FEDNAT HOLDING CO – 10-Q – Administration’s Dialogue and Evaluation of Monetary Situation and Outcomes of Operations – InsuranceNewsNet

Overview

The following discussion and analysis should be read in conjunction with our
unaudited consolidated financial statements and notes thereto included under
Part I, Item 1 of this Quarterly Report on Form 10-Q (the "Form 10-Q"). In
addition, please refer to our audited consolidated financial statements and
notes thereto and related "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in our most recent Annual Report
on Form 10-K for the year ended December 31, 2021 (the "2021 Form 10-K").

Unless the context requires otherwise, as used in the remainder of this Form
10-Q, the terms "FNHC," "Company," "we," "us" and "our" refer to FedNat Holding
Company and its consolidated subsidiaries.

Below, in addition to providing consolidated revenues and net income (loss), we
also provide adjusted operating revenues and adjusted operating income (loss)
because we believe these performance measures that are not United States of
America generally accepted accounting principles ("GAAP") measures allow for a
better understanding of the underlying trend in our business, as the excluded
items are not necessarily indicative of our operating fundamentals or
performance.
Non-GAAP measures do not replace the most directly comparable GAAP measures and
we have included a detailed reconciliation thereof in "Results of Operations"
below.

We exclude the after-tax (using our prevailing income tax rate) effects of the
following items from GAAP net income (loss) to arrive at adjusted operating
income (loss):

•Net realized and unrealized investment gains (losses);
•Gains (losses) associated with early extinguishment of debt;
•Merger and acquisition, integration and other strategic costs, and the
amortization of specifically identifiable intangibles (other than value of
business acquired);
•Impairment of intangibles;
•Income (loss) from initial adoption of new regulations and accounting guidance;
and
•Income (loss) from discontinued operations.

We also exclude the pre-tax effect of the first bullet above from GAAP revenues
to arrive at adjusted operating revenues.

Forward-Looking Statements

This Form 10-Q or the documents that are incorporated by reference into this
Form 10-Q contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, or the Securities Act, and Section
21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.
These statements are therefore entitled to the protection of the safe harbor
provisions of these laws. These statements may be identified by the use of
forward-looking terminology such as "anticipate," "believe," "budget,"
"contemplate," "continue," "could," "envision," "estimate," "expect,"
"forecast," "guidance," "indicate," "intend," "may," "might," "outlook," "plan,"
"possibly," "potential," "predict," "probably," "pro-forma," "project," "seek,"
"should," "target," "will," "would," "will be," "will continue" or the negative
thereof or other variations thereon or comparable terminology. We have based
these forward-looking statements on our current expectations, assumptions,
estimates and projections. While we believe these expectations, assumptions,
estimates and projections are reasonable, such forward-looking statements are
only predictions and involve a number of risks and uncertainties, many of which
are beyond our control. These and other important factors may cause our actual
results, performance or achievements to differ materially from any future
results, performance or achievements expressed or implied by these
forward-looking statements. Management cautions that the forward-looking
statements contained in this Form 10-Q are not guarantees of future performance,
and we cannot assume that such statements will be realized, or the
forward-looking events and circumstances will occur. Factors that might cause
such a difference include, without limitation, the risks and uncertainties
discussed under Item 1. Business - "Going Concern" and Item 1A. "Risk Factors"
in our 2021 Form 10-K, and discussed from time to time in our other reports
filed with the Securities and Exchange Commission ("SEC"), including this Form
10-Q.

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Given these risks and uncertainties, you are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking statements
included or incorporated by reference into this Form 10-Q are made only as of
the date hereof. We do not undertake and specifically decline any obligation to
update any such statements or to publicly announce the results of any revisions
to any such statements to reflect future events or developments.

                                    GENERAL

The Company is a regional insurance holding company that controls substantially
all aspects of the insurance underwriting, distribution and claims processes
through our subsidiaries and contractual relationships with independent agents
and general agents. We, through our wholly owned subsidiaries, are authorized to
underwrite, and/or place homeowners multi-peril ("homeowners"), federal flood
and other lines of insurance in Florida and other states. We market, distribute
and service our own and third-party insurers' products and other services
through a network of independent and general agents.

FedNat Insurance Company ("FNIC"), our largest wholly-owned insurance
subsidiary, is licensed as an admitted carrier to write homeowners property and
casualty insurance by the state insurance departments in Florida, Louisiana,
Texas, South Carolina, Alabama, Georgia and Mississippi.

Maison Insurance Company ("MIC" or "Maison"), an insurance subsidiary, is
licensed as an admitted carrier to write homeowners property and casualty
insurance as well as wind/hail only exposures by the state insurance departments
in Louisiana, Texas and Florida. Refer to Overview of Insurance Lines of
Business - Non-Florida below for information regarding the Company's plan to
execute an orderly runoff of MIC's insurance operations.

Monarch National Insurance Company (“MNIC”), an insurance subsidiary, is
licensed to write homeowners property and casualty insurance in Florida.

Through our wholly-owned subsidiary, FedNat Underwriters, Inc. ("FNU"), we serve
as managing general agent for FNIC, MIC and MNIC. ClaimCor, LLC ("ClaimCor"), a
wholly-owned subsidiary, is a claims solutions company that processes claims for
FNIC, MIC and MNIC.

Material Distribution Relationships

We are a party to an insurance agency master agreement with Ivantage Select
Agency, Inc. ("ISA"), an affiliate of Allstate Insurance Company ("Allstate"),
pursuant to which we have been authorized by ISA to appoint Allstate agents to
offer our FNIC homeowners insurance products to consumers in Florida.

We are a party to a managing general underwriting agreement with SageSure
Insurance Managers, LLC ("SageSure") in which they underwrite our FNIC
homeowners business outside of Florida. Refer to Overview of Insurance Lines of
Business - Non-Florida below for information regarding the Company's plan to
execute an orderly runoff of insurance policies in our non-Florida market.

Going Concern

Refer to in "Part 1, Item 1, Business" and "Part I, Item 1A., Risk Factors" of
our 2021 Form 10-K and "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations, Liquidity and Capital Resources"
of this Form 10-Q for information with respect to the Company's going concern
status.

