RISK FACTORS

An investment in our common stock involves a high degree of risk and many uncertainties. You should carefully consider the specific factors listed below together with the other information included in this prospectus before purchasing our common stock in this offering. If any of the possibilities described as risks below actually occurs, our business, results of operations and financial condition would likely suffer and the trading price of our common stock could fall, causing you to lose some or all of your investment. The following is a description of what we consider the key challenges and material risks to our business and an investment in our common stock. Unless the context otherwise requires, all references in this subsection to the “Company,” “we,” “us” or “our” refer to the business of Slide Insurance Holdings, Inc., its subsidiaries, including Slide Insurance Company (the “Carrier”).

Risks Relating to Our Business

We have a limited operating history, and our business and future prospects are difficult to evaluate.

We began operations in March 2021 and wrote our first policy on March 1, 2022. We expect to make significant investments to further develop and expand our business. In particular, we expect to continue to expend financial and other resources on marketing and advertising as part of our strategy to increase our customer base, which can result in expenses that exceed the related revenue generated in any given year. In addition, we expect to continue to increase our headcount significantly in the coming years. We may generate a net loss in the near term as we continue to make such investments to grow our business. Despite these investments, we may not succeed in increasing our revenue on the timeline that we expect or in an amount sufficient to lower a net loss or maintain profitable operations. Moreover, if our revenue declines, we may not be able to reduce costs in a timely manner because many of our costs are fixed at least in the short term. In addition, if we reduce variable costs to respond to losses, this may limit our ability to sign up new customers and grow our revenues. Accordingly, we may not achieve or maintain profitability, and we may incur significant losses in the future.

In addition, a substantial portion of our historical revenue has been generated from policies assumed from Citizens Property Insurance Corporation (“Citizens”), created by the Florida legislature in 2002 as not-for-profit, tax-exempt, government entity to provide property insurance to eligible Florida property owners unable to find insurance coverage in the private market, as well as our acquisition of policies from several Florida insurance companies and subsequent renewals of these policies. As of December 31, 2024, approximately 56% of our 343,056 policies in force were assumed from Citizens. Our ability to participate in this program is subject to a variety of factors, including continuation of the program. There can be no assurance that Citizens will decide to continue the depopulation program for a significant period of time, or at all. Our ability to grow our premium base may depend upon the availability of future policy assumptions and acquisitions upon acceptable terms. Opportunities to acquire large numbers of policies from Citizens meeting our strict underwriting criteria have diminished over certain historical periods as a result of the volatility of the Florida property insurance market. We cannot provide assurance that such opportunities will increase in the future.

Our success and ability to grow our business depends on retaining and expanding our customer base. If we fail to add new customers or retain current customers, our business, results of operations and financial condition could be harmed.

We believe that the growth of our business and revenue depends upon our ability to retain our existing customers and add new customers in our current geographic markets and in the markets in which we expand. While we have experienced significant customer growth since we commenced operations, we may not be able to maintain this growth and our customer base could shrink over time.

Our ability to attract new customers and retain existing customers depends on our ability to continue providing positive insurance-buying and claims-filing customer experiences, competitive pricing and adequate

 

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insurance coverage. In order to maintain this reputation, we may be required to incur significantly higher marketing expenses, costs related to improving our service, and lower margins in order to attract new customers and retain existing customers. If we fail to remain competitive on customer experience, pricing and insurance coverage options, our ability to grow our business and generate revenue by attracting and retaining customers may be adversely affected.

There are many factors that could negatively affect our ability to grow our customer base, including if:

 

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we fail to effectively use search engines, social media platforms, content-based online advertising and other online sources for generating traffic to our website;

 

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potential customers in a particular marketplace or generally do not meet our underwriting guidelines;

 

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our competitors mimic our digital platform or develop other innovative services, causing current and potential customers to purchase their insurance products instead of our products;

 

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we lose customers to new market entrants and/or existing competitors;

 

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we do not obtain regulatory approvals necessary for expansion into new markets or in relation to our products (such as line, form, underwriting and rating approvals) or such approvals contain conditions that impose restrictions on our operations (such as limitations on growth);

 

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our digital platform experiences disruptions;

 

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we suffer reputational harm to our brand resulting from negative publicity, whether accurate or inaccurate;

 

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we fail to expand geographically;

 

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we fail to offer new and competitive products;

 

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customers have difficulty installing, updating or otherwise accessing our website on mobile devices or web browsers as a result of actions by us or third parties;

 

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technical or other problems frustrate the customer experience, particularly if those problems prevent us from generating quotes or paying claims in a fast and reliable manner; or

 

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we are unable to address customer concerns regarding the content, data privacy and security of our digital platform.

Our inability to overcome these challenges could impair our ability to attract new customers and retain existing customers, and could have a material adverse effect on our business, results of operations and financial condition.

The “Slide” brand may not become as widely known as incumbents’ brands or the brand may become tarnished.

Many of our competitors have brands that are well recognized. As a relatively new entrant into the insurance market, we have spent considerable money and other resources to create brand awareness and build our reputation.

We may not be able to build brand awareness, and our efforts at building, maintaining and enhancing our reputation could fail. There are many factors that, whether valid or not, could diminish confidence in our brand, which could adversely affect our reputation, business, results of operations and financial condition, including:

 

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complaints or negative publicity about our business practices;

 

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our marketing and advertising campaigns;

 

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our compliance with applicable laws and regulations;

 

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the integrity of the data that we provide to customers or business partners;

 

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data privacy and security issues;

 

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business practices or adverse financial developments;

 

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perceptions of our corporate governance or social responsibility;

 

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the conduct of our officers or employees;

 

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the actions of a significant customer or other business with which we do business; or

 

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other aspects of our business.

As we expand our product offerings and enter new markets, we must continue to establish our reputation in an expanded marketplace, and to the extent we are not successful in this endeavor, our business, results of operations and financial condition could be adversely affected. There can be no assurance that we will be able to maintain or enhance our reputation, and failure to do so could materially adversely affect our business, results of operations and financial condition. If we are unable to maintain or enhance consumer awareness of our brand cost-effectively, our business, results of operations and financial condition could be materially adversely affected.

The negative impacts of these or other events may be aggravated as consumers and other stakeholders increase their expectations regarding corporate conduct and responsibility. These impacts may be further complicated by the fact that their perceptions are formed through rapid and broad interactions using modern communication and social media tools over which we have no control. Any such event could decrease demand for our products, reduce our ability to recruit and retain employees and lead to greater regulatory scrutiny of our businesses.

A failure to establish accurate reserves, a failure to adjust claims accurately, the denial of claims or our failure to accurately and timely pay claims could materially and adversely affect our business, results of operations and financial condition.

We must accurately and timely evaluate and pay claims that are made under our policies, including establishing accurate reserves. Many factors affect our ability to pay claims accurately and timely and establish accurate reserves, including the efficacy of our claims processing software, the training and experience of our claims adjusters and third-party claims administrators and our ability to develop or select and implement appropriate procedures and systems to support our claims functions.

The speed by which we process and pay claims is a differentiating factor for our business and an increase in the average time to process claims could undermine our reputation and position in the insurance marketplace. Any failure to pay claims accurately or timely could also lead to regulatory and administrative actions or material litigation, or result in damage to our reputation, any one of which could materially and adversely affect our business, results of operations and financial condition.

If our claims adjusters or third-party claims administrators are unable to effectively process our volume of our customers’ claims, our ability to grow our business while maintaining high levels of customer satisfaction could be compromised, which in turn, could adversely affect our business, results of operations and financial condition.

Our actual incurred losses may be greater than our loss and loss adjustment expense reserves, which could have a material adverse effect on our business, results of operations and financial condition.

Our financial condition and results of operations depend on our ability to accurately assess potential losses and loss adjustment expenses under the terms of the policies we underwrite. Reserves do not represent an exact

 

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calculation of liability. Rather, reserves represent an estimate of what the expected ultimate settlement and administration of claims will cost, and the ultimate liability may be greater or less than the current estimate. In our industry, there is always the risk that reserves may prove inadequate as it is possible for us to underestimate the cost of claims and claims administration.

We base our estimates on our assessment of known facts and circumstances, as well as estimates of future trends in claim severity, claim frequency, judicial theories of liability and other factors. These variables are affected by both internal and external events that could increase our exposure to losses, including changes in actuarial projections, claims handling procedures, inflation, severe weather, climate change, economic and judicial trends and legislative changes. We regularly monitor reserves using new information on reported claims and a variety of statistical techniques to update our current estimate. Our estimates could prove to be inadequate, and this underestimation could have a material adverse effect on our financial condition.

Recorded claim reserves, including case reserves and incurred but not reported (“IBNR”) claims reserves, are based on our estimates of losses after considering known facts and interpretations of the circumstances, including settlement agreements. Additionally, models that rely on the assumption that past loss development patterns will persist into the future are used. Internal factors are considered including our experience with similar cases, actual claims paid, historical trends involving claim payment patterns, pending levels of unpaid claims, loss management programs, product mix, contractual terms and changes in claim reporting and settlement practices. External factors are also considered, such as court decisions, changes in law and litigation imposing unintended coverage. We also consider benefits, such as disallowing the use of benefit payment schedules, requiring coverage designed to cover losses that occur in a single policy period to losses that develop continuously over multiple policy periods or requiring the availability of multiple limits. Regulatory requirements and economic conditions are also considered.

Since reserves are estimates of the unpaid portion of losses that have occurred, including IBNR losses, the establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain and complex process that is regularly refined to reflect current estimation processes and practices. The ultimate cost of losses may vary materially from recorded reserves and such variance may adversely affect our results of operations and financial condition as the reserves and reinsurance recoverables are re-estimated.

If any of our insurance reserves should prove to be inadequate for the reasons discussed above, or for any other reason, we will be required to increase reserves, resulting in a reduction in our net income and shareholders’ equity in the period in which the deficiency is identified. Future loss experience substantially in excess of established reserves could also have a material adverse effect on future earnings and liquidity and financial rating, which would affect our ability to attract new business or to retain existing customers.

Our success depends on our ability to accurately price the risks we underwrite.

Our results of operations and financial condition depend on our ability to underwrite and set premium rates accurately for a wide variety of risks. Rate adequacy is necessary to generate sufficient premiums to pay losses, loss adjustment expenses, reinsurance costs and underwriting expenses and to earn a profit. In order to price our products accurately, we must collect and properly analyze a substantial amount of data; develop, test and apply appropriate rating formulas; closely monitor and timely recognize changes in trends; and project both severity and frequency of losses with reasonable accuracy. Our ability to successfully perform these tasks, and as a result price our products accurately, is subject to a number of risks and uncertainties, some of which are outside our control, including:

 

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the availability of sufficient reliable data and our ability to properly analyze available data;

 

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regulatory delays in approving filed rate changes;

 

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the uncertainties that inherently characterize estimates and assumptions;

 

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our selection and application of appropriate rating and pricing techniques;

 

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changes in legal standards, claim resolution practices and restoration costs; and

 

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legislatively imposed consumer initiatives.

In addition, we could underprice risks, which would negatively affect our profit margins. We could also overprice risks, which could reduce the number of policies we write and our competitiveness. In either event, our profitability could be materially and adversely affected.

Serving as the Managing General Agency (“MGA”) for the Carrier results in the Carrier being our primary customer. As MGA for the Carrier, we have an interest in the growth of the Carrier as our earnings are largely generated from management fees based on the affiliated assumed and direct premiums earned by the Carrier. If the Carrier’s ability to grow or renew policies were adversely affected, the premium revenue of the Carrier would be adversely affected, which would reduce our management fee revenue.

Our direct, wholly-owned subsidiary, Slide MGA, LLC serves as MGA for the Carrier, performing various business functions, such as underwriting, binding, policy administration, claims and distribution on behalf of the Carrier, and, as such, we earn a management fee, calculated as a percentage of the assumed and direct premiums earned by the Carrier. For further discussion, see “—If the management fee rate paid by the Carrier is reduced or if there is a significant decrease in the amount of affiliated assumed and direct premiums earned by the Carrier, revenues and profitability could be materially adversely affected.” below.

Unfavorable changes in macroeconomic conditions, including declining consumer confidence, inflation, high unemployment and the threat of recession, among others, may lead the Carrier’s customers to modify coverage, not renew policies or even cancel policies, which could adversely affect the premium revenue of the Carrier, and consequently our management fee.

If the management fee rate paid by the Carrier is reduced or if there is a significant decrease in the amount of affiliated assumed and direct premiums earned by the Carrier, revenues and profitability could be materially adversely affected.

Because of our MGA structure, we are dependent upon management fees paid by the Carrier, which, along with agency commissions from the Carrier and third-party carriers, represent one of our primary sources of revenue. Accordingly, any reduction in premiums for policies earned by the Carrier on the management fee rate would have a negative effect on our revenues and net income.

The management fee rate and the claims fee rate may be adjusted as agreed to by the MGA and the Carrier. Any such adjustments to the fee rates are subject to the written approval by the FLOIR.

Our ability to compete in the property and casualty insurance industry and our ability to expand our business is partially dependent on us maintaining our Demotech, Inc. rating, and may be negatively affected by the fact that we do not have a rating from AM Best Company.

The Carrier currently has a Financial Stability Rating (“FSR”) of A, Exceptional from Demotech, Inc. (“Demotech”), a financial analysis firm that provides FSRs and consulting services for property and casualty insurance companies and title underwriters. Demotech provides financial stability ratings to insurance companies of all sizes. When providing a rating, Demotech evaluates total assets, liabilities, revenues and expenses, working capital, administrative expenses, net income, surplus, receivables, amount of business written, industry focus and business model, among others. Below is Demotech’s rating scale:

 

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A” (A Double Prime), Unsurpassed: 100% of insurers with this rating are expected to have a positive surplus at least 18 months from the initial date of rating assignment;

 

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A’ (A Prime), Unsurpassed: 99% of insurers with this rating are expected to have a positive surplus at least 18 months from the initial date of rating assignment;

 

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A, Exceptional: 97% of insurers with this rating are expected to have a positive surplus at least 18 months from the initial date of rating assignment;

 

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S, Substantial: 95% of insurers with this rating are expected to have a positive surplus at least 18 months from the initial date of rating assignment;

 

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M, Moderate: 90% of insurers with this rating are expected to have a positive surplus at least 18 months from the initial date of rating assignment; and

 

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L, Licensed: These companies have been assessed but have not been given one of the financial strength ratings listed above.

While our Demotech rating has proved satisfactory to date, we cannot assure that this rating will remain at its current level. Furthermore, we do not currently have a rating from AM Best Company, a U.S.-based credit rating agency (“AM Best”). We do not currently intend to seek a rating from AM Best because, in order to receive a satisfactory rating from AM Best, we would be required to forgo certain revenues and efficiency of size. It is possible that some prospective customers may be reluctant to do business with a company that is not rated by AM Best and not having an AM Best rating may prevent us from expanding our business or limit our access to credit from certain financial institutions, which may in turn limit our ability to compete with large, national insurance companies and certain regional insurance companies.

Our limited operating history makes it difficult to evaluate our current business performance, implementation of our business model and our future prospects.

We launched our business to sell homeowners and commercial residential insurance in 2021 and have a limited operating history. Due to our limited operating history and rapid growth we have experienced since we began operations, our operating results are difficult to predict and our historical results may not be indicative of, or comparable to, our future results. In addition, we have limited data to validate key aspects of our business model. We cannot provide any assurance that the data that we collect will provide useful measures for evaluating our business model. Our inability to adequately assess our performance and growth could have a material adverse effect on our brand, business, results of operations and financial condition.

We may pursue opportunities to participate in Citizens’ take-out program and directly assume policies issued by Citizens to policyholders who were otherwise unable to obtain private insurance. Take-out opportunities are subject to a number of timing and execution risks, and we may fail to participate in Citizens’ take-out programs on terms that are ultimately profitable to us, or at all.

Citizens acts as Florida’s state-owned insurer of last resort, and is the largest homeowners insurer in Florida as measured by premiums in-force. From time to time, Citizens transfers certain of its existing policies to private companies in order to reduce the State of Florida’s risk exposure. We participated in seven take-out opportunities in 2024, assuming 135,974 policies. The Citizens personal residential policies assumed in 2024 represented 39.6% of our policies in force and 52% of our premiums in force as of December 31, 2024. Although each policy we pursue from Citizens is run through our standard underwriting procedures, the amount of data made available to us by Citizens may be less or different from what is available to us through other channels. The lack of availability of this information may pose a material risk to our underwriting profitability with respect to any take-outs we pursue.

Additionally, there can be no guarantee that Citizens will timely offer sizeable take-out opportunities to the private insurance market that would meet our underwriting and profitability criteria or continue the depopulation program at all. While Citizens does replenish its policies after conducting take-outs, there is no guarantee that such replenishments will meet our underwriting and profitability criteria or provide attractive take-out

 

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opportunities for us in the future, and our financial condition may suffer as a result. In addition, there may be a negative perception regarding our depopulations from Citizens or the desirability of the policies we assume, which could adversely affect the price of our Common Stock.

Further, the market for attractive take-out opportunities is highly competitive and is subject to a bidding process. If competing private insurers offer a lower premium than us for the same policy, Citizens is required to allocate that policy to the insurer who offers the lowest premium. In the past, certain of our peers have been able to offer lower premiums than us when pursuing the same take-out opportunities. Other carriers may also choose to re-enter or expand their business in Florida in light of potential attractive take-out opportunities and generally improving market conditions on the back of the legislative reforms in 2022. There is no guarantee that we will be able to renew these assumed policies, and a lack of renewals could have a material adverse effect on our business, results of operations and financial condition.

Our expansion within the United States will subject us to additional costs and risks and our plans may not be successful.

