S-1/A

As filed with the Securities and Exchange Commission on April 30, 2014

Registration No. 333-195409

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1 to

Form S-1

REGISTRATION STATEMENT

Under

The Securities Act of 1933

Heritage Insurance Holdings, LLC*

(Exact name of Registrant as specified in its charter)

Delaware	6331	45-5338504
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(IRS Employer Identification No.)

Heritage Insurance Holdings, LLC

2600 McCormick Drive, Suite 300

Clearwater, Florida 33759

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Bruce Lucas

Chairman & Chief Investment Officer

Heritage Insurance Holdings, LLC

2600 McCormick Drive, Suite 300

Clearwater, Florida 33759

(727) 362-7202

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Please send copies of all communications to:

Steven J. Gavin, Esq. Karen A. Weber, Esq. Winston & Strawn LLP 35 West Wacker Drive Chicago, Illinois 60601 (312) 558-5600 Edward S. Best, Esq. John P. Berkery, Esq. Mayer Brown LLP 71 South Wacker Drive Chicago, Illinois 60606 (312) 782-0600

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box:  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)(2)	Amount of Registration Fee
Common Stock, $0.0001 par value per share	$100,000,000	$12,880(3)

(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2) Includes additional shares that the underwriters have the option to purchase.

(3) Previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.

* Heritage Insurance Holdings, LLC, the registrant whose name appears on the cover of this registration statement, is a Delaware limited liability company. Prior to the effectiveness of this registration statement, Heritage Insurance Holdings, LLC will be converted into a Delaware corporation and renamed Heritage Insurance Holdings, Inc. Shares of the common stock of Heritage Insurance Holdings, Inc. are being offered by the prospectus. Except as disclosed in the prospectus, the consolidated financial statements and selected historical consolidated financial data and other financial information included in this registration statement are those of Heritage Insurance Holdings, LLC and its subsidiaries and do not give effect to the corporate conversion.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED APRIL 30, 2014

PRELIMINARY PROSPECTUS

             Shares

Heritage Insurance Holdings, Inc.

Common Stock

$         per share

This is the initial public offering of our common stock. Prior to this offering, there has been no public market for our common stock. We are selling              shares of our common stock. We currently expect the initial public offering price to be between $         and $         per share of our common stock.

We have granted the underwriters an option to purchase up to              additional shares of our common stock to cover over-allotments.

We intend to apply to have the common stock listed on the New York Stock Exchange under the symbol “            .”

We are an “emerging growth company” as defined under the federal securities laws and are eligible for reduced public company reporting requirements.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 14.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Per Share	Total
Public Offering Price	$	$
Underwriting Discount	$	$
Proceeds to Us (before expenses)	$	$

The underwriters expect to deliver the shares to purchasers on or about                     , 2014 through the book-entry facilities of The Depository Trust Company.

Sole Book-Running Manager

Citigroup

Joint Lead Managers

SunTrust Robinson Humphrey Sandler O’Neill + Partners,  L.P.

Co-Managers

Dowling & Partners Securities LLC     JMP Securities Willis Capital Markets & Advisory

                    , 2014

We are responsible for the information contained in this prospectus and in any free-writing prospectus we have authorized. We have not authorized anyone to provide you with different information, and we take no responsibility for any other information others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than its date.

TABLE OF CONTENTS

	Page
Prospectus Summary		1
Risk Factors		14
Forward-Looking Statements		34
Industry and Market Data		35
Use of Proceeds		36
Dividend Policy		37
Capitalization		38
Dilution		39
Selected Consolidated Financial Data		41
Management’s Discussion and Analysis of Financial Condition and Results of Operations		43
Business		62
Management		77
Executive Compensation		82
Certain Relationships and Related Party Transactions		94
Security Ownership by Certain Beneficial Owners and Management		96
Description of Capital Stock		98
Shares Eligible for Future Sale		101
Underwriting		103
Material U.S. Federal Income Tax Considerations to Non-U.S. Holders		108
Legal Matters		112
Experts		112
Where You Can Find More Information		112
Index to Consolidated Financial Statements		F-1

PROSPECTUS SUMMARY

This summary highlights information that we present more fully in the rest of this prospectus and does not contain all of the information you should consider before investing in our securities. You should read this entire prospectus carefully, including the “Risk Factors” section and our consolidated financial statements and related notes. Prior to the consummation of this offering, we intend to convert from a limited liability company to a corporation as discussed below in “—Reorganization Transactions.” Unless the context requires otherwise, as used in this prospectus, the terms “we,” “us,” “our,” “the Company,” “our company,” and similar references refer to Heritage Insurance Holdings, LLC, together with its subsidiaries, prior to our conversion to a corporation and Heritage Insurance Holdings, Inc. and its consolidated subsidiaries on and after such conversion. References in this prospectus to “stockholders” and “stockholders’ equity” refer to members and members’ equity, respectively, prior to our conversion to a corporation. References to “pro forma stockholders’ equity” or “after giving effect to this offering” mean after giving effect to this offering, assuming the sale of              shares at a public offering price of $         per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

Our Business

We are a property and casualty insurance holding company headquartered in Clearwater, Florida and, through our subsidiary, Heritage Property & Casualty Insurance Company (“Heritage P&C”), we provide personal residential insurance for single-family homeowners and condominium owners in Florida. We are vertically integrated and control or manage substantially all aspects of insurance underwriting, actuarial analysis, distribution and claims processing and adjusting. We are led by an experienced senior management team with an average of 26 years of insurance industry experience. We began operations in August 2012, and in December 2012 we began selectively assuming policies from Citizens Property Insurance Corporation (“Citizens”), a Florida state-supported insurer, through participation in a legislatively established “depopulation program” designed to reduce the state’s risk exposure by encouraging private companies to assume insurance policies from Citizens. We also write policies outside the Citizens depopulation program, which we refer to as voluntary policies. Heritage P&C is currently rated “A” (“Exceptional”) by Demotech, Inc. (“Demotech”), a rating agency specializing in evaluating the financial stability of insurers.

As of March 31, 2014, we had approximately 140,000 policies in force, approximately 89% of which were assumed from Citizens. For the three months ended March 31, 2014 and the year ended December 31, 2013, we had gross premiums written of $68.9 million and $218.5 million, respectively, and net income of $7.9 million and $34.2 million, respectively. At March 31, 2014, we had total assets of $286.1 million, total stockholders’ equity of $110.1 million and pro forma stockholders’ equity, after giving effect to this offering, of $         million.

As of March 31, 2014, Citizens had approximately 940,000 insurance policies, of which approximately 690,000 were personal residential policies. We selectively assumed personal residential policies from Citizens in nine separate assumption transactions between December 2012 and April 2014, and a substantial portion of our revenue since our inception has come from these policies. We intend to continue assuming policies from Citizens that meet our assumption strategy and underwriting criteria.

In order to assume a policy from Citizens, we must obtain the prior approval of the insurance agent that wrote the policy. With respect to policies written by agents that are affiliated with an insurance company or agency, we must also obtain the approval of the insurance company or agency. Currently, four large national insurance companies or agencies permit us to assume policies from Citizens that have been written by their agents—State Farm, Allstate, Brown & Brown and AAA (formerly the American Automobile Association). In an effort to increase the pool of Citizens policies that we may assume, we are seeking similar advance approvals

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from other insurance companies and agencies. We currently have advance approvals covering more than 4,500 agents. These agents were responsible for writing more than 93% of the approximately 690,000 personal residential insurance policies held by Citizens as of March 31, 2014.

We market and write voluntary policies through a network of approximately 1,100 independent agents. Of these agents, approximately 46% are affiliated with nine large agency networks with which we have entered into master agency agreements. We recently entered into an agreement with FAIA Member Services (“FMS”), the in-house, for-profit managing general agency division of the Florida Association of Insurance Agents, which gives us access to several hundred additional agents throughout the state. We intend to pursue additional voluntary business from agents in our existing independent agent network, expand our independent agent network and seek additional opportunities to use insurer-affiliated agents to offer our personal residential policies in Florida. While we had 15,417 voluntary policies (11% of our total policies in force) as of March 31, 2014, during the three months ended March 31, 2014, we wrote an average of 1,870 new voluntary policies per month. The voluntary market is a significant component of our growth strategy.

We seek to underwrite a diverse mix of geographic risks within Florida to manage the potential impact of a catastrophic event and reduce our per policy reinsurance costs. As of March 31, 2014, the geographic distribution of our policies in force and total insured values were as follows (figures may not sum to totals due to rounding):

	As of March 31, 2014
	(Total Insured Value in Millions)
	Policy Count		%		Total Insured Value		%
South Florida Counties
Broward		17,903		12.8%	$	4,623		12.6%
Miami-Dade		11,742		8.4%		3,297		9.0%
Palm Beach		16,856		12.1%		3,945		10.7%
South Florida exposure		46,501		33.2%	$	11,865		32.3%
Other Significant Counties(1)
Pinellas		23,997		17.2%	$	6,478		17.6%
Hillsborough		18,068		12.9%		5,332		14.5%
Pasco		14,220		10.2%		3,746		10.2%
Hernando		4,873		3.5%		1,465		4.0%
Lee		4,148		3.0%		1,076		2.9%
Total other significant counties		65,306		46.7%	$	18,097		49.2%
Summary for all of Florida
South Florida exposure		46,501		33.2%	$	11,865		32.3%
Total other significant counties		65,306		46.7%		18,097		49.2%
Other Florida counties		28,072		20.1%		6,812		18.5%
Total		139,879		100.0%	$	36,774		100.0%

(1) Significant counties are defined as those counties with a policy count or total insured value greater than 2.5% of our 139,879 total policy count or $36.8 billion total insured value as of March 31, 2014.

In order to limit our potential exposure to individual risks and catastrophic events, we purchase significant reinsurance from third party reinsurers. Purchasing reinsurance is an important part of our risk strategy, and premiums paid (or ceded) to reinsurers is our single largest cost. We have strong relationships with reinsurers which we believe are a result of our management’s industry experience and reputation for selective underwriting.

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For the twelve months ending May 31, 2014, we purchased reinsurance from the following sources: (i) the Florida Hurricane Catastrophe Fund, a state-mandated catastrophe reinsurance fund (“FHCF”), (ii) 13 private reinsurers, all of which were rated “A-” or higher by A.M. Best Company, Inc. (“A.M. Best”) or Standard & Poor’s Financial Services LLC (“S&P”), (iii) two private reinsurers that have provided collateral to fully cover their exposure, and (iv) our wholly-owned reinsurance subsidiary, Osprey Re Ltd. (“Osprey”). We are in the process of placing our reinsurance program for the 2014 hurricane season, which will be effective from June 1, 2014 through May 31, 2015. See “Business—Reinsurance—2014-2015 Reinsurance Program.”

The Florida Office of Insurance Regulation (“FLOIR”) requires all insurance companies, like us, to have a certain amount of capital reserves and reinsurance coverage in order to cover losses upon the occurrence of a catastrophic event. Our reinsurance program for the twelve months ending May 31, 2014 provides reinsurance in excess of FLOIR’s requirements, which are based on the probable maximum loss that we would incur from an individual catastrophic event estimated to occur once every 100 years based on our portfolio of insured risks. We also purchase reinsurance coverage to protect against the potential for multiple catastrophic events occurring in the same year.

We test the sufficiency of our reinsurance program by subjecting our personal residential exposures to statistical testing using the AIR U.S. Hurricane Model, which replicates the most severe hurricanes to have occurred historically in Florida, individual storms of severity in excess of such historical levels, and the historical calendar years in which the most severe multiple catastrophic events occurred in Florida. In this regard, the 2004 calendar year, in which four large catastrophic hurricanes made landfall in Florida, is considered to be the worst catastrophic year in Florida’s recorded history. Assuming the reoccurrence of the 2004 calendar year events, the probable maximum net loss to us in 2013 would have been $10.3 million (after tax, net of all reinsurance recoveries and including our retention through Osprey). This loss would have represented 9.4% of our stockholders’ equity at March 31, 2014 and     % of our pro forma stockholders’ equity at March 31, 2014, after giving effect to this offering.

We closely manage all aspects of our claims adjustment process. Claims are initially reviewed by our managers and staff adjusters, who determine the extent of the loss and the resources needed to adjust each claim. In the case of a catastrophic event, we have contracted with four large national claims adjusting firms to assist our adjusters with the increased volume of claims and ensure timely responses to our policyholders. We utilize our wholly-owned subsidiary, Contractors’ Alliance Network, LLC (“Contractors’ Alliance”), to manage mitigation and restoration services for our customers. Contractors’ Alliance primarily handles water damage-related claims, which comprised approximately 68% of our losses and loss adjustment expenses through March 31, 2014. In March 2014, we completed the acquisition of the assets and personnel of our main water mitigation services vendor. We believe this acquisition will allow us to better service our customers and expand our mitigation and restoration services. In addition, all of our voluntary policies and renewed Citizens policies are enrolled in our Platinum Preferred Savings Program (the “Platinum Program”). Under the Platinum Program, customers receive a 10% discount on their claim deductible, and we obtain control over inspection, claims adjusting and repair services. We believe our approach to claims handling results in a higher level of customer service and reduces our losses and loss adjustment expenses. As a result of our efforts, our gross loss ratio, which expresses our losses and loss adjustment expenses as a percentage of gross earned premiums, was 33.8% and 27.5% for the three months ended March 31, 2014 and the year ended December 31, 2013, respectively.

Our Market

According to the U.S. Census Bureau, at July 1, 2013, Florida was the fourth largest U.S. state with an estimated population of approximately 20 million people. The University of Florida Bureau of Economic and Business Research estimates that Florida is expected to reach a population of approximately 26 million people by

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2040, an increase of 36% percent from 2010. Property ownership and development represent key drivers of the Florida economy.

Because of its location, Florida is exposed to an increased risk of hurricanes during the entire six months of Atlantic hurricane season, which spans from June 1 through November 30. While a significant hurricane has not made landfall in Florida since 2005, eight hurricanes in 2004 and 2005, including Hurricanes Charley, Katrina, Rita and Wilma, caused a combined estimated property damage of over $110 billion, a significant portion of which occurred in Florida. As a result, personal residential insurance and claims servicing are vitally important to Florida residents.

The Florida personal residential insurance market is highly fragmented and dominated by in-state insurance companies, including Citizens. Significant dislocation in the Florida property insurance market began following Hurricane Andrew in 1992 and accelerated following the 2004 and 2005 hurricane seasons. In total, national and regional insurers reduced their share of the market in Florida from 84% in 1999 to 26% in 2012. As national and regional insurance companies reduced their exposure in Florida, Citizens increased efforts to provide affordable personal residential insurance to those residents unable to obtain coverage in the private market. As a result, Citizens’ policy count grew from roughly 810,000 policies in 2005 to a peak level of approximately 1.5 million policies in late 2011. To reduce Citizens’ risk exposure, beginning in 2010, Florida elected officials encouraged Citizens to focus on reducing the size of its portfolio by returning policies to the private market. In response, Citizens instituted a number of measures to incentivize the private sector to participate in the depopulation program. Some of these initiatives include increased inspections, improved underwriting, reductions in coverage and annual rate increases.

In May 2013, Florida passed legislation to facilitate the reduction of Citizens’ policy count and establish the Property Insurance Clearinghouse (the “Clearinghouse”), which launched in January 2014. The Clearinghouse makes new and renewal business ineligible for Citizens if a participating insurance company is willing to extend comparable coverage at prescribed rates. On March 31, 2014, Heritage P&C was approved to participate in the Clearinghouse.

According to data compiled by FLOIR, Citizens was the largest personal residential insurance carrier in Florida for the year ended December 31, 2013, with a market share of approximately 19.8% based on total in force direct premiums written for personal and commercial residential insurance. As of the same date, we ranked 15th in Florida within this market, with a market share of approximately 1.8%. Assuming further access to capital and reinsurance support, we believe we have the opportunity to significantly expand the size of our personal residential insurance business in Florida and explore the expansion of our business into other complementary business lines and states.

In recent years, the property and casualty insurance market has experienced a substantial increase in the availability of property catastrophe reinsurance resulting from the increased supply of capital from non-traditional insurance providers, including private capital and hedge funds. This increased capital supply, coupled with a lack of recent significant catastrophic storm activity in Florida, has reduced the cost of property catastrophe reinsurance, directly benefitting purchasers of this reinsurance, including us. We believe this market trend will continue for the foreseeable future.

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Our Strategy

Since our inception, a substantial portion of our revenue has come from policies we assumed from Citizens, with the balance of our revenue generated from renewal of these assumed policies and from voluntary policies. Building on these successful transactions, we intend to continue to grow profitably by undertaking the following:

Increase Our Policies in Force in Florida Through Strategic Policy Assumptions and Expansion of Our Voluntary Market Share

We intend to continue assuming policies from Citizens that meet our assumption strategy and underwriting criteria. We may also pursue opportunities to acquire policies from private insurers. Additionally, we intend to increase our policy count by participating in the Clearinghouse. We will also pursue opportunities to increase the number of our voluntary policies by expanding our independent agent distribution network, as well as obtaining approval from national insurance companies to allow their agents to offer our personal residential policies in Florida. Our recent affiliation with FMS gives us access to several hundred additional agents throughout the state and should assist us in our effort to attract high-quality agents. We also intend to increase our advertising, which we believe will allow us to more effectively penetrate areas of the state where we are not currently writing significant new business.

Opportunistically Diversify Product Offerings

We will continue to focus on writing personal residential policies, but will opportunistically expand into complementary product lines we believe we can effectively and profitably underwrite. New product lines may include commercial residential and manufactured housing policies, as well as additional non-residential coverage, such as general liability insurance. In January 2014, we hired two individuals with significant experience in Florida commercial residential insurance sales and underwriting, who will assist us in developing this new product line.

Optimize Our Reinsurance Program

We will continue to obtain what we believe to be the most appropriate levels and sources of reinsurance. We believe that the significant additional capital entering portions of the reinsurance market provides us with the opportunity to obtain favorable pricing and contract terms and conditions, including the potential for multi-year commitments. In April 2014, we entered into two fully collateralized catastrophe reinsurance agreements funded through the issuance of $200.0 million principal amount of catastrophe bonds, and we will continue evaluating such cost-efficient alternatives to traditional reinsurance. See “—Recent Developments.” Additionally, we will continue to meet certain of our reinsurance needs through the use of our reinsurance subsidiary, Osprey, which mitigates our reinsurance expense and reduces our reliance on third party reinsurance.

Efficiently Manage Losses and Loss Adjustment Expenses

We are committed to proactively managing our losses and loss adjustment expenses through prudent underwriting and the use of internal claims adjustment and repair services. In March 2014, we acquired the largest vendor in the Contractors’ Alliance network, which we believe will allow us to expand our in-house mitigation and restoration services. We also intend to license our Contractors’ Alliance employees as adjusters, which we believe will reduce our loss adjustment expenses and shorten the length of time required to resolve claims.

Expand to New Geographic Markets

We intend to explore opportunities to enter other coastal states where we believe the market opportunity is most similar to Florida and where we can utilize our underwriting and claims expertise to attract and manage

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profitable business. We believe further increasing our geographic diversification is an important factor in reducing our potential risk of loss from any catastrophic event, reducing our per policy reinsurance costs and providing an additional area for future growth beyond our expansion in Florida.

Our Competitive Strengths

We believe that our rapid growth to date and our ability to capitalize on our future growth prospects are a result of the following competitive strengths of our business:

Experienced Management Team With a Long History in the Florida Personal Residential Insurance Market

We have a deep and experienced management team led by Bruce Lucas, Chairman and Chief Investment Officer, Richard Widdicombe, Chief Executive Officer and President, Stephen Rohde, Chief Financial Officer, Melvin Russell, Chief Underwriting Officer, Kent Linder, Chief Operating Officer, Ernesto Garateix, Executive Vice President, and Paul Nielsen, Vice President of Claims, most of whom have been with Heritage since inception. Our management team, which averages 26 years of insurance industry experience, has extensive experience in the Florida personal residential insurance market, has built longstanding relationships with key participants in the insurance industry and is supported by a group of highly qualified individuals with industry expertise, including a Chief Actuary with more than 34 years of industry experience.

Strong, Conservative Capital Structure

As of March 31, 2014, we had stockholders’ equity of $110.1 million and pro forma stockholders’ equity, after giving effect to this offering, of $         million. As of March 31, 2014, Heritage P&C had policyholder surplus of $67.8 million. We believe that this level of surplus places us among the best capitalized insurance companies focusing primarily on the Florida personal residential insurance market and is significantly in excess of the minimum capital levels required by FLOIR and Demotech for similarly rated in-state insurance companies. In addition, unlike many of our in-state competitors, we have relied almost exclusively upon common equity to provide our capital.

Selective Underwriting and Policy Acquisition Criteria

We believe our proprietary data analytics capabilities and underwriting processes allow us to better select the insurance policies we are willing to assume from the Citizens depopulation program, leading to strong profitability and reduced risk. In addition, we choose to minimize our exposure to or avoid certain types of coverage if we believe there is significant risk of loss, including coverage for sink-hole related losses in high-risk areas. As a result of our efforts, our gross loss ratio was 33.8% and 27.5% for the three months ended March 31, 2014 and the year ended December 31, 2013, respectively.

Unique Claims Servicing Model and Superior Customer Service

We believe that the vertical integration of our claims adjustment and repair services provides us with a competitive advantage. Because we manage both claims adjusting and repair services, we are generally able to begin the adjustment and mitigation process much earlier than our competitors, thus reducing our loss adjustment expenses and ultimate loss payouts. We expect that, in the near future, a significant number of our repair technicians will participate in training and certification programs to become licensed claims adjusters, allowing us to capture additional efficiencies. We also believe our unique model provides a superior level of customer service for our policyholders, enhancing our reputation and increasing the likelihood that our policyholders will renew their policies with us.

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Relationships with Highly Rated Reinsurers

We manage our exposure to catastrophic events through, among other things, the purchase of reinsurance. Our relationships with highly rated reinsurers have been developed as a result of our management team’s industry experience and reputation for selective underwriting. Our financial strength, underwriting results and the long-term relationships between our management team and our reinsurance partners help improve the cost-effectiveness of our reinsurance program.

Relationships with Independent Agents and National Underwriters

We have developed relationships with a network of approximately 1,100 independent insurance agents. We believe we have been able to build this network due to our reputation for financial stability, commitment to the Florida market and integrity in the underwriting and claims process. We are also exploring relationships with additional large national insurers and agencies that no longer write substantial personal residential insurance in Florida, which would give us access to their network of Florida agents.

Risks Associated with Our Business

As part of your evaluation of our company, you should take into consideration the following risks that we face in implementing or executing our growth strategies and maintaining our profitability:

• We have an operating history of less than two years, which makes it difficult to evaluate our business and prospects.

• If claims exceed our loss reserves, our financial results could be adversely affected.

• Our only line of business is personal residential insurance in Florida, which exposes us to a significant risk of loss from hurricanes and other catastrophic events, which typically occur from June 1 through November 30 each year.

• A single catastrophic event or series of catastrophic events or other conditions effecting losses in Florida could adversely affect our financial condition and results of operations because our business is concentrated in Florida.

• Our results of operations may fluctuate significantly due to the cyclical nature of the insurance business and our participation in the Citizens depopulation program.

• To date, we have been dependent on the Citizens depopulation program for the majority of our business and we may be unable to assume further policies from Citizens on attractive terms.

• In the event that the reinsurance we purchase is inadequate or a reinsurer is unable or unwilling to make timely payments, our operating results would be adversely affected.

• We compete with large, well-established insurance companies, as well as other specialty insurers, some of which possess greater financial resources, larger agency networks and greater name recognition than we do.

• If we are unable to underwrite and set premium rates accurately, our results of operations and financial condition will be adversely affected.

• A failure to effectively manage and remediate claims could lead to material litigation, undermine our reputation in the marketplace and negatively affect our financial results.

• If we are unable to maintain our financial stability rating, which is important in establishing our competitive position, the marketability of our product offerings, and our liquidity, operating results and financial condition may be materially adversely affected.

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• We do not anticipate paying any dividends on our common stock in the foreseeable future.

• The insurance industry is highly regulated and our failure to fully comply with these regulations could have an adverse effect on our business. Changes to the statutes and rules governing the insurance industry could have an adverse effect on our business.

See “Risk Factors” beginning on page 14 of this prospectus for a more detailed discussion of these and other risks we face.

Recent Developments

On April 17, 2014, Heritage P&C entered into a catastrophe reinsurance agreement with Citrus Re Ltd., a newly-formed Bermuda special purpose insurer. The agreement provides for three years of coverage from catastrophe losses caused by certain named storms, including hurricanes, beginning on June 1, 2014. The limit of coverage of $150 million is fully collateralized by a reinsurance trust account for the benefit of Heritage P&C. Heritage P&C pays a periodic premium to Citrus Re during this three-year risk period. Citrus Re Ltd. issued $150 million of principal-at-risk variable notes due April 18, 2017 to fund the reinsurance trust account and its obligations to Heritage P&C under the reinsurance agreement. The maturity date of the notes may be extended up to two additional years to satisfy claims for catastrophic events occurring during the three-year term of the reinsurance agreement.

On April 24, 2014, Heritage P&C entered into a second catastrophe reinsurance agreement with Citrus Re Ltd. providing for $50 million of coverage on substantially similar terms as the agreement described above. Citrus Re Ltd. issued an additional $50 million of principal-at-risk variable notes due April 24, 2017 to fund its obligations under the reinsurance agreement.

Reorganization Transactions

Warrant Exercise.    Certain of our current stockholders also hold warrants to purchase an aggregate of 3,026 shares of the Company at an exercise price of $15,000 per share. Prior to the consummation of this offering, warrants to purchase an aggregate of 2,974 shares will be exercised (the “Warrant Exercise”), including warrants to purchase an aggregate of              shares to be exercised on a cashless basis. Pursuant to the cashless exercise provisions of the warrants, each warrant holder will pay the exercise price by surrendering to the Company an amount of shares having a value equal to the aggregate exercise price of the warrants being exercised. The terms of the warrants provide that the value ascribed to each share that will be surrendered to the Company as payment for the exercise price will be equal to the initial public offering price per share of our common stock in this offering. As a result, the actual number of shares that will be issued upon the Warrant Exercise is dependent upon the initial public offering price per share of our common stock in this offering. Assuming an initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus, an aggregate of              shares will be issued in connection with the Warrant Exercise. A $1.00 increase (decrease) in the assumed initial public offering price of $         per share would increase (decrease) the number of shares that will be issued in connection with the Warrant Exercise by              shares. Following the Warrant Exercise, we expect that there will remain outstanding warrants to purchase an aggregate of              shares at an exercise price of $         per share.

Conversion.    Following the Warrant Exercise and prior to the consummation of this offering, we will convert from a Delaware limited liability company into a Delaware corporation (the “Conversion”), and all outstanding shares of the limited liability company will be converted into shares of common stock of the Company on a one-for-one basis and all outstanding warrants to purchase shares of the limited liability company

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will convert into warrants to purchase shares of common stock of the Company on a one-for-one basis. Prior to the Conversion, we anticipate distributing an aggregate amount of $         in cash to our stockholders to satisfy such stockholders’ tax obligations (the “Tax Distribution” and, together with the Warrant Exercise and the Conversion, the “Reorganization Transactions”).

Corporate Information

Our principal executive offices are located at 2600 McCormick Drive, Suite 300, Clearwater, Florida 33759, and our telephone number is 727-362-7200. Our website is www.heritagepci.com. Information contained on our website is not incorporated by reference into this prospectus, and such information should not be considered to be part of this prospectus.

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THE OFFERING

Common Stock Offered              shares

Common Stock to be Outstanding After This Offering              shares

Underwriters’ Option to Purchase Additional Shares We have granted the underwriters the right to purchase up to              additional shares of common stock within 30 days of the date of this prospectus.

Use of Proceeds We estimate that our net proceeds from the sale of the common stock that we are offering will be approximately $        , assuming an initial public offering price of $         per share, which is the midpoint of the price range on the cover page of this prospectus, and after deducting underwriting discounts and commissions and offering expenses payable by us. We intend to use a portion of the net proceeds from this offering to increase our statutory capital and surplus to enable us to write additional policies and to fund collateralized reinsurance through Osprey, our reinsurance subsidiary. We intend to use the remainder of the net proceeds to fund the growth of our business and for general corporate purposes. See “Use of Proceeds.”

Proposed New York Stock Exchange Symbol We intend to apply to list our common stock on the New York Stock Exchange (“NYSE”) under the symbol “    .”

Risk Factors You should read the “Risk Factors” section of this prospectus for a discussion of facts to consider carefully before deciding to invest in shares of our common stock.

Dividend Policy We do not anticipate paying any dividends on our common stock in the foreseeable future. Any future determinations relating to our dividend policies will be made at the discretion of our board of directors and will depend on various factors. See “Dividend Policy.”

Directed Share Program At our request, the underwriters have reserved up to       % of the shares of common stock for sale at the initial public offering price to persons who are directors, officers, employees and other parties associated with us through a directed share program. The number of shares of common stock available for sale to the general public will be reduced by the number of directed shares purchased by participants in the program. Any directed shares not purchased will be offered by the underwriters to the general public on the same basis as all other shares of common stock offered. We have agreed to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”), in connection with the sales of the directed shares. Individuals who purchase shares in the directed share program will be subject to a 180-day lock-up period, as described in “Shares Eligible for Future Sale—Lock-Up Agreements.”

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Unless otherwise indicated, all information in this prospectus relating to the number of shares of common stock to be outstanding immediately after this offering:

• gives effect to the completion of the Reorganization Transactions prior to the completion of this offering as described in “—Reorganization Transactions;”

• assumes no exercise by the underwriters of their option to purchase up to              additional shares from us;

• excludes an aggregate of              shares of common stock issuable upon the exercise of warrants at an exercise price of $             per share that will remain outstanding following the consummation of this offering; and

• excludes an aggregate of              shares of our common stock reserved for issuance under the Heritage Insurance Holdings, Inc. Omnibus Incentive Plan (the “Plan”) that we intend to adopt in connection with this offering.

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following tables set forth our summary consolidated historical financial data for the periods presented and pro forma balance sheet information as of March 31, 2014. You should read the information set forth below in conjunction with “Use of Proceeds,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto included elsewhere in this prospectus. The statements of income (loss) data for the period ended December 31, 2012 and the year ended December 31, 2013 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The statements of income (loss) data for the three months ended March 31, 2013 and 2014 and the balance sheet data as of March 31, 2014 are derived from our unaudited quarterly consolidated financial statements included elsewhere in this prospectus. The statements of income (loss) data for the three months ended June 30, 2013, September 30, 2013 and December 31, 2013 set forth below are derived from our unaudited quarterly consolidated financial statements not included in this prospectus and contain all adjustments, consisting of normal recurring adjustments, that management considers necessary for a fair presentation of our financial position and results of operations for the periods presented. See “Index to Consolidated Financial Statements.”

Statement of Operations Data (in thousands except share and per share data)	August 7, 2012 (inception) to December 31, 2012			Three Months Ended												Year Ended December 31, 2013			Three Months Ended March 31, 2014
				March 31, 2013			June 30, 2013			September 30, 2013			December 31, 2013
Revenue:
Gross premiums written	$	43,384		$	16,349		$	81,049		$	37,176		$	83,963		$	218,537		$	68,903
Gross premiums earned		5,719			20,324			28,040			41,506			50,089			139,959			60,860
Ceded premium		(120	)		(358	)		(6,416	)		(19,701	)		(18,325	)		(44,800	)		(18,624	)
Net premiums earned		5,599			19,966			21,624			21,805			31,764			95,159			42,236
Retroactive reinsurance income(1)		—			—			26,072			—			(26	)		26,046			—
Net investment income		27			212			125			302			410			1,049			618
Net realized losses		—			(2	)		(46	)		(123	)		(152	)		(323	)		(42	)
Other revenue		4			166			826			796			1,113			2,901			1,066
Total revenue	$	5,630		$	20,342		$	48,601		$	22,780		$	33,109		$	124,832		$	43,878
Expenses:
Losses and loss adjustment expenses		1,402			5,280			7,870			9,996			15,355			38,501			20,587
Policy acquisition costs		84			115			865			1,740			3,430			6,150			4,473
General and administrative expenses		7,922	(2)		3,988			5,579			3,373			11,764			24,704			6,997
Interest expense		829			6			6			4			—			16			—
Income (loss) before income taxes		(4,607	)		10,953			34,281			7,667			2,560			55,461			11,821
Provision for income taxes		859			3,899			13,263			2,340			1,746			21,248			3,933
Net income (loss)	$	(5,466	)	$	7,054		$	21,018		$	5,327		$	814		$	34,213		$	7,888
Basic earnings (loss) per share(3)	$	(2,219	)	$	1,671		$	3,525		$	890		$	130		$	6,095		$	1,229
Diluted earnings (loss) per share (3)	$	(2,219	)	$	1,671		$	3,525		$	890		$	125		$	6,028		$	1,059
Basic weighted average shares outstanding(3)		2,463			4,221			5,962			5,982			6,257			5,613			6,416
Diluted weighted average shares outstanding(3)		2,463			4,221			5,962			5,982			6,507			5,676			7,450

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	Three Months Ended												Year  Ended December 31, 2013			Three Months Ended March 31, 2014
	March 31, 2013			June 30, 2013			September 30, 2013			December 31, 2013
Selected Other Data
Book value per share(3)(4)	$	11,496		$	14,850		$	15,755		$	15,742		$	15,742		$	17,164
Growth in book value per share(4)		33.2	%		29.2	%		6.1	%		(0.1	)%		82.4	%		9.0	%
Return on average equity(4)		59.3	%		107.8	%		23.2	%		3.3	%		45.0	%		29.9	%
Selected ratios(5)
Ratios to gross premiums earned
Gross loss ratio		26.0	%		28.1	%		24.1	%		30.7	%		27.5	%		33.8	%
Ceded premium ratio		1.8	%		22.9	%		47.5	%		36.6	%		32.0	%		30.6	%
Gross expense ratio		20.2	%		23.0	%		12.3	%		30.3	%		22.0	%		18.8	%
Combined ratio		47.9	%		73.9	%		83.9	%		97.6	%		81.6	%		83.3	%
Ratios to net premiums earned
Net loss ratio		26.4	%		36.4	%		45.9	%		48.3	%		40.5	%		48.7	%
Net expense ratio		20.5	%		29.8	%		23.4	%		47.8	%		32.4	%		27.2	%
Combined ratio		47.0	%		66.2	%		69.3	%		96.2	%		72.9	%		75.9	%

	March 31, 2014
Consolidated Balance Sheet Data (in thousands)	Actual		Pro Forma(6)	Pro Forma  As Adjusted(7)
Cash, cash equivalents and investments	$	225,749
Total assets	$	286,114
Unpaid losses and loss adjustment expenses	$	28,456
Unearned premiums	$	124,285
Total liabilities	$	175,973
Total stockholders’ equity	$	110,141

(1) Retroactive reinsurance income of $26.0 million during the year ended December 31, 2013 represents premiums earned, net of losses, for the period from January 1, 2013 through May 31, 2013 from a retroactive reinsurance agreement entered into in connection with our assumption of approximately 39,000 policies from Citizens in June 2013. See Note 2 to our consolidated financial statements for the year ended December 31, 2013 included elsewhere in this prospectus.

(2) General and administrative expenses for the period ended December 31, 2012 includes $5.5 million of stock-based compensation.

(3) Share and per share data for the periods presented does not give retroactive effect to the Reorganization Transactions.

(4) Includes the value, as of the end of each period, of the redeemable equity described in footnote 8 below. See “Selected Consolidated Financial Data.”

(5) The ratios presented do not reflect the impact of the retroactive reinsurance income described in footnote 1 above. For a definition of each of the ratios presented, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Components of Our Results of Operations—Ratios.”

(6) The pro forma balance sheet data gives effect to the Reorganization Transactions.

(7) The pro forma as adjusted balance sheet data gives further effect to (i) the issuance of              shares of common stock in this offering and (ii) our receipt of the estimated net proceeds from the sale of shares of common stock offered by us in this offering at an assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

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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 operating results 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.

Risks Related to Our Business

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

We began operations in August 2012 and wrote our first policy in November 2012. Due to our limited operating history, our ability to execute our business strategy is materially uncertain and our operations and prospects are subject to all risks inherent in a developing business enterprise. Our limited operating history also makes it difficult to evaluate our long term commercial viability. As a new business, we must work to establish and develop successful operating procedures, hire staff, tailor and fine-tune our information management and other systems, maintain adequate control of our expenses, develop business relationships, implement our marketing strategies (and adapt and modify them as needed), establish a positive image and reputation in the community, and take any other steps necessary to conduct our business. As a result of these challenges, it is possible that we may not be successful in implementing our business strategy or completing the development of the infrastructure necessary to expand our business.

Our loss reserves are estimates and may be inadequate to cover our actual liability for losses, causing our results of operations to be adversely affected.

We maintain reserves to cover our estimated ultimate liabilities for losses and loss adjustment expenses, also referred to as loss reserves. As a new company, we have a limited operating history and a limited loss history which may negatively impact our ability to accurately establish loss reserves. Our current loss reserves are based primarily on industry historical data and statistical projections of what we believe the resolution and administration of claims will cost based on facts and circumstances then known to us. As a new company, our claims experience and our experience with the risks related to certain claims is inherently limited, and we must rely heavily on industry historical data, which may not be indicative of future periods. As a result, our projections and our estimates may be inaccurate, which in turn may cause our actual losses to exceed our loss reserves. If our actual losses exceed our loss reserves, our financial results, our ability to expand our business and to compete in the property and casualty insurance industry may be negatively affected.

Factors that affect unpaid losses and loss adjustment expenses include the estimates made on a claim-by-claim basis known as “case reserves” coupled with bulk estimates known as “incurred but not yet reported” (or “IBNR”). Periodic estimates by management of the ultimate costs required to resolve all claims are based on our analysis of historical data and estimations of the impact of numerous factors such as (i) per claim information; (ii) industry and company historical loss experience and development patterns; (iii) legislative enactments, judicial decisions, legal developments in the awarding of damages and changes in political attitudes; and (iv) trends in general economic conditions, including the effects of inflation. Management revises its estimates based on the results of its analysis. This process assumes that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for estimating the ultimate resolution of all claims. There is no precise method for subsequently evaluating the impact of any specific factor on the adequacy of the reserves, because the eventual redundancy or deficiency is affected by multiple factors.

Because of the inherent uncertainties in the reserving process, we cannot be certain that our reserves will be adequate to cover our actual losses and loss adjustment expenses. If our reserves for unpaid losses and loss adjustment expenses are less than actual losses and loss adjustment expenses, we will be required to increase

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our reserves with a corresponding reduction in our net income in the period in which the deficiency is identified. Future loss experience substantially in excess of our reserves for unpaid losses and loss adjustment expenses could substantially harm our results of operations and financial condition.

Because we conduct our business in Florida only, any single catastrophic event, or a series of such events, or other condition affecting losses in Florida could adversely affect our financial condition and results of operations.

We currently conduct our insurance business in Florida only. The distribution of our policies is generally consistent with that of Florida’s population and is therefore more concentrated in densely-populated coastal areas. A single catastrophic event, or a series of such events, destructive weather pattern, general economic trend, regulatory development or other condition specifically affecting Florida, particularly the more densely populated areas of the state, could have a disproportionately adverse impact on our business, financial condition and results of operations. While we actively manage our exposure to catastrophic events through our underwriting process and the purchase of reinsurance, the fact that our business is concentrated in Florida subjects us to increased exposure to certain catastrophic events and destructive weather patterns such as hurricanes, tropical storms and tornadoes. Changes in the prevailing regulatory, legal, economic, political, demographic and competitive environment, and other conditions in Florida could also make it less attractive for us to do business in Florida and would have a more pronounced effect on our business than it would on other insurance companies that are more geographically diversified than we are. Since our business is concentrated in this manner, the occurrence of one or more catastrophic events or other conditions affecting losses in Florida could have an adverse effect on our business, financial condition and results of operations.

We have exposure to unpredictable catastrophes, which can materially and adversely affect our financial results.

We write insurance policies that cover homeowners and condominium owners for losses that result from, among other things, catastrophes. We are therefore subject to losses, including claims under policies we have assumed or written, arising out of catastrophes that may have a significant effect on our business, results of operations and financial condition. A significant catastrophe, or a series of catastrophes, could also have an adverse effect on our reinsurers. Catastrophes can be caused by various events, including hurricanes, tropical storms, tornadoes, earthquakes, hailstorms, explosions, power outages, fires and by man-made events, such as terrorist attacks. The incidence and severity of catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected and the severity of the event. Our policyholders are currently concentrated in Florida, which is especially subject to adverse weather conditions such as hurricanes and tropical storms. Therefore, although we attempt to manage our exposure to catastrophes through our underwriting process and the purchase of reinsurance protection, an especially severe catastrophe or series of catastrophes could exceed our reinsurance protection and may have a material adverse impact on our results of operations and financial condition. In total, for the period from June 1, 2013 through May 31, 2014, we have purchased $721.0 million of reinsurance coverage, including our retention, for multiple catastrophic events. We are in the process of placing our reinsurance program for the period from June 1, 2014 through May 31, 2015, which will include our catastrophe reinsurance agreements with Citrus Re Ltd. and its issuance of $200.0 million of catastrophe bonds. See “Business—Reinsurance—2014-2015 Reinsurance Program.” Our ability to access this coverage, however, is subject to the severity and frequency of such events. As of March 31, 2014, our total insured value was $36.8 billion, and we may experience significant losses and loss adjustment expenses in excess of our retention.

Our results of operations may fluctuate significantly based on industry factors as well as our participation in the Citizens depopulation program.

The insurance business historically has been a cyclical industry characterized by periods of intense price competition due to excess underwriting capacity, as well as periods when shortages of capacity permitted an increase in pricing. As premium levels increase, there may be new entrants to the market, which could then lead to increased competition, a significant reduction in premium rates, less favorable policy terms and fewer

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opportunities to underwrite insurance risks, which could have a material adverse effect on our results of operations and cash flows. In addition to these considerations, changes in the frequency and severity of losses suffered by insureds and insurers, including changes resulting from multiple and/or catastrophic hurricanes, may affect the cycles of the insurance business significantly. We cannot predict whether market conditions will improve, remain constant or deteriorate. Negative market conditions may impair our ability to write insurance at rates that we consider appropriate relative to the risk assumed. If we cannot write insurance at appropriate rates, our business would be materially and adversely affected.

In addition, the uncertainties inherent in the reserving process, together with the potential for unforeseen developments, including changes in laws and the prevailing interpretation of policy terms, may result in losses and loss adjustment expenses materially different from the reserves initially established. Changes to prior year reserves will affect current underwriting results by increasing net income if the prior year reserves prove to be redundant or by decreasing net income if the prior year reserves prove to be insufficient. We are not allowed to record contingency reserves to account for expected future losses. As a result, we expect volatility in operating results in periods in which significant loss events occur because generally accepted accounting principles do not permit insurers or reinsurers to reserve for loss events until they have occurred and are expected to give rise to a claim. We anticipate that claims arising from future events may require the establishment of substantial reserves from time to time.

Our results of operations may also vary based on our continued participation in the Citizens depopulation program. As part of a typical assumption transaction with Citizens, we acquire the unearned premium associated with the assumed policies, which, depending on the size of the transaction, may cause significant variability in our financial results from period to period. In June 2013, we entered into a retroactive quota share reinsurance agreement with Citizens that resulted in our recognition of $26.0 million of retroactive insurance income for the year ended December 31, 2013, as we realized income equal to the earned premiums, net of associated losses and loss adjustment expenses, from such policies for the period from January 1, 2013 through May 31, 2013 with no corresponding reinsurance cost. We do not expect to enter into similar retroactive arrangements in connection with future policy assumptions from Citizens. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Components of Our Results of Operations—Retroactive reinsurance income.”

Our successful participation in the Citizens depopulation program depends on the continuation of such program and our ability to select favorable policies to assume.

An important element of our growth strategy involves continued participation in the Citizens depopulation program. As of March 31, 2014, approximately 89% of our 140,000 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. In addition, the establishment of the Clearinghouse, which launched in January 2014 and makes certain new or renewed business ineligible to be underwritten by Citizens, may substantially reduce Citizens’ policy count and, in particular, the number of policies we would like to assume. Any efforts by the Florida legislature or Citizens to curtail the depopulation program, materially modify the terms of the program as it relates to personal residential policies, or restrict our participation in the program would hurt our growth prospects and will adversely impair our financial condition and results of operations. When we enter into an assumption transaction with Citizens, we have the opportunity to review information about the policies available for assumption. We undertake a robust selection process in which we analyze various aspects of each policy’s risk profile and, based on the results, select the policies we would like to assume. Our successful participation in the depopulation program depends on our ability to select policies that will be accretive to our financial results. However, our selection process involves many different considerations, and there can be no assurances that we will appropriately assess the risks associated with each policy. As a result, we may select unfavorable policies that could result in substantial losses, which may in turn adversely impact our financial condition and results of operations.

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We may not be able to collect reinsurance amounts due to us from the reinsurers with which we have contracted.

Reinsurance is a method of transferring part of an insurance company’s risk under an insurance policy to another insurance company. To the extent that our reinsurers are unable to meet the obligations they assume under our reinsurance agreements, we remain liable for the entire insured loss. We use reinsurance arrangements to limit and manage the amount of risk we retain, to stabilize our underwriting results and to increase our underwriting capacity. Our ability to recover amounts due from reinsurers under the reinsurance treaties we currently have in effect is subject to the reinsurance company’s ability and willingness to pay and to meet its obligations to us. We attempt to select financially strong reinsurers with an A.M. Best or S&P rating of “A-” or better or we require the reinsurer to fully collateralize its exposure. While we monitor from time to time their financial condition, we also rely on our reinsurance broker and rating agencies in evaluating our reinsurers’ ability to meet their obligations to us.

Our reinsurance coverage in any given year may be concentrated with one or a limited group of reinsurers. For the twelve months ending May 31, 2014, Allianz Risk Transfer (AG) Limited reinsures 75% of each layer of our reinsurance coverage up to the $401.5 million level and 90% and 100%, respectively, of our first and second aggregate layers. Any failure on the part of any one reinsurance company to meet its obligations to us could have a material adverse effect on our financial condition or results of operations.

All residential and commercial insurance companies that write business in Florida, including us, are required to obtain reinsurance through FHCF, and this coverage comprises a substantial portion of our reinsurance program. The limit and retention of the FHCF coverage is subject to upward or downward adjustment based on, among other things, submitted exposures to FHCF by all participants. We have purchased private reinsurance alongside our FHCF layer to fill in gaps in coverage that may result from the adjustment of the limit or retention of our FHCF coverage; however, such reinsurance would not cover any losses we may incur as a result of FHCF’s inability to pay the full amount of our claims. If a catastrophic event occurs in Florida, FHCF may not have sufficient funds to pay all of its claims from insurance companies in full or in a timely manner. This could result in significant financial, legal and operational challenges to our Company. In the event of a catastrophic loss, FHCF’s ability to pay may be dependent upon its ability to issue bonds in amounts that would be required to meet its reinsurance obligations. There can be no assurance that FHCF will be able to do this. While we believe FHCF currently has adequate capital and financing capacity to meet its reinsurance obligations, there can be no assurance that it will be able to meet its obligations in the future, and any failure to do so could have a material adverse effect on our liquidity, financial condition and results of operations.

Reinsurance coverage may not be available to us in the future at commercially reasonable rates or at all.

The cost of reinsurance is subject to prevailing market conditions beyond our control such as the amount of capital in the reinsurance market, as well as the frequency and magnitude of natural and man-made catastrophes. We cannot be assured that reinsurance will remain continuously available to us in the amounts we consider sufficient and at prices acceptable to us. As a result, we may determine to increase the amount of risk we retain or look for other alternatives to reinsurance, which could in turn have a material adverse effect on our financial position, results of operations and cash flows.

Increased competition, competitive pressures, industry developments and market conditions could affect the growth of our business and adversely impact our financial results.

The property and casualty insurance industry in Florida is cyclical and, during times of increased capacity, highly competitive. We compete not only with other stock companies, but also with Citizens, mutual companies, other underwriting organizations and alternative risk sharing mechanisms. Our principal lines of business are written by numerous other insurance companies. Competition for any one account may come from very large, well-established national companies, smaller regional companies, other specialty insurers in our field and other companies that write insurance only in Florida. Some of these competitors have greater financial resources, larger agency networks and greater name recognition than we do. We compete for business not only on the basis

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of price, but also on the basis of financial strength, types of coverages offered, availability of coverage desired by customers, commission structure and quality of service. We may have difficulty continuing to compete successfully on any of these bases in the future. Competitive pressures coupled with market conditions may affect our rate of premium growth and financial results.