Overview of Insurance Lines of Business

Homeowners Property and Casualty Insurance
FNIC, MIC and MNIC underwrite homeowners insurance in Florida and FNIC and MIC
also underwrites homeowners insurance in Louisiana and Texas, while FNIC also
underwrites homeowners in South Carolina, Alabama and Mississippi. Homeowners
insurance generally protects an owner of real and personal property against
covered causes of loss to that property. As of March 31, 2022, the total
homeowners policies in-force was 248,000, of which 152,000 were in Florida and
96,000 were outside of Florida. As of December 31, 2021, the total homeowners
policies in-force was 280,000, of which 160,000 were in Florida and 120,000 were
outside of Florida. Refer to Overview of Insurance Lines of Business -
Non-Florida below for information regarding the Company's plan to execute an
orderly runoff of our non-Florida insurance operations.

Florida

Our homeowners insurance products provide maximum dwelling coverage of
approximately $3.6 millionwith the aggregate maximum policy limit being
approximately $6.3 million. We currently offer living coverage “A” up to $4.0
million
with an

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aggregate total insured value of $6.5 million. We continually review and update
these limits. The typical deductible is either $2,500 or $1,000 for
non-hurricane-related claims and generally 2% of the coverage amount for the
structure for hurricane-related claims.

Premium rates charged to our homeowners insurance policyholders are continually
evaluated to assure that they meet the expectation that they are actuarially
sound and produce a reasonable level of profit (neither excessive, inadequate or
discriminatory). Premium rates in Florida and other states are regulated and
approved by the respective states' office of insurance regulation. We
continuously monitor and seek appropriate adjustment to our rates in order to
remain competitive and profitable.

Through MIC, we have assumed Florida policies through the state-run insurer
Citizens Property Insurance Corporation (“Citizens”).

The following are our recent approved rate actions that we have taken across our
three insurance subsidiaries:

•In 2020, FNIC received approval from the Florida Office of Insurance
Regulations ("OIR") for a statewide-average rate increase of 6.7% for Florida
homeowners multiple-peril insurance policies, which became effective for new
policies on February 8, 2021 and for renewal policies on March 30, 2021.
•In 2020, FNIC received OIR approval for a statewide-average rate increase of
8.3% for Florida dwelling fire insurance policies, which became effective for
new policies on February 2, 2021 and for renewal policies on March 30, 2021.
•In 2020, MIC received OIR approval for a statewide-average rate increase of
15.0% for Florida manufactured home insurance policies, which became effective
for new policies on March 10, 2021.
•In 2021, FNIC received OIR approval for a statewide-average rate increase of
9.0% for Florida homeowners multiple-peril insurance policies, which became
effective for new policies on March 1, 2021 and for renewal policies on April
15, 2021.
•In 2021, MIC received OIR approval for a statewide-average rate increase of
14.8% for Florida takeout wind only policies, which became effective on August
1, 2021.
•In 2021, MIC filed for a statewide-average rate increase of 14.9% for Florida
manufactured home insurance policies, which became effective for new and renewal
policies on August 15, 2021.
•In 2021, FNIC received approval from the OIR for a statewide-average rate
increase of 0.9% for Florida homeowners multiple-peril insurance policies, which
became effective for new policies on September 1, 2021 and for renewal policies
on October 15, 2021.
•In 2021, FNIC received approval from the OIR for a statewide-average rate
increase of 5.7% for Florida homeowners multiple-peril insurance policies, which
became effective for new policies on October 15, 2021 and for renewal policies
on November 22, 2021.
•In 2021, FNIC received OIR approval for a statewide-average rate increase of
6.7% for Florida dwelling fire insurance policies, which became effective for
new policies on October 15, 2021 and for renewal policies on November 22, 2021.
•In 2021, MIC received OIR approval for a statewide-average rate increase of
14.9% for Florida takeout wind only policies, which became effective on December
25, 2021.
•In 2021, MIC received OIR approval for a statewide-average rate increase of
14.9% for Florida voluntary wind only policies, which became effective on
February 7, 2022.
•In 2022, FNIC received approval from the OIR for a statewide-average rate
increase of 6.0% for Florida homeowners multiple-peril insurance policies, which
became effective for new policies on January 15, 2022 and for renewal policies
on March 3, 2022.
•In 2022, FNIC received OIR approval for a statewide-average rate increase of
8.9% for Florida dwelling fire insurance policies, which became effective for
new policies on January 15, 2022 and for renewal policies on March 3, 2022.
•Other rate filings have been filed with the OIR and are pending approval.

Non-Florida

Our FNIC non-Florida homeowners insurance products, produced through our
partnership with SageSure, provide maximum dwelling coverage “A” up to $1.8
million
with the aggregate maximum policy limit being approximately $3.6
million
. The typical deductible is either $2,500 or $1,000 for
non-hurricane-related claims and generally 2% of the coverage amount for the
structure for hurricane-related claims.

Effective July 1, 2020, FNIC entered into a quota-share treaty with Anchor Re,
Inc. ("Anchor Re"), an Arizona captive that is an affiliate of SageSure, the
non-affiliated managing general underwriter that writes FNIC's non-Florida
homeowners business. The treaty provided 50% quota-share reinsurance protection
on claims incurred subsequent to July 1, 2020 on in-force, new and renewal
business through June 30, 2021, subject to certain limitations. The treaty was
fully collateralized through Anchor Re.

On November 3, 2020, FNIC increased its cession percentage in this treaty from
50% to 80%, effective December 1, 2020, on claims incurred subsequent to
December 1, 2020 on in-force, new and renewal basis. Effective January 31, 2021,
the Company
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terminated its then-existing quota-share reinsurance treaty with Anchor Re and
commuted the agreement. Immediately after the commutation, the Company entered
into an 80% quota-share treaty with Anchor Re on February 1, 2021 on an
in-force, new and renewal basis, which covered the thirteen month period through
February 28, 2022, subject to certain limitations. The treaty arrangement was
fully collateralized through Anchor Re.

Effective December 31, 2021, the Company terminated its existing 80% quota-share
reinsurance treaty with Anchor Re and commuted the agreement. Immediately after
the commutation, the Company entered into a 100% quota-share treaty with Anchor
Re on December 31, 2021 on an in-force, new and renewal basis, which covers the
six month period through June 30, 2022, subject to certain limitations which
include limits on the net losses that Anchor Re can realize during the treaty
year. The new treaty excludes catastrophe losses, involves a funded trust and is
fully collateralized through Anchor Re.

Our MIC non-Florida insurance products include homeowners insurance,
manufactured home insurance and dwelling fire insurance. MIC writes both full
peril property policies as well as wind/hail only exposures.