Our success depends in significant part on our ability to expand into additional markets in the United States. As of December 31, 2024, the Carrier is legally permitted to write insurance in two states, Florida and South Carolina, which are home to approximately 10% of the U.S. population. We have targeted expansion to more states, but we cannot guarantee that we will be able to provide coverage in other states in the near term or at all. Moreover, one or more states could revoke our ability to operate, or implement additional regulatory hurdles that could inhibit our ability to obtain or maintain our ability to operate in such states. In addition to requiring additional management attention to operations over a broad geographic area, operating in additional states may place strain on our finance, analytics, compliance, legal, engineering and operations teams. We may incur significant operating expenses and may not be successful in our expansion for a variety of reasons, including:

 

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obtaining any required government approvals, licenses or other authorizations;

 

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complying with varying laws and regulatory standards, including with respect to the insurance business and insurance distribution, capital and outsourcing requirements, data privacy, tax and local regulatory restrictions;

 

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competition from local incumbents that better understand the local market, may market and operate more effectively and may enjoy greater local affinity or awareness; and

 

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differing demand dynamics, which may make our product offerings less successful.

If we invest substantial time and resources to expand our operations and are unable to manage these risks effectively, our business, results of operations and financial condition could be adversely affected.

Expansion into new markets will require additional investments by us in both regulatory approvals and marketing. These incremental costs may include hiring additional personnel, as well as engaging third-party service providers and other research and development costs. If we fail to grow our geographic footprint or if geographic growth occurs at a slower rate than expected, our business, results of operations and financial condition could be materially and adversely affected.

If we are unable to expand our product offerings, our prospects for future growth may be adversely affected.

Our ability to attract and retain customers and therefore increase our revenue depends in part on our ability to successfully expand our product offerings. We have historically concentrated our efforts exclusively on the homeowners and, beginning in the fourth quarter of 2024, commercial residential insurance markets in order to achieve our long-term goals. Our success in the homeowners and commercial residential insurance market depends on our deep understanding of this industry. To penetrate new vertical markets, we will need to develop a similar understanding of those new markets and products and the associated business challenges faced by

 

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participants in them. Developing this level of understanding may require substantial investments of time and resources, and we may not be successful. In addition to the need for substantial resources, insurance regulation could limit our ability to introduce new product offerings. Additionally, any new insurance products could take months to be approved by regulatory authorities, or may not be approved at all. If we fail to penetrate new vertical markets successfully, our revenue may grow at a slower rate than we anticipate and our business, results of operations and financial condition could be materially and adversely affected. In addition, our decision to expand our insurance product offerings beyond the homeowners and commercial residential insurance market would subject us to additional regulatory requirements specific to such insurance products, which, in turn, could require us to incur additional costs or devote additional resources to compliance.

Intense competition in the segments of the insurance industry in which we operate could negatively affect our ability to attain or increase profitability.

The homeowners and commercial residential insurance market is highly competitive with carriers competing through product coverage, reputation, financial strength, advertising, price, customer service and distribution.

We face significant competition from traditional insurance companies for homeowners and commercial residential insurance products. We currently compete with other homeowners and commercial residential insurance carriers doing business in Florida and South Carolina as admitted carriers and in the future we will compete with homeowners and commercial residential insurance carriers doing business in other states into which we may seek to expand including on a non-admitted basis. Competitors include companies such as Universal Property and Casualty, Progressive and People’s Trust in the State of Florida and companies such as Allstate, Farmers, Progressive, Liberty Mutual, State Farm and Travelers in states we may seek to expand into. Most of these companies are materially larger than us and have significant competitive advantages over us, including increased name recognition, higher financial ratings, greater resources, additional access to capital and more types of available insurance coverage. Our future growth will depend in large part on our ability to grow our homeowners and commercial residential insurance business, a marketplace where traditional insurance companies retain certain significant advantages. In particular, unlike us, many of these competitors offer consumers the ability to purchase renters, homeowners, or commercial residential insurance with multiple other types of insurance coverage and “bundle” them together into one policy and, in certain circumstances, include an umbrella liability policy for additional coverage at competitive prices. Moreover, as we expand into new lines of business beyond homeowners and commercial residential insurance, we expect to face intense competition from insurance companies that are already established in such markets. Additionally, any new insurance products could take months to be approved by regulatory authorities or may not be approved at all.

We currently face competition by technology companies in the markets in which we operate. There are various technology companies that have recently started operating in adjacent insurance categories that may in the future offer homeowners and commercial residential insurance products. Technology companies may in the future begin offering products at better and more competitive pricing than us, which could cause our business, results of operations and financial condition to be materially and adversely affected. In addition, traditional insurance companies may seek to adapt their businesses to sell insurance and process claims using technology similar to ours. Given their size, resources and other competitive advantages, they may be able to erode any market advantage we may currently have.

We may not be able to continue to compete successfully in homeowners and commercial residential insurance markets in the jurisdictions in which we currently operate, or will expand to in the future. Increased competition in these markets could result in a change in the supply and demand for insurance, affect our ability to price our products at risk-adequate rates and retain existing business, or underwrite new business on favorable terms. Further, our ability to compete successfully in the homeowners and commercial residential insurance markets is dependent on our ability to create and maintain relationships with customers, suppliers and other third-party businesses, for example, although no such relationship of the Company is individually material. If this

 

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increased competition so limits our ability to transact business, our business, results of operations and financial condition could be materially and adversely affected.

Reinsurance may be unavailable at current levels and prices, which may limit our ability to write new business. Furthermore, reinsurance subjects us to counterparty risk and may not be adequate to protect us against losses, which could have a material effect on our results of operations and financial condition.

Reinsurance is a contract by which an insurer, which may be referred to as the ceding insurer, agrees with a second insurer, called a reinsurer, that, in exchange for a premium payment, the reinsurer will cover a portion of the losses incurred by the ceding insurer in the event a claim is made under a policy issued by the ceding insurer. The ceding insurer obtains reinsurance to help manage its exposure to insurance risks incurred pursuant to its issued policy. Although our reinsurance counterparties are liable to us according to the terms of the reinsurance treaty, we remain primarily liable to our policyholders as the direct insurers on all risks reinsured. As a result, reinsurance does not eliminate the obligation of the ceding insurer to pay all claims. We are subject to the risk that one or more of our reinsurers will be unable or unwilling to honor its obligations, that the reinsurers will not pay in a timely fashion, or that our losses are so large that they exceed the contractual limits of liability set forth in a reinsurance treaty. Reinsurers may become financially unsound by the time that they are obligated to pay claims due under the treaty, in which case we may have no practical ability to recover amounts due under the reinsurance treaty. Any coverage disputes with reinsurers under reinsurance treaties could be time-consuming, costly and of uncertain success.

Our reinsurance treaties generally have a fixed term and caps on liability. Each reinsurer’s share in the interest and liabilities related to the reinsurance treaty varies and the reinsurers are severally, but not jointly, liable under the applicable reinsurance treaty. Further, these reinsurance agreements may not cover renewals of policies that the insurance carrier is required by law to renew or write, and we may not be able to lawfully cancel or non-renew insurance policies in a manner that assures ongoing reinsurance protection under our reinsurance treaties.

As of June 1, 2024, we had:

 

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approximately $1.14 billion in first-event private catastrophe excess of loss reinsurance, which provides protection for a 1-in-194-year first-event loss as of September 30, 2024; of this approximately $1.14 billion limit, $470 million reinstates one time and 70% of $35 million reinstates two times;

 

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FHCF reinsurance, which provides the Carrier coverage for a catastrophe occurrence where losses exceed $379 million. The coverage provided is 90% of losses, up to a $713 million limit, in excess of the $379 million triggering threshold. This reinsurance coverage does not reinstate after a triggering event;

 

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“excess per risk” reinsurance coverage provides four layers of excess coverage for homeowners. The first excess layer provides $300,000 limit of loss coverage in excess of the Carrier’s “per risk” retention limit of $700,000 for any loss occurrence excluding a Named Wind occurrence. The second excess layer provides $1,000,000 limit of loss coverage in excess of $1,000,000 “per risk” retention. The third excess layer provides $1,000,000 limit of loss coverage in excess of $2,000,000 “per risk” retention. The fourth excess layer provides $2,000,000 limit of loss coverage in excess of $3,000,000 “per risk” retention. This agreement provides for unlimited reinstatements for the first excess layer, four reinstatements for the second excess layer, two reinstatements for the third excess layer, and one reinstatement for the fourth excess layer during the treaty period. Reinsurance coverage provides three layers of excess coverage for commercial residential. The first excess layer provides $1,000,000 limit of loss coverage in excess of the Carrier’s “per risk” retention limit of $1,000,000 for any loss occurrence excluding a Named Wind occurrence. The second excess layer provides $3,000,000 limit of loss coverage in excess of $2,000,000 “per risk” retention. The third excess layer provides $5,000,000 limit of loss coverage in excess of $5,000,000 “per risk” retention; and

 

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“facultative” reinsurance coverage provides coverage above the “excess per risk” agreement of $7 million limit of loss coverage in excess of $5 million “per risk” for any loss occurrence excluding a Named Wind

 

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occurrence for homeowners. Reinsurance coverage provides coverage above the “excess per risk” agreement of $50 million limit of loss coverage in excess of $10 million “per risk” for any loss occurrence excluding a Named Wind occurrence for commercial residential.

The reinstatement premiums are fully covered under our prepaid reinsurance coverage or reinstatement premium protection coverage. Our current catastrophe reinsurance agreements (excluding catastrophe bonds) expire on May 31, 2025, and our catastrophe bonds mature between April 24, 2026 and June 7, 2027. Our homeowners and commercial residential “excess per risk” and homeowners “facultative” reinsurance agreements are on a continuous basis, while our commercial residential “facultative” agreement expires November 1, 2025. All of our rated reinsurers have an AM Best rating of A- or better. If any of our rated reinsurers’ AM Best rating falls below A-, we have the contractual right to replace such reinsurer. However, if we were to replace a reinsurer whose AM Best rating declined below A-, we would incur additional costs to replace such reinsurer, which could have a material adverse effect on our business, results of operations and financial condition.

We formed Slide Reinsurance Holdings, LLC, a Florida limited liability company, as a direct subsidiary of Slide on or about March 24, 2022. Slide Reinsurance Holdings, LLC, is a holding company that owns the preferred shares of White Rock Insurance (SAC) Ltd. T104 (collectively with Slide Reinsurance Holdings, LLC, the “Captive Reinsurer”). Separate accounts are legally segregated from other segregated accounts, often referred to as “segregated cells.” The Captive Reinsurer, from time-to-time, enters into a fully collateralized quota share treaty with the Carrier, and/or enter into excess of loss reinsurance contracts with the Carrier. We have funded the collateral for the Captive Reinsurer.

We may change the structure of our reinsurance arrangement in the future which may impact our overall risk profile and financial and capital condition.

We may be unable to negotiate a new reinsurance contract to provide continuous coverage or negotiate reinsurance on the same terms and rates as are currently available, as such availability depends in part on factors outside of our control. New reinsurance treaties may not provide sufficiently protective insurance. Market forces and external factors, such as significant losses from hurricanes or terrorist attacks or an increase in capital requirements, impact the availability and cost of the reinsurance we purchase. Were we unable to maintain our current level of reinsurance, extend our reinsurance treaties or purchase new reinsurance protection in sufficient amounts at acceptable prices, we would have to accept an increase in our exposure, reduce our insurance writings or develop other alternatives.

The unavailability of acceptable reinsurance protection would have an adverse effect on our business model, which depends on reinsurance companies to absorb any unfavorable variance from the level of losses anticipated at underwriting. If we are unable to obtain adequate reinsurance at reasonable rates, we would have to increase our risk exposure or reduce the level of our underwriting commitments, each of which could have a material adverse effect upon our business volume and profitability. Alternatively, we could elect to pay higher-than-anticipated rates for reinsurance coverage, which could have a material adverse effect upon our profitability until policy premium rates could be raised, in most cases subject to approval by state regulators, to offset this additional cost. The inability to procure sufficient reinsurance at reasonable rates could result in a ratings downgrade by Demotech, Inc., which would adversely affect our Carrier and its ability to continue as a going concern.

Failure to maintain our risk-based capital at the required levels could adversely affect the ability of the Carrier to maintain regulatory authority to conduct our business.

We must have sufficient capital to comply with insurance regulatory requirements and maintain authority to conduct our business. The National Association of Insurance Commissioners (“NAIC”) has developed a system to test the adequacy of statutory capital of U.S.-based insurers, known as risk-based capital, that all states have adopted. This system establishes the minimum amount of capital necessary for an insurance company to support its overall business operations. It identifies insurers, including property-casualty insurers, that may be

 

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inadequately capitalized by looking at certain inherent risks of each insurer’s assets and liabilities and its mix of net written premiums. Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action, including supervision, rehabilitation or liquidation. Moreover, as a new entrant to the insurance industry, we may face additional capital requirements as compared to those of our larger and more established competitors. Failure to maintain adequate risk-based capital at the required levels could adversely affect the ability of the Carrier to maintain regulatory authority to conduct its business. For additional information regarding the capital requirements applicable to us as an insurance holding company, see “—Risks Relating to the Insurance Industry—State insurance regulators impose additional reporting requirements regarding enterprise risk on insurance holding company systems, with which we must comply as an insurance holding company” below.

Failure to maintain our financial strength ratings could adversely affect the Carrier’s competitive position in the insurance industry and its ability to conduct our business as currently conducted.

Financial strength ratings are an important factor in evaluating and establishing the competitive position of insurance companies. These ratings represent the independent opinion of an insurer’s financial strength, operating performance and ability to meet policyholder obligations. Higher ratings generally indicate greater financial stability and a stronger ability to meet ongoing obligations to policyholders. Rating agencies could downgrade or change the outlook on ratings due to:

 

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changes in the financial profile of one of our insurance companies;

 

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changes in a rating agency’s determination of the amount of capital required to maintain a particular rating; or

 

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increases in the perceived risk of our investment portfolio, a reduced confidence in management or our business strategy, or other considerations that may or may not be under our control.

A downgrade in our financial strength ratings could have a material effect on our sales, competitiveness, customer retention, the marketability of our product offerings, liquidity, access to and cost of borrowing, results of operations and financial condition, and could result in the Carrier being placed into liquidation or supervision by regulators.

If we are unable to underwrite risks accurately and charge competitive yet profitable rates to our customers, our business, results of operations and financial condition will be adversely affected.

In general, the premiums for our insurance policies are established at the time a policy is issued and, therefore, before all of our underlying costs are known. The accuracy of our pricing is subject to our ability to adequately assess risks, estimate losses and comply with state insurance regulations. Like other insurance companies, we rely on estimates and assumptions in setting our premium rates. We also utilize the data that we gather through our interactions with our customers, as evaluated and curated by our proprietary technology.

Establishing adequate premium rates is necessary, together with investment income, if any, to generate sufficient revenue to offset losses, loss adjustment expenses, acquisition expenses and other costs. If we do not accurately assess the risks that we underwrite, we may not charge adequate premiums to cover our losses and expenses, which would adversely affect our business, results of operations and financial condition. Moreover, if we determine that our prices are too low, insurance regulations may preclude us from being able to non-renew insurance contracts, non-renew customers or raise prices. Alternatively, we could set our premiums too high, which could reduce our competitiveness and lead to lower revenues, which could have a material adverse effect on our business, results of operations and financial condition.

Pricing involves the acquisition and analysis of historical loss data and the projection of future trends, loss costs and expenses and inflation trends, among other factors, for each of our products in multiple risk tiers and many different markets. In order to accurately price our policies, we must, among other factors:

 

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collect and properly and accurately analyze a substantial volume of data from our customers;

 

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develop, test and apply appropriate actuarial projections and rating formulas;

 

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review and evaluate competitive product offerings and pricing dynamics;

 

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closely monitor and timely recognize changes in trends; and

 

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project both frequency and severity of our customers’ losses with reasonable accuracy.

There are no assurances that we will have success in implementing our pricing methodology accurately in accordance with our assumptions. Our ability to accurately price our policies is subject to a number of risks and uncertainties, including, but not limited to:

 

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insufficient, inaccurate or unreliable data;

 

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incorrect or incomplete analysis of available data;

 

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uncertainties generally inherent in estimates and assumptions;

 

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our failure to implement appropriate actuarial projections and rating formulas or other pricing methodologies;

 

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incorrect or incomplete analysis of the competitive environment;

 

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regulatory constraints on rate increases or coverage limitations;

 

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our failure to accurately estimate investment yields and the duration of our liability for loss and loss adjustment expenses; and

 

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unanticipated litigation, court decisions and legislative or regulatory actions or changes to the existing regulatory landscape.

To address the potential errors or desired or required changes in our current premium rates, we may be compelled to increase the amount allocated to cover policy claims or increased expenses, or to address other economic factors resulting in an increase in future premium rates or to additionally or alternatively adopt different underwriting standards. Any of these changes may result in a decline in new business and renewals and, as a result, have a material adverse effect on our business, results of operations and financial condition.

Retention of business written by our subsidiary could expose us to potential losses.

We retain risk for our own account on business underwritten by our insurance company subsidiary. The determination to reduce the amount of reinsurance we purchase, or not to purchase reinsurance for a particular risk, customer segment or niche is based on a variety of factors, including market conditions, pricing, availability of reinsurance, our capital levels and loss experience. Retention increases our financial exposure to losses and significant losses could have a material adverse effect on our business, results of operations and financial condition.

Our future success depends on our ability to continue to develop and implement our technology, and to maintain the confidentiality of this technology.

Our business is characterized by rapidly changing technologies and evolving industry standards. Our future success depends in part on our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products, which will require the investment of significant financial resources. We may not be able to successfully identify new opportunities and may not have the necessary financial resources to develop new products and services and technologies in a timely or cost-effective manner. Furthermore, the need to make these expenditures could divert our attention and resources from other projects, and we cannot be sure that these expenditures ultimately will lead to the timely development of new products and services or technologies.

 

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Changes to existing regulations, their interpretation or implementation, or new regulations could impede our use of this technology, or require that we disclose our proprietary technology to our competitors, which could impair our competitive position and result in a material adverse effect on our business, results of operations and financial condition.