In addition, industry developments could further increase competition in our industry. These developments could include:

• an influx of new capital in the marketplace as existing companies attempt to expand their businesses and new companies attempt to enter the insurance business as a result of better premium pricing and/or policy terms;

• an increase in programs in which state-sponsored entities provide property insurance in catastrophe-prone areas;

• changes in Florida’s regulatory climate; and

• the passage of federal proposals for an optional federal charter that would allow some competing insurers to operate under regulations different or less stringent than those applicable to Heritage P&C.

These developments and others could make the property and casualty insurance marketplace more competitive by increasing the supply of insurance available. If competition limits our ability to write new business at adequate rates, our future results of operations would be adversely affected.

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:

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

• regulatory delays in approving filed rate changes;

• the uncertainties that inherently characterize estimates and assumptions;

• our selection and application of appropriate rating and pricing techniques;

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

• 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.

The inherent uncertainty of models and our reliance on such models as a tool to evaluate risk may have an adverse effect on our financial results.

We license analytic and modeling software from third parties to facilitate our pricing, assess our risk exposure and determine our reinsurance needs. Given the inherent uncertainty of modeling techniques and the application of such techniques, these models and databases may not accurately address the emergence of a variety of matters which might impact our exposure to losses. Accordingly, these models may understate the exposures we are assuming and our financial results may be adversely impacted, perhaps significantly.

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The failure of our claims department to effectively manage or remediate claims could adversely affect our insurance business, financial results and capital requirements.

We rely on our claims department to facilitate and oversee the claims adjustment process for our policyholders. Many factors could affect the ability of our claims department to effectively manage claims by our policyholders, including:

• the accuracy of our adjusters as they make their assessments and submit their estimates of damages;

• the training, background and experience of our claims representatives;

• the ability of our claims department to ensure consistent claims handling;

• the ability of our claims department to translate the information provided by adjusters into acceptable claims resolutions; and

• the ability of our claims department to maintain and update its claims handling procedures and systems as they evolve over time based on claims and geographical trends in claims reporting.

Any failure to effectively manage the claims adjustment process, including failure to pay claims accurately, could lead to material litigation, undermine our reputation in the marketplace, impair our corporate image and negatively affect our financial results.

Additionally, in the final stage of the claims process, we leverage Contractors’ Alliance’s vendor network to provide repair and remediation services to the policyholder. If such services are not performed properly, we may face liability. Although we maintain professional liability insurance to cover losses arising from our repair and remediation services, there can be no assurances that such coverage is adequate. In addition, our failure to timely and properly remediate claims, or the perception of such failure, may damage our reputation and adversely affect our ability to renew existing policies or write new policies.

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.

Our participation in the new Clearinghouse may not result in an increase in our premium revenue.

Part of our growth strategy includes participating in the Clearinghouse. On March 31, 2014, we were approved to participate in the Clearinghouse, but there can be no assurance that our policy count or gross premiums will increase as a result of our participation in the Clearinghouse because our premiums may not be below the threshold required by Citizens, other carriers participating in the Clearinghouse may be willing to offer similar policies for lower premiums, or we may decide to not provide a quote on these policies if they do not meet our underwriting guidelines.

We may not be able to effectively execute our growth strategy.

As part of our growth strategy, we may broaden our service offerings in order to more efficiently serve our customers and manage the claims process. As part of our expansion strategy, we may enter into new lines of business or offer new products and services within existing lines of business. For example, in January 2014, we hired two individuals with experience in commercial residential insurance sales and underwriting who will assist us in developing this new product line. Additionally, in March 2014, we acquired the largest vendor in the

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Contractors’ Alliance network, a water remediation company, which we believe will allow us to expand our mitigation and restoration services. There are substantial risks and uncertainties associated with these efforts. We may invest significant time and resources to develop and market new lines of business and/or products and services and we may not achieve the return on our investment that we expect. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting customer preferences may also impact the successful implementation of a new line of business or a new product or service. Such external factors and requirements may increase our costs and potentially affect the speed with which we will be able to pursue new market opportunities. There can be no assurance that we will be successful bringing new insurance products to our marketplace. Additionally, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks could have a material adverse effect on our business, results of operations and financial condition.

Our growth strategy may also involve expansion of our business to states outside of Florida. Geographic diversification may be hindered by the fact that we are a new company with a limited operating history, and we may be unable to satisfy requirements imposed by state regulators and other third parties.

If we are unable to expand our business because our capital must be used to pay greater than anticipated claims, our financial results may suffer. Further, we may require additional capital in the future which may not be available or may only be available on unfavorable terms.

Our future growth and future capital requirements will depend on our ability to expand the number of insurance policies we assume or write in Florida, to expand the kinds of insurance products we offer and to expand the geographic markets in which we do business, all balanced by the business risks we choose to assume and cede. All of these growth initiatives require capital. Our existing sources of funds include possible sales of common or preferred stock, incurring debt and our earnings from operations and investments. Unexpected catastrophic events in our coverage areas, such as the hurricanes experienced in Florida in the past decade, may result in greater claims losses than anticipated, which could require us to limit or halt our growth while we redeploy our capital to pay these unanticipated claims unless we are able to raise additional capital.

To the extent that our present capital is insufficient to meet future operating requirements or to cover losses, we may need to raise additional funds through financings or curtail our growth. Based on our current operating plan, we believe that our current capital together with our anticipated retained income will support our operations. However, we cannot provide any assurance in that regard, since many factors will affect the amount and timing of our capital needs, including our growth and profitability, the availability and cost of reinsurance, as well as possible acquisition opportunities, market disruptions and other unforeseeable developments. If we require additional capital, it is possible that equity or debt financing may not be available on acceptable terms or at all. In the case of equity financings, dilution to our stockholders could result, and in any case such securities may have rights, preferences and privileges that are senior to those of existing stockholders. If we cannot obtain adequate capital on favorable terms or at all, our business, financial condition or results of operations could be materially adversely affected.

Our information technology systems may fail or suffer a loss of security which could adversely affect our business.

Our insurance business is highly dependent upon the successful and uninterrupted functioning of our computer and data processing systems. We rely on these systems to perform actuarial and other modeling functions necessary for writing business, as well as to handle our policy administration process (i.e., handling and adjusting claims, the printing and mailing of our policies, endorsements, renewal notices, etc.). The successful operation of our systems depends on a continuous supply of electricity. The failure of these systems or disruption in the supply of electricity could interrupt our operations and result in a material adverse effect on our business.

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The development and expansion of our insurance business is dependent upon the successful development and implementation of advanced technology, including modeling, underwriting and information technology systems. Because we intend to expand our business by writing additional voluntary policies and entering into new lines of business, we are enhancing our information technology systems to handle and process an increased volume of policies. The failure of these systems to function as planned could slow our growth and adversely affect our future business volume and results of operations. In addition, we have licensed certain systems and data from third parties. We cannot be certain that we will have access to these, or comparable systems, or that our technology or applications will continue to operate as intended. Moreover, we cannot be certain that we would be able to replace these systems without slowing our underwriting response time. A major defect or failure in our internal controls or information technology systems could result in management distraction, harm to our reputation, a loss or delay of revenues or increased expense.

In addition, a security breach of our computer systems could damage our reputation or result in liability. We retain confidential business and policyholder information in our computer systems. We may be required to spend significant capital and other resources to protect against security breaches or to alleviate problems caused by such breaches. It is critical that our facilities and infrastructure remain secure. Despite the implementation of security measures, our infrastructure may be vulnerable to physical break-ins, computer viruses, programming errors, attacks by third parties or similar disruptive problems. In addition, we could be subject to liability if hackers were able to penetrate our network security or otherwise misappropriate confidential information.

The development and implementation of new technologies will require an additional investment of our capital resources in the future.

Frequent technological changes, new products and services and evolving industry standards are all influencing the insurance business. We believe that the development and implementation of new technologies will require additional investment of our capital resources in the future. We have not determined, however, the amount of resources and the time that this development and implementation may require, which may result in short-term, unexpected interruptions to our business, or may result in a competitive disadvantage in price and/or efficiency, as we endeavor to develop or implement new technologies.

We do not have significant redundancy in our operations.

We conduct our business primarily from offices located on the west coast of Florida where hurricanes could damage our facilities or interrupt our power supply. The loss or significant impairment of functionality in these facilities for any reason could have a material adverse effect on our business, as we do not have significant redundancies to replace our facilities if functionality is impaired. We contract with a third party vendor to maintain complete daily backups of our systems, however, we have not fully tested our plan to recover data in the event of a disaster.

We may be unable to attract and retain qualified employees.

We depend on our ability to attract and retain experienced underwriting talent and other skilled employees who are knowledgeable about our business. If the quality of our underwriters and other personnel decreases, we may be unable to maintain our current competitive position in the specialized markets in which we operate and be unable to expand our operations, which could adversely affect our results.

Because we began operations in August 2012 and have relatively few employees, the loss of, or failure to attract, key personnel could have a more significant impact on our business as compared to some of our competitors that are larger or have longer operating histories. We believe that our ability to grow and fully execute our business plan will depend in large part on our ability to attract and retain additional skilled and qualified personnel and to expand, train and manage our employees. We may not be successful in doing so, because the competition for experienced personnel in the insurance industry is intense.

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We are dependent on key executives, the loss of whom could adversely affect our business.

Our future success depends to a significant extent on the efforts of our senior management. We believe there are only a limited number of available and qualified executives with substantial experience in our industry. Accordingly, the loss of the services of one or more of the members of our senior management could delay or prevent us from fully implementing our business strategy and, consequently, significantly and negatively affect our business.

Currently, we only maintain key man life insurance with respect to Bruce Lucas, our Chairman and Chief Investment Officer. If any other member of senior management dies or becomes incapacitated, or leaves the company to pursue employment opportunities elsewhere, we would be solely responsible for locating an adequate replacement for such senior management and for bearing any related cost. To the extent that we are unable to locate an adequate replacement or are unable to do so within a reasonable period of time, our business may be significantly and negatively affected.

Our financial results may be negatively affected by the fact that a portion of our income is generated by the investment of our company’s capital, premiums and loss reserves.

A portion of our income is, and likely will continue to be, generated by the investment of our capital, premiums and loss reserves. The amount of income so generated is a function of our investment policy, available investment opportunities and the amount of available cash invested. We are also constrained by investment limitations contained in the Florida Insurance Code. At March 31, 2014, approximately 67% of our available cash was invested in fixed-maturity and equity securities and mortgage loans with the balance in cash and cash equivalents. We may, under certain circumstances, be required to liquidate our investments in securities at prices below book value, which may adversely affect our financial results. We currently hold all of our cash in accounts with three financial institutions and, as a result of this concentration, a portion of the balances in such accounts exceeds the FDIC insurance limits. While we monitor and adjust the balances in our accounts as appropriate, these balances could be impacted if any of these financial institutions fail and could be subject to other adverse conditions in the financial markets.

We may alter our investment policy to accept higher levels of risk with the expectation of higher returns. Fluctuating interest rates and other economic factors make it impossible to estimate accurately the amount of investment income that will be realized. In fact, we may realize losses on our investments.

Our inability to maintain our financial stability rating may have a material adverse effect on our competitive position, the marketability of our product offerings, and our liquidity, operating results and financial condition.

Financial stability ratings are important factors in establishing the competitive position of insurance companies and can have a significant effect on an insurance company’s business. Many insurance buyers, agents, brokers and secured lenders use the ratings assigned by rating agencies to assist them in assessing the financial stability and overall quality of the companies from which they are considering purchasing insurance or in determining the financial stability of the company that provides insurance. We currently have a Demotech rating of “A” (“Exceptional”). This is the third highest financial stability rating of the six financial stability ratings utilized by Demotech. These financial stability ratings provide an objective baseline for assessing solvency and should not be interpreted as (and are not intended to serve as) an assessment of, a recommendation to buy, sell, or hold, any securities of an insurance company or its parent holding company, including the shares of our common stock being offered by this prospectus.

On an ongoing basis, rating agencies review the financial performance and condition of insurers and can downgrade or change the outlook on an insurer’s ratings due to, for example, a change in an insurer’s statutory capital, a reduced confidence in management or a host of other considerations that may or may not be under the

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insurer’s control. All ratings are subject to continuous review; therefore, the retention of these ratings cannot be assured. A downgrade in any of these ratings could have a material adverse effect on our competitive position, the marketability of our product offerings and our ability to grow in the marketplace.

The effects of emerging claim and coverage issues on our business are uncertain.

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. In addition, as industry practices and social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge. These issues may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the number or size of claims. In some instances, these changes may not become apparent until some time after we have issued insurance policies that are affected by the changes. As a result, the full extent of liability under our insurance policies may not be known at the time such policies are issued or renewed, and our financial position and results of operations may be adversely affected.

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

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

• employing proper underwriting procedures;

• carefully evaluating the terms and conditions of our policies;

• geographic diversification; and

• 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 financial condition or results of operations.

Lack of effectiveness of exclusions and other loss limitation methods in the insurance policies we assume or write could have a material adverse effect on our financial condition or our results of operations.

Various provisions of our policies, such as limitations or exclusions from coverage which are designed to limit our risks, may not be enforceable in the manner we intend. In addition, the policies we issue contain conditions requiring the prompt reporting of claims to us and our right to decline coverage in the event of a violation of that condition. While our insurance product exclusions and limitations reduce the loss exposure to us and help eliminate known exposures to certain risks, it is possible that a court or regulatory authority could nullify or void an exclusion or limitation, or legislation could be enacted modifying or barring the use of such endorsements and limitations in a way that would adversely affect our loss experience, which could have a material adverse effect on our financial condition or results of operations.

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 through a network of independent agents. Of our network of approximately 1,100 independent agents, approximately 46% are affiliated with nine large agency networks with which we have entered into master agency agreements. As of March 31, 2014, voluntary policies written through independent agents constituted approximately 11% of our total policies in force and represented approximately $23.4 million in annualized premiums. We expect to increase the number of voluntary policies we write as our

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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.

Changing climate conditions may adversely affect our financial condition, profitability or cash flows.

Climate change, to the extent it produces extreme changes in temperatures and changes in weather patterns, could affect the frequency or severity of weather events. Further, it could reduce the affordability and availability of personal residential insurance, which could have an effect on pricing. Changes in weather patterns could also affect the frequency and severity of other natural catastrophe events to which we may be exposed.

We identified material weaknesses in our internal controls over financial reporting. 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, 2015, 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.

In connection with the preparation of our financial statements for the period ended December 31, 2012 and the year ended December 31, 2013, we identified material weaknesses in our internal control over financial reporting related to, among other things, accounting for stock based compensation, equity transactions and income taxes. With the oversight of senior management, we have taken steps and plan to take additional measures to remediate the underlying causes of these material weaknesses, primarily through the development and implementation of formal policies, improved processes, as well as the hiring of additional finance personnel. Although we plan to complete this remediation process as quickly as possible, we cannot at this time estimate how long it will take, and our initiatives may not prove to be successful in remediating these material weaknesses.

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:

• our inability to remediate the material weaknesses discussed above;

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

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• 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 Securities and Exchange Commission (“SEC”) or other regulatory authorities, as well as lawsuits by private plaintiffs.

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 the NYSE, 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 $1.0 billion in annual revenues; (ii) the date we qualify as a “large accelerated filer,” with at least $700 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 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

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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.

In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to “opt- out” of such extended transition period, however, and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt-out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Risks Related to Regulation of our Insurance Operations

We are subject to extensive regulation which may reduce our profitability or limit our growth. Moreover, if we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition and results of operations.

We are subject to extensive state regulation. Heritage P&C is subject to supervision and regulation that is primarily designed to protect our policyholders rather than our stockholders, and such regulation is imposed by both the state in which it is domiciled (Florida) and the states in which it does business (currently only Florida). These regulations relate to, among other things, the approval of policy forms and premium rates, our conduct in the marketplace, our compliance with solvency and financial reporting requirements, transactions with our affiliates, and limitations on the amount of business we can write, the amount of dividends we can pay to stockholders, and the types of investments we can make. Insurance holding company regulations generally provide that transactions between an insurance company and its affiliates must be fair and reasonable, and must be clearly and accurately disclosed in the records of the respective parties, with expenses and payments allocated between the parties in accordance with customary accounting practices. Many types of transactions between an insurance company and its affiliates, such as transfers of assets, loans, reinsurance agreements, service agreements, certain dividend payments by the insurance company and certain other material transactions, may be subject to prior approval by, or prior notice to, state regulatory authorities. If we are unable to obtain the requisite prior approval for a specific transaction, we would be precluded from taking the action, which could adversely affect our operations. These regulatory requirements may adversely affect or inhibit our ability to achieve some or all of our business objectives. In addition, regulatory authorities also may conduct periodic examinations into insurers’ business practices. These reviews may reveal deficiencies in our insurance operations or differences between our interpretations of regulatory requirements and those of the regulators.

State insurance regulations also frequently impose notice or approval requirements for the acquisition of specified levels of ownership in the insurance company or insurance holding company. For example, Florida law requires that a person may not, individually or in conjunction with any affiliated person of such person, acquire directly or indirectly, conclude a tender offer or exchange offer for, enter into any agreement to exchange securities for, or otherwise finally acquire 5% or more of the outstanding voting securities of a Florida domiciled stock insurer or of a controlling company, unless it is in compliance with certain notice and approval requirements. Such restriction may inhibit our ability to grow our business or achieve our business objectives.

Further, regulatory authorities have relatively broad discretion to deny or revoke licenses for various reasons, including the violation of regulations. In some instances, we follow practices based on our interpretations of regulations or practices that we believe may be generally followed by the industry. These practices may turn out to be different from the interpretations of regulatory authorities. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, insurance regulatory

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authorities could preclude or temporarily suspend us from carrying on some or all of our activities or otherwise penalize us. This could adversely affect our ability to operate our business.

Heritage P&C is subject to additional regulation imposed by consent orders entered into with 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 memorialized in a consent order entered into between FLOIR and the insurer applying for a certificate of authority. We are subject to such a consent order. We have, in certain cases, agreed to higher or more stringent restrictions than are otherwise required under Florida law. The material restrictions we have agreed to include:

• Florida law requires a residential property writer to maintain surplus of the greater of $15.0 million or 10% of its liabilities. Pursuant the consent order, we agreed to establish a minimum capital and surplus of $18.0 million.

• 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 during 2012, 2013 and 2014. As part of the FLOIR approval process for the various Citizens assumption transactions in which we have participated, we have received approval to exceed these projected premiums.

• 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 July 31, 2015, except such distributions as are required to offset stockholders’ tax obligations resulting from the ownership of our equity or such distributions as may be approved by FLOIR in advance and in writing.

• Florida law allows an insurer to pay certain dividends to stockholders without approval of FLOIR. Pursuant to the consent order, we agreed that, until July 31, 2017, Heritage P&C would pay only those dividends that have 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 June 2013 assumption transaction, we are required to offer to renew each assumed policy for a minimum of three years and limit rate increases to the higher of those offered by Citizens for comparable risks or 10%.

In the event we are unable to comply with the additional regulation imposed by these consent orders, it may adversely affect our ability to operate our business.

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

We are subject to extensive regulation in Florida, the only state in which we currently conduct business. The National Association of Insurance Commissioners (“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. For example, in 2013 FLOIR asked the Florida legislature to amend the Florida Insurance Code in conformity with the latest amendments to the NAIC Model Holding Company System Regulatory Act. Among other things, such amendments would require the ultimate controlling person of any Florida insurance company to file an annual report identifying the material risks within the insurance holding company system that could pose enterprise risk to the insurance company. The proposed legislation was not enacted in 2013, but is expected to be reintroduced and eventually enacted into law.

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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, 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. For example, in 2007, Florida enacted legislation that led to rate levels in the private insurance market that we believe, in many instances in the past, were inadequate to cover the related underwriting risk. This same legislation required Citizens to reduce its premium rates and begin competing against private insurers in the Florida residential property insurance market. Florida lawmakers may continue to enact or retain legislation that suppresses the rates of Citizens, further adversely impacting the private insurance market and increasing the likelihood that it must levy assessments on private insurance companies and ultimately on Florida consumers. These and other aspects of the political environment in jurisdictions where we operate may reduce our profitability, limit our growth, or otherwise adversely affect our operations.

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 nonrenew 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 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 operations.

Our insurance subsidiary is subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action.

Our insurance subsidiary is subject to risk-based capital standards and other minimum capital and surplus requirements imposed under applicable state laws, currently the laws of Florida. The risk-based capital standards, based upon the Risk-Based Capital Model Act adopted by the NAIC, require our insurance subsidiary to report its results of risk-based capital calculations to FLOIR and the NAIC. 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 NAIC guidelines, 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

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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, 2013, Heritage P&C’s risk-based capital ratio was 357%.

In addition, our insurance subsidiary is required to maintain certain minimum capital and surplus and to limit its written premiums to specified multiples of its capital and surplus. The insurance subsidiary 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.

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 entered into in connection with receiving our certificate of authority, we agreed to establish a minimum capital and surplus of $18.0 million. As of March 31, 2014, our insurance subsidiary held surplus of $67.8 million. Florida law also 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. As of December 31, 2013, our insurance subsidiary’s gross and net writing ratios were 3.5 to 1 and 2.2 to 1, respectively. 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 during 2012, 2013, and 2014. As part of the FLOIR approval process for the various Citizens assumption transactions in which we have participated, we have received approval to exceed these projected premiums.

Any failure by our insurance subsidiary to meet the applicable risk-based capital or minimum statutory capital requirements or the writings ratio limitations imposed by the laws of Florida (or other states where we may eventually conduct business) could subject it 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 applicable writings ratios may require us to increase our statutory capital levels, which we may be unable to do.

Regulation limiting rate increases and requiring us to participate in loss sharing may decrease our profitability.

From time to time, political dispositions affect the insurance market, including efforts to effectively suppress rates at a level that may not allow us to reach targeted levels of profitability. Despite efforts to remove politics from insurance regulation, facts and history demonstrate that public policymakers, when faced with untoward events and adverse public sentiment, can act in ways that impede a satisfactory correlation between rates and risk. Such acts may affect our ability to obtain approval for rate changes that may be required to attain rate adequacy along with targeted levels of profitability and returns on equity. Our ability to afford reinsurance required to reduce our catastrophe risk may be dependent upon the ability to adjust rates for our cost.

Additionally, we are required to participate in guaranty funds for insolvent insurance companies. The funds periodically assess losses against all insurance companies doing business in the state. Our operating results and financial condition could be adversely affected by any of these factors.

Risks Relating to 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 the

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NYSE or 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:

• our operating and financial performance and prospects;

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

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

• 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;

• the failure of research analysts to cover our common stock;

• general economic, industry and market conditions;

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

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

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

• material litigation or government investigations;

• 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;

• changes in key personnel;

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

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

• the granting or exercise of employee stock options;

• volume of trading in our common stock; and

• impact of the facts described elsewhere in “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 upon exercise of outstanding warrants to purchase our common stock or if we issue restricted stock to our employees under our equity incentive plan.

We do not currently intend to pay dividends on our common stock following the offering.

We do not anticipate paying any cash dividends on our common stock for the foreseeable future. Instead, we intend to retain future earnings to fund our growth. In addition, as a holding company, our ability to pay dividends will depend on amounts that our subsidiaries are able to pay us. We have agreed to refrain from making distributions to our equity holders through July 31, 2015, except for such distributions as are required to offset holders’ tax obligations or as may be approved by FLOIR in advance and in writing. Further, for a five-year period beginning on July 31, 2012, Heritage P&C, as a newly licensed insurer in Florida, is precluded from paying dividends unless approved by FLOIR. There is no guarantee that we or Heritage P&C 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 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.

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. Of these, the shares being sold in this offering (or             shares if the underwriters exercise their option to purchase additional shares in full) will be freely tradable immediately after this offering (except for any shares purchased by affiliates, if any) and approximately             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 the Plan, as described in “Executive Compensation—Heritage Insurance Holdings, Inc. Omnibus Incentive Plan.” Effective upon the completion of this offering, an aggregate of shares of our common stock will be reserved for future issuance under the 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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We have broad discretion in the use of the net proceeds from our initial public offering and may not use them effectively.

We cannot specify with any certainty the particular uses of the net proceeds that we will receive from our initial public offering. We will have broad discretion in the application of the net proceeds, including working capital, possible acquisitions, and other general corporate purposes, and we may spend or invest these proceeds in a way with which our stockholders disagree. The failure by our management to apply these funds effectively could adversely affect our business and financial condition. Pending their use, we may invest the net proceeds from our initial public offering in a manner that does not produce income or that loses value. These investments may not yield a favorable return to our investors.

Certain provisions of our certificate of incorporation and our bylaws 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 certificate of incorporation and bylaws 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 certificate of incorporation and bylaws will include, among other things, the following:

• 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;

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

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

• removal of directors only for cause; and

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

We will elect in our certificate of incorporation not to be subject to Section 203 of the DGCL, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group owning 15% or more of the corporation’s voting stock for a period of three years following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Accordingly, we will not be subject to any anti-takeover effects of Section 203.

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.”

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

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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 Heritage P&C is 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.

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 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.

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions, or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions. Examples of forward-looking statements include, without limitation:

• statements regarding our growth and other strategies, results of operations or liquidity;

• statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance;

• statements of management’s goals and objectives;

• projections of revenue, earnings, capital structure and other financial items;

• assumptions underlying statements regarding us or our business; and

• other similar expressions concerning matters that are not historical facts.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, factors discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business.”

Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances, or achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to, those listed below and those discussed in greater detail under the heading “Risk Factors” above:

• our limited operating history;

• the possibility that actual losses may exceed reserves;

• the concentration of our business in Florida;

• our exposure to catastrophic events;

• the fluctuation in our results of operations;

• the discontinuation of the Citizens depopulation program and our inability to select favorable Citizens policies to assume;

• increased costs of reinsurance, non-availability of reinsurance, and non-collectability of reinsurance;

• increased competition, competitive pressures, and market conditions;

• our failure to accurately price the risks we underwrite;

• inherent uncertainty of our models and our reliance on such model as a tool to evaluate risk;

• the failure of our claims department to effectively manage or remediate claims;

• low renewal rates and failure of such renewals to meet our expectations;

• unsuccessful participation in the Clearinghouse;

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• our failure to execute our growth strategy;

• failure of our information technology systems and unsuccessful development and implementation of new technologies;

• we do not have significant redundancy in our operations;

• our failure to attract and retain qualified employees and independent agents or our loss of key personnel;

• our inability to generate investment income;

• our inability to maintain our financial stability rating;

• effects of emerging claim and coverage issues relating to legal, judicial, environmental and social conditions;

• the failure of our risk mitigation strategies or loss limitation methods; and

• changes in regulations and our failure to meet increased regulatory requirements.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.

The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Consequently, you should not place undue reliance on forward-looking statements.

INDUSTRY AND MARKET DATA

This prospectus includes industry data, forecasts and information that we have prepared based, in part, upon data, forecasts and information obtained from independent industry publications and surveys and other information available to us. Some data is also based on our good faith estimates, which are derived from management’s knowledge of the industry and independent sources. Industry publications and surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of included information. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. Statements as to our market position are based on market data currently available to us. While we are not aware of any misstatements regarding the industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus. Similarly, we believe our internal research is reliable, even though such research has not been verified by any independent sources.

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USE OF PROCEEDS

We estimate that the net proceeds from our issuance and sale of              shares of common stock in this offering will be approximately $         million, assuming an initial public offering price of $         per share, which is the midpoint of the price range listed on the cover page of this prospectus, and after deducting underwriting discounts and commissions and offering expenses payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $         per share would increase (decrease) our net proceeds from this offering by approximately $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares in full, we estimate that the net proceeds from this offering will be approximately $         million, assuming an initial public offering price of $         per share, which is the midpoint of the price range listed on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use a portion of the net proceeds from this offering to increase our statutory capital and surplus to enable us to write additional policies and to fund collateralized reinsurance through Osprey, our reinsurance subsidiary. We intend to use the remainder of the net proceeds to fund the growth of our business and for general corporate purposes. We may use a portion of the net proceeds from this offering to pursue expansions of the insurance products that we offer in existing and new markets. We have no commitments with respect to any such investments, and we are not currently involved in any negotiations with respect to any such investments. As a result, our management will retain broad discretion over the allocation of a portion of the net proceeds from this offering.

Pending use of the proceeds from this offering, we intend to invest the proceeds in a variety of capital preservation investments, including short-term, investment-grade and interest-bearing instruments.

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DIVIDEND POLICY

Following the consummation of this offering, we do not plan to pay a regular dividend on our common stock for the foreseeable future. The declaration and payment of all future dividends, if any, will be at the discretion of our board of directors and will depend upon, among other things, our financial condition, earnings and contractual obligations. Moreover, our ability to pay dividends if and when our board of directors determines to do so, may be restricted by regulatory limits on the amount of dividends Heritage P&C is permitted to pay to us. We have agreed to refrain from making distributions to our equity holders through July 31, 2015, except for such distributions as are required to offset members’ tax obligations or as may be approved by FLOIR in advance and in writing. Further, until July 31, 2017, Heritage P&C has agreed to pay only those dividends that have been approved in advance and in writing by FLOIR. Heritage P&C has not paid, and has not sought approval from FLOIR to pay, any dividends to date. Prior to the Conversion, we expect to effect the Tax Distribution. See “Prospectus Summary—Reorganization Transactions.”

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2014:

• on an actual basis;

• on a pro forma basis to give effect to the Reorganization Transactions; and

• on a pro forma as adjusted basis to give further effect to (i) the issuance of              shares of common stock in this offering and (ii) our receipt of the estimated net proceeds from the sale of shares of common stock offered by us in this offering at an assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the net proceeds as described in “Use of Proceeds.”

This information should be read in conjunction with “Use of Proceeds,” “Selected Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements and related notes appearing elsewhere in this prospectus.

	March 31, 2014
	Actual		Pro  Forma(1)		Pro Forma As  Adjusted(1)(2)
	(dollars in thousands)
Cash and cash equivalents	$	74,692	$		$
Stockholders’ equity:
Contributed members’ capital	$	83,859	$		$
Preferred stock, par value $0.0001 per share; no shares authorized, issued or outstanding, actual; 5,000,000 shares authorized, no shares issued or outstanding, pro forma and pro forma as adjusted		—		—		—
Common stock, par value $0.0001 per share; no shares authorized, issued or outstanding, actual; 50,000,000 shares authorized pro forma and pro forma as adjusted,              shares issued and outstanding, pro forma and              shares issued and outstanding, pro forma as adjusted		—
Additional paid-in capital		—
Retained earnings		25,812
Accumulated other comprehensive income		470
Total members’/stockholders’ equity		110,141
Total capitalization	$	110,141	$		$

(1) Assuming an initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus, an aggregate of              shares will be issued in connection with the Warrant Exercise. A $1.00 increase (decrease) in the assumed initial public offering price of $         per share would increase (decrease) the number of shares that will be issued in connection with the Warrant Exercise by              shares. Following the Warrant Exercise, we expect that there will remain outstanding warrants to purchase an aggregate of              shares at an exercise price of $         per share.

(2) A $1.00 increase or decrease in the assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus, would result in an approximately $         million increase or decrease in each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization, assuming that the number of shares offered by us set forth on the cover of this prospectus remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. Each 1.0 million increase or decrease in the number of shares offered by us would increase or decrease each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $         million, assuming the initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus, remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The as adjusted information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering.

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DILUTION

If you purchase our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering. Dilution results from the fact that the initial public offering price per share of our common stock is substantially in excess of the pro forma book value per share of common stock attributable to the existing stockholders for the currently outstanding shares of common stock.

Our pro forma net tangible book value as of March 31, 2014 was $         million, or $         per share of common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock that will be outstanding immediately prior to the completion of the offering after giving effect to the Reorganization Transactions.

After giving effect to the sale of the              shares of common stock offered by us in this offering at an assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus, less estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2014 would have been approximately $         million, or $         per share of common stock after giving effect to this offering. This represents an immediate increase in pro forma net tangible book value to our existing stockholders of $         per share and an immediate dilution to purchasers in this offering of $         per share. The following table illustrates this per share dilution to new investors purchasing shares in this offering.

Assumed initial public offering price per share	$
Pro forma as adjusted net tangible book value per share as of
Increase per share attributable to investors in this offering
Pro forma as adjusted net tangible book value per share after giving effect to this offering
Dilution in per share to investors in this offering	$

A $1.00 increase or decrease in the assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus, would increase or decrease pro forma net tangible book value by $         million, or $         per share, and would increase or decrease the dilution per share to investors in this offering by $        , based on the assumptions set forth above.

The following table summarizes as of March 31, 2014, on a pro forma as adjusted basis, the number of shares of common stock purchased, the total consideration paid and the average price per share paid by investors in this offering, based upon an assumed initial public offering price of $         per share, the midpoint of the range set forth on the cover page of this prospectus, and before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:

	Shares purchased				Total consideration
	Number	Percent			Amount	Percent			Average price per share
Existing stockholders				%	$			%	$
New investors
Total			100	%			100	%	$

Except as otherwise indicated, the discussion and tables above assume no exercise of the underwriters’ option to purchase additional shares and no exercise of any outstanding options. If the underwriters’ option to purchase additional shares is exercised in full, our existing stockholders would own approximately     % and

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investors in this offering would own approximately     % of the total number of shares of our common stock outstanding after this offering. If the underwriters exercise their option to purchase additional shares in full, the pro forma as adjusted net tangible book value per share after this offering would be $         per share, and the dilution per share to investors in this offering would be $         per share.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following tables set forth our consolidated historical financial data. You should read the information set forth below in conjunction with “Use of Proceeds,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto included elsewhere in this prospectus. The statements of income (loss) data for the period ended December 31, 2012 and the year ended December 31, 2013 and the balance sheet data as of December 31, 2012 and 2013 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The statements of income (loss) data for the three months ended March 31, 2013 and 2014 and the balance sheet data as of March 31, 2014 are derived from our unaudited quarterly consolidated financial statements included elsewhere in this prospectus. The statements of income (loss) data for the three months ended June 30, 2013, September 30, 2013 and December 31, 2013 and the balance sheet data as of March 31, 2013, June 30, 2013 and September 30, 2013 set forth below are derived from our unaudited quarterly consolidated financial statements not included in this prospectus and contain all adjustments, consisting of normal recurring adjustments, that management considers necessary for a fair presentation of our financial position and results of operations for the periods presented. See “Index to Consolidated Financial Statements.”

Consolidated Statement of Operations Data (in thousands except share and per share data)	August 7, 2012 (inception) to December 31, 2012			Three Months Ended												Year  Ended December 31, 2013			Three Months Ended March 31, 2014
				March 31, 2013			June 30, 2013			September 30, 2013			December 31, 2013
Revenue:
Gross premiums written	$	43,384		$	16,349		$	81,049		$	37,176		$	83,963		$	218,537		$	68,903
Gross premiums earned		5,719			20,324			28,040			41,506			50,089			139,959			60,860
Ceded premiums		(120	)		(358	)		(6,416	)		(19,701	)		(18,325	)		(44,800	)		(18,624	)
Net premiums earned		5,599			19,966			21,624			21,805			31,764			95,159			42,236
Retroactive reinsurance income(1)		—			—			26,072			—			(26	)		26,046			—
Net investment income		27			212			125			302			410			1,049			618
Net realized losses		—			(2	)		(46	)		(123	)		(152	)		(323	)		(42	)
Other revenue		4			166			826			796			1,113			2,901			1,066
Total revenue	$	5,630		$	20,342		$	48,601		$	22,780		$	33,109		$	124,832		$	43,878
Expenses:
Losses and loss adjustment expenses		1,402			5,280			7,870			9,996			15,355			38,501			20,587
Policy acquisition costs		84			115			865			1,740			3,430			6,150			4,473
General and administrative expenses		7,922	(2)		3,988			5,579			3,373			11,764			24,704			6,997
Interest expense		829			6			6			4			—			16			—
Income (loss) before income taxes		(4,607	)		10,953			34,281			7,667			2,560			55,461			11,821
Provision for income taxes		859			3,899			13,263			2,340			1,746			21,248			3,933
Net income (loss)	$	(5,466	)	$	7,054		$	21,018		$	5,327		$	814		$	34,213		$	7,888
Basic earnings (loss) per share(3)	$	(2,219	)	$	1,671		$	3,525		$	890		$	130		$	6,095		$	1,229
Diluted earnings per share(3)	$	(2,219	)	$	1,671		$	3,525		$	890		$	125		$	6,028		$	1,059
Basic weighted average shares outstanding(3)		2,463			4,221			5,962			5,982			6,257			5,613			6,416
Diluted weighted average shares outstanding(3)		2,463			4,221			5,962			5,982			6,507			5,676			7,450

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	Three Months Ended												Year Ended December 31, 2013			Three Months Ended March 31, 2014
	March 31, 2013			June 30, 2013			September 30, 2013			December 31, 2013
Selected Other Data
Book value per share(3)(4)	$	11,496		$	14,850		$	15,755		$	15,742		$	15,742		$	17,164
Growth in book value per share(4)		33.2	%		29.2	%		6.1	%		(0.1	)%		82.4	%		9.0	%
Return on average equity(4)		59.3	%		107.8	%		23.2	%		3.3	%		45.0	%		29.9	%
Selected ratios(5):
Ratios to gross premiums earned
Gross loss ratio		26.0	%		28.1	%		24.1	%		30.7	%		27.5	%		33.8	%
Ceded premium ratio		1.8	%		22.9	%		47.5	%		36.6	%		32.0	%		30.6	%
Gross expense ratio		20.2	%		23.0	%		12.3	%		30.3	%		22.0	%		18.8	%
Combined ratio		47.9	%		73.9	%		83.9	%		97.6	%		81.6	%		83.3	%
Ratios to net premiums earned
Net loss ratio		26.4	%		36.4	%		45.9	%		48.3	%		40.5	%		48.7	%
Net expense ratio		20.5	%		29.8	%		23.4	%		47.8	%		32.4	%		27.2	%
Combined ratio		47.0	%		66.2	%		69.3	%		96.2	%		72.9	%		75.9	%

Consolidated Balance Sheet Data (in thousands):	December 31, 2012		March 31, 2013		June 30, 2013		September 30, 2013		December 31, 2013		March 31, 2014
Cash, cash equivalents and investments	$	76,940	$	113,259	$	104,778	$	179,456	$	201,236		225,749
Total assets		81,864		121,584		272,039		264,745		281,978		286,114
Unpaid losses and loss adjustment expense		1,393		4,973		9,493		12,366		19,344		28,456
Unearned premiums		37,665		33,689		86,698		82,369		116,243		124,285
Total liabilities		53,745		54,526		183,060		170,343		181,073		175,973
Redeemable equity(6)		—		6,220		7,775		8,217		20,921		—
Total stockholders’ equity		28,119		60,838		81,204		86,185		79,984		110,141

(1) Retroactive reinsurance income of $26.0 million during the year ended December 31, 2013 represents premiums earned, net of losses, for the period from January 1, 2013 through May 31, 2013 from a retroactive reinsurance quota share agreement entered into in connection with our assumption of approximately 39,000 policies from Citizens in June 2013. See Note 2 to our consolidated financial statements for the year ended December 31, 2013 included elsewhere in this prospectus.

(2) General and administrative expenses for the period ended December 31, 2012 includes $5.5 million of stock-based compensation.

(3) Share and per share data for the periods presented does not give retroactive effect to the Reorganization Transactions.

(4) Includes the value, as of the end of each period, of the redeemable equity described in footnote 6 below.

(5) The ratios presented do not reflect the impact of the retroactive reinsurance income described in footnote 1 above. For a definition of each of the ratios presented, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Components of Our Results of Operations—Ratios.”

(6) At March 31, June 30, September 30 and December 31, 2013, represents equity held by certain members of our management which was redeemable at the option of the holder upon termination of their employment. Effective February 5, 2014, this redemption right was terminated, and this equity was reclassified as contributed members’ capital.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations is intended to help prospective investors understand our business, results of operations, liquidity and capital resources and should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those which are not within our control. We began operations in August 2012 and wrote our first policy in November 2012. Accordingly, results of operations for the period from August 7, 2012 to December 31, 2012 are not representative of future periods.

Overview

We are a property and casualty insurance holding company headquartered in Clearwater, Florida and, through our insurance subsidiary, Heritage P&C, we provide personal residential insurance for single-family homeowners and condominium owners in Florida. We began operations in August 2012 and wrote our first policy in November 2012. In December 2012, we began selectively assuming policies from Citizens through participation in a legislatively established depopulation program, which is designed to reduce the state’s risk exposure by encouraging private insurance companies to assume Citizens’ policies. Once Citizens informs us which policies we may assume, we notify each policyholder of our offer to assume their policy, the amount of their estimated premium upon renewal and their right to elect not to participate in, or “opt-out” of, the assumption transaction. Citizens transfers to us the unearned premiums as of the effective date of the assumption transaction for the policies that have not opted out of such transaction. A policyholder may also opt-out during the 30-day period following the effective date of the assumption transaction. If a policyholder opts-out during such period, we return the applicable unearned premiums to Citizens. See “Business—Citizens Assumption Transactions.”

On December 4, 2012, we entered into our first assumption transaction with Citizens, resulting in our assumption of approximately 37,000 policies and assumed premiums written of approximately $43.4 million. We entered into five additional assumption transactions during the year ended December 31, 2013 (one in the first quarter of 2013 and two in each of the second and fourth quarters of 2013), resulting in our assumption of an aggregate of approximately 90,000 additional policies and assumed premiums written of approximately $97.6 million. We entered into three additional assumption transactions during the three months ended March 31, 2014, resulting in our assumption of approximately 10,000 additional policies and assumed premiums written of approximately $16.8 million. We intend to continue assuming policies from Citizens that meet our assumption strategy and underwriting criteria.

In connection with our assumption of 39,000 policies in June 2013, we entered into a retroactive quota share reinsurance agreement with Citizens that resulted in our recognition of $26.0 million of retroactive reinsurance income, representing the earned premium, net of associated losses and loss adjustment expenses, from such policies for the period from January 1, 2013 through May 31, 2013. We do not expect to enter into similar retroactive arrangements with Citizens in connection with future policy assumptions.

During 2013 and the three months ended March 31, 2014, we implemented a number of initiatives to grow our voluntary program, including establishing a network of independent agents throughout Florida, offering competitive pricing and focusing on superior customer service. As a result of these efforts, we had 15,417 voluntary policies in force as of March 31, 2014, compared to 145 voluntary policies in force as of December 31, 2012.

Our wholly-owned subsidiary, Contractors’ Alliance, manages repair and mitigation services provided to our customers. In March 2014, we completed the acquisition of the assets and personnel of the largest vendor in the Contractors’ Alliance network, SVM Restoration Services, Inc., for $2.5 million. See “Certain Relationships and Related Party Transactions—Relationship with SVM Restoration Services.”

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In April 2013, we purchased a two-building, 13-acre campus located in Clearwater, Florida for aggregate consideration of $9.8 million in cash and contributed the property to our wholly-owned subsidiary, Skye Lane Properties, LLC (“Skye Lane”). We established our operating headquarters on this site in March 2014. The property is primarily occupied by unaffiliated tenants, and we expect to make further investments in the property in connection with a long-term lease that has been secured for a substantial portion of the remainder of the property. See “—Liquidity and Capital Resources—Investing Activities.”

In May 2013, we capitalized our wholly-owned reinsurance subsidiary, Osprey, with $1.7 million in cash. Osprey secures its reinsurance obligations to Heritage P&C with a $5.0 million irrevocable letter of credit. This letter of credit is in turn collateralized with our otherwise unencumbered real estate in Clearwater, Florida. We utilize Osprey to mitigate our reinsurance expense and reduce our reliance on third party reinsurance.

Key Components of Our Results of Operations

Revenue

Gross premiums written.    Gross premiums written represent, with respect to a fiscal period, the sum of assumed premiums written (premiums from policies that we assumed from Citizens, net of opt-outs) plus direct premiums written (premiums from subsequent renewals of Citizens’ policies and voluntary policies written during the period, net of any midterm cancellations), in each case prior to ceding premiums to reinsurers.

Gross premiums earned.    Gross premiums earned represent the total premiums earned during a fiscal period from policies assumed from Citizens, subsequent renewals of such policies and voluntary policies. Premiums associated with assumed policies are earned ratably over the remaining term of the policy and premiums associated with voluntary and renewal policies are earned ratably over the twelve-month term of the policy.

Ceded premiums.    Ceded premiums represent the cost of our reinsurance during a fiscal period. We recognize the cost, excluding premiums ceded to Osprey, of our reinsurance program ratably over the twelve month term of the arrangement—June 1, 2013 through May 31, 2014.

Net premiums earned.    Net premiums earned reflect gross premiums earned less ceded premiums during the fiscal period.

Retroactive reinsurance income.    Retroactive reinsurance income represents the income, net of associated losses and loss adjustment expenses, arising from the retroactive reinsurance agreement we entered in connection with our assumption of approximately 39,000 policies from Citizens in June 2013. Under this retroactive reinsurance agreement, we realized income equal to the earned premiums, net of associated losses and loss adjustment expenses, from such polices for the period from January 1, 2013 through May 31, 2013 with no corresponding reinsurance costs. The earned premiums for the period from June 1, 2013 through June 27, 2013 are included in gross premiums written for the three months ended June 30, 2013. See Note 2 to our consolidated financial statements for the year ended December 31, 2013 included elsewhere in this prospectus. The retroactive reinsurance agreement, which was a key element of our decision to enter into an assumption transaction at the outset of hurricane season, is not typical of our assumption transactions with Citizens. The typical assumption transaction with Citizens provides for the assumption of unearned premiums as of the effective date of the transaction, and does not result in the transfer of earned premiums and losses and loss adjustment expenses for prior periods. We do not expect to enter into similar retroactive arrangements with Citizens in connection with future policy assumptions.

Net investment income.    Net investment income represents interest earned from fixed maturity securities, short term securities and other investments, dividends on equity securities, and the gains or losses from the sale of investments.

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Other revenue.    Other revenue represents rental income due under non-cancelable leases for space at our commercial property in Clearwater, Florida that we acquired in April 2013, and all policy and pay-plan fees. Florida law allows insurers to charge policyholders a $25 policy fee on each policy written; these fees are not subject to refund, and we recognize the income immediately when collected. We also charge pay-plan fees to policyholders that pay their premium in more than one installment and record the fees as income when collected.

Expenses

Losses and loss adjustment expenses.    Losses and loss adjustment expenses reflect losses paid, expenses paid to resolve claims, such as fees paid to adjusters, attorneys and investigators, and changes in our reserves for unpaid losses and loss adjustment expenses during the fiscal period, in each case net of losses ceded to reinsurers. Our reserves for unpaid losses and loss adjustment expenses represent the estimated ultimate cost of resolving all reported claims plus all losses we incurred related to insured events that we assume have occurred as of the reporting date, but that policyholders have not yet reported to us (which are commonly referred to as incurred but not reported, or “IBNR”). We estimate our reserves for unpaid losses using individual case-based estimates for reported claims and actuarial estimates for IBNR losses. We continually review and adjust our estimated losses as necessary based on industry development trends, our evolving claims experience and new information obtained. If our unpaid losses and loss adjustment expenses are considered deficient or redundant, we increase or decrease the liability in the period in which we identify the difference and reflect the change in our current period results of operations.

Policy acquisition costs.    Policy acquisition costs consist of the following items: (i) commissions paid to outside agents at the time of policy issuance, (ii) policy administration fees paid to a third-party administrator at the time of policy issuance, (iii) premium taxes and (iv) inspection fees. We recognize policy acquisition costs ratably over the term of the underlying policy. Until renewed, policies assumed from Citizens have no associated policy acquisition costs.

General and administrative expenses.    General and administrative expenses include compensation and related benefits, professional fees, office lease and related expenses, information system expenses, corporate insurance, and other general and administrative costs.

Provision for income taxes.    Provision for income taxes generally consists of income taxes payable by our subsidiaries that are taxed as corporations. In connection with this offering, we will convert from a limited liability company to a corporation. Once we are treated as a corporation for tax purposes, we will be subject to typical corporate U.S. federal and state income tax rates which we expect to result in a statutory tax rate of approximately 37.6% under current tax law.

