on a timely basis or at an acceptable cost.
+Added: If one or more of the technologies we use now or in the future were to become obsolete, our business, financial condition or results of operations could be adversely affected.
+Added: AI presents risks and challenges that could impact our business, including potential breaches of privacy or security incidents related to the use of AI.
+Added: We are in the early stages of integrating AI tools into our systems, and we expect our third-party service providers as well as our competitors will also develop or use such tools.
+Added: Over time, AI may become more important to our operations and future growth.
+Added: We cannot provide assurance that we will realize any desired or anticipated benefits from AI, and we may face challenges in properly implementing this technology.
+Added: We may face potentially significant costs associated with acquiring, deploying, maintaining and updating AI technologies.
+Added: Additionally, we or our AI service providers may fail to meet existing or rapidly evolving regulatory or industry standards related to privacy and data protection, intellectual property, transparency and compliance, among others, which could inhibit our or our service providers’ ability to maintain an adequate level of functionality or service.
+Added: AI tools used by us or by our service providers could produce inaccurate or unexpected results or behaviors that could harm our business, customers or reputation.
+Added: While AI systems may enhance productivity, they could also lead to the displacement of certain jobs or roles, which if true, could create social and organizational challenges.
+Added: Our competitors or other third parties may incorporate AI in their business operations more quickly, at a lower cost or more successfully than we do, which may negatively impact our ability to compete effectively.
+Added: Additionally, the complex and rapidly evolving landscape around AI may expose us to claims, inquiries, demands and proceedings by private parties and global regulatory authorities and subject us to legal liability as well as reputational harm.
+Added: New laws and regulations are being adopted in various jurisdictions globally, and existing laws and regulations may be interpreted in ways that would affect our business operations and the way in which we use AI.
+Added: Any of these outcomes could impair our ability to compete effectively, damage our reputation, result in the loss of our or our Clients’ information and materially adversely affect our financial position, operating results or cash flows.
+Added: Technological advancements, including artificial intelligence and digital distribution platforms, may change the way insurance products are marketed, sold, and serviced, which could adversely affect our business if we are unable to adapt effectively.
+Added: The insurance distribution industry is undergoing rapid technological change, driven by increased use of artificial intelligence, automation, and digital platforms by insurance carriers, technology providers, and competitors.
+Added: These technologies may alter how insurance products are marketed, quoted, bound, and serviced, and may reduce or replace certain manual processes traditionally performed by insurance agencies or brokers.
+Added: In addition, insurance carriers and new market entrants may expand direct‑to‑consumer distribution models or develop technology‑driven platforms that reduce reliance on intermediaries.
+Added: Although we believe that our technology investments, platform capabilities, and agent network position us well to adapt to these developments, there can be no assurance that technological advancements will not shift customer preferences, reduce demand for traditional agency distribution models, intensify competition, or place pressure on commission rates or operating margins.
+Added: Maintaining competitiveness may require continued investment in technology and systems modernization, and if we fail to adopt these tools effectively or if competitors do so more successfully our market position could suffer.
+Added: If we are unable to continue investing in and effectively deploying technology—including artificial intelligence‑driven tools designed to enhance the efficiency and value of our distribution platform—our business, financial condition, and results of operations could be adversely affected.
+Added: Additionally, public speculation regarding AI related disruption in the insurance distribution industry may contribute to volatility in our stock price.
+Added: Press reports, analyst commentary, or broader market sentiment, regardless of our underlying performance, could cause significant fluctuations in the trading price of our stock.
+Added: If these risks materialize, our business, financial condition, operating results, and stock price could be materially adversely affected.
We rely on the availability and performance of information technology services provided by third parties.
1 unchanged sentence
If the service providers to which we outsource these functions do not perform effectively, we may not be able to achieve the expected cost savings and may have to incur additional costs to correct errors made by such service providers.
−Removed: Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, the loss of or damage to intellectual property through security breach, the loss of confidential proprietary or personal
−Removed: information (including sensitive personal information) through a security breach, or otherwise.
−Removed: While we or any of our third-party service providers have not experienced any material disruption, failure or breach impacting our or their information technology systems, any such disruption, failure or breach could adversely affect our business, financial condition and results of operations.
−Removed: We rely on data from our Clients, third parties and insurance carriers for pricing and underwriting our insurance policies, the unavailability or inaccuracy of which could limit the functionality of our products and disrupt our business.
−Removed: We use data, technology and intellectual property licensed from unaffiliated third parties in certain of our products, including insurance industry proprietary information that we license from third parties, and we may license additional third-party technology and intellectual property in the future.
−Removed: Any errors or defects in this third-party technology and intellectual property could result in errors that could harm our brand and business.
−Removed: In addition, licensed technology and intellectual property may not continue to be available on commercially reasonable terms, or at all.
−Removed: Also, should any third party refuse to license its proprietary information to us on the same terms that it offers to our competitors, we could be placed at a significant competitive disadvantage.
−Removed: Further, although we believe that there are currently adequate replacements for the third-party technology and intellectual property we presently use, the loss of our right to use any of this technology and intellectual property could result in delays in producing or delivering affected products until equivalent technology or intellectual property is identified, licensed or otherwise procured, and integrated.
−Removed: Our business would be disrupted if any technology and intellectual property we license from others or functional equivalents of this software were either no longer available to us or no longer offered to us on commercially reasonable terms.
−Removed: In either case, we would be required either to attempt to redesign our products to function with technology and intellectual property available from other parties or to develop these components ourselves, which would result in increased costs and could result in delays in product sales and the release of new product offerings.
−Removed: Alternatively, we might be forced to limit the features available in affected products.
+Added: Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, the loss of or damage to intellectual property through a security breach, the loss of confidential proprietary or personal information (including sensitive personal information) through a security breach, or otherwise.
+Added: While we are not aware of any material disruption, failure or breach impacting our or our third-party service providers’ information technology systems, any such disruption, failure or breach could adversely affect our business, financial condition and results of operations.
+Added: We rely on data from our Clients, third parties and insurance carriers for pricing and underwriting our insurance policies, and the unavailability or inaccuracy of which could limit the functionality of our products and disrupt our business.
+Added: We rely on data from Clients, insurance carriers, and third parties for pricing and underwriting.
+Added: Inaccurate or unavailable data could impair product functionality and disrupt our business.
+Added: We also license technology, intellectual property, and proprietary information from third parties.
+Added: Errors in, or loss of access to, these resources, or inability to renew licenses on reasonable terms, could require costly replacements, delay product delivery, limit features, and place us at a competitive disadvantage.
Any of these results could harm our business, results of operations and financial condition.
We have debt outstanding, and the ability to borrow significantly greater amounts under our Revolving Credit Agreement (as defined below), which could adversely affect our financial flexibility, and our Credit Agreements (as defined below) subject us to restrictions and limitations that could significantly impact our ability to operate our business.
−Removed: As of the date of this Annual Report, we had total debt outstanding under our Credit Agreements of approximately $5.9 million, consisting of $5.9 million outstanding under our Term Loan Credit Agreement, which total debt is secured by substantially all of our assets including rights to future commissions.
−Removed: For the years ended December 31, 2024 and December 31, 2023, we had debt servicing costs of $2.2 million and $1.0 million , respectively, all of which were attributable to interest and fees .
−Removed: In addition, under our Revolving Credit Agreement, we have the ability to borrow from time-to-time up to a principal amount of $50.0 million.
−Removed: The level of debt we have outstanding during any period could adversely affect our financial flexibility.
−Removed: We also bear risk at the time the debt matures.
−Removed: Our ability to make interest and principal payments, to refinance our debt obligations and to fund our planned capital expenditures will depend on our ability to generate cash from operations.
−Removed: Our ability to generate cash from operations is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, such as an environment of rising interest rates.
−Removed: The need to service our indebtedness will also reduce our ability to use cash for other purposes, including working capital, dividends to stockholders, acquisitions, capital expenditures, share repurchases, and general corporate purposes.
−Removed: Any failure to service payments of interest on or principal of our outstanding indebtedness on a timely basis would likely result in a reduction of our credit worthiness, which would also harm our ability to incur additional indebtedness.
−Removed: If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity or reducing or delaying capital expenditures, strategic acquisitions, and investments, any of which could impede the implementation of our business strategy or prevent us from entering into transactions that would otherwise benefit our business.
−Removed: Additionally, we may not be able to effect such actions, if necessary, on favorable terms, or at all.
−Removed: We may not be able to refinance any of our indebtedness on favorable terms, or at all, which may not permit us to meet our scheduled debt service obligations.
−Removed: Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants.
−Removed: In the absence of such cash flows and resources, we could face substantial liquidity problems and may be required to sell material assets or operations to attempt to meet our debt service obligations.
−Removed: If we cannot meet our debt service obligations, the holders of our indebtedness may accelerate such indebtedness and, to the extent such indebtedness is secured, foreclose on our assets.
−Removed: In such an event, we may not have sufficient assets to repay all of our indebtedness.
−Removed: The Credit Agreements governing our debt contain covenants that, among other matters and subject to certain exceptions, restrict our ability to make restricted payments, incur additional debt, engage in asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in certain transactions with affiliates, change our business or make investments.
−Removed: In addition, the Credit Agreements contain financial covenants that require us, subject to certain exceptions, to maintain a Consolidated Debt Service Coverage Ratio (as defined in the Revolving Credit Agreement) of at least 1.50 to 1.00 and a Consolidated Leverage Ratio (as defined in the Revolving Credit Agreement) of not more than 2.00 to 1.00, in each case, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, and as of December 31, 2024 and December 31, 2023, we were in compliance with each such covenant.
−Removed: The restrictions in the Credit Agreements governing our debt may prevent us from taking actions that we believe would be in the best interest of our business and our stockholders and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted.
−Removed: We may also incur future debt obligations that may subject us to additional or more restrictive covenants that could affect our financial and operational flexibility, including our ability to pay dividends.
+Added: As of the date of this Annual Report, we had approximately $4.0 million in total debt outstanding under our Term Loan Credit Agreement secured by substantially all of our assets.
+Added: For the years ended December 31, 2025 and December 31, 2024, we incurred debt servicing costs of $0.3 million and $2.2 million, re spectively .
+Added: We may borrow up to $50.0 million under our Revolving Credit Agreement.
+Added: The level of debt outstanding during any period could adversely affect our financial flexibility, and we bear risk at maturity.
+Added: Our ability to make payments, refinance obligations and to fund capital expenditures depends on cash generations from operations, which is, to a certain extent, subject to factors beyond our control.
+Added: The need to service debt also reduces our ability to use cash for other purposes.
+Added: Any failure to service debt could reduce our credit worthiness and limit future borrowing.
+Added: If we cannot service our debt, we may need to sell assets, seek equity, or delay strategic initiatives, which could impede our business strategy.
+Added: Additionally, we may not be able to effect such actions on favorable terms, or at all.
+Added: Without sufficient cash flow, we could face substantial liquidity problems and may be required to sell material assets or operations.
+Added: If we cannot meet our debt service obligations, lenders may accelerate debt and foreclose on assets, and we may not have sufficient assets to repay all indebtedness.