We rely on our digital platform to collect data points that we evaluate in pricing and underwriting our insurance policies, managing claims and customer support and improving business processes, and any legal or regulatory requirements that restrict our ability to collect this data could thus materially and adversely affect our business, results of operations and financial condition.

We use our digital platform to collect data that we evaluate in pricing and underwriting our insurance policies, managing claims and customer support and improving business processes. If federal, state or international regulators were to determine that the type of data we collect, the process we use for collecting this data or how we use it unfairly discriminates against some groups of people, laws and regulations could be interpreted or implemented to prohibit or restrict our collection or use of this data.

State regulators may issue regulations or pass legislation imposing requirements on the collection, use and disclosure of data, external data sources, algorithms and/or predictive models in insurance underwriting or rating, including to address concerns about the potential for unfair discrimination and lack of consumer transparency associated with the use of consumer data. If such laws or regulations were enacted federally or in a large number of states in which we operate, it could impact our business, including the integrity of our pricing and underwriting processes. A determination by federal or state regulators that the data points we collect and the process we use for collecting this data unfairly discriminates against some groups of people could also subject us to fines and other sanctions, including, but not limited to, disciplinary action, revocation and suspension of licenses and withdrawal of product forms. Any such event could, in turn, materially and adversely affect our business, results of operations and financial condition, and make it harder for us to be profitable over time. Although we have implemented policies and procedures into our business operations that we feel are appropriately calibrated to our artificial intelligence and automation-driven operations, these policies and procedures may prove inadequate to manage our use of this nascent technology, resulting in a greater likelihood of inadvertent legal or compliance failures.

Additionally, existing laws, such as the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act (“CPRA,” and collectively, “CCPA”), future laws and evolving attitudes about privacy protection may impair our ability to collect, use and maintain data points of sufficient type or quantity to adequately price and underwrite our insurance policies. For more information regarding the evolution of such data privacy laws and the risks regarding our compliance with such laws, see “—Risks Relating to Our Intellectual Property and Data Privacy—We collect, process, store, share, disclose and use information, including confidential information and personal data. Our actual or perceived failure to protect such data, respect customers’ privacy or comply with data privacy and security laws and regulations could damage our reputation and brand and harm our business and operating results.”

We undertake advertising campaigns and other efforts to improve brand recognition, generate new business and increase the retention of our current customers. If these campaigns or efforts are unsuccessful or are less effective than those of competitors, our business could be materially adversely affected.

We have developed, continue to develop and regularly undertake innovative approaches to advertising campaigns and other efforts that generate new business, improve brand recognition, build customer trust in our brand and maintain or increase the retention of our customers. We believe the effectiveness of our methodologies is particularly important given our direct-to-consumer distribution model and our customer-focused approach. If our marketing and retention approach became unsuccessful or our brand reputation was compromised, our business, results of operations and financial condition could be materially adversely affected.

 

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We use search engines, social media platforms, content-based online advertising and other online sources to attract consumers to our website, which may be affected by third-party interference beyond our control and, as we grow, our customer acquisition costs may continue to rise.

We depend on search engines, social media platforms, content-based online advertising and other online sources for traffic to our website. With respect to search engines, we are included in search results as a result of both paid search listings, where we purchase specific search terms that result in the inclusion of our advertisement, and free search listings, which depend on algorithms used by search engines. For paid search listings, if one or more of the search engines or other online sources on which we rely for purchased listings modifies or terminates its relationship with us, our expenses could rise, we could lose consumers and traffic to our website could decrease, any of which could have a material adverse effect on our business, results of operations and financial condition. For free search listings, if search engines on which we rely for algorithmic listings modify their algorithms, our websites may appear less prominently or not at all in search results, which could result in reduced traffic to our websites.

Our ability to maintain and increase the number of consumers directed to our products from digital platforms is not within our control. Search engines, social media platforms and other online sources often revise their algorithms and introduce new advertising products. If one or more of the search engines or other online sources on which we rely for traffic to our website were to modify its general methodology for how it displays our advertisements or keyword search results, resulting in fewer consumers clicking through to our website, our business and operating results are likely to suffer. In addition, if our online display advertisements are no longer effective or are not able to reach certain consumers due to consumers’ use of ad-blocking software, our business and operating results could suffer.

Additionally, changes in regulations could limit the ability of search engines and social media platforms, including, but not limited to, Google and Facebook, to collect data from users and engage in targeted advertising, making them less effective in disseminating our advertisements to our target customers. For example, the proposed Designing Accounting Safeguards to Help Broaden Oversight and Regulations on Data (“DASHBOARD”) Act would mandate annual disclosure to the SEC of the type and “aggregate value” of user data used by harvesting companies, such as, but not limited to, Facebook, Google and Amazon, including how revenue is generated by user data and what measures are taken to protect the data. If the costs of advertising on search engines and social media platforms increase, we may incur additional marketing expenses or be required to allocate a larger portion of our marketing spend to other channels and our business, results of operations and financial condition could be adversely affected. Similarly, insurance brokerage and distribution regulation may limit our ability to rely on key distribution platforms if the third-party distribution platforms are unable to continue to distribute our insurance products pursuant to insurance law and regulations.

We also attract customers through our relationships with certain business development partners. If our business development partners were to charge higher rates or decide to terminate their relationships with us, our ability to attract customers could be materially impaired. In addition, we have expanded our direct-to-customer acquisition channels, including direct mail and video advertisements. We use our underwriting technology to identify areas of profitable business that are targeted by our direct-to-consumer (“DTC”) operations. Our efforts to acquire customers through direct marketing may subject us to increased regulatory scrutiny by state insurance regulators pursuant to unfair methods of competition or unfair or deceptive acts or practices laws.

We may require additional capital to grow our business, which may not be available on terms acceptable to us or at all.

To the extent that our present capital (including the funds received through the sale of our common stock) is insufficient to meet future operating requirements (including regulatory capital requirements) or to cover losses, we may need to raise additional funds through financings or curtail our projected growth. Many factors will affect our capital needs as well as their amount and timing, including our growth and profitability, the availability of reinsurance, as well as market disruptions and other developments.

 

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Historically, we have funded our operations, marketing expenditures and capital expenditures primarily through equity issuances and debt issuances. We evaluate financing opportunities from time to time, and our ability to obtain financing will depend, among other things, on our development efforts, business plans and operating performance and the condition of the capital markets at the time we seek financing. In addition, certain regulatory bodies may not permit additional equity issuances or other forms of financing that we may wish to pursue. We cannot be certain that additional financing will be available to us on favorable terms, or at all.

If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to those of our common stock, and our existing stockholders may experience dilution. Any debt financing secured by us in the future could require that a substantial portion of our operating cash flow be devoted to the payment of interest and principal on such indebtedness, which may decrease available funds for other business activities, and could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities.

If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth, maintain minimum amounts of risk-based capital and to respond to business challenges could be significantly limited, and our business, results of operations and financial condition could be adversely affected.

We are periodically subject to examinations by our state insurance regulators, which could result in adverse examination findings and necessitate remedial actions.

As our Carrier is a Florida-domiciled insurer, our primary insurance regulator responsible for our supervision and examination is the FLOIR. Periodically, the FLOIR performs examinations of insurance companies under its jurisdiction to assess compliance with applicable laws and regulations, financial condition and the conduct of regulated activities. These examinations provide the FLOIR a significant opportunity to review and scrutinize our business. If, as a result of an examination, the FLOIR determines that our financial condition, capital resources or other aspects of any of our operations are less than satisfactory, or that we are in violation of applicable laws or regulations, the FLOIR may require us to take one or more remedial actions or otherwise subject us to regulatory scrutiny, such as pursuant to an enforcement action. We cannot predict with precision the likelihood, nature or extent of any necessary remedial actions, if any, resulting from such an examination, or the associated costs of such remedial actions or regulatory scrutiny. In addition, insurance regulators of other states in which we are licensed to operate may also conduct periodic financial examinations or other targeted investigations. Any regulatory or enforcement action or any regulatory order imposing remedial, injunctive or other corrective action against us resulting from these examinations could have a material adverse effect on our business, results of operations and financial condition.

We rely on the experience and expertise of our Co-Founders, senior management team, highly specialized insurance experts, key technical employees and other highly skilled personnel.

Our success to date has depended heavily upon the service of Bruce Lucas, our co-founder and Chief Executive Officer, and Shannon Lucas, our Chief Risk Officer and Chief Operating Officer (collectively with Mr. Lucas, our “Co-Founders”) our senior management team, highly specialized insurance experts and key technical employees. Our future success depends on our continuing ability to identify, hire, develop, motivate, retain and integrate highly skilled personnel for all areas of our organization. If we are unable to attract the requisite personnel, our business and prospects may be adversely affected. Each of our Co-Founders, executive officers, specialized insurance experts, key technical personnel and other employees could terminate his or her relationship with us at any time. The loss of either of our Co-Founders or any other member of our senior management team, specialized insurance experts or key personnel might significantly delay or prevent the achievement of our strategic business objectives and could harm our business. We rely on approximately eleven highly specialized insurance experts, the loss of any one of whom could have a disproportionate impact on our business. Competition in our industry for qualified employees is intense. Our compensation arrangements, such

 

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as our equity award programs, may not always be successful in attracting new employees and retaining and motivating our existing employees. Moreover, if and when the stock options or other equity awards are substantially vested, employees under such equity arrangements may be more likely to leave, particularly when the underlying shares have seen a value appreciation.

We face significant competition for personnel. To attract top talent, we have to offer, and believe we will need to continue to offer, competitive compensation and benefits packages. We may also need to increase our employee compensation levels in response to competitor actions. If we are unable to hire new employees quickly enough to meet our needs, or otherwise fail to effectively manage our hiring needs or successfully integrate new hires, including our recently hired management team members, our efficiency, ability to meet forecasts and our employee morale, productivity and retention could suffer, which in turn could have an adverse effect on our business, results of operations and financial condition.

In addition, we must forecast sales and claims volume and other factors in changing business environments (for multiple products and business units and in multiple geographic markets) with reasonable accuracy and adjust our hiring and training programs and employment levels accordingly. Our failure to recognize the need for such adjustments, or our failure or inability to react appropriately on a timely basis, could lead either to over-staffing or under-staffing in one or more business units. In either such event, our financial results, customer relationships, employee morale and brand could be materially adversely affected.

Our success also depends, in large part, on our ability to maintain and improve staffing effectiveness and the culture that we have developed over the years. Our ability to do so may be impaired as a result of litigation against us, other judicial decisions, legislation or regulations or other factors in the employment marketplace, as well as our failure to recognize and respond to changing trends and other circumstances that affect our employees. In such events, the productivity of our workers and the efficiency of our operations could be adversely affected, which could lead to an erosion of our operating performance and margins.

Bruce Lucas and Shannon Lucas are married to each other. The separation or divorce of the couple in the future could adversely affect our business.

Bruce Lucas and Shannon Lucas are each members of the board of directors and Chief Executive Officer and Chief Operating Officer and Chief Risk Officer, respectively, and they are married to each other. They are two of our executive officers and are a vital part of our operations. If they were to become separated or divorced or could otherwise not amicably work with each other, one or both of them may decide to cease his or her employment with Slide or it could negatively impact our working environment. Alternatively, their work performance may not be satisfactory if they become preoccupied with issues relating to their personal situation. In these cases, our business could be materially harmed.

We are in the process of winding down operations in India, which may take time and/or create financial risks.

We are in the process of winding down our Indian subsidiary, SIH Technologies LLP (“Slide India”). Slide India was formed for the purpose of employing an executive based in India who is no longer with the Company. We have employed Indian counsel, who is assisting us with the tasks needed to wind down Slide India in as expeditiously a manner as possible. However, if the winddown process is prolonged, this could result in higher expenses and litigation or regulatory risk for us on behalf of Slide India.

If our customers were to claim that the policies they purchased failed to provide adequate or appropriate coverage, we could face claims that could harm our business, results of operations and financial condition.

Although we aim to provide adequate and appropriate coverage under each of our policies, customers could purchase policies that prove to be inadequate or inappropriate. If such customers were to bring a claim or claims

 

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alleging that we failed in our responsibilities to provide them with the type or amount of coverage that they sought to purchase, referred to as error and omission claims (“E&O claims”), we could be found liable, resulting in an adverse effect on our business, results of operations and financial condition. Errors and omissions could include failure, whether negligently or intentionally, to place coverage on behalf of clients, to provide complete and accurate information relating to the risks being insured against or to appropriately apply funds that we hold on a fiduciary basis. It is not always possible to prevent or detect errors and omissions, and the precautions we take may not be effective in all cases. E&O claims often involve substantial amounts of money and, accordingly, can involve significant defense costs. While we maintain insurance coverage to protect us against liability from E&O claims, such coverage may be insufficient or inadequate. Additionally, prices for this insurance and the scope and limits of the coverage terms available are dependent on our claims history as well as market conditions that are outside of our control. While we endeavor to purchase coverage that is appropriate to our assessment of our risk, we are unable to predict with certainty the frequency, nature or magnitude of claims for direct or consequential damages or whether our errors and omissions insurance will cover such claims. In establishing liabilities for E&O claims, we utilize case level reviews by inside and outside counsel and an internal analysis to estimate potential losses. Liability for E&O claims is reviewed and adjusted as new developments warrant. 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 business, results of operations and financial condition or cash flow in a given quarterly or annual period.

Our company culture has contributed to our success and if we cannot maintain this culture as we grow, our business could be harmed.

We believe that our company culture has been critical to our success. We not only seek to engender a trusting relationship between our brand and our customers, but also among our employees. Our ability to continue to cultivate and maintain this culture is essential to our growth and continued success. We face a number of challenges that may affect our ability to sustain our corporate culture, including:

 

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failure to identify, attract, reward and retain people in leadership positions in our organization who share and further our culture, values and mission;

 

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the increasing size and geographic diversity of our workforce, and our ability to promote a uniform and consistent culture across all our offices and employees;

 

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the market perception about our charitable contributions and social and political stances;

 

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competitive pressures to move in directions that may divert us from our mission, vision and values;

 

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the continued challenges of a rapidly evolving industry; and

 

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the increasing need to develop expertise in new areas of business that affect us.

Our unique culture is one of our core characteristics that helps us to attract and retain key personnel. If we are not able to maintain our culture, we might have to incur additional costs and find alternative methods to recruit key employees, which in turn could cause our business, results of operations and financial condition to be adversely affected.

Misconduct or fraudulent acts by employees, agents or third parties may expose us to financial loss, disruption of business, regulatory assessments and reputational harm.

Our Company and the insurance industry are inherently susceptible to past and future misconduct or fraudulent activities by employees, representative agents, vendors, customers or other third parties. These activities could include fraud against the Company, its employees and its customers through illegal or prohibited activities, or unauthorized acts or representations, unauthorized use or disclosure of personal or proprietary information.

 

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We may be unable to prevent, monitor or detect fraudulent activity, including policy acquisitions or payments of claims that are fraudulent in nature.

If we fail to maintain adequate systems and processes to prevent, monitor and detect fraud, including employee fraud, fraudulent policy acquisitions, vendor fraud or fraudulent claims activity, or if inadvertent errors occur with such prevention, monitoring and detection systems due to human or computer error, business, results of operations and financial condition could be materially adversely affected. While we believe past incidents of fraudulent activity have been minor and isolated, we cannot be certain that our systems and processes will always be adequate in the face of increasingly sophisticated and ever-changing fraud schemes. We use a variety of tools to protect against fraud, but these tools may not always be successful at preventing such fraud.

Our exposure to loss activity and regulation may be greater in states where we currently have most of our customers, including Florida.

For the year ended December 31, 2024, nearly all of the gross premiums written for the Carrier originated from customers in Florida. As a result of this concentration, if a significant catastrophe event or series of catastrophe events occur and causes material losses in Florida, our business, results of operations and financial condition could be materially adversely affected. Further, as compared to our competitors who operate on a wider geographic scale, any adverse changes in the regulatory environment affecting property and casualty insurance in Florida may expose us to more significant risks.

In addition, the geographic concentration of our policies in counties that border the Atlantic Ocean in Florida and South Carolina may increase the risk that our business is impacted by one or more catastrophes specific to these regions, such as hurricanes, winter storms, windstorms and hailstorms. In the event of such catastrophes, the laws and regulations of Florida and South Carolina, as well as of other states we may enter in the future, may restrict or prevent us from taking actions to reduce our exposure to losses related to such catastrophes. For example, we may be prevented from using non-renewals or cancellations to limit our exposure following a catastrophe, may be required to provide additional advance notice of non-renewals and cancellations, may be subject to rate change delays or limits or may be prevented from exiting a market that has become unprofitable. See also “—Severe weather events and other catastrophes, including the effects of climate change and global pandemics, are inherently unpredictable and may have a material adverse effect on our financial results and financial condition” and “Business—Government Regulation.”

Litigation and legal proceedings filed by or against us could have a material adverse effect on our business, results of operations and financial condition.

Litigation and other proceedings may include, but are not limited to, complaints from or litigation by customers or reinsurers, related to alleged breaches of contract or otherwise. As our market share increases, competitors may pursue litigation to require us to change our business practices or offerings and limit our ability to compete effectively. As is typical in the insurance industry, we continually face risks associated with litigation of various types arising in the normal course of our business operations, including disputes relating to insurance claims under our policies as well as other general commercial and corporate litigation. Although we are not currently involved in any material litigation with our customers, members of the insurance industry are often the target of class action lawsuits and other types of litigation, some of which involve claims for substantial amounts, and the outcomes of which are unpredictable. This litigation is based on a variety of issues, including insurance and claim settlement practices. In addition, because we use sophisticated data collection and analysis technologies, it is possible that customers or consumer groups could bring individual or class action claims alleging that our methods of collecting data and pricing risk are impermissibly discriminatory. We cannot predict with any certainty whether we will be involved in such litigation in the future or what impact such litigation would have on our business. If we were to be involved in litigation and it was determined adversely, it could require us to pay significant damages or to change aspects of our operations, either of which could have a material adverse effect on our financial results. Even claims without merit can be time-consuming and costly to

 

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defend and may divert management’s attention and resources away from our business and adversely affect our business, results of operations and financial condition. Additionally, routine lawsuits over claims that are not individually material could in the future become material if aggregated with a substantial number of similar lawsuits. In addition to increasing costs, a significant volume of customer complaints or litigation could adversely affect our brand and reputation, regardless of whether such allegations are valid or whether we are liable. We cannot predict with certainty the costs of defense, the costs of prosecution, insurance coverage or the ultimate outcome of litigation or 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.