Ratios

Ceded premium ratio.    Our ceded premium ratio represents ceded premiums as a percentage of gross premiums earned.

Gross loss ratio.    Our gross loss ratio represents losses and loss adjustment expenses as a percentage of gross premiums earned.

Net loss ratio.    Our net loss ratio represents losses and loss adjustment expenses as a percentage of net premiums earned.

Gross expense ratio.    Our gross expense ratio represents policy acquisition costs and general and administrative expenses as a percentage of gross premiums earned.

Net expense ratio.    Our net expense ratio represents policy acquisition costs and general and administrative expenses as a percentage of net premiums earned.

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Combined ratios.    Our combined ratio on a gross basis represents the sum of ceded premiums, losses and loss adjustment expenses, policy acquisition costs and general and administrative expenses as a percentage of gross premiums earned. Our combined ratio on a net basis represents the sum of losses and loss adjustment expenses, policy acquisition costs and general and administrative expenses as a percentage of net premiums earned.

The combined ratio is the key measure of underwriting performance traditionally used in the property and casualty industry. A combined ratio under 100% generally reflects profitable underwriting results. A combined ratio over 100% generally reflects unprofitable underwriting results.

Due to the impact our reinsurance costs have on net premiums earned from period to period, our management believes the combined ratio on a gross basis is more relevant in assessing overall performance.

Highlights for the Three Months Ended March 31, 2014

• Approximately 140,000 policies in force at March 31, 2014, of which approximately 89.0% were assumed from Citizens

• Gross premiums written of $68.9 million and total revenue of $43.9 million

• Net premiums earned of $42.2 million

• Net income of $7.9 million

• Combined ratio of 83.3% on a gross basis; combined ratio of 75.9% on a net basis

• Cash, cash equivalents and investments of $225.7 million

Results of Operations

Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013

Revenue

Gross premiums written.    Gross premiums written increased from $16.3 million for the three months ended March 31, 2013 to $68.9 million for the three months ended March 31, 2014. The increase in gross premiums written was due to the renewal of a significant number of policies previously assumed from Citizens and the growing number of new voluntary policies written. Of our gross premiums written for the three months ended March 31, 2014, $52.1 million represents direct premiums written and $16.8 million represents assumed premiums written. Renewals of policies previously assumed from Citizens accounted for $45.0 million, while voluntary business accounted for $7.1 million.

Gross premiums earned.    Gross premiums earned increased from $20.3 million for the three months ended March 31, 2013 to $60.9 million for the three months ended March 31, 2014. Our policies in force as of March 31, 2013 and March 31, 2014 were approximately 42,000, and 140,000, respectively, and this increase had a favorable impact on our gross premiums earned.

Ceded premiums.    Ceded premiums increased from $0.4 million for the three months ended March 31, 2013 to $18.6 million for the three months ended March 31, 2014. The increase in ceded premiums reflects the commencement of our annual catastrophe reinsurance program effective June 1, 2013. Prior to June 1, 2013, our reinsurance costs were significantly lower because we purchased reinsurance limited to non-hurricane related losses through May 31, 2013.

Net premiums earned.    Net premiums earned increased from $20.0 million for the three months ended March 31, 2013 to $42.2 million for the three months ended March 31, 2014. The increase in net premiums earned in the comparable periods is primarily attributable to the increase in the number of policies in force during the three months ended March 31, 2014 as compared to the same period in 2013.

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Net investment income.    Net investment income, inclusive of realized investment losses, increased from $0.2 million for the three months ended March 31, 2013 to $0.6 million for the three months ended March 31, 2014. The increase in net investment income is due to the significant increase in invested assets at March 31, 2014 as compared to March 31, 2013.

Other revenue.    Other revenue increased from $0.2 million for the three months ended March 31, 2013 to $1.1 million for the three months ended March 31, 2014. The increase in other revenue between the comparable periods is primarily attributable to the purchase of our commercial property in Clearwater, Florida in April 2013 and the rental income received pursuant to non-cancelable leases for such property. Policy fees generated by our growing portfolio of new and renewed policies also contributed to the increase in other revenue.

Total revenue.    Total revenue increased from $20.3 million for the three months ended March 31, 2013 to $43.9 million for the three months ended March 31, 2014. The increase in total revenue was due primarily to the growth in net premiums earned resulting from the significant increase in the number of policies in force throughout the three months ended March 31, 2014 as compared to the same period in the prior year.

Expenses

Losses and loss adjustment expenses.    Losses and loss adjustment expenses increased from $5.3 million for the three months ended March 31, 2013 to $20.6 million for the three months ended March 31, 2014. The increase in losses and loss adjustment expenses resulted primarily from an increase in the number of policies in force between the respective periods as well as reserve strengthening during the three months ended March 31, 2014. Losses and loss adjustment expenses for the three months ended March 31, 2014 include losses paid of $11.5 million and a $9.1 million increase in unpaid losses and loss adjustment expenses, including the addition of $4.6 million of IBNR reserves. As of March 31, 2014, we reported $28.5 million in unpaid losses and loss adjustment expenses which included $15.6 million attributable to IBNR, or 55% of total reserves for unpaid losses and loss adjustment expenses.

Policy acquisition costs.    Policy acquisition costs increased from $0.1 million for the three months ended March 31, 2013 to $4.5 million for the three months ended March 31, 2014. The increase is primarily attributable to the significant increase in new and renewal policies, which have associated commissions paid to outside agents at the time of policy issuance, policy administration fees paid to a third-party administrator at the time of policy issuance, premium taxes and inspection fees, whereas policies assumed from Citizens have none of these expenses prior to their renewal.

General and administrative expenses.    General and administrative expenses increased from $4.0 million for the three months ended March 31, 2013 to $7.0 million for the three months ended March 31, 2014. The increase was due primarily to the growth in our infrastructure resulting in greater costs associated with our personnel, facilities and overall business activity. Also contributing to the increase was greater utilization of professional services and consultants in response to the growing complexity and scope of our business activities, as well as expenses associated with our initial public offering.

Provision for income taxes.    Provision for income taxes was $3.9 million for the three months ended March 31, 2014 and 2013. Our effective tax rate for the three months ended March 31, 2014 and 2013 was 33.3% and 35.6%, respectively.

Ratios

Ceded premium ratio.    Our ceded premium ratio increased from 1.8% for the three months ended March 31, 2013 to 30.6% for the three months ended March 31, 2014, primarily as a result of the commencement of our annual catastrophe reinsurance program effective June 1, 2013. Prior to June 1, 2013, our reinsurance costs were significantly lower because we purchased reinsurance limited to non-hurricane related losses through May 31, 2013.

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Gross loss ratio.    Our gross loss ratio increased from 26.0% for the three months ended March 31, 2013 to 33.8% for the three months ended March 31, 2014, primarily due to reserve strengthening during the three months ended March 31, 2014.

Net loss ratio.    Our net loss ratio increased from 26.4% for the three months ended March 31, 2013 to 48.7% for the three months ended March 31, 2014, primarily as a result of an increase in ceded premiums in connection with the commencement of our annual catastrophe reinsurance program effective June 1, 2013.

Gross expense ratio.    Our gross expense ratio decreased from 20.2% for the three months ended March 31, 2013 to 18.8% for the three months ended March 31, 2014. This decrease is due to the achievement of certain economies of scale associated with the significant growth in the number of policies in force, as the increases in our revenue outpaced the increases in our expenses.

Net expense ratio.    Our net expense ratio increased from 20.5% for the three months ended March 31, 2013 to 27.2% for the three months ended March 31, 2014 as a result of the increase in ceded premium in connection with the commencement of our annual catastrophe reinsurance program effective June 1, 2013.

Combined ratio.    Our combined ratio on a gross basis increased from 47.9% for the three months ended March 31, 2013 to 83.3% for the three months ended March 31, 2014. Our combined ratio on a net basis increased from 47.0% for the three months ended March 31, 2013 to 75.9% for the three months ended March 31, 2014. The increase in our combined ratio, on both a gross and net basis, is due primarily to an increase in the proportion of our policies having policy acquisition costs, coupled with the commencement of our annual catastrophe reinsurance program effective June 1, 2013.

Year Ended December 31, 2013

Revenue

Gross premiums written.    Gross premiums written for the year ended December 31, 2013 were $218.5 million. Of our gross written premiums for this period, $120.9 million represents direct premiums written and $97.6 million represents assumed premiums written, including earned premium for the period from June 1, 2013 to June 27, 2013 with respect to the approximately 39,000 policies we assumed from Citizens on June 28, 2013. Renewals of policies previously assumed from Citizens accounted for $102.8 million, while voluntary business accounted for $18.1 million.

Gross premiums written for the three months ended March 31, June 30, September 30 and December 31, 2013 were $16.3 million (including $11.6 million of direct premiums written and $4.7 million of assumed premiums written), $81.0 million (including $28.2 million of direct premiums written and $52.8 million of assumed premiums written), $37.2 million (including $36.2 million of direct premiums written and $1.0 million of assumed premiums written) and $84.0 million (including $44.9 million of direct premiums written and $39.1 million of assumed premiums written), respectively. The significant increase in gross premiums written for the three months ended June 30, 2013 as compared to the three months ended March 30, 2013 was a result of two assumption transactions with Citizens during the three months ended June 30, 2013, which resulted in our assumption of approximately 43,000 policies from Citizens. During the three months ended December 31, 2013, we also participated in two assumption transactions with Citizens, resulting in a significant increase during the period as compared to the three months ended September 30, 2013.

Gross premiums earned.    Gross premiums earned for the year ended December 31, 2013 were $140.0 million.

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Gross premiums earned for the three months ended March 31, June 30, September 30 and December 31, 2013 were $20.3 million, $28.0 million, $41.5 million and $50.1 million, respectively. From December 31, 2012 to December 31, 2013, policies in force grew by approximately 246%, favorably impacting our gross premiums earned throughout 2013.

Ceded premiums.    Ceded premiums for the year ended December 31, 2013 were $44.8 million.

Ceded premiums for the three months ended March 31, June 30, September 30 and December 31, 2013 were $0.4 million, $6.4 million, $19.7 million and $18.3 million, respectively. The increase beginning in the three months ended June 30, 2013 reflects the commencement of our annual catastrophe reinsurance program effective June 1, 2013. Prior to June 1, 2013, our reinsurance costs were significantly lower because we purchased reinsurance limited to non-hurricane related losses through May 31, 2013.

Net premiums earned.    Net premiums earned for the year ended December 31, 2013 were $95.2 million.

Net premiums earned for the three months ended March 31, June 30, September 30 and December 31, 2013 were $20.0 million, $21.6 million, $21.8 million and $31.8 million, respectively.

Retroactive reinsurance income.    Retroactive reinsurance income of $26.0 million for the year ended December 31, 2013 represents premiums earned, net of losses and loss adjustment expenses, for the period from January 1, 2013 through May 31, 2013 from a retroactive reinsurance agreement entered in connection with our assumption of approximately 39,000 policies in June 2013. This income, which had no corresponding reinsurance costs, is excluded from our premiums and losses. Beginning June 1, 2013, premiums and losses associated with these polices are included in our underwriting results. See Note 2 to our consolidated financial statements for the year ended December 31, 2013 included elsewhere in this prospectus.

Net investment income.    Net investment income was $1.0 million for the year ended December 31, 2013. Our average investable assets for the year ended December 31, 2013 were $135.8 million, and our average net return on investment for such period was 0.7%. Our net investment income was impacted by large cash balances and low interest rates on fixed maturity securities during the period.

Net investment income for the three months ended March 31, June 30, September 30 and December 31, 2013 was $0.2 million, $0.1 million, $0.3 million and $0.4 million, respectively.

Other revenue.    Other revenue for the year ended December 31, 2013 was $2.9 million.

Other revenue for the three months ended March 31, June 30, September 30 and December 31, 2013 was $0.2 million, $0.8 million, $0.8 million and $1.1 million, respectively. The increase in other revenue commencing with the three months ended June 30, 2013 is primarily related to the purchase of our commercial property in Clearwater, Florida in April 2013 and the rental income received pursuant to non-cancelable leases for such property. Policy fees generated by our growing portfolio of new and renewed policies also contributed to the increase in other revenue.

Total revenue.    Total revenue for the year ended December 31, 2013 was $124.8 million.

Total revenue for the three months ended March 31, June 30, September 30 and December 31, 2013 was $20.3 million, $48.6 million, $22.8 million and $33.1 million, respectively. The increase in revenue for the three months ended June 30, 2013 was primarily attributable to retroactive reinsurance income recognized in connection with the retroactive reinsurance agreement we entered into in June 2013. The increase in revenue for the three months ended December 31, 2013 as compared to the prior period was due primarily to the significant Citizens assumption transaction in November 2013.

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Expenses

Losses and loss adjustment expenses.    Losses and loss adjustment expenses for the year ended December 31, 2013 were $38.5 million. Losses and loss adjustment expenses for this period include losses paid of $20.6 million and a $17.9 million increase in unpaid losses and loss adjustment expenses, including the addition of $10.0 million of IBNR reserves. As of December 31, 2013, we reported $19.3 million in unpaid losses and loss adjustment expenses which included $11.0 million (57%) attributable to IBNR.

Losses and loss adjustment expenses for the three months ended March 31, June 30, September 30 and December 31, 2013 were $5.3 million, $7.9 million, $10.0 million and $15.4 million, respectively. The increase in losses and loss adjustment expenses resulted primarily from an increase in the number of policies in force in each period.

Policy acquisition costs.    Policy acquisition costs were $6.2 million for the year ended December 31, 2013. We expect these costs to increase as we renew additional policies assumed from Citizens and pursue our strategy to increase the number of voluntary policies.

For the three months ended March 31, June 30, September 30 and December 31, 2013, policy acquisition costs were $0.1 million, $0.9 million, $1.7 million and $3.4 million, respectively.

General and administrative expenses.    General and administrative expenses were $24.7 million for the year ended December 31, 2013.

For the three months ended March 31, June 30, September 30 and December 31, 2013, general and administrative expenses were $4.0 million, $5.6 million, $3.4 million and $11.8 million respectively. The increase in general and administrative expenses in the second and fourth quarters of 2013 is primarily related to an accrual for cash and equity bonuses payable to directors, officers and certain employees based on earnings. The bonuses paid during the three months ended December 31, 2013 exceeded the amount accrued as of the date of payment, resulting in an increase in general and administrative expenses during the period.

Interest expense.    Interest expense was $16,000 for the year ended December 31, 2013.

Provision for income taxes.    Provision for income taxes was $21.2 million for the year ended December 31, 2013, and our effective tax rate for such period was 38.3%.

Ratios

Ceded premium ratio.    Our ceded premium ratio for the year ended December 31, 2013 was 32.0%.

For the three months ended March 31, June 30, September 30 and December 31, 2013, our ceded premium ratio was 1.8%, 22.9%, 47.5% and 36.6% respectively. The increase in our ceded premium ratio reflects the commencement of our annual reinsurance program effective June 1, 2013 as described above. The decrease in the ceded premium ratio for the three months ended December 31, 2013 resulted from the assumed premiums for the policies we assumed from Citizens during the fourth quarter of 2013, for which there was no incremental reinsurance cost.

Gross loss ratio.    Our gross loss ratio for the year ended December 31, 2013 was 27.5%.

For the three months ended March 31, June 30, September 30 and December 31, 2013, our gross loss ratio was 26.0%, 28.1%, 24.1% and 30.7%, respectively.

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Net loss ratio.    Our net loss ratio for the year ended December 31, 2013 was 40.5%.

For the three months ended March 31, June 30, September 30 and December 30, 2013, our net loss ratio was 26.4%, 36.4%, 45.9% and 48.3% respectively. The increase in our net loss ratio during the second half of the year reflects the increase in ceded premium in connection with the commencement of our twelve month reinsurance program on June 1, 2013. Prior to June 1, 2013, our reinsurance costs were significantly lower because we purchased reinsurance limited to non-hurricane related losses through May 31, 2013.

Gross expense ratio.    Our gross expense ratio for the year ended December 31, 2013 was 22.0%. Our gross expense ratio was favorably impacted by the assumption of policies from Citizens, which have no policy acquisition costs until renewed.

For the three months ended March 31, June 30, September 30 and December 31, 2013, our gross expense ratio was 20.2%, 23.0%, 12.3% and 30.3%, respectively. The increase in our gross expense ratio for the three months ended December 31, 2013 resulted primarily from the cash and equity bonuses paid to directors, officers and employees during the period.

Net expense ratio. Our net expense ratio for the year ended December 31, 2013 was 32.4%. Our relatively low net expense ratio is due in part to the assumption of policies from Citizens, which have no policy acquisition costs until renewed.

For the three months ended March 31, June 30, September 30 and December 31, 2013, our net expense ratio was 20.5%, 29.8%, 23.4% and 47.8%, respectively. The increase in our net expense ratio for the three months ended December 31, 2013 resulted primarily from the payment of bonuses described above.

Combined ratio.    Our combined ratio on a gross basis for the year ended December 31, 2013 was 81.6% and on a net basis was 72.9%.

For the three months ended March 31, June 30, September 30 and December 31, 2013, our combined ratio on a gross basis was 47.9%, 73.9%, 83.9% and 97.6%, respectively, and on a net basis was 47.0%, 66.2%, 69.3% and 96.2% respectively. The increase in the combined ratios beginning during the three months ended June 30, 2013 was a result of the commencement of our annual reinsurance program effective June 1, 2013 and the payment of bonuses described above.

Period from August 7, 2012 (inception) to December 31, 2012

Revenue

Gross premiums written.    Gross premiums written for the period ended December 31, 2012 were $43.4 million and primarily related to our assumption of approximately 37,000 policies from Citizens in December 2012.

Gross premiums earned.    Gross premiums earned for the period ended December 31, 2012 were $5.7 million and primarily related to our December 2012 assumption transaction with Citizens.

Ceded premiums.    Ceded premiums during the period ended December 31, 2012 were $0.1 million.

Net premiums earned.    Net premiums earned for the period ended December 31, 2012 were $5.6 million.

Net investment income.    Net investment income was $27,000 for the period ended December 31, 2012.

Total revenue.    Total revenue for the period ended December 31, 2012 was $5.6 million.

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Expenses

Losses and loss adjustment expenses.    Losses and loss adjustment expenses for the period ended December 31, 2012 were $1.4 million and reflect our brief period of operations. No meaningful conclusions relating to trends or variance from expectations can be drawn from the very few reported losses during the period. Consequently, we established IBNR reserves to complement our limited paid and reserved loss experience consistent with the risk characteristics related to the exposures drawn from our assumption of policies from Citizens in December 2012.

Policy acquisition costs.    Policy acquisition costs were $84,000 for the period ended December 31, 2012 and related to an insignificant number of voluntary and renewed policies.

General and administrative expenses.    General and administrative expenses were $7.9 million for the period ended December 31, 2012 and primarily related to stock-based compensation of $5.5 million and start-up expenses.

Interest expense.    Interest expense was $0.8 million for the period ended December 31, 2012 and related to the payment of a 20% fee payable upon the exchange of $3.9 million aggregate principal amount of notes for equity.

Provision for income taxes.    Provision for income taxes was $0.9 million for the period ended December 31, 2012. Heritage P&C had taxable income for the period ended December 31, 2012, while our limited liability company subsidiaries sustained losses. Such losses were passed through to our equity holders and were not available to offset Heritage P&C’s taxable income.

Liquidity and Capital Resources

As of March 31, 2014, we had $74.7 million in cash and cash equivalents, which primarily consisted of cash and money market accounts. We intend to maintain substantial cash balances during hurricane season to meet seasonal liquidity needs relating to potential catastrophic losses.

We generate cash through premium collections, investment income and the sale or maturity of invested assets. During our start-up phase, we funded our working capital requirements primarily through private sales of equity. We received net proceeds of approximately $60.9 million primarily from four equity issuances through December 31, 2013. See “—Equity Issuances.” We use our cash to pay reinsurance premiums, losses and loss adjustment expenses, policy acquisition costs, salaries and employee benefits, other expenses, as well as to purchase investments.

Although we can provide no assurances, we believe that the net proceeds from this offering, together with our available cash and cash equivalents balance and cash generated from operations, should be sufficient to meet our working capital requirements and other capital expenditures for the next twelve months.

Operating Activities

Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013

Cash provided by operating activities increased from $5.2 million for the three months ended March 31, 2013 to $24.0 million for the three months ended March 31, 2014. The increase in cash provided by operating activities resulted from the significant increase in premiums associated with renewals of Citizens policies and voluntary policies. Renewal activity for the three months ended March 31, 2013 was associated with a significantly smaller number of policies eligible for renewal. Also contributing to the increase in cash provided by operating activities was the growth in the number of voluntary policies written compared to the same period in the prior year.

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Year Ended December 31, 2013

For the year ended December 31, 2013, our operations generated cash of $105.1 million primarily from the transfer of unearned premiums associated with assumption transactions with Citizens and the retroactive reinsurance agreement effected during the period, as well as premiums associated with renewals of Citizens policies and voluntary policies. Our cash flows from operating activities generally represent the difference between: (l) premiums collected, net of reinsurance paid, and investment earnings realized and (2) losses and loss adjustment expenses paid and underwriting and other expenses paid.

Investing Activities

Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013

Net cash used in investing activities decreased from $52.3 million for the three months ended March 31, 2013 to $14.5 million for the three months ended March 31, 2014. The decrease in net cash used in investing activities was primarily attributable to the decision to hold larger cash balances during the three months ended March 31, 2014. Also contributing to the greater investment activity during the three months ended March 31, 2013 was our deployment of the proceeds from our initial capitalization.

Year Ended December 31, 2013

For the year ended December 31, 2013, we deployed approximately $136.5 million of our liquid resources, including $125.6 million, net of sales or maturities, to acquire investment securities and other invested assets, $9.7 million to acquire the commercial property in Clearwater, Florida, $0.9 million to effect real estate improvements and $0.3 million to acquire office equipment. We expect to make capital expenditures of approximately $4.0 million relating to improvements on the Clearwater property during 2014. We will continue to position our investment funds to achieve a prudent balance between current yield, conservation of investment capital and the immediate liquidity requirements of our operation.

In addition to maintaining a $300,000 cash deposit with FLOIR to meet regulatory requirements, at December 31, 2013, we held significant cash balances reflecting the receipt of premiums associated with significant assumption and retroactive reinsurance transactions with Citizens, limited attractive investment opportunities and our seasonal liquidity objective as we neared the end of the Florida hurricane season.

Financing Activities

Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013

Net cash provided by financing activities decreased from $31.3 million for the three months ended March 31, 2013 to $88,000 for the three months ended March 31, 2014. Net cash provided by financing activities for the three months ended March 31, 2013 consisted of proceeds from capital raising activity occurring during such period. There was no comparable capital raising activity for the three months ended March 31, 2014.

Year Ended December 31, 2013

During the year ended December 31, 2013, we raised $33.6 million through equity issuances. We satisfied a $1.0 million note payable to a financial institution that had been in place since our formation.

Seasonality of our Business

Our insurance business is seasonal as hurricanes typically occur during the period from June 1 through November 30 each year. With our reinsurance program effective on June 1 each year, any variation in the cost of our reinsurance, whether due to changes to reinsurance rates or changes in the total insured value of our policy base, will occur and be reflected in our financial results beginning June 1 of each year, subject to certain adjustments.

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Equity Issuances

Historically, we have funded our working capital requirements primarily through private issuances of our equity. The equity issuances described below resulted in an aggregate of 6,417 shares and 3,026 warrants outstanding as of March 31, 2014, reflecting total paid in capital of $83.9 million as of such date, exclusive of the effects of issuing redeemable shares. Prior to the consummation of this offering,              of our outstanding warrants will be exercised for              shares of common stock of the Company, assuming an initial public offering price of $         per share, the midpoint of the range set forth on the cover of this prospectus. An additional              shares of common stock of the Company will be issued in connection with such exercise for every $1.00 increase in the public offering price in this offering. See “Prospectus Summary—Reorganization Transactions.”

In 2012, we initially raised an aggregate of $23.3 million from the sale of 2,329 shares at a price of $10,000 per share. We sold these shares to directors, certain members of senior management and a select group of initial investors. The price per share was established to achieve the desired capital in the formation of our Company and reflect the progress made by the Company towards the licensure of Heritage P&C.

In the fourth quarter of 2012, we issued $3.9 million aggregate principal amount of notes to certain members, including directors and members of senior management, to raise additional capital required by Heritage P&C. The notes provided for a 20% fee due upon repayment. Following the issuance of these notes, we determined that debt would not allow us to achieve our desired financial stability rating and exchanged the notes and the right to receive the accompanying 20% fee for equity in the form of investment units, with each investment unit comprised of one share and one warrant to purchase a share. Based on a value of $12,500 per investment unit, we issued 398 investment units in exchange for the notes. Certain investors, including directors and members of our senior management, who received fractional investment units upon the exchange of their notes, paid in $95,000 in cash in order to receive whole investment units. Additionally, in connection with the exchange of the notes, certain members of senior management received, in the aggregate, $200,000 in stock-based compensation in the form of investment units. The warrants are exercisable at any time at a strike price of $15,000 until their expiry at March 31, 2018. The value of $12,500 per investment unit was based on share sales to unrelated parties and the value inherent in the option to purchase shares represented by the warrant.

Also in the fourth quarter of 2012, we issued 532 shares to certain members of senior management and a select group of initial investors and recognized $5.3 million of compensation expense at $10,000 per share, which was based upon recent sales of investment units to unrelated parties after eliminating the consideration payable in respect of the warrants. These shares were distributed in connection with the successful execution of our initial assumption transaction with Citizens.

On January 1, 2013, we reclassified 415 equity shares to redeemable shares classified as temporary equity upon entering into employment agreements with certain members of management.

In the first quarter of 2013, we raised an additional $32.7 million through the issuance of 2,618 investment units to certain investors, including each member of our management team, at a price of $12,500 per investment unit. The warrants issued in this transaction are exercisable at any time at an exercise price of $15,000 per share until their expiry at March 31, 2018. The 2,618 investment units consisted of 2,511 equity shares, 107 redeemable shares classified as temporary equity and 2,618 warrants to purchase one share per warrant.

Also in the first quarter of 2013, certain members of management were given an opportunity to purchase, in the aggregate, 115 shares (15 equity shares and 100 redeemable shares classified as temporary equity) at $5,000 per share. Each member of management exercised his option to purchase the shares pursuant to this grant. We also established a reserve in order to reimburse management for their personal tax consequences of the stock grant in the amount of $318,000. We assigned a fair value to these stock grants of $10,000 per share, based upon recent sales of investment units to unrelated parties after reduction to eliminate the consideration payable in respect of the warrants, and recognized $893,000 compensation expense as a result of this grant.

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In the fourth quarter of 2013, the Board resolved to award $5.1 million of equity compensation to our directors and certain members of our senior management and staff based upon a value per share as of October 31, 2013. We engaged an independent valuation specialist to perform a valuation of our shares, which value was approximately $13,125 per share as of October 31, 2013. Consistent with the valuation, we awarded 389 shares (97 equity shares and 292 redeemable shares classified as temporary equity) to our directors, members of senior management and staff valued at $13,125 per share. The independent valuation specialist’s valuation was based on various assumptions and considerations, which were evaluated by management, including a liquidity discount customarily associated with a private company.

Taxation

Deferred Tax Asset and Current Tax Liability

We report a deferred tax asset arising from the portion (20%) of unearned premiums that are recognized as taxable income in advance of being earned and recognized as income for financial reporting purposes. Accordingly, our income taxes currently paid and payable also reflect this temporary difference between taxable income and earned income reported in our financial statements. The increases in our deferred tax asset from December 31, 2012 through March 31, 2014 reflect the significant unearned premiums arising from our assumption transactions and the additional resulting temporary differences due to certain amounts being taxable in advance of being recognized as earned for financial reporting purposes.

Conversion to a Corporation

In connection with this offering, we will convert from a limited liability company to a corporation. Because we are currently treated as a partnership for tax purposes, we are not subject to entity-level federal or state income taxation. Our income tax provision generally consists of income taxes payable by our separate subsidiaries that are taxed as corporations. As such, our current effective tax rate is driven primarily by the taxable income recognized with respect to gross premiums written as described above. Once we are treated as a corporation for tax purposes, we will be subject to typical corporate U.S. federal and state income tax rates which we expect to result in a statutory tax rate of approximately 37.6% under current tax law.

Off-Balance Sheet Arrangements

We obtained a $5.0 million irrevocable letter of credit from a financial institution to secure Osprey’s obligations arising from our reinsurance program. We collateralized this letter of credit facility with otherwise unencumbered real estate.

Quantitative and Qualitative Disclosures about Market Risk

Our investment portfolios at March 31, 2014 included fixed-maturity and equity securities, the purposes of which are not for trading or speculation. Our main objective is to maximize after-tax investment income and maintain sufficient liquidity to meet policyholder obligations while minimizing market risk which is the potential economic loss from adverse fluctuations in securities’ prices. We consider many factors including credit ratings, investment concentrations, regulatory requirements, anticipated fluctuation of interest rates, durations and market conditions in developing investment strategies. Investment securities are managed by a group of nationally recognized asset managers and are overseen by the investment committee appointed by our board of directors. Our investment portfolios are primarily exposed to interest rate risk, credit risk and equity price risk. We classify our fixed-maturity and equity securities as available-for-sale and report any unrealized gains or losses, net of deferred income taxes, as a component of other comprehensive income within our stockholders’ equity. As such, any material temporary changes in their fair value can adversely impact the carrying value of our stockholders’ equity.

Interest Rate Risk

Our fixed-maturity securities are sensitive to potential losses resulting from unfavorable changes in interest rates. We manage the risk by analyzing anticipated movement in interest rates and considering our future capital needs.

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The following table illustrates the impact of hypothetical changes in interest rates to the fair value of our fixed-maturity securities at March 31, 2014 (in thousands):

Hypothetical Change in Interest Rates	Estimated Fair Value After Change		Change in Estimated Fair Value			Percentage Increase (Decrease) in Estimated Fair Value
300 basis point increase	$	112,095	$	(17,121	)		(13.2	)%
200 basis point increase		117,800		(11,416	)		(8.8	)%
100 basis point increase		123,507		(5,709	)		(4.4	)%
100 basis point decrease		134,775		5,559			4.3	%
200 basis point decrease		139,029		9,813			7.6	%
300 basis point decrease		141,339		12,123			9.4	%

Credit Risk

Credit risk can expose us to potential losses arising principally from adverse changes in the financial condition of the issuers of our fixed-maturity securities. We mitigate the risk by primarily investing in fixed-maturity securities that are rated “BBB” or higher and diversifying our investment portfolio to avoid concentrations in any single issuer or business sector. Pursuant to our investment policy, only $1.0 million may be invested in below investment grade bonds. The following table presents the composition of our fixed-maturity securities, consisting of bonds and redeemable preferred stocks, by rating, at March 31, 2014 (in thousands):

Comparable Rating	Amortized Cost		% of Total Amortized Cost			Estimated Fair Value		% of Total Estimated Fair Value
AAA	$	4,068		3.1	%	$	4,055		3.1	%
AA+		16,268		12.6	%		16,183		12.5	%
AA		21,931		17.0	%		21,917		17.0	%
AA-		13,989		10.8	%		14,033		10.9	%
A+		14,489		11.2	%		14,452		11.2	%
A		17,720		13.7	%		17,725		13.7	%
A-		11,009		8.5	%		11,040		8.5	%
BBB+		13,526		10.5	%		13,552		10.5	%
BBB		14,275		11.0	%		14,301		11.1	%
BBB-		785		0.6	%		765		0.6	%
BB+		907		0.7	%		894		0.7	%
BB		162		0.1	%		157		0.1	%
B+		48		0.0	%		48		0.0	%
B-		92		0.1	%		94		0.1	%
Total	$	129,269		100.0	%	$	129,216		100.0	%

Equity Price Risk

Our equity investment portfolio at March 31, 2014 primarily consisted of non-redeemable preferred stocks and interests in publicly traded limited partnerships. We may incur potential losses due to adverse changes in equity security prices. We manage the risk primarily through industry and issuer diversification and asset allocation techniques.

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The following table illustrates the composition of our equity securities at March 31, 2014 (in thousands):

	Estimated Fair Value		% of Total Estimated Fair Value
Stocks by sector:
Financial	$	2,475		15.7	%
Energy		8,547		54.1	%
Utility		—		0.0	%
Other		4,661		29.5	%
Subtotal		15,683		99.3	%
Mututal Funds and ETF by type:
Debt		—		0.0	%
Equity		117		0.7	%
Subtotal		117		0.7	%
Total	$	15,800		100.0	%

Foreign Currency Exchange Risk

At March 31, 2014, we did not have any material exposure to foreign currency related risk.

Critical Accounting Policies and Estimates

Preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses. We believe that the accounting estimates discussed below represent the accounting estimates requiring the exercise of judgment where a different set of judgments could result in the greatest changes to reported results. Our current critical accounting policies and estimates are as follows:

Premiums.    We record direct and assumed premiums written as revenue, net of ceded amounts, on a daily pro rata basis over the contract period of the related policies that are in force. For any portion of premiums not earned at the end of the reporting period, we record an unearned premium liability.

Premiums receivable represents amounts due from our policyholders for billed premiums and related policy fees. We perform a policy-level evaluation to determine the extent to which the balance of the premium receivable exceeds the balance of the unearned premium. We then age any resulting exposure based on the last date the policy was billed to the policyholder, and we establish an allowance account for credit losses for any amounts outstanding for more than 90 days. When we receive payments on amounts previously charged off, we credit bad debt expense in the period we receive the payment. Balances in premiums receivable and the associated allowance account are removed upon cancellation of the policy due to non-payment. We did not record an allowance for uncollectible premiums at March 31, 2014 or December 31, 2013.

When we receive premium payments from policyholders prior to the effective date of the related policy, we record an advance premium liability. On the policy effective date, we reduce the advance premium liability and record the premiums as described above.

Reserves For Unpaid Losses and Loss Adjustment Expenses.    Reserves for unpaid losses and loss adjustment expenses, also referred to as loss reserves, represent the most significant accounting estimate inherent in the preparation of our financial statements. These reserves represent management’s best estimate of the amount we will ultimately pay for losses and loss adjustment expenses and we base the amount upon the application of various actuarial reserve estimation techniques as well as considering other material facts and circumstances known at the balance sheet date.

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We establish two categories of loss reserves as follows:

• Case reserves—When a claim is reported, we establish an initial estimate of the losses that will ultimately be paid on the reported claim. Our initial estimate for each claim is based upon the judgment of our claims professionals who are familiar with property and liability losses associated with the coverage offered by our policies. Then, our claims personnel perform an evaluation of the type of claim involved, the circumstances surrounding each claim and the policy provisions relating to the loss and adjust the reserve as necessary. As claims mature, we increase or decrease the reserve estimates as deemed necessary by our claims department based upon additional information we receive regarding the loss, the results of on-site reviews and any other information we gather while reviewing the claims.

• IBNR reserves—Our IBNR reserves include true IBNR reserves plus “bulk” reserves. True IBNR reserves represent amounts related to claims for which a loss occurred on or before the date of the financial statements but which have not yet been reported to us. Bulk reserves represent additional amounts that cannot be allocated to particular claims, but which are necessary to estimate ultimate losses on known claims. We estimate our IBNR reserves by projecting our ultimate losses using industry accepted actuarial methods and then deducting actual loss payments and case reserves from the projected ultimate losses. We review and adjust our IBNR reserves on a quarterly basis based on information available to us at the balance sheet date.

When we establish our reserves, we analyze various factors such as the evolving historical loss experience of the insurance industry as well as our experience, claims frequency and severity, our business mix, our claims processing procedures, legislative enactments, judicial decisions and legal developments in imposition of damages, and general economic conditions, including inflation. A change in any of these factors from the assumptions implicit in our estimates will cause our ultimate loss experience to be better or worse than indicated by our reserves, and the difference could be material. Due to the interaction of the foregoing factors, there is no precise method for evaluating the impact of any one specific factor in isolation, and an element of judgment is ultimately required. Due to the uncertain nature of any projection of the future, the ultimate amount we will pay for losses will be different from the reserves we record.

We determine our ultimate loss reserves by selecting a point estimate within a relevant range of indications that we calculate using generally accepted actuarial techniques. Our selection of the point estimate is influenced by the analysis of our paid losses and incurred losses since inception, as well as industry information relevant to the population of exposures drawn from Citizens. At our current level of experience, industry information strongly influences the basis for estimates of claims related factors. We expect that our loss experience will be of growing significance in future periods.

Our independent actuary evaluated the adequacy of our reserves as of December 31, 2013 and concluded that total reserves ranging from a low of $17.0 million to a high of $20.8 million would meet the requirements of the insurance laws of Florida, be consistent with reserves computed in accordance with accepted loss reserving standards and principles, and make a reasonable provision for all unpaid loss and loss adjustment expense obligations under the terms of our contracts and agreements. In addition to $7.6 million of recorded case reserves, we recorded $11.0 million of IBNR reserves as of December 31, 2013 to achieve overall reserves of $18.6 million, plus an additional $783,000 attributable to reinsurance claims payable.

The process of establishing our reserves is complex and necessarily imprecise, as it involves using judgment that is affected by many variables. We believe a reasonably likely change in almost any of the factors we evaluate as part of our loss reserve analysis could have an impact on our reported results, financial position and liquidity.

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The following table quantifies the impact of changes in our loss reserves on our net income, stockholders’ equity and liquidity as of and for the year ended December 31, 2013.

(dollars in thousands)	Actual			Low Estimate		% Change from Actual			High Estimate		% Change from Actual
Loss Reserves	$	18,561	(1)	$	16,992				$	20,786
Impact on:
Net income	$	34,213		$	35,154		2.8	%	$	32,878		(3.9	)%
Stockholders’ equity	$	79,984		$	80,925		1.2	%	$	78,649		(1.7	)%
Cash, cash equivalents and investments	$	201,236		$	201,236		—		$	201,236		—
Adjusted cash, cash equivalents and investments(2)	$	190,099		$	191,041		0.5	%	$	188,764		(0.7	)%

⁽¹⁾  Does not include $783,000 attributable to reinsurance claims payable.

⁽²⁾  Adjusted cash, cash equivalents and investments is intended to present a measure of future liquidity and consists of cash, cash equivalents and investments, less loss reserves, net of taxes, assuming a 40% tax rate.

Policy Acquisition Costs.    We incur policy acquisition costs that vary with, and are directly related to, the production of new business. Policy acquisition costs consist of the following four items: (i) commissions paid to outside agents at the time of policy issuance, (ii) policy administration fees paid to a third-party administrator at the time of policy issuance, (iii) premium taxes and (iv) inspection fees. We capitalize policy acquisition costs to the extent recoverable, then we amortize those costs over the contract period of the related policy.

At each reporting date, we determine whether we have a premium deficiency. A premium deficiency would result if the sum of our expected losses, deferred policy acquisition costs and policy maintenance costs (such as costs to store records and costs incurred to collect premiums and pay commissions) exceeded our related unearned premiums plus investment income. Should we determine that a premium deficiency exists, we would write off the unrecoverable portion of deferred policy acquisition costs.

Reinsurance.    We follow industry practice of reinsuring a portion of our risks. Reinsurance involves transferring, or “ceding,” all or a portion of the risk exposure on policies we write to another insurer, known as a reinsurer. To the extent that our reinsurers are unable to meet the obligations they assume under our reinsurance agreements, we remain liable for the entire insured loss.

Our reinsurance agreements are short-term, prospective contracts. We record an asset, prepaid reinsurance premiums, and a liability, reinsurance payable, for the entire contract amount upon commencement of our new reinsurance agreements. We amortize our prepaid reinsurance premiums over the 12-month contract period.

In the event that we incur losses recoverable under our reinsurance program, we record amounts recoverable from our reinsurers on paid losses plus an estimate of amounts recoverable on unpaid losses. The estimate of amounts recoverable on unpaid losses is a function of our liability for unpaid losses associated with the reinsured policies; therefore, the amount changes in conjunction with any changes to our estimate of unpaid losses. Though an estimate of amounts recoverable from reinsurers on unpaid losses may change at any point in the future because of its relation to our reserves for unpaid losses, a reasonable probability exists that an estimated recovery may change significantly in the near term from the amounts included in our consolidated financial statements.

We estimate uncollectible amounts receivable from reinsurers based on an assessment of factors including the creditworthiness of the reinsurers and the adequacy of collateral obtained, where applicable. We recorded no amounts recoverable under our reinsurance program or bad debt expense related to reinsurance during the three months ended March 31, 2014 or the year ended December 31, 2013.

Investments.    We currently classify all of our investments in fixed maturity securities and equity securities as available-for-sale, and report them at fair value. We currently classify our investments in mortgage loans as

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held to maturity and report them at amortized cost. Subsequent to our acquisition of available-for-sale securities, we record changes in value through the date of disposition as unrealized holding gains and losses, net of tax effects, and include them as a component of other comprehensive income. We include realized gains and losses, which we calculate using the specific-identification method for determining the cost of securities sold, in net income. We amortize any premium or discount on investments over the remaining maturity period of the related investments using the effective interest method, and we report the amortization in net investment income. We recognize dividends and interest income when earned.

Quarterly, we perform an assessment of our investments to determine if any are “other-than-temporarily” impaired. An investment is impaired when the fair value of the investment declines to an amount less than the cost or amortized cost of that investment. As part of our assessment process, we determine whether the impairment is temporary or “other-than-temporary”. We base our assessment on both quantitative criteria and qualitative information, considering a number of factors including, but not limited to: how long the security has been impaired; the amount of the impairment; whether, in the case of equity securities, we intend to hold, and have the ability to hold, the security for a period sufficient for us to recover our cost basis, or whether, in the case of debt securities or mortgage loans, we intend to sell the investment or it is more likely than not that we will have to sell the investment before we recover the amortized cost; the financial condition and near-term prospects of the issuer; whether the issuer is current on contractually-obligated interest and principal payments; key corporate events pertaining to the issuer and whether the market decline was affected by macroeconomic conditions.

If we were to determine that an equity security has incurred an “other-than-temporary” impairment, we would permanently reduce the cost of the security to fair value and recognize an impairment charge. If a debt security or mortgage loan is impaired and we either intend to sell the security or mortgage loan or it is more likely than not that we will have to sell the security or mortgage loan before we are able to recover the amortized cost, then we would record the full amount of the impairment in our net income.

A large portion of our investment portfolio consists of fixed maturity securities and a mortgage loan, which may be adversely affected by changes in interest rates as a result of governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. A rise in interest rates would decrease the net unrealized holding gains of our investment portfolio, offset by our ability to earn higher rates of return on funds reinvested. Conversely, a decline in interest rates would increase the net unrealized holding gains of our investment portfolio, offset by lower rates of return on funds reinvested.

Fair Value.    Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price). When reporting the fair values of our financial instruments, we prioritize those fair value measurements into one of three levels based on the nature of the inputs, as follows:

• Level 1—Valuations based on quoted prices in active markets for identical assets and liabilities;

• Level 2—Valuations based on observable inputs that do not meet the criteria for Level 1, including quoted prices in inactive markets and quoted prices in active markets for similar, but not identical instruments; and

• Level 3—Valuations based on unobservable inputs, which are based upon the best available information when external market data is limited or unavailable.

We estimate the fair value of our investments using the closing prices on the last business day of the reporting period, obtained from active markets. For securities for which quoted prices in active markets are unavailable, we use observable inputs such as quoted prices in inactive markets, quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs. We do not have any investments in our portfolio which require us to use unobservable inputs. Our estimates of fair value reflect the interest rate environment that existed as of the close of business on March 31, 2014 and December 31, 2013. Changes in interest rates subsequent to March 31, 2014 may affect the fair value of our investments.

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The carrying amounts for the following financial instruments approximate their fair values at March 31, 2014 and December 31, 2013 because of their short-term nature: cash and cash equivalents, accrued investment income, premiums receivable, reinsurance payable, and accounts payable and accrued expenses.

Stock-Based Compensation.    We account for stock-based compensation under the fair value recognition provisions of U.S. GAAP which requires the measurement and recognition of compensation for all stock-based awards made to employees and directors based on estimated fair values. In accordance with U.S. GAAP, the fair value of stock-based awards is amortized over the requisite service period, which is defined as the period during which an employee is required to provide service in exchange for an award. We use a straight-line attribution method for all grants that include only a service condition.

Income taxes.    We file as a consolidated partnership along with our limited liability company affiliates, Heritage MGA, LLC, Contractors’ Alliance, First Access Insurance Group, LLC and Heritage Insurance Claims, LLC. The limited liability companies are not required to provide for federal income taxes. As such, taxable income, losses, deductions and credits pass through to members for them to report on their respective income tax returns. Our insurance subsidiary, Heritage P&C, writes policies only in Florida and files a federal and Florida state income tax return. Our reinsurance subsidiary, which is based in Bermuda, plans to make an irrevocable election under Section 953(d) of the U.S. Internal Revenue Code of 1986, as amended, to be treated as a domestic insurance company for U.S. federal income tax purposes. As a result of this election, our reinsurance subsidiary will be subject to United States income tax on its worldwide income as if it were a U.S. corporation.

We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. Should a change in tax rates occur, we recognize the effect on deferred tax assets and liabilities in operations in the period that includes the enactment date. Realization of our deferred income tax assets depends upon our generation of sufficient future taxable income.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant taxing authority.

We record any income tax penalties and income tax-related interest as income tax expense in the period incurred. We did not incur any material tax penalties or income tax-related interest during the three months ended March 31, 2014 or the year ended December 31, 2013.

Recent Accounting Pronouncements

We determined that all recently issued accounting pronouncements will not have a material impact on our consolidated financial position, results of operations and cash flows, or do not apply to our operations.

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BUSINESS

Our Business

We are a property and casualty insurance holding company headquartered in Clearwater, Florida and, through our subsidiary, Heritage P&C, we provide personal residential insurance for single-family homeowners and condominium owners in Florida. We are vertically integrated and control or manage substantially all aspects of insurance underwriting, actuarial analysis, distribution and claims processing and adjusting. We are led by an experienced senior management team with an average of 26 years of insurance industry experience. We began operations in August 2012, and in December 2012 we began selectively assuming policies from Citizens, a Florida state-supported insurer, through participation in a legislatively established “depopulation program” designed to reduce the state’s risk exposure by encouraging private companies to assume insurance policies from Citizens. We also write policies outside the Citizens depopulation program, which we refer to as voluntary policies. Heritage P&C is currently rated “A” (“Exceptional”) by Demotech, a rating agency specializing in evaluating the financial stability of insurers.

As of March 31, 2014, we had approximately 140,000 policies in force, approximately 89% of which were assumed from Citizens. For the three months ended March 31, 2014 and the year ended December 31, 2013, we had gross premiums written of $68.9 million and $218.5 million, respectively, and net income of $7.9 million and $34.2 million, respectively. At March 31, 2014, we had total assets of $286.1 million, total stockholders’ equity of $110.1 million and pro forma stockholders’ equity, after giving effect to this offering, of $         million.

As of March 31, 2014, Citizens had approximately 940,000 insurance policies, of which approximately 690,000 were personal residential policies. We selectively assumed personal residential policies from Citizens in nine separate assumption transactions between December 2012 and April 2014, and a substantial portion of our revenue since our inception has come from these policies. We intend to continue assuming policies from Citizens that meet our assumption strategy and underwriting criteria.

In order to assume a policy from Citizens, we must obtain the prior approval of the insurance agent that wrote the policy. With respect to policies written by agents that are affiliated with an insurance company or agency, we must also obtain the approval of the insurance company or agency. Currently, four large national insurance companies or agencies permit us to assume policies from Citizens that have been written by their agents—State Farm, Allstate, Brown & Brown and AAA (formerly the American Automobile Association). In an effort to increase the pool of Citizens policies that we may assume, we are seeking similar advance approvals from other insurance companies and agencies. We currently have advance approvals covering more than 4,500 agents. These agents were responsible for writing more than 93% of the approximately 690,000 personal residential insurance policies held by Citizens as of March 31, 2014.