The following are our recent approved rate actions that we have taken across our
insurance subsidiaries that do business outside of Florida:

•In 2021, FNIC applied for a statewide-average rate increase of 8.4.% for
Mississippi homeowners insurance policies, which was approved by the respective
regulatory agency and became effective for new policies on January 17, 2022 and
for renewal policies on March 1, 2022.
•In 2021, MIC applied for a statewide-average rate increase of 24.6% for
Louisiana voluntary dwelling insurance policies, which was approved by the
respective regulatory agency and became effect for new policies on March 15,
2021 and for renewal policies on April 15, 2021.
•In 2021, FNIC applied for a statewide-average rate increase of 5.0% for Alabama
homeowners insurance policies, which was approved by the respective regulatory
agency and became effective for new policies on April 1, 2021 and for renewal
policies on May 1, 2021.
•In 2021, FNIC applied for a statewide-average rate increase of 6.9% for South
Carolina homeowners insurance policies, which was approved by the respective
regulatory agency and became effective for new policies on April 1, 2021 and for
renewal policies on May 1, 2021.
•In 2021, FNIC applied for a statewide-average rate increase of 9.0% for Texas
homeowners insurance policies, which was approved by the respective regulatory
agency and became effective for new policies on April 8, 2021 and for renewal
policies on May 1, 2021.
•In 2021, FNIC applied for a statewide-average rate increase of 9.5% for Texas
homeowners insurance policies, which was approved by the respective regulatory
agency and became effective for new policies on August 16, 2021 for renewal
policies on November 1, 2021.
•In 2021, FNIC applied for a statewide-average rate increase of 15.0% for Texas
homeowners insurance policies, which was approved by the respective regulatory
agency and became effective for new policies on November 1, 2021 and for renewal
policies on December 16, 2021.
•In 2021, MIC applied for a statewide-average rate increase of 11.1% for
Louisiana homeowners insurance policies, which was approved by the respective
regulatory agency and became effective for new policies on May 15, 2021 and for
renewal policies on July 1, 2021.
•In 2021, MIC applied for a statewide-average rate increase of 11.0% for
Louisiana takeout insurance policies, which was approved by the respective
regulatory agency and became effective for new and renewal policies on July 1,
2021.
•In 2021, FNIC applied for a statewide-average rate increase of 11.0% for
Louisiana homeowners insurance policies, which was approved by the respective
regulatory agency and became effective for new and renewal policies on July 1,
2021. In 2021, MIC applied for a statewide-average rate increase of 25.7% for
Texas voluntary wind only insurance policies, which was effective for new and
renewal policies on July 15, 2021.
•In 2021, MIC applied for a statewide-average rate increase of 9.5% for Texas
takeout wind only insurance policies, which was effective for new and renewal
policies on July 15, 2021.
•In 2021, MIC applied for a statewide-average rate increase of 22.6% for Texas
manufactured home insurance policies, which was effective for new and renewal
policies on August 15, 2021.
•In 2021, FNIC applied for a statewide-average rate increase of 15.0% for
Louisiana homeowners insurance policies, which was approved by the respective
regulatory agency and became effective for new policies on October 25, 2021 and
for renewal policies on December 1, 2021.
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•In 2021, MIC applied for a statewide-average rate increase of 19.0% for
Louisiana takeout insurance policies, which was approved by the respective
regulatory agency and became effective for new and renewal policies on November
25, 2021.
•In 2021, MIC applied for a statewide-average rate increase of 8.6% for
Louisiana manufactured home insurance policies, which was approved by the
respective regulatory agency and became effective for new and renewal policies
on November 25, 2021.
•In 2021, MIC applied for a statewide-average rate increase of 23.1% for Texas
homeowners insurance policies, which was effective for new policies on December
1, 2021 and effective for renewal policies on January 1, 2022.
•In 2021, MIC applied for a statewide-average rate increase of 18.9% for
Louisiana homeowners insurance policies, which was approved by the respective
regulatory agency and became effective for new and renewal policies on December
3, 2021.
•In 2021, FNIC applied for a statewide-average rate increase of 20.0% for South
Carolina homeowners insurance policies, which was approved by the respective
regulatory agency and became effective for new policies on April 1, 2022 and for
renewal policies on May 1, 2022.
•Additional rate filings have been applied for by FNIC and MIC and are pending
to be approved by the respective regulatory agency.

In November 2021, the Company announced its plan to re-focus its operations on
the Florida market, which has been the Company's historical focus. In
conjunction with this shift in strategy, the Company commenced an orderly runoff
of MIC's insurance operations. In that regard, MIC filed appropriate
documentation with its insurance regulators in Louisiana, Florida and Texas
concerning MIC's withdrawal plan. We began non-renewing MIC's Louisiana policies
on their anniversary dates in January 2022. Non-renewal of MIC's Texas policies
began in March 2022, and the non-renewal of MIC's Florida policies is expected
to begin in July 2022. With respect to FNIC's Texas and Louisiana books, the
Company and SageSure (the third-party MGU that underwrote the business and owns
the renewal rights thereof) began transferring policies onto alternative
SageSure insurance carrier partners in December 2021, by virtue of making offers
of coverage to FNIC policyholders. FNIC policies in South Carolina, Alabama and
Mississippi are expected to continue to be renewed by FNIC up through June 30,
2022. SageSure has begun offering renewals in Texas and Louisiana from
alternative SageSure insurance carrier partners and we expect they will do the
same in South Carolina, Alabama and Mississippi by July 2022. Non-renewals of
FNIC's policies produced by SageSure began April 30, 2022 for Texas and
Louisiana and subject to regulatory approvals of our withdrawal plans will begin
May 31, 2022 for Alabama and Mississippi, and June 30, 2022 in South Carolina.
The non-renewal of all existing policies is governed by the appropriate
regulatory requirements of each state in which the property insured by the
policy is located. In conjunction with the 100% quota-share treaty and the
in-process transfer of the book discussed above, effective February 1, 2022,
claims handling for the SageSure book was transferred to an affiliate of
SageSure.