We are subject to risks related to online payment processing, including third-party payment processing-related risks.

We currently rely on a limited number of providers to provide payment processing services, including the processing of payments from credit cards and debit cards, and our business would be disrupted if such vendors become unwilling or unable to provide these services to us and we are unable to find suitable replacements on a timely basis. If we or our processing vendors fail to maintain adequate systems for the authorization and processing of credit card transactions, it could cause one or more of the major credit card companies to disallow our continued use of their payment products. In addition, if these systems fail to work properly and, as a result, we do not charge our customers’ credit cards on a timely basis or at all, our business, revenue, results of operations and financial condition could be harmed.

The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. In addition, we are subject to the Payment Card Industry Data Security Standard (“PCI DSS”). PCI DSS is a specific set of comprehensive security standards imposed by payment card networks on companies that process credit card information, related to enhancing payment account information security, including, but not limited to, requirements for security management, policies, procedures and standards related to network architecture, software design and certification requirements. PCI DSS compliance is required in order to maintain credit card processing services and to provide our payment facilitation services. Additionally, we are also required to comply with payment card network operating rules, which are set and interpreted by the payment card networks. Payment card networks could adopt new operating rules or interpret or reinterpret existing rules in ways that might prohibit us from providing certain services to some consumers, be costly to implement or be difficult to follow. Moreover, compliance with PCI DSS does not guarantee a completely secure environment and, notwithstanding the results of a compliance assessment, there can be no assurance that payment card networks will not request further compliance assessments or set forth additional requirements binding on us to maintain access to credit card processing services. Compliance is an ongoing effort and the requirements evolve as new threats are identified. In the event that we were to lose PCI DSS compliance status (or fail to renew compliance under a future version of the PCI DSS), or if we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data are compromised due to a breach of data, we may be liable for significant costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs. If we fail to adequately control fraudulent credit card transactions, we may face civil liability, diminished public perception of our security measures and significantly higher credit card-related costs, each of which could harm our business, results of operations and financial condition.

Performance of our investment portfolio is subject to a variety of investment risks that may adversely affect our financial results.

Our results of operations depend, in part, on the performance of our investment portfolio. We seek to hold a diversified portfolio of investments in accordance with our investment policy, and it is routinely reviewed by the

 

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investment committee of Slide Insurance Company, comprised of Bruce Lucas, Shannon Lucas and Stephen Rohde (the “Investment Committee”). However, our investments are subject to general economic and market risks as well as risks inherent to particular securities.

Our primary market risk exposures are to changes in interest rates and equity prices. In prior years, interest rates have been at or near historic lows. A protracted low interest rate environment would continue to place pressure on our net investment income, particularly as it relates to fixed income securities and short-term investments, which, in turn, may adversely affect our operating results. Future increases in interest rates could cause the values of our fixed income securities portfolios to decline, with the magnitude of the decline depending on the duration of securities included in our portfolio and the amount by which interest rates increase. Some fixed income securities have call or prepayment options, which create possible reinvestment risk in declining rate environments. Other fixed income securities, such as mortgage-backed and asset-backed securities, carry prepayment risk or, in a rising interest rate environment, may not prepay as quickly as expected.

Further in recent years, the U.S. Federal Reserve has raised certain benchmark interest rates in an effort to combat inflation. Changing interest rates may have unpredictable effects on markets, may result in heightened market volatility and may detract from our performance, and the performance of our investment portfolio, to the extent we are exposed to such interest rates and/or volatility. A rising interest rate environment could have an adverse effect on the value of our fixed income investment portfolio by decreasing the fair values of the fixed income securities. Longer-term assets may also be sold and reinvested in shorter-term assets that may have lower yields in anticipation of or in response to rising interest rates. In periods of rising interest rates, such as the current interest rate environment, to the extent we borrow money subject to a floating interest rate, including under our Credit Facility, our operating costs would increase, which could reduce our net income.

The value of our investment portfolio is subject to the risk that certain investments may default or become impaired due to deterioration in the financial condition of one or more issuers of the securities we hold, or due to deterioration in the financial condition of an insurer that guarantees an issuer’s payments on such investments. Downgrades in the credit ratings of fixed maturities also have a significant negative effect on the market valuation of such securities.

Such factors could reduce our net investment income and result in realized investment losses. Our investment portfolio is subject to increased valuation uncertainties when investment markets are illiquid. The valuation of investments is more subjective when markets are illiquid, thereby increasing the risk that the estimated fair value (i.e., the carrying amount) of the securities we hold in our portfolio does not reflect prices at which actual transactions would occur.

We may invest in marketable equity securities. These securities would be carried on the balance sheet at fair market value and are subject to potential losses and declines in market value.

In addition, our investment portfolio, managed by a third-party investment management firm, BlackRock, may be subject to increasing scrutiny on environmental, social and governance (“ESG”) matters. Anti-ESG initiatives may impose additional costs on us, limit BlackRock’s views or limit the success of our investment strategy.

Risks for all types of securities are managed through the application of our investment policy, which establishes investment parameters that include, but are not limited to, maximum percentages of investment in certain types of securities and minimum levels of credit quality, which we believe are within applicable guidelines established by the FLOIR.

Although we seek to preserve our capital, we cannot be certain that our investment objectives will be achieved, and results may vary substantially over time. In addition, although we seek to employ investment strategies that are not correlated with our insurance and reinsurance exposures, losses in our investment portfolio

 

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may occur at the same time as underwriting losses and, therefore, exacerbate the adverse effect of the losses on us.

We expect our results of operations to fluctuate on a quarterly and annual basis. In addition, our operating results and operating metrics are subject to seasonality and volatility, which could result in fluctuations in our quarterly revenues and operating results or in perceptions of our business prospects.

Our revenue and results of operations could vary significantly from period to period and may fail to match expectations as a result of a variety of factors, some of which are outside of our control. Our results may vary as a result of fluctuations in the number of customers purchasing our insurance products and fluctuations in the timing and amount of our expenses. In addition, the insurance industry, and particularly homeowners and commercial residential insurance, are subject to their own cyclical trends and uncertainties, including extreme weather which is often seasonal and may result in volatility in claims reporting and payment patterns. Fluctuations and variability across the industry may affect our revenue. As a result of the potential variations in our revenue and results of operations, period-to-period comparisons may not be meaningful and the results of any one period should not be relied on as an indication of future performance. In addition, our results of operations may not meet the expectations of investors or public market analysts who follow us, which may adversely affect our stock price.

We may experience seasonal fluctuations in our revenues and resulting fluctuations in our rate of growth as a result of insurance spending patterns. Volatility in our key operating metrics or their rates of growth could have a negative impact on our financial results and investor perceptions of our business prospects and a failure to achieve our quarterly forecasts or to meet or exceed the expectations of research analysts or investors will cause our stock price to decline.

Our goal is to maximize the long-term value of the business; we do not manage to short-term earnings expectations, which at times may adversely affect short-term results.

We believe that stockholder value will be increased in the long run if we meet or exceed the financial goals and policies that we establish each year. We do not manage our business to maximize short-term stock performance. Due to our focus on the long-term value of the enterprise, we may undertake business strategies and establish related financial goals for a specific year that are designed to enhance our longer-term performance, while understanding that such strategies may not always similarly benefit short-term results. Consequently, these strategies may adversely affect short-term performance.

If actual renewals of our existing contracts do not meet expectations, our premiums written in future years and our future results of operations could be materially adversely affected.

Our insurance policies are written for a one-year term. We make assumptions about the renewal of our prior year’s contracts, including for purposes of determining the amount of reinsurance we purchase. If actual renewals do not meet expectations or if we choose not to write on a renewal basis because of pricing conditions, our premiums written in future years and our future operations would be materially adversely affected, and we may purchase reinsurance beyond what we believe is the most appropriate level.

Damage to our reputation could have a material adverse effect on our business.

Our reputation is one of our key assets. 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. Negative perceptions or publicity regarding these or other matters, including our association with clients or business partners who themselves have a damaged reputation, or from actual or alleged conduct by us or our employees or based on the coverage of our policies and their exclusions, could damage our reputation. Any resulting erosion of trust and confidence among existing and potential clients, regulators and

 

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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, results of operations and financial condition.

We could be forced to sell investments to meet our liquidity requirements.

We invest the premiums we receive from our insureds until they are needed to pay policyholder claims. Consequently, we seek to manage the duration of our investment portfolio based on the duration of our losses and loss adjustment expenses reserves to ensure sufficient liquidity and avoid having to liquidate investments to fund claims. Risks such as inadequate losses and loss adjustment expenses reserves or unfavorable trends in litigation could potentially result in the need to sell investments to fund these liabilities. We may not be able to sell our investments at favorable prices or at all. Sales could result in significant realized losses depending on the conditions of the general market, interest rates and credit issues with individual securities.

We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and limitations that could significantly impact our ability to operate our business.

As of December 31, 2024, we had total consolidated debt outstanding of approximately $39.2 million. In the year ended December 31, 2023 and December 31, 2024, we had debt servicing costs of $2 million and $3.3 million, respectively, most of which was attributable to interest. The level of debt we have outstanding during any period could adversely affect our financial flexibility. We also bear risk at the time debt matures. 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. 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. 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. 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. Additionally, we may not be able to affect such actions, if necessary, on favorable terms or at all. We may not be able to refinance any of our indebtedness on favorable terms, or at all.

On June 25, 2024, we entered into an amended and restated credit agreement with Regions Bank, which includes $10.0 million revolving credit facility, a term loan in an aggregate principal amount of $40.0 million and a delayed draw term loan facility up to $125.0 million (together, the “Credit Facility”). The Credit Facility contains covenants that, among other things, restrict our ability to make certain restricted payments, incur additional debt, engage in certain asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in certain transactions with affiliates, change our business or make investments and require us to comply with certain financial covenants. The restrictions in the Credit Facility 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. We may also incur future debt obligations that might subject us to additional or more restrictive covenants that could affect our financial and operational flexibility, including our ability to pay dividends. 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. A failure to comply with the restrictions under the Credit Facility could result in a default under the financing obligations or could require us to obtain waivers from our lenders for failure to comply with these restrictions. 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, results of operations and financial condition.

 

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The failure of the risk mitigation strategies we utilize could have a material adverse effect on our business, results of operations or financial condition.

We utilize a number of strategies to mitigate our risk exposure including:

 

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employing proper underwriting procedures;

 

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carefully evaluating the terms and conditions of our policies;

 

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geographic diversification; and

 

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ceding insurance risk to reinsurance companies.

However, there are inherent limitations in all of these tactics. No assurance can be given that an event or series of unanticipated events will not result in loss levels which could have a material adverse effect on our business, results of operations or financial condition.

Our acquisitions may be difficult to integrate, divert management resources, result in unanticipated costs or dilute our stockholders.

Part of our continuing business strategy is to make acquisitions of, or investments in, companies, products or technologies that complement our current products, enhance our market coverage, technical capabilities or production capacity or offer growth opportunities. Acquisitions could pose numerous risks to our operations, including:

 

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we may have difficulty integrating the acquired operations, products, technologies or personnel;

 

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we may incur substantial unanticipated integration costs;

 

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assimilating the acquired businesses may divert significant management attention and financial resources from our other operations and could disrupt our ongoing business;

 

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acquisitions could result in the loss of key employees, particularly those of the acquired operations;

 

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we may have difficulty retaining or developing the acquired businesses’ customers;

 

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acquisitions could adversely affect our existing business relationships with suppliers and other third parties;

 

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we may fail to realize the potential cost savings or other financial benefits and/or the strategic benefits of the acquisitions; and

 

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we may incur liabilities from the acquired businesses for infringement, misappropriation or other violation of intellectual property rights or other claims, and we may not be successful in seeking indemnification for such liabilities or claims.

In connection with these acquisitions or investments, we could incur debt, amortization expenses related to intangible assets, large and immediate write-offs, assume liabilities or issue stock that would dilute our current stockholders’ percentage of ownership. We may not be able to complete acquisitions or integrate the operations, products, technologies or personnel gained through any such acquisition without a material adverse effect on our business, results of operations and financial condition.

Changes in accounting practices and future pronouncements may materially affect our reported financial results.

Developments in accounting practices may require us to incur considerable additional expenses to comply, particularly if we are required to prepare information relating to prior periods for comparative purposes or to apply the new requirements retroactively. The impact of changes in current accounting practices and future pronouncements cannot be predicted but may affect the calculation of net income, shareholders’ equity and other relevant financial statement line items.

 

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Our insurance subsidiary is required to comply with statutory accounting principles (“SAP”). SAP and various components of SAP are subject to constant review by the NAIC and its task forces and committees, as well as state insurance departments, in an effort to address emerging issues and otherwise improve financial reporting. Various proposals are pending before committees and task forces of the NAIC, some of which, if enacted, could have negative effects on insurance industry participants. The NAIC continuously examines existing laws and regulations. We cannot predict whether or in what form such reforms will be enacted and, if so, whether the enacted reforms will positively or negatively affect us.

We rely on independent agents to write voluntary insurance policies for us, and if we are not able to attract and retain independent agents, our revenues would be negatively affected.

We write voluntary insurance policies (i.e., policies not acquired through the Citizens program) through a network of independent agents. Of our network of over 5,300 independent agents, approximately 30% are affiliated with a large agency network with which we have entered into a master agency agreement. As of December 31, 2024, policies written through independent agents constituted approximately 99% of our total in force premiums and represented approximately $1,335 million in annualized premiums. In addition, as of December 31, 2024 approximately 2,200 independent agents in our network produced 90% of this business. We expect to increase the number of voluntary policies we write as our business expands, which will further increase our reliance on our network of independent agents. In fact, in the future, we may rely on independent agents to be the primary source for our property insurance policies. If any of our independent agents cease writing policies for us, or if any of our master agency agreements are terminated, we may suffer a reduction in the amount of products we are able to sell, which would negatively impact our results.

Many of our competitors also rely on independent agents. As a result, we must compete with other insurers for independent agents’ business. Our competitors may offer a greater variety of insurance products, lower premiums for insurance coverage or higher commissions to their agents. If our products, pricing and commissions do not remain competitive, we may find it more difficult to attract business from independent agents to sell our products.

We may be subject to greater than anticipated liabilities for taxes, and any successful action by federal or state authorities to collect additional taxes could adversely harm our business.

Although we believe our tax estimates are reasonable, federal or state taxing authorities may challenge our tax positions upon audit or other proceeding with any governmental entity with respect to any taxes or tax returns. The final determination of any tax audit and any related litigation, proceeding, examination or investigation could be materially different from our historical tax provisions and accruals, and any successful action by federal or state authorities to impose or collect additional taxes, either retroactively, prospectively or both, could harm our business, results of operations and financial condition.

We may be adversely impacted by inflation.

Our operations, like those of other insurers, are susceptible to the effects of both economic and social inflation because premiums are established before the ultimate amounts of losses and loss adjustment expenses are known. Although we consider the potential effects of inflation when setting premium rates, our premiums may not fully offset the effects of inflation and may essentially result in our underpricing the risks we insure and reinsure. Our reserve for losses and loss adjustment expenses includes assumptions about future payments for settlement of claims and claims-handling expenses, such as the value of replacing property and associated labor costs for the property business we write and litigation costs. To the extent inflation causes costs to increase above reserves established for claims, we will be required to increase our loss reserves with a corresponding reduction in our net income in the period in which the deficiency is identified, which may have a material adverse effect on our business, results of operations or financial condition. Unanticipated higher inflation could also lead to higher interest rates, which would negatively impact the value of our fixed income securities and potentially other investments.

 

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In recent years, we have experienced an increase in loss costs as a result of relatively high inflation in several locations in which we have exposure. We have seen high inflation in many components of our claims payments, across all lines. The underlying drivers of increased claims costs include, but are not limited to consumer prices, retail prices, wages, property rebuild costs and energy prices. In response to the rising costs driven by inflation, we conducted a thorough assessment of loss cost inflation, which we used to update our pricing models and reserving and planning assumptions. This analysis suggests that the positive rate movement we have achieved has matched or exceeded loss cost trends when we account for current rates of inflation and forecasted rates of future inflation. However, there is a risk that our inflation assumptions and forecasts prove to be insufficient, or that the impact of those inflation drivers upon our future claim payments is inconsistent with our assumptions, and this risk could negatively impact our business, results of operations and financial condition.

Risks Relating to Our Intellectual Property and Data Privacy

We are subject to cybersecurity risks, including cyber-attacks, security incidents or real or perceived errors, failures or bugs in our systems or website or our service providers’ systems, which could impair our operations, result in loss of personal customer information, damage our reputation and brand and harm our business, results of operations and financial condition.

Our continued success is dependent on our systems, applications and software continuing to operate and to meet the changing needs of our customers and users. We rely on our technology and engineering staff and vendors to successfully implement changes to and maintain our systems and services in an efficient and secure manner. Like all information systems and technology, our website may contain material errors, failures, vulnerabilities or bugs, particularly when new features or capabilities are released, and may be subject to cybersecurity threats as well as unintentional incidents causing data leakage, any of which could lead to interruptions, delays or website shutdowns, or could cause loss of critical data, or the unauthorized disclosure, access, acquisition, alteration or use of personal or other confidential information.