We market and write voluntary policies through a network of approximately 1,100 independent agents. Of these agents, approximately 46% are affiliated with nine large agency networks with which we have entered into master agency agreements. We recently entered into an agreement with FMS, the in-house, for-profit managing general agency division of the Florida Association of Insurance Agents, which gives us access to several hundred additional agents throughout the state. We intend to pursue additional voluntary business from agents in our existing independent agent network, expand our independent agent network and seek additional opportunities to use insurer-affiliated agents to offer our personal residential policies in Florida. While we had 15,417 voluntary policies (11% of our total policies in force) as of March 31, 2014, during the three months ended March 31, 2014, we wrote an average of 1,870 new voluntary policies per month. The voluntary market is a significant component of our growth strategy.

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We seek to underwrite a diverse mix of geographic risks within Florida to manage the potential impact of a catastrophic event and reduce our per policy reinsurance costs. As of March 31, 2014, the geographic distribution of our policies in force and total insured values were as follows (figures may not sum to totals due to rounding):

	As of March 31, 2014
	(Total Insured Value in Millions)
	Policy Count		%			Total Insured Value		%
South Florida Counties
Broward		17,903		12.8	%	$	4,623		12.6	%
Miami-Dade		11,742		8.4	%		3,297		9.0	%
Palm Beach		16,856		12.1	%		3,945		10.7	%
South Florida exposure		46,501		33.2	%	$	11,865		32.3	%
Other Significant Counties(1)
Pinellas		23,997		17.2	%	$	6,478		17.6	%
Hillsborough		18,068		12.9	%		5,332		14.5	%
Pasco		14,220		10.2	%		3,746		10.2	%
Hernando		4,873		3.5	%		1,465		4.0	%
Lee		4,148		3.0	%		1,076		2.9	%
Total other significant counties		65,306		46.7	%	$	18,097		49.2	%
Summary for all of Florida
South Florida exposure		46,501		33.2	%	$	11,865		32.3	%
Total other significant counties		65,306		46.7	%		18,097		49.2	%
Other Florida counties		28,072		20.1	%		6,812		18.5	%
Total		139,879		100.0	%	$	36,774		100.0	%

(1) Significant counties are defined as those counties with a policy count or total insured value greater than 2.5% of the 139,879 total policy count or $36.8 billion total insured value as of March 31, 2014.

In order to limit our potential exposure to individual risks and catastrophic events, we purchase significant reinsurance from third party reinsurers. Purchasing reinsurance is an important part of our risk strategy, and premiums paid (or ceded) to reinsurers is our single largest cost. We have strong relationships with reinsurers which we believe are a result of our management’s industry experience and reputation for selective underwriting. For the twelve months ending May 31, 2014, we purchased reinsurance from the following sources: (i) FHCF, a state-mandated catastrophe reinsurance fund, (ii) 13 private reinsurers, all of which were rated “A-” or higher by A.M. Best or S&P, (iii) two private reinsurers that have provided collateral to fully cover their exposure, and (iv) our wholly-owned reinsurance subsidiary, Osprey.

FLOIR requires all insurance companies, like us, to have a certain amount of capital reserves and reinsurance coverage in order to cover losses upon the occurrence of a catastrophic event. Our reinsurance program for the twelve months ending May 31, 2014 provides reinsurance in excess of FLOIR’s requirements, which are based on the probable maximum loss that we would incur from an individual catastrophic event estimated to occur once every 100 years based on our portfolio of insured risks. We also purchase reinsurance coverage to protect against the potential for multiple catastrophic events occurring in the same year.

We test the sufficiency of our reinsurance program by subjecting our personal residential exposures to statistical testing using the AIR U.S. Hurricane Model, which replicates the most severe hurricanes to have occurred historically in Florida, individual storms of severity in excess of such historical levels, and the historical

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calendar years in which the most severe multiple catastrophic events occurred in Florida. In this regard, the 2004 calendar year, in which four large catastrophic hurricanes made landfall in Florida, is considered to be the worst catastrophic year in Florida’s recorded history. Assuming the reoccurrence of the 2004 calendar year events, the probable maximum net loss to us in 2013 would have been $10.3 million (after tax, net of all reinsurance recoveries and including our retention through Osprey). This loss would have represented 9.4% of our stockholders’ equity at March 31, 2014 and     % of our pro forma stockholders’ equity at March 31, 2014, after giving effect to this offering.

We closely manage all aspects of our claims adjustment process. Claims are initially reviewed by our managers and staff adjusters, who determine the extent of the loss and the resources needed to adjust each claim. In the case of a catastrophic event, we have contracted with four large national claims adjusting firms to assist our adjusters with the increased volume of claims and ensure timely responses to our policyholders. We utilize our wholly-owned subsidiary, Contractors’ Alliance to manage mitigation and restoration services for our customers. Contractors’ Alliance primarily handles water damage-related claims, which comprised approximately 68% of our losses and loss adjustment expenses through March 31, 2014. In March 2014, we completed the acquisition of the assets and personnel of our main water mitigation services vendor. We believe this acquisition will allow us to better service our customers and expand our mitigation and restoration services. In addition, all of our voluntary policies and renewed Citizens policies are enrolled in our Platinum Program. Under the Platinum Program, participating customers receive a 10% discount on their claim deductible, and we obtain control over inspection, claims adjusting and repair services. We believe our approach to claims handling results in a higher level of customer service and reduces our losses and loss adjustment expenses. As a result of our efforts, our gross loss ratio, which expresses our losses and loss adjustment expenses as a percentage of gross earned premiums, was 33.8% and 27.5% for the three months ended March 31, 2014 and the year ended December 31, 2013, respectively.

Our Market

According to the U.S. Census Bureau, at July 1, 2013, Florida was the fourth largest U.S. state with an estimated population of approximately 20 million people. The University of Florida Bureau of Economic and Business Research estimates that Florida is expected to reach a population of approximately 26 million people by 2040, an increase of 36% percent from 2010. Property ownership and development represent key drivers of the Florida economy.

Because of its location, Florida is exposed to an increased risk of hurricanes during the entire six months of Atlantic hurricane season, which spans from June 1 through November 30. While a significant hurricane has not made landfall in Florida since 2005, eight hurricanes in 2004 and 2005, including Hurricanes Charley, Katrina, Rita and Wilma, caused a combined estimated property damage of over $110 billion, a significant portion of which occurred in Florida. As a result, personal residential insurance and claims servicing are vitally important to Florida residents.

The Florida personal residential insurance market is highly fragmented and dominated by in-state insurance companies, including Citizens. Significant dislocation in the Florida property insurance market began following Hurricane Andrew in 1992 and accelerated following the 2004 and 2005 hurricane seasons. In total, national and regional insurers reduced their exposure in Florida from 84% in 1999 to 26% in 2012. As national and regional insurance companies reduced their share of the market in Florida, Citizens increased efforts to provide affordable personal residential insurance to those residents unable to obtain coverage in the private market. As a result, Citizens’ policy count grew from roughly 810,000 policies in 2005 to a peak level of approximately 1.5 million policies in late 2011. To reduce Citizens’ risk exposure, beginning in 2010, Florida elected officials encouraged Citizens to focus on reducing the size of its portfolio by returning policies to the private market.

In response, Citizens instituted a number of measures to incentivize the private sector to participate in the depopulation program. Some of these initiatives include increased inspections, improved underwriting,

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reductions in coverage and annual rate increases. In May 2013, Florida passed legislation to facilitate the reduction of Citizens’ policy count and establish the Clearinghouse, which launched in January 2014. The Clearinghouse makes new business ineligible for Citizens if a participating insurance company is willing to extend similar coverage at a price that is no more than 15% above the price of a Citizens’ policy. Similarly, existing Citizens policies will not be eligible for renewal with Citizens if a participating insurance company is willing to afford similar coverage at no additional cost over the price of a Citizens policy. The Clearinghouse will allow potential new and renewal policies of Citizens to be comparatively shopped by participating private market insurers before becoming, or remaining, Citizens policies. On March 31, 2014, Heritage P&C was approved to participate in the Clearinghouse.

According to data compiled by FLOIR, Citizens was the largest personal residential insurance carrier in Florida for the year ended December 31, 2013, with a market share of approximately 19.8% based on total in force direct premiums written for personal and commercial residential insurance. As of the same date, we ranked 15th in Florida within this market, with a market share of approximately 1.8%. Assuming further access to capital and reinsurance support, we believe we have the opportunity to significantly expand the size of our personal residential insurance business in Florida and explore the expansion of our business into other complementary business lines and states.

In recent years, the property and casualty insurance market has experienced a substantial increase in the availability of property catastrophe reinsurance resulting from the increased supply of capital from non-traditional insurance providers, including private capital and hedge funds. This increased capital supply, coupled with a lack of recent significant catastrophic storm activity in Florida, has reduced the cost of property catastrophe reinsurance, directly benefitting purchasers of this reinsurance, including us. We believe this market trend will continue for the foreseeable future.

Our Strategy

Since our inception, a substantial portion of our revenue has come from policies we assumed from Citizens, with the balance of our revenue generated from renewal of these assumed policies and from voluntary policies. Building on these successful transactions, we intend to continue to grow profitably by undertaking the following:

Increase Our Policies in Force in Florida Through Strategic Policy Assumptions and Expansion of Our Voluntary Market Share

We intend to continue assuming policies from Citizens that meet our assumption strategy and underwriting criteria. We may also pursue opportunities to acquire policies from private insurers. Additionally, we intend to increase our policy count by participating in the Clearinghouse. We will also pursue opportunities to increase the number of our voluntary policies by expanding our independent agent distribution network, as well as obtaining approval from national insurance companies to allow their agents to offer our personal residential policies in Florida. Our recent affiliation with FMS gives us access to several hundred additional agents throughout the state and should assist us in our effort to attract high-quality agents. We also intend to increase our advertising, which we believe will allow us to more effectively penetrate areas of the state where we are not currently writing significant new business.

Opportunistically Diversify Product Offerings

We will continue to focus on writing personal residential policies, but will opportunistically expand into complementary product lines we believe we can effectively and profitably underwrite. New product lines may include commercial residential and manufactured housing policies, as well as additional non-residential coverage, such as general liability insurance. In January 2014, we hired two individuals with significant experience in Florida commercial residential insurance sales and underwriting, who will assist us in developing this new product line.

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Optimize Our Reinsurance Program

We will continue to obtain what we believe to be the most appropriate levels and sources of reinsurance. We believe that the significant additional capital entering portions of the reinsurance market provides us with the opportunity to obtain favorable pricing and contract terms and conditions, including the potential for multi-year commitments. In April 2014, we entered into two fully collateralized catastrophe reinsurance agreements funded through the issuance of $200.0 million principal amount of catastrophe bonds, and we will continue evaluating such cost-efficient alternatives to traditional reinsurance. See “Prospectus Summary—Recent Developments.” Additionally, we will continue to meet certain of our reinsurance needs through the use of our reinsurance subsidiary, Osprey, which mitigates our reinsurance expense and reduces our reliance on third party reinsurance.

Efficiently Manage Losses and Loss Adjustment Expenses

We are committed to proactively managing our losses and loss adjustment expenses through prudent underwriting and the use of internal claims adjustment and repair services. In March 2014, we acquired the largest vendor in the Contractors’ Alliance network, which we believe will allow us to expand our in-house mitigation and restoration services. We also intend to license our Contractors’ Alliance employees as adjusters, which we believe will reduce our loss adjustment expenses and shorten the length of time required to resolve claims.

Expand to New Geographic Markets

We intend to explore opportunities to enter other coastal states where we believe the market opportunity is most similar to Florida and where we can utilize our underwriting and claims expertise to attract and manage profitable business. We believe further increasing our geographic diversification is an important factor in reducing our potential risk of loss from any catastrophic event, reducing our per policy reinsurance costs and providing an additional area for future growth beyond our expansion in Florida.

Our Competitive Strengths

We believe that our rapid growth to date and our ability to capitalize on our future growth prospects are a result of the following competitive strengths of our business:

Experienced Management Team With a Long History in the Florida Personal Residential Insurance Market

We have a deep and experienced management team led by Bruce Lucas, Chairman and Chief Investment Officer, Richard Widdicombe, Chief Executive Officer and President, Stephen Rohde, Chief Financial Officer, Melvin Russell, Chief Underwriting Officer, Kent Linder, Chief Operating Officer, Ernesto Garateix, Executive Vice President, and Paul Nielsen, Vice President of Claims, most of whom have been with Heritage since inception. Our management team, which averages 26 years of insurance industry experience, has extensive experience in the Florida personal residential insurance market, has built longstanding relationships with key participants in the insurance industry and is supported by a group of highly qualified individuals with industry expertise, including a Chief Actuary with more than 34 years of industry experience.

Strong, Conservative Capital Structure

As of March 31, 2014, we had stockholders’ equity of $110.1 million and pro forma stockholders’ equity, after giving effect to this offering, of $         million. As of March 31, 2014, Heritage P&C had policyholder surplus of $67.8 million. We believe that this level of surplus places us among the best capitalized insurance companies focusing primarily on the Florida personal residential insurance market and is significantly in excess of the minimum capital levels required by FLOIR and Demotech for similarly rated in-state insurance companies. In addition, unlike many of our in-state competitors, we have relied almost exclusively upon common equity to provide our capital.

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Selective Underwriting and Policy Acquisition Criteria

We believe our proprietary data analytics capabilities and underwriting processes allow us to better select the insurance policies we are willing to assume from the Citizens depopulation program, leading to strong profitability and reduced risk. In addition, we choose to minimize our exposure to or avoid certain types of coverage if we believe there is significant risk of loss, including coverage for sink-hole related losses in high-risk areas. As a result of our efforts, our gross loss ratio was 33.8% and 27.5% for the three months ended March 31, 2014 and the year ended December 31, 2013, respectively.

Unique Claims Servicing Model and Superior Customer Service

We believe that the vertical integration of our claims adjustment and repair services provides us with a competitive advantage. Because we manage both claims adjusting and repair services, we are generally able to begin the adjustment and mitigation process much earlier than our competitors, thus reducing our loss adjustment expenses and ultimate loss payouts. We expect that, in the near future, a significant number of our repair technicians will participate in training and certification programs to become licensed claims adjusters, allowing us to capture additional efficiencies. We also believe our unique model provides a superior level of customer service for our policyholders, enhancing our reputation and increasing the likelihood that our policyholders will renew their policies with us.

Relationships with Highly Rated Reinsurers

We manage our exposure to catastrophic events through, among other things, the purchase of reinsurance. Our relationships with highly rated reinsurers have been developed as a result of our management team’s industry experience and reputation for selective underwriting. Our financial strength, underwriting results and the long-term relationships between our management team and our reinsurance partners help improve the cost-effectiveness of our reinsurance program.

Relationships with Independent Agents and National Underwriters

We have developed relationships with a network of approximately 1,100 independent insurance agents. We believe we have been able to build this network due to our reputation for financial stability, commitment to the Florida market and integrity in the underwriting and claims process. We are also exploring relationships with additional large national insurers and agencies that no longer write substantial personal residential insurance in Florida, which would give us access to their network of Florida agents.

Underwriting

Our underwriters evaluate and select only those risks that they believe will enable us to achieve an underwriting profit. In order to achieve underwriting profitability on a consistent basis, we focus on (1) the suitability of the risk to be assumed or written, (2) the adequacy of the premium with regard to the risk to be assumed or written and (3) the geographic distribution of existing policies within Florida.

All of our underwriting is done internally under the supervision of our Chief Underwriting Officer with input from our Chief Actuary. Our underwriters use our proprietary data analytics capabilities, which include a number of automated processes, to analyze a number of risk evaluation factors, including the age, construction, location and value of the residence and the premiums to be received from insuring the residence. New technological advances in computer generated geographical mapping afford us an enhanced perspective as to geographic concentrations of policyholders. When considering the geographic distribution of existing policies, our underwriters may consider the number of other residences we insure within the same region, county, city and zip code. We also consider the cost of reinsurance when assessing the adequacy of the premium with regard to the risk to be assumed or written. In particular, because we assume policies from Citizens in large quantities, we must evaluate the aggregate impact of the assumed policies on our reinsurance program. The underwriting criteria that we consider will continue to evolve as our business grows and expands.

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We also review our expiring policies to determine whether those risks continue to meet our underwriting guidelines. If a given policy no longer meets our underwriting guidelines, we will take appropriate action regarding that policy, including raising premium rates or, to the extent permitted by applicable law and our assumption agreements with Citizens, not offering to renew the policy.

Policy Administration

We have engaged West Point Underwriters, Inc. (“West Point”), a provider of web-based software solutions and insurance personnel, to provide us with policy administration services, including processing, billing and policy maintenance. West Point’s software is able to adapt to a variety of forms and rates, handle the administration of an increasing number of policies as our Company grows and expands, and provide detailed information about our book of business to our internal underwriters so that they can adjust our underwriting criteria as necessary. West Point’s software provides us with daily updates regarding the insurance policies that we have issued. The system also allows us to provide renewal notices, late payment notices, cancellation notices, endorsements and policies to our policyholders in a timely fashion.

The term of our current agreement with West Point extends until September 2015. Pursuant to this agreement, we pay West Point a fixed fee for each policy for which it provides services.

Claims Administration

We closely manage all aspects of the claims process, from processing the initial filing to providing remediation services through our wholly-owned subsidiary, Contractors’ Alliance. When a policyholder contacts us to report a claim, members of our claims department create a claim file and aggregate the appropriate supporting documentation. Claims are then reviewed by our managers and staff adjusters, who assess the extent of the loss, including through on-site investigations, and determine the resources needed to adjust each claim. Our claims are generally adjusted by our staff claims professionals, except in the case of a catastrophic event for which we have contracted with four large national claims adjusting firms to assist our adjusters with the increased volume of claims and ensure timely responses to our policyholders. In the final stage of the claims process, we leverage Contractors’ Alliance’s vendor network to provide repair and remediation services to the policyholder.

We perform or supervise the services rendered to our policyholders at all stages of the claims process, which we believe allows us to reduce cost and provide a high level of customer service to our policyholders. To encourage our policyholders to allow us to manage their claims from beginning to end, we developed our Platinum Program. Under the Platinum Program, participating customers receive a 10% discount on their claim deductible, and we obtain control over inspection, claims adjusting and repair services, with the repair services being managed by either Contractors’ Alliance or one of our contracted vendors. If the policyholder elects to use a different vendor to provide repair services, we will resolve the claim for the amount we would have paid had Contractors’ Alliance or one of our contracted vendors performed the work. In March 2014, we acquired the largest vendor in the Contractors’ Alliance network, which we believe will allow us to expand our in-house mitigation and restoration services.

Citizens Assumption Transactions

As of March 31, 2014, we have assumed an aggregate of approximately 139,000 policies through participation in the Citizens depopulation program. Citizens generally offers depopulations on a monthly basis. Our practice is generally not to assume additional policies during hurricane season, and therefore we typically participate in assumption transactions during the first and fourth quarters of the year.

In order to be eligible to participate in an assumption transaction, we first apply to FLOIR for approval to assume a specified number of policies. We prepare and submit a report showing the cumulative pro forma

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financial impact of assuming all policies for which we have applied and all policies we have been previously approved to assume. Once we have received FLOIR approval indicating the maximum number of policies we may assume, Citizens provides us with a list of policies eligible for assumption and the relevant policy data. We evaluate these policies using our proprietary data analytics capabilities and submit to Citizens a list of policies we would like to assume. Citizens then compares our list of preferred policies with those of other private insurance companies participating in the depopulation and informs us which policies will be assigned to us.

Once Citizens informs us which policies we may assume, we notify each policyholder of our offer to assume their policy, the amount of their estimated premium upon renewal and their right to opt-out of the assumption transaction. We believe we were the first insurance carrier in Florida to inform holders of their estimated renewal premium prior to the assumption of their policies from Citizens and that this practice has led to an increase in the number of policyholders accepting, or not “opting-out” of, our offer of assumption. On the effective date of such transaction, Citizens transfers to us the unearned premiums for the policies that have not opted out of the assumption transaction. A policyholder may also opt-out during the 30-day period following the effective date of the assumption transaction. If a policyholder opts-out during such period, we return the applicable unearned premiums to Citizens.

Under the terms of our typical assumption agreement with Citizens, we assume all liability and obligation for losses under the assumed policies arising on or after the effective date of the assumption transaction, and we directly service all policyholder claims related to such losses. All terms and conditions of the assumed policies, including coverage and rates, remain unchanged for the remainder of the policy term. Citizens remains liable for all losses under the assumed policies arising prior to the effective date of the assumption transaction and is solely responsible for servicing all policyholder claims related to such losses.

Our current assumption agreement with Citizens requires us to offer renewals on the policies that we assume in the depopulation program for a period of three years subsequent to the initial expiration of the policies, during which time our rates may not exceed the greater of 110% of the previous rate or the renewal rate charged by Citizens for such policy. We strive to retain these policies by offering competitive rates and efficient claims handling to our policyholders. Through March 31, 2014, we renewed approximately 84% of the policies we assumed from Citizens upon their initial expiration.

Loss Development

Our losses and loss adjustment expenses represent estimated costs ultimately required to settle all claims for a given period. The following table illustrates, as of December 31, 2013, development of the estimated liability for losses and loss adjustment expenses from August 7, 2012 through December 31, 2013 (dollars in thousands):

	August 7, 2012 (inception) through December 31, 2012		Year ended December 31, 2013
Original estimated losses and loss adjustment expense liability(1)	$	1,393	$	19,344
Re-estimated losses and loss adjustment expense liability(2) as of:
One year later		926
Cumulative redundancy (deficiency)(3)		467
Cumulative amount of liability paid off as of:
One year later		549
Gross premiums earned	$	5,719	$	139,959

(1) Represents management’s original best estimated liability of (i) unpaid claims, (ii) IBNR and (iii) loss adjustment expenses.

(2) Represents the re-estimated liabilities in later years of unpaid claims, IBNR and loss adjustment expenses in the respective years

(3) Represents the difference between the latest re-estimate and the original estimate. A redundancy means the original estimate is higher than the current estimate whereas a deficiency means that the original estimate is lower than the current estimate.

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Technology

Our business depends upon the use, development and implementation of integrated technology systems. These systems enable us to provide a high level of service to agents and policyholders by processing business efficiently, communicating and sharing data with agents, providing a variety of methods for the payment of premiums and allowing for the accumulation and analysis of information for our management. We believe the availability and use of these technology systems has resulted in improved service to agents and customers, increased efficiencies in processing Heritage P&C’s business and lower operating costs.

We also license software from third parties, including West Point and AIR Worldwide, Inc. (“AIR”). AIR’s catastrophe modeling software enables us to optimize our insurance portfolio to reduce our reinsurance costs. We also own or license other technology systems used by Heritage P&C. These technology systems consist primarily of an integrated central processing computer, a series of server-based computer networks, a back-up server and various Internet-based communications systems.

Reinsurance

In order to limit our potential exposure to catastrophic events, we purchase significant reinsurance from third party reinsurers. Purchasing reinsurance is an important part of our risk strategy, and premiums paid (or ceded) to reinsurers is our single largest cost. Reinsurance involves transferring, or “ceding”, a portion of the risk exposure on policies we write to another insurer, known as a reinsurer. To the extent that our reinsurers are unable to meet the obligations they assume under our reinsurance agreements, we remain liable for the entire insured loss. See “Risk Factors—We may not be able to collect reinsurance amounts due to us from the reinsurers with which we have contracted.”

Our reinsurance agreements are short-term, prospective contracts. We record an asset, prepaid reinsurance premiums, and a liability, reinsurance payable, for the entire contract amount upon commencement of our new reinsurance agreements. We amortize our reinsurance premiums over the 12-month contract period, which is June 1 through May 31.

In the event that we incur losses and loss adjustment expenses recoverable under our reinsurance program, we record amounts recoverable from our reinsurers on paid losses plus an estimate of amounts recoverable on unpaid losses. The estimate of amounts recoverable on unpaid losses is a function of our liability for unpaid losses associated with the reinsured policies; therefore, the amount changes in conjunction with any changes to our estimate of unpaid losses. As a result, a reasonable possibility exists that an estimated recovery may change significantly in the near term from the amounts included in our consolidated financial statements.

FLOIR requires all insurance companies, like us, to have a certain amount of capital and reinsurance coverage in order to cover losses and loss adjustment expenses upon the occurrence of a catastrophic event. Our reinsurance program for the twelve months ending May 31, 2014 provides reinsurance in excess of FLOIR’s requirements, which are based on the probable maximum loss that we would incur from an individual catastrophic event estimated to occur once in every 100 years based on our portfolio of insured risks. The nature, severity and location of the event giving rise to such a probable maximum loss differs for each insurer depending on the insurer’s portfolio of insured risks, including, among other things, the geographic concentration of insured value within such portfolio. As a result, a particular catastrophic event could be a one-in-100 year loss event for one insurance company while having a greater or lesser probability of occurrence for another insurance company. We also purchase reinsurance coverage to protect against the potential for multiple catastrophic events occurring in the same year.

During the second quarter of 2013, we placed our reinsurance program for the period from June 1, 2013 through May 31, 2014. Our reinsurance program, which is segmented into layers of coverage, protects us for excess property catastrophe losses and loss adjustment expenses. Our current reinsurance program incorporates the mandatory coverage required by law to be placed with FHCF. We also purchase private reinsurance below,

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alongside and above the FHCF layer, as well as aggregate reinsurance coverage. The following describes the various layers of our reinsurance program.

• Our Retention. For the first catastrophic event, we have a primary retention on the first $9.0 million of losses and loss adjustment expenses, of which our reinsurance subsidiary, Osprey, is responsible for $3.0 million. For a second and third catastrophic event, Heritage P&C’s primary retention decreases to $3.0 million per event. To the extent that there is reinsurance coverage remaining, Heritage P&C has no primary retention for events beyond the third catastrophic event. Osprey has no primary retention beyond the first catastrophic event.

• Layers Below FHCF. Immediately above our retention, we have purchased $94.0 million of reinsurance from third party reinsurers and Osprey. Through Osprey, we retain an aggregate participation in this coverage of $3.5 million, comprised of a 3% participation of $31.0 million of losses and loss adjustment expenses in excess of $9.0 million, or $0.9 million, and a 4% participation of $63.0 million of losses and loss adjustment expenses in excess of $40.0 million, or $2.5 million. Through the payment of a reinstatement premium, we are able to reinstate the full amount of this reinsurance up to two times. To the extent that $94.0 million or a portion thereof is exhausted in a first catastrophic event, we have purchased reinstatement premium protection insurance to pay the required premium necessary for the first reinstatement of this coverage.

• FHCF Layer. Our FHCF coverage includes an estimated maximum provisional limit of 90% of $270.0 million, or $243.0 million, in excess of our retention and private reinsurance of $103.0 million. The limit and retention of the FHCF coverage is subject to upward or downward adjustment based on, among other things, submitted exposures to FHCF by all participants. We have purchased coverage alongside and above the FHCF layer from third party reinsurers. The layer alongside is in the amount of $27.0 million and the layer immediately above is in the amount of $28.5 million. This private reinsurance will generally adjust to fill in gaps in the FHCF coverage. Through the payment of a reinstatement premium, we are able to reinstate the full amount of this private reinsurance up to two times. To the extent that all or a portion of either of these private layers is exhausted in a first catastrophic event, we have purchased reinstatement premium protection insurance to pay the required premium necessary for the first reinstatement of this coverage. The FHCF coverage cannot be reinstated once exhausted, but it does provide coverage for multiple events.

• Aggregate Coverage. In addition to the layers described above, we have also purchased $170.0 million of aggregate reinsurance coverage for losses and loss adjustment expenses in excess of $401.5 million for a first catastrophic event. To the extent that this coverage is not fully exhausted in the first catastrophic event, it provides coverage commencing at our reduced retention levels for second and subsequent events and where underlying coverage has been previously exhausted. There is no reinstatement of the aggregate reinsurance coverage once exhausted, but it does provide coverage for multiple events.

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For a first catastrophic event, our reinsurance program provides coverage for $571.5 million of losses and loss adjustment expenses, including our retention, and we are responsible for all losses and loss adjustment expenses in excess of such amount. For subsequent catastrophic events, our total available coverage depends on the magnitude of the first event, as we may have coverage remaining from layers that were not previously fully exhausted. We have also purchased reinstatement premium protection insurance to provide an additional $149.5 million of coverage. Our aggregate reinsurance layer also provides coverage for second and subsequent events to the extent not exhausted in prior events. In total, we have purchased $721.0 million of potential reinsurance coverage, including our retention, for multiple catastrophic events. Our ability to access this coverage, however, is subject to the severity and frequency of such events. As of March 31, 2014, our total insured value was $36.8 billion, and we may experience significant losses and loss adjustment expenses in excess of our retention. The chart below provides a graphic illustration of the structure and operation of our current reinsurance program.

We test the sufficiency of our reinsurance program by subjecting our personal residential exposures to statistical testing using the AIR U.S. Hurricane Model, which replicates the most severe hurricanes to have

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occurred historically in Florida, individual storms of severity in excess of such historical levels, and the calendar years in which the most severe multiple catastrophic events occurred in Florida. In this regard, the 2004 calendar year, in which four large catastrophic hurricanes made landfall in Florida, is considered to be the worst catastrophic year in Florida’s recorded history. Assuming the reoccurrence of the 2004 calendar year events, the probable maximum net loss to us in 2013 would have been $10.3 million (after tax, net of all reinsurance recoveries and including our retention through Osprey). This loss would have represented 9.4% of our stockholders’ equity at March 31, 2014 and             % of our pro forma stockholders’ equity at March 31, 2014, after giving effect to this offering. We estimate that, based on our portfolio of insured risks as of September 30, 2013, the 2004 calendar year events would represent, in the aggregate, a catastrophic event likely to occur approximately once every 164 years and would have exhausted approximately 14% of our total reinsurance coverage.

Assuming the reoccurrence of Hurricane Andrew, which is considered to be the most catastrophic single event in Florida’s recorded history, the probable maximum net loss to us in 2013 would have been $7.2 million (after tax, net of all reinsurance recoveries and including our retention through Osprey). This loss would have represented 6.5% of our stockholders’ equity at March 31, 2014 and             % of our pro forma stockholders’ equity at March 31, 2014, after giving effect to this offering. We estimate that, based on our portfolio of insured risks as of September 30, 2013, Hurricane Andrew would represent a catastrophic event likely to occur approximately once every 37 years and would have exhausted approximately 34% of our total reinsurance coverage.

For the twelve months ending May 31, 2014, we purchased reinsurance from the following sources: (i) FHCF, (ii) 13 private reinsurers, all of which were rated “A-” or higher by A.M. Best or S&P, (iii) two private reinsurers that have provided collateral to fully cover their exposure, and (iv) our wholly-owned reinsurance subsidiary, Osprey. Allianz Risk Transfer (AG) Limited reinsures 75% of each layer of our reinsurance coverage up to the $401.5 million level and 90% and 100%, respectively, of our first and second aggregate layers. The chart below lists our third-party reinsurers with A.M. Best and S&P ratings:

Reinsurer	A.M. Best Rating	S&P Rating
ACE Tempest Reinsurance Ltd.	A+	AA-
Allianz Risk Transfer (AG) Limited	N/A	AA-
Alterra Bermuda Limited	A	AA
Arch Reinsurance Ltd.	A+	A+
Lloyd’s Underwriter Syndicate No. 0958	A	A+
Lloyd’s Underwriter Syndicate No. 1955	A	A+
Lloyd’s Underwriter Syndicate No. 2001	A+	A+
Lloyd’s Underwriter Syndicate No. 4444	A	A+
Montpelier Reinsurance Ltd.	A	A-
Partner Reinsurance Ltd.	A+	A+
S.A.C. Re, Ltd.	A-	N/A
Tokio Millennium Reinsurance Limited	A++	AA-
XL Re Ltd.	A	A

2014-2015 Reinsurance Program

We are in the process of placing our reinsurance program for the 2014 hurricane season, which will be effective from June 1, 2014 through May 31, 2015. On April 17, 2014, Heritage P&C entered into a catastrophe reinsurance agreement with Citrus Re Ltd., a newly-formed Bermuda special purpose insurer. The agreement provides for three years of coverage from catastrophe losses caused by certain named storms, including hurricanes, beginning on June 1, 2014. The limit of coverage of $150 million is fully collateralized by a reinsurance trust account for the benefit of Heritage P&C. Heritage P&C pays a periodic premium to Citrus Re during this three-year risk period. Citrus Re Ltd. issued $150 million of principal-at-risk variable notes due April 18, 2017 to fund the reinsurance trust account and its obligations to Heritage P&C under the reinsurance agreement. The maturity date of the notes may be extended up to two additional years to satisfy claims for

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catastrophic events occurring during the three-year term of the reinsurance agreement. By accessing catastrophe reinsurance coverage through capital markets vehicles like Citrus Re Ltd., we aim to diversify our sources of reinsurance capacity in a cost-effective manner given current market conditions.

On April 24, 2014, Heritage P&C entered into a second catastrophe reinsurance agreement with Citrus Re Ltd. providing for $50 million of coverage on substantially similar terms as the agreement described above. Citrus Re Ltd. issued an additional $50 million of principal-at-risk variable notes due April 24, 2017 to fund its obligations under the reinsurance agreement.

We are in the process of evaluating the remaining sources of our reinsurance for the 2014 hurricane season.

Investments

Our investments are managed by third-party asset managers. We have designed our investment policy to provide a balance between current yield, conservation of capital and the liquidity requirements of our operations. As such, our investable assets are primarily held in cash and bonds with relatively short durations. Our investment policy sets guidelines that provide for a well-diversified investment portfolio that is compliant with Florida statutes that emphasizes quality and preservation of capital. The policy limits investments in common and preferred stocks to 15% of Heritage P&C’s admitted assets, with no more than 10% in either class. Our bond portfolio must have a minimum weighted average portfolio quality of A, with only $1 million invested in below investment grade bonds. No more than 2% of admitted assets can be invested in any one issuer, excluding government-related securities. Investments in commercial mortgages cannot exceed 10% of admitted assets. Prohibited investments include short sales and margin purchases, oil gas, mineral or other types of leases, speculative uses of futures and options, unrated corporate securities, non-US denominated securities, convertible securities high risk CMO instruments, repurchase agreements, securities lending transactions and speculative foreign currency valuation transactions. Our investment policy, which may change from time to time, is approved by our Investment Committee and is reviewed on a regular basis in order to ensure that our investment policy evolves in response to changes in the financial market. See Note 3 to our consolidated financial statements for the year ended December 31, 2013 included elsewhere in this prospectus.

As of March 31, 2014, we held $74.7 million in cash and cash equivalents and $151.0 million in securities, which were comprised of $126.4 million in bonds, $9.6 million in preferred stocks, $9.0 million in common stock and $6.0 million in mortgage loans.

Government Regulation

The insurance industry is extensively regulated. Heritage P&C is subject to the laws and regulations of Florida and any other state where we may seek to do business. Florida’s insurance regulatory regime provides for regulation of virtually all aspects of Heritage P&C’s business. Florida, like many states, has adopted several model laws and regulations as promulgated by the NAIC. State statutes and administrative rules generally require each insurance company that is part of a holding company group to register with the department of insurance in its state of domicile and to furnish information concerning the operations of the companies within the holding company system which may materially affect the operations, management or financial condition of the insurers within the group. As part of its registration, each insurance company must identify material agreements, relationships and transactions with affiliates, including without limitation loans, investments, asset transfers, transactions outside of the ordinary course of business, certain management, service, and cost sharing agreements, reinsurance transactions, dividends and consolidated tax allocation agreements. In many instances, Florida’s insurance laws and regulations are even more stringent that those promulgated by the NAIC or other states.

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As an initial matter, Florida routinely places additional restrictions on new insurers as a condition of receiving a certificate of authority. These restrictions are typically memorialized in a consent order entered into between FLOIR and the insurer applying for a certificate of authority. We are subject to such a consent order in which we have agreed to higher or more stringent restrictions than are otherwise required under Florida law. The material restrictions we have agreed to include:

• 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 $18.0 million. As of March 31, 2014, our insurance subsidiary held surplus of $68.3 million, in full compliance with Florida law and the consent order.

• 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. As of December 31, 2013, Heritage P&C’s gross and net writing ratios were 3.5 to 1 and 2.2 to 1, respectively. Pursuant to the consent order, we also 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 during 2012, 2013 and 2014. As part of the FLOIR approval process for the various Citizens assumption transactions in which we have participated, we have received approval to exceed these projected premiums. We are in full compliance with these provisions of the consent order.

• 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 July 31, 2015, except such distributions as are required to offset stockholders’ tax obligations resulting from the ownership of our equity or such distributions as may be approved by FLOIR in advance and in writing. We are in full compliance with this provision of the consent order.

• Florida law allows an insurer to pay certain dividends to stockholders without approval of FLOIR. Pursuant to the consent order, we agreed that, until July 31, 2017, Heritage P&C would pay only those dividends that have been approved in advance and in writing by FLOIR. Our insurance subsidiary has paid no stockholder dividends since its inception and is in full compliance with this provision of the consent order.

We are also subject to consent orders setting conditions for FLOIR’s approval of the Citizens assumption transactions in which we have participated. We are required by consent order to comply with the assumption agreements entered into with Citizens at the time of each assumption transaction, which requires that for the assumed policies, we must offer to renew each policy for a minimum of three years and limit rate increases to the higher of those approved by FLOIR for Citizens for comparable risks or 10%. We are in full compliance with all consent orders issued with regard to Citizens’ depopulation program.

Additionally, we are subject to regulations administered by a department of insurance in each state in which we do business (currently, only Florida). These regulations relate to, among other things:

• the content and timing of required notices and other policyholder information;

• the amount of premiums the insurer may assume or write in relation to its surplus;

• the amount and nature of reinsurance a company is required to purchase;

• participation in guaranty funds and other statutorily created markets or organizations;

• business operations and claims practices;

• approval of policy forms and premium rates;

• standards of solvency, including risk-based capital measurements;

• licensing of insurers and their products;

• restrictions on the nature, quality and concentration of investments;

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• restrictions on the ability of insurance company subsidiaries to pay dividends to insurance holding companies;

• restrictions on transactions between insurance companies and their affiliates;

• restrictions on the size of risks insurable under a single policy;

• requiring deposits for the benefit of policyholders;

• requiring certain methods of accounting;

• periodic examinations of our operations and finances;

• the form and content of records of financial condition required to be filed; and

• requiring reserves.

FLOIR and regulators in other jurisdictions where we may become licensed and offer insurance products conduct periodic examinations of the affairs of insurance companies and require the filing of annual and other reports relating to financial condition, holding company issues and other matters. These regulatory authorities also conduct periodic examinations into insurers’ business practices. Additionally, as an insurance company operating in Florida, Heritage P&C is subject to assessments levied by Citizens, the Florida Insurance Guaranty Association and the FHCF.

Employees

As of March 31, 2014 we had 90 employees, all of whom are full time employees. We are not a party to any collective bargaining agreement and have not experienced any work stoppages or strikes as a result of labor disputes. We consider relations with our employees to be satisfactory.

Facilities

In April 2013, we purchased a two-building 13-acre campus located in Clearwater, Florida for aggregate consideration of $9.8 million and contributed the property to our wholly-owned subsidiary, Skye Lane. We established our operating headquarters on this site in March 2014. Approximately 88% of the property will be occupied by unaffiliated tenants.

Legal Proceedings

We are subject to routine legal proceedings in the ordinary course of business. We believe that the ultimate resolution of these matters will not have a material adverse effect on our business, financial condition or results of operations.

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MANAGEMENT

Executive Officers and Directors

The following table provides information with respect to our directors and executive officers as of April 30, 2014:

Name	Age		Position
Richard Widdicombe		55	President, Chief Executive Officer and Director
Bruce Lucas		42	Chairman and Chief Investment Officer and Director
Stephen Rohde		62	Chief Financial Officer, Treasurer and Secretary
Melvin (Mel) Russell		59	Executive Vice President, Chief Underwriting Officer and Director of Sales & Marketing
Kent Linder		52	Chief Operating Officer
Ernesto (Ernie) Garateix		42	Executive Vice President
Paul Neilson		58	Vice President Claims
Panagiotis (Pete) Apostolou		39	Director
Trifon Houvardas		47	Director
James Masiello		73	Director
Nicholas Pappas		39	Director
Joseph Vattamattam		37	Director
Monica Vernon		46	Director
Vijay Walvekar		67	Director

Executive Officers

Richard Widdicombe.    Mr. Widdicombe has served as our President and Chief Executive Officer since August 2012. Prior to joining the Company, Mr. Widdicombe served as Risk Manager of Homeowners Choice Property & Casualty Insurance Company (NYSE: HCI) from November 2009 to September 2011. Prior to that, Mr. Widdicombe served as President of People’s Trust Insurance Company from July 2007 to February 2009. Mr. Widdicombe brings to the board of directors an in-depth knowledge of the insurance industry gained from his years of leadership experience at multiple insurance carriers.

Bruce Lucas.    Bruce Lucas has served as our Chairman and Chief Investment Officer since August 2012. Prior to joining the Company, from January 2012 to August 2012, Mr. Lucas served as the Managing Member of IIM Holdings, II, LLC, an investment company. Prior to that, Mr. Lucas served as Chief Executive Officer of Infinity Investment Funds, a hedge fund, from April 2009 to December 2011. Mr. Lucas brings to the board of directors a critical link to management’s perspective in board discussions regarding the business and strategic direction of the Company.

Stephen Rohde.    Mr. Rohde has served as our Chief Financial Officer, Treasurer and Secretary since August 2012. Prior to joining the Company, Mr. Rohde served as Chief Financial Officer and Treasurer of People’s Trust Insurance Company from April 2008 to July 2012. Mr. Rohde serves on the board of directors of Lion Insurance Company.

Mel Russell.    Mr. Russell has served as our Executive Vice President, Chief Underwriting Officer and Director of Sales & Marketing since August 2013. Prior to joining the Company, Mr. Russell served as President, Chief Underwriting Officer, Corporate Secretary and Executive Vice President of United Insurance Holdings Corporation (NASDAQ: UIHC) beginning in January 2009.

Kent Linder.    Mr. Linder has served as our Chief Operating Officer since August 2012. Prior to joining the Company, Mr. Linder served in the business development department of SVM Restoration Services, Inc. beginning in February 2006. Prior to joining SVM Restoration Services, Mr. Linder served as Chief Operating Officer of Federated National Holding Company (NASDAQ: FNHC) from September 2003 to February 2006.

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Ernie Garateix.    Mr. Garateix has served as our Executive Vice President since August 2012. Prior to joining the Company, Mr. Garateix served as Vice President for American Integrity Insurance Group beginning in October 2007.

Paul Neilson.    Mr. Neilson has served as our Vice President Claims since September 2012. Prior to joining the Company, Mr. Neilson served as the Manager, Claim Quality Assurance for Citizens Property Insurance Corporation from September 2011 to August 2012. Prior to that, from August 2010 to August 2011, Mr. Neilson served as the Director of Claims Management for Homeowners Choice Property & Casualty Insurance Company (NYSE: HCI). From April 1996 to August 2010, Mr. Neilson served in various capacities at First Floridian Auto & Home / Travelers of Florida, an affiliate of The Travelers Indemnity Company.

Pete Apostolou.    Mr. Apostolou has served on our board of directors since August 2012. Mr. Apostolou is the owner of Central Cleaning Services and Central Parking Services, which he founded in 2010. He is also a real estate broker and owner of Alexa Realty of St. Petersburg, which he founded in 2004. Mr. Apostolou also serves as a manager and owner of several other commercial real estate companies. Mr. Apostolou brings to the board of directors an in-depth knowledge of the Florida commercial and residential real estate market.

Trifon Houvardas.    Mr. Houvardas has served on our board of directors since August 2012. Mr. Houvardas has been involved in the real estate industry since 1992 and currently manages all aspects of three real estate businesses, Foresight Property Services, Foresight Holding Inc. and Fasco Investments Inc. Mr. Houvardas serves as a director of First Home Bank, LLC. Mr. Houvardas possesses particular knowledge and experience in real estate and complex transactions that strengthen the board’s collective qualifications, skills and experience.

James Masiello.    Mr. Masiello has served on our board of directors since April 2014 and served as a director pending regulatory approval in 2013. Mr. Masiello founded Alliance Holdings, Inc., the parent company of Strategic Independent Agency Alliance, Inc. (SIAA), a national alliance of insurance agents, in 1994 and has served as its Chairman and Chief Executive Officer since that time. Mr. Masiello brings to the board of directors extensive operational and executive leadership experience in the insurance industry.

Nicholas Pappas.    Mr. Pappas has served on our board of directors since April 2014 and served as a director pending regulatory approval in 2013. Mr. Pappas is the President and owner of FlameStone American Grill and Besa Grill, restaurants in the Tampa area that opened in 2007 and 2011, respectively. Mr. Pappas also owns or serves on the executive team of several commercial real estate holding companies with properties in the Tampa and Jacksonville, Florida areas. Mr. Pappas brings to the board of directors an entrepreneurial and executive management background, as well as a strong knowledge of the Florida commercial real estate market.

Joseph Vattamattam.    Mr. Vattamattam has served on our board of directors since April 2014 and served as a director pending regulatory approval in 2013. Mr. Vattamattam is the Chief Executive Officer of HealthMap Solutions, a provider of technology and consulting services to healthcare organizations, a position he has held since July 2013. Prior to that, Mr. Vattamattam served as Vice President of Medical Economics at CareCentrix, Inc., a provider of home health solutions, from August 2010 to July 2013 and as Area Vice President, Operations from January 2010 to August 2010. Prior to that, Mr. Vattamattam held several positions at WellCare Health Plans, a provider of managed care services, from June 2007 to December 2009, most recently as Director, Health Services. Mr. Vattamattam previously held positions at Wachovia Securities and PricewaterhouseCoopers LLP. Mr. Vattamattam brings to the board executive management and leadership skills, as well as an in-depth knowledge of capital markets and financial analysis.

Monica Vernon.    Ms. Vernon has served on our board of directors since April 2014. Ms. Vernon is an owner and shareholder of Vernon & Vernon, CPA, PA, a public accounting firm headquartered in St. Petersburg, Florida, a position she has held since November 2000. Ms. Vernon is a certified public accountant in the State of Florida with more than 22 years of tax and accounting experience. Ms. Vernon brings to the board of directors extensive experience in financial statement preparation and financial reporting and analysis.

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Vijay Walvekar.    Mr. Walvekar has served on our board of directors since August 2012. Mr. Walvekar currently serves as Vice President of Central Home Health Care, Inc., a position he has held since January 1985. Mr. Walvekar also serves as President or Managing Member of several real property holding companies owning real estate in Florida and Michigan. Mr. Walvekar also serves as Managing Director of Control-Touch Electronics (Poona) Pvt. Ltd., an Indian technology company. Mr. Walvekar possesses knowledge and experience in real estate, strategic planning and leadership.

Board Composition

Our certificate of incorporation, which will be in effect prior to the completion of this offering, will provide that, subject to any rights applicable to any then outstanding preferred stock, our board of directors shall consist of such number of directors as determined from time to time by resolution adopted by a majority of the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. Initially, our board of directors will consist of nine directors. Subject to any rights applicable to any then outstanding preferred stock, any additional directorships resulting from an increase in the number of directors may only be filled by the directors then in office unless otherwise required by law or by a resolution passed by the board of directors. The term of office for each director will be until his or her successor is elected at our annual meeting or his or her death, resignation or removal, whichever is earliest to occur.

Our board of directors has affirmatively determined that each of Messrs. Houvardas, Masiello, Pappas and Walvekar and Ms. Vernon will be an “independent director,” as defined under the rules of the NYSE.

Committees of the Board of Directors

We expect that, immediately following this offering, the standing committees of our board of directors will consist of an Audit Committee, a Compensation Committee and a Corporate Governance and Nominating Committee. Each of the committees will report to the board of directors as they deem appropriate and as the board may request. The expected composition, duties and responsibilities of these committees are set forth below.

Audit Committee

The Audit Committee will be responsible for, among other matters: (1) appointing, retaining and evaluating our independent registered public accounting firm and approving all services to be performed by them; (2) overseeing our independent registered public accounting firm’s qualifications, independence and performance; (3) overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; (4) reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; (5) establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters; and (6) reviewing and approving related person transactions.

Upon the completion of this offering, our audit committee will consist of Ms. Vernon and Messrs. Houvardas and Walvekar. We believe that each of Ms. Vernon and Messrs. Houvardas and Walvekar meets the definition of “independent director” for purposes of serving on an audit committee under Rule 10A-3 and NYSE rules. In addition, our board of directors has determined that Ms. Vernon qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K. Our board of directors will adopt a new written charter for our audit committee, which will be available on our corporate website at www.heritagepci.com upon the completion of this offering. The information on our website is not part of this prospectus.