+Added: Each of our Credit Agreements requires the Company to maintain a consolidated leverage ratio of no greater than 2.00 to 1.00 (or, after the occurrence of certain acquisitions, 2.50 to 1.00).
+Added: The Credit Agreements also contain covenants that, among other provisions and subject to certain exceptions, restrict our ability to pay dividends or other distributions, incur additional debt, engage in asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in transactions with affiliates, change our business or make investments.
+Added: As of December 31, 2025 and December 31, 2024, the Company was in compliance with these covenants.
+Added: The restrictions may limit our ability to act in the best interest of our business and our stockholders.
+Added: We may also incur future debt obligations that may subject us to additional or more restrictive covenants.
We cannot make any assurances that we will be able to refinance our debt or obtain additional financing on terms acceptable to us, or at all.
−Removed: A failure to comply with the restrictions under the Credit Agreements could result in a default or could require us to obtain waivers from our lenders for failure to comply with these restrictions.
−Removed: The occurrence of a default that remains uncured or the inability to secure a necessary consent or waiver could cause our obligations with respect to our debt to be accelerated and have a material adverse effect on our business, financial condition and results of operations.
+Added: A failure to comply with the restrictions under the Credit Agreements could result in a default, acceleration of obligations, and a material adverse effect on our business, financial condition, and results of operations.
Changes to TWFG Holding’s ownership, that of the guarantors under the Credit Agreements or our ownership could trigger a change of control default under our Credit Agreements.
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(“Gordy”) Bunch III and his affiliates) owns more than 35% of the membership interests of TWFG Holding or (iv) TWFG Holding shall cease to own, free and clear of all liens or other encumbrances (other than certain Permitted Liens as defined in our Credit Agreements), 100% of the outstanding voting equity interests of each guarantor (other than us) on a fully diluted basis, except as a result of a merger, consolidation or disposition permitted under the Credit Agreement.
−Removed: Such a default could result in the acceleration of repayment of our and our subsidiaries’ indebtedness, including borrowings under our Term Loan Credit Agreement (as defined below) and any amounts then outstanding under the Revolving Credit Agreement if not waived by the lenders under our Credit Agreements.
−Removed: Any acceleration of repayment of our and our subsidiaries’ indebtedness may negatively affect our financial condition and operating results.
−Removed: In addition, we may not have sufficient funds to finance repayment of any of such indebtedness upon any such change of control.
−Removed: Any acceleration of repayment of our and our subsidiaries’ indebtedness may negatively affect our financial condition and operating results.
−Removed: In addition, we may not have sufficient funds to finance repayment of any of such indebtedness upon any such change of control.
+Added: Such a default could result in the acceleration of repayment of our and our subsidiaries’ indebtedness, including borrowings under our Term Loan Credit Agreement (as defined below) and any amounts then outstanding under the Revolving Credit Agreement if not waived by the lenders under our Credit Agreements, which may negatively affect our financial condition and operating results.
+Added: In addition, we may not have sufficient funds to finance repayment of any such indebtedness upon any such change of control.
We may require additional debt financing in the future, which may not be available or may be available only on unfavorable terms.
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Any debt financing or refinancing, if available at all, may be on terms that are not favorable to us.
−Removed: Our access to funds under our Credit Agreements are dependent on the ability of the banks that are parties to Credit Agreements to meet their funding commitments.
+Added: Our access to funds under our Credit Agreements are dependent on the ability of the banks that are parties to our Credit Agreements to meet their funding commitments.
If we cannot obtain adequate capital or sources of credit on favorable terms, or at all, our business, results of operations, and financial condition could be adversely affected.
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Operating funds available for corporate use were $155.9 million and $195.8 million at December 31, 2025 and December 31, 2024, respectively, and are reported in cash and cash equivalents.
−Removed: Restricted cash held on behalf of Clients and insurance carriers was $9.6 million and $7.2 million at December 31, 2024 and December 31, 2023, respectively, are reported as restricted cash on the balance sheet.
+Added: Restricted cash held on behalf of Clients and insurance carriers was $12.0 million and $9.6 million at December 31, 2025 and December 31, 2024, respectively, are reported as restricted cash on the Consolidated Balance Sheet.
We may experience reduced investment earnings on our cash and short-term investments of restricted and operatin g funds if the yields on investments deemed to be low risk remain at or near their current low levels or fall below their current levels, or if negative yields on deposits or investments are experienced.
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We assist in the placement of premium finance solutions through IPFS Corporation (“IPFS”), an entity licensed to refer premium financing arrangements, for the payment of premiums due on insurance coverage.
−Removed: While we are licensed to originate loans, at present we exclusively distribute on behalf of third-party capital providers.
−Removed: Nonetheless, as a participant in the placement of premium financing, IPFS is dependent upon the success of the companies to which we make referrals.
−Removed: Insurance premium finance arrangements involve a different, and possibly higher, risk of delinquency or collection than our other operations because these loans are originated, and many times funded, through relationships with unaffiliated insurance retail brokers and agent.
+Added: We commit a limited amount of capital to fund premium financing arrangements.
+Added: The capital we commit exposes us to a combination of credit, interest rate, collateral, regulatory, operational and market risk, all of which may affect repayment and capital recovery.
+Added: While we are licensed to originate loans, we primarily distribute on behalf of third-party capital providers.
+Added: As a participant in the placement of premium financing, IPFS is dependent upon the success of the companies to which we make referrals.
+Added: Insurance premium finance arrangements involve a different, and possibly higher, risk of delinquency or collection than our other operations because these loans are originated, and many times funded, through relationships with unaffiliated insurance retail brokers and agents.
If our referrals default on premium finance arrangements at a rate which is found to be unacceptable, premium finance companies may in the future refuse to accept referrals from us.
−Removed: We could incur substantial losses from our cash and investment accounts if one of the financial institutions that we use fails or is taken over by the U.S.
−Removed: Federal Deposit Insurance Corporation (“FDIC”).
−Removed: We maintain cash and investment balances, including funds held in trust, at a limited number of depository institutions in amounts that are significantly in excess of the limits insured by the FDIC.
−Removed: If one or more of the depository institutions with which we maintain significant cash balances were to fail or be taken over by the FDIC, our ability to access these funds might be temporarily or permanently limited, and we could face material liquidity problems and potential material financial loss.
If any of our MGA programs are terminated or changed, our business and operating results could be harmed.
In our underwriting management specialty, we act as an MGA for insurance carriers that have given us authority to underwrite and bind coverage on their behalf.
−Removed: Our MGA generated 17.0% and 18.0% of our consolidated total revenue for 2024 and 2023, respectively.
−Removed: Our MGA programs are governed by contracts between us and the participating insurance carriers.
+Added: Our MGAs generated 20% and 17% of our consolidated total revenue for 2025 and 2024, respectively.
+Added: Our MGA programs are governed by contracts between us and the
+Added: participating insurance carriers.
These contracts establish, among other matters, the underwriting and pricing guidelines for the program, the scope of our authority and our commission rates for policies that we underwrite under the program.
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We cannot be assured that lost insurance capacity can be replaced or that other MGA programs will not be terminated or modified in the future.
−Removed: Moreover, we cannot be assured that we will be able to replace any of our MGA programs that are terminated with a similar program with other insurance carriers.
+Added: Moreover, there can be no assurance that we will be able to replace any of our MGA programs that are terminated with a similar program with other insurance carriers.
If our underwriting models contain errors or are otherwise ineffective, our reputation and relationships with insurance carriers, retail brokers and agents could be harmed.
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If we are unable to collect our receivables, our results of operations and cash flows could be adversely affected.
−Removed: Our business de pends on our ability to obtain payment from insurance carriers of the amounts due to us for the work we perform.
+Added: Our business de pends on our ability to obtain payment from insurance carriers of the amounts due to us for the work we perfor m.
As of December 31, 2025 and December 31, 2024, our receivables for our commissions and fees were approximately $37.3 million and $27.1 million, respectively, or approximately 15.0% and 13.3%, respectively, of our total annual revenues in 2025 and 2024.
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Conditions impacting insurance carriers or other parties that we do business with may impact us.
−Removed: We have a significant amount of accounts receivable from insurance carriers with which we place insurance.
−Removed: If those insurance carriers were to experience liquidity problems or other financial difficulties, we could encounter delays or defaults in payments owed to us, which could have a significant adverse impact on our financial condition and results of operations.
The potential for an insurance carrier to cease writing insurance we offer our Clients could negatively impact overall capacity in the industry, which in turn could have the effect of reduced placement of certain lines and types of insurance and reduced revenue and profitability for us.
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In many cases, insurance carriers also have the ability to amend the terms of our agreements unilaterally on short notice.
−Removed: Insurance carriers may be unwilling to allow us to sell their existing or new insurance products or may amend our agreements with them, for a variety of reasons, including for competitive or regulatory reasons or because of a reluctance to distribute their products through our platform.
+Added: Insurance carriers may be unwilling to allow us to sell their existing or new insurance products or may amend our agreements with
+Added: them, for a variety of reasons, including for competitive or regulatory reasons or because of a reluctance to distribute their products through our platform.
Insurance carriers may decide to rely on their own internal distribution channels, choose to exclude us from their most profitable or popular products, or decide not to distribute insurance products in individual markets in certain geographies or altogether.
−Removed: The termination or amendment of our relationship with an insurance carrier could reduce the variety of insurance products we offer.
−Removed: We also could lose a source of, or be paid reduced commissions for, future sales and could reduce or lose renewal revenue for past sales.
Our business could also be harmed if we fail to develop new insurance carrier relationships.
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The success of this strategy is dependent upon our ability to identify appropriate acquisition and disposition targets, negotiate transactions on favorable terms, complete transactions and, in the case of acquisitions, successfully integrate them into our existing businesses.
−Removed: If a proposed transaction is not consummated, the time and resources spent in researching it could adversely result in missed opportunities to locate and acquire other businesses.
If acquisitions are made, there can be no assurance that we will realize the anticipated benefits of such acquisitions, including, but not limited to, revenue growth, operational efficiencies or expected synergies.
−Removed: If we dispose of or otherwise exit certain businesses, there can be no assurance that we will not incur certain disposition related charges, or that we will be able to reduce overhead related to the divested assets.
From time to time, either through acquisitions or internal development, we may enter new lines of business or offer new products and services within existing lines of business.
These new lines of business or new products and services may present additional risks, particularly in circumstances where the markets are not fully developed.
−Removed: Such risks include the investment of significant time and resources;
−Removed: the possibility that these efforts will not be successful;
−Removed: the possibility that marketplace does not accept our products or services, or that we are unable to retain Clients that adopt our new products or services;
−Removed: and the risk of additional liabilities associated with these efforts.
+Added: These risks include significant time and resource investment, potential failure of initiatives, lack of market acceptance, difficulty retaining clients, and exposure to additional liabilities.
In addition, many of the businesses that we acquire and develop will likely have significantly smaller scales of operations prior to the implementation of our growth strategy.