We and our service providers and partners have experienced, and may in the future experience, failures of, or disruptions to, our systems and data, and may be subject to attempted and successful security breaches. The breadth and scope of security breaches has grown over time, and the techniques and sophistication used to conduct such breaches, as well as the sources and targets of the attacks, change frequently. Security breaches are also becoming increasingly difficult to detect, and may come from a variety of sources, including organized criminal groups, “hacktivists,” terrorists, nation states and nation state-supported actors. These threats include, among other things, computer viruses, malicious code, worms, malware, ransomware, attempts to overload our servers with denial-of-service or other attacks, defective software, credential stuffing, social engineering, break-ins, phishing impersonation attacks, human error, fraud, theft, malfeasance or unauthorized parties gaining access to our systems and other similar incidents. For example, unauthorized parties could steal or access names, email addresses, physical addresses, phone numbers and other information regarding our customers which we collect when providing insurance quotes, and credit card or other payment information if a customer agrees to purchase insurance coverage from us. Further, outside parties may attempt to fraudulently induce employees or customers to disclose sensitive information in order to gain access to our information or customers’ information. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently, often they are not recognized until launched against a target, and may originate from less regulated and remote areas around the world, we may be unable to proactively address these techniques or to implement adequate preventative measures. Given the unpredictability of the timing, nature and scope of security breaches, we cannot guarantee that the technologies we use will adequately secure the data we maintain, including confidential information and personal data, against attacks or such breaches, and we cannot entirely eliminate the risk of improper or unauthorized access to or disclosure of such information, or other data privacy or security incidents that impact the confidentiality, integrity and/or availability of such information, or our systems and operations. While we use encryption and authentication technology licensed from third parties designed to effect secure transmission of such information, we cannot guarantee the security of the transfer and storage of information. Despite our efforts to continually refine our procedures, educate our employees and

 

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implement security measures to protect against such cybersecurity risks, there can be no assurance that these measures will prevent unauthorized access or detect every type of attempt or attack and our infrastructure may still be vulnerable to physical break-ins, computer viruses, programming errors, attacks by third parties or similar disruptive problems. If we experience compromises to our security that result in technology performance, integrity or availability problems, the complete shutdown of our website or the loss or unauthorized disclosure, access, acquisition, alteration or use of confidential information, customers may lose trust and confidence in us, and customers may decrease the use of our website or stop using our website entirely. Security breaches, cyber-attacks and other similar incidents, including with respect to third-party systems that have access to or process our, our clients’ or our employees’ personal, proprietary and confidential information, could disrupt the security of our internal systems and business applications, 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 information or personal data being lost or stolen, including client, employee or company data, which could harm our competitive position, expose us to litigation and enforcement actions, potential regulatory investigations, fines, penalties, compliance orders and remediation costs, as well as reputational harm, or otherwise adversely affect our business. Additionally, even if we take steps that we believe are adequate to protect us from cyber threats, attempted or successful hackings against our competitors or other companies could create the perception among our customers or potential customers that our digital platform is not safe to use.

Our business is highly dependent upon our ability to perform, in an efficient and uninterrupted manner, necessary business functions. The shut-down or unavailability of our systems or facilities for any reason could significantly impair our ability to perform critical business functions on a timely basis. In addition to our systems and those of our service providers being vulnerable to security incidents, additional damage or interruption to our or our service providers’ systems may arise from telecommunications or network failures or interruptions, system malfunction, epidemics and war. Furthermore, many of our critical business systems interface with and depend on third-party systems; an interruption of service from a third party for any reason could significantly impair our ability to perform critical business functions. If sustained or repeated, and if an alternate system, process or vendor is not immediately available to us, such events could result in a deterioration of our ability to write and process policies, provide customer service, resolve claims in a timely manner, make payments when required or perform other necessary business functions, and could also trigger claims by affected third parties. Any such event could have a material adverse effect on our business, results of operations and financial condition, as well as damage to our brand and customer goodwill.

Any or all of the issues described above, including cyber-attacks, security breaches, disruption by malware, system failure or other damage may have a significant impact on the performance, reliability, security and availability of our systems, software or services that may harm our reputation, and could adversely affect our ability to attract new customers or retain existing customers, impair our ability to operate or subject us to governmental or third-party lawsuits, investigations, regulatory fines or other actions or liability, resulting in a material adverse impact on our business, results of operations and financial condition.

We collect, process, store, share, disclose and use information, including confidential information and personal data. Our actual or perceived failure to protect such data, respect customers’ privacy or comply with data privacy and security laws and regulations could damage our reputation and brand and harm our business and operating results.

We collect, process, store, share, disclose and use information, including confidential information and personal data. We use technology to offer insurance products involving the storage and transmission of such information, including personal data, in relation to our staff, contractors, business partners and current, past or potential customers. Also, we depend on a number of external third parties in relation to the operation of our business, a number of which process personal data on our behalf, provide us with data, such as our lead generation service providers, or partner with us. With each such third party, we attempt to mitigate the associated risks by performing security and data transfer assessments and detailed due diligence, entering into contractual arrangements to ensure that such third parties only process personal data according to agreed-upon instructions,

 

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and that they have sufficient and appropriate technical and organizational security measures in place. There is no assurance that these measures and our own data privacy and security-related safeguards will protect data, including personal information from the risks associated with the third-party access, processing, storage and transmission of such information. Any violation of data or security laws by such suppliers could have a material adverse effect on our business and result in fines and penalties including those outlined below.

In the United States, various laws and regulations apply to the collection, processing, disclosure and security of certain types of data, including the Federal Trade Commission Act, and state equivalents, the Gramm-Leach-Bliley Act (“GLBA”), the Telephone Consumer Protection Act and various state laws relating to privacy and data security, including the CCPA. The U.S. Federal Trade Commission (the “FTC”), many state attorneys general and many courts interpret the various existing federal and state data privacy and consumer protection laws, and enforce various standards for the collection, disclosure, process, use, storage and security of data, including personal data. State laws are changing rapidly and there is discussion in Congress of a new comprehensive federal data protection law to which we would become subject if it is enacted, which may add additional complexity, variation in requirements, restrictions and potential legal risks, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data, and could result in increased compliance costs or changes in business practices and policies.

The CCPA increases privacy rights for California residents and imposes obligations on companies that process personal information about such residents, including an obligation to provide certain new disclosures and provide new consumer rights to such residents. As a result, the CCPA imposes corresponding obligations on covered businesses, relating to the access to, deletion of and sharing of personal information collected by covered businesses, including California residents’ right to access and delete personal information about them, opt out of certain sharing and sales of such personal information and receive detailed information about how such personal information is used. The law exempts from certain requirements of the CCPA certain personal information that is collected, processed, sold or disclosed pursuant to the California Financial Information Privacy Act (“CFIPA”), the GLBA or the federal Driver’s Privacy Protection Act (“DPPA”). Also, the definition of “personal information” in the CCPA is broad and may encompass other information that we maintain beyond that excluded under the GLBA, the DPPA or the CFIPA exemption. Further, the CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action is expected to increase the likelihood of, and risks associated with, data breach litigation.

On November 3, 2020, California enacted the CPRA expanding on existing rights under the CCPA and creating new consumer privacy rights for California residents, including rights to correct personal information. Further, the CPRA imposes additional obligations on businesses to implement data retention and minimization practices, perform cybersecurity audits and risk assessments, and implement reasonable security protections. The CPRA also permits consumers to opt out of the sharing of personal information for use in behavioral advertising, which may impact our ability to market our products and services. The CPRA also establishes the California Privacy Protection Agency, which is the first data privacy regulator in the United States to enforce the CPRA. The CPRA strengthens some of the enforcement authority established under the CCPA and could result in increased enforcement actions and fines. The enactment of the CCPA and other state privacy, data protection and cybersecurity laws, rules and regulations is prompting a wave of similar legislative developments in other states in the United States, which creates the potential for a patchwork of overlapping but different state laws. For example, Virginia has adopted a new state data protection act referred to as the Virginia Consumer Data Protection Act (“VCDPA”), which became effective on January 1, 2023, Colorado has adopted a new state data protection act titled the Colorado Privacy Act (“CPA”), which became effective on July 1, 2023, and Connecticut has adopted a new state data protection act titled the Connecticut Data Privacy Act (“CTDPA”), which became effective on July 1, 2023. The VCDPA, the CPA and the CTDPA have some similarities to the CCPA and introduced new data privacy rights for residents of such states and new operational requirements for covered companies, including consent requirements for the collection of sensitive personal information. At least nine additional states (Utah, Iowa, Indiana, Tennessee, Montana, Delaware, Oregon, Texas and Florida) have passed similar laws, with some scheduled to take effect in subsequent years, and other states are considering enacting similar laws. In addition, laws

 

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in all 50 states in the United States require businesses to provide notice to consumers whose personal information has been accessed or acquired as a result of a data breach (and, in some cases, also to regulators). Some observers have noted that these new laws could mark the beginning of a trend toward more stringent privacy legislation in the United States. There is also discussion in Congress of a new comprehensive federal data protection and privacy law to which we likely would be subject if it is enacted. The effects of these state laws and other similar state or federal laws are potentially significant and may require us to modify our data processing practices and policies and to incur substantial costs and potential liability in an effort to comply with such legislation. Further, any such laws may also have potentially conflicting requirements that would make compliance challenging, as well as potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. Any failure or perceived failure by us or third parties with which we do business with (e.g., service providers or partners) to comply with laws, regulations or regulatory guidance relating to data privacy or security may also result in governmental investigations and enforcement actions, litigation, fines and penalties or adverse publicity, and could cause our partners and customers to lose trust in us, which could have an adverse effect on our business, results of operations and financial condition.

In the event of a data breach, we are also subject to breach notification laws in the jurisdictions in which we operate, including U.S. state laws, and the risk of litigation and regulatory enforcement actions. In addition, a number of federal and state laws and regulations relating to privacy affect and apply to the insurance industry specifically, including those regulated by the FLOIR.

Additionally, we are subject to the terms of our privacy policies and privacy-related obligations to third parties. Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to customers or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of information, which could include personally identifiable information or other user data, may result in governmental or regulatory investigations, enforcement actions, regulatory fines, compliance orders, litigation or public statements against us by consumer advocacy groups or others, and could cause customers to lose trust in us, all of which could be costly and have an adverse effect on our business, results of operations and financial condition. In addition, new and changed rules and regulations regarding privacy, data protection and cross-border transfers of customer information could cause us to delay planned uses and disclosures of data to comply with applicable privacy and data protection requirements. Moreover, if third parties that we work with violate applicable laws or our policies, such violations also may put personal data at risk, which may result in increased regulatory scrutiny and have a material adverse effect to our reputation, business, results of operations and financial condition.

Compliance with these privacy and data security requirements is rigorous and time-intensive and may increase our cost of doing business and, despite these efforts, there is a risk that we fail to comply and may become subject to government enforcement actions, fines and penalties, litigation and reputational harm, which could materially and adversely affect our business, results of operations and financial condition. All of these evolving compliance and operational requirements impose significant costs on us, such as costs related to organizational changes and implementing additional protection technologies, which are likely to increase over time. Any failure or perceived failure by us to comply with any applicable federal or state laws, rules, regulations and guidelines relating to data privacy and security could result in damage to our reputation and our relationship with our employees and consumers, as well as proceedings or litigation by governmental agencies or consumers, including class action privacy litigation in certain jurisdictions, which could subject us to significant fines, sanctions, awards, penalties, corrective measures or judgments, any of which could result in costly investigations and litigation, civil or criminal penalties (including against officers), operational changes and negative publicity that could adversely affect our reputation, as well as our results of operations and financial condition.

 

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We employ third-party licensed software for use in our business, and the inability to maintain these licenses, errors in the software we license or the terms of open-source licenses could result in increased costs or reduced service levels, which would adversely affect our business.

Our business relies on certain third-party software obtained under licenses from other companies. We anticipate that we will continue to rely on such third-party software in the future. Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace. In addition, integration of new third-party software may require significant work and require substantial investment of our time and resources. Our use of additional or alternative third-party software would require us to enter into license agreements with third parties, which may not be available on commercially reasonable terms or at all. Many of the risks associated with the use of third-party software cannot be eliminated, and these risks could negatively affect our business.

Additionally, the software powering our technology systems incorporates software covered by open-source licenses. The terms of many open-source licenses have not been interpreted by U.S. courts, and there is a risk that the licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to operate our systems. In the event that portions of our proprietary software are determined to be subject to an open-source license, we could be required to publicly release the affected portions of our source code or be required to grant licenses to our proprietary software for free. To avoid the application of such open-source licenses to our proprietary software, we may be required to re-engineer all or a portion of our technology systems, which could be time-consuming and expensive. Such risk could be difficult or impossible to eliminate and could adversely affect our business, results of operations and financial condition.

We rely on data from our customers and third parties for pricing and underwriting our insurance policies, handling claims and maximizing automation, the unavailability or inaccuracy of which could limit the functionality of our products and disrupt our business.

We use data, technology and intellectual property licensed from unaffiliated third parties in certain of our products, including, for example, proprietary information that we license from LexisNexis Risk Solutions, Inc. (“LexisNexis”) and Verisk Analytics, Inc. (“Verisk”), and we may license additional third-party technology and intellectual property in the future. Any errors or defects in this third-party technology and intellectual property could result in errors that could harm our brand and business. In addition, licensed technology and intellectual property may not continue to be available on commercially reasonable terms, or at all. Also, should LexisNexis or Verisk refuse to license their proprietary information to us on the same terms that it offers to our competitors, we could be placed at a significant competitive disadvantage.

Further, although we believe that there are currently adequate replacements for the third-party technology and intellectual property we presently use other than proprietary information provided by LexisNexis or Verisk, 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. 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. 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. Alternatively, we might be forced to limit the features available in affected products. Any of these results could harm our business, results of operations and financial condition.

 

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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 technology and related tools, our operating results, client relationships, growth and compliance programs could be adversely affected.

Our future success depends, in part, on our ability to anticipate and respond effectively to the threat of digital disruption and other technology change. 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. 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. Additionally, the effort to gain technological expertise and develop new technologies in our business requires us to incur significant expenses. 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.

In some cases, we depend on key vendors and partners to provide technology and other support for our strategic initiatives. 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 use of artificial intelligence, machine learning, data analytics and other similar tools may adversely impact our business and subject us to additional regulatory and other risks and possible litigation, including claims alleging unfair insuring practices arising from the use of such tools.

We utilize artificial intelligence, machine learning, data analytics and similar tools that collect, aggregate and analyze data, in connection with our business. The introduction of artificial intelligence tools into new or existing products may enhance or create legal, operational, regulatory and technological and related contractual risks, as the technologies underlying such tools and their use cases are subject to a variety of laws, regulations, orders and industry standards, including intellectual property, privacy, data protection and cybersecurity, consumer protection, competition, equal protection and equal opportunity laws. Regulation of artificial intelligence and machine learning is complex and rapidly evolving worldwide as legislators, regulators, including the Securities and Exchange Commission (the “SEC”) and the FTC and consumer advocacy groups are increasingly focusing on these powerful emerging technologies. The laws and regulations applicable to our business and artificial intelligence are complex and subject to varying interpretations, with limited regulatory guidance at this time. It is not possible to predict all of the risks related to the use of artificial intelligence, and changes in laws, rules, directives and regulations governing artificial intelligence may adversely affect our ability to develop and use artificial intelligence or subject us to legal liability. Moreover, any changes in laws, regulations, orders and industry standards governing the use of artificial intelligence may be costly or impossible to comply with, and may result in claims, disputes, litigation or costs associated with any compliance failure or redesign of our platform or services to comply with such regulations.

There are significant risks involved in utilizing such tools, such as an increase in intellectual property infringement or misappropriation, data privacy, cybersecurity, operational and technological risks, harmful content, accuracy, bias, toxicity and discrimination, any of which could affect our further development, adoption and use of artificial intelligence, and may cause us to incur additional research and development costs to resolve such issues. No assurance can be provided that the usage of such tools will enhance our business or assist our business in being more efficient, or better at assessing insuring risk or profitability. Artificial intelligence tools may also have errors or inadequacies that are not easily detectable. For example, certain artificial intelligence tools may utilize historical performance, historical market or sector data in their analytics. To the extent that such historical data is not indicative of current or future conditions in the applicable market or sector, or such artificial intelligence fails to filter biases in the underlying data or collection methods, the usage of such tools may lead us to make determinations on behalf of our business that have an adverse effect. If artificial intelligence tools are

 

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incorrectly designed, or the data used to train them is incomplete, inadequate or biased in some way, our use of such tools may inadvertently reduce our efficiency or cause unintentional or unexpected outputs that are incorrect, do not match our business goals, do not comply with our policies or interfere with the performance of our services or platform, our business and our reputation. Additionally, our reliance on artificial intelligence and similar tools could pose ethical concerns, which could have negative implications for our organization. Any of the foregoing could adversely affect our ability to utilize artificial intelligence as part of our business, which in turn may adversely affect our operational capacity and ability to attract and maintain consumers.

We may be unable to prevent or address the misappropriation of our data.

From time to time, third parties may misappropriate our data through website scraping, bots or other means and aggregate this data on their websites with data from other companies. In addition, copycat websites or online apps may misappropriate our data and attempt to imitate our brand or the functionality of our website. If we become aware of such websites or online apps, we intend to employ technological or legal measures in an attempt to halt their operations. However, we may be unable to detect all such websites or online apps in a timely manner or at all and, even if we could, technological and legal measures may be insufficient to halt their operations. In some cases, our available remedies may not be adequate to protect us against the effect of the operation of such websites or online apps. Regardless of whether we can successfully enforce our rights against the operators of these websites or online apps, any measures that we may take could require us to expend significant financial or other resources, which could harm our business, results of operations or financial condition. In addition, to the extent that such activity creates confusion among consumers or advertisers, our brand and business could be harmed.

Failure to maintain, protect or enforce our intellectual property rights could harm our business, results of operations and financial condition.