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Compensation Committee

The Compensation Committee will be responsible for, among other matters: (1) reviewing key employee compensation goals, policies, plans and programs; (2) reviewing and approving the compensation of our directors, chief executive officer and other executive officers; (3) reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and (4) administering our stock plans and other incentive compensation plans.

Immediately following this offering, our Compensation Committee will consist of Ms. Vernon and Messrs. Masiello and Pappas. Our board of directors will adopt a written charter for the Compensation Committee in connection with this offering, which will be available on our corporate website at www.heritagepci.com upon the completion of this offering. The information on our website is not part of this prospectus.

Corporate Governance and Nominating Committee

Our Corporate Governance and Nominating Committee will be responsible for, among other matters: (1) identifying individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors; (2) overseeing the organization of our board of directors to discharge the board’s duties and responsibilities properly and efficiently; (3) identifying best practices and recommending corporate governance principles; and (4) developing and recommending to our board of directors a set of corporate governance guidelines and principles applicable to us.

Immediately following this offering, our Corporate Governance and Nominating Committee will consist of Messrs. Masiello, Pappas and Walvekar. Our board of directors will adopt a written charter for the Corporate Governance and Nominating Committee in connection with this offering, which will be available on our corporate website at www.heritagepci.com upon the completion of this offering. The information on our website is not part of this prospectus.

Compensation Committee Interlocks and Insider Participation

None of our executive officers has served as a member of the board of directors or compensation committee of another entity that had one or more of its executive officers serving as a member of our board of directors.

Other Committees

Our board of directors may establish other committees as it deems necessary or appropriate from time to time.

Risk Oversight

Our board of directors will oversee the risk management activities designed and implemented by our management. The board of directors will execute its oversight responsibility for risk management both directly and through its committees. The full board of directors will also consider specific risk topics, including risks associated with our strategic plan, business operations and capital structure. In addition, the board of directors will receive detailed regular reports from members of our senior management and other personnel that include assessments and potential mitigation of the risks and exposures involved with their respective areas of responsibility.

Our board of directors will delegate to the audit committee oversight of our risk management process. Our other board committees will also consider and address risk as they perform their respective committee responsibilities. All committees will report to the full board of directors as appropriate, including when a matter rises to the level of a material or enterprise level risk.

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Family Relationships

Mr. Vattamattam, one of our directors, is the brother-in-law of Mr. Lucas, our Chairman and Chief Investment Officer. There are no other family relationships among any of our executive officers, directors or any of the persons to be nominated as our directors prior to the consummation of this offering.

Code of Ethics

We intend to adopt a Code of Ethics that will apply to all of our employees, including our chief executive officer, chief financial officer and principal accounting officer. Our Code of Ethics will be available on our website at www.heritagepci.com by clicking on About Heritage and then Code of Ethics. If we amend or grant a waiver of one or more of the provisions of our Code of Ethics, we intend to satisfy the requirements under Item 5.05 of Item 8-K regarding the disclosure of amendments to or waivers from provisions of our Code of Ethics that apply to our Chief Executive Officer and Chief Financial Officer by posting the required information on our website at the above address. Our website is not part of this prospectus.

Director Compensation

See “Executive Compensation—Director Compensation.”

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following Summary Compensation Table discloses the compensation information for fiscal year 2013 for our principal executive officer (“PEO”) and the two most highly compensated executive officers other than the PEO who were serving as executive officers at the end of the last completed fiscal year. Certain updated 2014 compensation and other information is provided in the narrative sections following the Summary Compensation Table.

Name and Principal Position	Year		Salary ($)(1)		Bonus ($)(2)		Stock Awards ($)(3)		All Other Compensation ($)(4)		Total ($)
Richard Widdicombe		2013		413,333		861,186		1,116,250		167,577		2,558,346
President and Chief Executive Officer
Bruce Lucas		2013		317,500		2,390,268		1,929,375		22,291		4,659,434
Chairman and Chief Investment Officer
Kent Linder		2013		335,417		688,948		1,286,875		159,835		2,471,075
Chief Operating Officer

(1) The amount for Mr. Widdicombe includes $383,333 for base salary and an additional $30,000 in fees earned pursuant to his service as a director on our Board. The amount for Mr. Lucas includes $287,500 for base salary and an additional $30,000 in fees earned pursuant to his service as a director on our Board.

(2) Amounts disclosed in the Bonus column represent discretionary bonus amounts earned under the Company’s annual cash incentive program.

(3) The amounts disclosed above represent the grant date fair value of vested Company shares granted by the Company during 2013 computed in accordance with FASB ASC Topic 718. Grant date fair value was determined by multiplying the number of vested Company shares granted by the market value of shares as determined by an independent third party, less any amounts paid to the Company to acquire such shares. The amount for Mr. Widdicombe includes a January 1, 2013 award of vested Company shares with a grant date fair value of $250,000 and an October 31, 2013 award of vested Company shares with a grant date fair value of $866,250. The amount for Mr. Lucas includes only an October 31, 2013 award of vested Company shares with a grant date fair value of $1,929,375. The amount for Mr. Linder includes a January 1, 2013 award of vested Company shares with a grant date fair value of $250,000 and an October 31, 2013 award of vested Company shares with a grant date fair value of $1,036,875.

(4) Each of Messrs. Widdicombe, Lucas and Linder received a $10,800 automobile allowance during 2013. In addition, in connection with their January 1, 2013 awards of vested Company shares, Messrs. Widdicombe and Linder are receiving amounts of $138,204 and $138,205, respectively, in the first quarter of 2014 to reimburse them for personal income taxes resulting from such awards. The amounts disclosed above also include the excess portion of the employer share of premiums offered to our named executive officers with respect to the following benefits: health insurance, dental insurance, life insurance, long-term disability insurance (Mr. Widdicombe only) and HSA account contributions.

Base Salaries

Our named executive officers were entitled to the following annual base salaries pursuant to their employment agreements:

Named Executive Officer	2013 Base  Salary (Effective January 1, 2013)		2014 Base  Salary (Effective January 1, 2014)
Richard Widdicombe	$	400,000	$	680,000
Bruce Lucas	$	300,000	$	680,000
Kent Linder	$	350,000	$	600,000

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Annual Incentive Awards

Each year, the Board establishes a bonus pool in its discretion, based on the Company’s EBITDA performance. Annual incentive awards for 2013 for our named executive officers were determined in the Board’s discretion, subject to the minimum bonus entitlements specified in the named executive officers’ employment agreements, as described below. The Board did not establish preset performance goals with respect to 2013 annual incentive awards. In the Board’s discretion, annual incentive awards may be paid in cash and/or vested Company shares, as described below.

Award of Vested Company Shares

On January 1, 2013, we granted vested Company shares to certain of our employees, including 50 shares to each of Messrs. Widdicombe and Linder. Messrs. Widdicombe and Linder each invested $5,000 per share in exchange for shares with a fair market value of $10,000 per share, resulting in each individual receiving $250,000 of compensation. In addition, Messrs. Widdicombe and Linder received additional compensation of $138,204 and $138,205, respectively, in the form of tax allowances intended to cover their federal income taxes pursuant to such awards.

On October 31, 2013, we granted vested Company shares, free of any purchase price, to certain of our employees, including 66 shares to Mr. Widdicombe, 147 shares to Mr. Lucas and 79 shares to Mr. Linder. Our named executive officers did not receive tax allowances pursuant to the October 31, 2013 awards.

Severance and Change of Control Agreements

Our named executive officers are not parties to any separate severance or change of control agreements. As described below, our named executive officers are entitled to certain severance and change of control payments and benefits pursuant to their employment agreements.

Employee Benefits

Our named executive officers participate in other employee benefit plans generally available to all employees on the same terms, such as medical, dental, life, disability insurance programs and a 401(k) plan. In 2013, we provided nonelective contributions to the 401(k) accounts of all our employees, including our named executive officers, equal to 3% of our his or her annual compensation, subject to applicable IRS limitations. We do not provide our named executive officers with significant perquisites or similar personal benefits.

Mr. Widdicombe’s Employment Agreement

Effective January 1, 2014, Mr. Widdicombe entered into an employment agreement with us to serve as our President and Chief Executive Officer for a term of five years. The agreement provided for an initial base salary of $680,000 per year beginning January 1, 2014 and, if the Company achieves $25 million in EBITDA on a consolidated basis during 2014, his base salary would increase to $750,000 per year beginning on January 1, 2015 and remain at this level for the balance of the term of the agreement. In addition, Mr. Widdicombe is entitled to participate in the annual bonus pool in an amount not less than 10% of the bonus pool, subject to the discretion of the Chairman of the Board.

Mr. Widdicombe would be entitled to his base salary for the remainder of the employment term in the event he is terminated by us without “Cause,” which is defined as (i) a breach of the employment agreement or (ii) any fraud, breach of fiduciary duty, gross negligence, embezzlement or misappropriation against the Company. If Mr. Widdicombe’s agreement expires without the Company offering him a new employment agreement with compensation levels similar to those offered under this agreement in the last year of its term, then he would be entitled to severance equal his annual base salary in the final year of the agreement. If Mr. Widdicombe dies during the term of the agreement, his estate would be entitled to 50% of his base salary for the remainder of the employment term. Mr. Widdicombe may resign upon giving no less than 90 days’ notice.

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In the event of a “change of control” (as defined in the agreement), Mr. Widdicombe would be entitled to continue receiving, through the remainder of the term of the agreement, (i) his base salary as in effect on the change of control date, (ii) his annual bonuses in amounts no less than those paid in the preceding 12 months and (iii) employee benefits as in effect on the change of control date.

Mr. Widdicombe is subject to certain restrictive covenants, including non-competition and non-solicitation of Company employees obligations for a period of two years following any termination of his employment with the Company.

Mr. Widdicombe previously was a party to an employment agreement with us dated January 1, 2013. This agreement contained terms substantially similar to his agreement dated January 1, 2014, except that it provided for an initial base salary of $400,000 per year, subject to 10% annual increases (up to a maximum of $500,000) in the event the Company achieves $5 million in EBITDA on a consolidated basis during the preceding year.

Mr. Lucas’ Employment Agreement

Effective January 1, 2014, Mr. Lucas entered into an employment agreement with us to serve as our Chairman of the Board and Chief Investment Officer for a term of five years. The agreement provided for an initial base salary of $680,000 per year beginning January 1, 2014 and, if the Company achieves $25 million in EBITDA on a consolidated basis during 2014, his base salary would increase to $750,000 per year beginning on January 1, 2015 and remain at this level for the balance of the term of the agreement. In addition, Mr. Lucas is entitled to participate in the annual bonus pool in an amount not less than 30% of the bonus pool, as determined by the current Chairman of the Board and the Chief Executive Officer.

Mr. Lucas would be entitled to his base salary for the remainder of the employment term in the event he is terminated by us without “Cause,” which is defined as (i) a breach of the employment agreement or (ii) any fraud, breach of fiduciary duty, gross negligence, embezzlement or misappropriation against the Company. If Mr. Lucas’ agreement expires without the Company offering him a new employment agreement with compensation levels similar to those offered under this agreement in the last year of its term, then he would be entitled to severance equal his annual base salary in the final year of the agreement. If Mr. Lucas dies during the term of the agreement, his estate would be entitled to 50% of his base salary for the remainder of the employment term. Mr. Lucas may resign upon giving no less than 90 days’ notice.

In the event of a “change of control” (as defined in the agreement), Mr. Lucas would be entitled to continue receiving, through the remainder of the term of the agreement, (i) his base salary as in effect on the change of control date, (ii) his annual bonuses in amounts no less than those paid in the preceding 12 months and (iii) employee benefits as in effect on the change of control date.

Mr. Lucas is subject to certain restrictive covenants, including non-competition and non-solicitation of Company employees obligations for a period of two years following any termination of his employment with the Company.

Mr. Lucas previously was a party to an employment agreement with us dated January 1, 2013. This agreement contained terms substantially similar to his agreement dated January 1, 2014, except that (i) it provided for an initial base salary of $300,000 per year, subject to 20% annual increases (up to a maximum of $500,000) in the event the Company achieves $5 million in EBITDA on a consolidated basis during the preceding year and (ii) Mr. Lucas was previously required to pay the cash surrender value, if any, of any life insurance policy he chooses to have assigned to him upon his termination for any reason.

Mr. Linder’s Employment Agreement

Effective January 1, 2014, Mr. Linder entered into an employment agreement with us to serve as our Chief Operating Officer for a term of five years. The agreement provided for an initial base salary of $600,000 per year

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beginning January 1, 2014 and, if the Company achieves $25 million in EBITDA on a consolidated basis during 2014, his base salary would increase to $700,000 per year beginning on January 1, 2015 and remain at this level for the balance of the term of the agreement. In addition, Mr. Linder is entitled to participate in the annual bonus pool in an amount not less than 10% of the bonus pool, subject to the discretion of the Chairman of the Board.

Mr. Linder would be entitled to his base salary for the remainder of the employment term in the event he is terminated by us without “Cause,” which is defined as (i) a breach of the employment agreement or (ii) any fraud, breach of fiduciary duty, gross negligence, embezzlement or misappropriation against the Company. If Mr. Linder’s agreement expires without the Company offering him a new employment agreement with compensation levels similar to those offered under this agreement in the last year of its term, then he would be entitled to severance equal his annual base salary in the final year of the agreement. If Mr. Linder dies during the term of the agreement, his estate would be entitled to 50% of his base salary for the remainder of the employment term. Mr. Linder may resign upon giving no less than 90 days’ notice.

In the event of a “change of control” (as defined in the agreement), Mr. Linder would be entitled to continue receiving, through the remainder of the term of the agreement, (i) his base salary as in effect on the change of control date, (ii) his annual bonuses in amounts no less than those paid in the preceding 12 months and (iii) employee benefits as in effect on the change of control date.

Mr. Linder is subject to certain restrictive covenants, including non-competition and non-solicitation of Company employees obligations for a period of two years following any termination of his employment with the Company.

Mr. Linder previously was a party to an employment agreement with us dated January 1, 2013. This agreement contained terms substantially similar to his agreement dated January 1, 2014, except that it provided for an initial base salary of $350,000 per year, subject to 10% annual increases (up to a maximum of $450,000) in the event the Company achieves $5 million in EBITDA on a consolidated basis during the preceding year.

Outstanding Equity Awards at 2013 Fiscal Year-End

	Stock Awards(1)
Name	No. of shares that have not vested (#)		Market value of  shares that have not vested ($)
Richard Widdicombe		—		—
Bruce Lucas		—		—
Kent Linder		—		—

(1) As of December 31, 2013, none of our named executive officers held any options or unvested equity awards.

Director Compensation

As described more fully below, the following table summarizes the annual compensation for our non-employee directors during 2013.

2013 DIRECTOR COMPENSATION

Name(1)	Fees Earned or Paid in Cash ($)(2)		Stock Awards ($)(3)(4)		Total ($)
Pete Apostolou		135,000		105,000		240,000
Trifon Houvardas		230,000		—		230,000
James Masiello		135,000		105,000		240,000
Nicholas Pappas		135,000		105,000		240,000
Joseph Vattamattam		135,000		105,000		240,000
Vijay Walvekar		30,000		210,000		240,000

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(1) Two of our named executive officers, Messrs. Widdicombe and Lucas, are also directors. In accordance with SEC rules, we have omitted them from this table because their compensation is disclosed in the Summary Compensation Table and described in the accompanying narrative.

(2) Messrs. Apostolou, Houvardas, Masiello, Pappas and Vattamattam received annual cash payments in connection with their provision of services to the Board during 2013. The amounts disclosed above for Messrs. Apostolou, Masiello, Pappas and Vattamattam include $30,000 for their annual cash retainers and $105,000 cash payments. The amount disclosed above for Mr. Houvardas includes $30,000 for his annual cash retainer and a $200,000 cash payment. The amount disclosed above for Mr. Walvekar includes only his $30,000 annual cash retainer.

(3) The amounts disclosed above represent the grant date fair value of vested Company shares granted during 2013, computed in accordance with FASB ASC Topic 718. Grant date fair value was determined by multiplying the number of vested Company shares granted by the market value of shares as determined by an independent third party. On October 31, 2013, Messrs. Apostolou, Masiello, Pappas and Vattamattam received 8 vested Company shares and Mr. Walvekar received 16 vested Company shares in connection with their provision of services to the Board during 2013.

(4) During 2013, we granted the following vested Company shares to our directors: Mr. Lucas: 147 shares, Mr. Widdicombe: 116 shares, Mr. Apostolou: 8 shares, Mr. Houvardas: 0 shares, Mr. Masiello: 8 shares, Mr. Pappas: 8 shares, Mr. Vattamattam: 8 shares and Mr. Walvekar: 16 shares. As of December 31, 2013, none of our directors held any unvested shares or option awards.

Narrative to Director’s Compensation Table

The table above describes the compensation earned by our directors (other than Messrs. Widdicombe and Lucas, whose compensation is described in the Summary Compensation Table and accompanying narrative) in 2013. Our processes and procedures for considering and determining the amount of compensation we pay our non-employee directors consist of a periodic review of director compensation by the Board.

In 2013, each director earned an annual cash retainer of $30,000. We do not pay meeting fees or provide additional compensation for participation in Board committees. We provide discretionary bonuses in the form of cash and/or equity awards to directors pursuant to their services provided to the Board, as determined in the discretion of the Board based on the Company’s EBITDA performance. The Board did not establish preset performance goals with respect to 2013 annual incentive awards. In 2013, the Board approved the following bonuses for our non-employee directors: Messrs. Apostolou, Masiello, Pappas and Vattamattam received cash payments of $105,000 and each individual received 8 vested Company shares with a value of $105,000, Mr. Houvardas received a $200,000 cash payment and Mr. Walvekar received 16 vested Company shares with a value of $210,000. We reimburse our directors for their travel expenses related to attending Board and committee meetings.

2014 Updates to Director Compensation Program

Effective January 1, 2014, the Company revised its compensation program for its non-employee directors by increasing the annual cash retainer from $30,000 to $40,000.

Heritage Insurance Holdings, Inc. Omnibus Incentive Plan

Our board of directors intends to adopt the Heritage Insurance Holdings, Inc. Omnibus Incentive Plan (the “Plan”) before the effective date of this offering. The Plan described below is filed as an exhibit to the registration statement of which this summary forms a part and the following description is qualified by reference to the Plan document in all respects. Capitalized terms used herein which are not otherwise defined shall have the meaning assigned to such terms in the Plan, unless clearly stated otherwise.

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Purpose of the Plan

The purpose of the Plan is twofold: (1) it enables us to attract and retain individuals who are expected to make important contributions to our business, and (2) it increases stockholder value by aligning the interests of such persons with our stockholders.

Effective Date

The Plan will become effective on, and awards may be granted under the Plan on and after, the date of the consummation of this offering.

Participants

The Plan permits us to grant certain stock-based and other incentive awards to any of our or our affiliates’ officers, employees or other service providers, any individual that we or an affiliate has engaged to become an officer or employee, or any non-employee director.

Administration

The Administrator will be the Compensation Committee of the Board or such other committee designated by the Board of Directors to administer the Plan. Our Chief Executive Officer may act as the Administrator with respect to awards granted to employees other than executive officers or employees who are not subject to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Subject to any limitations contained in the Plan, the Administrator will have the authority to designate those eligible individuals who will become participants and determine the type of awards to be granted to each participant and the number, terms and conditions of such awards, as well as establish, adopt or revise any rules and regulations as it may deem advisable to administer the Plan.

Awards

The Administrator may grant the following types of awards to any eligible individual it selects:

• Stock Options.    A stock option permits the award holder to purchase shares of our common stock in the future at a fixed price. Two types of stock options may be granted: incentive (or qualified) stock options, which may only be granted to our employees (or those of any of our subsidiaries), and nonqualified stock options. A stock option must have an exercise price at least equal to the fair market value of a share of our common stock as determined on the date of grant. The date of grant may not be a date prior to the date the Administrator takes action to approve the option. For purposes of the Plan, fair market value means the closing price of a share of our common stock as reported on the NYSE on the relevant date, or if no sales occur on such date, on the last preceding date on which a sale occurred on such market. A stock option must expire no later than the tenth anniversary of its grant date.

• Stock Appreciation Rights (“SARs”).    A SAR gives the award holder the right to receive the difference between the fair market value per share of our common stock on the date of exercise over the grant price. Similar to stock options, a SARs grant must be price at least equal to the fair market value of a share of our common stock as determined on the date of grant, and the date of grant may not be a date prior to the date the Administrator takes action to approve the SAR. A SAR must expire no later than the tenth anniversary of its grant date.

• Restricted Stock.    A holder of a restricted stock award immediately receives shares of our common stock, which shares are subject to restrictions on transferability and subject to forfeiture based on certain conditional events.

• Restricted Stock Units or Deferred Stock Rights.    These units/rights provide the award holder the right to receive shares of our common stock (or an equivalent value in cash or other property, as specified in the award agreement) in the future, based upon the attainment of stated vesting or performance criteria.

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• Performance Awards (Performance Shares or Performance Units).    These awards entitle the holder to a payment in stock or cash upon the attainment of one or more specified performance goals.

• Annual or Long-Term Incentive Awards.    These awards entitle the holder to a payment in cash based on the attainment of one or more specified performance goals.

• Dividend Equivalent Units.    These units entitle the award holder to payments (or an equivalent value payable in stock or other property) equal to any dividends paid on the shares of stock underlying such award.

• Other Stock-Based Awards.    The Administrator may grant other types of stock-based awards that are payable in stock or cash.

Subject to the limitations of the Plan, the Administrator has discretion to determine the terms and conditions of the awards, including: (1) whether the award will be subject to a vesting schedule, (2) when the award will be cancelled, and (3) what happens to the award when a participant stops providing services to us and our affiliates.

Shares Available for Awards

Subject to adjustment as provided in the Plan, the aggregate number of shares of our common stock reserved and available for issuance pursuant to awards granted under the Plan is the amount equal to ten percent (10%) of all our issued and outstanding shares of common stock (on a fully-diluted basis) as of the effective date of the Plan. Only an amount equal to five percent (5%) of all our issued and outstanding shares of common stock (on a fully-diluted basis) as of the effective date of the Plan may be issued upon the exercise of incentive stock options.

If (i) a Plan award lapses, expires, terminates or is cancelled without the issuance of shares under such award, (ii) it is determined during or at the conclusion of the term of an award that all or some portion of the shares with respect to which the Award was granted will not be issuable, (iii) shares subject to an award are forfeited or (iv) shares subject to an award are reacquired by us pursuant to rights reserved upon the issuance of such shares, then such shares shall be recredited to the Plan’s reserve and may again be used for new Plan awards. Any such shares recredited under clause (iv) may not, however, be issued pursuant to incentive stock options. In no event, however, will shares tendered in payment of the exercise price of an option, shares withheld to satisfy federal, state or local tax withholding obligations, or shares purchased by us using proceeds from option exercises be recredited back to the Plan reserve.

To the extent that Code Section 162(m) applies to us (see “Code Section 162(m)” below for more information), the maximum aggregate limits applicable to awards made to any participant during any fiscal year are as follows:

Type of Award	Limit
Options and Stock Appreciation Rights	2% of all issued and outstanding shares (on a fully-diluted basis) as of the effective date of the Plan
Restricted Stock (including any dividends paid thereon) and Restricted Stock Units (including any associated Dividend Equivalent Units) and Deferred Stock Rights (including any associated Dividend Equivalent Units)	2% of all issued and outstanding shares (on a fully-diluted basis) as of the effective date of the Plan
Performance Shares or Performance Units the value of which is based on the fair market value of shares of common stock	2% of all issued and outstanding shares (on a fully-diluted basis) as of the effective date of the Plan
Performance Units, the value of which is not based on the fair market value of shares of common stock	$5,000,000
Other Stock-Based Awards	2% of all issued and outstanding shares (on a fully-diluted basis) as of the effective date of the Plan
Annual Incentive Awards	$5,000,000
Long-Term Incentive Awards	$5,000,000

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Performance Goals

For any awards made under the Plan that are intended to meet the requirements of Section 162(m) of the Code, the grant or vesting of such awards may be based upon one or more performance goals that apply to the specified participant, one or more of our business units, or us as a whole. The categories of performance goals (defined as “Performance Goals” under the Plan) on which performance goals intended to qualify compensation as performance-based compensation for purposes of Code Section 162(m) may be based are:

• Our basic earnings per common share on a consolidated basis • Our diluted earnings per common share on a consolidated basis • Total stockholder return • Fair market value of shares • Net sales Non-catastrophic claims incurred • Cost of sales • Gross profit • Selling, general and administrative expenses • Operating income • Earnings before interest and the provision for income taxes (EBIT) • Earnings before interest, the provision for income taxes, depreciation, and amortization (EBITDA) • Net income • Accounts receivable • Gross premiums earned • Inventories • Trade working capital • Return on equity • Return on assets • Return on invested capital • Reinsurance costs • Return on sales • Economic value added, or other measure of profitability that considers the cost of capital employed • Free cash flow • Net cash provided by operating activities • Net increase (decrease) in cash and cash equivalents • Customer satisfaction • Market share • Quality

The Administrator may designate other categories with respect to awards under the Plan that are not intended to qualify as performance-based compensation within the meaning of Code Section 162(m) or to the extent that the application of such categories results in a reduction of the maximum amount otherwise payable under the award.

Termination of Employment

Generally, a participant’s employment, retention, change of control, severance or similar agreement with us will control if such agreement discusses the treatment of awards upon a termination of employment. Otherwise, unless otherwise specified in a participant’s award agreement, the following provisions will apply.

If a participant is terminated for Cause or due to Inimical Conduct, all vested and unvested awards are automatically cancelled and forfeited.

All unvested and/or unexercisable stock options, SARs, restricted stock, restricted stock units and deferred stock rights (in each case, other than performance awards) will automatically be cancelled and forfeited upon termination of employment for any reason. If the participant terminates employment due to Retirement, death or Disability, all vested stock options and SARs will remain exercisable until the earlier of the end of the term of such award or the date that is one year following the date of such termination. The post-termination exercise

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period for vested stock options and SARs described in the preceding sentence is reduced to 30 days if the participant terminates employment for any reason other than due to Retirement, death, Disability or for Cause or Inimical Conduct.

Subject to the exceptions described below, all awards other than stock options, SARs, restricted stock, restricted stock units and deferred stock rights will be automatically cancelled and forfeited upon any termination of employment. Upon a termination of employment due to Retirement, (i) all performance awards outstanding will be paid in shares of our common stock or cash, as applicable, following the end of the performance period and based on the achievement of the performance goals as though the termination had not occurred, and (ii) all incentive awards shall be cancelled in exchange for a cash payment following the end of the performance period based on the achievement of the performance goals but prorated based on the number of days in the performance period that had passed prior to such termination of employment. Upon a termination of employment due to death or Disability, (i) all performance awards outstanding will be paid in shares of our common stock or cash, as applicable, following the end of the performance period and based on the achievement of the performance goals as though the termination had not occurred, but prorated based on the number of days in the performance period that had passed prior to such termination of employment, and (ii) all incentive awards shall be cancelled in exchange for a cash payment following the end of the performance period based on the achievement of the performance goals but prorated based on the number of days in the performance period that had passed prior to such termination of employment.

Limitations on Transfer

No award (other than unrestricted shares) will be assignable or transferable by a participant other than by will or the laws of descent and distribution, unless and to the extent the Administrator allows a participant to designate, in writing, a beneficiary to exercise the award after the participant’s death or to transfer an award.

Treatment of Awards upon a Change of Control

Generally, a participant’s employment, retention, change of control, severance or similar agreement with us, if applicable, will control if such agreement discusses the treatment of awards upon a Change of Control. Otherwise, unless otherwise specified in a participant’s award agreement or by the Administrator prior to the Change of Control, the following provisions will apply.

Upon a Change of Control, the successor entity in the transaction may assume all of our outstanding awards or replace such awards with similar awards. However, to the extent awards are not assumed or replaced, then all outstanding stock-based awards will vest immediately prior to the date of the Change of Control and (unless otherwise determined by the Administrator) (i) all stock options and SARs will be cancelled and paid out in cash and (ii) all earned but unpaid performance and incentive awards would be cancelled in exchange for a cash payment based on the maximum value payable to the participant under such award, but prorated based on the number of days in the performance period that had passed prior to such Change of Control.

If a participant who receives a replacement award by the successor entity in the transaction is terminated without cause (or the participant terminates employment for “good reason” under an agreement with us that contemplates such termination) within twelve months following a change of control, then the participant’s awards will be vested in full, or on a prorated basis if the award is subject to the attainment of performance goals (based on the maximum value payable to the participant under such award) and shall be cancelled in exchange for shares of the successor entity’s common stock or other securities or a cash payment to the participant.

Adjustments

In the event we enter into a transaction that causes the per-share value of the common stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering or large nonrecurring cash

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dividend), the Administrator will make such adjustments to the number and type of shares subject to the Plan and outstanding awards, the grant, purchase or exercise price with respect to any award or the performance goals of an award (limited by the Code Section 162(m) rules, to the extent applicable) as the Administrator may deem equitable to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

In no event, however, may we, the Administrator or any other person amend an option or SAR to reduce the exercise or grant price, cancel an option or SAR in exchange for a similar award with a lower exercise or grant price, or cancel an out-of-the-money option or SAR for a cash payment or other consideration.

Termination and Amendment

The Administrator may, at any time and from time to time, terminate or amend the Plan, but an amendment will require stockholder approval if (i) it is required by the Securities Exchange Act of 1934, as amended, the listing requirements of any principal securities exchange or market on which our shares of common stock are then traded, or any applicable law; or (ii) the amendment increases the number of shares reserved under the Plan or the individual participant share or payment limits set forth in the Plan, expands the group of individuals that may become participants, or diminishes the protections afforded by the anti-repricing provisions of the Plan.

In no event, however, may we, the Administrator or any other person amend an option or SAR to reduce the exercise or grant price, cancel an option or SAR in exchange for a similar award with a lower exercise or grant price, or cancel an out-of-the-money option or SAR for a cash payment or other consideration.

Code Section 162(m)

Section 162(m) of the Code generally limits the deduction companies can take for compensation paid to the chief executive officer and the four other highest paid officers other than the chief financial officer (determined as of the end of each year) to $1,000,000 per year per individual.

However, performance-based compensation that meets the requirements of Section 162(m) does not have to be included as part of the $1,000,000 limit. The Plan is designed so that awards granted to the covered individuals may meet the Section 162(m) requirements for performance-based compensation, if applicable.

Under a Section 162(m) transition rule for compensation plans of corporations that are privately held and that become publicly held in an initial public offering, the Plan will not be subject to Section 162(m) until a specified transition date, which is the earlier of:

• the material modification of the Plan;

• the issuance of all of the shares of our common stock reserved for issuance under the Plan

• the expiration of the Plan; or

• the first meeting of our stockholders at which members of our board of directors are to be elected that occurs after the close of the third calendar year following the calendar year in which our initial public offering occurs.

United States Federal Income Tax Consequences

The following discussion is only a summary of certain of the United States federal income tax consequences of awards under the Plan.

Nonqualified Stock Options

A participant subject to United States income tax will not recognize income at the time of grant of a nonqualified stock option and we will not be entitled to a deduction at that time. When the nonqualified stock

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option is exercised, the participant will recognize ordinary income equal to the difference, if any, between the aggregate exercise price paid and the fair market value, as of the date the nonqualified stock option is exercised, of the shares received. The participant’s tax basis in the exercised shares will equal the exercise price paid plus the amount recognized by the participant as ordinary income. We will generally be entitled to a United States federal income tax deduction, in the tax year in which the nonqualified stock option is exercised, equal to the ordinary income recognized by the participant at exercise. The gain or loss a participant realizes when he or she later sells shares that were acquired by exercising a nonqualified stock option may be a capital gain or loss for United States income tax purposes. The participant’s holding period for shares he or she acquires by exercising a nonqualified stock option will generally begin on the date of exercise.

Incentive Stock Options

The participant will not recognize income under United States federal income tax law at the time of grant of an incentive stock option and we will not be entitled to a deduction at that time. If the incentive stock option is exercised during employment, or within three months thereafter (or one year in the case of a permanently and totally disabled employee), the participant will not recognize any income and we will not be entitled to a deduction. The excess of the fair market value of the shares on the exercise date over the exercise price, however, is includible in computing the participant’s alternative minimum taxable income.

Generally, if the participant disposes of shares acquired by exercising an incentive stock option within either two years after the date of grant or one year after the date of exercise, the participant will recognize ordinary income, and we will be entitled to a deduction, equal to the excess of the fair market value of the shares on the date of exercise (or the sale price, if lower) over the exercise price. The balance of any gain or loss will be treated as a capital gain or loss to the participant. If the shares are disposed of after the two year and one year periods described above, we will not be entitled to any deduction, and the entire gain or loss for the participant will be treated as a capital gain or loss.

SARs

A participant will generally not recognize income, and we will not be entitled to a deduction from income, at the time of grant of a SAR. When the SAR is exercised, the participant will recognize ordinary income equal to the difference between the aggregate grant price and the fair market value, as of the date the SAR is exercised, of the our common stock. The participant’s tax basis in the shares acquired upon exercise of a stock-settled SAR will equal the amount recognized by the participant as ordinary income. We will generally be entitled to a United States federal income tax deduction, in the tax year in which the SAR is exercised, equal to the ordinary income recognized by the participant as described above. If the participant holds shares acquired through exercise of a stock-settled SAR for more than one year after the exercise of the SAR, the capital gain or loss realized upon the sale of those shares will be a long-term capital gain or loss. The participant’s holding period for shares acquired upon the exercise of a stock-settled SAR will begin on the date of exercise.

Restricted Stock Units and Deferred Stock Rights

Restricted stock units and deferred stock rights generally are subject to United States federal income tax at the time of payment and we will have a corresponding deduction when the participant recognizes income.

Other Awards

The current United States federal income tax consequences of other awards authorized under the Plan are generally as follows:

• Restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value of the shares over the purchase price (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant);

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• Performance shares, performance units, dividend equivalent units and other cash awards generally are subject to United States federal income tax (as ordinary income) at the time of payment.

In each of the foregoing cases, we will generally have a deduction equal to the amount of income the participant recognizes, at the same time as the participant recognizes it.

Payment with Shares

When shares subject to an award are used to satisfy any minimum required United States federal income tax withholding, the participant will recognize gain or loss on those shares. In this situation, the participant will recognize a capital gain or loss, as the case may be, equal to the difference between the amount of the minimum required United States federal income tax withholding satisfied by the shares over the participant’s tax basis, if any, in those shares.

If shares owned by the participant are used to pay, in whole or part, the exercise price of a stock option, no gain or loss will be recognized on those shares. In this situation, however, the United States federal income tax basis of the shares received upon exercise will be the tax basis of the shares delivered as payment, share for share, to the extent the number of shares received equals the number of shares delivered as payment. The United States federal income tax basis in shares received in excess of the number of shares delivered by the participant will be equal to the sum of the amount of the exercise price paid in cash or by check, if any, plus any amount the participant is required to recognize as income as a result of the exercise. However, if the holder of an incentive stock option pays the exercise price of that stock option with shares acquired through earlier exercise of an incentive stock option, and the shares used for payment have not been held for the required holding period discussed above, payment in shares will result in the participant recognizing ordinary income.

Code Section 409A

Any deferral of compensation may be subject to the requirements of Code Section 409A. Several forms of compensation allowed under the Plan, including, but not limited to, any grants of restricted stock units may constitute deferred compensation. Notwithstanding any of the preceding tax discussions, any deferred compensation under Plan awards that do not satisfy the requirements of Code Section 409A will, upon vesting, be currently taxable to participants and will be subject (in addition to normal income taxes) to a 20 percent excise tax plus interest. The Committee has established rules and procedures regarding deferred compensation that are meant to comply with the requirements of Code Section 409A. However, there is no guarantee that the rules and procedures comply with such requirements.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following is a description of transactions since our inception to which we have been a party in which the amount involved exceeded or will exceed $120,000 within any fiscal year and in which any of our directors, executive officers, beneficial holders of more than 5% of our capital stock or entities affiliated with them had or will have a direct or indirect material interest.

Relationship with SVM Restoration Services

In March 2014, we acquired the assets and personnel of SVM Restoration Services, Inc., a company that provides water mitigation and repair services to the Company’s policyholders, for $2.5 million in cash. The spouses of Messrs. Widdicombe and Linder, two of our executive officers, founded SVM Restoration Services, Inc. in 2003 and each held 33.3% of its outstanding equity interests. For the year ended December 31, 2013, we paid SVM Restoration Services, Inc. approximately $818,000 for services rendered.

Property Ownership, Management and Construction

The building in which our former St. Petersburg, Florida headquarters is located is owned by The Arc Group, Inc. One of our directors, Pete Apostolou, and his father collectively own 22.5% of the outstanding equity interests of The Arc Group, Inc. For the years ended December 31, 2012 and 2013, we made rent payments to The Arc Group, Inc. of approximately $65,000 and $488,000, respectively.

Further, in November 2013, Skye Lane entered into a Property Management Agreement with Central Management, Inc., a company owned by Mr. Apostolou, for the management of the 13-acre campus in Clearwater, Florida. Pursuant to this agreement, Skye Lane has agreed to pay an annual management fee of $100,000.

We have entered into an agreement with George Apostolou Construction, a company owned by the father of Mr. Apostolou, for the construction of a parking facility for our Clearwater property. In February 2014, we made a payment of approximately $82,000 for engineering and architectural services, and we expect to pay an aggregate of approximately $2.4 million in connection with this construction project.

Consulting Arrangements

In January 2013, we entered into consulting agreements with each of Loukas Zagaris, Melani Zagaris and Estelle Valsamis, the children of Varnavas Zagaris, a former holder of greater than 5% of our outstanding shares. We paid an aggregate of $900,000 for services rendered pursuant to the consulting agreements, which expired on December 31, 2013.

Mr. Lucas, one of our executive officers, holds 50% of the outstanding equity interests of Infinity Investment Funds, LLC, a company that provides the Company with consulting services related to the evaluation of potential strategic acquisitions. We entered into a consulting agreement with Infinity Investment Funds, LLC on December 1, 2013, which is subject to termination at any time. In connection with the provision of these consulting services, we paid Infinity Investment Funds, LLC a non-recurring flat fee of $500,000 in December 2013.

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Sales of our Equity Securities

We sold shares of the Company to our directors and officers and their respective affiliates in private transactions on the dates set forth below.

Subscriber	Date of Purchase		Number of Shares		Number of Warrants		Aggregate Purchase Price
Richard Widdicombe		Third quarter of 2012		25		—	$	250,000
		Fourth quarter of 2012		38		15		417,500
		First quarter of 2013		24		24		300,000
Bruce Lucas		Third quarter of 2012		122		—	$	1,220,000
		Fourth quarter of 2012		168		80		1,880,000
		First quarter of 2013		48		48		600,000
		Second quarter of 2013		46		46		575,000
Kent Linder		Third quarter of 2012		25		—	$	250,000
		Fourth quarter of 2012		49		26		555,000
		First quarter of 2013		6		6		75,000
		Second quarter of 2013		6		6		75,000
Panagiotis (Pete) Apostolou		Third quarter of 2012		96		—	$	960,000
		Fourth quarter 2012		98		10		1,005,000
		First quarter of 2013		12		12		150,000
Trifon Houvardas		Third quarter of 2012		85		—	$	850,000
		Fourth quarter of 2012		128		40		1,380,000
		First quarter of 2013		4		4		50,000
Vijay Walvekar		Third quarter of 2012		190		—	$	1,900,000
		Fourth quarter of 2012		23		—		230,000
		First quarter of 2013		90		90		1,125,000
		Second quarter of 2013		78		78		975,000

Each of Messrs. Widdicombe, Lucas, Linder, Apostolou, Houvardas and Walvekar have irrevocably committed to exercise their warrants in connection with the Reorganization Transactions.

In addition, in the fourth quarter of 2012, we issued $3.9 million aggregate principal amount of notes to certain investors, including Messrs. Lucas, Linder, Apostolou and Widdicombe, to raise additional capital required by Heritage P&C. The notes provided for a 20% fee due upon repayment. Following the issuance of these notes, we exchanged the notes for equity in the form of investment units, with each investment unit comprised of one share and one warrant to purchase a share. Based on a value of $12,500 per investment unit we issued 398 investment units in exchange for the notes. Certain investors, including Messrs. Lucas, Apostolou and Widdicombe, who received fractional investment units upon the exchange of their notes, paid in $95,000 in cash in order to receive whole investment units. The shares issued in connection with the exchange of the notes are reflected in the table above.

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SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of our common stock as of April 30, 2014 and after giving effect to the Reorganization Transactions and the anticipated beneficial ownership percentages immediately following this offering, by:

• each person who is known by us to beneficially own more than 5% of our outstanding common stock,

• each of our directors and named executive officers, and

• all directors and named executive officers as a group.

Each stockholder’s percentage ownership before the offering is based on 6,417 shares outstanding as of April 30, 2014, as adjusted to give effect to the Reorganization Transactions in which 2,974 warrants will be exercised for shares of the Company. Each stockholder’s percentage ownership after the offering is based on             shares of our common stock outstanding immediately after the completion of this offering, assuming no exercise of the underwriters’ option to purchase additional shares. We have granted the underwriters an option to purchase up to             additional shares of our common stock and the table below assumes no exercise of that option.

Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. Percentage of beneficial ownership is based on             shares of common stock to be outstanding after the completion of this offering, assuming no exercise of the underwriters’ option to purchase additional shares. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder. Unless otherwise specified in the footnotes, the address of each beneficial owner listed in the table below is c/o Heritage Insurance Holdings, LLC, 2600 McCormick Drive, Suite 300, Clearwater, Florida 33759.

	Beneficially Owned Before the Offering					Beneficially Owned Following the Offering
Name and Address of Beneficial Owners	Number of Shares(1)		Percent			Number of Shares	Percent
Named Executive Officers and Directors:
Richard Widdicombe		242		2.6	%			%
Bruce Lucas(2)		647		6.9	%			%
Stephen Rohde		47		*				%
Melvin (Mel) Russell		—		—				%
Kent Linder(3)		253		2.7	%			%
Ernesto (Ernie) Garateix		24		*				%
Paul Neilson		3		*				%
Panagiotis (Pete) Apostolou		108		1.2	%			%
Trifon Houvardas(4)		228		2.4	%			%
James Masiello(5)		118		1.3	%
Nicholas Pappas(6)		31		*	%
Joseph Vattamattam		34		*	%
Monica Vernon(7)		18		*	%
Vijay Walvekar(8)		238		2.6	%			%
All Named Executive Officers and Directors as a Group (14 persons)		1,991		21.2	%			%

* Less than 1.0%

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(1) Does not reflect the withholding of shares by the Company as payment of the exercise price in connection with a cashless exercise of warrants in the Reorganization Transactions. The number of shares to be withheld in a cashless exercise will be based upon the public offering price.

(2) Includes 462 shares held by Mr. Lucas and his wife, Sheba Lucas, as tenants by the entirety, 12 shares held by Ms. Lucas and 189 shares held by IIM Holdings, LLC and IIM Holdings II, LLC, entities controlled by Mr. Lucas.

(3) Includes 188 shares held jointly by Mr. Linder and his wife, Veronica Linder, and 12 shares held by Ms. Linder.

(4) Includes 213 shares held by K&M Insurance Investors, LLC, an entity controlled by Mr. Houvardas.

(5) Includes 13 shares held by Mr. Masiello’s wife.

(6) Includes 31 shares held jointly by Mr. Pappas and his father.

(7) Includes 18 shares held jointly by Ms. Vernon and her spouse.

(8) Includes 120 shares held by the Vijay S. Walvekar Revocable Living Trust and 78 shares held by Mr. Walvekar’s wife.

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DESCRIPTION OF CAPITAL STOCK

The following is a summary of our capital stock and provisions of our certificate of incorporation and our bylaws, as each will be in effect prior to the closing of this offering, and certain provisions of Delaware law. This summary does not purport to be complete and is qualified in its entirety by the provisions of our certificate of incorporation and bylaws, copies of which have been or will be filed with the SEC as exhibits to the registration statement of which this prospectus is a part. References in this section to the “Company,” “we” “us” and “our” refer to Heritage Insurance Holdings, Inc. and not to any of its subsidiaries.

General

The total amount of our authorized capital stock consists of 50,000,000 shares of common stock, $0.0001 par value, and 5,000,000 shares of preferred stock, $0.0001 par value. As of March 31, 2014, after giving effect to the Reorganization Transactions and the issuance and sale of shares of common stock in this offering, we will have             shares of common stock outstanding and no shares of preferred stock outstanding, assuming no exercise of the underwriters’ option to purchase additional shares.

Common Stock

Holders of common stock are entitled to one vote for each share held on all matters subject to a vote of stockholders, subject to the rights of holders of any outstanding preferred stock. Accordingly, holders of a majority of the shares of common stock entitled to vote in any election of directors may elect all of the directors standing for election, subject to the rights of holders of any outstanding preferred stock. Holders of common stock will be entitled to receive ratably any dividends that the board of directors may declare out of funds legally available therefor, subject to any preferential dividend rights of outstanding preferred stock. Upon our liquidation, dissolution or winding up, the holders of common stock will be entitled to receive ratably our net assets available after the payment of all debts and other liabilities and subject to the prior rights of holders of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of our capital stock are fully paid and nonassessable, and the shares of common stock to be issued upon the closing of this offering will be fully paid and nonassessable.

Preferred Stock

The board of directors, without further approval of the stockholders, will be authorized to fix the number of shares constituting any series, as well as the dividend rights and terms, conversion rights and terms, voting rights and terms, redemption rights and terms, liquidation preferences and any other rights, preferences, privileges and restrictions applicable to each series of preferred stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could also adversely affect the voting power and dividend and liquidation rights of the holders of common stock. The issuance of preferred stock could also, under certain circumstances, have the effect of making it more difficult for a third-party to acquire, or discouraging a third-party from acquiring, a majority of our outstanding voting stock or otherwise adversely affect the market price of our common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of common stock until the board of directors determines the specific rights of that series of preferred stock.

Warrants to Purchase Common Stock

Following this offering, we will have outstanding warrants to purchase an aggregate of             shares of common stock. The warrants have an exercise price of $         per share and expire on March 31, 2018. The warrants are non-redeemable by the Company and are subject to certain restrictions on transfer.

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Elimination of Liability in Certain Circumstances

Our certificate of incorporation eliminates the liability of our directors to us or our stockholders for monetary damages resulting from breaches of their fiduciary duties as directors. Directors will remain liable for breaches of their duty of loyalty to us or our stockholders, as well as for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, and transactions from which a director derives improper personal benefit. Our certificate of incorporation will not absolve directors of liability for payment of dividends or stock purchases or redemptions by us in violation of Section 174 (or any successor provision of the Delaware General Corporation Law).

The effect of this provision is to eliminate the personal liability of directors for monetary damages for actions involving a breach of their fiduciary duty of care, including any such actions involving gross negligence. We do not believe that this provision eliminates the liability of our directors to us or our stockholders for monetary damages under the federal securities laws. The certificate of incorporation and by-laws provide indemnification for the benefit of our directors and officers to the fullest extent permitted by the Delaware General Corporation Law as it may be amended from time to time, including most circumstances under which indemnification otherwise would be discretionary.

Number of Directors; Removal; Vacancies

Our by-laws provide that we have five directors, provided that this number may be changed by the board of directors. Vacancies on the board of directors may be filled only by the affirmative vote of a majority of the remaining directors then in office. Our by-laws provide that, subject to the rights of holders of any future series of preferred stock, directors may be removed, with or without cause, at meetings of stockholders by the affirmative vote of the holders of a majority of the outstanding shares entitled to vote generally in the election of directors.

Special Meetings of Stockholders; Limitations on Stockholder Action by Written Consent

Our certificate of incorporation provides that special meetings of our stockholders may be called only by our chairman of the board, our chief executive officer, our board of directors or holders of not less than a majority of our issued and outstanding voting stock. Any action required or permitted to be taken by our stockholders must be effected at an annual or special meeting of stockholders and may not be effected by written consent unless the action to be effected and the taking of such action by written consent have been approved in advance by our board of directors.