If we are not able to manage the growing complexity of these businesses, including improving, refining or revising our systems and operational practices, and enlarging the scale and scope of the businesses, our business may be adversely affected.
−Removed: Other risks include developing knowledge of and experience in the new business, integrating the acquired business into our systems and culture, recruiting professionals and developing and capitalizing on new relationships with experienced market participants.
−Removed: External factors, such as compliance with new or revised regulations, competitive alternatives and shifting market preferences may also impact the successful implementation of a new line of business.
+Added: Additional risks include gaining expertise in new businesses, integrating acquisitions into our operations and culture, hiring talent, and building relationships with key market participants.
Failure to manage these risks in the acquisition or development of new businesses could materially and adversely affect our business, financial condition and results of operations.
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Bunch III, our Chief Executive Officer.
−Removed: Although we operate with a decentralized management system, the loss of our senior managers or other key personnel, or our inability to continue to identify, recruit and retain such personnel, could materially and adversely affect our business, financial condition and results of operation.
+Added: Although we operate with a decentralized management system, the loss of our senior managers or other key personnel, or our inability to continue to identify, recruit and retain such personnel, could materially and adversely affect our business, financial condition and results of operations.
We could also be adversely affected if we fail to attract and retain talent and foster a collaborative workplace throughout our organization.
−Removed: Competition for talent is intense in many areas of our business.
In addition, our industry has experienced competition for leading brokers and in the past we have lost key brokers and groups of brokers, along with their clients, business relationships and intellectual property directly to our competition.
−Removed: We enter into agreements with our Branches, which prohibit them from disclosing confidential information or soliciting our Clients, prospects and employees upon termination of the Branch agreement.
−Removed: Although we pursue legal actions for alleged breaches of non-compete or other restrictive covenants, theft of trade secrets, breaches of fiduciary duties, intellectual property infringement and related causes of action, such legal actions may not be effective in preventing such breaches, theft or infringement.
−Removed: In addition, the FTC has adopted new rules to, among other
−Removed: things, prohibit and make unenforceable any post-employment non-compete arrangement that restricts an employee or individual independent contractor, unless such arrangement was entered into in connection with an acquisition and meets certain conditions.
−Removed: While these rules have been challenged judicially and their implementation has been stayed, if the rules are ultimately upheld, or if we fail to adequately address any of the issues referred to above, we could experience a material adverse effect on our business, operating results and financial condition.
+Added: In 2024, the FTC adopted a rule to, among other things, prohibit and make unenforceable any post-employment non-compete arrangement that restricts an employee or individual independent contractor.
+Added: Shortly after enactment, the rule was subject to various legal challenges and the rule was set aside by the U.S.
+Added: District Court for the Northern District of Texas.
+Added: While the rule has been vacated and is not currently in effect, the legal and regulatory landscape governing non-compete agreements continues to evolve - including through existing state-level restrictions in jurisdictions such as California, Minnesota, North Dakota and Oklahoma where such agreements are already significantly limited or unenforceable - and future legislative,
+Added: regulatory or judicial developments could further restrict our ability to enforce such agreements.
+Added: It is possible that additional similar legislation may be introduced in the future.
If we cannot maintain the valuable aspects of our Company’s culture as we grow, our business may be harmed.
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Damage to our reputation could have a material adverse effect on our business.
−Removed: Our reputation is one of our key assets.
We advise our Clients on and provide services related to a wide range of subjects and our ability to attract and retain Clients is highly dependent upon the external perceptions of our level of service, trustworthiness, business practices, financial condition and other subjective qualities.
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Our success is also dependent on maintaining a good reputation with existing and potential employees, investors, regulators and the communities in which we operate.
−Removed: Negative perceptions or publicity regarding these or other matters, including our association with Clients, agents or business partners who themselves have a damaged reputation, or from actual or alleged conduct by us or our employees, could damage our reputation.
Any resulting erosion of trust and confidence among existing and potential Clients, regulators and other parties important to the success of our business could make it difficult for us to attract new Clients and maintain existing ones, which could have a material adverse effect on our business, financial condition and results of operations.
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These third parties may act in ways that could harm our business.
−Removed: We rely on third parties, and in some cases subcontractors, to provide services, data and information such as technology, information security, funds transfers, data processing, support functions and administration that are critical to the operations of our business.
−Removed: These third parties include correspondents, agents and other brokerage and intermediaries, insurance markets, data providers, plan trustees, payroll service providers, benefits administrators, software and system vendors, health plan providers, and providers of human resources, among others.
−Removed: As we do not fully control the actions of these third parties, we are subject to the risk that their decisions, actions, or inactions may adversely impact us, and replacing these service providers could create significant delay and expense.
−Removed: A failure by third parties to comply with service-level agreements or regulatory or legal requirements in a high-quality and timely manner, particularly during periods of our peak demand for their services, could result in economic and reputational harm to us.
−Removed: In addition, we face risks as we transition from in-house functions to third-party support functions and providers that there may be disruptions in service or other unintended results that may adversely affect our business operations.
−Removed: These third parties face their own technology, operating, business and economic risks, and any significant failures by them, including the improper use or disclosure of confidential client, employee or company information, could cause harm to our business and reputation.
−Removed: If one or more of these third parties, whether negligently or intentionally, fails to provide the risk-bearing insurance, capital as agreed, mishandles or misappropriates funds, or otherwise fails to properly provide products and services as expected, we face potential liability for damages and reputational harm.
−Removed: An interruption in or the cessation of service by any service provider as a result of systems failures, cybersecurity incidents, capacity constraints, financial difficulties, or for any other reason could disrupt our operations, impact our ability to offer certain products and services, and
−Removed: result in contractual or regulatory penalties, liability claims from Clients or employees, damage to our reputation, and harm to our business.
−Removed: Our ability to attract and retain Clients, employees, investors, capital and insurer trading partners is highly dependent upon the external perceptions of our level of service, trustworthiness, business practices, financial condition and other subjective qualities.
−Removed: Negative perceptions or publicity regarding these matters could erode trust and confidence and damage our reputation among existing and potential Clients which in turn could make it difficult for us to maintain existing Clients and attract new ones.
−Removed: Damage to our reputation due to a failure to proactively communicate to stakeholders on changes in strategy and business plans could further affect the confidence of our Clients, regulators, creditors, investors, insurer trading partners and other parties that are important to our business, having a material adverse effect on our business, ability to raise capital, financial condition, and results of operations.
+Added: We depend on third-party service providers for critical functions, including technology, information security, data processing, fund transfers, and administrative support.
+Added: Because we do not control these providers, their failures, delays, or noncompliance with contractual or regulatory obligations could disrupt our operations, cause reputational harm, and result in financial loss.
+Added: Transitioning functions to third parties may also create service disruptions.
+Added: These providers face their own operational and cybersecurity risks, and any significant failure, misuse of confidential information, or cessation of services could impair our ability to deliver products and services and expose us to liability.
+Added: Negative publicity or failure to communicate strategic changes could erode confidence among stakeholders and materially adversely affect our business, financial condition, and results of operations.
Our growth strategy may involve opening new offices, entering new product lines or establishing new distribution channels, and will involve hiring new brokers and underwriters, which will require substantial investment by us and may adversely affect our results of operations and cash flows in a particular period.
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Moreover, we cannot assure you that we will be able to recover our investment in new offices, brokers or underwriters or that these offices, brokers and underwriters will achieve profitability.
−Removed: Increasing scrutiny and changing expectations from investors, Clients and our employees with respect to our environmental, social and governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks.
−Removed: There is increased and sometimes conflicting focus, including from governmental organizations, investors, employees and Clients, on ESG issues such as environmental stewardship, climate change, diversity and inclusion, pay equity, racial justice, workplace conduct and cybersecurity and data privacy.
+Added: Increasing scrutiny and changing expectations from investors, Clients and our employees with respect to our corporate responsibility and stakeholder interest practices may impose additional costs on us or expose us to new or additional risks.
+Added: There is increased and sometimes conflicting focus, including from governmental organizations, investors, employees and clients, on corporate responsibility and stakeholder interest issues such as environmental stewardship, climate change, workplace inclusion, pay equity, racial justice, workplace conduct and cybersecurity and data privacy.
There can be no certainty that we will manage such issues successfully, or that we will successfully meet society’s expectations as to our proper role.
−Removed: Negative public perception, adverse publicity or negative comments in social media, including as a result of actions taken by companies we acquire before the acquisition, could damage our reputation, or harm our relationships with regulators and the communities in which we operate, if we do not, or are not perceived to, adequately address these issues.
−Removed: Any harm to our reputation could impact employees’ engagement and retention and the willingness of Clients and insurance carriers to do business with us.
−Removed: In addition, negative public perception resulting from the potential conflict with anti-ESG initiatives from the U.S.
−Removed: federal and certain state governments and other stakeholders could damage our reputation with investors, customers, employees and regulators.
−Removed: It is possible that stakeholders may not be satisfied with our ESG practices or the speed of their adoption.
−Removed: Actual or perceived shortcomings with respect to our ESG initiatives and reporting could negatively impact our business.
−Removed: We could also incur additional costs and require additional resources to monitor, report, and comply with various ESG practices.
−Removed: In addition, a variety of organizations have developed ratings to measure the performance of companies on ESG topics, and the results of these assessments are widely publicized.
−Removed: Investments in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of such ESG measures to their investment decisions.
−Removed: Unfavorable ratings of our company or our industry, as well as omission of inclusion of our stock into ESG-oriented investment funds may lead to negative investor sentiment and the diversion of investment to other companies or industries, which could have a negative impact on our stock price.
+Added: Negative public perception, adverse publicity or negative comments in social media, including as a result of actions taken by companies we acquire before acquisition, could damage our reputation, or harm our relationships with regulators and the communities in which we operate, if we do not, or are not perceived to, adequately address these issues.
+Added: Any harm to our reputation could impact employees’ engagement and retention and the willingness of clients and carriers to do business with us.
+Added: In addition, there exists certain negative sentiment from some individuals and government institutions related to corporate responsibility and stakeholder interests, and we may also face scrutiny, reputational risk, lawsuits or market access restrictions from these parties regarding these initiatives.
+Added: In addition, a variety of organizations, including proxy advisory firms, have developed ratings to measure the performance of companies on topics of corporate responsibility or stakeholder interests.
+Added: Such ratings and proxy advisory services are used by some investors to inform their investment and voting decisions.
+Added: Several states either proposed or passed new laws, requiring additional disclosure from proxy advisory firms concerning factors influencing their proxy advisory services, especially when those factors extend beyond traditional financial or pecuniary analyses (such as corporate responsibility and related matters).
+Added: These new or proposed laws face legal challenges, including Texas SB 2337 providing public companies headquartered or domiciled (or considering redomiciling) in Texas with such additional protections, but enforcement of which by the Texas Attorney General has been enjoined by the U.S.
+Added: District Court for the Western District of Texas pending trial.
+Added: Unfavorable ratings of our company or our industry, as well as omission of inclusion of our stock into investment funds oriented towards various corporate responsibility and stakeholder interests may lead to negative investor sentiment and the diversion of investment to other companies or industries, which could have a negative impact on our stock price.