Our success is dependent in part on protecting our intellectual property rights and technology (such as source code, information, data, processes and other forms of information, know-how and technology). We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish, maintain, protect and enforce our intellectual property. Additionally, the steps that we have already taken to maintain, protect or enforce our intellectual property may not be sufficient or effective.

While we take precautions designed to protect our intellectual property, competitors and other unauthorized third parties may still seek to copy, infringe, misappropriate or otherwise violate or exploit our technology, or use our proprietary brand, content and information to create or enhance competing solutions and services, which could adversely affect our competitive position in our rapidly evolving and highly competitive industry. We may be required to spend significant resources in order to monitor and protect our intellectual property rights, and some violations may be difficult or impossible to detect. We may also be forced to bring claims against third parties to determine the ownership of what we regard as our intellectual property or to enforce our intellectual property. Even if we do detect violations, we may need to engage in litigation to enforce our rights, and we cannot assure you that we will have sufficient resources to do so. Litigation to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management, and the measures we take to protect our intellectual property from unauthorized use by others may not be effective, and there can be no assurance that our intellectual property rights will be sufficient to protect against others offering products that are substantially similar or superior to ours and that compete with our business. 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 and, if such defenses are successful, we could lose valuable intellectual property rights. The outcomes of such intellectual property-related proceedings are often unpredictable. In addition, even if we are successful in enforcing our intellectual property against third parties, the damages or other remedies awarded, if any, may not be commercially meaningful.

Additionally, while we include in our agreements with business partners provisions that protect against unauthorized use, copying, transfer and disclosure of our technology, some of these provisions may be

 

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unenforceable under the laws of certain jurisdictions. Furthermore, while we enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with our third-party providers and strategic partners, we cannot assure you that we have entered into confidentiality agreements with each party that may have or has access to our trade secrets and proprietary technology or that we have executed adequate invention assignment agreements with all employees or third parties involved in the development of our intellectual property, including the proprietary technology used in certain parts of our business. We also cannot guarantee that these agreements will be effective in controlling access to, and use and distribution of, our platform and proprietary information. Further, regardless of what measures we take to maintain, protect or enforce our intellectual property and proprietary technologies, our competitors may still independently develop technologies that are substantially equivalent or superior to our offerings.

We may in the future file applications to protect certain of our innovations and intellectual property. If we were to seek patent protection, we cannot assure you that any of our patent applications would result in the issuance of a patent. Further, even if issued, we cannot assure you that the scope of the patent would provide any meaningful protection. Similarly, we cannot guarantee that all of our applications for trademark registrations will be successful. In addition, even if we are successful in obtaining intellectual property protection, our intellectual property rights may be contested, circumvented or invalidated, and we may not be able to prevent third parties from infringing, misappropriating or otherwise violating our intellectual property rights. Therefore, the exact effect of the protection of this intellectual property cannot be predicted with certainty.

We currently hold various domain names relating to our brand, including, among others, slideinsurance.com. Failure to maintain, protect or enforce our domain names could adversely affect our reputation and brand and make it more difficult for users to find our website. We may be unable, without significant cost or at all, to prevent third parties from acquiring domain names that are similar to, infringe upon, misappropriate or otherwise violate or decrease the value of our trademarks and other proprietary rights.

Although we take measures to protect our intellectual property, if we are unable to prevent the infringement, misappropriation or other violation of our intellectual property, the value of our brand, content and other intangible assets may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to customers and potential customers may become confused, and our ability to attract customers may be adversely affected. Any inability or failure to maintain, protect and enforce our intellectual property could adversely impact our business, results of operations and financial condition.

Claims by others that we infringed, misappropriated or otherwise violated their proprietary technology or other intellectual property rights could harm our business.

Companies in the internet and technology industries are frequently subject to litigation based on allegations of infringement, misappropriation or other violations of intellectual property rights. In addition, certain companies and rights holders seek to enforce and monetize patents or other intellectual property rights they own, have purchased or otherwise obtained. As we gain an increasingly high public profile, the possibility of intellectual property rights claims against us grows. From time to time, third parties may assert claims of intellectual property infringement against us. There can be no assurance that we will be successful in defending against these allegations, or that we will be able to settle any such claims in a manner that is satisfactory to us. Any claims of infringement, misappropriation or other violation of intellectual property rights, even those without merit, could be costly to defend, could distract our management from our business and could require us to cease use of such intellectual property. We may be required to pay substantial damages, royalties or other fees in connection with a claimant securing a judgment against us, we may be subject to an injunction or other restrictions that prevent us from using or distributing our intellectual property, or from operating under our brand, or we may agree to a settlement that prevents us from distributing our offerings or a portion thereof, which could adversely affect our business, results of operations and financial condition.

 

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With respect to any intellectual property infringement claim, we may have to seek out a license to continue operations found to violate such rights, which may not be available on favorable or commercially reasonable terms and may significantly increase our operating expenses. If a third party does not offer us a license to its intellectual property on reasonable terms, or at all, we may be required to develop alternative, non-infringing technology, which could require significant time (during which we would be unable to continue to offer our affected offerings), effort and expense and may ultimately not be successful. Any of these events could adversely affect our business, results of operations and financial condition.

Risks Relating to the Insurance Industry

The insurance business, including the market for homeowners and commercial residential insurance, is historically cyclical in nature, currently experiencing high demand and low supply, and we may experience periods with excess underwriting capacity and unfavorable premium rates, which could adversely affect our business.

Historically, insurers have experienced significant fluctuations in operating results due to competition, frequency and severity of catastrophic events, levels of capacity, adverse litigation trends, regulatory constraints, volatility in investment results, general economic conditions and other factors. The supply of insurance is related to prevailing prices, the level of insured losses and the level of capital available to the industry that, in turn, may fluctuate in response to changes in rates of return on investments being earned in the insurance industry. As a result, the insurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of capacity increased premium levels. Currently, we believe the market for homeowners and commercial residential insurance is experiencing high demand and low supply, partially as a result of recent regulatory developments in the Florida homeowners and commercial residential insurance market, which has resulted in restricted capital and restricted capacity in the market. See “Prospectus Summary—Recent Florida legislative developments” for more information. Demand for insurance depends on numerous factors, including the frequency and severity of catastrophic events, levels of capacity, the introduction of new capital providers and general economic conditions. All of these factors fluctuate and may contribute to price declines generally in the insurance industry.

We cannot predict with certainty whether market conditions will improve, remain constant or deteriorate. Negative market conditions may impair our ability to underwrite insurance at rates we consider appropriate and commensurate relative to the risk assumed. Additionally, negative market conditions could result in a decline in policies sold, an increase in the frequency of claims and premium defaults and an uptick in the frequency of falsification of claims. If we cannot underwrite insurance at appropriate rates, our ability to transact business will be materially and adversely affected. Any of these factors could lead to an adverse effect on our business, results of operations and financial condition.

We undertake strategic initiatives to innovate within the competitive, regulatory and legal environments of the insurance industry and our innovations may entail a degree of risk, may not ultimately achieve anticipated business goals, or may be subject to challenge by regulators or private litigants.

Our insurance business operates in highly regulated environments. Our insurance subsidiaries are subject to regulation and supervision by multiple state insurance departments and multiple jurisdictions, each of which has a unique and complex set of laws and regulations. In addition, certain federal laws impose additional requirements on businesses, including insurers, in a wide range of areas, such as the use of credit information, privacy and the reimbursement of certain medical costs incurred by the government. Our ability to implement business plans and remain competitive while complying with these laws and regulations, and to obtain necessary regulatory action in a timely manner, is and will continue to be critical to our success.

Most jurisdictions impose restrictions on, or require prior regulatory approval of, various actions by regulated insurers, which may adversely affect our insurance subsidiaries’ ability to operate, innovate and obtain

 

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necessary rate adjustments in a timely manner. Our compliance efforts are further complicated by changes in laws or regulations applicable to insurance companies, or by judicial interpretations of those laws or regulations. Insurance laws and regulations may limit, among other things, our ability to underwrite and price risks accurately, prevent us from obtaining timely rate changes to respond to increased or decreased costs, restrict our ability to discontinue unprofitable businesses or exit unprofitable markets, prevent us from terminating policies under certain circumstances and dictate or limit the types of investments that we may hold. Moreover, inconsistencies between requirements at the state and federal level may further complicate our compliance efforts, potentially resulting in additional costs being imposed on us. In addition, laws in certain jurisdictions mandate that insurance companies pay assessments in a number of circumstances, including assessments to pay claims upon the insolvency of other insurance companies or to cover losses in government-provided insurance programs for high-risk coverages. Compliance with laws and regulations often results in increased costs, which can be substantial. These costs, in turn, may adversely affect our profitability or our ability or desire to grow or operate our business in the applicable jurisdictions.

The actual or alleged failure to comply with this complex variety of laws and regulations by us or other companies in the insurance, financial services or related industries, also could result in actions or investigations by regulators, state attorneys general, federal officials or other law enforcement officials. Such actions and investigations, and any determination that we have not complied with an applicable law or regulation, could potentially lead to significant monetary payments, fines and penalties, adverse publicity and damage to our reputation in the marketplace, and in certain cases, revocation of a subsidiary’s authority to do business in one or more jurisdictions. In addition, we could face individual and class action lawsuits by insureds and other parties for alleged violations of certain of these laws or regulations.

New federal or state legislation or regulations may be adopted in the future that could materially adversely affect our operations or ability to write business profitably in one or more jurisdictions.

We operate in a highly regulated environment and are subject to a variety of complex federal and state laws and regulations.

In the United States, each state regulator retains the authority to license insurers within its state, and an insurer generally may not operate in a state in which it is not licensed. Accordingly, we are not permitted to sell insurance to residents of the states and territories of the United States in which we do not currently possess a license, which is likely to put us at a disadvantage among many of our competitors that have been in business much longer than us and are licensed to sell their insurance products in most, if not all, U.S. jurisdictions.

Our insurance company subsidiary, Slide Insurance Company, is subject to extensive regulation and supervision in Florida, its state of domicle, and in the states in which it transacts business, principally by the individual state insurance departments. Such regulation and supervision are generally designed to protect the interests of policyholders, and not necessarily the interests of insurers or agents, their stockholders or other investors. Numerous aspects of our insurance business are subject to regulation, including, but not limited to, premium rates, mandatory covered risks, limitations on the ability to renew or elect not to renew business, prohibited exclusions, licensing and appointment of agents, restrictions on the size of risks that may be insured under a single policy, reserves and provisions for unearned premiums, losses and other obligations, deposits of securities for the benefit of customers, investments, capital and surplus requirements, dividend limits, affiliate transactions, policy forms and coverages, advertising and other conduct, including restrictions on the use of credit information and other factors in underwriting, as well as other underwriting and claims practices. To the extent we decide to expand our current product offerings to include other insurance products, such as auto or life insurance, this would subject us to additional regulatory requirements and scrutiny in each state in which we elect to offer such products. States have also adopted legislation defining and prohibiting unfair methods of competition and unfair or deceptive acts and practices in the business of insurance. Prohibited practices include, but are not limited to, misrepresentations, false advertising, coercion, disparaging other insurers, unfair claims settlement procedures and discrimination in the business of insurance. Noncompliance with any of such state

 

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statute may subject us to regulatory action by the relevant state insurance regulator, and, in certain states, private litigation. States also regulate various aspects of the contractual relationships between insurers and independent agents.

Such laws, rules and regulations are usually overseen and enforced by the various state insurance departments, as well as through private rights of action and by state attorneys general. Such regulations or enforcement actions are often responsive to current consumer and political sensitivities, such as homeowners and commercial residential insurance rates and coverage forms, or which may arise after a major event. Such rules and regulations may result in rate suppression, limit our ability to manage our exposure to unprofitable or volatile risks, or lead to fines, premium refunds or other adverse consequences.

For example, insurers licensed in Florida, including Slide Insurance Company, are subject to Section 624.4073, Florida Statutes, which prohibits any person who served as an officer or director of an insolvent insurer within the two-year period before insolvency from serving as an officer or director of another insurer (or having direct or indirect control over the selection or appointment of such an officer or director), unless the person demonstrates that his or her personal actions or omissions were not a significant contributing cause to the insolvency. While none of the officers and directors of Slide Insurance Company served as an officer or director of such an insolvent insurer, our President and Chief Financial Officer and two senior employees at our managing general agent subsidiary were previously officers of St. Johns Insurance Company which became insolvent. Recently, the FLOIR has issued letters to many insurance carriers in Florida, including Slide Insurance Company, asking for additional information on compliance with the statute. Although the statutory prohibition does not, on its face, extend to officers or directors of parent holding companies or other non-insurer affiliates of Florida insurers (so long as such officers or directors have defined separation of duties that allow them to perform specific duties at the non-insurer entity that remove any direct or indirect control over the insurer’s selection of officers or directors), the FLOIR could determine that our President and Chief Financial Officer and the senior employees of our managing general agent subsidiary are subject to this statutory prohibition. Under such circumstances, Slide Insurance Company would be afforded an opportunity to clear any aggrieved individual under the statute, and it currently expects that it will avail itself of such opportunity, although the outcome of that process is inherently uncertain. We have responded to all inquiries issued to us by the FLOIR to date; however timing of resolution of this matter remains uncertain as the timing is controlled by the FLOIR and there is no required timing specified in the statute. Any such final determination by the FLOIR may result in damage to our reputation, including negative publicity about our business practices, which could have a material adverse effect on our business, results of operations and financial condition. Further, following any adverse resolution of this matter by the FLOIR, whether or not required by the FLOIR, Slide could terminate our President and Chief Financial Officer, as well as certain other senior employees previously employed by insolvent insurers. The termination of one or more of these employees would result in additional time and expense for us to find qualified individuals to serve in these capacities. Competition for such individuals is intense, and our search for qualified personnel may not be successful.

In addition, the federal government also may regulate aspects of our businesses, such as the protection of consumer confidential information or the use of consumer insurance (credit) scores to underwrite and assess the risk of customers under the Fair Credit Reporting Act (“FCRA”). Among other things, the FCRA requires insurance companies to have a permissible purpose before obtaining and using a consumer report for underwriting purposes, as well as comply with related notice and recordkeeping requirements. Failure to comply with federal requirements under the FCRA or any other applicable federal laws would subject us to regulatory fines and other sanctions. In addition, given our short operating history to date and rapid speed of growth, we are particularly vulnerable to state insurance regulators identifying errors in the policy forms we use, the rates we charge and our customer communications. As a result of such noncompliance, regulators could impose fines, rebates or other penalties, including cease-and-desist orders for an individual state, or all states, until the identified noncompliance is rectified.

The FLOIR, the insurance regulatory authority for insurance carriers in the State of Florida, conducts examinations on a periodic basis and may conduct special or targeted examinations to address particular concerns or issues at any time. Insurance regulators of other states in which we are licensed to sell insurance as an agent

 

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may also conduct examinations. The results of these examinations can give rise to regulatory orders requiring remedial, injunctive or other corrective action. For a discussion of the FLOIR insurance regulatory authority, see “—Risks Relating to Our Business—We are periodically subject to examinations by our state insurance regulators, which could result in adverse examination findings and necessitate remedial actions” above.

Our ability to retain state licenses depends on our ability to meet licensing requirements adopted by each state, subject to variations across states. If we are unable to satisfy the applicable licensing requirements of any particular state, we could lose our license to do business in such state, which would result in the temporary or permanent cessation of our operations in that state. Alternatively, if we are unable to satisfy applicable state licensing requirements, we may be subject to additional regulatory oversight, have our license suspended or be subject to seizure of assets. Any such events could adversely affect our business, results of operations or financial condition.

In addition, as a condition to writing business in certain states, insurers are required to participate in various pools or risk sharing mechanisms or to accept certain classes of risk, regardless of whether such risks meet their underwriting requirements for voluntary business. Some states limit or impose significant restrictions on an insurer’s ability to materially reduce its exposures or to withdraw from certain lines of business. The state insurance departments can impose significant charges on an insurer in connection with a market withdrawal or refuse to approve withdrawal plans on the grounds that they could lead to market disruption. Laws and regulations that limit cancellation and non-renewal of policies or that subject withdrawal plans to prior approval requirements may significantly restrict our ability to exit unprofitable markets. Such actions and related regulatory restrictions may limit our ability to reduce our potential exposure to hurricane-related losses. For further discussion, see “—The Carrier is subject to assessments and other surcharges from state guaranty funds, and mandatory state insurance facilities, which may reduce our profitability” below.

State insurance regulators impose additional reporting requirements regarding enterprise risk on insurance holding company systems, with which we must comply as an insurance holding company.

In the past decade, various state insurance regulators have increased their focus on risks within an insurer’s holding company system that may pose enterprise risk to the insurer. In 2012, the NAIC adopted significant changes to the insurance holding company act and regulations (the “NAIC Amendments”). The NAIC Amendments are designed to respond to perceived gaps in the regulation of insurance holding company systems in the United States. One of the major changes is a requirement that an insurance holding company system’s ultimate controlling person submit annually to its lead state insurance regulator an “enterprise risk report” that identifies activities, circumstances or events involving one or more affiliates of an insurer that, if not remedied properly, are likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole. Other changes include requiring a controlling person to submit prior notice to its domiciliary insurance regulator of a divestiture of control, having detailed minimum requirements for cost sharing and management agreements between an insurer and its affiliates and expanding of the agreements between an insurer and its affiliates to be filed with its domiciliary insurance regulator. The NAIC Amendments must be adopted by the individual state legislatures and insurance regulators in order to be effective. Florida, our main domiciliary state for the Carrier, includes a form of the enterprise risk report requirement pursuant to Section 628.801 of the Florida Insurance Code.