Amendments; Vote Requirements

Certain provisions of our certificate of incorporation and by-laws provide that the affirmative vote of a majority of the shares entitled to vote on any matter is required for stockholders to amend our certificate of incorporation or by-laws, including those provisions relating to action by written consent and the ability of stockholders to call special meetings.

Authorized but Unissued Shares

The authorized but unissued shares of common stock will be available for future issuance without stockholder approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock could render it more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Advance Notice Requirements for Stockholder Proposals and Nomination of Directors

Our by-laws provide that stockholders seeking to bring business before an annual meeting of stockholders, or to nominate candidates for election as directors at an annual meeting of stockholders, must provide timely

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notice in writing. To be timely, a stockholder’s notice must be delivered to or mailed and received at our principal executive offices not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders. However, in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, such notice will be timely only if received not later than the close of business on the tenth day following the date on which notice of the date of the annual meeting was mailed to stockholders or made public, whichever first occurs. Our by-laws also specify requirements as to the form and content of a stockholder’s notice.

NYSE Trading

We intend to apply to have our common stock approved for listing on the NYSE under the symbol “        .”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is             . The transfer agent’s address is             , and its telephone number is             .

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. Future sales of substantial amounts of our common stock in the public market, or the perception that such sales may occur, could adversely affect the prevailing market price of our common stock. No prediction can be made as to the effect, if any, future sales of shares, or the availability of shares for future sales, will have on the market price of our common stock prevailing from time to time. The sale of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of our common stock.

Rule 144

In general, under Rule 144 of the Securities Act as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell such shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then such person is entitled to sell such shares without complying with any of the requirements of Rule 144.

In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

• 1% of the number of shares of common stock then outstanding; or

• the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Rule 144 also provides that a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale and who has for at least six months beneficially owned shares of our common stock that are restricted securities, will be entitled to freely sell such shares of our common stock subject only to the availability of current public information regarding us. A person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale and who has beneficially owned for at least one year shares of our common stock that are restricted securities, will be entitled to freely sell such shares of our common stock under Rule 144 without regard to the current public information requirements of Rule 144.

Rule 701

Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144.

Stock Plans

We intend to file registration statements on Form S-8 under the Securities Act covering all of the shares of our common stock reserved for issuance under the Plan we intend to adopt in connection with this offering. We expect to file this registration statement as soon as practicable after this offering and adoption of the Plan.

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Accordingly, shares registered under the registration statement on Form S-8 will be available for sale in the open market following its effective date, subject to the Rule 144 limitations applicable to affiliates.

Lock-Up Agreements

In connection with this offering, we, our executive officers, directors and certain of our stockholders (whose common stock represents substantially all of our pre-offering shares) will enter into 180-day lock-up agreements with the underwriters of this offering under which neither we nor they may, for a period of 180 days after the date of this prospectus, directly or indirectly sell, dispose of or hedge any shares of common stock or any securities convertible into or exchangeable or exercisable for shares of common stock without the prior written consent of Citigroup Global Markets Inc. on behalf of the underwriters. Individuals who purchase shares in the directed share program will also be subject to a 180-day lock-up period.

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UNDERWRITING

Citigroup Global Markets Inc. is acting as sole book-running manager of the offering and as representative of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus, each underwriter named below has severally agreed to purchase, and we have agreed to sell to that underwriter, the number of shares set forth opposite the underwriter’s name.

Underwriter	Number of Shares
Citigroup Global Markets Inc.
SunTrust Robinson Humphrey, Inc.
Sandler O’Neill & Partners, L.P.
Dowling & Partners Securities LLC
JMP Securities LLC
Willis Securities, Inc.
Total

The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all the shares (other than those covered by the over-allotment option described below) if they purchase any of the shares.

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount from the initial public offering price not to exceed $         per share. If all the shares are not sold at the initial offering price, the underwriters may change the offering price and the other selling terms. The representative has advised us that the underwriters do not intend to make sales to discretionary accounts.

If the underwriters sell more shares than the total number set forth in the table above, we have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to              additional shares at the public offering price less the underwriting discount. The underwriters may exercise the option solely for the purpose of covering over-allotments, if any, in connection with this offering. To the extent the option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter’s initial purchase commitment. Any shares issued or sold under the option will be issued and sold on the same terms and conditions as the other shares that are the subject of this offering.

We, our officers and directors, certain of our employees and our other stockholders have agreed that, for a period of 180 days from the date of this prospectus, we and they will not, without the prior written consent of Citigroup, dispose of or hedge any shares or any securities convertible into or exchangeable for our common stock. Citigroup in its sole discretion may release any of the securities subject to these lock-up agreements at any time, which, in the case of officers and directors, shall be with notice.

At our request, the underwriters have reserved up to     % of the shares for sale at the initial public offering price to persons who are directors, officers or employees, or who are otherwise associated with us through a directed share program. The number of shares available for sale to the general public will be reduced by the number of directed shares purchased by participants in the program. Except for certain of our officers, directors and employees who have entered into lock-up agreements as contemplated in the immediately preceding paragraph, each person buying shares through the directed share program has agreed that, for a period of 180 days from the date of this prospectus, he or she will not, without the prior written consent of Citigroup, dispose of or hedge any shares or any securities convertible into or exchangeable for our common stock with respect to shares purchased in the program. For certain officers, directors and employees purchasing shares through the directed share program, the lock-up agreements contemplated in the immediately preceding paragraph shall

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govern with respect to their purchases. Citigroup in its sole discretion may release any of the securities subject to these lock-up agreements at any time, which, in the case of officers and directors, shall be with notice. Any directed shares not purchased will be offered by the underwriters to the general public on the same basis as all other shares offered. We have agreed to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with the sales of the directed shares.

Prior to this offering, there has been no public market for our shares. Consequently, the initial public offering price for the shares was determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price were our results of operations, our current financial condition, our future prospects, our markets, the economic conditions in and future prospects for the industry in which we compete, our management, and currently prevailing general conditions in the equity securities markets, including current market valuations of publicly traded companies considered comparable to our company. We cannot assure you, however, that the price at which the shares will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our shares will develop and continue after this offering.

We intend to apply to have our shares listed on the NYSE under the symbol “        .”

The following table shows the underwriting discounts and commissions that we are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ over-allotment option.

	Paid by Heritage
	No Exercise	Full Exercise
Per share	$	$
Total	$	$

We estimate that our portion of the total expenses of this offering will be $        .

In connection with the offering, the underwriters may purchase and sell shares in the open market. Purchases and sales in the open market may include short sales, purchases to cover short positions, which may include purchases pursuant to the over-allotment option, and stabilizing purchases.

• Short sales involve secondary market sales by the underwriters of a greater number of shares than they are required to purchase in the offering.

• “Covered” short sales are sales of shares in an amount up to the number of shares represented by the underwriters’ over-allotment option.

• “Naked” short sales are sales of shares in an amount in excess of the number of shares represented by the underwriters’ over-allotment option.

• Covering transactions involve purchases of shares either pursuant to the underwriters’ over-allotment option or in the open market in order to cover short positions.

• To close a naked short position, the underwriters must purchase shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

• To close a covered short position, the underwriters must purchase shares in the open market or must exercise the over-allotment option. In determining the source of shares to close the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option.

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• Stabilizing transactions involve bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum.

Purchases to cover short positions and stabilizing purchases, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the shares. They may also cause the price of the shares to be higher than the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on the NYSE, in the over-the-counter market or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time.

Other Relationships

The underwriters are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, insurance and reinsurance related brokering, hedging, financing and brokerage activities. The underwriters and their respective affiliates may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business for which they may receive customary fees and reimbursement of expenses. Willis Securities Inc. acted as sole structuring agent, sole bookrunner and joint lead manager, and Citigroup Global Markets Inc. acted as joint lead manager, in the placement of the principal-at-risk variable notes by Citrus Re Ltd. In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities.

Notice to Prospective Investors in the European Economic Area

In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a relevant member state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of shares described in this prospectus may not be made to the public in that relevant member state other than:

• to any legal entity which is a qualified investor as defined in the Prospectus Directive;

• to fewer than 100 or, if the relevant member state has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by us for any such offer; or

• in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of shares shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

For purposes of this provision, the expression an “offer of securities to the public” in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe for the shares, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that

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member state, and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the relevant member state) and includes any relevant implementing measure in the relevant member state. The expression 2010 PD Amending Directive means Directive 2010/73/EU.

The sellers of the shares have not authorized and do not authorize the making of any offer of shares through any financial intermediary on their behalf, other than offers made by the underwriters with a view to the final placement of the shares as contemplated in this prospectus. Accordingly, no purchaser of the shares, other than the underwriters, is authorized to make any further offer of the shares on behalf of the sellers or the underwriters.

Notice to Prospective Investors in the United Kingdom

This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (each such person being referred to as a “relevant person”). This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.

Notice to Prospective Investors in France

Neither this prospectus nor any other offering material relating to the shares described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or of the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the shares has been or will be:

• released, issued, distributed or caused to be released, issued or distributed to the public in France; or

• used in connection with any offer for subscription or sale of the shares to the public in France.

Such offers, sales and distributions will be made in France only:

• to qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint d’investisseurs), in each case investing for their own account, all as defined in, and in accordance with articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier;

• to investment services providers authorized to engage in portfolio management on behalf of third parties; or

• in a transaction that, in accordance with article L.411-2-II-1°-or-2°-or 3° of the French Code monétaire et financier and article 211-2 of the General Regulations (Règlement Général) of the Autorité des Marchés Financiers, does not constitute a public offer (appel public à l’épargne).

The shares may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.

Notice to Prospective Investors in Hong Kong

The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance

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(Cap. 32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Notice to Prospective Investors in Japan

The shares offered in this prospectus have not been and will not be registered under the Financial Instruments and Exchange Law of Japan. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan (including any corporation or other entity organized under the laws of Japan), except (i) pursuant to an exemption from the registration requirements of the Financial Instruments and Exchange Law and (ii) in compliance with any other applicable requirements of Japanese law.

Notice to Prospective Investors in Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.

Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

• a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

• a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:

• to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;

• where no consideration is or will be given for the transfer; or

• where the transfer is by operation of law.

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS TO NON-U.S. HOLDERS

The following is a summary of the material U.S. federal income tax consequences of the purchase, ownership and disposition of our common stock to a “non-U.S. holder” (as defined below) that purchases shares of our common stock in this offering. This summary applies only to a non-U.S. holder that holds our common stock as a capital asset, within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). For purposes of this summary, a “non-U.S. holder” means any beneficial owner of our common stock that is, for U.S. federal income tax purposes, an individual, corporation, estate or trust (other than a grantor trust) other than:

• an individual citizen or resident of the United States, as defined for U.S. federal income tax purposes;

• a corporation or other entity treated as a corporation for U.S. federal income tax purposes created or organized in the United States or under the laws of the United States or any political subdivision thereof;

• an estate whose income is subject to U.S. federal income tax regardless of its source; or

• a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in place to be treated as a U.S. person for U.S. federal income tax purposes.

In the case of a holder that is classified as a partnership for U.S. federal income tax purposes, the tax treatment of a partner in such partnership generally will depend upon the status of the partner and the activities of the partner and the partnership. A non-U.S. holder that is a partner in a partnership considering an investment in our common stock, should consult its tax advisor.

This summary is based upon the provisions of the Code, the Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those summarized below. We cannot assure you that a change in law, possibly with retroactive application, will not alter significantly the tax considerations that we describe in this summary. We have not sought and do not plan to seek any ruling from the U.S. Internal Revenue Service, which we refer to as the IRS, with respect to statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with our statements and conclusions.

This summary does not address all aspects of U.S. federal income taxes that may be relevant to non-U.S. holders in light of their personal circumstances, and does not deal with federal taxes other than the U.S. federal income tax (such as U.S. federal estate and gift tax laws) or with non-U.S., state or local tax considerations. This summary does not address the tax consequences for the stockholders, beneficiaries or other owners of a non-U.S. holder. Special rules, not discussed here, may apply to certain non-U.S. holders, including:

• former citizens or residents of the U.S. or part-year non-resident aliens;

• brokers, dealers or traders in securities, commodities or currencies or persons who elect to mark-to-market their securities;

• persons who hold our common stock as a position in a “straddle,” “conversion transaction” or other risk reduction transaction;

• controlled foreign corporations, passive foreign investment companies (or their stockholders), or corporations that accumulate earnings to avoid U.S. federal income tax;

• tax-exempt organizations or government agencies or instrumentalities;

• non-U.S. holders subject to the alternative minimum tax;

• banks, insurance companies, or other financial institutions; and

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• pass-through entities and investors in pass-through entities that are subject to special treatment under the Code.

Non-U.S. holders should consult their own tax advisors to determine the U.S. federal, state, local and other tax and tax treaty consequences that may be relevant to them.

Non-U.S. holders considering the purchase of our common stock, should consult their tax advisor concerning the particular U.S. federal income tax consequences of the purchase, ownership and disposition of our common stock, as well as the consequences arising under U.S. tax laws other than the federal income tax law (such as estate or gift tax laws) or under the laws of any state, local, or non-U.S. taxing jurisdiction or the application of any tax treaties.

Dividends

As discussed under the section entitled “Dividend Policy” above, we do not currently anticipate paying dividends. In the event that we do make a distribution of cash or property (other than certain stock distributions) with respect to our common stock (or certain redemptions that are treated as distributions with respect to common stock), any such distributions will be treated as a dividend for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Dividends paid to a non-U.S. holder generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by a non-U.S. holder within the U.S. and if an income tax treaty applies, are attributable to a permanent establishment or fixed base maintained by such non-U.S. holder in the U.S., are not subject to the withholding tax, but instead are subject to U.S. federal income tax on a net income basis at applicable graduated individual or corporate rates, unless an applicable income tax treaty provides otherwise. Certain certification and disclosure requirements, including timely delivery of a properly executed IRS Form W-8ECI (or applicable successor form), must be satisfied for effectively connected income to be exempt from withholding. Any such effectively connected dividends received by a non-U.S. corporation may be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.

If the amount of a distribution paid on our common stock exceeds our current and accumulated earnings and profits, such excess will be allocated ratably among each share of common stock with respect to which the distribution is paid and treated first as a tax-free return of capital to the extent of the non-U.S. holder’s adjusted tax basis in each such share, and thereafter as capital gain from a sale or other taxable disposition of such share of common stock that is taxed to the non-U.S. holder as described below under the heading “Gain on Disposition of Common Stock.” Any such distribution would also be subject to the discussion below under “—FATCA.” A non-U.S. holder’s adjusted tax basis in a share is generally the purchase price of such share, reduced by the amount of any such tax-free returns of capital.

If a non-U.S. holder wishes to claim the benefit of an applicable treaty rate to avoid or reduce withholding of U.S. federal income tax for dividends, then such non-U.S. holder must timely (a) provide the withholding agent with a properly completed IRS Form W-8BEN (or other applicable successor form) and certify under penalties of perjury that the non-U.S. holder is not a “United States person” (as defined in the Code) and is eligible for treaty benefits, or (b) if our common stock is held through certain foreign intermediaries, satisfy the relevant certification requirements of applicable U.S. Treasury regulations. Special certification and other requirements apply to certain non-U.S. holders that act as intermediaries (including partnerships).

If a non-U.S. holder is eligible for a reduced rate of U.S. federal income tax pursuant to an income tax treaty, then such holder may obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim with the IRS.

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Gain on Disposition of Common Stock

A non-U.S. holder generally will not be subject to U.S. federal income tax with respect to gain realized on the sale or other taxable disposition of our common stock, unless:

• the gain is effectively connected with a trade or business conducted by such non-U.S. holder in the U.S., and, where a tax treaty applies, is attributable to a U.S. permanent establishment or a fixed base maintained by such holder in the U.S.;

• if the non-U.S. holder is an individual, and is present in the U.S. for 183 days or more in the taxable year of the sale or other taxable disposition and certain other conditions are met; or

• we are or have been during a specified testing period a “U.S. real property holding corporation” for U.S. federal income tax purposes, and certain other conditions are met.

We believe that we are not, and we do not anticipate becoming, a “U.S. real property holding corporation” for U.S. federal income tax purposes. Even if we are or become a U.S. real property holding corporation, a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain in respect of our common stock as long as our common stock is “regularly traded” (within the meaning of Section 897(c)(3) of the Code on an established securities market) and such non-U.S. holder actually or constructively owned no more than 5% of our common stock during the specified testing period. Non-U.S. holders should be aware that no assurance can be given that our common stock will be regularly traded on an established securities market when a non-U.S. holder sells its shares of common stock. If we are or become a U.S. real property holding corporation and a non-U.S. holder actually or constructively owned more than 5% of our common stock at any time during the specified testing period, such non-U.S. holder will be subject to tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates. If a non-U.S. holder is a person described in the first bullet point above, such non-U.S. holder will be subject to tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates. In addition, a non-U.S. corporation may be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty. If a non-U.S. holder is an individual described in the second bullet point above, such non-U.S. holder will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by U.S. source capital losses.

Information Reporting and Backup Withholding

We must report annually to the IRS and to a non-U.S. holder the amount of dividends paid to the non-U.S. holder and the amount of tax, if any, withheld with respect to such dividends, regardless of whether withholding was required. The IRS may make this information available to the tax authorities in the country in which the non-U.S. holder is resident under the provisions of an applicable income tax treaty or information exchange agreement.

In addition, a non-U.S. holder may be subject to information reporting requirements and backup withholding (currently at a rate of 28%) with respect to dividends paid on, and the proceeds of disposition of, shares of our common stock, unless, such non-U.S. holder timely establishes an exemption, for example, by properly certifying that such non-U.S. holder is not a United States person, as defined under the Code, on a valid IRS Form W-8BEN or another appropriate version of IRS Form W-8 (or applicable successor form) and includes any applicable attachments (provided that the payor does not have actual knowledge or reason to know that such holder is a United States person, within the meaning of the Code).

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability, provided the required information is timely furnished by to the IRS. A non-U.S. holder should consult its tax advisor regarding the application of the information reporting and backup withholding rules.

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FATCA

In addition to the withholding discussed above, Sections 1471-1474 of the Code, U.S. Treasury regulations and official IRS guidance promulgated thereunder (commonly known as “FATCA”) generally will impose a withholding tax of 30 percent on dividend income from our common stock and the gross proceeds of a disposition of our common stock paid to a “foreign financial institution” (as defined in FATCA), whether acting as an intermediary or for its own account, unless such institution enters into an agreement with the U.S. government to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which would include certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or is otherwise exempt from or treated as complying with FATCA. Absent any applicable exception, FATCA also generally will impose a withholding tax of 30 percent on dividend income from our common stock and the gross proceeds of a disposition of our common stock paid to a foreign entity that is not a foreign financial institution unless such entity provides the withholding agent with a certification that the beneficial owner of such payment does not have any “substantial US owners” (as defined in FATCA) or provides the name, address and taxpayer identification number of each “substantial U.S. owner” and certain other specified requirements are met. Under certain circumstances, a non-U.S. holder of our common stock might be eligible for refunds or credits of such taxes, and a non-U.S. holder might be required to file a U.S. federal income tax return to claim such refunds or credits. Recently finalized U.S. Treasury regulations and IRS Notice 2013-43 delayed the implementation of withholding (i) on dividend income until July 1, 2014 and (ii) on gross proceeds from the disposition of stock until January 1, 2017. Additional requirements and conditions may be imposed pursuant to an intergovernmental agreement (if and when entered into) between United States and a non-U.S. holder’s home jurisdiction governing FATCA. Application of this FATCA tax does not depend on whether the payments otherwise would be exempt from U.S. federal withholding tax under the other exemptions described above. Investors should consult with their tax advisors regarding the implications of this legislation on their investment in our common stock.

THE SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES ABOVE IS INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY. POTENTIAL PURCHASERS OF OUR COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX AND TAX TREATY CONSIDERATIONS OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK.

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LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us by Winston & Strawn LLP, Chicago, Illinois. The underwriters have been represented by Mayer Brown LLP, Chicago, Illinois.

EXPERTS

The audited consolidated financial statements of Heritage Insurance Holdings, LLC and its subsidiaries included in this prospectus and elsewhere in the registration statement have been so included herein in reliance upon the report of Grant Thornton LLP, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and the common stock offered hereby, reference is made to the registration statement and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. We currently do not file periodic reports with the SEC. Upon closing of our initial public offering, we will be required to file periodic reports, proxy statements and other information with the SEC pursuant to the Exchange Act. A copy of the registration statement and the exhibits filed therewith may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street, NE, Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from that office. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Unaudited Quarterly Consolidated Financial Statements
Consolidated Balance Sheets at March 31, 2014 and December 31, 2013		F-2
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2014 and 2013		F-3
Consolidated Statements of Members’ Equity for the three months ended March 31, 2014 and 2013		F-4
Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013		F-5
Notes to Consolidated Financial Statements		F-6
Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm		F-29
Consolidated Balance Sheets at December 31, 2013 and 2012		F-30
Consolidated Statements of Comprehensive Income (Loss) for the year ended December 31, 2013 and the period from August 7, 2012 (inception) to December 31, 2012		F-31
Consolidated Statements of Members’ Equity for the year ended December 31, 2013 and the period from August 7, 2012 (inception) to December 31, 2012		F-32
Consolidated Statements of Cash Flows for the year ended December 31, 2013 and the period from August 7, 2012 (inception) to December 31, 2012		F-33
Notes to Consolidated Financial Statements		F-34

F-1

Heritage Insurance Holdings, LLC

Consolidated Balance Sheets

(In thousands)

	March 31, 2014		December 31, 2013
	(Unaudited)
ASSETS
Fixed maturity securities, available for sale, at fair value	$	129,216	$	104,668
Equity securities, available for sale, at fair value		15,800		25,446
Mortgage loan, held to maturity, at amortized cost		6,041		6,063
Total investments		151,057		136,177
Cash and cash equivalents		74,692		65,059
Accrued investment income		1,122		971
Premiums receivable, net		12,356		10,347
Prepaid reinsurance premiums		12,642		31,252
Reinsurance premiums receivable		580		5,337
Federal income tax refund receivable		616		5,073
Deferred income taxes		5,052		4,436
Deferred policy acquisition costs, net		12,226		9,765
Property and equipment, net		11,996		10,935
Other assets		3,775		2,626
Total Assets	$	286,114	$	281,978
LIABILITIES AND MEMBERS’ EQUITY
Unpaid losses and loss adjustment expenses	$	28,456	$	19,344
Unearned premiums		124,285		116,243
Reinsurance payable		3,500		29,591
Income taxes payable		1,255		2,805
Accrued compensation		1,864		505
Advance premiums		7,039		3,829
Other liabilities		9,574		8,756
Total Liabilities		175,973		181,073
Commitments and contingencies (Note 10)
Redeemable shares (Note 14)		—		20,921
Members’ Equity:
Contributed members’ capital		83,859		62,850
Accumulated other comprehensive income (loss)		470		(790	)
Retained earnings		25,812		17,924
Total Members’ Equity		110,141		79,984
Total Liabilities and Members’ Equity	$	286,114	$	281,978

See accompanying notes to unaudited consolidated financial statements.

F-2

Heritage Insurance Holdings, LLC

Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands, except share and per share amounts)

	Three Months Ended March 31,
	2014			2013
REVENUE:
Gross premiums written	$	68,903		$	16,349
(Increase) decrease in gross unearned premiums		(8,043	)		3,975
Gross premiums earned		60,860			20,324
Ceded premiums		(18,624	)		(358	)
Net premiums earned		42,236			19,966
Net investment income		618			212
Net realized losses		(42	)		(2	)
Other revenue		1,066			166
Total revenue		43,878			20,342
EXPENSES:
Losses and loss adjustment expenses		20,587			5,280
Policy acquisition costs		4,473			115
General and administrative expenses		6,997			3,988
Interest expense		—			6
Total expenses		32,057			9,389
Income before income taxes
Provision for income taxes		3,933			3,899
Net income	$	7,888		$	7,054
OTHER COMPREHENSIVE INCOME:
Change in net unrealized gains / losses on investments		2,010			(6	)
Reclassification adjustment for net realized investment losses		42			2
Income tax (expense) benefit related to items of other comprehensive income		(792	)		1
Total comprehensive income	$	9,148		$	7,051
Weighted average shares outstanding
Basic		6,416			4,221
Diluted		7,450			4,221
Earnings per share
Basic	$	1,229		$	1,671
Diluted	$	1,059		$	1,671

See accompanying notes to unaudited consolidated financial statements.

F-3

Heritage Insurance Holdings, LLC

Consolidated Statements of Members’ Equity (Unaudited)

(In thousands)

	Contributed Members’ Capital						Accumulated Other Comprehensive Income (loss)			Retained Earnings (Deficit)			Total Members’ Equity
	Shares			Amount
December 31, 2013		5,493		$	62,850		$	(790	)	$	17,924		$	79,984
Temporary equity reclassified to equity		917			20,921			—			—			20,921
Net income		—			—			—			7,888			7,888
Net unrealized change in investments, net of tax		—			—			1,260			—			1,260
Issuance of equity		7			88			—			—			88
March 31, 2014		6,417		$	83,859		$	470		$	25,812		$	110,141
December 31, 2012		3,259		$	33,585		$	—		$	(5,466	)	$	28,119
Equity reclassified to temporary equity		(415	)		(4,150	)		—			—			(4,150	)
Net income		—			—			—			7,054			7,054
Net unrealized change in investments, net of tax		—			—			(3	)		—			(3	)
Executive stock grant		15			150			—			—			150
Issuance of equity		2,352			29,668			—			—			29,668
March 31, 2013		5,211		$	59,253		$	(3	)	$	1,588		$	60,838

See accompanying notes to unaudited consolidated financial statements.

F-4

Heritage Insurance Holdings, LLC

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Three Months Ended March 31,
	2014			2013
OPERATING ACTIVITIES
Net income	$	7,888		$	7,054
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		—			575
Amortization of bond discount		431			112
Depreciation and amortization		104			12
Net realized losses		42			2
Deferred income taxes		(1,408	)		692
Changes in operating assets and liabilities:
Accrued investment income		(151	)		(315	)
Premiums receivable, net		(2,009	)		(1,602	)
Prepaid reinsurance premiums		18,610			356
Reinsurance premiums receivable		4,757			—
Federal income tax refund receivable		4,457			—
Deferred policy acquisition costs, net		(2,461	)		(1,294	)
Other assets		(1,149	)		(1,169	)
Unpaid losses and loss adjustment expenses		9,112			3,580
Unearned premiums		8,042			(3,976	)
Reinsurance payable		(26,091	)		(1,484	)
Income taxes payable		(1,550	)		(1,765	)
Accrued compensation		1,359			1,225
Advance premiums		3,210			1,964
Other liabilities		818			1,230
Net cash provided by operating activities		24,011			5,197
INVESTING ACTIVITIES
Proceeds from sales and maturities of investments available for sale		16,750			271
Purchases of investments available for sale		(30,051	)		(52,523	)
Cost of property and equipment acquired		(1,165	)		(80	)
Net cash used in investing activities		(14,466	)		(52,332	)
FINANCING ACTIVITIES
Proceeds from issuance of equity and redeemable shares		88			31,313
Net cash provided by financing activities		88			31,313
Increase (decrease) in cash and cash equivalents		9,633			(15,822	)
Cash and cash equivalents at beginning of period		65,059			63,872
Cash and cash equivalents at end of period	$	74,692		$	48,050
Supplemental Cash Flows Information:
Interest paid	$	—		$	6
Income taxes paid	$	2,434		$	—

See accompanying notes to unaudited consolidated financial statements.

F-5

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

1) ORGANIZATION, CONSOLIDATION AND PRESENTATION

(a) Business

Heritage Insurance Holdings, LLC (referred to in this document as we, our, us, and Heritage Insurance) is a property and casualty insurance holding company formed in 2012 that provides personal residential insurance for single family homeowners and condominium owners. Our insurance subsidiary is Heritage Property & Casualty Insurance Company. Our other subsidiaries include Heritage MGA, LLC, the managing general agent that manages substantially all aspects of our insurance subsidiary’s business; Contractors’ Alliance Network, LLC, our vendor network manager; Skye Lane Properties, LLC, our property management subsidiary; First Access Insurance Group, LLC, our retail agency; Osprey Re LTD, our reinsurance subsidiary that provides a portion of the reinsurance protection purchased by our insurance subsidiary; and Heritage Insurance Claims, LLC, an inactive subsidiary reserved for future development. On January 1, 2014, we formed a Delaware limited liability company, also named Heritage Insurance Holdings, LLC and merged with it in order to domicile our ultimate parent in Delaware.

Our primary product is personal residential insurance, which we currently offer in Florida only under authorization from the Florida Office of Insurance Regulation (“FLOIR”).

Substantially all of our policies have been obtained as a result of participation in a “depopulation program” with Citizens Property Insurance Corporation (“Citizens”), a Florida state supported insurer. Beginning in December 2012, we received authorization to assume personal residential policies from Citizens, Florida’s residential residual market, through assumption transactions. The assumption is part of a program created by the Florida legislature to reduce the number of properties insured by Citizens. The assumed Citizen policy is not cancelled and remains in effect until its cancelation date. All of the terms and conditions of those policies, including coverage and rates, remain unchanged for the remainder of the policy term. At expiration, we can renew the policies under our own terms and conditions. We are required to offer renewals on the policies acquired for a period of three years subsequent to the initial expiration of the assumed policies.

F-6

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

During the first three years after assumption, our offer of renewals are required to have rates that may not exceed the greater of 110% of the previous rate or the renewal rate charged by Citizens for that policy. In addition to the Citizens assumptions, we write voluntary personal residential policies through a network of independent agents.

We conduct our operations under one business segment.

(b) Consolidation and Presentation

We prepare our financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). GAAP differs from statutory accounting principles prescribed or permitted for insurance entities by regulatory authorities. While preparing our financial statements, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. Accordingly, actual results will differ from those estimates. Reported amounts that require us to make extensive use of estimates include our reserves for unpaid losses and loss adjustment expenses, deferred policy acquisition costs, and investments. Except for the captions on our Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income, we generally use the term loss expense(s) to collectively refer to both losses and loss adjustment expenses.

We include all of our subsidiaries in our consolidated financial statements, eliminating all significant intercompany balances and transactions during consolidation. All references to members’ equity, shares, and stockholders collectively refer to ownership interests of our members.

The accompanying unaudited consolidated financial statements as of and for the three-month periods ended March 31, 2014 and 2013, with the consolidated balance sheet as of December 31, 2013 (for comparative purposes), have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the Securities and Exchange Commission (“SEC”) rules for interim financial reporting. In compliance with those rules and regulations, we have omitted certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP, though management believes the disclosures made herein are sufficient to ensure that the information presented is not misleading. Operating results for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the year ending December 31, 2014. In the opinion of management, the unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. These unaudited consolidated financial statements and related notes should be read in conjunction with the annual consolidated financial statements and notes for December 31, 2013.

2) SIGNIFICANT ACCOUNTING POLICIES

(a) Cash and Cash Equivalents

Our cash and cash equivalents include demand deposits with financial institutions and short-term, highly- liquid instruments with original maturities of three months or less when purchased.

(b) Investments

We currently classify all of our investments in fixed maturity securities and equity securities as available-for-sale, and report them at fair value. Our participation in a commercial mortgage loan is classified as held to maturity and reported at amortized cost. Subsequent to our acquisition of available-for-sale securities, we record

F-7

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

changes in value through the date of disposition as unrealized holding gains and losses, net of tax effects, and include them as a component of other comprehensive income. We include realized gains and losses, which we calculate using the specific-identification method for determining the cost of securities sold, in net income. We amortize any premium or discount on fixed maturities over the remaining maturity period of the related securities using the effective interest method, and we report the amortization in net investment income. We recognize dividends and interest income when earned.

Quarterly, we perform an assessment of our investments to determine if any are “other-than-temporarily” impaired. An investment is impaired when the fair value of the investment declines to an amount less than the cost or amortized cost of that investment. As part of our assessment process, we determine whether the impairment is temporary or “other-than-temporary”. We base our assessment on both quantitative criteria and qualitative information, considering a number of factors including, but not limited to: how long the security has been impaired; the amount of the impairment; whether, in the case of equity securities, we intend to hold, and have the ability to hold, the security for a period sufficient for us to recover our cost basis, or whether, in the case of debt securities and participations in mortgage loans, we intend to sell the investment or it is more likely than not that we will have to sell the investment before we recover the amortized cost or cost; the financial condition and near-term prospects of the issuer; whether the issuer is current on contractually-obligated interest and principal payments; key corporate events pertaining to the issuer and whether the market decline was affected by macroeconomic conditions.

If we were to determine that an equity security has incurred an “other-than-temporary” impairment, we would permanently reduce the cost of the security to fair value and recognize an impairment charge in our Consolidated Statements of Comprehensive Income. If a debt security or participation in a commercial mortgage loan is impaired and we either intend to sell the investment or it is more likely than not that we will have to sell the investment before we are able to recover the amortized cost or cost, then we would record the full amount of the impairment in our net income.

A large portion of our investment portfolio consists of fixed maturity securities, which may be adversely affected by changes in interest rates as a result of governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. A rise in interest rates would decrease the net unrealized holding gains of our investment portfolio, offset by our ability to earn higher rates of return on funds reinvested. Conversely, a decline in interest rates would increase the net unrealized holding gains of our investment portfolio, offset by lower rates of return on funds reinvested.

(c) Fair Value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price). When reporting the fair values of our financial instruments, we prioritize those fair value measurements into one of three levels based on the nature of the inputs, as follows:

• Level 1—Valuations based on quoted prices in active markets for identical assets and liabilities;

• Level 2—Valuations based on observable inputs that do not meet the criteria for Level 1, including quoted prices in inactive markets and quoted prices in active markets for similar, but not identical instruments; and

• Level 3—Valuations based on unobservable inputs, which are based upon the best available information when external market data is limited or unavailable.

F-8

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

We estimate the fair value of our investments using the closing prices on the last business day of the reporting period, obtained from active markets such as the NYSE, NASDAQ and NYSE MKT. For securities for which quoted prices in active markets are unavailable, we use observable inputs such as quoted prices in inactive markets, quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs. We do not have any investments in our portfolio which require us to use unobservable inputs. Our estimates of fair value reflect the interest rate environment that existed as of the close of business on March 31, 2014. Changes in interest rates subsequent to March 31, 2014 may affect the fair value of our investments.

The carrying amounts for the following financial instruments approximate their fair values at March 31, 2014 because of their short-term nature: cash and cash equivalents, accrued investment income, premiums receivable, reinsurance payable, and accounts payable and accrued expenses.

(d) Premiums

We record assumed premiums written (premiums from policies that we assumed from Citizens, net of opt-outs) and direct premiums written (premiums from subsequent renewals of Citizens’ policies and voluntary policies written during the period) as revenue, net of ceded amounts, on a daily pro rata basis over the contract period of the related policies that are in force. For any portion of premiums not earned at the end of the reporting period, we record an unearned premium liability.

Premiums receivable represents amounts due from our policyholders for billed premiums and related policy fees. We perform a policy-level evaluation to determine the extent to which the balance of premiums receivable exceeds the balance of unearned premiums. We then age any resulting exposure based on the last date the policy was billed to the policyholder, and we establish an allowance for credit losses for any amounts outstanding for more than 90 days. When we receive payments on amounts previously charged off, we reduce bad debt expense in the period we receive the payment. Balances in premiums receivable and the associated allowance account are removed upon cancellation of the policy due to non-payment. We did not record an allowance for uncollectible premiums at March 31, 2014.

When we receive premium payments from policyholders prior to the effective date of the related policy, we record an advance premiums liability. On the policy effective date, we reduce the advance premium liability and record the premiums as described above.

(e) Policy Acquisition Costs

We incur policy acquisition costs that vary with, and are directly related to, the production of new business. Policy acquisition costs consist of the following four items: (i) commissions paid to outside agents at the time of policy issuance; (ii) policy administration fees paid to a third-party administrator at the time of policy issuance; (iii) premium taxes; and (iv) inspection fees. We capitalize policy acquisition costs to the extent recoverable, then we amortize those costs over the contract period of the related policy.

At each reporting date, we determine whether we have a premium deficiency. A premium deficiency would result if the sum of our expected losses, deferred policy acquisition costs, and policy maintenance costs (such as costs to store records and costs incurred to collect premiums and pay commissions) exceeded our related unearned premiums plus investment income. Should we determine that a premium deficiency exists, we would write off the unrecoverable portion of deferred policy acquisition costs.

F-9

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

(f) Long-Lived Assets—Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis over the estimated useful lives as follows: building—40 years; computer hardware and software 3—years; office and furniture equipment—3 to 7 years. Leasehold improvements are amortized over the shorter of the lease term or the asset’s useful life. Expenditures for improvements are capitalized to the property accounts. Replacements and maintenance and repairs that do not improve or extend the life of the respective assets are expensed as incurred.

(g) Impairment of Long-Lived Assets

We assess the recoverability of long-lived assets when events or circumstances indicate that the assets might have become impaired. We determine whether the assets can be recovered from undiscounted future cash flows and if not recoverable we recognize impairment to reduce the carrying value to fair value. Recoverability of long lived assets is dependent upon, among other things, our ability to maintain profitability, so as to be able to meet our obligations when they become due. In the opinion of management, based upon current information and projections, long-lived assets will be recovered over the period of benefit.

(h) Unpaid Losses and Loss Adjustment Expenses

Our reserves for unpaid losses and loss adjustment expenses represent the estimated ultimate cost of settling all reported claims plus all claims we incurred related to insured events that have occurred as of the reporting date, but that policyholders have not yet reported to us (incurred but not reported, or IBNR).

We estimate our reserves for unpaid losses and loss adjustment expenses using individual case-based estimates for reported claims and actuarial estimates for IBNR losses. We continually review and adjust our estimated losses as necessary based on industry development trends, our evolving claims experience and new information obtained. If our unpaid losses and loss adjustment expenses are considered to be deficient or redundant, we increase or decrease the liability in the period in which we identify the difference and reflect the change in our current period results of operations. Though our estimate of the ultimate cost of settling all reported and unreported claims may change at any point in the future, a reasonable possibility exists that our estimate may vary significantly in the near term from the estimated amounts included in our consolidated financial statements.

We report our reserves for unpaid losses and loss adjustment expenses gross of the amounts related to unpaid losses recoverable from reinsurers and we report losses net of amounts ceded to reinsurers. We do not discount our loss reserves for financial statement purposes.

(i) Other Revenue

Other revenue represents rental income due under non-cancelable leases for space at our commercial property in Clearwater, Florida that we acquired in April 2013, and all policy and pay-plan fees. Florida law allows insurers to charge policyholders a $25 policy fee on each policy written; these fees are not subject to refund, and we recognize the income immediately when collected. We also charge pay-plan fees to policyholders that pay their premium in more than one installment and record the fees as income when collected.

(j) Reinsurance

We follow industry practice of reinsuring a portion of our risks. Reinsurance involves transferring, or “ceding”, all or a portion of the risk exposure on policies we write to another insurer, known as a reinsurer. To the extent that our reinsurers are unable to meet the obligations they assume under our reinsurance agreements, we remain liable for the entire insured loss.

F-10

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

Our reinsurance agreements are short-term, prospective contracts. We record an asset, prepaid reinsurance premiums, and a liability, reinsurance payable, for the entire contract amount upon commencement of our new reinsurance agreements. We amortize our prepaid reinsurance premiums over the 12-month contract period.

In the event that we incur losses recoverable under our reinsurance program, we record amounts recoverable from our reinsurers on paid losses plus an estimate of amounts recoverable on unpaid losses. The estimate of amounts recoverable on unpaid losses is a function of our liability for unpaid losses associated with the reinsured policies; therefore, the amount changes in conjunction with any changes to our estimate of unpaid losses. Though an estimate of amounts recoverable from reinsurers on unpaid losses may change at any point in the future because of its relation to our reserves for unpaid losses, a reasonable possibility exists that an estimated recovery may change significantly in the near term from the amounts included in our consolidated financial statements.

We estimate uncollectible amounts receivable from reinsurers based on an assessment of factors including the creditworthiness of the reinsurers and the adequacy of collateral obtained, where applicable. We recorded no amounts recoverable under our reinsurance program or bad debt expense related to reinsurance during the three-months ended March 31, 2014 and 2013.

(k) Assessments

Guaranty fund and other insurance-related assessments imposed upon us are recorded as policy acquisition costs in the period the regulatory agency imposes the assessment. To recover Florida Insurance Guaranty Association (FIGA) assessments, we calculate and begin collecting a policy surcharge that will allow us to collect the entire assessment over a 12-month period, based on our estimate of the number of policies we expect to write. We then submit an information only filing, pursuant to Florida Statute 631.57(3)(h), to the insurance regulatory authority requesting formal approval of the policy FIGA surcharge. The process may be repeated in successive 12-month periods until we collect the entire assessment. We record the recoveries as revenue in the period that we collect the cash. While current regulations allow us to recover from policyholders the amount of assessments imposed upon us, our payment of the assessments and our recoveries may not offset each other in the same fiscal period in our financial statements. There were no such assessments during the periods presented.

We collect assessments imposed upon policyholders as a policy surcharge and we record the amounts collected as a liability until we remit the amounts to the regulatory agency that imposed the assessment.

(l) Accrued Bonus Compensation

We accrued bonuses of $1.2 million and $1.0 million for the three months ended March 31, 2014 and 2013, respectively, based on 8.5% of targeted earnings before interest, taxes, depreciation and amortization.

(m) Income Taxes

We file a consolidated partnership return along with our limited liability company subsidiaries, Heritage MGA, LLC, Contractors’ Alliance Network, LLC, First Access Insurance Group, LLC and Heritage Insurance Claims, LLC. The limited liability companies are not required to provide for Federal taxes. As such, taxable income, losses, deductions and credits pass through to members for them to report on their respective income tax returns. Our insurance subsidiary, Heritage Property & Casualty Insurance Company, a Florida corporation, writes premium in Florida only and files a Federal and Florida state income tax return. Our reinsurance affiliate, which is based in Bermuda, plans to make an irrevocable election under section 953(d) of the U.S. Internal Revenue Code of 1986, as amended, to be treated as a domestic insurance company for U.S. Federal income tax purposes. As a result of this election, our reinsurance subsidiary will be subject to U.S. income tax on its worldwide income as if it were a U.S. corporation.

F-11

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. Should a change in tax rates occur, we recognize the effect on deferred tax assets and liabilities in operations in the period that includes the enactment date. Realization of our deferred income tax assets depends upon our generation of sufficient future taxable income.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant taxing authority.

We record any income tax penalties and income-tax-related interest as income tax expense in the period incurred. We did not incur any material tax penalties or income-tax-related interest during the three months ended March 31, 2014 and 2013, respectively.

(n) Stock-Based Compensation

We account for stock-based compensation under the fair value recognition provisions of U.S. GAAP which require the measurement and recognition of compensation for all stock-based awards made to employees and directors based on estimated fair values. In accordance with U.S. GAAP, the fair value of stock-based awards is amortized over the requisite service period, which is defined as the period during which an employee is required to provide service in exchange for an award. We use a straight-line attribution method for all grants that include only a service condition. During the periods presented there were no service based vesting periods as all stock based awards were immediately vested.

(o) Earnings Per Share

We report both basic earnings per share and diluted earnings per share. To calculate basic earnings per share, we divide net income attributable to members by the weighted-average number of shares outstanding during the period, including redeemable shares. We calculate diluted earnings per share by dividing net income attributable to members by the weighted-average number of shares, redeemable shares, share equivalents, and restricted shares outstanding during the period. We use the treasury stock method to calculate common stock equivalents.

(p) Concentrations of Risk

Our current operations subject us to the following concentrations of risk:

• Revenue—we write residential property and liability policies exclusively

• Geographic—we write 100% of our premium in Florida

• Group concentration of credit risk—all of our reinsurers engage in similar activities and have similar economic characteristics that could cause their ability to repay us to be similarly affected by changes in economic or other conditions

• Credit risk—we choose to deposit all our cash at four financial institutions

We mitigate our geographic and group concentrations of risk by entering into reinsurance contracts with highly rated, financially-stable reinsurers, and by securing irrevocable letters of credit from reinsurers when necessary.

F-12

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

With regard to our cash, we had $71.5 million and $65.9 million in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits at March 31, 2014 and December 31, 2013, respectively. Deposits held in non- interest-bearing transaction accounts are combined with interest-bearing accounts and insured up to $250,000.

(q) Accounting Pronouncements

We determined that all recently issued accounting pronouncements will not have a material impact on our consolidated financial position, results of operations and cash flows, or do not apply to our operations.

3) INVESTMENTS

The following table details the difference between cost or adjusted/amortized cost and estimated fair value, by major investment category, at March 31, 2014, and December 31, 2013:

	Cost or Adjusted / Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
March 31, 2014
Available for sale:
U.S. government and agency securities	$	1,593	$	—	$	36	$	1,557
States, municipalities and political subdivisions		16,410		134		73		16,471
Special revenue		49,641		268		310		49,599
Industrial and miscellaneous		58,771		247		228		58,790
Redeemable preferred stocks		2,854		28		83		2,799
Total fixed maturities		129,269		677		730		129,216
Available for sale:
Nonredeemable preferred stocks		6,855		97		119		6,833
Equity securities		8,127		878		38		8,967
Total equity securities		14,982		975		157		15,800
Held to maturity:
Mortgage loan participation		6,041		—		—		6,041
Total investments	$	150,292	$	1,652	$	887	$	151,057
December 31, 2013
Available for sale:
U.S. government and agency securities	$	1,486	$	—	$	44	$	1,442
States, municipalities and political subdivisions		14,255		42		136		14,161
Special revenue		41,114		89		608		40,595
Industrial and miscellaneous		46,726		69		480		46,315
Redeemable preferred stocks		2,374		4		223		2,155
Total fixed maturities		105,955		204		1,491		104,668
Available for sale:
Nonredeemable preferred stocks		5,283		6		331		4,958
Equity securities		20,163		370		45		20,488
Total equity securities		25,446		376		376		25,446
Held to maturity:
Mortgage loan participation		6,063		—		—		6,063
Total investments	$	137,464	$	580	$	1,867	$	136,177

F-13

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

We calculate the gain or loss realized on the sale of investments by comparing the sales price (fair value) to the cost or adjusted/amortized cost of the security sold. We determine the cost or adjusted/ amortized cost of the security sold using the specific-identification method. The following tables detail our realized gains (losses) by major investment category for the three month periods ended March 31, 2014 and 2013, respectively:

	2014					2013
	Gains (Losses)			Fair Value at Sale		Gains (Losses)			Fair Value at Sale
	(In thousands)
Three Months Ended March 31
Fixed maturities	$	1		$	255	$	1		$	94
Equity securities		15			15,015		—			—
Total realized gains		16			15,270		1			94
Fixed maturities		(18	)		184		(2	)		144
Equity securities		(40	)		878		(1	)		29
Total realized losses		(58	)		1,062		(3	)		173
Net realized losses	$	(42	)	$	16,332	$	(2	)	$	267

The table below summarizes our fixed maturities at March 31, 2014 and December 31, 2013 by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturity of those obligations.

	Cost or Amortized Cost		Precent of Total			Fair Value		Percent of Total
	(In thousands)					(In thousands)
March 31, 2014
Due in one year or less	$	3,117		2.4	%	$	3,126		2.4	%
Due after one year through five years		68,335		52.9	%		68,425		53.0	%
Due after five years through ten years		45,323		35.1	%		45,233		35.0	%
Due after ten years		12,494		9.6	%		12,432		9.6	%
Total	$	129,269		100.0	%	$	129,216		100.0	%
December 31, 2013
Due in one year or less	$	1,518		1.4	%	$	1,523		1.5	%
Due after one year through five years		62,242		58.8	%		62,059		59.2	%
Due after five years through ten years		33,620		31.7	%		32,921		31.5	%
Due after ten years		8,575		8.1	%		8,165		7.8	%
Total	$	105,955		100.0	%	$	104,668		100.0	%

F-14

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

The following table summarizes our net investment income by major investment category during the three month periods ended March 31, 2014 and 2013:

	For the Three Months Ended
	March 31, 2014		March 31, 2013
	(In thousands)
Fixed maturities	$	519	$	159
Equity securities		186		54
Cash, cash equivalents and short-term investments		13		7
Other investments		85		4
Net investment income		803		224
Investment expenses		185		12
Net investment income, less investment expenses	$	618	$	212

During our quarterly evaluations of our securities for impairment, we determined that none of our investments in debt and equity securities that reflected an unrealized loss position were other-than-temporarily impaired. The issuers of our debt securities continue to make interest payments on a timely basis and have not suffered any credit rating reductions. We do not intend to sell nor is it likely that we would be required to sell the debt securities before we recover our amortized cost basis. All the issuers of the equity securities we own had near-term prospects that indicated we could recover our cost basis, and we also have the ability and the intent to hold these securities until their value equals or exceeds their cost.

