Kestrel Group Reports Third Quarter 2025 Financial Results

KESTREL GROUP LTD

CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars, except share and per share data)

September 30,
2025

December 31,
2024

(Unaudited)

(Audited)

ASSETS

Investments:

Fixed maturities, available-for-sale, at fair value (Amortized cost 2025 - $197,941)

$          198,658

$                    —

Equity securities, at fair value (Cost: 2025 - $11,145)

11,350

—

Equity method investments

32,518

—

  Other investments

171,791

—

Total investments

414,317

—

Cash and cash equivalents

12,890

4,286

Restricted cash and cash equivalents

27,634

—

Accrued investment income

5,076

—

Reinsurance balances receivable, net

9,706

—

Reinsurance recoverable on unpaid losses

492,790

—

Net loan receivable from related party

101,689

—

Intangible assets

10,370

—

Funds withheld receivable

11,941

—

Other assets

24,872

1,224

Assets held for sale

19,155

—

Total assets

$       1,130,440

$              5,510

LIABILITIES

Reserve for loss and loss adjustment expenses

$          677,667

$                    —

Unearned premiums

19,615

—

Liability for securities purchased

11,692

—

Accrued expenses and other liabilities

102,874

904

Senior notes - principal amount

262,361

—

Less: unamortized fair value adjustment

88,277

—

Senior notes, net

174,084

—

Liabilities held for sale

734

—

Total liabilities

986,666

904

Commitments and Contingencies

EQUITY

Common shares

100

27

Additional paid-in capital

177,101

10,107

Accumulated other comprehensive loss

(916)

—

Retained earnings (accumulated deficit)

18,952

(5,528)

Treasury shares, at cost

(51,463)

—

Total Equity

143,774

4,606

Total Liabilities and Equity

$       1,130,440

$              5,510

Book value per common share⁽¹⁾

$              18.57

$                 1.67

Common shares outstanding

7,741,943

2,749,996

KESTREL GROUP LTD

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands of U.S. dollars, except share and per share data)

For the Three Months Ended
September 30,

For the Nine Months Ended
September 30,

2025

2024

2025

2024

Revenues:

Gross premiums written

$          3,760

$               —

$         4,856

$               —

Net premiums written

$          3,895

$               —

$         4,990

$               —

Change in unearned premiums

2,941

—

4,268

—

Net premiums earned

6,836

—

9,258

—

Fee revenue

1,621

700

2,972

2,457

Net investment income

3,494

52

5,059

170

Net realized and unrealized investment gains

5,494

—

6,552

—

Total revenues

17,445

752

23,841

2,627

Expenses:

Net loss and loss adjustment expenses

10,406

—

4,445

—

Commission and other acquisition expenses

1,718

—

2,112

—

General and administrative expenses

10,783

1,181

17,006

3,980

Total expenses

22,907

1,181

23,563

3,980

Other expenses

Interest and amortization expenses

4,128

—

5,647

—

Change in fair value of earn out liability

(2,679)

—

—

—

Gain on bargain purchase

—

—

(73,590)

—

Foreign exchange and other (gains) losses

(2,854)

—

2,155

—

Total other expenses

(1,405)

—

(65,788)

—

Net (loss) income before income taxes

(4,057)

(429)

66,066

(1,353)

Less: income tax expense

7

—

102

—

Interest in loss of equity method investments

(24)

—

(24)

—

Net (loss) income from continuing operations

(4,088)

(429)

65,940

(1,353)

Loss from discontinued operations, net of income tax

(965)

—

(1,460)

—

Net (loss) income

$        (5,053)

$           (429)

$       64,480

$       (1,353)

Basic and diluted (loss) earnings per share from continuing operations

$          (0.53)

$          (0.16)

$         12.99

$          (0.49)

Basic and diluted loss per share from discontinued operations

(0.12)

—

(0.29)

—

Basic and diluted (loss) earnings per share attributable to Kestrel common shareholders

$          (0.65)

$          (0.16)

$         12.70

$          (0.49)

Annualized return on average common equity

(13.6) %

(36.3) %

116.2 %

(35.0) %

Weighted average number of common shares - basic and diluted

7,741,943

2,749,996

5,053,828

2,749,996

KESTREL GROUP LTD

SUPPLEMENTAL FINANCIAL DATA - SEGMENT INFORMATION (Unaudited)

(In thousands of U.S. dollars)