Risks relating to our Branch business
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They may disagree with certain network-wide policies and procedures, including policies such as those dictating brand standards or affecting their marketing efforts.
−Removed: They may also be disappointed with any marketing campaigns designed to develop our brand.
−Removed: There are a variety of reasons why our Branch relationships can give rise to conflict.
If we experience any conflicts with our Branches on a large scale, our Branches may file lawsuits against us or they may seek to disaffiliate with us, which could also result in litigation.
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If industry trends or economic conditions are not sustained or do not continue to improve, our Branches’ financial results may worsen and our revenue may decline.
−Removed: We rely in part on our Branches and the manner in which they operate their locations to develop and promote our business.
+Added: We rely in part on our Branches and the way they operate their locations to develop and promote our business.
Although we have developed criteria to evaluate and screen prospective independent branches, we cannot be certain that our Branches will have the business acumen or financial resources necessary to operate successful Branches in their Branch areas.
−Removed: Moreover, despite our training, support and monitoring, Branches may not successfully operate in a manner consistent with our standards and requirements, or may not hire and train qualified personnel.
The failure of our Branches to operate their Branches successfully could have a material adverse effect on us, our reputation, our brand and our ability to attract prospective Branches and could materially adversely affect our business, financial condition or results of operations.
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Our Branches are independent businesses and the agents who work within these brokerages are independent contractors and, as such, are not our employees, and we do not exercise control over their day-to-day operations.
−Removed: Our Branches may not operate their insurance brokerage businesses in a manner consistent with industry standards, or may not attract and retain qualified agents.
−Removed: If Branches were to provide diminished quality of service to Clients, engage in fraud, defalcation, misconduct or negligence or otherwise violate the law, our image and reputation may suffer materially and we may become subject to liability claims or regulatory claims based upon such actions of our Branches and agents.
−Removed: Any such incidence could adversely affect our results of operations.
+Added: If Branches were to provide diminished quality of service to Clients, engage in fraud, defalcation, misconduct or negligence or otherwise violate the law or fail to comply with industry standards, our image and reputation may
+Added: suffer materially, and we may become subject to liability claims or regulatory claims based upon such actions of our Branches and agents.
Brand value can be severely damaged even by isolated incidents, particularly if the incidents receive considerable negative publicity or result in litigation.
−Removed: Some of these incidents may relate to the way we manage our relationship with our Branches, our growth strategies or the ordinary course of our business or our Branches’ business.
−Removed: Other incidents may arise from events that are or may be beyond our control and may damage our brand, such as actions taken (or not taken) by one or more Branches or their agents relating to health, safety, welfare or other matters;
−Removed: litigation and claims;
−Removed: failure to maintain high ethical and social standards for all of our operations and activities;
−Removed: failure to comply with local laws and regulations;
−Removed: and illegal activity targeted at us or others.
+Added: Incidents outside our control, including actions or omissions by Branches or their agents, legal proceedings, regulatory noncompliance, unethical conduct, or illegal activity, could harm our brand.
Our brand value could diminish significantly if any such incidents or other matters erode consumer confidence in us, which may result in a decrease in our total agent count and, ultimately, lower continuing commissions, which in turn would materially and adversely affect our business, financial condition and results of operations.
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however, may not be covered, and insurance may not be available (or may be available only at prohibitively expensive rates).
−Removed: Moreover, any loss incurred could exceed policy limits or the Branch could lack the required insurance at the time the claim arises, in breach of the insurance requirement, and policy payments made to
−Removed: Branches may not be made on a timely basis.
+Added: Moreover, any loss incurred could exceed policy limits or the Branch could lack the required insurance at the time the claim arises, in breach of the insurance requirement, and policy payments made to Branches may not be made on a timely basis.
Any such loss or delay in payment could have a material and adverse effect on a Branch’s ability to satisfy its obligations under its Branch agreement, including its ability to make payments for contractual fees or to indemnify us.
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We cannot predict with certainty the costs of defense, the costs of prosecution, insurance coverage or the ultimate outcome of litigation and other proceedings filed by or against us, including remedies or damage awards, and adverse results in such litigation and other proceedings may harm our business and financial condition.
−Removed: Such litigation and other proceedings may include, but are not limited to, complaints from or litigation by Branches, usually related to alleged breaches of contract or wrongful termination under the Branch agreements, actions relating to intellectual property, infringement, misappropriation or other violation, commercial arrangements and Branch arrangements.
+Added: Litigation may involve Branch-related contract disputes, wrongful termination claims, intellectual property issues, and other commercial or Branch arrangement matters.
In addition, litigation against a Branch or its agents by third parties, whether in the ordinary course of business or otherwise, may also include claims against us for liability by virtue of the Branch relationship.
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Branches may fail to obtain insurance naming TWFG as an additional insured on such claims.
−Removed: In addition to increasing Branches’ costs and limiting the funds available to pay us contractual fees and reducing the execution of new Branch agreements, claims against us (including vicarious liability claims) divert our management resources and could cause adverse publicity, which may materially and adversely affect us and our brand, regardless of whether such allegations are valid or whether we are liable.
+Added: In addition to increasing Branches’ costs and limiting the funds available to pay us contractual fees and reducing the execution of new Branch agreements, claims against us (including vicarious liability claims) divert our management resources and could cause adverse publicity, which may materially and adversely affect us and our brand.
A substantial unsatisfied judgment against us or one of our subsidiaries could result in bankruptcy, which would materially and adversely affect our business, financial condition and results of operations.
We may not be able to manage growth successfully.
−Removed: In order to successfully expand our business, we must effectively recruit, develop and motivate new independent branches, and we must maintain the beneficial aspects of our corporate culture.
+Added: In order to successfully expand our business, we must effectively recruit, develop and motivate new Branches, and we must maintain the beneficial aspects of our corporate culture.
We may not be able to hire new employees with the expertise necessary to manage our growth quickly enough to meet our needs.
−Removed: If we fail to effectively manage our hiring needs and successfully develop our Branches, our Branches’ and employee morale, productivity and retention could suffer, and our brand and results of operations could be harmed.
+Added: If we fail to effectively manage our hiring needs and successfully develop our Branches, our Branches’ and employees’ morale, productivity and
+Added: retention could suffer, and our brand and results of operations could be harmed.
Effectively managing our potential growth could require significant capital expenditures and place increasing demands on our management.
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Security or data breaches, cyberattacks or other similar incidents with respect to our or our vendors’ information processing systems may hurt our business, damage our reputation and negatively impact Client retention and insurance carrier relationships.
−Removed: Our ability to provide services and to create and maintain comprehensive tracking and reporting of Client accounts depends in part on our capacity to store, retrieve and process data, manage significant databases and expand and periodically upgrade our information processing capabilities.
−Removed: As our operations evolve, we will need to continue to
−Removed: make investments in new and enhanced information systems.
−Removed: As our information system providers revise and upgrade their hardware, software and equipment technology, we may encounter difficulties in integrating these new technologies into our business.
−Removed: Any integration of artificial intelligence (“AI”) in our or any third-party’s operations is expected to pose new or unknown cybersecurity risks and challenges.
−Removed: Interruption or loss of our information processing capabilities or adverse consequences from implementing new or enhanced systems could have a material adverse effect on our business, financial condition and results of operations.
−Removed: In the course of providing services, we may electronically store or transmit personal information (including sensitive personal information), such as social security numbers or credit card or bank information, of Clients or employees of Clients.
−Removed: Breaches in data security or infiltration by unauthorized persons of our network security could cause interruptions in operations and damage to our reputation, among other adverse impacts.
−Removed: While we maintain policies, procedures and technological safeguards designed to protect the security and privacy of this information, we cannot entirely eliminate the risk of improper access to or disclosure of personal information nor the related costs we incur to mitigate the consequences from such events.
−Removed: Security incidents can also occur as a result of non-technical issues, such as physical theft.
−Removed: More recently, advancements in AI, such as generative AI, may pose serious risks for many of the traditional tools used to identify individuals, including voice recognition (whether by machine or the human ear), facial recognition or screening questions to confirm identities.
−Removed: In addition, generative AI systems may also be used by malicious actors to create more sophisticated cyber-attacks (i.e., more realistic phishing or other attacks).
−Removed: The advancements in AI could lead to an increase in the frequency of identity fraud or cyberattacks (whether successful or unsuccessful), which could cause us to incur increasing costs, including costs to deploy additional personnel, protection technologies and policies and procedures, train employees, and engage third-party experts and consultants.
−Removed: Data privacy and cybersecurity laws, rules and regulations are matters of growing public concern and are continuously changing in the states in which we operate.
−Removed: The failure to adhere to or successfully implement procedures to respond to these regulations could result in legal liability or impairment to our reputation.
−Removed: We rel y substantially upon third-party service providers for various aspects of our business processes and to protect us from service disruptions and cybersecurity intrusions.
−Removed: This reliance may mean that we will not be able to resolve operational problems internally or on a timely basis, which could lead to participant or Client dissatisfaction or long-term disruption of our operations.
−Removed: Our operations also depend upon our third-party service providers to communicate appropriately and respond swiftly to their own service disruptions through industry standard best practices in information security, business continuity and/or disaster recovery.
−Removed: As a last resort, we may rely on our ability to replace a third-party service provider if such third-party service provider experiences difficulties that interrupt operations for a prolonged period of time or if an essential third-party service terminates.
−Removed: If these service arrangements are terminated for any reason without an immediately available substitute arrangement, our operations may be severely interrupted or delayed.
−Removed: If such interruption or delay were to continue for a substantial period of time, it could adversely impact our business, financial condition and results of operations.
−Removed: Further, despite security measures implemented by us and our vendors, our systems and those of our vendors may be vulnerable to physical break-ins, unauthorized access, viruses or other disruptive problems.
−Removed: If our systems or facilities were infiltrated or damaged, our Clients could experience data loss, financial loss and significant business interruption leading to a material adverse effect on our business, financial condition and results of operations.
−Removed: We may be required to expend significant additional resources to modify protective measures, to investigate and remediate vulnerabilities or other exposures or to make required notifications.
+Added: Our ability to deliver services and maintain accurate client account reporting depends on reliable data processing systems and the capacity to store, retrieve, and manage significant databases.
+Added: We must continue investing in new and enhanced information systems and integrating upgrades from third-party providers, which may present operational challenges and cybersecurity risks, including those associated with artificial intelligence.
+Added: Interruptions in our information processing capabilities or failures to integrate new technologies could materially and adversely affect our business, financial condition, and results of operations.
+Added: In providing services, we electronically store and transmit sensitive personal information of Clients and their employees, including social security numbers and financial data.
+Added: Despite implementing policies, procedures, and technological safeguards, we cannot eliminate the risk of unauthorized access, disclosure, or misuse of this information.
+Added: Breaches in data security could result in operational disruptions, reputational harm, regulatory exposure, and significant remediation costs.
+Added: Emerging technologies such as generative AI may increase these risks by enabling more advanced social engineering, phishing and AI-powered hacking attacks, identity fraud, misappropriation of funds and other malicious activities, which could require us to deploy additional resources and protective measures, or cause financial harm or loss of customer data or trust.