Other Lines of Business
Flood:  FNIC writes flood insurance through the National Flood Insurance Program
("NFIP"). We write the policy for the NFIP, which assumes 100% of the flood risk
while we retain a commission for our service. FNIC offers this line of business
in Florida, Louisiana, Texas, Alabama, South Carolina and Mississippi. FNIC
plans to file an admitted flood endorsement as an alternative to the NFIP
program. Until December 2021, MIC wrote flood insurance through a partnership
with Bintech Partners, Inc. who assumes 100% of the risk, in Louisiana only.

See the discussion in Item 1: “Business” in our 2021 Form 10-K, for additional
information with respect to our business.

Regulation

All insurance companies must file quarterly and annual statements with certain
regulatory agencies and are subject to regular and special examinations by those
agencies. We may be the subject of additional special examinations or analysis.
These examinations or analysis may result in one or more corrective orders being
issued by the OIR or Louisiana Department of Insurance ("LDI"), our primary
regulators. Refer to "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, Liquidity and Capital Resources" for
discussion of OIR consent orders and the Company's action plans with respect
thereto.


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                             RESULTS OF OPERATIONS

Operating Results Overview – Three Months Ended March 31, 2022 Compared with
Three Months Ended March 31, 2021

The following overview does not address all of the matters covered in the other
sections of Management's Discussion and Analysis of Financial Condition and
Results of Operations or contain all of the information that may be important to
our shareholders or the investing public. This overview should be read in
conjunction with the other sections of Management's Discussion and Analysis of
Financial Condition and Results of Operations herein and in our 2021 Form 10-K.

The following table sets forth results of operations for the periods presented:
                                                             Three Months Ended
                                                                 March 31,
                                                     2022         % Change         2021
                                                           (Dollars in thousands)
Revenues:
Gross premiums written                           $ 137,892         (20.8) %    $ 174,207
Gross premiums earned                              164,328          (8.2) %      179,002
Ceded premiums                                    (118,343)        (15.0) %     (139,257)
Net premiums earned                                 45,985          15.7  %       39,745
Net investment income                                1,264         (24.5) %        1,674
Net realized and unrealized gains (losses)         (15,053)             NCM           92
Direct written policy fees                           2,613         (21.2) %        3,315
Other income                                         7,426          (6.3) %        7,922
Total revenues                                      42,235         (19.9) %       52,748

Costs and expenses:
Losses and loss adjustment expenses                 58,783          22.4  % 

48,016

Commissions and other underwriting expenses 19,107 (9.1) %

21,031

General and administrative expenses                  6,997          15.3  %        6,066
Interest expense                                     2,300          19.4  %        1,926
Total costs and expenses                            87,187          13.2  %       77,039

Income (loss) before income taxes                  (44,952)         85.1  %      (24,291)
Income tax expense (benefit)                        (1,038)        (78.9) %       (4,910)
Net income (loss)                                $ (43,914)        126.6  %    $ (19,381)


Ratios to net premiums earned:
Net loss ratio                                       127.8  %                      120.8  %
Net expense ratio                                     56.8  %                       68.2  %
Combined ratio                                       184.6  %                      189.0  %



(1)Net loss ratio is calculated as losses and loss adjustment expenses ("LAE")
divided by net premiums earned.
(2)Net expense ratio is calculated as all operating expenses less interest
expense divided by net premiums earned.
(3)Combined ratio is calculated as the sum of losses and LAE and all operating
expenses less interest expense divided by net premiums earned.

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The following table sets forth a reconciliation of GAAP to non-GAAP measures:
                                                                  Three Months Ended
                                                                      March 31,
                                                                 2022             2021
                                                                (Dollars in thousands)
Revenue
Total revenues                                              $    42,235       $  52,748
Less:
Net realized and unrealized investment gains (losses)           (15,053)             92
Adjusted operating revenues                                 $    57,288       $  52,656

Net Income (Loss)
Net income (loss)                                           $   (43,914)      $ (19,381)
Less:
Net realized and unrealized investment gains (losses)           (15,053)    

73

Acquisition and strategic costs                                       -     

(9)

Amortization of identifiable intangibles                              -     

(30)

Adjusted operating income (loss)                            $   (28,861)    

$ (19,415)

Income tax rate assumed for reconciling items above                   -  %  

21.00%



Our first quarter of 2022 reported results on May 9, 2022, did not include an
impairment loss of $12.6 million, which is included above. This impairment loss
was precipitated by the OIR approval of the mid-term cancellation pursuant to
the Company's action plan, which occurred on May 13, 2022. Total shareholders'
equity was not impacted by such charge; however, the Company's net loss for
three months ended March 31, 2022 worsened and other comprehensive income
improved by $12.6 million in offsetting amounts. Refer to Note 2 of the notes to
our Consolidated Financial Statements for additional information.

Revenue

Total revenue decreased $10.5 million or 19.9%, to $42.2 million for the three
months ended March 31, 2022, compared with $52.7 million for the three months
ended March 31, 2021. The decrease was driven primarily by lower net realized
gains, gross premiums, direct written policy fees, net investment income and
other income, partially offset by a decrease in ceded premiums, all of which are
discussed in further detail below.

Gross Premiums Written

The following table sets forth the gross premiums written for the periods
presented:
                                      Three Months Ended
                                          March 31,
                                     2022           2021
                                        (In thousands)
Gross premiums written:
Homeowners Florida                $ 116,159      $ 111,969
Homeowners non-Florida               17,317         57,909
Federal flood                         4,481          4,389
Non-core (1)                            (65)           (60)
Total gross premiums written      $ 137,892      $ 174,207


(1)Reflects exited lines of business.

Gross premiums written decreased $36.3 million, or 20.8%, to $137.9 million in
the quarter compared with $174.2 million for the same three-month period last
year, driven by a reduction in our policies-in-force and exposure in non-Florida
states, as a result of
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the orderly runoff of MIC and the transfer-upon-renewal of FNIC’s non-Florida
business to alternative insurance carrier partners of SageSure.

Gross Premiums Earned

The following table sets forth the gross premiums earned for the periods
presented:
                                     Three Months Ended
                                         March 31,
                                    2022           2021
                                       (In thousands)
Gross premiums earned:
Homeowners Florida               $ 105,138      $ 109,426
Homeowners non-Florida              53,939         64,923
Federal flood                        5,316          4,713
Non-core (1)                           (65)           (60)
Total gross premiums earned      $ 164,328      $ 179,002


(1)Reflects exited lines of business.

Gross premiums earned decreased $14.7 million, or 8.2%, to $164.3 million for
the three months ended March 31, 2022, as compared to $179.0 million for the
three months ended March 31, 2021, driven primarily by the same reasons as the
decrease in gross premiums written, discussed above.

