U.S. state insurance laws and regulations prescribe accounting practices for determining statutory net income and capital and surplus for insurance companies. In addition, state regulators may permit statutory accounting practices ("SAP") that differ from prescribed practices. SAP prescribed or permitted by regulatory authorities for the Company’s Insurance Company Subsidiaries differ from GAAP. The principal differences between SAP and GAAP as they relate to the financial statements of the Company’s Insurance Company Subsidiaries are (i) policy acquisition costs are expensed as incurred under SAP, whereas they are deferred and amortized under GAAP, (ii) deferred tax assets are subject to more limitations regarding what amounts can be recorded under SAP and (iii) on the Company's Consolidated Balance Sheets, reinsurance recoverables on reserves are presented as an asset under GAAP, but reduce gross unpaid losses and loss adjustment expenses under SAP and (iv) bonds are recorded at amortized cost under SAP and fair value under GAAP.

Risk-Based Capital ("RBC") requirements as promulgated by the National Association of Insurance Commissioners (‘‘NAIC’’) require property and casualty insurers to maintain minimum capitalization levels determined based on formulas incorporating various business risks (e.g., investment risk, underwriting profitability, etc.) of the Insurance Company Subsidiaries. As of December 31, 2025, TIC fell within the Company Action Level of the RBC formula. Management has provided a plan to its domiciliary regulator that showed how TIC will get above the minimum level requirements. The Company made capital contributions to TIC in 2025 and 2024 totaling $26.1 million and $14.0 million, respectively. Additionally as part of this plan, management significantly decreased its writings in TIC. TIC is also subject to additional regulatory monitoring requirements as a result of the Company not being above the minimum required RBC levels as of December 31, 2025. In the event there are losses in excess of expectations, it may take longer and more capital than expected to bring TIC back into full compliance. This could require an additional reduction in premium volume and adversely impact underwriting results, our liquidity and ability to repay debt. In the event TIC does not regain compliance, the director may suspend, revoke, or limit the certificate of authority of the Company.

Summarized 2025 and 2024 statutory basis information for the non-captive Insurance Company Subsidiaries, which differs from generally accepted accounting principles, is as follows (dollars in thousands).


	TIC			WPIC
2025
Statutory capital and surplus	$	42,555		$	8,173
RBC authorized control level		18,028			2,063
Statutory net income (loss)		(8,098	)		(1,859	)
RBC %		236	%		396	%


	TIC			WPIC
2024
Statutory capital and surplus	$	33,482		$	10,045
RBC authorized control level		21,424			3,301
Statutory net income (loss)		(15,692	)		(112	)
RBC %		156	%		304	%

Effective December 31, 2025, PHI contributed all of the capital stock of WPIC to TIC. Accordingly, TIC's $42.6 million of statutory capital and surplus as of December 31, 2025, includes WPIC's $8.2 million of capital and surplus.

The state insurance statutes in which the Insurance Company Subsidiaries are domiciled limit the amount of dividends that they may pay annually without first obtaining regulatory approval. Generally, the limitations are based on the greater of statutory net income for the preceding year or 10% of statutory surplus at the end of the preceding year. The Insurance Company Subsidiaries must receive regulatory approval in order to pay dividends to the Parent Company from its Insurance Company Subsidiaries. No dividends were issued from the Insurance Companies in 2025 and 2024. There was a $4.0 million return of capital paid from WPIC to the Parent Company in 2025.