F-15

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

The following table presents an aging of our unrealized investment losses by investment class as of March 31, 2014 and December 31, 2013:

	Less Than Twelve Months						Twelve Months or More
	Number of Securities		Gross Unrealized Losses		Fair Value		Number of Securities		Gross Unrealized Losses		Fair Value
			(In thousands)						(In thousands)
March 31, 2014
U.S. government and agency securities		4	$	17	$	985		2	$	20	$	419
States, municipalities and political subdivisions		10		52		3,726		2		20		398
Industrial and miscellaneous		75		181		23,894		6		46		905
Special revenue		48		291		19,211		3		19		506
Redeemable preferred stocks		26		83		1,488		1		1		14
Total fixed maturities		163		624		49,304		14		106		2,243
Nonredeemable preferred stocks		52		119		3,220		—		—		—
Equity securities		7		38		697		—		—		—
Total equity securities		59		157		3,917		—		—		—
Total		222	$	781	$	53,221		14	$	106	$	2,243
December 31, 2013
U.S. government and agency securities		6	$	44	$	1,335		—	$	—	$	—
States, municipalities and political subdivisions		17		116		8,294		2		20		341
Industrial and miscellaneous		89		413		30,962		6		66		888
Special revenue		59		582		27,256		3		27		502
Redeemable preferred stocks		27		223		1,844		—		—		—
Total fixed maturities		198		1,378		69,691		11		113		1,731
Nonredeemable preferred stocks		58		331		4,349		—		—		—
Equity securities		4		45		689		—		—		—
Total equity securities		62		376		5,038		—		—		—
Total		260	$	1,754	$	74,729		11	$	113	$	1,731

F-16

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

The following table presents the fair value measurements of our financial instruments by level at March 31, 2014 and December 31, 2013:

	Total		Level 1		Level 2		Level 3
	(In thousands)
March 31, 2014
U.S. government and agency securities	$	1,557	$	—	$	1,557	$	—
States, municipalities and political subdivisions		16,471		—		16,471		—
Special revenue		49,599		—		49,599		—
Industrial and miscellaneous		58,790		—		58,790		—
Redeemable preferred stocks		2,799		2,799		—		—
Total fixed maturities	$	129,216	$	2,799	$	126,417	$	—
Nonredeemable preferred stocks	$	6,833	$	6,833	$	—	$	—
Equity securities		8,967		8,967		—		—
Total equity securities	$	15,800	$	15,800	$	—	$	—
December 31, 2013
U.S. government and agency securities	$	1,442	$	—	$	1,442	$	—
States, municipalities and political subdivisions		14,161		—		14,161		—
Special revenue		40,595		—		40,595		—
Industrial and miscellaneous		46,315		—		46,315		—
Redeemable preferred stocks		2,155		2,155		—		—
Total fixed maturities	$	104,668	$	2,155	$	102,513	$	—
Nonredeemable preferred stocks	$	4,958	$	4,958	$	—	$	—
Equity securities		20,488		20,488		—		—
Total equity securities	$	25,446	$	25,446	$	—	$	—

For our investments in U.S. government securities that do not have prices in active markets, agency securities, state and municipal governments, and corporate bonds, we obtain the fair values from our custodian, which uses a third-party valuation service and we evaluate the relevant inputs, assumptions, methodologies and conclusions associated with such valuations. The valuation service calculates prices for our investments in the aforementioned security types on a month-end basis by using several matrix-pricing methodologies that incorporate inputs from various sources. The model the valuation service uses to price U.S. government securities and securities of states and municipalities incorporates inputs from active market makers and inter-dealer brokers. To price corporate bonds and agency securities, the valuation service calculates non-call yield spreads on all issuers, uses option-adjusted yield spreads to account for any early redemption features, then adds final spreads to the U.S. Treasury curve as of quarter end. The inputs the valuation service uses in their calculations are not quoted prices in active markets, but are observable inputs, and therefore represent Level 2 inputs.

On October 7, 2013, we acquired a 55% participation in a commercial real estate mortgage loan for $6.1 million. The $11.5 million loan was originated by unaffiliated lenders, and collateralized by commercial real estate located in Polk County, Florida. We recorded an asset in the amount of our pro rata share of the outstanding principal and carry the investment at amortized cost. We receive monthly principal and interest payments and recognize income when collected.

F-17

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

4) PROPERTY AND EQUIPMENT, net

Property and equipment, net consists of the following at March 31, 2014 and December 31, 2013, respectively:

	2014		2013
	(In thousands)
Land	$	2,582	$	2,582
Building		7,090		7,090
Computer hardware and software		554		364
Office furniture and equipment		252		176
Tenant and leasehold improvements		1,554		873
Vehicle fleet		216		—
Total, at cost		12,248		11,085
Less: accumulated depreciation and amortization		252		150
Property and equipment, net	$	11,996	$	10,935

Depreciation and amortization expense for property and equipment was $104,000 and $12,000 for the three-month periods ended March 31, 2014 and 2013, respectively. Our real estate consists of 13 acres of land and two buildings with a gross area of 148,000 square feet. We relocated to these facilities during March 2014. These facilities and the related existing tenant lease agreements were acquired in April 2013 for a total purchase price of $9.8 million paid in cash. We currently lease space to non-affiliates.

5) EARNINGS PER SHARE

We have 6,417 outstanding equity shares and 5,833 (5,211 equity shares and 622 redeemable shares) outstanding Members’ shares as of March 31, 2014 and 2013, respectively. Our Members also hold 3,026 and 2,857 warrants as of March 31, 2014 and 2013, respectively, to purchase additional ownership shares at any time until the warrant’s expiry at March 31, 2018 at an exercise price of $15,000 per share. Utilizing a weighted fair market value of $22,815 per share for the three months ended March 31, 2014 and a fair market value of $10,000 per share for the three months ended March 31, 2013 based on equity sales to unrelated parties in close proximity to the exchange date, and the treasury stock method of accounting, the table below reflects the diluted weighted-average number of shares outstanding using the treasury stock method. See Note 14 – “Members’ Equity and Temporary Equity” for a summary of warrant activity.

	Three Months Ended March 31,
	2014		2013
Basic earnings per share:
Net income attributable to common shareholders (000’s)	$	7,888	$	7,054
Weighted average shares outstanding		6,416		4,221
Basic earnings per share:	$	1,229	$	1,671
Diluted earnings per share:
Net income attributable to common shareholders (000’s)	$	7,888	$	7,054
Weighted average shares outstanding		6,416		4,221
Weighted average dilutive shares		1,034		—
Total Weighted Average Shares		7,450		4,221
Diluted earnings per share:	$	1,059	$	1,671

F-18

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

6) DEFERRED POLICY ACQUISITION COSTS

We anticipate that our deferred policy acquisition costs will be fully recoverable in the near term. The table below depicts the activity with regard to deferred policy acquisition costs during the three-month periods ended March 31, 2014 and 2013:

	Three Months Ended March 31,
	2014			2013
	(In thousands)
Beginning Balance	$	9,765		$	32
Policy acquisition costs deferred		6,934			1,377
Amortization		(4,473	)		(115	)
Ending Balance	$	12,226		$	1,294

7) REINSURANCE

Our reinsurance program is designed, utilizing our risk management methodology, to address our exposure to catastrophes. Our program provides reinsurance protection for catastrophes including hurricanes, tropical storms, and tornadoes. These reinsurance agreements are part of our catastrophe management strategy, which is intended to provide our shareholders an acceptable return on the risks assumed in our property business, and to reduce variability of earnings, while providing protection to our policyholders.

Effective December 4, 2012 through May 31, 2013, concurrent with the effective date of our initial assumption transaction with Citizens, we secured catastrophe excess of loss reinsurance providing $9.5 million of protection in excess of our $2 million primary retention. Loss payments under this contract reduce the limits of coverage afforded by the amounts paid, but the limit of coverage would be reinstated from the time of the occurrence of the loss. We would pay an additional premium calculated at pro rata of 100% of the reinsurer’s premium for the term of this contract, being pro rata only as to the fraction of the reinsurer’s limit of liability and reinstated simultaneously with the reinsurer’s loss payment. Under no circumstances would the reinsurer’s liability exceed $9.5 million for any one loss occurrence, and $19.0 million for all loss occurrences during the contract term.

During the second quarter of 2013, we placed our reinsurance program for the period from June 1, 2013 through May 31, 2014. Our reinsurance program, which is segmented into layers of coverage, protects us for excess property catastrophe losses and loss adjustment expenses. Our current reinsurance program incorporates the mandatory coverage required by law to be placed with FHCF. We also purchase private reinsurance below, alongside and above the FHCF layer, as well as aggregate reinsurance coverage. The following describes the various layers of our reinsurance program.

• Our Retention. For the first catastrophic event, we have a primary retention of the first $9.0 million of losses and loss adjustment expenses, of which our reinsurance subsidiary, Osprey, is responsible for $3.0 million. For a second and third catastrophic event, Heritage P&C’s primary retention decreases to $3.0 million per event. To the extent that there is reinsurance coverage remaining, Heritage P&C has no primary retention for events beyond the third catastrophic event. Osprey has no primary retention beyond the first catastrophic event.

• Layers Below FHCF. Immediately above our retention, we have purchased $94.0 million of reinsurance from third party reinsurers and Osprey. Through Osprey, we retain an aggregate participation in this coverage of $3.5 million, comprised of a 3% participation of $31.0 million of losses and loss adjustment

F-19

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

expenses in excess of $9.0 million, or $0.9 million, and a 4% participation of $63.0 million of losses and loss adjustment expenses in excess of $40.0 million, or $2.5 million. Through the payment of a reinstatement premium, we are able to reinstate the full amount of this reinsurance up to two times. To the extent that $94.0 million or a portion thereof is exhausted in a first catastrophic event, we have purchased reinstatement premium protection insurance to pay the required premium necessary for the first reinstatement of this coverage.

• FHCF Layer. Our FHCF coverage includes an estimated maximum provisional limit of 90% of $270.0 million, or $243.0 million, in excess of our retention and private reinsurance of $103.0 million. The limit and retention of the FHCF coverage is subject to upward or downward adjustment based on, among other things, submitted exposures to FHCF by all participants. We have purchased coverage alongside and above the FHCF layer from third party reinsurers. The layer alongside is in the amount of $27.0 million and the layer immediately above is in the amount of $28.5 million. To the extent the FHCF coverage is adjusted, this private reinsurance will adjust to fill in any gaps in coverage up to the reinsurers’ aggregate limits for this layer. Through the payment of a reinstatement premium, we are able to reinstate the full amount of this private reinsurance up to two times. To the extent that all or a portion of either of these private layers is exhausted in a first catastrophic event, we have purchased reinstatement premium protection insurance to pay the required premium necessary for the first reinstatement of this coverage. The FHCF coverage cannot be reinstated once exhausted, but it does provide coverage for multiple events.

• Aggregate Coverage. In addition to the layers described above, we have also purchased $170.0 million of aggregate reinsurance coverage for losses and loss adjustment expenses in excess of $401.5 million for a first catastrophic event. To the extent that this coverage is not fully exhausted in the first catastrophic event, it provides coverage commencing at our reduced retention levels for second and subsequent events and where underlying coverage has been previously exhausted. There is no reinstatement of the aggregate reinsurance coverage once exhausted, but it does provide coverage for multiple events.

For a first catastrophic event, our reinsurance program provides coverage for $571.5 million of losses and loss adjustment expenses, including our retention, and we are responsible for all losses and loss adjustment expenses in excess of such amount. For subsequent catastrophic events, our total available coverage depends on the magnitude of the first event, as we may have coverage remaining from layers that were not previously fully exhausted. We have also purchased reinstatement premium protection insurance to provide an additional $149.5 million of coverage. Our aggregate reinsurance layer also provides coverage for second and subsequent events to the extent not exhausted in prior events.

Assumption Transactions and Assumed Premiums Written

Substantially all of our policies have been obtained in connection with assumption transactions with Citizens, pursuant to which we record the assumed premiums written in the amount of the unearned premiums transferred to us. In connection with each assumption transaction, we assume the responsibility of the primary writer of the risk through the expiration of the term of the policy.

F-20

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

The following table depicts written premiums, earned premiums and losses, showing the effects that our reinsurance transactions have on these components of our Consolidated Statements of Comprehensive Income:

	Three Months Ended March 31,
	2014			2013
	(In thousands)
Premium written:
Direct	$	52,100		$	11,578
Assumed		16,803			4,771
Ceded		(14	)		(2	)
Net premium written	$	68,889		$	16,347
Change in unearned premiums:
Direct	$	(17,957	)	$	(10,686	)
Assumed		9,914			14,661
Ceded		(18,610	)		(356	)
Net decrease (increase)	$	(26,653	)	$	3,619
Premiums earned:
Direct	$	34,143		$	892
Assumed		26,717			19,432
Ceded		(18,624	)		(358	)
Net premiums earned	$	42,236		$	19,966
Losses and LAE incurred:
Direct	$	10,250		$	151
Assumed		10,337			5,129
Ceded		—			—
Net losses and LAE incurred	$	20,587		$	5,280

The following table highlights the effects that our reinsurance transactions have on unpaid losses and loss adjustment expenses and unearned premiums:

	March 31, 2014			December 31, 2013
	(In thousands)
Unpaid losses and loss adjustment expenses:
Direct	$	15,028		$	10,037
Assumed		13,428			9,307
Gross unpaid losses and LAE		28,456			19,344
Ceded		—			—
Net unpaid losses and LAE	$	28,456		$	19,344
Unearned premiums:
Direct	$	92,957		$	75,000
Assumed		31,328			41,243
Gross unearned premiums		124,285			116,243
Ceded		(12,642	)		(31,252	)
Net unearned premiums	$	111,643		$	84,991

There were no amounts recoverable under our reinsurance agreements as of March 31, 2014 and December 31, 2013. Prepaid reinsurance premiums related to fourteen reinsurers at March 31, 2014 and December 31, 2013.

F-21

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

There were no amounts receivable with respect to reinsurers at March 31, 2014 and December 31, 2013. Thus, there were no concentrations of credit risk associated with reinsurance receivables as of March 31, 2014 and December 31, 2013. The percentages of assumed premiums earned to net premiums earned for the three-month periods ended March 31, 2014 and 2013 were 63% and 97%, respectively.

8) RESERVE FOR UNPAID LOSSES

We determine the reserve for unpaid losses on an individual-case basis for all incidents reported. The liability also includes amounts for IBNR claims as of the balance sheet date.

The table below summarizes the activity related to our reserve for unpaid losses for the three months ended March 31, 2014 and 2013:

	Three Months Ended March 31,
	2014		2013
	(In thousands)
Balance, beginning of period	$	19,344	$	1,393
Less: reinsurance recoverable on unpaid losses		—		—
Net balance, beginning of period		19,344		1,393
Incurred related to:
Current year		20,555		5,300
Prior years		32		(20	)
Total incurred		20,587		5,280
Paid related to:
Current year		5,241		1,104
Prior years		6,234		596
Total paid		11,475		1,700
Net balance, end of period		28,456		4,973
Plus: reinsurance recoverable on unpaid losses		—		—
Balance, end of period	$	28,456	$	4,973

The significant increase in our reserve for unpaid losses in 2014 from 2013 is primarily due to the increase in policy base as a result of the assumption of Citizens policies in 2013. We write insurance in the state of Florida, which could be exposed to hurricanes or other natural catastrophes. Although the occurrence of a major catastrophe could have a significant effect on our monthly or quarterly results, such an event is unlikely to be so material as to disrupt our overall normal operations. However, we are unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

We believe that the reserve for unpaid losses reasonably represents the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.

Our losses incurred related to the prior year reflect a reserve deficiency of $32,000 for the three months ended March 31, 2014 and a redundancy of $20,000 for the three months ended March 31, 2013. The immaterial deficiency and redundancy we experienced in 2014 and 2013, respectively, resulted from changes to our estimate of ultimate losses on claims incurred in prior years not attributable to any specific trend or claims handling dynamic.

F-22

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

9) STATUTORY ACCOUNTING AND REGULATION

The insurance industry is heavily-regulated. State laws and regulations, as well as national regulatory agency requirements, govern the operations of all insurers such as our insurance subsidiary. The various laws and regulations require that insurers maintain minimum amounts of statutory surplus and risk-based capital, they restrict insurers’ ability to pay dividends, they specify allowable investment types and investment mixes, and they subject insurers to assessments.

The National Association of Insurance Commissioners (“NAIC”) published risk-based capital guidelines for insurance companies that are designed to assess capital adequacy and to raise the level of protection that statutory surplus provides for policy holders. Most states, including Florida, have enacted the NAIC guidelines as statutory requirements, and insurers having less statutory surplus than required will be subject to varying degrees of regulatory action, depending on the level of capital inadequacy. State insurance regulatory authorities could require an insurer to cease operations in the event the insurer fails to maintain the required statutory capital.

The level of required risk-based capital (RBC) is calculated and reported annually. There are five outcomes to the RBC calculation set forth by the NAIC which are as follows:

1. No Action Level—If RBC is greater than 200%, no further action is required.

2. Company Action Level—If RBC is between 150% -200%, the insurer must prepare a report to the regulator outlining a comprehensive financial plan that identifies conditions that contributed to the insurer’s financial condition and proposes corrective actions.

3. Regulatory Action Level—If RBC is between 100% -150%, the state insurance commissioner is required to perform any examinations or analyses to the insurer’s business and operations that he or she deems necessary as well as issuing appropriate corrective orders.

4. Authorized Control Level—If RBC is between 70%—100%, this is the first point that the regulator may take control of the insurer even if the insurer is still technically solvent and is in addition to all the remedies available at the higher action levels.

5. Mandatory Control Level—If RBC is less than 70%, the regulator is required to take steps to place the insurer under its control regardless of the level of capital and surplus.

At December 31, 2013, the ratio of adjusted capital to authorized control level risk based capital was 357%.

Florida law permits an insurer to pay dividends or make distributions out of that part of statutory surplus derived from net operating profit and net realized capital gains. The law further provides calculations to determine the amount of dividends or distributions that can be made without the prior approval of the insurance regulatory authority and the amount of dividends or distributions that would require prior approval of the insurance regulatory authority. Statutory risk-based capital requirements may further restrict our insurance subsidiary’s ability to pay dividends or make distributions if the amount of the intended dividend or distribution would cause statutory surplus to fall below minimum risk-based capital requirements. However, the consent order authorizing our commencement of operations precludes us from paying dividends without the prior approval of FLOIR until July 31, 2017.

Florida law limits an insurer’s investment in equity instruments and also restricts investments in medium to low quality debt instruments. We were in compliance with all investment restrictions at March 31, 2014 and December 31, 2013.

F-23

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

Governmental agencies or certain quasi-governmental entities can levy assessments upon us in the states in which we write policies. See Note 2(k) for a description of how we recover assessments imposed upon us.

Governmental agencies or certain quasi-governmental entities can also levy assessments upon policyholders, and we collect the amount of the assessments from policyholders as surcharges for the benefit of the assessing agency. We currently collect assessments levied upon policyholders on behalf of Citizens in the amount of 1.0%, and on behalf of FHCF in the amount of 1.3%. We multiply the premium written on each policy by these assessment percentages to determine the additional amount that we will collect from the policyholder and remit to the assessing agencies.

We have reported our insurance subsidiary’s assets, liabilities and results of operations in accordance with GAAP, which varies from statutory accounting principles prescribed or permitted by state laws and regulations, as well as by general industry practices. The following items are principal differences between statutory accounting and GAAP:

• Statutory accounting requires that we exclude certain assets, called non-admitted assets, from the balance sheet.

• Statutory accounting requires us to expense policy acquisition costs when incurred, while GAAP allows us to defer and amortize policy acquisition costs over the estimated life of the policies.

• Statutory accounting dictates how much of a deferred income tax asset we can admit on a statutory balance sheet.

• Statutory accounting requires that we record certain investments at cost or amortized cost, while we record other investments at fair value; however, GAAP requires that we record all investments at fair value.

• Statutory accounting requires that surplus notes, also known as surplus debentures, be recorded in statutory surplus, while GAAP requires us to record surplus notes as a liability.

• Statutory accounting allows bonds to be carried at amortized cost or fair value based on the rating received from the Securities Valuation Office of the NAIC, while they are recorded at fair value for GAAP.

• Statutory accounting allows ceding commission income to be recognized when written if the cost of acquiring and renewing the associated business exceeds the ceding commissions, but under GAAP such income is deferred and recognized over the coverage period.

• Statutory accounting requires that unearned premiums and loss reserves be presented net of related reinsurance rather than on a gross basis under GAAP.

• Statutory accounting requires a provision for reinsurance liability be established for reinsurance recoverable on paid losses aged over ninety days and for unsecured amounts recoverable from unauthorized reinsurers. Under GAAP there is no charge for uncollateralized amounts ceded to a company not licensed in the insurance affiliate’s domiciliary state and a reserve for uncollectable reinsurance is charged through earnings rather than surplus or equity.

• Statutory accounting requires an additional admissibility test outlined in Statements on Statutory Accounting Principles, No. 101 and the change in deferred income tax is reported directly in capital and surplus, rather than being reported as a component of income tax expense under GAAP.

Our insurance subsidiary must file with the insurance regulatory authorities an “Annual Statement” which reports, among other items, net income (loss) and surplus as regards policyholders, which is called stockholder’s equity under GAAP. For the three-month periods ended March 31, 2014 and 2013, our insurance subsidiary recorded statutory net income of $2.2 million and $6.1 million, respectively. Our insurance subsidiary is

F-24

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

domiciled in Florida, and the laws of that state require that our insurance subsidiary maintain capital and surplus equal to the greater of $15 million or 10% of its liabilities. Our statutory capital surplus was $67.8 million and $63.1 million at March 31, 2014 and December 31, 2013. State law also requires our insurance subsidiary to adhere to prescribed premium-to-capital surplus ratios, with which we are in compliance.

Our reinsurance subsidiary, Osprey Re Ltd. (“Osprey”), which was incorporated on April 23, 2013, is licensed as a Class 3a Insurer under The Bermuda Insurance Act 1978 and related regulations. Osprey is required to maintain statutory capital and surplus of at least $1.0 million and maintain liquid resources or have access to liquid resources equal to its maximum obligation for which it is responsible under the terms of any reinsurance arrangement to which it is a party. We contributed $1.7 million to Osprey in cash and provided an irrevocable letter of credit in the amount of $5 million. These resources, in addition to premiums ceded to it by our insurance subsidiary are sufficient to comply with regulatory requirements. Bermuda’s standard for financial statement reporting is U.S. GAAP.

10) COMMITMENTS AND CONTINGENCIES

We are involved in claims-related legal actions arising in the ordinary course of business. We accrue amounts resulting from claims-related legal actions in unpaid losses and loss adjustment expenses during the period that we determine an unfavorable outcome becomes probable and we can estimate the amounts. Management makes revisions to our estimates based on its analysis of subsequent information that we receive regarding various factors, including: (i) per claim information; (ii) company and industry historical loss experience; (iii) judicial decisions and legal developments in the awarding of damages, and (iv) trends in general economic conditions, including the effects of inflation. When determinable, we disclose the range of possible losses in excess of those accrued and for reasonably possible losses.

11) LEASES

We leased the space that we had occupied through March 2014 at 700 Central Avenue, Ste. 500 St. Petersburg, Florida without obligation to continue doing so in the future. We paid $70,000 and $122,000 in rent under the terms of this lease during the three-month periods ended March 31, 2014 and 2013, respectively.

12) RELATED PARTY TRANSACTIONS

We have been party to various related party transactions involving our Members. The Members involved were not controlling persons with respect to us, we have entered into these arrangements without obligation to continue their effect in the future and the associated expense was immaterial to our results of operations or financial position as of March 31, 2014 and December 31, 2013.

• We leased the space that we had occupied through March 2014 at 700 Central Avenue, Ste. 500 St. Petersburg, Florida from a real estate management company controlled by a shareholder. We leased the space without obligation to continue doing so in the future. For the three-month periods ended March 31, 2014 and 2013 we incurred rent expense of approximately $70,000 and $122,000, respectively. We relocated to one of the buildings located on our Clearwater property in March 2014.

• We have entered into an agreement with a real estate management company controlled by one of our directors to manage our Clearwater office space. Management services are provided at a fixed fee, plus ordinary and necessary out of pocket expenses. Fees for additional services, such as the oversight of construction activity, are provided for on an as needed basis.

F-25

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

• We have entered into an agreement for the construction of a parking facility for our Clearwater property with a relative of one of our directors. We expect construction to commence in the spring of 2014.

• Our insurance subsidiary received water mitigation services from SVM Restoration Services, Inc. (“SVM”), a Florida corporation providing water loss mitigation services in Florida. SVM had been controlled by an executive officer and shareholder through February 28, 2014. During the three-month periods ended March 31, 2014 and 2013, we incurred approximately $488,000 and $203,000, respectively, payable to this Company. On March 1, 2014, we acquired the assets of SVM for $2.5 million, which have been allocated $150,000 to property and equipment and $2.35 million to goodwill included in other assets. The allocation of purchase price as of March 31, 2014 is preliminary pending our evaluation of the underlying asset values. The acquired assets will be deployed by our subsidiary, Contractors’ Alliance Network, LLC, in the delivery of a broadened spectrum of services. Pro forma disclosures have been omitted as this acquisition is not material to our consolidated financial statements.

• We entered into a consulting arrangement with a firm in which a member of executive management is a named member to explore expansion and merger and acquisition opportunities. The firm was paid a non-recurring flat fee of $500,000 for the services provided under the consulting arrangement.

13) EMPLOYEE BENEFIT PLAN

We provide a 401(k) plan for substantially all of our employees. We contribute 3% of employees’ salary, up to the maximum allowable contribution, regardless of the employees’ level of participation in the plan. For the three-month periods ended March 31, 2014 and 2013, our contributions to the plan on behalf of the participating employees were $39,000, and $17,000, respectively.

14) MEMBERS’ EQUITY AND TEMPORARY EQUITY

There were 6,417 equity shares and 3,026 warrants outstanding as of March 31, 2014 and 6,410 shares (5,493 equity shares and 917 redeemable shares classified as temporary equity) and 3,019 warrants outstanding as of December 31, 2013. On January 1, 2013 (the modification date), the Company executed employment agreements with three of its key executives (“management investors”) each containing a provision requiring the Company to repurchase the executive’s stock if the executive is terminated for any reason. Because the redemption of the shares was subject to redemption at the option of the holder in an event that is outside of our control, these shares were required to be classified outside of permanent equity on the consolidated balance sheets and recorded at fair value as of the modification date with adjustments to fair value through the settlement date. On January 1, 2013, we classified 415 equity shares as redeemable shares classified as temporary equity upon entering into employment agreements with certain members of management. Accordingly, this temporary equity was recorded as “redeemable shares” on our consolidated balance sheets at December 31, 2013. On February 5, 2014, all redeemable shares were reclassified at fair value into contributed members’ capital on our consolidated balance sheets. The reclassifications resulted from the cancelation of the redeemable stock repurchase provision in the employment agreements of the three company executives.

Our common stock and redeemable shares (“Shares”) are owned by our Members, who are automatically bound by the terms of the Agreement Among the Members of Heritage Insurance Holdings, LLC (the “Agreement”). The Agreement governs and restricts the transferability of the Shares. The Agreement provides us the right of first refusal for any Shares to be disposed by any Members, or the estate of a deceased Member. In the event that a ready market does not exist for our shares, the Agreement provides for a valuation methodology to arrive at an approximate market value.

F-26

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

We first began to raise capital in 2012 and offered ownership at $10,000 per share. We issued 2,329 shares and raised $23.3 million in capital. In the fourth quarter of 2012, we issued notes payable to certain members, including executive management, to raise the additional $4 million necessary to fund the capital required by the insurance subsidiary. We determined that debt would not allow us to achieve our desired financial stability rating and exchanged the notes for equity in the form of investment units, with each investment unit comprised of one share and one warrant to purchase a share. The notes were obtained for a fee of 20% of the principal due upon repayment. The notes, plus accrued interest, $780,000, and equity compensation awarded to our executives, $200,000, were exchanged for 398 investment units. In conjunction with this transaction, certain participants who received fractional investment units in exchange for the notes paid in $95,000 in order to receive whole investment units in exchange for our note obligation. The warrants are exercisable at any time at a strike price of $15,000 until their expiry at March 31, 2018. The investment units were issued at a fair value of $12,500 based on equity sales to unrelated parties on dates in close proximity to the exchange date.

On December 4, 2012, we issued 532 shares of equity to our core group of investors pursuant to the terms of the private placement memorandum governing our initial capital raise and recognized $5.3 million of compensation expense. Shares were distributed based on the successful execution of our initial Citizens depopulation transaction. We recognized compensation expense at $10,000 per share.

In the first and second quarters of 2013 we raised an additional $32.7 million of capital. Many of our initial investors, including members of our executive management, participated in the 2013 private placement offering. Upon its conclusion, we raised $32.7 million through the issuance of 2,618 investment units at $12,500 per investment unit. The warrants issued in the 2013 placement are exercisable at any time at a strike price of $15,000 until their expiry at March 31, 2018. The 2,618 investment units consisted of 2,511 equity shares, 107 redeemable shares classified as temporary equity and 2,618 warrants to purchase one share per warrant.

On January 1, 2013, certain members of management were given the opportunity to purchase a total of 115 shares (15 equity shares and 100 redeemable shares classified as temporary equity) of unrestricted stock, at $5,000 per share, as well as a cash award of $318,000 payable early in 2014. Each member of management purchased the shares. We assigned a fair value to these stock grants of $10,000 per share based upon recent share sales to unrelated parties. Therefore we recognized $893,000 of compensation expense as a result of this grant.

In the fourth quarter of 2013, we raised an additional $285,000 of capital through the issuance of 6 investment units for $75,000 and 16 shares for $210,000.

In October 2013, we awarded our directors, executive officers and certain employees bonuses totaling $11.5 million for 2013, comprised of $6.4 million in cash and $5.1 million in ownership equity. The equity component was issued in the form of 389 ownership shares at a value of $13,125 per share. The per share value was determined based on an independent valuation and we evaluated the assumptions, methodologies and conclusions associated with such valuation.

In the first quarter 2014, we raised an additional $88,000 of capital through the issuance of 7 investment units.

Common Stock Warrants

At March 31, 2014 and December 31, 2013, we had 3,026 and 3,019 outstanding warrants, all of which are classified as equity (equity warrants). At issuance, equity warrants are recorded at their relative fair values, using the relative fair value method, in the members’ equity section of the consolidated balance sheets. Our equity warrants can only be settled through the issuance of shares and are not subject to anti-dilution provisions.

F-27

Heritage Insurance Holdings, LLC

Notes to Unaudited Consolidated Financial Statements

March 31, 2014

All outstanding warrants can be exercised at an exercise price equal to $15,000 per share on or before March 31, 2018. The aggregate intrinsic value of warrants was approximately $23.6 million at both March 31, 2014 and December 31, 2013.

On February 19, 2014, we offered our existing investment unit holders an amendment to their existing warrant agreements to provide for either a cashless exercise of warrants or a cash based exercise of warrants based on a commitment by the investor communicated to us by March 31, 2014. If the investor commits to a cash based exercise, the investor must pay the exercise price by April 30, 2014 to be held in escrow until the exercise date, which will be immediately before an initial public offering of our shares. If the investor commits to a cashless exercise, the cashless exercise will also occur immediately prior to the initial public offering. In the event we do not proceed with the initial public offering prior to December 31, 2014, the agreement will terminate and all escrowed funds will be returned to the investor. Approximately 99% of our existing investment unit holders have agreed to either exercise their warrants for an additional cash investment or accept the cashless exercise option offered.

15) SUBSEQUENT EVENTS

We evaluate all subsequent events and transactions through April 30, 2014 (the date the financial statements were issued) for potential recognition or disclosure in our financial statements.

On April 17, 2014, Heritage P&C entered into a catastrophe reinsurance agreement with Citrus Re Ltd., a newly-formed Bermuda special purpose insurer. The agreement provides for three years of coverage from catastrophe losses caused by certain named storms, including hurricanes, beginning on June 1, 2014. The limit of coverage of $200 million is fully collateralized by a reinsurance trust account for the benefit of Heritage P&C. Heritage P&C pays a periodic premium to Citrus Re during this three-year risk period. Citrus Re Ltd. issued $200 million of principal-at-risk variable notes due April 2017 to fund the reinsurance trust account and its obligations to Heritage P&C under the reinsurance agreement. The maturity date of the notes may be extended up to two additional years to satisfy claims for catastrophic events occurring during the three-year term of the reinsurance agreement.

On April 24, 2014, Heritage P&C entered into a second catastrophe reinsurance agreement with Citrus Re Ltd. providing for $50 million of coverage on substantially similar terms as the agreement described above. Citrus Re Ltd. issued an additional $50 million of principal-at-risk variable notes due April 24, 2017 to fund its obligations under the reinsurance agreement.

On April 21, 2014, we filed a Form S-1 with the Securities and Exchange Commission in preparation for an initial public offering of $100 million. In connection with the initial public offering, we intend to convert from a Delaware limited liability company to a Delaware corporation.

F-28

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Members

Heritage Insurance Holdings, LLC

We have audited the accompanying consolidated balance sheets of Heritage Insurance Holdings, LLC (a Delaware limited liability company) and subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income (loss), members’ equity, and cash flows for the year ended December 31, 2013 and the period from August 7, 2012 (inception) to December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Heritage Insurance Holdings, LLC and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the year ended December 31, 2013 and the period from August 7, 2012 (inception) to December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

/s/ GRANT THORNTON LLP

Tampa, Florida

April 2, 2014

F-29

Heritage Insurance Holdings, LLC

Consolidated Balance Sheets

As of December 31, 2013 and 2012

(In thousands)

	2013			2012
ASSETS
Fixed maturity securities, available for sale, at fair value	$	104,668		$	13,068
Equity securities, available for sale, at fair value		25,446			—
Mortgage loan, held to maturity, at amortized cost		6,063			—
Total investments		136,177			13,068
Cash and cash equivalents		65,059			63,872
Accrued investment income		971			115
Premiums receivable		10,347			120
Prepaid reinsurance premiums		31,252			594
Reinsurance premiums receivable		5,337			—
Federal income tax refund receivable		5,073			—
Deferred income taxes		4,436			3,046
Deferred policy acquisition costs, net		9,765			32
Property and equipment, net		10,935			201
Other assets		2,626			816
Total Assets	$	281,978		$	81,864
LIABILITIES AND MEMBERS’ EQUITY
Unpaid losses and loss adjustment expenses	$	19,344		$	1,393
Unearned premiums		116,243			37,665
Reinsurance payable		29,591			8,987
Income taxes payable		2,805			3,905
Accrued compensation		505			1
Advance premiums		3,829			5
Other liabilities		8,756			789
Notes payable		—			1,000
Total Liabilities		181,073			53,745
Commitments and contingencies (Note 12)
Redeemable shares, 917 shares		20,921			—
Members’ Equity:
Contributed members' capital		62,850			33,585
Accumulated other comprehensive income (loss)		(790	)		—
Retained earnings (deficit)		17,924			(5,466	)
Total Members’ Equity		79,984			28,119
Total Liabilities and Members’ Equity	$	281,978		$	81,864

See accompanying notes to consolidated financial statements.

F-30

Heritage Insurance Holdings, LLC

Consolidated Statements of Comprehensive Income (Loss)

For the Year Ended December 31, 2013 and the Period from August 7, 2012 (Inception) to December 31, 2012

(In thousands, except share and per share amounts)

	2013			2012
REVENUE:
Gross premiums written	$	218,537		$	43,384
Increase in gross unearned premiums		(78,578	)		(37,665	)
Gross premiums earned		139,959			5,719
Ceded premiums		(44,800	)		(120	)
Net premiums earned		95,159			5,599
Retroactive reinsurance		26,046			—
Net investment income		1,049			27
Net realized losses		(323	)		—
Other revenue		2,901			4
Total revenue		124,832			5,630
EXPENSES:
Losses and loss adjustment expenses		38,501			1,402
Policy acquisition costs		6,150			84
General and administrative expenses		24,704			7,922
Interest expense		16			829
Total expenses		69,371			10,237
Income (loss) before income taxes		55,461			(4,607	)
Provision for income taxes		21,248			859
Net income (loss)	$	34,213		$	(5,466	)
OTHER COMPREHENSIVE INCOME:
Change in net unrealized losses on investments		(1,610	)		—
Reclassification adjustment for net realized investment losses		323			—
Income tax benefit related to items of other comprehensive income		497			—
Total comprehensive income (loss)	$	33,423		$	(5,466	)
Weighted average shares outstanding
Basic		5,613			2,463
Diluted		5,676			2,463
Earnings (loss) per share
Basic	$	6,095		$	(2,219	)
Diluted	$	6,028		$	(2,219	)

See accompanying notes to consolidated financial statements.

F-31

Heritage Insurance Holdings, LLC

Consolidated Statements of Members’ Equity

(dollars in thousands)

	Contributed Members' Capital						Accumulated Other Comprehensive Income (loss)			Retained Earnings (Deficit)			Total Members' Equity
	Shares			Amount
August 7, 2012 (Inception)		—		$	—		$	—		$	—		$	—
Issuance of equity		2,329			23,290			—			—			23,290
Equity based compensation (Note 16)		532			5,320			—			—			5,320
Notes payable exchanged to equity (Note 16)		398			4,975			—			—			4,975
Net loss		—			—			—			(5,466	)		(5,466	)
December 31, 2012		3,259			33,585			—			(5,466	)		28,119
Equity reclassified to temporary equity		(415	)		(4,150	)		—			—			(4,150	)
Net income		—			—			—			34,213			34,213
Net unrealized change in investments, net of tax		—			—			(790	)		—			(790	)
Executive stock grant		15			150			—			—			150
Issuance of equity for services		4			53									53
Issuance of equity		2,533			31,939			—			—			31,939
Equity based compensation (Note 16)		97			1,273			—			—			1,273
Change in fair value of redeemable shares					—			—			(10,823	)		(10,823	)
December 31, 2013		5,493		$	62,850		$	(790	)	$	17,924		$	79,984

See accompanying notes to consolidated financial statements.

F-32

Heritage Insurance Holdings, LLC

Consolidated Statements of Cash Flows

For the Year Ended December 31, 2013 and the Period from August 7, 2012 (Inception) to December 31, 2012

(In thousands)

	2013			2012
OPERATING ACTIVITIES
Net income (loss)	$	34,213		$	(5,466	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Share and redeemable share-based compensation		5,733			5,520
Non-cash interest expense		—			780
Amortization of bond discount		891			16
Depreciation and amortization		150			—
Net realized losses		323			—
Deferred income taxes		(893	)		(3,046	)
Changes in operating assets and liabilities:
Accrued investment income		(856	)		(115	)
Premiums receivable, net		(10,227	)		(120	)
Prepaid reinsurance premiums		(30,658	)		(594	)
Reinsurance premiums receivable		(5,337	)		—
Federal income tax refund receivable		(5,073	)		—
Deferred policy acquisition costs, net		(9,733	)		(32	)
Other assets		(1,810	)		(213	)
Unpaid losses and loss adjustment expenses		17,951			1,393
Unearned premiums		78,578			37,665
Reinsurance payable		20,604			8,987
Income taxes payable		(1,100	)		3,312
Accrued compensation		504			1
Advance premiums		3,824			5
Other liabilities		7,967			1,382
Net cash provided by operating activities		105,051			49,475
INVESTING ACTIVITIES
Proceeds from sales and maturities of investments available for sale		7,424			—
Purchases of investments available for sale		(126,971	)		(13,084	)
Cost of property and equipment acquired		(10,884	)		(201	)
Purchase of mortgage loan participation		(6,063	)		—
Purchase of other invested assets		—			(603	)
Net cash used in investing activities		(136,494	)		(13,888	)
FINANCING ACTIVITIES
Proceeds (repayments) note payable—bank		(1,000	)		1,000
Proceeds from notes payable—members		—			3,900
Proceeds from issuance of equity and redeemable shares		33,630			23,385
Net cash provided by financing activities		32,630			28,285
Increase in cash and cash equivalents		1,187			63,872
Cash and cash equivalents at beginning of period		63,872			—
Cash and cash equivalents at end of period	$	65,059		$	63,872
Supplemental Cash Flows Information:
Interest paid	$	16		$	48
Income taxes paid	$	28,314		$	—
Notes payable, $3.9 million, and accrued interest, $780, converted to equity	$	—		$	4,680

See accompanying notes to consolidated financial statements.

F-33

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

1) Organization, Consolidation and Presentation

(a) Business

Heritage Insurance Holdings, LLC (referred to in this document as we, our, us, and Heritage Insurance) is a property and casualty insurance holding company formed in 2012 that provides personal residential insurance for single family homeowners and condominium owners. Our insurance subsidiary is Heritage Property & Casualty Insurance Company. Our other subsidiaries include: Heritage MGA, LLC, the managing general agent that manages substantially all aspects of our insurance subsidiary’s business; Contractors’ Alliance Network, LLC, our vendor network manager; Skye Lane Properties, LLC, our property management subsidiary; First Access Insurance Group, LLC, our retail agency; Osprey Re LTD, our reinsurance subsidiary that provides a portion of the reinsurance protection purchased by our insurance subsidiary; and Heritage Insurance Claims, LLC., an inactive subsidiary reserved for future development. On January 1, 2014, we formed a Delaware limited liability company, also named Heritage Insurance Holdings, LLC, and merged with it in order to domicile our ultimate parent in Delaware.

Our primary product is personal residential insurance, which we currently offer in Florida only under authorization from the Florida Office of Insurance Regulation (“FLOIR”).

Substantially all of our policies have been obtained as a result of participation in a “depopulation program” with Citizens Property Insurance Corporation (“Citizens”), a Florida state supported insurer. Beginning in December 2012, we received authorization to assume personal residential policies from Citizens, Florida’s residential residual market, through assumption transactions. The assumption is part of a program created by the Florida legislature to reduce the number of properties insured by Citizens. The assumed Citizen policy is not cancelled and remains in effect until its cancelation date. All of the terms and conditions of those policies, including coverage and rates, remain unchanged for the remainder of the policy term. At expiration, we can renew the policies under our own terms and conditions. We are required to offer renewals on the policies acquired for a period of three years subsequent to the initial expiration of the assumed policies.

F-34

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

During the first three years after assumption, our offer of renewals are required to have rates that may not exceed the greater of 110% of the previous rate or the renewal rate charged by Citizens for that policy. Our Citizens policies have been obtained in one assumption transaction which took place in December 2012 and five separate assumption transactions that took place from January 2013 through December 2013. In addition to the Citizens assumptions, we write voluntary personal residential policies through a network of independent agents.

We conduct our operations under one business segment.

(b) Consolidation and Presentation

We prepare our financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). GAAP differs from statutory accounting principles prescribed or permitted for insurance entities by regulatory authorities. While preparing our financial statements, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. Accordingly, actual results will differ from those estimates. Reported amounts that require us to make extensive use of estimates include our reserves for unpaid losses and loss adjustment expenses, deferred policy acquisition costs, and investments. Except for the captions on our Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income, we generally use the term loss expense(s) to collectively refer to both losses and loss adjustment expenses.

We include all of our subsidiaries in our consolidated financial statements, eliminating all significant intercompany balances and transactions during consolidation. All references to members’ equity, shares, and stockholders collectively refer to ownership interests of our members.

We commenced operations on August 7, 2012. Unless otherwise indicated, results of operations and cash flows reported for 2012 are for the period from August 7, 2012 through December 31, 2012.

2) Significant Accounting Policies

(a) Cash and Cash Equivalents

Our cash and cash equivalents include demand deposits with financial institutions and short-term, highly- liquid instruments with original maturities of three months or less when purchased.

(b) Investments

We currently classify our investments in fixed maturity securities and equity securities as available-for-sale, and report them at fair value. Our participation in a commercial mortgage loan is classified as held to maturity and reported at amortized cost. Subsequent to our acquisition of available-for-sale securities, we record changes in value through the date of disposition as unrealized holding gains and losses, net of tax effects, and include them as a component of other comprehensive income. We include realized gains and losses, which we calculate using the specific-identification method for determining the cost of securities sold, in net income. We amortize any premium or discount on fixed maturities over the remaining maturity period of the related securities using the effective interest method, and we report the amortization in net investment income. We recognize dividends and interest income when earned.

Quarterly, we perform an assessment of our investments to determine if any are “other-than-temporarily” impaired. An investment is impaired when the fair value of the investment declines to an amount less than the

F-35

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

cost or amortized cost of that investment. As part of our assessment process, we determine whether the impairment is temporary or “other-than-temporary”. We base our assessment on both quantitative criteria and qualitative information, considering a number of factors including, but not limited to: how long the security has been impaired; the amount of the impairment; whether, in the case of equity securities, we intend to hold, and have the ability to hold, the security for a period sufficient for us to recover our cost basis, or whether, in the case of debt securities and participations in mortgage loans, we intend to sell the investment or it is more likely than not that we will have to sell the investment before we recover the amortized cost or cost; the financial condition and near-term prospects of the issuer; whether the issuer is current on contractually-obligated interest and principal payments; key corporate events pertaining to the issuer; and whether the market decline was affected by macroeconomic conditions.

If we were to determine that an equity security has incurred an “other-than-temporary” impairment, we would permanently reduce the cost of the security to fair value and recognize an impairment charge in our Consolidated Statements of Comprehensive Income. If a debt security or participation in a commercial mortgage loan is impaired and we either intend to sell the investment or it is more likely than not that we will have to sell the investment before we are able to recover the amortized cost or cost, then we would record the full amount of the impairment in our net income.

A large portion of our investment portfolio consists of fixed maturity securities, which may be adversely affected by changes in interest rates as a result of governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. A rise in interest rates would decrease the net unrealized holding gains of our investment portfolio, offset by our ability to earn higher rates of return on funds reinvested. Conversely, a decline in interest rates would increase the net unrealized holding gains of our investment portfolio, offset by lower rates of return on funds reinvested.

(c) Fair Value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price). When reporting the fair values of our financial instruments, we prioritize those fair value measurements into one of three levels based on the nature of the inputs, as follows:

• Level 1—Valuations based on quoted prices in active markets for identical assets and liabilities;

• Level 2—Valuations based on observable inputs that do not meet the criteria for Level 1, including quoted prices in inactive markets and quoted prices in active markets for similar, but not identical instruments; and

• Level 3—Valuations based on unobservable inputs, which are based upon the best available information when external market data is limited or unavailable.

We estimate the fair value of our investments using the closing prices on the last business day of the reporting period, obtained from active markets such as the NYSE, NASDAQ and NYSE MKT. For securities for which quoted prices in active markets are unavailable, we use observable inputs such as quoted prices in inactive markets, quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs. We do not have any investments in our portfolio which require us to use unobservable inputs. Our estimates of fair value reflect the interest rate environment that existed as of the close of business on December 31, 2013, and 2012. Changes in interest rates subsequent to December 31, 2013 may affect the fair value of our investments.

F-36

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

The carrying amounts for the following financial instruments approximate their fair values at December 31, 2013 and 2012 because of their short-term nature: cash and cash equivalents, accrued investment income, premiums receivable, reinsurance payable, and accounts payable and accrued expenses.

(d) Premiums

We record assumed premiums written (premiums from policies that we assumed from Citizens, net of opt-outs) and direct premiums written (premiums from subsequent renewals of Citizens’ policies and voluntary policies written during the period) as revenue, net of ceded amounts, on a daily pro rata basis over the contract period of the related policies that are in force. For any portion of premiums not earned at the end of the reporting period, we record an unearned premium liability.

Premiums receivable represents amounts due from our policyholders for billed premiums and related policy fees. We perform a policy-level evaluation to determine the extent to which the balance of premiums receivable exceeds the balance of unearned premiums. We then age any resulting exposure based on the last date the policy was billed to the policyholder, and we establish an allowance for credit losses for any amounts outstanding for more than 90 days. When we receive payments on amounts previously charged off, we credit bad debt expense in the period we receive the payment. Balances in premiums receivable and the associated allowance account are removed upon cancellation of the policy due to non-payment. We did not record an allowance for uncollectible premiums at December 31, 2013 and 2012, respectively.