+Added: We also rely heavily on third-party service providers for critical business processes and cybersecurity protections.
+Added: Service disruptions or termination of these arrangements without immediate alternatives could lead to prolonged operational interruptions and Client dissatisfaction.
+Added: If such events occur, or if our systems or those of our vendors are infiltrated or damaged, Clients could experience data loss, financial harm, and business interruption, which could materially and adversely affect our business, financial condition, and results of operations.
Our business depends on a strong brand, and any failure to maintain, protect and enhance our brand would hurt our ability to grow our business, particularly in new markets where we have limited brand recognition.
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Moreover, our brand promotion activities may not generate brand awareness or yield increased revenue and, even if they do, any increased revenue may not offset the expenses we incur in building our brand.
−Removed: If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to
−Removed: attract new Clients or retain our existing Clients to the extent necessary to realize a sufficient return on our brand-building efforts.
+Added: If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract new Clients or retain our existing Clients to the extent necessary to realize a sufficient return on our brand-building efforts.
We rely on the efficient, uninterrupted, and secure operation of complex information technology systems and networks to operate our business.
Any significant system or network disruption due to a breach in the security of our information technology systems could have a negative impact on our reputation, regulatory compliance status, operations, sales and operating results.
−Removed: While we manage some of our information technology systems and some are outsourced to third parties, all information technology systems are potentially vulnerable to damage, breakdown or interruption from a variety of sources, including but not limited to cyberattacks, ransomware, malware, security breaches, theft or misuse, unauthorized access or improper actions by insiders or employees, sophisticated nation-state and nation-state-supported actors, natural disasters, terrorism, war, telecommunication and electrical failures or other compromise.
−Removed: We are at risk of attack by a growing list of adversaries through increasingly sophisticated methods of attack.
−Removed: Because the techniques used to infiltrate or sabotage systems change frequently, we may be unable to anticipate these techniques or implement adequate preventative measures.
−Removed: For example, in August 2023, we became aware that the Company was the victim of a cyberattack and unauthorized access was gained to our servers through a third-party service provider (the “2023 Cyber Incident”).
−Removed: In response to this event, the Company took immediate action to secure the compromised servers and to prevent the unauthorized person(s) from continuing to have access, or gaining future access, to the Company’s accounts or related information.
−Removed: The Company also reassessed and modified its approach to third-party service providers that provide cybersecurity services to the Company.
−Removed: Through our investigation, we were not able to conclusively determine whether personal information was accessed without authorization.
−Removed: Therefore, with an abundance of caution, we provided notification of the incident to potentially affected parties, including government departments and agencies and state regulators, departments of insurance and other such departments or agencies with oversight over regulated insurance entities.
−Removed: While we determined the security event was not material and did not have a material impact on the Company’s business, operating results or financial conditions, we cannot rule out future impacts from this event, or other future events.
−Removed: If we fail to make such notifications within the timelines required under applicable laws it could result in violations, fines, penalties, litigation, proceedings or enforcement action.
−Removed: In addition, it is possible that state regulators may initiate investigations of the Company in connection with the incident, that the Company could be subject to civil penalties, resolution agreements, monitoring or similar agreements, or third-party claims against the Company, including class action lawsuits.
−Removed: Moreover, future incidents of this nature that could occur with respect to our systems or the systems of our third-party service providers, as well as any other security incident or other misuse or disclosure of our participant or other data could lead to improper use or disclosure of Company information, including personal information obtained from our participants, and information from employees.
−Removed: Any such incident or misuse of data could harm our reputation, lead to legal exposure, divert management attention and resources, increase our operating expenses due to the employment of consultants and third-party experts and the purchase of additional security infrastructure, and/or subject us to liability, resulting in increased costs and loss of revenue.
−Removed: In addition, any remediation efforts we undertake may not be successful.
−Removed: The perception that we do not adequately protect the privacy of information of our employees or Clients could inhibit our growth and damage our reputation.
−Removed: If we are unable to maintain and upgrade our system safeguards, we may incur unexpected costs and certain aspects of our systems may become more vulnerable to unauthorized access.
−Removed: While we select our Clients and third-party vendors carefully, cyberattacks and security breaches at a Client or vendor could adversely impact our or our vendors’ ability to deliver products and services and otherwise conduct business and could put our systems at risk.
−Removed: Additionally, we are an acquisitive organization and the process of integrating the information systems of the businesses we acquire is complex and exposes us to additional risk as we may not adequately identify weaknesses in the targets’ information systems, which could expose us to unexpected liabilities or make our own systems more vulnerable to attack.
−Removed: These types of incidents affecting us, our Clients, or our third-party vendors could result in intellectual property or other confidential information being lost or stolen, including client, employee or company data.
−Removed: We may not be able to detect breaches in our information technology systems or assess the severity or impact of a breach in a timely manner.
−Removed: In addition, to the extent we integrate AI into our operations, this may increase cybersecurity and privacy risks, including the risk of unauthorized or misuse of AI tools.
−Removed: We have implemented various measures to manage our risks related to system and network security and disruptions, but a security breach or a significant and extended disruption in the functioning of our information
−Removed: technology systems could damage our reputation and cause us to lose Clients, adversely impact our operations, and operating results, and require us to incur significant expense to address and remediate or otherwise resolve such issues.
−Removed: In order to maintain the level of security, service, compliance and reliability that our Clients and laws of various jurisdictions require, we will be required to make significant additional investments in our information technology systems on an ongoing basis.
−Removed: We have experienced information technology system disruptions and cyberattacks in the past, and a failure of our information technology infrastructure and cyberattacks could adversely impact us in the future.
−Removed: We depend on our information technology systems for the efficient operation of our business.
−Removed: Accordingly, we rely upon the capacity, reliability and security of our information technology hardware and software infrastructure and our ability to expand and update this infrastructure in response to our changing needs.
−Removed: Despite our implementation of security measures, our systems are vulnerable to damage from computer viruses, natural disasters, incursions by intruders or hackers, failures in hardware or software, power fluctuations, cyber terrorists and other similar disruptions.
−Removed: Additionally, we rely on third parties to support the operation of our information technology hardware and software infrastructure, and in certain instances, utilize web-based applications.
−Removed: We routinely monitor our systems for information technology disruptions and cyberattacks and have processes in place to detect and remediate vulnerabilities.
−Removed: Nevertheless, we have experienced occasional information technology disruptions, cyberattacks, phishing attempts and attempted breaches, including the 2023 Cyber Incident.
−Removed: We responded to and mitigated the impact of these incidents.
−Removed: Cyber-criminals are constantly devising new, sophisticated schemes to gain unauthorized access to computer systems and confidential or sensitive data, including through the use of AI.
−Removed: The failure of our information technology systems or those of our vendors to perform as anticipated for any reason or any significant breach of security could disrupt our business and result in numerous adverse consequences, including reduced effectiveness and efficiency of operations, inappropriate disclosure of confidential and proprietary information, reputational harm, increased overhead costs, loss of important information, theft or misappropriation of funds, violation of privacy or other laws, and exposure to litigation or indemnity claims, including resulting from Client-imposed cybersecurity controls or other related contractual obligations, which could have a material adverse effect on our business and results of operations.
−Removed: In addition, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.
+Added: Our information technology systems, whether managed internally or by third-party providers, are subject to risks of damage, disruption, or unauthorized access from cyberattacks, ransomware, malware, phishing, AI-driven schemes,
+Added: insider threats, nation-state actors, natural disasters, hardware or software failures and other events.
+Added: Attack methods are increasingly sophisticated and evolve rapidly, which may limit our ability to anticipate or prevent them.
+Added: In August 2023, we experienced a cyber incident involving unauthorized access to our servers through a third-party provider.
+Added: In response to this event, we promptly secured compromised servers, reassessed vendor relationships, and determined the event was not material;
+Added: however, similar incidents could occur in the future and result in regulatory investigations, fines, litigation, reputational harm, and increased costs.
+Added: Future breaches involving our systems or those of Clients, vendors, or acquired businesses could lead to loss or misuse of confidential or personal data, theft of funds operational disruption, and diversion of management resources.
+Added: Integration of acquired systems and adoption of AI tools may introduce additional vulnerabilities.
+Added: Although we implement security measures and invest in cybersecurity and information technology infrastructure to maintain compliance and service reliability, no system is fully secure.
+Added: Significant disruptions or breaches could adversely affect our operations, financial condition, reputation, and require substantial remediation costs and result in loss of clients.
+Added: See also “—Improper disclosure of confidential, personal or proprietary data, whether due to human error, misuse of information by employees or vendors, or as a result of security breaches, cyberattacks or other similar incidents with respect to our or our vendors’ systems, could result in regulatory scrutiny, legal liability or reputational harm, and could have an adverse effect on our business or operations.”
Infringement, misappropriation, dilution or other violations of our intellectual property by third parties could harm our business.
−Removed: We believe our TWFG Insurance trademarks have significant value and that this and other intellectual property are valuable assets that are critical to our success.
+Added: We believe our TWFG Insurance trademarks and trade secrets have significant value and that these and other intellectual property are valuable assets that are critical to our success.
Unauthorized uses or other infringement, misappropriation or violation of our trademarks, service marks or other intellectual property could diminish the value of our brand and may adversely affect our business.
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Additionally, we cannot guarantee that future trademark registrations for pending or future applications will issue, or that any registered trademarks will be enforceable or provide adequate protection of our intellectual property and other proprietary rights.
−Removed: The United States Patent and Trademark Office and various foreign trademark offices also require compliance with a number of procedural, documentary, fee payment and other similar provisions during the trademark registration process and after a registration has issued.
+Added: Patent and Trademark Office and various foreign trademark offices also require compliance with a number of procedural, documentary, fee payment and other similar provisions during the trademark registration process and after a registration has issued.
There are situations in which non-compliance can result in abandonment or cancellation of a trademark filing, resulting in partial or complete loss of trademark rights in the relevant jurisdiction.
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Failure to adequately protect our intellectual property rights could damage our brand and impair our ability to compete effectively.
−Removed: Even where we have effectively secured statutory protection for our trademarks and other intellectual property, our competitors and other third parties may infringe on, misappropriate or otherwise violate our intellectual property, and in the course of litigation, such competitors and other third parties may attempt to challenge the breadth of our rights or ability to prevent others from using similar marks or designs, or invalidate our intellectual property.
−Removed: If such challenges were to be successful, less ability to prevent others from using similar marks or designs may ultimately result in a reduced distinctiveness of our brand in the minds of consumers.
−Removed: Defending or enforcing our trademark rights, branding practices and other intellectual property could result in the expenditure of significant resources and divert the attention of management, which may materially and adversely affect our business and operating results, even if such defense or enforcement is ultimately successful.
−Removed: Even though competitors
−Removed: occasionally may attempt to challenge our ability to prevent infringers from using our marks, we are not aware of any challenges to our right to use, and to authorize our Branches to use, any of our brand names or trademarks.