In 2012, the NAIC also adopted the Risk Management and Own Risk and Solvency Assessment Model Act (the “ORSA Model Act”). The ORSA Model Act, when adopted by the various states, will require an insurance holding company system’s Chief Risk Officer to submit annually to its lead state insurance regulator an Own Risk and Solvency Assessment Summary Report (“ORSA”). The ORSA is a confidential internal assessment appropriate to the nature, scale and complexity of an insurer, conducted by that insurer of the material and relevant risks identified by the insurer associated with an insurer’s current business plan and the sufficiency of capital resources to support those risks. The ORSA Model Act must be adopted by the individual state legislature and insurance regulators in order to be effective. We cannot predict the impact, if any, that the NAIC Amendments, compliance with the ORSA Model Act, or any other regulatory requirements may have on our business, results of operations and financial condition.

 

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There is also risk that insurance holding company systems may become subject to group capital requirements at the holding company level. The NAIC is currently working to develop a group capital calculation framework that regulators may use for informational purposes. As envisioned, the framework is intended to complement the current holding company analytics framework by providing additional information to the lead state regulator for use in assessing group risks and capital adequacy.

The increasing adoption by states and the SEC of cybersecurity regulations could impose additional compliance burdens on us and expose us to additional liability.

In response to the growing threat of cyber-attacks in the insurance industry, certain jurisdictions have begun to consider new cybersecurity measures, including the adoption of cybersecurity regulations. On October 24, 2017, the NAIC adopted its Insurance Data Security Model Law, intended to serve as model legislation for states to enact in order to govern cybersecurity and data protection practices of insurers, insurance agents and other licensed entities registered under state insurance laws. Alabama, Connecticut, Delaware, Indiana, Louisiana, Maryland, Michigan, Mississippi, New Hampshire, Ohio, South Carolina and Virginia have adopted versions of the NAIC Insurance Data Security Model Law, each with a different effective date, and other states may adopt versions of the NAIC Insurance Data Security Model Law in the future. Further, on July 26, 2023, the SEC adopted rules requiring registrants to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy and governance. Although we take steps to comply with financial industry cybersecurity regulations and believe we are materially compliant with their requirements, our failure to comply with new or existing cybersecurity regulations could result in regulatory actions and other penalties. In addition, efforts to comply with new or existing cybersecurity regulations could impose significant costs on our business, which could materially and adversely affect our business, results of operations or financial condition.

Severe weather events and other catastrophes, including the effects of climate change and global pandemics, are inherently unpredictable and may have a material adverse effect on our financial results and financial condition.

Our homeowners and commercial residential insurance business is exposed to the risk of severe weather conditions and other catastrophes. Severe weather events include, but are not limited to, winter storms, rain, hail and high winds. The incidence and severity of weather conditions are largely unpredictable. Catastrophes can be caused by various events, such as wildfires, tornadoes, tsunamis, hurricanes, tropical storms, earthquakes, windstorms, hailstorms, severe thunderstorms, fires and other non-natural events such as explosions, riots, terrorism or war.

The incidence and severity of severe weather conditions and catastrophes are inherently unpredictable and the occurrence of one catastrophe does not render the possibility of another catastrophe greater or lower. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. In particular, severe weather and other catastrophes could significantly increase our costs due to a surge in claims following such events and/or legal and regulatory changes in response to catastrophes that may impair our ability to limit our liability under our policies. Severe weather conditions and catastrophes can cause greater losses for us, which can cause our liquidity and financial condition to deteriorate. Resulting reductions in our capital could materially adversely affect our ability to underwrite new insurance policies.

In addition, we may not be able to obtain reinsurance coverage at reasonable rates and in amounts adequate to mitigate the risks associated with severe weather conditions and other catastrophes, and we may not purchase enough reinsurance to cover catastrophic events such as hurricanes. While we only work with reinsurers whom we believe have acceptable credit, if our reinsurers are unable to pay for the claims for which they are responsible, we could be exposed to additional liability, which could have a material adverse effect on our business, results of operations and financial condition. In addition, we have accessed multi-year catastrophe

 

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reinsurance coverage from the capital markets through the issuance of catastrophe bonds. We may not be successful in accessing such coverage through catastrophe bonds in the future, on acceptable terms or at all.

Climate change may affect the occurrence of certain natural events, such as an increase in the frequency or severity of wind and thunderstorm events, eruptions of volcanoes and tornado or hailstorm events due to increased convection in the atmosphere; more frequent wildfires in certain geographies; higher incidence of deluge flooding and the potential for an increase in severity of the hurricane events due to higher sea surface temperatures. Additionally, climate change may cause an impact on the demand, price and availability of homeowners and commercial residential insurance and reinsurance coverages, as well as the value of our investment portfolio. Due to significant variability associated with future changing climate conditions, we are unable to predict the impact climate change will have on our business.

An overall decline in economic activity could have a material adverse effect on our business, results of operations and financial condition.

The demand for property and casualty insurance generally rises as the overall level of household income increases and generally falls as household income decreases, affecting premiums, commissions and fees generated by our business. Some new accounts are sourced by referral sources tied to home closing transactions, and major slowdowns in the various housing markets we serve could impact our ability to generate new business. The economic activity that impacts property and casualty insurance is most closely correlated with employment levels, corporate revenue and asset values.

Our results of operations and financial condition may be adversely affected due to limitations in the analytical models used to assess and predict our exposure to catastrophe losses.

Along with others in the insurance industry, models developed internally and by third-party vendors that employ various modeling techniques, including Stochastic, Bayesian statistics, classification, regression, clustering and other advanced machine learning techniques, are used along with our own historical data in assessing property insurance exposure to catastrophe losses. These models assume various conditions and probability scenarios; however, they do not necessarily accurately predict future losses or measure losses currently incurred. As with many technological innovations, artificial intelligence and machine learning present risks and challenges that could affect their adoption, and therefore our business. Further, the accuracy of such models may be negatively impacted by changing climate conditions. Catastrophe models use historical information and scientific research about natural events, such as hurricanes and earthquakes, as well as detailed information about our in-force business. This information is used in connection with pricing and risk management activities. However, since actual catastrophic events vary considerably, there are limitations with respect to its usefulness in predicting losses in any reporting period. Other limitations are evident in significant variations in estimates between models, material increases and decreases in results due to model changes and refinements of the underlying data elements and actual conditions that are not yet well understood or may not be properly incorporated into the models. Additionally, there are significant risks involved in developing and deploying artificial intelligence, such as an increase in intellectual property infringement or misappropriation, data privacy, cybersecurity, operational and technological risks, harmful content, accuracy, bias, toxicity and discrimination, any of which could affect our further development, adoption and use of artificial intelligence, and may cause us to incur additional research and development costs to resolve such issues. It is not possible to predict all of the risks related to the use of artificial intelligence, and changes in laws, rules, directives and regulations governing artificial intelligence may adversely affect our ability to develop and use artificial intelligence or subject us to legal liability. For more information on the risks related to our use of artificial intelligence, see “—Risks Relating to Our Intellectual Property and Data Privacy—Our use of artificial intelligence, machine learning, data analytics and other similar tools may adversely impact our business and subject us to additional regulatory and other risks and possible litigation, including claims alleging unfair insuring practices arising from the use of such tools.”

 

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The Carrier is subject to minimum capital and surplus requirements, and failure to meet these requirements could subject us to regulatory action.

The Carrier is subject to risk-based capital standards and other minimum capital and surplus requirements. The risk-based capital standards, based upon the Risk Based Capital Model Act developed by the NAIC and adopted in all states, including the Carrier’s state of domicile, require the Carrier to report results of risk-based capital calculations to its domestic regulator. These risk-based capital standards provide for different levels of regulatory attention depending upon the ratio of an insurance company’s total adjusted capital, as calculated in accordance with the NAIC’s RBC formula, to its authorized control level risk-based capital. Authorized control level risk-based capital is determined using the NAIC’s risk-based capital formula, which measures the minimum amount of capital that an insurance company needs to support its overall business operations.

An insurance company with total adjusted capital that is less than 200% of its authorized control level risk-based capital is at a company action level, which would require the insurance company to file a risk-based capital plan that, among other things, contains proposals of corrective actions the Company intends to take that are reasonably expected to result in the elimination of the Company action level event. Additional action level events occur when the insurer’s total adjusted capital falls below 150%, 100% and 70% of its authorized control level risk-based capital. The lower the percentage, the more severe the regulatory response, including, in the event of a mandatory control level event (total adjusted capital falls below 70% of the insurer’s authorized control level risk-based capital), placing the insurance company into receivership. As of December 31, 2024, the Carrier’s risk-based capital ratio was well in excess of minimum statutory requirements.

In addition, the Carrier is required to maintain certain minimum capital and surplus and generally must keep its net written premiums within specified multiples of its surplus that regulators customarily view as prudent. The Carrier could exceed these ratios if its volume increases faster than anticipated or if its surplus declines due to catastrophe or non-catastrophe losses or excessive underwriting and operational expenses.

Any failure by the Carrier to meet the applicable risk based capital or minimum statutory capital requirements or the writings ratio limitations regulators customarily use where we currently or may in the future conduct business could subject us to further examination or corrective action imposed by state regulators, including limitations on our writing of additional business, state supervision or liquidation.

Any changes in existing risk-based capital requirements, minimum statutory capital requirements or customary writings ratios may require us to increase our statutory capital levels, which we may be unable to do.

The Carrier is subject to assessments and other surcharges from state guaranty funds, and mandatory state insurance facilities, which may reduce our profitability.

The insurance laws of many states subject property and casualty insurers doing business in those states to statutory property and casualty guaranty fund assessments. The purpose of a guaranty fund is to protect customers by requiring that solvent property and casualty insurers pay the insurance claims of insolvent insurers. These guaranty associations, including the Florida Insurance Guaranty Association, generally pay these claims by assessing solvent insurers proportionately based on each insurer’s share of voluntary premiums written in the state. While most guaranty associations provide for recovery of assessments through subsequent rate increases, surcharges or premium tax credits, there is no assurance that insurers will ultimately recover these assessments, which could be material, particularly following a large catastrophe or in markets which become disrupted.

Maximum contributions required by law in any one year vary by state. We cannot predict with certainty the amount of future assessments because they depend on factors outside our control, such as insolvencies of other insurance companies. Significant assessments could have a material adverse effect on our business, results of operations and financial condition.

 

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Unexpected changes in the interpretation of our coverage or provisions in our policies, including loss limitations and exclusions, could have a material adverse effect on our financial condition and results of operations.

There can be no assurances that specifically negotiated loss limitations or exclusions in our policies will be enforceable in the manner we intend. As industry practices and legal, judicial, social and other conditions change, unexpected and unintended issues related to claims and coverage may emerge. For example, many of our policies limit the period during which a customer may bring a claim, which may be shorter than the statutory period under which such claims can be brought against our customers. While these limitations and exclusions help us assess and mitigate our loss exposure, it is possible that a court or regulatory authority could nullify or void a limitation or exclusion or legislation could be enacted modifying or barring the use of such limitations or exclusions. These types of governmental actions could result in higher-than-anticipated loss and loss adjustment expense, which could have a material adverse effect on our financial condition or results of operations. In addition, court decisions, such as the 1995 Montrose decision in California could read policy exclusions narrowly so as to expand coverage, thereby requiring insurers to create and write new exclusions. These issues may adversely affect our business by either broadening coverage beyond our underwriting intent or by increasing the frequency or severity of claims. In some instances, these changes may not become apparent until sometime after we have issued insurance contracts that are affected by the changes. As a result, the full extent of liability under our insurance contracts may not be known for many years after a contract is issued.

We face vigorous competition from large, well-capitalized national companies and smaller regional insurers. Other large national and international insurance or financial services companies also may enter these markets in the future. Many of these companies may have greater financial, marketing and management resources than we have.

We write coastal specialty personal lines insurance including homeowners, condominium unit owners, commercial residential, and other products. The coastal specialty insurance market is highly competitive. We face vigorous competition from large, well-capitalized national and international companies, as well as smaller regional insurers. Other large insurance or financial services companies also may enter these markets in the future. Many of these companies have substantial resources, experienced management and strong marketing, underwriting and pricing capabilities. The property and casualty insurance industry is a relatively mature industry, in which brand recognition, marketing skills, operational effectiveness, pricing, scale and cost control are major competitive factors. If our competitors offer similar insurance products at lower prices, offer such insurance products bundled with other products or services that we do not offer, or engage in other successful competitive initiatives, our ability to generate new business or to retain a sufficient number of our existing customers could be compromised.

Property insurance markets historically have been known as cyclical, with periods of relatively strong profitability being followed by increased pricing competition among insurers. This price competition, which is sometimes referred to as a “soft market,” can adversely affect revenue and profitability levels. As insurers recognize this situation (which can occur at different times for different companies), the historical reaction has been for insurers to raise their rates (sometimes referred to as a “hard market”) in an attempt to restore profitability to acceptable levels. As more insurers react in this way, profit levels in the industry may increase to a point where some insurers begin to lower their rates, starting the cycle over again. In the past, this cycle has generally played out over a number of years. We cannot be certain whether and to what extent such cyclicality is currently impacting the property insurance markets, nor can we predict whether it will do so in the future.

The highly competitive nature of the insurance marketplace could result in consolidation within the industry, or in the failure of one or more competitors. The concentration of premium volume in a reduced number of major competitors could significantly increase the level of competition in a manner that is not favorable to us. In addition, in the event of a failure of a major insurer or a state-sponsored catastrophe fund, our company and other insurance companies may be required by law to absorb the losses of the failed insurer or fund, resulting in a potentially significant increase in our costs. We might also be faced with an unexpected surge in new business

 

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from a failed insurer’s former policyholders. Such events could materially adversely affect our business, results of operations and financial condition.

Industry trends, such as increased litigation against the insurance industry and individual insurers, the willingness of courts to expand covered causes of loss, rising jury awards and the escalation of loss severity may contribute to increased costs and to the deterioration of the reserves of our insurance subsidiary.

Loss severity in the property and casualty insurance industry has continued to increase in recent years, principally driven by larger court judgments. In addition, many legal actions and proceedings have been brought on behalf of classes of complainants, which can increase the size of judgments. The propensity of policyholders and third-party claimants to litigate and the willingness of courts to expand causes of loss and the size of awards may render the loss reserves of our insurance subsidiary inadequate for current and future losses.

Risks Relating to Regulatory and Legal Matters

Our business is subject to risks related to legal proceedings and governmental inquiries.

We are subject to litigation, regulatory investigations and claims arising in the normal course of our business operations. 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. While we have insurance coverage for some of these potential claims, others may not be covered by insurance, insurers may dispute coverage or any ultimate liabilities may exceed our coverage.

We may be subject to actions and claims relating to the sale of insurance, including the suitability of such products and services. Actions and claims may result in the rescission of such sales. The outcome of such actions cannot be predicted and such claims or actions could have a material adverse effect on our business, results of operations and financial condition.

We are subject to laws and regulations, as well as regulatory investigations. 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. There have also been a number of revisions to existing, or proposals to modify or enact new, laws and regulations regarding insurance agents and brokers. These actions have imposed or could impose additional obligations on us with respect to our products sold.

We cannot predict the impact that any new laws, rules or regulations may have on our business and financial results. Given the current regulatory environment and local markets in which we operate, 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. 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.

Our involvement in any investigations and lawsuits would cause us to incur additional legal and other costs and, if we were found to have violated any laws, we could be required to pay fines, damages and other costs, perhaps in material amounts. Regardless of final costs, these matters could have a material adverse effect on us by exposing us to negative publicity, reputational damage, harm to client relationships, or diversion of personnel and management resources.

We are subject to additional regulation imposed by consent orders entered into with the FLOIR in connection with our formation.

In addition to compliance with statutes and regulations, Florida routinely places additional restrictions on new insurers as a condition of receiving their certificate of authority. These restrictions are typically

 

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memorialized in a consent order entered into between FLOIR and the insurer applying for a certificate of authority. We were subject to such a consent order in which we agreed to higher or more stringent restrictions than are otherwise required under Florida law. The material restrictions we agreed to included:

 

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Florida law requires a residential property writer to maintain surplus of the greater of $15.0 million or 10% of its liabilities. Pursuant to the consent order, we agreed to establish a minimum capital and surplus of 300% of our authorized control level risk-based capital.

 

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Florida law restricts the ratio of premiums written to policyholder surplus to 10 to 1 on a gross basis and 4 to 1 on a net of reinsurance basis. Pursuant to the consent order, we agreed to not exceed the projected premiums in the plan of operation submitted with our original application for licensure without the prior written approval of FLOIR. As part of the FLOIR approval process for the various Citizens assumption transactions in which we have participated, we received approval to exceed these projected premiums.

 

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Florida law places no restrictions on the parent of an insurer, or other upstream entities, with regard to the payment of dividends. Pursuant to the consent order, we agreed to not make any distributions to stockholders prior to January 7, 2025.

 

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Florida law allows an insurer to pay certain dividends to stockholders without approval of FLOIR. Pursuant to the consent order, we agreed that, until January 7, 2025, we would pay only those dividends that had been approved in advance and in writing by FLOIR.

In addition, we are subject to several consent orders setting conditions upon FLOIR’s approval of the various Citizens assumption transactions in which we have participated. For example, beginning with our August 2023 assumption transaction, we are required to offer to renew each assumed policy for a minimum of three years provided the policies satisfy our underwriting guidelines. If we violate a consent order, FLOIR may take administrative action as it deems appropriate, including suspending or revoking our insurance license.

Changes in regulation may reduce our profitability and limit our growth.

We are subject to extensive regulation in Florida and South Carolina, the only states in which we currently conduct business. The NAIC and state insurance regulators are constantly reexamining existing laws and regulations, generally focusing on modifications to holding company regulations, interpretations of existing laws and the development of new laws. From time to time, states consider and/or enact laws that may alter or increase state authority to regulate insurance companies and insurance holding companies. States also consider and/or enact laws that impact the competitive environment and marketplace for property and casualty insurance. Our insurance company subsidiary currently transacts insurance only in Florida and South Carolina, where the recent political environment has led to aggressive regulation of property and casualty insurance companies. We expect this to continue for the foreseeable future.