Ceded Premiums Earned

Ceded premiums earned decreased $21.0 million, or 15.0%, to $118.3 million in
the quarter, compared to $139.3 million in the same three-month period last
year. The decrease was driven by approximately $15 million lower catastrophe
reinsurance spend due to additional purchases of supplemental coverage in the
2020-2021 catastrophe excess of loss reinsurance program to backfill layers and
gaps in coverage stemming from the non-cascading portion of our reinsurance
tower, following the six retention catastrophe events that occurred during that
treaty year. Additionally, there was approximately $6 million of lower
quota-share ceded premium associated with lower gross premiums earned discussed
above which was largely offset by corresponding increases in net loss and LAE,
and commission and other underwriting expenses when comparing the periods. Refer
to Note 5 of the notes to our Consolidated Financial Statements for additional
information regarding these quota-share treaties.

Net Investment Income

Net investment income decreased $0.4 million, or 24.5%, to $1.3 million during
the three months ended March 31, 2022, as compared to $1.7 million during the
three months ended March 31, 2021. This decrease was driven by a smaller fixed
income portfolio as we have been impacted by several catastrophes, hail and
wind-related severe weather events and private reinsurers have raised the cost
of their coverages.

Net Realized and Unrealized Gains (Losses)

Net realized and unrealized gains (losses) decreased $15.2 million, to $(15.1)
million for the three months ended March 31, 2022, compared to $0.1 million the
prior year period. Refer to Note 2 of the notes to our Consolidated Financial
Statements for information about the Company recognition of an impairment loss
of $(12.6) million. We also recognized $(0.6) million and less than $(0.1)
million in unrealized investment gains (losses) for equity securities during
these respective periods. Our current and prior year net realized investment
gains on sales are primarily associated with our portfolio managers, under our
control, moving out of positions due to both macro and micro conditions, a
typical practice in most quarters.

Direct Written Policy Fees

Direct written policy fees decreased $0.7 million, or 21.2%, to $2.6 million for
the three months ended March 31, 2022, compared with $3.3 million for the three
months ended March 31, 2021. The decrease is primarily driven by a reduction in
our policies in-force in the state of Florida, as a result of our rigorous
exposure management in response to the challenging litigation environment and
the orderly exit of the non-Florida business.

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Other Income

Other income included the following for the periods presented:

                                            Three Months Ended
                                                 March 31,
                                      2022         % Change       2021
                                          (Dollars in thousands)
Other income:
Commission income                 $    1,280         35.7  %    $   943
Brokerage                              5,796        (11.8) %      6,575
Financing and other revenue              350        (13.4) %        404
Total other income                $    7,426         (6.3) %    $ 7,922



The decrease in other income was primarily driven by lower brokerage revenue.
The brokerage revenue decrease is the result of lower excess of loss reinsurance
spend from the reinsurance programs in place, including reinstatement premiums
and/or additional purchases, during first quarter of 2022 as compared to the
first quarter of 2021.

Expenses

Losses and LAE

Losses and LAE incurred, net of reinsurance, included the following for the
periods presented:
                                                                                    Three Months Ended
                                                                                         March 31,
                                                                       2022                                     2021
                                                                              Net Loss                                 Net Loss
                                                          Amount               Ratio               Amount               Ratio
                                                                                      (In thousands)
Current accident year, excluding catastrophes:
Homeowners                                              $ 26,063                   56.7  %       $ 34,395                   86.4  %
Non-core (1)                                                   -                      -  %              -                      -  %
Total current accident year, excluding
catastrophes                                              26,063                   56.7  %         34,395                   86.4  %
Current year catastrophes (2):
Florida                                                   19,219                   41.8  %            166                    0.4  %
Texas                                                      6,458                   14.0  %         10,396                   26.2  %
Louisiana                                                  2,670                    5.8  %          2,531                    6.4  %
Other states                                                 901                    2.0  %              -                      -  %
Total current year catastrophes                           29,248                   63.6  %         13,093                   33.0  %
Prior year loss development (redundancy):
Homeowners                                                 3,543                    7.7  %            624                    1.6  %
Non-core (1)                                                 (71)                  (0.2) %              -                      -  %
Ceded losses subject to offsetting experience
account adjustments (3)                                        -                      -  %            (96)                  (0.2) %
Total prior year loss development (redundancy)             3,472                    7.5  %            528                    1.4  %
Total net losses and LAE                                $ 58,783                  127.8  %       $ 48,016                  120.8  %



(1)Reflects exited lines of business.
(2)Includes Property Claims Services ("PCS") weather events and other events
impacting multiple insureds for which the Company's insurance carriers
established catastrophe event codes, net of the benefit of claims handling
services. These catastrophe events are typically wind, hail and tornado related
weather events. Any individual catastrophe event with gross losses greater than
$20 million, on a pre-tax basis, are considered significant and specifically
addressed in the commentary below. Excludes any catastrophe related activity
recorded in other financial statement line items, outside of loss and loss
adjustment expenses.
                                      -37-
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(3)Reflects homeowners losses ceded under retrospective reinsurance treaties to
the extent there is an offsetting experience account adjustment, such that there
is no impact on pre-tax net income (loss).

Losses and LAE increased $10.8 million, or 22.4%, to $58.8 million for the three
months ended March 31, 2022, compared to $48.0 million for 2021. The net loss
ratio increased 7.0 percentage points, to 127.8% in the current quarter, as
compared to 120.8% in the first quarter of 2021. The higher loss expense and
corresponding ratio were primarily driven by larger net catastrophe losses and
prior year development as well as lower ceded losses under quota-share
reinsurance treaties attributable to lower gross premiums earned, partially
offset by lower gross attritional losses in the current quarter. Refer to Gross
Premiums Earned above for additional information.

The current quarter included approximately $29.2 million of catastrophe losses,
net of reinsurance and claims handling fee income, driven primarily by eleven
notable events (including one wildfire) that impacted Florida, Texas, Louisiana
and South Carolina. Approximately $10 million of these net catastrophe losses
are related to books of business that the Company is in the process of running
off, including FNIC's non-Florida book as well as MIC's book of business. In
addition, the Company recorded approximately $2 million of net adverse reserve
development in the quarter related to Hurricane Laura, which hit Louisiana in
August 2020. By comparison, the first quarter of 2021 catastrophe net losses
were $13.1 million, net of reinsurance, primarily by Winter Storm Uri, which
caused heavy residential damage in Texas, primarily associated with freezing
temperatures causing widespread instances of burst water pipes.