+Added: Even where we have effectively secured statutory protection for our trademarks, trade secrets and other intellectual property, our competitors and other third parties may infringe on, misappropriate or otherwise violate our intellectual property, and in the course of litigation, such competitors and other third parties may attempt to challenge the breadth of our rights or ability to prevent others from misappropriating our intellectual property.
+Added: If such challenges were to be successful, our diminished ability to prevent others from misappropriating our intellectual property may ultimately result in a reduced distinctiveness of our brand in the minds of consumers.
+Added: Defending or enforcing our trademark and trade secret rights, branding practices and other intellectual property could result in the expenditure of significant resources and divert the attention of management, which may materially and adversely affect our business and operating results, even if such defense or enforcement is ultimately successful.
Failure to obtain, maintain, protect, defend or enforce our intellectual property rights, or allegations that we have infringed on, misappropriated or otherwise violated the intellectual property rights of others, could harm our reputation, ability to compete effectively, financial condition and business.
Our success and ability to compete depends in part on our ability to obtain, maintain, protect, defend and enforce our intellectual property.
−Removed: To protect our intellectual property rights, we rely on a combination of trademark laws, copyright laws, trade secret protection, confidentiality agreements and other contractual arrangements with our affiliates, employees, Clients, strategic partners and others.
+Added: To protect our intellectual property rights, we rely on a combination of trademark laws, copyright laws, trade secret protection, confidentiality agreements and other contractual arrangements with our affiliates, employees, Clients, vendors and others.
However, the protective steps that we undertake may be inadequate to deter infringement, misappropriation or other violations of our proprietary information or infringement of our intellectual property.
−Removed: In addition, we may be unable to detect the unauthorized use of our intellectual property rights.
−Removed: Policing unauthorized use of our intellectual property is difficult, expensive and time-consuming, and we may be required to spend significant resources to monitor and protect our intellectual property rights.
+Added: In addition, we may be unable to detect the unauthorized use of our
+Added: intellectual property rights.
Failure to protect our intellectual property adequately could harm our reputation and affect our ability to compete effectively.
−Removed: In addition, even if we initiate litigation against third parties such as legal suits alleging infringement, misappropriation or other violations of our intellectual property, we may not prevail.
Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management.
−Removed: Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights.
−Removed: Additionally, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
An adverse determination of any litigation proceedings could put our intellectual property at risk of being invalidated or interpreted narrowly and could put our related intellectual property at risk of not issuing or being cancelled.
−Removed: There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments.
If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.
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Meanwhile, third parties may assert intellectual property-related claims against us, including claims of infringement, misappropriation or other violation of their intellectual property, which may be costly to defend, could require the payment of damages, legal fees, settlement payments, royalty payments and other costs or damages, including treble damages if we are found to have willfully infringed certain types of intellectual property, and could limit our ability to use or offer certain technologies, products or other intellectual property.
−Removed: Any intellectual property claims, with or without merit, could be expensive, take significant time and divert management’s resources, time and attention from other business concerns.
Successful challenges against us could require us to modify or discontinue our use of technology or business processes where such use is found to infringe on, misappropriate or otherwise violate the rights of others, or require us to purchase licenses from third parties, which may not be available on commercially reasonable terms, or at all.
−Removed: Even if a license is available to us, it could be non-exclusive thereby giving our competitors and other third parties access to the same technologies licensed to us, and we may be required to pay significant upfront fees, milestone payments or royalties, which would increase our operating expenses, any of which could adversely affect our business, financial condition and results of operations.
−Removed: See, for example, our disclosure relating to the 2023 Cyber Incident involving unauthorized access to our servers through our third-party service provider under “—We rely on the efficient, uninterrupted, and secure operation of complex information technology systems and networks to operate our business.
−Removed: Any significant system or network dis ruption due to a breach in the security of our information technology systems could have a negative impact on our reputation, regulatory compliance status, operations, sales and operating results.”
+Added: Additionally, licenses may be costly and non-exclusive.
Improper disclosure of confidential, personal or proprietary data, whether due to human error, misuse of information by employees or vendors, or as a result of security breaches, cyberattacks or other similar incidents with respect to our or our vendors’ systems, could result in regulatory scrutiny, legal liability or reputational harm, and could have an adverse effect on our business or operations.
We maintain confidential, personal and proprietary information relating to our company, our employees and our Clients.
−Removed: This information includes personal information, protected health information and financial information.
We are subject to laws, regulations, rules, industry standards, contractual obligations and other legal obligations relating to the collection, use, retention, security and transfer of this information.
−Removed: These requirements apply to transfers of information among our affiliates, as well as to transactions we enter into with third party vendors.
−Removed: Cybersecurity breaches, including, among other issues, computer viruses, ransomware attacks, fraud, human error, improper access by employees or vendors, phishing campaigns, malware attacks, unauthorized parties gaining access to our information technology systems and similar incidents could disrupt the security of our internal systems and business applications or those of our vendors, impair our ability to provide services to our Clients and protect the privacy of their data, compromise confidential business information, result in intellectual property or other confidential or proprietary information being lost or stolen, including Client, employee or Company data, which could harm our competitive position or reputation or otherwise adversely impact our business.
−Removed: The rapid evolution of emerging technologies such as AI, and any integration of AI in our or any third party’s operations, is expected to pose new or unknown cybersecurity risks and challenges.
−Removed: Our business may be harmed if the AI we use is or alleged to be deficient, inaccurate, inappropriate, or biased, or if the AI results in the infringement of the intellectual property of third parties.
+Added: Cybersecurity breaches could compromise our systems or those of our vendors, disrupt services, expose confidential or proprietary data including Client, employee, or Company information, and damage our reputation or competitive position, potentially causing significant business harm.
+Added: The rapid evolution of emerging technologies such as AI, and any integration of AI in our or any third-party’s operations, poses new or unknown cybersecurity risks and challenges.
+Added: Our business may be harmed if the AI we use is or is alleged to be deficient, inaccurate, inappropriate, or biased, or if the AI results in the infringement of the intellectual property of third parties.
The use of AI applications may result in data leakage or unauthorized exposure of data, including confidential business information, personal information, or other sensitive information, which could result in legal liability or affect our reputation and business.
−Removed: Cybersecurity risks have significantly increased in recent years, in part, because of the proliferation of new technologies, the use of the internet and telecommunications technologies to exchange information and conduct transactions, and the increased sophistication and activities of computer hackers, organized crime, terrorists, and other external parties, including foreign state and state-sponsored actors.
−Removed: Moreover, cybersecurity threats are constantly evolving, which makes it more difficult to detect cybersecurity incidents, assess their severity or impact in a timely manner, and successfully defend against them.
+Added: Cybersecurity threats are constantly evolving, which makes it more difficult to detect cybersecurity incidents, assess their severity or impact in a timely manner, and successfully defend against them.
We cannot provide assurances that our preventative efforts, or those of our vendors or service providers, will be successful, and we may not be able to anticipate all security breaches, cyberattacks or other similar incidents, detect or react to such incidents in a timely manner, implement guaranteed preventive measures against such incidents, or adequately remediate any such incident.
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Nonetheless, we cannot eliminate the risk of human error or guarantee our safeguards against employee, vendor or third-party malfeasance.
−Removed: It is possible that the policies, procedures and technical safeguards we maintain, including our security controls over personal information and training of employees on data security, may not prevent improper access to, disclosure of, or misuse of confidential, personal or proprietary information.
+Added: It is possible that the policies, procedures and technical safeguards we maintain, may not prevent improper access to, disclosure of, or misuse of confidential, personal or proprietary information.
Moreover, while we generally perform cybersecurity due diligence on our key vendors, because we do not control our vendors and our ability to monitor their cybersecurity is limited, we cannot ensure the cybersecurity measures they take will be sufficient to protect any information we share with them.
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This could cause harm to our reputation, create legal exposure, or subject us to liability under laws that protect personal information, resulting in increased costs or loss of revenue.
−Removed: The occurrence of any security breach, cyberattack or other similar incident with respect to our or our vendors’ systems, or our failure to make adequate or timely disclosures to the public, regulators, law enforcement agencies or affected individuals, as applicable, following any such event, could cause harm to our reputation, subject us to additional regulatory scrutiny, expose us to civil litigation, fines, damages or injunctions or subject us to notification obligations or liability under applicable data privacy, cybersecurity and other laws, rules and regulations, resulting in increased costs or loss of commissions and fees, any of which could have a material adverse effect on our business, financial condition and results of operations.
+Added: The occurrence of any security breach, cyberattack or other similar incident with respect to our or our vendors’ systems, or our failure to make adequate or timely disclosures to the public, regulators, law enforcement agencies or affected individuals, as applicable, following any such event, could cause harm to our reputation, subject us to additional regulatory scrutiny, expose us to civil litigation, fines, damages or injunctions or subject us to notification
+Added: obligations or liability under applicable data privacy, cybersecurity and other laws, rules and regulations, resulting in increased costs or loss of commissions and fees, any of which could have a material adverse effect on our business, financial condition and results of operations.
We cannot ensure that any limitations of liability provisions in our agreements with Clients, vendors and other third parties with which we do business would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim in connection with a security breach, cyberattack or other similar incident.
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Data privacy is subject to frequently changing laws, rules and regulations in the various jurisdictions in which we operate.
−Removed: For example, legislators in the United States are proposing new and more robust data privacy and cybersecurity legislation in light of the recent broad-based cyberattacks at a number of companies.
Rapidly developing new technologies, such as generative AI, may result in new laws or changes to existing laws which may affect our business.
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and globally could increase the cost of developing or implementing cybersecurity protections or securing our servers and require us to allocate more resources to improved technologies, adding to our overall costs.
−Removed: Ensuring that our collection, use, retention, protection, transfer, disclosure and other processing of personal information complies with applicable laws, regulations, rules and
−Removed: industry standards regarding data privacy and cybersecurity in relevant jurisdictions can increase operating costs, impact the development of new products or services, and reduce operational efficiency.
+Added: Ensuring that our collection, use, retention, protection, transfer, disclosure and other processing of personal information complies with applicable laws, regulations, rules and industry standards regarding data privacy and cybersecurity in relevant jurisdictions can increase operating costs, impact the development of new products or services, and reduce operational efficiency.
Any actual or perceived failure to adhere to, or successfully implement processes in response to, changing legal or regulatory requirements in this area could result in regulatory fines, penalties or other sanctions, legal liability, including litigation, damage to our reputation in the marketplace, and could adversely affect our business, financial condition and results of operations.
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Instead, the taxable income of TWFG Holding is allocated to the other holders of LLC Units and us.
−Removed: Accordingly, we incur income taxes on our allocable share of any net taxable income and partnership items of TWFG Holding .
+Added: Accordingly, we incur income taxes on our allocable share of any net taxable income of TWFG Holding .
We also incur expenses related to our operations, and will have obligations to make payments under the Tax Receivable Agreement.