During the past several years, various regulatory and legislative bodies have adopted or proposed new laws or regulations to address the cyclical nature of the insurance industry, catastrophic events and insurance capacity and pricing. These regulations include (i) the creation of “market assistance plans” under which insurers are induced to provide certain coverages, (ii) restrictions on the ability of insurers to rescind or otherwise cancel certain policies in mid-term or to non-renew policies at their scheduled expirations, (iii) advance notice requirements or limitations imposed for certain policy non-renewals, (iv) limitations upon or decreases in rates permitted to be charged, (v) expansion of governmental involvement in the insurance market and (vi) increased regulation of insurers’ policy administration and claims handling practices.

Currently, the federal government does not directly regulate the insurance business. However, in recent years the state insurance regulatory framework has come under increased federal scrutiny. Congress and some federal agencies from time to time investigate the current condition of insurance regulation in the United States to determine whether to impose federal regulation or to allow an optional federal charter, similar to banks. In

 

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addition, changes in federal legislation and administrative policies in several areas, including changes in the Gramm-Leach-Bliley Act, financial services regulation and federal taxation, can significantly impact the insurance industry and us.

We cannot predict with certainty the effect any enacted, proposed or future state or federal legislation or NAIC initiatives may have on the conduct of our business. Furthermore, there can be no assurance that the regulatory requirements applicable to our business will not become more stringent in the future or result in materially higher costs than current requirements, or that creation of a federal insurance regulatory system will not adversely affect our business or disproportionately benefit our competitors. Changes in the regulation of our business may reduce our profitability, limit our growth or otherwise adversely affect our business, results of operations and financial condition.

Applicable insurance laws may make it difficult to effect a change of control of our company.

State insurance holding company laws require prior approval by the state insurance department of any change of control of an insurer that is domiciled in that respective state. “Control” is generally defined as the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a company, whether through the ownership of voting securities, by contract or otherwise. Control is generally presumed to exist through the direct or indirect ownership of 10% or more of the voting securities of a domestic insurance company or any entity that controls a domestic insurance company. Because we are domiciled in Florida, we are subject to Florida law, which prohibits any person from acquiring 5% or more of our outstanding voting securities without the prior approval of FLOIR. However, a party acquiring more than 5% but less than 10% of our voting securities that does not otherwise exercise control may make such acquisition without prior approval by filing a disclaimer of affiliation and control with FLOIR. These laws may discourage potential acquisition proposals and may delay, deter or prevent a change of control of us, including through transactions, and in particular unsolicited transactions, that some or all of our stockholders might consider to be desirable.

Recent and future changes to tax laws or applicable tax rates in the jurisdictions where we operate could materially and adversely affect our company.

The taxation of our business is subject to the enactment of, or changes in, tax laws, regulations and treaties, or the interpretation thereof, tax policy initiatives and reforms under consideration and the practices of tax authorities in various jurisdictions. Existing, new or future changes in tax laws, regulations and treaties, or the interpretation thereof, could have an adverse effect on our tax liabilities, business, results of operations and financial condition. We are unable to predict changes in tax laws or applicable tax rates enacted in the future in jurisdictions where we have operations or what effect such changes would have on our business, but such changes could affect our future financial position and overall tax rates in the future or increase the complexity, burden and cost of tax compliance.

Applicable tax rates may be subject to significant change in the jurisdictions or future jurisdictions in which we operate. If our effective tax rate increases, our operating results and cash flow could be adversely affected. Our effective income tax rate can vary significantly between periods due to a number of complex factors including, but not limited to, projected levels of taxable income in each jurisdiction, tax audits conducted and settled by various tax authorities, and adjustments to income taxes upon finalization of income tax returns.

Risks Relating to Our Initial Public Offering and Ownership of Our Common Stock

There is no existing market for our common stock, and we do not know if one will develop to provide you with adequate liquidity to sell our common stock at prices equal to or greater than the price you paid in this offering.

Prior to this offering, there has not been a public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on Nasdaq or

 

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otherwise or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling any of our common stock that you buy. The initial public offering price for the common stock will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell our common stock at prices equal to or greater than the price you paid in this offering, or at all.

The price of our common stock may fluctuate significantly, and you could lose all or part of your investment.

Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for them. The market price for our common stock could fluctuate significantly for various reasons, including:

 

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our operating and financial performance and prospects;

 

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our quarterly or annual earnings or those of other companies in our industry;

 

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the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

 

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changes in, or failure to meet, earnings estimates or recommendations by research analysts who track our common stock or the stock of other companies in our industry;

 

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the failure of research analysts to cover our common stock;

 

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general economic, industry and market conditions;

 

•

strategic actions by us, our customers or our competitors, such as acquisitions or restructurings;

 

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new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

 

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changes in accounting standards, policies, guidance, interpretations or principles;

 

•

material litigation or government investigations;

 

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changes in general conditions in the U.S. and global economies or financial markets, including those resulting from war, incidents of terrorism or responses to such events;

 

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changes in key personnel;

 

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sales of common stock by us, our principal stockholders or members of our management team;

 

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termination of lock-up agreements with our management team and principal stockholders;

 

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the granting or exercise of employee stock options;

 

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volume of trading in our common stock; and

 

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impact of the facts described elsewhere in these “Risk Factors.”

In addition, in recent years, the stock market has regularly experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us and these fluctuations could materially reduce our share price.

If you purchase shares of our common stock in our initial public offering, you will experience substantial and immediate dilution.

If you purchase shares of our common stock in our initial public offering, you will experience substantial and immediate dilution in the pro forma net tangible book value per share because the price that you pay will be

 

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substantially greater than the pro forma net tangible book value per share of the common stock that you acquire. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares of our capital stock. You will experience additional dilution if we issue restricted stock to our employees under our equity incentive plan.

Our Pre-IPO Significant Stockholders may exert significant influence over us, their interests in our business may be different than yours, and certain statutory provisions afforded to stockholders are not applicable to us.

Bruce Lucas, Shannon Lucas and Robert Gries (the “Pre-IPO Significant Stockholders”) will control approximately   % of the combined voting power of our common stock (or   % if the underwriters exercise their option to purchase additional shares of common stock in full) after the completion of this offering and the application of the net proceeds from this offering. Further, at the closing of this offering, we will enter into a stockholders agreement (the “Stockholders Agreement”) with the Pre-IPO Significant Stockholders. Under the Stockholders Agreement, the Pre-IPO Significant Stockholders may approve or disapprove substantially all transactions and other matters requiring approval by our stockholders, such as a merger, consolidation, dissolution or sale of all or substantially all of our assets, the issuance or redemption of certain additional equity interests in an amount exceeding $50 million, any change in the size of the board of directors and amendments to our certificate of incorporation or bylaws. Approval by the Pre-IPO Significant Stockholders is also required for any changes to the strategic direction or scope of the Company’s business, any acquisition or disposition of any asset or business having consideration in excess of 15% of our total assets and the hiring and termination of our Chief Executive Officer, Chief Financial Officer or Chief Operating Officer (including terms of compensation). Furthermore, until the Pre-IPO Significant Stockholders no longer beneficially hold at least 10% of the aggregate number of outstanding shares of our common stock (the “Substantial Ownership Requirement”), the Pre-IPO Significant Stockholders may 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.

These rights may also 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 common stock and may make some transactions more difficult or impossible without the support of the Pre-IPO Significant Stockholders, even if such events are in the best interests of minority stockholders. Furthermore, this concentration of voting power with the Pre-IPO Significant Stockholders may have a negative impact on the price of our common stock. In addition, the Pre-IPO Significant Stockholders will have 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 until the Substantial Ownership Requirement is no longer met which is defined in our Stockholders Agreement as requiring 10% of the aggregate number of outstanding shares of our common stock to be beneficially held by the Pre-IPO Significant Stockholders. As a result, the Pre-IPO Significant Stockholders may not be inclined to permit us to issue additional shares of common stock, including for the facilitation of acquisitions, if it would dilute their holdings below the 10% threshold.

The Pre-IPO Significant Stockholders’ interests may not be fully aligned with yours, which could lead to actions that are not in your best interests. In addition, the Pre-IPO Significant Stockholders’ significant influence over us may discourage someone 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 common stock might otherwise receive a premium for your shares over the then-current market price.

Our amended and restated certificate of incorporation will provide 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 underwriting activities. This doctrine will not apply to any business activity other than insurance underwriting activities. Furthermore, the Pre-IPO Significant Stockholders may have business relationships outside of our business.

 

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Our management will have broad discretion over the use of the proceeds we receive in this offering, and may not apply the proceeds in ways that increase the value of your investment.

We estimate that gross proceeds, prior to the deduction of transaction expenses, of the offering that we will receive will be approximately $   million, of which there is no assurance that all such shares will be sold. We intend to use the net proceeds of this offering to enable us to underwrite additional policies, to fund the growth of our business and for general corporate purposes. We will have broad discretion in the application of the proceeds, and investors will be relying on our judgment regarding the application of the proceeds of this offering. The actual amounts and timing of our actual expenditures depend on numerous factors, including the success of our efforts to market our products, the timing, our ability to reduce operating costs, and other unforeseen costs. Such costs and timing are highly uncertain, and they are subject to substantial risks and can often change. Depending on the outcome of these activities and other unforeseen events, our plans and priorities may change, and we may apply the proceeds of this offering in different proportions than we currently anticipate. Moreover, you will not have the opportunity to influence our decision on how to use the proceeds from this offering. We may use the proceeds for corporate purposes that do not immediately enhance our prospects for the future or increase the value of your investment.

We will incur significantly increased costs and devote substantial management time as a result of operating as a public company.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and will be required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC and Nasdaq, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices, including the establishment and maintenance of a majority independent board of directors and required committees. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. In addition, our management team and board of directors have limited experience implementing public company compliance requirements, and therefore we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to such efforts. In particular, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when we are no longer an emerging growth company, as defined in The Jumpstart Our Business Act of 2012 (the “JOBS Act”). We will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and may need to establish an internal audit function. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs. We also expect that operating as a public company will make it more difficult and significantly more expensive for us to obtain director and officer liability insurance.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure and other requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act with respect to our internal control over financial reporting, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these provisions for up to five years or such earlier time that we are no longer an “emerging growth company.” We would cease to be an “emerging growth company” upon the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.235 billion (as adjusted for inflation pursuant to SEC rules from time to time) in annual revenues; (ii) the date we qualify as a “large accelerated filer,” with at least $700.0 million of equity securities; (iii) the issuance, in any three-year period, by our company of more than $1.0 billion in non-convertible debt securities held by non-affiliates; and (iv) the last day of the fiscal year ending

 

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after the fifth anniversary of this offering. We may choose to take advantage of some but not all of these reduced reporting and other burdens. To the extent we take advantage of any of the reduced reporting burdens in this prospectus or in future filings, the information that we provide our security holders may be different than you might get from other public companies in which you hold equity interests. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Because we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company,” our combined financial statements may not be comparable to companies that currently comply with these accounting standards.

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 7(a)(2)(B) of the Securities Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our combined financial statements may not be comparable to companies that comply with these accounting standards as of the public company effective dates. Consequently, our combined financial statements may not be comparable to companies that comply with public company effective dates. Because our combined financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock. We cannot predict if investors will find our common stock less attractive because we plan to rely on this exemption. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

If we are unable to implement and maintain effective internal controls over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

As a public company, we will be required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and, beginning with our annual report for the fiscal year ending December 31, 2026, provide a management report on the internal controls over financial reporting. If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We are in the process of designing and implementing the internal controls over financial reporting required to comply with this obligation, which process will be time-consuming, costly and complicated.

The occurrence of any of the following may cause investors to lose confidence in the accuracy and completeness of our financial reports and could negatively impact the price of our common stock:

 

•

identification of material weaknesses in our internal controls over financial reporting;

 

•

our inability to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner;

 

•

our inability to assert that our internal controls over financial reporting are effective; or

 

•

our independent registered public accounting firm’s inability to express an opinion as to the effectiveness of our internal controls over financial reporting.

If any of the foregoing occur, we may also become subject to investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities, as well as lawsuits by private plaintiffs.

 

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We are a holding company, and we are accordingly dependent upon distributions from our subsidiaries to pay dividends, if any, taxes and other expenses. Additionally, we do not currently intend to pay dividends on our common stock following the offering.

We do not currently anticipate paying any cash or other dividends on our common stock. Instead, we intend to retain future earnings to fund our growth. In addition, as a holding company, our ability to pay dividends, taxes and other expenses will depend on amounts that our subsidiaries are able to pay us. For a three-year period beginning on January 7, 2022, Slide, as a newly licensed insurer in Florida, was precluded from paying dividends unless approved by FLOIR. There is no guarantee that we will elect to pay dividends when permitted to do so. Finally, business and regulatory considerations may impact the amount of dividends actually paid, and prior approval of dividend payments may be required. Therefore, you may not receive a return on your investment in our common stock by receiving a payment of dividends. See “Dividend Policy.”

The issuer of common stock in this offering does not conduct any substantive operations and, as a result, its ability to pay dividends, taxes and other expenses will be dependent upon the financial results and cash flows of its operating subsidiaries and the distribution or other payment of cash to it in the form of dividends or otherwise. The direct and indirect subsidiaries of the issuer are separate and distinct legal entities and have no obligation to make any funds available to the issuer.

In addition, the declaration and payment of dividends will be at the discretion of our board of directors and will be dependent upon the profits and financial requirements of our company and other factors, including legal and regulatory restrictions on the payment of dividends, general business conditions and such other factors as our board of directors deems relevant.

We may change our underwriting guidelines or our strategy without stockholder approval.

Our management has the authority to change our underwriting guidelines or our strategy without notice to our stockholders and without stockholder approval. As a result, we may make significant changes to our operations which could result in our pursuing a strategy or implementing underwriting guidelines that may be materially different from the strategy or underwriting guidelines described in this prospectus.

Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

Sales of substantial amounts of our common stock in the public market after this offering, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. Upon completion of this offering, there will be      shares of our common stock outstanding, including      shares issuable upon conversion of the Series A preferred stock immediately after the Stock Split and prior to the closing of this offering. Of these shares, all the    shares of common stock sold in this offering will be freely tradable immediately after this offering (except for any shares purchased by our affiliates, if any). The remaining outstanding    shares may be sold upon expiration of lock-up agreements 180 days after the date of this prospectus (subject in some cases to volume limitations).

We also intend to register all common stock that we may issue under our equity compensation plans. Effective upon the completion of this offering, an aggregate of     shares of our common stock will be reserved for future issuance under the 2025 Plan and the Prior Plan. Once we register these shares, which we plan to do shortly after the completion of this offering, they can be freely sold in the public market upon issuance, subject to the lock-up agreements referred to above. If a large number of these shares are sold in the public market, the sales could reduce the trading price of our common stock.

 

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Certain provisions of our amended and restated certificate of incorporation, our amended and restated bylaws and the Stockholders Agreement may make it difficult for stockholders to change the composition of our board of directors and may discourage hostile takeover attempts that some of our stockholders may consider to be beneficial.

Certain provisions of our amended and restated certificate of incorporation, amended and restated bylaws and Stockholders Agreement may have the effect of delaying or preventing changes in control if our board of directors determines that such changes in control are not in the best interests of us and our stockholders. The provisions in such amended and restated certificate of incorporation, amended and restated bylaws and Stockholders Agreement will include, among other things, the following:

 

•

until the Substantial Ownership Requirement, which is defined in our Stockholders Agreement as requiring 10% of the aggregate number of outstanding shares of our common stock to be beneficially held by the Pre-IPO Significant Stockholders, is no longer met, the Pre-IPO Significant Stockholders may 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;

 

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the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms, including preferences and voting rights, of those shares without stockholder approval;

 

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stockholder action can only be taken at a special or regular meeting and not by written consent;

 

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advance notice procedures for nominating candidates to our board of directors or presenting matters at stockholder meetings;

 

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provide that our board of directors will be divided into three classes of directors, with each class as nearly equal in number as possible, serving staggered three-year terms;

 

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removal of directors only for cause and by the affirmative vote of 662⁄3% of the voting power of our outstanding shares or common stock; and

 

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allowing only our board of directors to fill vacancies on our board of directors.

While these provisions have the effect of encouraging persons seeking to acquire control of our company to negotiate with our board of directors, they could enable the board of directors to hinder or frustrate a transaction that some, or a majority, of the stockholders might believe to be in their best interests, including an acquisition that would result in a price per share at a premium over the market price, and, in that case, may prevent or discourage attempts to remove and replace incumbent directors.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. For more information, see “Description of Capital Stock.”

Any issuance of preferred stock could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.

Upon completion of this offering, our board of directors will have the authority to issue preferred stock and to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium over the market price, and adversely affect the market price and the voting and other rights of the holders of our common stock.

Our business and stock price may suffer as a result of our lack of public company operating experience. In addition, if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

We are a privately held company. Our lack of public company operating experience may make it difficult to forecast and evaluate our future prospects. If we are unable to execute our business strategy, either as a result of

 

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our inability to effectively manage our business in a public company environment or for any other reason, our business, prospects, financial condition and results of operations may be harmed. In addition, as a new public company we do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for certain disputes between us and 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 or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that, 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) shall be the exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or to our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or (iv) any action asserting a claim governed by the internal affairs doctrine. This provision would 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. Furthermore, our amended and restated certificate of incorporation will also provide 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. 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. Our amended and rested certificate of incorporation will further provide 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 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. See “Description of Capital Stock—Forum Selection.” This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes with us or our directors, officers or other employees and may discourage these types of lawsuits. In addition, stockholders who do bring a claim in the Court of Chancery of the State of Delaware could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. Furthermore, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.

Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

We are not currently required to comply with SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal controls over financial reporting for that purpose. We will be required to comply with these rules upon ceasing to be an “emerging growth company” as defined in the JOBS Act.

 

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When evaluating our internal controls over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. We cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, our independent registered public accounting firm may issue an adverse opinion due to ineffective internal controls over financial reporting, and we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel. Any such action could negatively affect our business, results of operations and financial condition.

 

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