For the Three Months Ended September 30, 2025

Legacy
Reinsurance

Program
Services

Total

Gross premiums written

$              3,760

$                   —

$              3,760

Net premiums written

$              3,895

$                   —

$              3,895

Net premiums earned

$              6,836

$                   —

$              6,836

Fee revenue

—

1,621

1,621

Net loss and loss adjustment expenses ("loss and LAE")

(10,406)

—

(10,406)

Commission and other acquisition expenses

(1,718)

—

(1,718)

General and administrative expenses⁽²⁾

(3,689)

(664)

(4,353)

Underwriting loss and fee income⁽³⁾

$            (8,977)

$                 957

(8,020)

Reconciliation to net loss from continuing operations

Net investment income and net realized and unrealized investment gains

8,988

Interest and amortization expenses

(4,128)

Change in fair value of earn out liability

2,679

Foreign exchange and other gains, net

2,854

Other general and administrative expenses⁽²⁾

(6,430)

Income tax expense

(7)

Interest in loss of equity method investments

(24)

Net loss from continuing operations

$            (4,088)

For the Three Months Ended September 30, 2024

Legacy
Reinsurance

Program
Services

Total

Fee revenue

$                   —

$                 700

$             700

General and administrative expenses⁽²⁾

—

(590)

(590)

Fee income⁽⁴⁾

$                   —

$                 110

110

Reconciliation to net loss

Net investment income

52

Other general and administrative expenses⁽²⁾

(591)

Net loss

$           (429)

KESTREL GROUP LTD

SUPPLEMENTAL FINANCIAL DATA - SEGMENT INFORMATION (Unaudited)

(In thousands of U.S. dollars)

For the Nine Months Ended September 30, 2025

Legacy
Reinsurance

Program
Services

Total

Gross premiums written

$              4,856

$                   —

$          4,856

Net premiums written

$              4,990

$                   —

$          4,990

Net premiums earned

$              9,258

$                   —

$          9,258

Fee revenue

—

2,972

2,972

Net loss and LAE

(4,445)

—

(4,445)

Commission and other acquisition expenses

(2,112)

—

(2,112)

General and administrative expenses⁽²⁾

(5,432)

(2,003)

(7,435)

Underwriting loss and fee income⁽³⁾

$            (2,731)

$                 969

(1,762)

Reconciliation to net income from continuing operations

Net investment income and net realized and unrealized investment gains

11,611

Interest and amortization expenses

(5,647)

Gain on bargain purchase

73,590

Foreign exchange and other losses, net

(2,155)

Other general and administrative expenses⁽²⁾

(9,571)

Income tax expense

(102)

Interest in loss from equity method investments

(24)

Net income from continuing operations

$        65,940

For the Nine Months Ended September 30, 2024

Legacy
Reinsurance

Program
Services

Total

Fee revenue

$                   —

$              2,457

$          2,457

General and administrative expenses⁽²⁾

—

(1,990)

(1,990)

Fee income

$                   —

$                 467

467

Reconciliation to net loss

Net investment income

170

Other general and administrative expenses⁽²⁾

(1,990)

Net loss

$        (1,353)

KESTREL GROUP LTD

NON-GAAP FINANCIAL MEASURES (Unaudited)

(In thousands of U.S. dollars, except share and per share data)

For the Three Months Ended
September 30,

For the Nine Months Ended
September 30,

2025

2024

2025

2024

Non-GAAP operating loss ⁽⁴⁾

$       (15,091)

$           (429)

$      (12,023)

$        (1,353)

Non-GAAP basic and diluted operating loss per common share attributable to Kestrel common shareholders⁽⁴⁾

$           (1.95)

$          (0.16)

$          (2.38)

$          (0.49)

Annualized non-GAAP operating return on average adjusted common equity⁽⁵⁾

(40.7) %

(36.3) %

(21.7) %

(35.0) %

Reconciliation of net loss to non-GAAP operating loss:

Net (loss) income

$         (5,053)

$           (429)

$        64,480

$        (1,353)

Add (subtract):

Net realized and unrealized investment gains

(5,494)

—

(6,552)

—

Foreign exchange and other (gains) losses

(2,854)

—

2,155

—

Interest in loss of equity method investments

24

—

24

—

Bargain purchase gain

—

—

(73,590)

—

 Net loss from discontinued operations

965

—

1,460

—

Change in fair value of earn out consideration

(2,679)