Commissions and Other Underwriting Expenses

The following table sets forth the commissions and other underwriting expenses
for the periods presented:
                                                                 Three Months Ended
                                                                     March 31,
                                                                 2022           2021
                                                                   (In thousands)

Commissions and other underwriting expenses:

      Homeowners Florida                                     $   10,682      $ 12,399
      All others                                                 13,233        11,691
      Ceding commissions                                        (18,051)      (19,460)
      Total commissions                                           5,864         4,630

      Fees                                                          993         1,335
      Salaries and wages                                          2,511         3,572
      Other underwriting expenses                                 9,739    

11,494

Total commissions and other underwriting expenses $19,107

$21,031



Commissions and other underwriting expenses decreased $1.9 million, or 9.1%, to
$19.1 million for the three months ended March 31, 2022, compared with $21.0
million for the three months ended March 31, 2021. This decrease was due to
lower acquisition and underwriting expenses due to lower policies-in-force,
offset by lower ceding commission as a result of higher catastrophe costs, which
has the affect of reducing the ceded commissions in the quarter.

The net expense ratio decreased 11.4 percentage points to 56.8% in the first
quarter of 2022, as compared to 68.2% in the first quarter of 2021 due primarily
to higher ceded reinsurance premiums in 2021 Our gross expense ratio was 26.9%
during the three months ended March 31, 2022, as compared to 26.0% during the
three months ended March 31, 2021, due primarily to inflation, partially offset
by the Company's continued focus on expense control.

General and Administrative Expenses

General and administrative expenses increased $0.9 million, or 15.3%, to $7.0
million for the three months ended March 31, 2022 compared to $6.1 million in
the first quarter of 2021, due primarily to investments in employees, which are
critical to accomplishing our corporate goals, including providing service to
our insureds.

                                      -38-
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Interest Expense

Interest expense increased $0.4 million, or 19.4%, to $2.3 million for the three
months ended March 31, 2022 compared to $1.9 million for the three months ended
March 31, 2021. The increase was primarily attributable to debt issued on April
20, 2021. Refer to Note 10 of the notes to our Consolidated Financial Statements
set forth in Part II, Item 8. Financial Statements and Supplementary Data of our
2021 Form 10-K, for additional information.

Income Taxes

Income tax expense (benefit) decreased $3.9 million, to $(1.0) million for the
three months ended March 31, 2022, compared to $(4.9) million for the three
months ended March 31, 2021. Refer to Note 9 of the notes to our Consolidated
Financial Statements for information related to our valuation allowance and our
effective income tax rate.

Consolidated Company Outlook – Potential Changes in Financial Trends

See "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, Liquidity and Capital Resources," for discussion of the
action plan the Company has submitted to the OIR. If approved and implemented
the plan would materially impact forward-looking expectations with respect to
financial trends. Such impacts with respect to the Company's business include,
but are not limited to:

•Declines in net written and gross earned premiums;
•Declines in loss and loss adjustment expenses as well as in commissions and
other underwriting expenses;
•Declines in exposure to catastrophe weather losses;
•Declines in the expected cost of excess of loss reinsurance coverages over the
runoff period; and
•Reduced need or potential need for surplus infusions into FNIC and MIC, and
corresponding reductions in the Company's overall capital needs.

Overall, the Company anticipates lower consolidated earnings. However, if
catastrophe losses were to continue at the elevated levels experienced in the
past twenty one months, it is expected that the reduction of our Florida book of
business and the orderly exit of the non-Florida business will have proven
beneficial to the Company's earnings over the runoff period.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our primary sources of funds are gross written premiums, ceding of claims
payments pursuant to reinsurance treaties, investment income, commission income
and fee income. Our primary uses of funds are the payment of claims, catastrophe
and other reinsurance premiums and operating expenses. As of March 31, 2022, on
a consolidated basis, the Company held $87.4 million in cash and cash
equivalents and $275.6 million in investments. As of December 31, 2021, on a
consolidated basis, the Company held $83.5 million in cash and cash equivalents
and $333.4 million in investments. Total shareholders' equity decreased $45.3
million, to $14.1 million as of March 31, 2022, compared with $59.4 million as
of December 31, 2021 due primarily to a net loss and unrealized losses on our
bond portfolio. The Company believes it has adequate holding company liquidity
to accommodate its potential second quarter catastrophe losses, and to maintain
regulatory minimum RBC ratios throughout 2022.

As described in Going Concern in "Part I, Item I. Business, Insurance Operations
and Related Services" of our 2021 Form 10-K, the Company believes there is
substantial doubt regarding its ability to continue as a going concern. Demotech
currently rates FNIC "S" and MNIC "A". The Company believes FNIC's Demotech
rating will adversely impact our ability to obtain excess-of-loss reinsurance
for coverage beginning July 1, 2022. Absent such coverage, the Company will not
be in compliance with requirements communicated by the Office of Insurance
Regulation of the state of Florida regarding such coverage, which could
ultimately result in the Company being placed into receivership. The Company has
submitted a proposed action plan to the OIR. A portion of the action plan has
been approved by the OIR, and consists of the mid-term cancellation, effective
June 29, 2022, of approximately 68,200 Florida policies currently in force on
FNIC, MNIC and Maison, as requested by the Company. Such cancellations will
require the refund of approximately $126 million of unearned premium to the
impacted policyholders and result in the Company becoming much smaller, with
significantly fewer policies in force. The refund of these unearned premiums
will require the liquidation of a substantial portion of our insurance carriers'
portfolios of fixed income securities. Because of this near-term liquidity need,
unrealized losses on our investment portfolio have been recognized as realized
losses for the three months ended March 31, 2022.

Additional portions of the Company's action plan continue to be subject to
approval by the OIR and regulatory authorities in other states, including
mid-term cancellations in non-Florida states, as well as reinsurance and capital
raising options. More specifically, the Company is seeking to fully exit all
non-Florida states as of an approved date. Concurrently, the Company is seeking
additional capital investments into the holding company or directly into an
insurance carrier, specifically MNIC. The Company's requests
                                      -39-
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would bring its overall book of business to a more manageable size, consistent
with its capital position and increase the likelihood of success with multiple
stakeholders, including its regulators, rating agency, shareholders and its
remaining policyholders. The proposed action plan would be expected to enable
the Company to obtain excess-of-loss reinsurance on a smaller, Florida-only book
of business. There can be no assurance such approvals will be obtained or that
these plans can be effectively implemented.