−Removed: As the sole managing member of TWFG Holding , TWFG Holding makes distributions to us and the other holders of LLC Units in amounts sufficient to (i) cover taxes payable by us and the other holders of LLC Units allocable to the taxable income of TWFG Holding, (ii) allow us to make any payments required under the Tax Receivable Agreement we entered into as part of the Reorganization Transactions, (iii) fund dividends to our stockholders in accordance with our dividend policy, to the extent that our board of directors declares such dividends and (iv) pay any of our expenses that are not otherwise reimbursed by TWFG Holding.
+Added: TWFG Holding makes distributions to us and the other holders of LLC Units in amounts sufficient to (i) cover taxes payable by us and the other holders of LLC Units allocable to the taxable income of TWFG Holding, (ii) allow us to make any payments required under the Tax Receivable Agreement we entered into as part of the Reorganization Transactions, (iii) fund dividends to our stockholders in accordance with our dividend policy, to the extent that our board of directors declares such dividends and (iv) pay any of our expenses that are not otherwise reimbursed by TWFG Holding.
Deterioration in the financial conditions, earnings or cash flow of TWFG Holding and its subsidiaries for any reason could limit or impair TWFG Holding’s ability to pay such distributions.
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As a result of (i) potential differences in the amount of net taxable income allocable to us and the other holders of LLC Units, (ii) the lower tax rate applicable to corporations than individuals and (iii) the use of an assumed tax rate (based on the higher of the tax rate applicable to individuals or corporations resident in the State of Texas) in calculating TWFG Hold ing’s distribution obligations, we may receive tax distributions significantly in excess of our tax liabilities and obligations to make payments under the Tax Receivable Agreement.
−Removed: Our board of directors will determine the appropriate uses for any excess cash so accumulated, which may include, among other uses, dividends, repurchases of our Class A Common Stock, the payment of obligations under the Tax Receivable Agreement and the payment of other expenses.
+Added: Our board of directors will determine the appropriate uses for any excess cash so accumulated, which may include, among other
+Added: uses, dividends, repurchases of our Class A Common Stock, the payment of obligations under the Tax Receivable Agreement and the payment of other expenses.
We will have no obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders.
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We are controlled by Bunch Holdings whose interests in our business may be different than yours, and certain statutory provisions afforded to stockholders are not applicable to us.
−Removed: Bunch Holdings controls approximately 94% of the combined voting power of our common stock.
+Added: Bunch Holdings controls approximatel y 94% of the combined voting power of our common stock.
This concentration of ownership and voting power may delay, defer or even prevent an acquisition by a third-party or other change of control of our company, which could deprive you of an opportunity to receive a premium for your shares of Class A Common Stock and may make some transactions more difficult or impossible without the support of Bunch Holdings, even if such events are in the best interests of minority stockholders.
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In addition, Bunch Holdings has the ability to designate a majority of the nominees for election to our board of directors, including the nominee for election to serve as Chairman of our board of directors for so long as Bunch Holdings holds at least 10% of the voting power of our common stock (the “Substantial Ownership Requirement”).
−Removed: As a result, Bunch Holdings may not be inclined to permit us to issue additional shares of Class A Common Stock, including for the facilitation of acquisitions, if it would dilute its holdings below the 10% threshold.
We cannot predict whether our multiple-class structure, combined with the concentrated control of Bunch Holdings, will result in a lower or more volatile market price of our Class A Common Stock or in adverse publicity or other adverse consequences.
For example, certain index providers have restrictions on including companies with multiple-class share structures in certain of their indices.
−Removed: For example, FTSE Russell requires new constituents of its indices to have greater than 5% of the company’s voting rights in the hands of public stockholders.
Under such policies, the multiple-class structure of our stock makes us ineligible for inclusion in certain indices and, as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to track those indices do not invest in our Class A Common Stock.
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In addition, Bunch Holdings’ significant ownership in us and resulting ability to effectively control us may discourage a third-party from making a significant equity investment in us, or could discourage transactions involving a change in control, including transactions in which you as a holder of shares of our Class A Common Stock might otherwise receive a premium for your shares over the then-current market price.
−Removed: For so long as Bunch Holdings holds at least a majority of the voting power of our common stock (the “Majority Ownership Requirement”), we have opted out of Section 203 of the General Corporation Law of the State of Delaware, (the “DGCL”), which prohibits a publicly held Delaware corporation from engaging in a business combination transaction with an interested stockholder for a period of three years after the interested stockholder became such unless the transaction fits within an applicable exemption, such as board approval of the business combination or the transaction which resulted in such stockholder becoming an interested stockholder.
−Removed: Therefore, Bunch Holdings is able to transfer control of us to a third party by transferring its shares of our common stock (subject to certain restrictions and limitations), which would not require the approval of our board of directors or our other stockholders.
+Added: For so long as Bunch Holdings holds at least a majority of the voting power of our common stock (the “Majority Ownership Requirement”), we have opted out of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”).
+Added: Section 203 generally prohibits a publicly held Delaware corporation from engaging in a business combination transaction with an interested stockholder for a period of three years after the stockholder becomes interested, unless the transaction meets an applicable exemption, such as prior board approval.
+Added: As a result of this opt-out, Bunch Holdings can transfer control of our Company to a third-party by selling its shares without requiring approval from our board of directors or other stockholders.
Our certificate of incorporation provides that, to the fullest extent permitted by law, the doctrine of “corporate opportunity” under Delaware law will only apply against our directors and officers and their respective affiliates for competing activities related to insurance brokerage activities.
−Removed: This doctrine will not apply to any business activity other than insurance brokerage activities.
+Added: This doctrine will not apply to any business activity
+Added: other than insurance brokerage activities.
Furthermore, Bunch Holdings has business relationships outside of our business.
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Because the other holders of LLC Units hold their economic interest in our business primarily through TWFG Holding, the other holders of LLC Units may have conflicting interests with holders of shares of our Class A Common Stock.
−Removed: For example, the other holders of LLC Units may have different tax positions from us, which could influence their decisions regarding
−Removed: whether and when we should dispose of assets or incur new or refinance existing indebtedness, especially in light of the existence of the Tax Receivable Agreement, and whether and when we should respond to a breach of any of our material obligations under the Tax Receivable Agreement, undergo certain changes of control for purposes of the Tax Receivable Agreement or terminate the Tax Receivable Agreement.
+Added: For example, the other holders of LLC Units may have different tax positions from us, which could influence their decisions regarding whether and when we should dispose of assets or incur new or refinance existing indebtedness, especially in light of the existence of the Tax Receivable Agreement, and whether and when we should respond to a breach of any of our material obligations under the Tax Receivable Agreement, undergo certain changes of control for purposes of the Tax Receivable Agreement or terminate the Tax Receivable Agreement.
In addition, the structuring of future transactions may take into consideration these tax or other considerations even where no similar benefit would accrue to us.
−Removed: Further, pursua nt to the Bipartisan Budget Act of 2015, f or tax years beginning after December 31, 2017, if the Internal Revenue Service (“IRS”) makes audit adjustments to TWFG Holding’s U.S.
+Added: Further, pursuant to the Bipartisan Budget Act of 2015, for tax years beginning after December 31, 2017, if the Internal Revenue Service (“IRS”) makes audit adjustments to TWFG Holding’s U.S.
federal income tax returns, it may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from TWFG Holding rather than from the other holders (former or current) of LLC Units directly, in which case we may economically bear a portion of such taxes (including any applicable penalties and interest) despite that we did not economically benefit from the income giving rise to such taxes.
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We are a “controlled company” within the meaning of the Nasdaq rules and, as a result, qualify for, and will rely on, exemptions from certain corporate governance requirements that provide protection to the stockholders of companies that are subject to such corporate governance requirements.
−Removed: Bunch Holdings beneficially owns more than 50% of the voting power for the election of members of our board of directors.
−Removed: As a result, we are a “controlled company” within the meaning of the corporate governance standards of the Nasdaq rules.
−Removed: Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain Nasdaq corporate governance requirements.
−Removed: As a controlled company, we rely on the exemption from the Nasdaq standards that enables us not to have director nominees selected or recommended for our board of directors be approved by either a majority of our independent directors or a nominating committee.
−Removed: As a consequence of our reliance on this exemption from the Nasdaq standard provided to “controlled companies,” you do not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq.
+Added: Bunch Holdings beneficially owns more than 50% of the voting power for the election of our directors.
+Added: As a result, we are considered a “controlled company” under Nasdaq corporate governance standards and may elect not to comply with certain Nasdaq corporate governance requirements.
+Added: We have established and maintain an audit committee comprised of all independent directors, in compliance with the applicable Nasdaq and SEC requirements, and have also established and maintain a compensation committee comprised of all independent directors.
+Added: As a controlled company, however, we have elected to rely on the exemption from the Nasdaq requirements that allows us not to have director nominees approved by a majority of independent directors or a nominating committee.
+Added: As a result, you do not have the same governance protections as stockholders of companies subject to all Nasdaq corporate governance requirements.
We are required to pay the other holders of LLC Units for certain tax benefits we may receive, and the amounts we may pay could be significant.
Pursuant to the Tax Receivable Agreement we are required to pay the other holders of LLC Units 85% of the amount of cash savings, if any, in U.S.
−Removed: federal, state and local income tax or franchise tax that we actually realize as a result of (i) any increase in tax basis in TWFG Holding’s assets resulting from (a) the purchase of LLC Units from any of the other holders of LLC Units using the net proceeds from any future offering of shares of our Class A Common Stock, (b) future taxable redemptions or exchanges by the other holders of LLC Units for shares of our Class A Common Stock or cash or (c) payments under the Tax Receivable Agreement and (ii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable Agreement.
+Added: federal, state and local income tax or franchise tax that we actually realize as a result of (i) any increase in tax basis in TWFG Holding’s assets resulting from (a) the purchase of LLC Units from
+Added: any of the other holders of LLC Units using the net proceeds from any future offering of shares of our Class A Common Stock, (b) future taxable redemptions or exchanges by the other holders of LLC Units for shares of our Class A Common Stock or cash or (c) payments under the Tax Receivable Agreement and (ii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable Agreement.
The payment obligations under the tax receivable agreement are our obligations and not obligations of TWFG Holding.
We expect that, as a result of the increases in the tax basis of the tangible and intangible assets of TWFG Holding attributable to taxable redemptions, exchanges or purchases of LLC Units from the other holders of LLC Units, the payments that we may make to the other holders of LLC Units could be substantial .
−Removed: The actual increases in tax basis
−Removed: with respect to future taxable redemptions, exchanges or purchase s of LLC Units, as well as the amount and timing of any payments we are required to make under the Tax Receivable Agreement in respect of future taxable redemptions, exchanges or purchases of LLC Units, will vary depending on a number of factors, including the market value of our Class A Common Stock at the time of purchase, redemption or exchange, the prevailing U.S.
+Added: The actual increases in tax basis with respect to future taxable redemptions, exchanges or purchases of LLC Units, as well as the amount and timing of any payments we are required to make under the Tax Receivable Agreement in respect of future taxable redemptions, exchanges or purchases of LLC Units, will vary depending on a number of factors, including the market value of our Class A Common Stock at the time of purchase, redemption or exchange, the prevailing U.S.
federal income tax rates applicable to us over the life of the Tax Receivable Agreement (as well as the assumed combined state and local tax rate), the amount and timing of the taxable income that we generate in the future and the extent to which future redemptions, exchanges or purchases of LLC Units are taxable transactions.