—

—

—

Non-GAAP operating loss ⁽⁴⁾

$       (15,091)

$           (429)

$      (12,023)

$        (1,353)

Weighted average number of common shares - basic and diluted

7,741,943

2,749,996

5,053,828

2,749,996

Reconciliation of diluted (loss) earnings per share attributable to Kestrel common
shareholders to non-GAAP diluted operating loss per share attributable to Kestrel
common shareholders:

Diluted (loss) earnings per share attributable to common shareholders

$           (0.65)

$          (0.16)

$          12.70

$          (0.49)

Add (subtract):

Net realized and unrealized investment gains

(0.71)

—

(1.29)

—

Foreign exchange and other (gains) losses

(0.37)

—

0.44

—

Interest in loss of equity method investments

—

—

0.01

—

Bargain purchase gain

—

—

(14.54)

—

 Net loss from discontinued operations

0.13

—

0.30

—

Change in fair value of earn out consideration

(0.35)

—

—

—

Non-GAAP diluted operating loss per share attributable to common shareholders⁽⁴⁾

$           (1.95)

$          (0.16)

$          (2.38)

$          (0.49)

KESTREL GROUP LTD

NON-GAAP FINANCIAL MEASURES (Unaudited)

(In thousands of U.S. dollars, except share and per share data)

September 30,
2025

December 31,
2024

Investable assets:

Total investments

$          414,317

$                    —

Cash and cash equivalents

12,890

4,286

Restricted cash and cash equivalents

27,634

—

Net loan receivable from related party

101,689

—

Funds withheld receivable

11,941

—

Total investable assets⁽⁶⁾

$          568,471

$              4,286

Capital:

Total shareholders' equity

$          143,774

$              4,606

2016 Senior Notes

110,000

—

2013 Senior Notes

152,361

—

Total capital resources⁽⁷⁾

$          406,135

$              4,606

(1) Book value per common share is calculated using shareholders' equity divided by the number of common shares outstanding. Management uses growth in this metric as a prime measure of the value we are generating for our common shareholders, because management believes that growth in this metric ultimately results in growth in the Company's common share price. This metric is impacted by the Company's net income and external factors, such as interest rates, which can drive changes in unrealized gains or losses on our investment portfolio as well as share repurchases.

(2) Underwriting and fee income related general and administrative expenses is a non-GAAP measure and includes expenses which are segregated for analytical purposes as a component of underwriting and fee income (loss).

(3) Underwriting and fee income or loss is a non-GAAP measure and is calculated as net premiums earned plus fee revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting and fee revenue activities. For purposes of these non-GAAP operating measures, the fee-generating business, which is included in our Program Services segment, is considered part of the underwriting and fee income operations of the Company. Management believes that this measure is important in evaluating the underwriting and fee income performance of the Company and its segments. This measure is also a useful tool to measure the profitability of the Company separately from the investment results and is also a widely used performance indicator in the insurance industry.

(4) Non-GAAP operating earnings (loss) and non-GAAP basic and diluted operating earnings (loss) per common share are non-GAAP financial measure defined by the Company as net income (loss) excluding realized investment gains and losses, foreign exchange and other gains and losses, interest in income (loss) of equity method investment, and should not be considered as an alternative to net income (loss). It also excludes on a non-recurring basis: (1) loss from discontinued operations, net of income tax; (2) the bargain purchase gain resulting from the Combination Agreement; and (3) the change in the fair value of the earn out liability. The Company's management believes that the use of non-GAAP operating earnings (loss) and non-GAAP diluted operating earnings (loss) per common share enables investors and other users of the Company's financial information to analyze its performance in a manner similar to how management analyzes performance. Management also believes that these measures generally follow industry practice therefore allowing the users of financial information to compare the Company's performance with its industry peer group, and that the equity analysts and certain rating agencies which follow the Company, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. Non-GAAP operating earnings should not be viewed as a substitute for U.S. GAAP net income.

(5) Non-GAAP operating return on average shareholders' equity is a non-GAAP financial measure. Management uses non-GAAP operating return on average adjusted shareholders' equity as a measure of profitability that focuses on the return to common shareholders. It is calculated using non-GAAP operating earnings divided by average shareholders' equity.

(6) Investable assets are the total of the Company's investments, cash and cash equivalents, net loan receivable from related party and funds withheld receivable.

(7) Total capital resources are the sum of the Company's principal amount of debt and shareholders' equity.