The Company has outstanding $100 million of 2029 Notes ("2029 Notes"), which
bear interest at the annual rate of 7.75%. The 2029 Notes mature on March 15,
2029 and the indenture covenants allow for a maximum debt-to-capital ratio
applicable to the incurrence of debt to 60% and a maximum debt-to-capital ratio
applicable to restricted payments, including cash dividends on our common stock,
to 20%.

The Company has outstanding $21 million of Convertible Senior Unsecured Notes
due 2026 ("2026 Notes"), which bear interest at the annual rate of 5.0%. The
2026 Notes are convertible in part or in whole at the option of the holders at
any time until the close of business on the second trading day prior to the
maturity date on April 19, 2026 ("Maturity Date") into shares of the Company's
common stock at an initial conversion rate of 166.6667 shares of the Company's
common stock per $1,000 principal amount of the 2026 Notes (equivalent to an
initial conversion price of $6.00 per share), subject to customary adjustments
in certain circumstances. The Company will not have the right to redeem the 2026
Notes prior to the Maturity Date. Holders of the 2026 Notes may require the
Company to purchase their 2026 Notes upon a change of control at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest to, but excluding, the date of purchase.

Refer to Note 10 of the notes to our Consolidated Financial Statements set forth
in Part II, Item 8. Financial Statements and Supplementary Data of the 2021 Form
10-K, for additional information regarding the 2029 Notes and 2026 Notes.

In May 2022, due primarily to the delay in the filing of the Company's Form 10-K
for the year ended December 31, 2021, Egan Jones' rating on the Company's
outstanding senior notes expired such that our notes are not currently rated.
The lack of a rating, if not remediated within 30 days from receipt of notice as
provided in the note indentures, has the potential to result in an Event of
Default under the note indentures. The Company intends to use its best efforts
to secure such a rating as soon as reasonably practicable. If the Company fails
to secure such a rating, is placed into receivership or fails to obtain
excess-of-loss reinsurance, such conditions, if not timely cured, could result
in acceleration of repayment of our debt. The Company does not have adequate
liquidity to repay this debt without replacement borrowings, which may not be
available. We cannot provide any assurance that we will be able to comply with
certain covenants in our senior note indentures or to make satisfactory
alternative arrangements in the event we cannot do so.

The Company’s actual debt to capital ratio as of March 31, 2022 was
approximately 89.4%.

Historically, we have met our liquidity requirements primarily through cash
generated from operations. Beginning in 2020, property and casualty businesses,
including FNHC's insurance carriers, have been materially adversely impacted by
multiple catastrophes, hail, and wind-related severe weather events and private
reinsurers have tightened coverage provisions and raised the cost of their
coverages. As a result, sales of our portfolio of fixed income securities was a
significant source of liquidity for the Company. Quota-share reinsurance
treaties are another liquidity management tool, via the ceding commission the
Company receives upon inception and the related reduction to statutory surplus
requirements. New quota-share treaties entered or increased were responsive to
these purposes, as well as to reduce the Company's exposure to non-named storm
catastrophes. Certain of the Company's quota-share treaties contain provisions
that give the reinsurer the option to terminate the treaty in the event that our
Demotech rating is downgraded or that we are placed into receivership. The
termination of any of our quota-share treaties would place additional strain on
our statutory surplus.

Management continually monitors and adjusts its liquidity and capital plans for
FNHC and its subsidiaries in light of the aforementioned challenges to ensure
that we have adequate liquidity and capital. The Company's Board and management
continue to explore all options to strengthen the Company's capital position.
Management is pursuing various financing alternatives to augment our capital and
liquidity, including possible equity or debt financings (consistent with our
indentures) and possible sales of non-core assets. Continuing occurrences of
severe weather events and the current significant economic uncertainty and
volatility in the credit and capital markets may impair our ability to raise
additional capital. We may not be able to raise sufficient additional capital to
support the Company's action plan, and our other efforts to improve our
profitability may not succeed.

Statutory Capital and Surplus of our Insurance Subsidiaries

As described more fully in Part I, Item 1. Business, Regulation of our 2021 Form
10-K, the Company's insurance operations are subject to the laws and regulations
of the states in which we operate. The OIR and their regulatory counterparts in
other states utilize the National Association of Insurance Commissions ("NAIC")
risk-based capital ("RBC") requirements, and the resulting RBC ratio, as a key
metric in the exercise of their regulatory oversight. The RBC ratio is a measure
of the sufficiency of an insurer's statutory capital and surplus. In addition,
the RBC ratio is used by insurance industry ratings services in the
determination of the financial strength ratings (i.e., claims paying ability)
they assign to insurance companies. Our rating agency for our insurance
carriers,
                                      -40-
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Demotech, Inc. requires a minimum RBC ratio of 300%, among other metrics, for a
carrier to maintain a Demotech rating. As of March 31, 2022 and December 31,
2021, FNIC's statutory surplus, which includes MNIC, was $73.2 million and $99.4
million, respectively. In addition, FNIC's surplus includes a surplus note
receivable due from MIC, carried at $17.3 million as of March 31, 2022, which
matures in December 2022. As of March 31, 2022 and December 31, 2021, MIC's
statutory surplus was $30.2 million and $30.8 million, respectively. In
conjunction with the Company's November 2021 decision to re-focus on its Florida
homeowners business as discussed under Overview of Insurance Lines of Business -
Non-Florida above in "Part I, Item 1. Business, Insurance Operations and Related
Services" of this Annual Report, the Company is in the process of executing an
orderly runoff of MIC's business. The Company remains committed to maintaining
statutory surplus in MIC that satisfies minimum regulatory requirements through
the runoff period. As a result of the Company's decision to support MIC to the
level of minimum regulatory capital but not to a 300% RBC level, Demotech has
withdrawn its rating of MIC. The ratings of FNIC and MNIC remain in place at "S"
and "A", respectively, and are independent of this action. Adjusted for the
intercompany impacts of the surplus note referenced above, the combined
statutory surplus of our insurance carriers is approximately $86.1 million.

