Exzeo Group (XZO) risk factors, FY2025 10-K

Risks Related to our Business and Industry

1. 01We may lose our existing customers and/or fail to acquire new customers. We continue to rely on a relatively small number of customers for a substantial portion of our revenue
2. 02We face intense competition in our industry, which could negatively impact our business, results of operations, and financial condition and cause our market share to decline

Risks Related to Intellectual Property, Data Privacy, and Cybersecurity

1. 03Our intellectual property and proprietary rights are valuable, and any inability to obtain, maintain, protect, defend, and enforce them could reduce the value of our products and brand
2. 26Our intellectual property and proprietary rights are valuable, and any inability to obtain, maintain, protect, defend, and enforce them could reduce the value of our products and brand
3. 27We use open source software in our proprietary IaaS platform, which may pose particular risks in a manner that could have a negative effect on our business
4. 28Claims by others that we infringe, misappropriate, or otherwise violate, or have infringed, misappropriated, or otherwise violated, their proprietary technology or other intellectual property rights could harm our business
5. 29Our business and IaaS platform make extensive use of third-party data
6. 30Our information technology systems may fail or be disrupted or subject to errors, bugs, vulnerabilities, or defects, which could adversely affect our business
7. 31Any disruption of our Internet connections, including to any third-party cloud providers that host any of our websites or web-based services, could affect the success of our IaaS platform of products and services and our business
8. 32The increasing adoption by states of cybersecurity regulations could impose additional compliance burdens on us and expose us to additional liability

Risks Related to our Relationship with HCI

1. 04HCI controls the direction of our business, and the concentrated ownership of our common stock will prevent you and other shareholders from influencing significant decisions

Risks Related to our Common Stock and the Securities Markets

1. 05Holders of our common stock may be diluted and our stock price may decline due to equity issuances

Risks Related to Our Business and Industry

1. 06We may not maintain profitability in the future
2. 07We expect a number of factors to cause our results of operations to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance
3. 08We may lose our existing customers and/or fail to acquire new customers
4. 09Our inability to overcome these challenges could impair our ability to attract and retain new customers and retain our existing customers and could have a material adverse effect on our business, operating results, and financial condition
5. 10Our success will depend on the continuous development and improvement of our proprietary IaaS platform of products and services, including the development and implementation of new features and analytical models
6. 11Estimates of market opportunity may prove to be inaccurate
7. 12We face intense competition in our industry, which could negatively impact our business, results of operations and financial condition and cause our market share to decline
8. 13Natural catastrophes and environmental risks may have significant adverse effects on our customers’ P&C insurance businesses, which may prevent us from maintaining or expanding our customer base and increasing our revenue
9. 14Our preliminary financial information represents management’s current estimates and are subject to change
10. 15There may be consolidation in the insurance industry, which could reduce the use of our platform, solutions, products, and services and adversely affect our revenues
11. 16Large potential customers may have substantial negotiating leverage, which may require that we agree to terms and conditions that result in increased cost of sales, decreased revenue, and lower average selling prices and gross margins, all of which could harm our results of operations
12. 17We may fail to set the optimal pricing and packaging of our insurance technology and operations solutions, which could negatively impact our growth strategy and ability to effectively compete in the market
13. 18Because the business conducted by our customers is highly concentrated in Florida and other coastal states, adverse economic conditions, natural disasters, or regulatory changes in these states could adversely affect our customers’ and, in turn, our financial condition, results of operations, and cash flows
14. 19We expect that our sales cycles may be lengthy and variable, may depend upon factors outside our control, and may cause us to expend significant time and resources
15. 20We may not continue to grow at historical rates in the future
16. 21We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all
17. 22Future acquisitions or investments contain inherent strategic, execution, and compliance risks that could disrupt our business and harm our financial condition
18. 23From time to time, we may be subject to allegations and may be party to litigation and other legal proceedings relating to our business operations. Litigation and other legal proceedings may include complaints from or litigation by customers related to alleged breaches of contract or otherwise
19. 24Our business may be materially adversely impacted by U.S. and global market and economic conditions adverse to the insurance industry
20. 25Our brand may not become as widely known or accepted as competitors’ brands or the brand may become tarnished

