Recent Accounting Standards

Recently Adopted Accounting Pronouncements

In June 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-06, Comprehensive Income (Topic 820), which changes the presentation of comprehensive income. These changes give an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements; the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity was eliminated. This guidance became effective for the Company on January 1, 2012 and only requires a change in the format of the presentation of comprehensive income. The adoption of this guidance did not impact the Company’s consolidated financial position, results of operations or cash flows.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRS"), which provides a consistent definition of fair value and ensures that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. The guidance changes certain fair value measurement principles and expands the disclosure requirements particularly for Level 3 fair value measurements. The guidance became effective for the Company beginning January 1, 2012 and is to be applied prospectively. The adoption of this guidance, which primarily relates to disclosure, did not impact the Company’s consolidated financial position, results of operations or cash flows.

In October 2010, the FASB issued ASU 2010-26, Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts, which updates the accounting for deferred acquisition costs. This guidance modifies the definition of the types of costs incurred by insurance entities that can be capitalized in the acquisition of new and renewal insurance contracts. The amendments in this guidance specify that the costs are limited to incremental direct costs that result directly from successful contract transactions and would not have been incurred by the insurance entity had the contract transactions not occurred. These costs must be directly related to underwriting, policy issuance and processing, medical and inspection reports and sales force contract selling. The amendments also specify that advertising costs are only included as deferred acquisition costs if the direct-response advertising criteria are met. ASU 2010-26 is effective for interim and annual reporting periods beginning after December 15, 2011. The Company retrospectively adopted the new standard on January 1, 2012. As of January 1, 2011, the beginning of the earliest period presented, the cumulative effect adjustment recorded to reflect this guidance resulted in decreases of $6.4 million to deferred acquisition costs, $2.3 million to deferred income taxes and $4.2 million to retained earnings. The following tables present the effect of the retrospective adoption on the Company's Consolidated Financial Statement line items for prior periods:



	December 31, 2011
Consolidated Balance Sheets	As Previously Reported (1)		Effect of the Change			As Restated
Assets
Deferred acquisition costs	$	62,687	$	(7,220	)	$	55,467
Total assets	$	611,724	$	(7,220	)	$	604,504

Liabilities
Deferred income taxes	$	26,533	$	(2,527	)	$	24,006
Total Liabilities	479,447		(2,527		)	476,920
Stockholders' Equity
Retained earnings	39,822		(4,672		)	35,150
Non-controlling interest	532		(21		)	511
Total Stockholders' Equity	132,277		(4,693		)	127,584
Total Liabilities and Stockholders' Equity	$	611,724	(7,220		)	$	604,504

(1) = Includes the business acquisition valuation measurement period adjustments described in Notes 5, 6 and 7.



	For the Three Months Ended March 31, 2011
Consolidated Statements of Income	As Previously Reported			Effect of the Change			As Restated
Total Revenues	$	54,696		—			$	54,696

Net losses and loss adjustment expenses	9,373			—			9,373
Commissions	18,517			—			18,517
Personnel costs	10,992			—			10,992
Other operating expenses	6,944			270			7,214
Depreciation	583			—			583
Amortization of intangibles	1,052			—			1,052
Interest expense	2,031			—			2,031
Total expenses	49,492			270			49,762
Income before income taxes and non-controlling interest	5,204			(270		)	4,934
Income taxes	1,775			(94		)	1,681
Income before non-controlling interest	3,429			(176		)	3,253
Less: net (loss) income attributable to non-controlling interest	(174		)	—			(174		)
Net income attributable to Fortegra Financial Corporation	$	3,603		$	(176	)	$	3,427

Earnings per share:
Basic	$	0.18		(0.01		)	$	0.17
Diluted	$	0.17		(0.01		)	$	0.16

Recently Issued Accounting Pronouncements

In December 2011, the FASB issued ASU No 2011-11, Disclosures About Offsetting Assets and Liabilities. This standard requires that the disclosures of both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, the standard requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. The new requirements are effective for the Company beginning on January 1, 2013. As the provisions of ASU No. 2011-11 only impact the disclosure requirements related to the offsetting of assets and liabilities, the Company does not expect a significant impact on its consolidated financial position, results of operations or cash flows as a result of adoption of these new requirements.