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Risks relating to ownership of our Class A Common Stock
−Removed: The high/low vote structure of our common stock has the effect of concentrating voting control with Bunch Holdings, which will limit your ability to influence the outcome of important transactions,
−Removed: including a change in control, and Bunch Holdings’ interests may conflict with ours or yours in the future.
+Added: The high/low vote structure of our common stock has the effect of concentrating voting control with Bunch Holdings, which will limit your ability to influence the outcome of important transactions, including a change in control, and Bunch Holdings’ interests may conflict with ours or yours in the future.
Our non-economic Class C Common Stock has ten votes per share, and our Class A Common Stock, has one vote per share.
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Bunch Holdings also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.
−Removed: In addition, Bunch Holdings may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, respectively, could enhance its investment, even though such transactions might involve risks to you or may not prove beneficial.
+Added: In addition, Bunch Holdings may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you or may not prove beneficial.
Future transfers of LLC Units by the holders of non-economic Class C Common Stock will result in the corresponding shares of non-economic Class C Common Stock converting into shares of non-economic Class B Common Stock, subject to limited exceptions, including transfers to Richard F.
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These provisions could also make it more difficult for stockholders to nominate directors for election to our board of directors and take other corporate actions.
−Removed: Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders and the federal district courts of the United States as the exclusive forum for litigation arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
−Removed: Pursuant to our certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the United States District Court for the District of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any current or former director, officer or other employee of ours or our stockholders, or a claim of aiding and abetting any such breach of fiduciary duty, (iii) any action asserting a claim against us or any director, officer or other employee of ours arising pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws (as either may be amended, restated, modified, supplemented or waived from time to time) (iv) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or our bylaws (as either may be amended), (v) any action asserting a claim against us or any director, officer or other employee of ours that is governed by the internal affairs doctrine or (vi) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL.
+Added: Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders and the federal district courts of the U.S.
+Added: as the exclusive forum for litigation arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
+Added: Pursuant to our certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the U.S.
+Added: District Court for the District of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any current or former director, officer or other employee of ours or our stockholders, or a claim of aiding and abetting any such breach of fiduciary duty, (iii) any action asserting a claim against us or any director, officer or other employee of ours arising pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws (as either may be amended, restated, modified, supplemented or waived from time to time) (iv) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or our bylaws (as either may be amended), (v) any action asserting a claim against us or any director, officer or other employee of ours that is governed by the internal affairs doctrine or (vi) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL.
This provision will not apply to any action or proceeding asserting a claim under the Securities Act or the Exchange Act for which the federal courts have exclusive jurisdiction or any other claim for which the federal courts have exclusive jurisdiction.
−Removed: Furthermore, our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, against us or any director, officer or other employee of ours.
+Added: Furthermore, our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the U.S.
+Added: will be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, against us or any director, officer or other employee of ours.
However, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce a duty or liability created by the Securities Act or the rules and regulations thereunder;
accordingly, we cannot be certain that a court would enforce such provision.
−Removed: Our certificate of incorporation provides that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the provisions of our certificate of incorporation described above;
+Added: Our certificate of incorporation
+Added: provides that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the provisions of our certificate of incorporation described above;
however, our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
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If the enforceability of our forum selection provision were to be challenged, we may incur additional costs associated with resolving such a challenge.
−Removed: While we currently have no basis to expect any such challenge would be successful, if a court were to find our forum selection provision to be inapplicable or unenforceable, we may incur additional costs associated with having to litigate in other jurisdictions, which could have an adverse effect on our business, financial condition and results
−Removed: of operations and result in a diversion of the time and resources of our employees, management and board of directors.
−Removed: Our operating results and stock price may be volatile.
+Added: While we currently have no basis to expect any such challenge would be successful, if a court were to find our forum selection provision to be inapplicable or unenforceable, we may incur additional costs associated with having to litigate in other jurisdictions, which could have an adverse effect on our business, financial condition and results of operations and result in a diversion of the time and resources of our employees, management and board of directors.
+Added: Our operating results and stock price may be volatile, and the volatility in our stock price could adversely affect our ability to execute our growth strategy and retain key personnel.
Securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations.
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• additions or departures of key personnel;
+Added: • changes in the insurance distribution market driven by technological advancements;
• regulatory or political developments;
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Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.
+Added: We have historically used, and may in the future use, shares of our Class A Common Stock as consideration for acquisitions or strategic investments.
+Added: If our Class A Common Stock price is volatile of declines significantly, the use of our equity as an acquisition currency may be less attractive to potential targets, who may instead demand cash or a greater number of shares.
+Added: Issuing additional shares under these circumstances would result in significant dilution to our existing stockholders.
+Added: Furthermore, a depressed stock price may limit our ability to execute our
+Added: growth strategy through M&A, as we may be unable to consummate transactions on terms that are favorable to us or accretive to our earnings.
+Added: Additionally, our ability to retain talent depends significantly on our use of equity-based compensation, including restricted stock units and performance stock units.
+Added: If our stock price experiences significant volatility or a sustained decline, the retention value and perceived worth of these awards may decrease, potentially resulting in diminished employee morale and increased turnover.
+Added: Such conditions may require us to offer more generous equity awards or increase cash compensation to remain competitive, which could increase our operating expenses and adversely affect our results of operations.
+Added: If we are unable to effectively incentivize our workforce due to stock price fluctuations, our business, financial condition, and culture may be materially harmed.
Our ability to pay dividends to our stockholders may be limited by our holding company structure, contractual restrictions and regulatory requirements.
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Our board of directors will periodically review the cash generated from our business and the capital expenditures required to finance our growth plans and determine whether to declare periodic dividends to our stockholders.
−Removed: Our board of directors will consider general economic and business conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, including restrictions and covenants contained in
−Removed: our debt agreements, business prospects and other factors that our board of directors considers relevant.
+Added: Our board of directors will consider general economic and business conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, including restrictions and covenants contained in our debt agreements, business prospects and other factors that our board of directors considers relevant.
Accordingly, we may not be able to pay dividends even if our board of directors would otherwise deem it appropriate.
−Removed: See “Dividend policy,” “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources.”
+Added: See “Dividend policy,” and “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources.”
If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our Class A Common Stock, the price of our Class A Common Stock could decline.
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We are classified as an “emerging growth company” under the JOBS Act.
−Removed: For as long as we are an emerging growth company, which may be up to five full fiscal years, unlike other public companies, we will not be required to, among other things:
+Added: For as long as we are an emerging growth company, which may be up to five full fiscal years, unlike other public companies, we will not be required
+Added: to, among other things:
(i) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
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or (iv) hold nonbinding advisory votes on executive compensation.
−Removed: We will remain an emerging growth company for up to five years, although we will lose that status earlier if we have equal to or more than $1.235 billion of revenues in a fiscal year, have equal to or more than $700.0 million in market value of our common stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period.
+Added: We will remain an emerging growth company up to the last day of the fiscal year following the fifth anniversary of the IPO, although we will lose that status earlier if we have equal to or more than $1.235 billion of revenues in a fiscal year, have equal to or more than $700.0 million in market value of our common stock held by non-affiliates, issue more than $1.0 billion of non-convertible debt over a three-year period, or the last day of the fiscal year in which we become a “large accelerated filer,” as defined in Rule 12b-2 promulgated under the Exchange Act.
To the extent that we rely on any of the exemptions a vailable to emerging growth companies, you will receive less information about our executive compensation and internal control over financial reporting than issuers that are not emerging growth companies.
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Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
−Removed: We are in the process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 of the Sarbanes-Oxley Act.
−Removed: We may not be able to complete our evaluation,
−Removed: testing and any required remediation in the time required.
+Added: We have completed the documentation and evaluation necessary to comply with Section 404(a) of the Sarbanes-Oxley Act and are required to assess the effectiveness of our internal control over financial reporting as of the end of the fiscal year.
+Added: However, our internal controls may not be effective, and we may not be able to complete any required remediation in the time required.
If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our Class A Common Stock to decline, and we may be subject to investigation or sanctions by the SEC.
−Removed: We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other requirements, the effectiveness of our internal control over financial reporting as of the end of the fiscal year that coincides with the filing of our second annual report on Form 10-K.
−Removed: This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
+Added: Pursuant to Section 404(a) of the Sarbanes-Oxley Act, we are required to include in this Annual Report a report of management on the effectiveness of our internal control over financial reporting as of December 31, 2025.
+Added: This assessment requires disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
We are also required to disclose changes made in our internal control and procedures on a quarterly basis.
−Removed: However, our independent registered public accounting firm will not be required to report on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an “emerging growth company” as defined in the JOBS Act if we take advantage of the exemptions contained in the JOBS Act.
+Added: As an emerging growth company, our independent registered public accounting firm is not required to, and does not, provide an attestation report on the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act.
+Added: We may remain exempt from this requirement until we are no longer an emerging growth company.
At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.
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The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect our business and stock price.
−Removed: To comply with public company requirements, we are undertaking various costly and time-consuming actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff, which may adversely affect our business, financial condition, results of operations, cash flows and prospects.
+Added: To comply with public company requirements, we are undertaking various costly and time-consuming actions, such as implementing and enhancing internal controls, procedures and information systems, and hiring and retaining qualified corporate and finance support personnel, which may adversely affect our business, financial condition, results of operations, cash flows and prospects.
The requirements of being a public c ompany may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an “emerging growth company.”
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We have invested, and intend to further invest, resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of our management’s time and attention from revenue-generating activities to compliance activities.
−Removed: If our efforts to comply with new
−Removed: laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and there could be a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
+Added: If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and there could be a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
+Added: We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long‑term stockholder value, and our Class A Common Stock has a comparably lower trading volume, which could amplify the program’s effects on market price and volatility.
+Added: Our Board has authorized a share repurchase program that does not obligate us to repurchase any specific number of shares and may be suspended, modified, or terminated at any time without notice.
+Added: We cannot guarantee that we will repurchase shares at all, that the program will be fully consummated, or that any repurchases will enhance long‑term stockholder value.
+Added: The timing and amount of repurchases, if any, will depend on a variety of factors, including the trading price of our Class A Common Stock, trading volume, working capital and other liquidity requirements, general market conditions, and alternative uses of capital.
+Added: Any repurchases we do complete will reduce our cash and liquidity, and could limit our financial flexibility.
+Added: Our Class A Common Stock has a comparably lower trading volume, which could magnify the impact of our repurchase activity on the market price of the stock and increase its volatility.
+Added: Low trading volume may also make it more difficult for stockholders to sell their shares without adversely affecting the market price.
+Added: Share repurchases conducted in a lower trading volume market could contribute to short‑term increases in the trading price of our Class A Common Stock, which may not be sustainable.
+Added: Conversely, any announcement of a suspension, reduction, or termination of the repurchase program could cause the market price of our Class A Common Stock to decline, particularly given the limited liquidity of our shares.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.