Financial Analysis

Commitments and Contingencies We have an agreement with a bank for an agent loan participation program. The maximum amount of loans and guarantees that could be funded by us through this program is $150 million. We have committed to fund a minimum of 30% of each loan executed under the program. As of June 30, 2026, our portion of the outstanding loans executed under this agreement is $68.7 million. Additionally, we have agreed to guarantee a portion of the funding provided by the other participants in the program in the event of default. As of June 30, 2026, our maximum potential amount of future payments on the guaranteed portion is $24.3 million. All loan payments under the participation program are current as of June 30, 2026. We also have contingent obligations for guarantees related to certain real estate development projects supporting revitalization efforts in our community. As of June 30, 2026, our maximum potential obligation related to guarantees is $6.2 million. We are involved in litigation arising in the ordinary course of conducting business. In accordance with current accounting standards for loss contingencies and based upon information currently known to us, we establish reserves for litigation when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss or range of loss can be reasonably estimated. When no amount within the range of loss is a better estimate than any other amount, we accrue the minimum am …

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Bank Line of Credit We have access to a $100 million bank revolving line of credit with a $25 million letter of credit sublimit that expires on November 1, 2029. As of June 30, 2026, a total of $99.2 million remains available under the facility due to $0.8 million outstanding letters of credit, which reduce the availability for letters of credit to $24.2 million. We had no borrowings outstanding on our line of credit as of June 30, 2026. Investments with a fair value of $110.5 million were pledged as collateral on the line of credit at June 30, 2026. These investments have no trading restrictions and are reported as available-for-sale securities and cash and cash equivalents on our Consolidated Statement of Financial Position as of June 30, 2026. The bank requires compliance with certain covenants, which include leverage ratios and debt restrictions. We are in compliance with all covenants at June 30, 2026.

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The following table disaggregates revenue by our two performance obligations: Three months ended June 30, Six months ended June 30, (in thousands) 2026 2025 2026 2025 Management fee revenue - policy issuance and renewal services $ 862,879 $ 823,853 $ 1,649,278 $ 1,578,902 Management fee revenue - administrative services 19,619 18,296 39,094 35,941 Administrative services reimbursement revenue 201,554 212,644 401,650 422,917 Total revenue from administrative services $ 221,173 $ 230,940 $ 440,744 $ 458,858

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"Fair Value Financial instruments carried at fair value Our available-for-sale and equity securities are recorded at fair value, which is the price that would be received to sell the asset in an orderly transaction between willing market participants as of the measurement date. Valuation techniques used to derive the fair value of our available-for-sale and equity securities are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources. Unobservable inputs reflect our own assumptions regarding fair market value for these securities. Financial instruments are categorized based upon the following characteristics or inputs to the valuation techniques: Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 Unobservable inputs for the asset or liability. Estimates of fair values for our investment portfolio are obtained primarily from a nationally recognized pricing service. Our Level 1 securities are valued using an exchange traded price provided by the pricing service. Pricing service valuations for Level 2 securities include multiple verifiable, observable inputs including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark se …

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Income Taxes Income tax expense is provided on an interim basis based upon our estimate of the annual effective income tax rate, adjusted each quarter for discrete items. For the three months ended June 30, 2026 and 2025, our effective tax rate was 21.0% and 20.9%, respectively. For the six months ended June 30, 2026 and 2025, our effective tax rate was 20.9% and 20.8%, respectively.

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"Recently issued accounting standards In November 2024, the Financial Accounting Standards Board (""FASB"") issued Accounting Standards Update (""ASU"") 2024-03, ""Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses"" , which requires entities to disclose disaggregated information about certain income statement expense line items. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments can be applied on either a prospective or retrospective basis. This will have no impact on our consolidated financial statements, and we are currently evaluating the impact of adoption on our disclosures. In September 2025, the FASB issued ASU 2025-06, ""Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software"" , which removes all references to prescriptive and sequential software development project stages and requires an entity to start capitalizing software costs when management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. The amendments in this ASU are required to be adopted for fiscal years beginning after Decem …

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"Postretirement Benefits Pension plans Our pension plans consist of a noncontributory defined benefit pension plan covering substantially all employees and an unfunded supplemental employee retirement plan (""SERP"") for certain members of executive and senior management. The pension plan provides benefits to covered individuals satisfying certain age and service requirements. The defined benefit pension plan and SERP each provide benefits through a final average earnings formula. Although we are the sponsor of these postretirement plans and record the funded status of these plans, there are reimbursements between us and the Exchange and its insurance subsidiaries for their allocated share of pension cost. These reimbursements represent pension benefits for employees performing administrative services and an allocated share of plan cost for employees in departments that support the administrative functions. For the six months ended June 30, 2026, the Exchange and its insurance subsidiaries reimbursed us for approximately 61% of the annual defined benefit pension cost and 33% of the annual SERP cost. For our funded pension plan, amounts are settled in cash for the portion of pension cost allocated to the Exchange and its insurance subsidiaries. For our unfunded SERP, we pay the obligations when due and amounts are settled in cash between entities when there is a payout. Our defined benefit pension plan funding policy is generally to contribute an amount equal to the greater of …

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Revenue The majority of our revenue is derived from the subscribers agreement between us and the subscribers (policyholders) at the Exchange. In accordance with the subscribers agreement, we retain a management fee calculated as a percentage, not to exceed 25%, of all direct and affiliated assumed written premiums of the Exchange. We allocate a portion of our management fee revenue, currently 25% of the direct and affiliated assumed written premiums of the Exchange, between the two performance obligations we have under the subscribers agreement. The first performance obligation is to provide policy issuance and renewal services to the subscribers (policyholders) at the Exchange, and the second is to act as attorney-in-fact on behalf of the subscribers at the Exchange, as well as the service provider for the Exchange's insurance subsidiaries, with respect to all administrative services. The transaction price, including management fee revenue and administrative services reimbursement revenue, includes variable consideration and is allocated based on the estimated standalone selling prices developed using industry information and other available information for similar services. A constraining estimate of variable consideration exists related to the potential for management fees to be returned if a policy were to be cancelled mid-term. Management fees are returned to the Exchange when policyholders cancel their insurance coverage mid-term and premiums are refunded to them. The c …

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"Segment Information We have one reportable segment: management operations. All segment revenue is derived in the United States, the majority of which is from the subscribers agreement between us and the subscribers (policyholders) at the Exchange, our sole customer, as further described in Note 3, ""Revenue"". Our chief operating decision maker (""CODM"") is our Executive Council, which includes our Chief Executive Officer (""CEO""), Chief Financial Officer, executive vice presidents and certain senior vice presidents reporting directly to the CEO as applicable. The CODM evaluates performance and decides how to allocate resources for the management operations segment based on net income, as reported in our Consolidated Statements of Operations. Net income is used to monitor budget versus actual results. Total assets as reported in our Consolidated Statements of Financial Position, all of which are located in the United States, are reviewed by the CODM for purposes of decision making. The accounting policies of our management operations segment are the same as those described in Note 2, ""Significant Accounting Policies, of Notes to Consolidated Financial Statements"" included in our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on February 23, 2026. Beginning in the first quarter of 2026, the significant segment expense categories included in the financial information regularly provided to the CODM were revised to align with the curren …

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Subsequent Events No items were identified in this period subsequent to the financial statement date that required adjustment or additional disclosure.

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