As of March 31, 2022, the Company has approximately $47 million of liquidity in
its holding company and non-regulated subsidiaries (collectively referred to
"holding company liquidity") that is available for general corporate purposes,
including supporting the capital requirements of its insurance subsidiaries.

Based on RBC requirements, the extent of regulatory intervention and action
increases as the ratio of an insurer's statutory surplus to its ACL, as
calculated under the NAIC's requirements, decreases. The first action level, the
Company Action Level, requires an insurer to submit a plan of corrective actions
to the insurance regulators if statutory surplus falls below 200% of the ACL
amount. The second action level, the Regulatory Action Level, requires an
insurer to submit a plan containing corrective actions and permits the insurance
regulators to perform an examination or other analysis and issue a corrective
order if statutory surplus falls below 150% of the ACL amount. The third action
level, ACL, allows the regulators to rehabilitate or liquidate an insurer in
addition to the aforementioned actions if statutory surplus falls below the ACL
amount. The fourth action level is the Mandatory Control Level, which requires
the regulators to rehabilitate or liquidate the insurer if statutory surplus
falls below 70% of the ACL amount. Based upon the 2021 statutory financial
statements for FNIC, MIC and MNIC, statutory surplus exceeded the regulatory
action levels established by the NAIC's RBC requirements. FNIC, MIC and MNIC had
ratios of statutory surplus to its ACL of 313%, 305% and 1,152%, respectively,
as of December 31, 2021.

As described above, the Company intends to maintain no less than the minimum
required regulatory capital within FNIC and MIC, but does not intend to maintain
a 300% RBC ratio. The Company will continue to closely coordinate with all
applicable state insurance departments with respect to its plan of operation
throughout the runoff period.

Refer to "Part I, Item 1A., Risk Factors" of our 2021 Form 10-K for more
information on how over time, additional weather-related events and actions by
reinsurers, including loss limitations in reinsurance treaties and our ability
to renew existing reinsurance treaties, could adversely affect the Company's
ability to maintain a 300% RBC ratio in MNIC (which is critical to maintaining a
Demotech rating and to the Company's proposed action plan) and minimum required
regulatory capital in FNIC and MIC or FNHC's ability to contribute necessary
capital. In addition, because of the valuation allowance on the Company's
deferred tax assets, the insurance carriers will not benefit from immediate tax
benefits of any future quarterly losses they incur. As such, any surplus
infusions required will be larger than they would have been if our net deferred
tax assets were deemed fully realizable.

Cash Flows Discussion

We currently believe that existing cash and investment balances, when combined
with anticipated cash flows, will be adequate to meet our expected liquidity
needs in both the short-term and the reasonably foreseeable future, including
maintaining regulatory minimum capital levels in our insurance carriers.
However, our ability to maintain 300% RBC levels in MNIC (which is critical to
maintaining a Demotech rating) may be dependent on our ability to raise
additional capital in the future. There can be no guarantee additional capital
will be available to the Company, if needed. Future strategies and catastrophe
events would require additional external financing and we may from time to time
seek to obtain external financing. We cannot assure that additional sources of
financing will be available to us on favorable terms, or at all, or that the
terms of any such financing would not negatively impact our results of
operations.

Operating Activities

Net cash provided by (used in) operating activities was $(37.0) million in the
three months ended March 31, 2022 compared to $(110.1) million in the same
period in 2021. This change primarily reflects lower reinsurance spend and lower
expenses from losses and LAE, primarily from reinsurance recoveries, partially
offset by lower gross premiums.

                                      -41-
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Investing Activities

Net cash provided by (used in) investing activities was $40.9 million in the
three months ended March 31, 2022, as compared to $62.1 million in the three
months ended March 31, 2021. The change primarily reflects lower purchases of
debt and equity investment securities of $27.4 million for the three months
ended March 31, 2022, as compared to $56.1 million for the three months ended
March 31, 2021, partially offset by lower sales, maturities and redemptions of
our debt and equity investment securities of $68.3 million in 2022 as compared
to $118.4 million in 2021.

Financing Activities

Net cash provided by (used in) financing activities for the three months ended
March 31, 2022 of $0.0 million as compared to $15.4 million for the three months
ended March 31, 2021. The change primarily reflects no proceeds from the
issuance of shares of our common stock in 2022 as compared to $15.4 million in
2021.

Impact of Inflation and Changing Prices

The consolidated financial statements and related data presented herein have
been prepared in accordance with GAAP, which requires the measurement of
financial position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to
inflation. Our primary assets and liabilities are monetary in nature. As a
result, interest rates have a more significant impact on performance than the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or with the same magnitude as the inflationary effect on
the cost of paying losses and LAE.

Insurance premiums are established before we know the amount of losses and LAE
and the extent to which inflation may affect such expenses. Consequently, we
attempt to anticipate the future impact of inflation when establishing rate
levels. While we attempt to charge adequate premiums, including the use of
third-party vendor "replacement cost estimator" tools when establishing coverage
limits on policies we issue, we may be limited in raising premium levels for
competitive and regulatory reasons. Inflation may also affect the market value
of our investment portfolio and the investment rate of return. Any future
economic changes that result in prolonged and increasing levels of inflation
could cause increases in the dollar amount of incurred losses and LAE and
thereby materially adversely affect future liability requirements.

Critical Accounting Policies

We prepare our consolidated financial statements in conformity with accounting
principles generally accepted in the United States ("GAAP"), which requires us
to make estimates and assumptions about future events that affect the amounts
reported in the financial statements and accompanying notes. Future events and
their effects cannot be determined with absolute certainty. Therefore, the
determination of estimates requires the exercise of judgment. Actual results may
materially differ from those estimates.

We believe our most critical accounting estimates inherent in the preparation of
our financial statements are: (i) fair value measurements of our investments;
(ii) accounting for investments; (iii) premium and unearned premium calculation;
(iv) reinsurance contracts; (v) the amount and recoverability of deferred
acquisition costs; (vi) reserve for loss and losses adjustment expenses; and
(vii) income taxes. The accounting estimates require the use of assumptions
about certain matters that are highly uncertain at the time of estimation. To
the extent actual experience differs from the assumptions used, our financial
condition, results of operations, and cash flows would be affected.

There have been no significant changes to our critical accounting estimates
during the three months ended March 31, 2022. Refer to Part II, Item 7:
Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Critical Accounting Estimates” included in our 2021 Form 10-K for a
more complete description of our critical accounting estimates.

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