Risks Related to Regulation of Our Business

1. 33We operate in a highly regulated environment, and any failure to comply with applicable insurance, data privacy, or other regulatory requirements could materially and adversely affect our business, financial condition, and results of operations
2. 34Regulatory scrutiny of delegated authority and claims administration functions may increase our regulatory compliance costs, limit our flexibility, and adversely affect our business
3. 35Failure to maintain required licenses in one or more jurisdictions could disrupt our business and impair our ability to grow
4. 36We are subject to stringent fiduciary duties with respect to insurance premium funds, and noncompliance could result in regulatory enforcement or reputational harm
5. 37We are subject to extensive and evolving data privacy and cybersecurity regulation, which could increase our compliance burden and exposure to liability
6. 38Our relationships with insurance carriers are subject to regulatory oversight and third-party risk
7. 39Our international operations in India expose us to regulatory risks under Indian law and cross-border compliance obligations
8. 40Changes in state insurance laws or regulations, or new interpretations of existing laws, could impose significant additional compliance costs or impede our ability to operate certain aspects of our business
9. 41Federal regulation of the insurance industry is evolving and may increase our compliance obligations and costs

Risks Related to Our Relationship with HCI

1. 42As our controlling stockholder, HCI has significant control over the direction of our business, and the concentrated ownership of our common stock will prevent you and other stockholders from influencing significant decisions
2. 43HCI holds a majority of our voting power. HCI has the ability, should it choose to do so, to sell some or all of its shares of our common stock in a privately negotiated transaction, which, if sufficient in size, could result in a change-of-control of us
3. 44HCI’s interests may conflict with our interests and the interests of our other stockholders. Conflicts of interest between HCI and us could be resolved in a manner unfavorable to us and our other stockholders
4. 45the intercompany agreements between HCI (or its affiliates) and us
5. 46business combinations involving us
6. 47Our CEO and Chairman of our board of directors may have actual or potential conflicts of interest because of his financial interests in HCI or because of his positions with HCI
7. 48We may be unable to achieve some or all of the anticipated benefits of being a standalone public company
8. 49enhancing employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives of our business
9. 50We have previously obtained, but no longer obtain, certain administrative and back-office services from HCI, as we have replicated, developed, or replaced functions and administrative services that we previously received from HCI
10. 51Third parties may seek to hold us responsible for liabilities of HCI, which could result in a decrease in our income
11. 52We may be required to make cash payments to HCI for prior tax years under the Tax Allocation Agreement with HCI
12. 53We may incur substantial additional costs and experience temporary business interruptions as we continue to operate as an independent, publicly traded company, and we may not be adequately prepared to meet all regulatory and operational requirements in a timely or cost‑effective manner
13. 54We have a limited operating history as an independent, publicly traded company, and our historical consolidated financial information is not necessarily representative of the results we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results
14. 55Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price

Risks Related to Our Common Stock and the Securities Markets

1. 56The market price of our common stock may be highly volatile, and stockholders may not be able to resell their shares at desired times or prices
2. 57threatened or actual litigation or government investigations
3. 58We will evaluate whether to pay cash dividends on shares of our common stock in the future
4. 59Future issuance of our common stock or other equity securities could result in dilution to existing stockholders
5. 60Holders of our common stock may be diluted due to equity issuances
6. 61We have broad discretion over the use of the net proceeds from any future offerings and it is possible that we will not use them effectively
7. 62A substantial portion of the outstanding shares of our common stock may become available for sale in the public market, which could depress the market price of our common stock
8. 63We are an EGC and the information we provide stockholders may be different from information provided by other public companies, which may result in a less active trading market for our common stock and higher volatility in our stock price
9. 64the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act
10. 65exemptions from the requirement of holding a nonbinding advisory vote on executive compensation and stockholder approval on golden parachute compensation not previously approved
11. 66As a Florida corporation, certain provisions of the FBCA, as well as our amended and restated articles of incorporation and bylaws, may discourage, delay, or prevent a change in control of our company even if such a change in control would be beneficial to our stockholders
12. 67Its principal place of business, its principal office, or substantial assets within Florida; and
13. 68Shares held by banks (except as trustee or guardian), brokers, or nominees are disregarded for purposes of calculating these percentages or numbers
14. 69An "interested stockholder" is generally defined as any person who is the beneficial owner of more than 15% of our outstanding voting shares
15. 70Both the control share acquisition statute and the affiliated transactions statute may have the effect of discouraging or preventing certain change of control or takeover transactions involving us
16. 71certain litigation against us can only be brought in Florida