When we receive premium payments from policyholders prior to the effective date of the related policy, we record an advance premiums liability. On the policy effective date, we reduce the advance premiums liability and record the premiums as described above.

During June 2013, we received authorization from FLOIR to enter into a quota share reinsurance agreement with Citizens that was retroactive to January 1, 2013. All of the terms and conditions of the policies assumed pursuant to that agreement, including coverage and rates, remained unchanged for the remainder of the policy term. The assumed Citizens policies that do not opt-out or cancel will remain in effect until their respective expiration date and will be renewed by us on our own policy forms thereafter. Effective June 28, 2013, we assumed the premiums and losses associated with approximately 39,000 policies pursuant to a retroactive reinsurance agreement for the period January 1, 2013 through June 27, 2013. The transaction involved a period in the past, where known loss activity had already been determined (January 1, 2013 to May 31, 2013) as well as a period after which our policy selection had been made and the loss activity undetermined. The transaction exhibited both retroactive and prospective characteristics; the pending transaction’s terms were substantially set by May 31, 2013 and the reinsurance consequences of the pending transaction would begin on June 1, 2013, at the placement of our 2013—2014 catastrophe excess of loss reinsurance program. Based on these factors, we concluded that consideration received relating to the period from January 1 through May 31, 2013 was retroactive reinsurance and the effects of this portion of the transaction were excluded from our underwriting results. We incurred no reinsurance cost associated with the retroactive component of this transaction and we recognized retroactive reinsurance income of $26.0 million, net of associated losses and loss adjustment expenses, of $1.1 million for the period January 1, 2013 through May 31, 2013. We do not currently expect to enter into similar transactions in future periods.

(e) Policy Acquisition Costs

We incur policy acquisition costs that vary with, and are directly related to, the production of new business. Policy acquisition costs consist of the following four items: i) commissions paid to outside agents at the time of

F-37

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

policy issuance; ii) policy administration fees paid to a third-party administrator at the time of policy issuance; iii) premium taxes and iv) inspection fees. We capitalize policy acquisition costs to the extent recoverable, then we amortize those costs over the contract period of the related policy.

At each reporting date, we determine whether we have a premium deficiency. A premium deficiency would result if the sum of our expected losses, deferred policy acquisition costs, and policy maintenance costs (such as costs to store records and costs incurred to collect premiums and pay commissions) exceeded our related unearned premiums plus investment income. Should we determine that a premium deficiency exists, we would write off the unrecoverable portion of deferred policy acquisition costs.

(f) Long-Lived Assets—Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis over the estimated useful lives as follows: building–40 years; computer hardware and software–3 years; office and furniture equipment–3 to 7 years. Leasehold improvements are amortized over the shorter of the lease term or the asset’s useful life. Expenditures for improvements are capitalized to the property accounts. Replacements and maintenance and repairs that do not improve or extend the life of the respective assets are expensed as incurred.

(g) Impairment of Long-Lived Assets

We assess the recoverability of long-lived assets when events or circumstances indicate that the assets might have become impaired. We determine whether the assets can be recovered from undiscounted future cash flows and if not recoverable we recognize impairment to reduce the carrying value to fair value. Recoverability of long lived assets is dependent upon, among other things, our ability to maintain profitability, so as to be able to meet our obligations when they become due. In the opinion of management, based upon current information and projections, long-lived assets will be recovered over the period of benefit.

(h) Unpaid Losses and Loss Adjustment Expenses

Our reserves for unpaid losses and loss adjustment expenses represent the estimated ultimate cost of settling all reported claims plus all claims we incurred related to insured events that have occurred as of the reporting date, but that policyholders have not yet reported to us (incurred but not reported, or IBNR).

We estimate our reserves for unpaid losses and loss adjustment expenses using individual case-based estimates for reported claims and actuarial estimates for IBNR losses. We continually review and adjust our estimated losses as necessary based on industry development trends, our evolving claims experience and new information obtained. If our unpaid losses and loss adjustment expenses are considered to be deficient or redundant, we increase or decrease the liability in the period in which we identify the difference and reflect the change in our current period results of operations. Though our estimate of the ultimate cost of settling all reported and unreported claims may change at any point in the future, a reasonable possibility exists that our estimate may vary significantly in the near term from the estimated amounts included in our consolidated financial statements.

We report our reserves for unpaid losses and loss adjustment expenses gross of the amounts related to unpaid losses recoverable from reinsurers and we report losses net of amounts ceded to reinsurers. We do not discount our loss reserves for financial statement purposes.

F-38

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

(i) Other Revenue

Other revenue represents rental income due under non-cancelable leases for space at our commercial property in Clearwater, Florida that we acquired in April 2013, and all policy and pay-plan fees. Florida law allows insurers to charge policyholders a $25 policy fee on each policy written; these fees are not subject to refund, and we recognize the income immediately when collected. We also charge pay-plan fees to policyholders that pay their premium in more than one installment and record the fees as income when collected.

(j) Reinsurance

We follow industry practice of reinsuring a portion of our risks. Reinsurance involves transferring, or “ceding”, all or a portion of the risk exposure on policies we write to another insurer, known as a reinsurer. To the extent that our reinsurers are unable to meet the obligations they assume under our reinsurance agreements, we remain liable for the entire insured loss.

Our reinsurance agreements are short-term, prospective contracts. We record an asset, prepaid reinsurance premiums, and a liability, reinsurance payable, for the entire contract amount upon commencement of our new reinsurance agreements. We amortize our prepaid reinsurance premiums over the 12-month contract period.

In the event that we incur losses recoverable under our reinsurance program, we record amounts recoverable from our reinsurers on paid losses plus an estimate of amounts recoverable on unpaid losses. The estimate of amounts recoverable on unpaid losses is a function of our liability for unpaid losses associated with the reinsured policies; therefore, the amount changes in conjunction with any changes to our estimate of unpaid losses. Though an estimate of amounts recoverable from reinsurers on unpaid losses may change at any point in the future because of its relation to our reserves for unpaid losses, a reasonable possibility exists that an estimated recovery may change significantly in the near term from the amounts included in our consolidated financial statements.

We estimate uncollectible amounts receivable from reinsurers based on an assessment of factors including the creditworthiness of the reinsurers and the adequacy of collateral obtained, where applicable. We recorded no amounts recoverable under our reinsurance program or bad debt expense related to reinsurance during the year ended December 31, 2013 or the period ended December 31, 2012.

(k) Assessments

Guaranty fund and other insurance-related assessments imposed upon us are recorded as policy acquisition costs in the period the regulatory agency imposes the assessment. To recover Florida Insurance Guaranty Association (FIGA) assessments, we calculate and begin collecting a policy surcharge that will allow us to collect the entire assessment over a 12-month period, based on our estimate of the number of policies we expect to write. We then submit an information only filing, pursuant to Florida Statute 631.57(3)(h), to the insurance regulatory authority requesting formal approval of the policy FIGA surcharge. The process may be repeated in successive 12-month periods until we collect the entire assessment. We record the recoveries as revenue in the period that we collect the cash. While current regulations allow us to recover from policyholders the amount of assessments imposed upon us, our payment of the assessments and our recoveries may not offset each other in the same fiscal period in our financial statements. There were no such assessments during the periods presented.

We collect assessments imposed upon policyholders as a policy surcharge and we record the amounts collected as a liability until we remit the amounts to the regulatory agency that imposed the assessment.

F-39

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

(l) Accrued Bonus Compensation

Our Board of Directors determined early in 2013 that a bonus pool was appropriate for projected 2013 results, however much of the projected favorable earnings were based upon the positive culmination of a variety of events or results of operations spread throughout the year. Consequently, we accrued bonuses of $5.3 million through September 30, 2013 based on 8.5% of targeted earnings before interest, taxes, depreciation and amortization. In the fourth quarter of 2013, we awarded our directors, executive officers and select employees bonus compensation totaling $11.5 million for 2013, comprised of $6.4 million in cash and $5.1 million in ownership equity, inclusive of $5.3 million recognized through September 30, 2013. The equity component was issued in the form of 389 ownership shares at a value of $13,125 per share. The per share value was determined based on an independent valuation, and we evaluated the assumptions, methodologies and conclusions associated with that valuation. Also see Note 16.

(m) Income Taxes

We file a consolidated partnership return along with our limited liability company subsidiaries, Heritage MGA, LLC, Contractors’ Alliance Network, LLC, First Access Insurance Group, LLC, Skye Lane Properties, LLC and Heritage Insurance Claims, LLC. The limited liability companies are not required to provide for Federal taxes. As such, taxable income, losses, deductions and credits pass through to members for them to report on their respective income tax returns. Our insurance subsidiary, Heritage Property & Casualty Insurance Company, a Florida corporation, writes premium in Florida only and files a Federal and Florida state income tax return. Our reinsurance affiliate, which is based in Bermuda, plans to make an irrevocable election under section 953(d) of the U.S. Internal Revenue Code of 1986, as amended, to be treated as a domestic insurance company for U.S. Federal income tax purposes. As a result of this election, our reinsurance subsidiary will be subject to U.S. income tax on its worldwide income as if it were a U.S. corporation.

We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. Should a change in tax rates occur, we recognize the effect on deferred tax assets and liabilities in operations in the period that includes the enactment date. Realization of our deferred income tax assets depends upon our generation of sufficient future taxable income.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant taxing authority.

We record any income tax penalties and income-tax-related interest as income tax expense in the period incurred. We did not incur any material tax penalties or income-tax-related interest during the year and period ended December 31, 2013 or 2012, respectively.

(n) Advertising Costs

We expense all advertising costs when we incur those costs. For the year and period ended December 31, 2013 and 2012, we incurred advertising costs of $393,000, and $77,000, respectively.

F-40

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

(o) Stock-Based Compensation

We account for stock-based compensation under the fair value recognition provisions of U.S. GAAP which require the measurement and recognition of compensation for all stock-based awards made to employees and directors based on estimated fair values. In accordance with U.S. GAAP, the fair value of stock-based awards is amortized over the requisite service period, which is defined as the period during which an employee is required to provide service in exchange for an award. We use a straight-line attribution method for all grants that include only a service condition. During the periods presented there were no service based vesting periods as all stock based awards were immediately vested.

(p) Earnings Per Share

We report both basic earnings per share and diluted earnings per share. To calculate basic earnings per share, we divide net income attributable to members by the weighted-average number of shares outstanding during the period, including redeemable shares. We calculate diluted earnings per share by dividing net income attributable to members by the weighted-average number of shares redeemable shares, share equivalents, and restricted shares outstanding during the period. We use the treasury stock method to calculate common stock equivalents.

(q) Concentrations of Risk

Our current operations subject us to the following concentrations of risk:

• Revenue—we write residential property and liability policies exclusively

• Geographic—we write 100% of our premium in Florida

• Group concentration of credit risk—all of our reinsurers engage in similar activities and have similar economic characteristics that could cause their ability to repay us to be similarly affected by changes in economic or other conditions

• Credit risk—we choose to deposit all our cash at four financial institutions

We mitigate our geographic and group concentrations of risk by entering into reinsurance contracts with highly rated, financially-stable reinsurers, and by securing irrevocable letters of credit from reinsurers when necessary.

With regard to our cash, we had $65.9 million and $59.8 million in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits at December 31, 2013 and 2012, respectively. For calendar year 2012, the FDIC expanded its insurance coverage to 100% of any amount in a non-interest-bearing deposit account. As a result, the only uninsured cash amount we had as of December 31, 2012 related to our interest-bearing money market accounts. In 2013, deposits held in non- interest-bearing transaction accounts are combined with interest-bearing accounts and insured up to $250,000.

(r) Accounting Pronouncements

We determined that all recently issued accounting pronouncements will not have a material impact on our consolidated financial position, results of operations and cash flows, or do not apply to our operations.

F-41

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

3) INVESTMENTS

The following table details the difference between cost or adjusted/amortized cost and estimated fair value, by major investment category, at December 31, 2013, and 2012:

	(in thousands)
	Cost or Adjusted / Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amount Shown in Consolidated Balance Sheets
December 31, 2013
Available for sale:
U.S. government and agency securities	$	1,486	$	—	$	44	$	1,442	$	1,442
States, municipalities and political subdivisions		14,255		42		136		14,161		14,161
Special revenue		41,114		89		608		40,595		40,595
Industrial and miscellaneous		46,726		69		480		46,315		46,315
Redeemable preferred stocks		2,374		4		223		2,155		2,155
Total fixed maturities		105,955		204		1,491		104,668		104,668
Available for sale:
Nonredeemable preferred stocks		5,283		6		331		4,958		4,958
Equity securities		20,163		370		45		20,488		20,488
Total equity securities		25,446		376		376		25,446		25,446
Held to maturity:
Mortgage loan participation		6,063		—		—		6,063		6,063
Total investments	$	137,464	$	580	$	1,867	$	136,177	$	136,177
December 31, 2012
Available for sale:
States, municipalities and political subdivisions	$	1,932	$	4	$	6	$	1,930	$	1,930
Special revenue		4,977		14		15		4,976		4,976
Industrial and miscellaneous		6,159		7		4		6,162		6,162
Total fixed maturities		13,068		25		25		13,068		13,068
Total investments	$	13,068	$	25	$	25	$	13,068	$	13,068

F-42

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

We calculate the gain or loss realized on the sale of investments by comparing the sales price (fair value) to the cost or adjusted/amortized cost of the security sold. We determine the cost or adjusted amortized cost of the security sold using the specific-identification method. The following tables detail our realized gains (losses) by major investment category for the year and period ended December 31, 2013 and 2012, respectively:

	(in thousands)
	2013					2012
	Gains (Losses)			Fair Value at Sale		Gains (Losses)		Fair Value at Sale
Fixed maturities	$	7		$	1,764	$	—	$	—
Equity securities		8			507		—		—
Total realized gains		15			2,271		—		—
Fixed maturities		(44	)		1,331		—		—
Equity securities		(294	)		3,603		—		—
Total realized losses		(338	)		4,934		—		—
Net realized losses	$	(323	)	$	7,205	$	—	$	—

The table below summarizes our fixed maturities at year end by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturity of those obligations.

	(in thousands)
December 31, 2013	Cost or Amortized Cost		Precent of Total			Fair Value		Percent of Total
Due in one year or less	$	1,518		1.4	%	$	1,523		1.5	%
Due after one year through five years		62,242		58.8	%		62,059		59.2	%
Due after five years through ten years		33,620		31.7	%		32,921		31.5	%
Due after ten years		8,575		8.1	%		8,165		7.8	%
Total	$	105,955		100.0	%	$	104,668		100.0	%
December 31, 2012
Due in one year or less	$	—		0.0	%	$	—		0.0	%
Due after one year through five years		7,793		59.7	%		7,793		59.7	%
Due after five years through ten years		4,015		30.7	%		4,015		30.7	%
Due after ten years		1,260		9.6	%		1,260		9.6	%
Total	$	13,068		100.0	%	$	13,068		100.0	%

F-43

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

The following table summarizes our net investment income by major investment category:

	(in thousands)
	For the Periods Ended
	December 31, 2013		December 31, 2012
Fixed maturities	$	914	$	12
Equity securities		456		—
Cash, cash equivalents and short-term investments		83		15
Other investments		93		5
Net investment income		1,546		32
Investment expenses		497		5
Net investment income, less investment expenses	$	1,049	$	27

During our quarterly evaluations of our securities for impairment, we determined that none of our investments in debt and equity securities that reflected an unrealized loss position were other-than-temporarily impaired. The issuers of our debt securities continue to make interest payments on a timely basis and have not suffered any credit rating reductions. We do not intend to sell nor is it likely that we would be required to sell the debt securities before we recover our amortized cost basis. All the issuers of the equity securities we own had near-term prospects that indicated we could recover our cost basis, and we also have the ability and the intent to hold these securities until their value equals or exceeds their cost.

The following table presents an aging of our unrealized investment losses by investment class:

	(in thousands)
	Less Than Twelve Months						Twelve Months or More
	Number of Securities		Gross Unrealized Losses		Fair Value		Number of Securities		Gross Unrealized Losses		Fair Value
December 31, 2013
U.S. government and agency securities		6	$	44	$	1,335		—	$	—	$	—
States, municipalities and political subdivisions		17		116		8,294		2		20		341
Industrial and miscellaneous		89		413		30,962		6		66		888
Special revenue		59		582		27,256		3		27		502
Redeemable preferred stocks		27		223		1,844		—		—		—
Total fixed maturities		198		1,378		69,691		11		113		1,731
Nonredeemable preferred stocks		58		331		4,349		—		—		—
Equity securities		4		45		689		—		—		—
Total equity securities		62		376		5,038		—		—		—
Total		260	$	1,754	$	74,729		11	$	113	$	1,731
December 31, 2012
States, municipalities and political subdivisions		5	$	6	$	792		—	$	—	$	—
Special revenue		11		15		1,836		—		—		—
Industrial and miscellaneous		21		4		3,371		—		—		—
Total fixed maturities		37		25		5,999		—		—		—
Total		37	$	25	$	5,999		—	$	—	$	—

F-44

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

Assets measured at fair value on a recurring basis consist of the following as of December 31, 2013 and 2012:

	(in thousands)
	Total		Level 1		Level 2		Level 3
December 31, 2013
U.S. government and agency securities	$	1,442	$	—	$	1,442	$	—
States, municipalities and political subdivisions		14,161		—		14,161		—
Special revenue		40,595		—		40,595		—
Industrial and miscellaneous		46,315		—		46,315		—
Redeemable preferred stocks		2,155		2,155		—		—
Total fixed maturities	$	104,668	$	2,155	$	102,513	$	—
Nonredeemable preferred stocks	$	4,958	$	4,958	$	—	$	—
Equity securities		20,488		20,488		—		—
Total equity securities	$	25,446	$	25,446	$	—	$	—
December 31, 2012
States, municipalities and political subdivisions	$	1,930	$	—	$	1,930	$	—
Special revenue		4,976		—		4,976		—
Industrial and miscellaneous		6,162		—		6,162		—
Total fixed maturities	$	13,068	$	—	$	13,068	$	—

For our investments in U.S. government securities that do not have prices in active markets, agency securities, state and municipal governments, and corporate bonds, we obtain the fair values from our custodian, which uses a third-party valuation service, and we evaluate the relevant inputs, assumptions, methodologies and conclusions associated with such valuations. The valuation service calculates prices for our investments in the aforementioned security types on a month-end basis by using several matrix-pricing methodologies that incorporate inputs from various sources. The model the valuation service uses to price U.S. government securities and securities of states and municipalities incorporates inputs from active market makers and inter-dealer brokers. To price corporate bonds and agency securities, the valuation service calculates non-call yield spreads on all issuers, uses option-adjusted yield spreads to account for any early redemption features, then adds final spreads to the U.S. Treasury curve as of quarter end. The inputs the valuation service uses in their calculations are not quoted prices in active markets, but are observable inputs, and therefore represent Level 2 inputs.

On October 7, 2013, we acquired a 55% participation in a commercial real estate mortgage loan for $6.1 million. The $11.5 million loan was originated by unaffiliated lenders, and collateralized by commercial real estate located in Polk County, Florida. We recorded an asset in the amount of our pro rata share of the outstanding principal and carry the investment at amortized cost. We receive monthly principal and interest payments and recognize income when collected.

F-45

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

4) Property and Equipment, Net

Property and equipment, net consists of the following at December 31, 2013 and 2012, respectively:

	(in thousands)
	December 31,
	2013		2012
Land	$	2,582	$	—
Building		7,090		—
Computer hardware and software		364		149
Office furniture and equipment		176		52
Tenant and leasehold improvements		873		—
Total, at cost		11,085		201
Less: accumulated depreciation and amortization		150		—
Property and equipment, net	$	10,935	$	201

Depreciation and amortization expense for property and equipment was $150,000 and $0 for the year and period ended December 31, 2013 and 2012, respectively. Our real estate consists of 13 acres of land and two buildings with a gross area of 148,000 square feet. We relocated to these facilities during March 2014. These facilities and the related existing tenant lease agreements were acquired in April 2013 for a total purchase price of $9.8 million paid in cash. We currently lease space to non-affiliates.

Expected annual rental income due under non-cancellable operating leases for our real estate properties is as follows:

	(in thousands)
Year	Amount
January 1 to December 31, 2014	$	1,796
January 1 to December 31, 2015	$	2,222
January 1 to December 31, 2016	$	2,088
January 1 to December 31, 2017	$	2,099
January 1 to December 31, 2018	$	2,145
Thereafter	$	8,444

F-46

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

5) Earnings Per Share

We have 6,410 (5,493 equity shares and 917 redeemable shares) and 3,259 outstanding equity shares as of December 31, 2013 and 2012, respectively. Our Members also hold 3,019 and 398 warrants as of December 31, 2013 and 2012, respectively, to purchase additional ownership shares at any time until the warrant’s expiry at March 31, 2018 at an exercise price of $15,000 per share. Utilizing a fair market value of $22,815 per share as of December 31, 2013, determined by an independent third party, and the treasury stock method of accounting, the table below reflects the diluted weighted-average number of shares outstanding using the treasury stock method. For the period from August 7, 2012 (inception) to December 31, 2012, 398 warrants to purchase 398 shares were excluded from the computation of diluted earnings per share because the exercise price of $15,000 exceeded the fair value price of the Company’s shares. See Note 16—“Members’ Equity and Temporary Equity” for a summary of warrant activity.

	For the Periods Ending
	December 31, 2013		December 31, 2012
Basic earnings (loss) per share:
Net income (loss) attributable to common shareholders (000's)	$	34,213	$	(5,466	)
Weighted average shares outstanding		5,613		2,463
Basic earnings (loss) per share:	$	6,095	$	(2,219	)
Diluted earnings (loss) per share:
Net income attributable to common shareholders (000's)	$	34,213	$	(5,466	)
Weighted average shares outstanding		5,613		2,463
Weighted average dilutive shares		63		—
Total Weighted Average Shares		5,676		2,463
Diluted earnings (loss) per share:	$	6,028	$	(2,219	)

6) Deferred Policy Acquisition Costs

We anticipate that our deferred policy acquisition costs will be fully recoverable in the near term. The table below depicts the activity with regard to deferred policy acquisition costs:

	(in thousands)
	2013			2012
Beginning Balance	$	32		$	—
Policy acquisition costs deferred		15,883			41
Amortization		(6,150	)		(9	)
Ending Balance	$	9,765		$	32

7) Reinsurance

Our reinsurance program is designed, utilizing our risk management methodology, to address our exposure to catastrophes. Our program provides reinsurance protection for catastrophes including hurricanes, tropical storms and tornadoes. These reinsurance agreements are part of our catastrophe management strategy, which is intended to provide our shareholders an acceptable return on the risks assumed in our property business, and to reduce variability of earnings, while providing protection to our policyholders.

F-47

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

Effective December 4, 2012 through May 31, 2013, concurrent with the effective date of our initial assumption transaction with Citizens, we secured catastrophe excess of loss reinsurance providing $9.5 million of protection in excess of our $2 million primary retention. Loss payments under this contract reduce the limits of coverage afforded by the amounts paid, but the limit of coverage would be reinstated from the time of the occurrence of the loss. We would pay an additional premium calculated at pro rata of 100% of the reinsurer’s premium for the term of this contract, being pro rata only as to the fraction of the reinsurer’s limit of liability and reinstated simultaneously with the reinsurer’s loss payment. Under no circumstances would the reinsurer’s liability exceed $9.5 million for any one loss occurrence, and $19.0 million for all loss occurrences during the contract term.

During the second quarter of 2013, we placed our reinsurance program for the period from June 1, 2013 through May 31, 2014. Our reinsurance program, which is segmented into layers of coverage, protects us for excess property catastrophe losses and loss adjustment expenses. Our current reinsurance program incorporates the mandatory coverage required by law to be placed with FHCF. We also purchase private reinsurance below, alongside and above the FHCF layer, as well as aggregate reinsurance coverage. The following describes the various layers of our reinsurance program.

• Our Retention. For the first catastrophic event, we have a primary retention of the first $9.0 million of losses and loss adjustment expenses, of which our reinsurance subsidiary, Osprey, is responsible for $3.0 million. For a second and third catastrophic event, Heritage P&C’s primary retention decreases to $3.0 million per event. To the extent that there is reinsurance coverage remaining, Heritage P&C has no primary retention for events beyond the third catastrophic event. Osprey has no primary retention beyond the first catastrophic event.

• Layers Below FHCF. Immediately above our retention, we have purchased $94.0 million of reinsurance from third party reinsurers and Osprey. Through Osprey, we retain an aggregate participation in this coverage of $3.5 million, comprised of a 3% participation of $31.0 million of losses and loss adjustment expenses in excess of $9.0 million, or $0.9 million, and a 4% participation of $63.0 million of losses and loss adjustment expenses in excess of $40.0 million, or $2.5 million. Through the payment of a reinstatement premium, we are able to reinstate the full amount of this reinsurance up to two times. To the extent that $94.0 million or a portion thereof is exhausted in a first catastrophic event, we have purchased reinstatement premium protection insurance to pay the required premium necessary for the first reinstatement of this coverage.

• FHCF Layer. Our FHCF coverage includes an estimated maximum provisional limit of 90% of $270.0 million, or $243.0 million, in excess of our retention and private reinsurance of $103.0 million. The limit and retention of the FHCF coverage is subject to upward or downward adjustment based on, among other things, submitted exposures to FHCF by all participants. We have purchased coverage alongside and above the FHCF layer from third party reinsurers. The layer alongside is in the amount of $27.0 million and the layer immediately above is in the amount of $28.5 million. To the extent the FHCF coverage is adjusted, this private reinsurance will adjust to fill in any gaps in coverage up to the reinsurers’ aggregate limits for this layer. Through the payment of a reinstatement premium, we are able to reinstate the full amount of this private reinsurance up to two times. To the extent that all or a portion of either of these private layers is exhausted in a first catastrophic event, we have purchased reinstatement premium protection insurance to pay the required premium necessary for the first reinstatement of this coverage. The FHCF coverage cannot be reinstated once exhausted, but it does provide coverage for multiple events.

• Aggregate Coverage. In addition to the layers described above, we have also purchased $170.0 million of aggregate reinsurance coverage for losses and loss adjustment expenses in excess of $401.5 million for a

F-48

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

first catastrophic event. To the extent that this coverage is not fully exhausted in the first catastrophic event, it provides coverage commencing at our reduced retention levels for second and subsequent events and where underlying coverage has been previously exhausted. There is no reinstatement of the aggregate reinsurance coverage once exhausted, but it does provide coverage for multiple events.

For a first catastrophic event, our reinsurance program provides coverage for $571.5 million of losses and loss adjustment expenses, including our retention, and we are responsible for all losses and loss adjustment expenses in excess of such amount. For subsequent catastrophic events, our total available coverage depends on the magnitude of the first event, as we may have coverage remaining from layers that were not previously fully exhausted. We have also purchased reinstatement premium protection insurance to provide an additional $149.5 million of coverage. Our aggregate reinsurance layer also provides coverage for second and subsequent events to the extent not exhausted in prior events.

Assumption Transactions and Assumed Premiums Written

Substantially all of our policies have been obtained in connection with assumption transactions with Citizens, pursuant to which we record the assumed premiums written in the amount of the unearned premiums transferred to us. In connection with each assumption transaction, we assume the responsibility of the primary writer of the risk through the expiration of the term of the policy. Since our inception, we have taken part in six assumption transactions, resulting in our assumption of 127,000 policies and assumed premiums written of $97.6 million and $43.2 million during the periods ended December 31, 2013 and 2012, respectively.

The following table depicts written premiums, earned premiums and losses, showing the effects that our reinsurance transactions have on these components of our Consolidated Statements of Comprehensive Income:

	(in thousands)
	2013			2012
Premium written:
Direct	$	120,893		$	215
Assumed		97,644			43,169
Ceded		(75,459	)		(714	)
Net premium written	$	143,078		$	42,670
Change in unearned premiums:
Direct	$	(74,797	)	$	(203	)
Assumed		(3,781	)		(37,462	)
Ceded		30,659			594
Net decrease (increase)	$	(47,919	)	$	(37,071	)
Premiums earned:
Direct	$	46,096		$	12
Assumed		93,863			5,707
Ceded		(44,800	)		(120	)
Net premiums earned	$	95,159		$	5,599
Losses and loss adjustment expenses incurred:
Direct	$	14,674		$	5
Assumed		23,827			1,397
Ceded		—			—
Net losses and loss adjustment expenses incurred	$	38,501		$	1,402

F-49

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

The following table highlights the effects that our reinsurance transactions have on unpaid losses and loss adjustment expenses and unearned premiums in our Consolidated Balance Sheets:

	(in thousands)
	2013			2012
Unpaid losses and loss adjustment expenses:
Direct	$	10,037		$	—
Assumed		9,307			1,393
Gross unpaid losses and loss adjustment expenses		19,344			1,393
Ceded		—			—
Net unpaid losses and loss adjustment expenses	$	19,344		$	1,393
Unearned premiums:
Direct	$	75,000		$	203
Assumed		41,243			37,462
Gross unearned premiums		116,243			37,665
Ceded		(31,252	)		(594	)
Net unearned premiums	$	84,991		$	37,071

There were no amounts recoverable under our reinsurance agreements as of December 31, 2013 and 2012. Prepaid reinsurance premiums related to fourteen reinsurers at December 31, 2013 and six reinsurers at December 31, 2012. There were no amounts receivable with respect to reinsurers at December 31, 2013 and 2012. Thus, there were no concentrations of credit risk associated with reinsurance receivables as of December 31, 2013 and 2012. The percentages of assumed premiums earned to net premiums earned for the year ended December 31, 2013 and the period from August 7, 2012 (inception) to December 31, 2012 were 99% and 102%, respectively.

8) Reserve for Unpaid Losses

We determine the reserve for unpaid losses on an individual-case basis for all incidents reported. The liability also includes amounts for IBNR claims as of the balance sheet date.

The table below summarizes the activity related to our reserve for unpaid losses:

	(in thousands)
	2013			2012
Balance at January 1, 2013 and August 7, 2012	$	1,393		$	—
Less: reinsurance recoverable on unpaid losses		—			—
Net balance at January 1, 2013 and August 7, 2012		1,393			—
Incurred related to:
Current year		38,968			1,402
Prior years		(467	)		—
Total incurred		38,501			1,402
Paid related to:
Current year		20,010			9
Prior years		540			—
Total paid		20,550			9
Net balance at December 31		19,344			1,393
Plus: reinsurance recoverable on unpaid losses		—			—
Balance at December 31	$	19,344		$	1,393

F-50

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

The significant increase from 2012 to 2013 is primarily due to the increase in policy base as a result of the assumption of Citizens policies in 2013. We write insurance in the state of Florida, which could be exposed to hurricanes or other natural catastrophes. Although the occurrence of a major catastrophe could have a significant effect on our monthly or quarterly results, such an event is unlikely to be so material as to disrupt our overall normal operations. However, we are unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

Based upon our internal analysis and our review of the statement of actuarial opinion provided by our actuarial consultants, we believe that the reserve for unpaid losses reasonably represents the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.

Our losses incurred related to the prior year reflect a reserve redundancy through December 31, 2013. The redundancy we experienced in 2013 resulted from reductions to our estimate of ultimate losses because of continued favorable loss development on claims incurred in the prior year.

9) Note Payable

We reported $0 and $1 million due for a note payable as of December 31, 2013 and 2012, respectively. The note bore interest at 2.25% per annum, required monthly interest payments through September 2014, at which time the entire principal balance and accrued interest were due. We satisfied the note obligation, as well as the accrued interest, in August 2013. Two members of our board of directors, one of whom is also an executive officer, are members of the board of directors of this bank.

10) Income Taxes

The following table summarizes the provision for income taxes:

	(in thousands)
	For the Periods Ending
	December 31, 2013			December 31, 2012
Federal:
Current	$	19,066		$	3,312
Deferred		(769	)		(2,583	)
Provision for Federal income tax expense		18,297			729
State:
Current		3,075			593
Deferred		(124	)		(463	)
Provision for State income tax expense		2,951			130
Provision for income taxes	$	21,248		$	859

F-51

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

The following table sets forth the components of income (loss) before income taxes for the periods ended December 31, 2013 and 2012:

	2013		2012
Pass-through entities	$	1,888	$	(7,165	)
Non-pass through entities		53,573		2,558
Income (loss) before income taxes	$	55,461	$	(4,607	)

Our pass-through entities incurred losses in 2012 primarily related to having limited revenue producing activities while incurring start-up and stock compensation costs from the Company’s August 7, 2012 inception date through December 31, 2012.

The actual income tax expense differs from the expected income tax expense computed by applying the combined applicable effective federal and state tax rates to income before the provision for income taxes as follows:

	For the Periods Ending
	December 30, 2013			December 31, 2012
Expected income tax expense at federal rate		35.0	%		34.0	%
State tax expense, net of federal tax benefits		3.6	%		3.6	%
Operating losses (income) of pass through entities (See note 2(m))		-1.2	%		-55.7	%
Rate change and other		0.9	%		-0.6	%
Reported income tax expense		38.3	%		-18.7	%

The effective income tax rate differs from the statutory income tax rate of 34% in 2012 primarily due to the fact that significant portions of the Company’s consolidated pre-tax book income (loss) is earned at our limited liability companies that have elected to be taxed under the Partnership provisions of the Internal Revenue Code. Accordingly, all income or losses and applicable tax credits generated by these entities are reported on the members’ individual tax returns, and no federal income taxes are recorded by the Company.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

F-52

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

The table below summarizes the significant components of our net deferred tax asset:

	(in thousands)
	December 31, 2013		December 31, 2012
Deferred tax assets:
Unearned premiums	$	6,843	$	2,958
Tax-related discount on loss reserve		385		30
Unrealized loss		497		—
Other		484		70
Total deferred tax assets		8,209		3,058
Deferred tax liabilities:
Deferred acquisition costs		3,767		12
Other		6		—
Total deferred tax liabilities		3,773		12
Less: valuation allowance		—		—
Net deferred tax asset	$	4,436	$	3,046

In assessing the net realizable value of deferred tax assets, we consider whether it is more likely than not that we will not realize some portion or all of the deferred tax assets. The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

No taxing authorities are currently examining either of our 2012 federal or state income tax returns.

As of December 31, 2013 and 2012 we have no uncertain tax positions.

11) Statutory Accounting and Regulation

The insurance industry is heavily-regulated. State laws and regulations, as well as national regulatory agency requirements, govern the operations of all insurers such as our insurance subsidiary. The various laws and regulations require that insurers maintain minimum amounts of statutory surplus and risk-based capital, they restrict insurers’ ability to pay dividends, they specify allowable investment types and investment mixes, and they subject insurers to assessments.

Our insurance subsidiary is domiciled in Florida, and the laws of that state require that our insurance subsidiary maintain capital and surplus equal to the greater of $15 million or 10% of its liabilities. Our statutory capital surplus was $63.1 million and $26.5 million at December 31, 2013 and 2012, respectively. State law also requires our insurance subsidiary to adhere to prescribed premium-to-capital surplus ratios, with which we were in compliance at December 31, 2013 and 2012.

The National Association of Insurance Commissioners (“NAIC”) published risk-based capital guidelines for insurance companies that are designed to assess capital adequacy and to raise the level of protection that statutory surplus provides for policy holders. Most states, including Florida, have enacted the NAIC guidelines as statutory requirements, and insurers having less statutory surplus than required will be subject to varying degrees of

F-53

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

regulatory action, depending on the level of capital inadequacy. State insurance regulatory authorities could require an insurer to cease operations in the event the insurer fails to maintain the required statutory capital.

The level of required risk-based capital (RBC) is calculated and reported annually. There are five outcomes to the RBC calculation set forth by the NAIC which are as follows:

1. No Action Level—If RBC is greater than 200%, no further action is required.

2. Company Action Level—If RBC is between 150%-200%, the insurer must prepare a report to the regulator outlining a comprehensive financial plan that identifies conditions that contributed to the insurer’s financial condition and proposes corrective actions.

3. Regulatory Action Level—If RBC is between 100%-150%, the state insurance commissioner is required to perform any examinations or analyses to the insurer’s business and operations that he or she deems necessary as well as issuing appropriate corrective orders.

4. Authorized Control Level—If RBC is between 70%-100%, this is the first point that the regulator may take control of the insurer even if the insurer is still technically solvent and is in addition to all the remedies available at the higher action levels.

5. Mandatory Control Level—If RBC is less than 70%, the regulator is required to take steps to place the insurer under its control regardless of the level of capital and surplus.

At December 31, 2013, the ratio of adjusted capital to authorized control level risk based capital was 357%.

Florida law permits an insurer to pay dividends or make distributions out of that part of statutory surplus derived from net operating profit and net realized capital gains. The law further provides calculations to determine the amount of dividends or distributions that can be made without the prior approval of the insurance regulatory authority and the amount of dividends or distributions that would require prior approval of the insurance regulatory authority. Statutory risk-based capital requirements may further restrict our insurance subsidiary’s ability to pay dividends or make distributions if the amount of the intended dividend or distribution would cause statutory surplus to fall below minimum risk-based capital requirements. However, the consent order authorizing our commencement of operations precludes us from paying dividends without the prior approval of FLOIR until July 31, 2017.

Florida law limits an insurer’s investment in equity instruments and also restricts investments in medium to low quality debt instruments. We were in compliance with all investment restrictions at December 31, 2013 and 2012.

Governmental agencies or certain quasi-governmental entities can levy assessments upon us in the states in which we write policies. See Note 2(k) for a description of how we recover assessments imposed upon us.

Governmental agencies or certain quasi-governmental entities can also levy assessments upon policyholders, and we collect the amount of the assessments from policyholders as surcharges for the benefit of the assessing agency. We currently collect assessments levied upon policyholders on behalf of Citizens in the amount of 1.0%, and on behalf of FHCF in the amount of 1.3%. We multiply the premium written on each policy by these assessment percentages to determine the additional amount that we will collect from the policyholder and remit to the assessing agencies.

F-54

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

We have reported our insurance subsidiary’s assets, liabilities and results of operations in accordance with GAAP, which varies from statutory accounting principles prescribed or permitted by state laws and regulations, as well as by general industry practices. The following items are principal differences between statutory accounting and GAAP:

• Statutory accounting requires that we exclude certain assets, called non-admitted assets, from the balance sheet.

• Statutory accounting requires us to expense policy acquisition costs when incurred, while GAAP allows us to defer and amortize policy acquisition costs over the estimated life of the policies.

• Statutory accounting dictates how much of a deferred income tax asset we can admit on a statutory balance sheet.

• Statutory accounting requires that we record certain investments at cost or amortized cost, while we record other investments at fair value; however, GAAP requires that we record all investments at fair value.

• Statutory accounting requires that surplus notes, also known as surplus debentures, be recorded in statutory surplus, while GAAP requires us to record surplus notes as a liability.

• Statutory accounting allows bonds to be carried at amortized cost or fair value based on the rating received from the Securities Valuation Office of the NAIC, while they are recorded at fair value for GAAP.

• Statutory accounting allows ceding commission income to be recognized when written if the cost of acquiring and renewing the associated business exceeds the ceding commissions, but under GAAP such income is deferred and recognized over the coverage period.

• Statutory accounting requires that unearned premiums and loss reserves be presented net of related reinsurance rather than on a gross basis under GAAP.

• Statutory accounting requires a provision for reinsurance liability be established for reinsurance recoverable on paid losses aged over ninety days and for unsecured amounts recoverable from unauthorized reinsurers. Under GAAP there is no charge for uncollateralized amounts ceded to a company not licensed in the insurance affiliate’s domiciliary state and a reserve for uncollectable reinsurance is charged through earnings rather than surplus or equity.

• Statutory accounting requires an additional admissibility test outlined in Statements on Statutory Accounting Principles, No. 101 and the change in deferred income tax is reported directly in capital and surplus, rather than being reported as a component of income tax expense under GAAP.

Our insurance subsidiary must file with the insurance regulatory authorities an “Annual Statement” which reports, among other items, net income (loss) and surplus as regards policyholders, which is called stockholder’s equity under GAAP.

F-55

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

The table below reconciles our consolidated GAAP net income (loss) to the statutory net income (loss) of our insurance subsidiary:

	(in thousands)
	For the Periods Ending
	December 31, 2013			December 31, 2012
Consolidated GAAP net income	$	34,213		$	(5,466	)
Increase (decrease) due to:
Deferred income taxes		(893	)		(3,046	)
Deferred policy acquisition costs		(9,733	)		(32	)
Unrecorded statutory audit adjustments		(128	)		240
Surplus note interest		(278	)		—
Non-statutory entities		(2,191	)		7,165
Statutory net income (loss) of insurance subsidiary	$	20,990		$	(1,139	)

The table below reconciles our consolidated GAAP members’ equity to the surplus as regards policyholders of our insurance subsidiary:

	(in thousands)
	For the Periods Ending
	December 31, 2013			December 31, 2012
Consolidated GAAP stockholders’ equity	$	79,984		$	28,119
Increase (decrease) due to:
Ownership shares issued		(72,948	)		(33,585	)
Redeemable shares classified as temporary equity		20,921			—
Subsidiary capitalization		20,000			18,000
Surplus debentures		17,000			7,000
Deferred policy acquisition costs		(9,765	)		(32	)
Deferred income taxes		2,891			(257	)
Non-admitted assets		(511	)		(143	)
Surplus debenture interest		(278	)		—
Non-statutory entities		5,355			7,165
Unrecorded statutory audit adjustments		(341	)		239
Unrealized investment losses		746			—
Statutory surplus as regards policyholders of insurance subsidiary	$	63,054		$	26,506

Our reinsurance subsidiary, Osprey Re Ltd. (“Osprey”), which was incorporated on April 23, 2013, is licensed as a Class 3a Insurer under The Bermuda Insurance Act 1978 and related regulations. Osprey is required to maintain statutory capital and surplus of at least $1.0 million and maintain liquid resources or have access to liquid resources equal to its maximum obligation for which it is responsible under the terms of any reinsurance arrangement to which it is a party. In May 2013, we contributed $1.7 million in cash to Osprey. Osprey secures its reinsurance obligations to our insurance subsidiary with an irrevocable letter of credit in the amount of $5 million. These resources, in addition to premiums ceded to it by our insurance subsidiary are sufficient to comply with regulatory requirements as of December 31, 2013. Bermuda’s standard for financial statement reporting is U.S. GAAP.

F-56

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

12) Commitments and Contingencies

We are involved in claims-related legal actions arising in the ordinary course of business. We accrue amounts resulting from claims-related legal actions in unpaid losses and loss adjustment expenses during the period that we determine an unfavorable outcome becomes probable and we can estimate the amounts. Management makes revisions to our estimates based on its analysis of subsequent information that we receive regarding various factors, including: (i) per claim information; (ii) company and industry historical loss experience; (iii) judicial decisions and legal developments in the awarding of damages and (iv) trends in general economic conditions, including the effects of inflation. When determinable, we disclose the range of possible losses in excess of those accrued and for reasonably possible losses.

13) Leases

We leased the space that we occupied through March 2014 at 700 Central Avenue, Ste. 500 St. Petersburg, Florida without obligation to continue doing so in the future. We paid $488,000 and $65,000 in rent under the terms of this lease during 2013 and 2012, respectively.

14) Related Party Transactions

We have been party to various related party transactions involving our Members. The Members involved were not controlling persons with respect to us, we have entered into these arrangements without obligation to continue their effect in the future and the associated expense was immaterial to our results of operations or financial position as of December 31, 2013 and 2012.

• We leased the space that we occupied through March 2014 at 700 Central Avenue, Ste. 500 St. Petersburg, Florida from a real estate management company controlled by a shareholder. We leased the space without obligation to continue doing so in the future. For the periods ended December 31, 2013 and 2012 we incurred rent expense of approximately $488,000 and $65,000, respectively.

• We have entered into an agreement with a real estate management company controlled by one of our directors to manage our Clearwater office space. Management services are provided at a fixed fee, plus ordinary and necessary out of pocket expenses. Fees for additional services, such as the oversight of construction activity, are provided for on an as needed basis.

• We have entered into an agreement for the construction of a parking facility for our Clearwater property with a relative of one of our directors. We expect construction to commence in the spring of 2014.

• Our insurance subsidiary receives water mitigation services from an outsource vendor controlled by an executive officer and shareholder. During the year ended December 31, 2013, we incurred approximately $818,000 payable to this Company. We acquired the assets of this entity subsequent to the date of these statements for $2.5 million.

• We entered into a consulting arrangement with a firm in which a member of executive management is a named member to explore expansion and merger and acquisition opportunities. The firm was paid a non-recurring flat fee of $500,000 for the services provided under the consulting arrangement.

Also see Notes 9, 16 and 18.

F-57

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

15) Employee Benefit Plan

We provide a 401(k) plan for substantially all of our employees. We contribute 3% of employees’ salary, up to the maximum allowable contribution, regardless of the employees’ level of participation in the plan. For the periods ended December 31, 2013 and 2012, our contributions to the plan on behalf of the participating employees were $155,000, and $0, respectively.

16) Members’ Equity and Temporary Equity

There were 6,410 shares (5,493 equity shares and 917 redeemable shares classified as temporary equity) and 3,019 warrants outstanding as of December 31, 2013 and 3,259 equity shares and 398 warrants outstanding as of December 31, 2012. Our shares and redeemable shares (“Shares”) are owned by our Members, who are automatically bound by the terms of the Agreement Among the Members of Heritage Insurance Holdings, LLC (the “Agreement”). The Agreement governs and restricts the transferability of the Shares. The Agreement provides us the right of first refusal for any Shares to be disposed by any Members, or the estate of a deceased Member. In the event that a ready market does not exist for our shares, the Agreement provides for a valuation methodology to arrive at an approximate market value.

We first began to raise capital in 2012 and offered ownership at $10,000 per share. We issued 2,329 shares and raised $23.3 million in capital. In the fourth quarter of 2012, we issued notes payable to certain members, including executive management, to raise the additional $4 million necessary to fund the capital required by the insurance subsidiary. We determined that debt would not allow us to achieve our desired financial stability rating and exchanged the notes for equity in the form of investment units, with each investment unit comprised of one share and one warrant to purchase a share. The notes were obtained for a fee of 20% of the principal due upon repayment. The notes, plus accrued interest, $780,000, and equity compensation awarded to our executives, $200,000, were exchanged for 398 investment units. In conjunction with this transaction, certain participants who received fractional investment units in exchange for the notes paid in $95,000 in order to receive whole investment units in exchange for our note obligation. The warrants are exercisable at any time at a strike price of $15,000 until their expiry at March 31, 2018. The investment units were issued at a fair value of $12,500 based on equity sales to unrelated parties on dates in close proximity to the exchange date.

On December 4, 2012, we issued 532 shares of equity to our core group of investors pursuant to the terms of the private placement memorandum governing our initial capital raise and recognized $5.3 million of compensation expense. Shares were distributed based on the successful execution of our initial Citizens depopulation transaction. We recognized compensation expense at $10,000 per share.

On January 1, 2013, we reclassified 415 equity shares to redeemable shares classified as temporary equity upon entering into employment agreements with certain members of management.

In the first and second quarters of 2013 we raised an additional $32.7 million of capital. Many of our initial investors, including members of our executive management, participated in the 2013 private placement offering. Upon its conclusion, we raised $32.7 million through the issuance of 2,618 investment units at $12,500 per investment unit. The warrants issued in the 2013 placement are exercisable at any time at a strike price of $15,000 until their expiry at March 31, 2018. The 2,618 investment units consisted of 2,511 equity shares, 107 redeemable shares classified as temporary equity and 2,618 warrants to purchase one share per warrant.

On January 1, 2013, certain members of management were given the opportunity to purchase a total of 115 shares (15 equity shares and 100 redeemable shares classified as temporary equity) of unrestricted stock, at

F-58

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

$5,000 per share, as well as a cash award of $318,000 payable early in 2014. Each member of management purchased the shares. We assigned a fair value to these stock grants of $10,000 per share based upon recent share sales to unrelated parties. Therefore we recognized $893,000 of compensation expense as a result of this grant.

In the fourth quarter of 2013, we raised an additional $285,000 of capital through the issuance of 6 investment units for $75,000 and 16 shares for $210,000.

In October 2013, we awarded our directors, executive officers and certain employees bonuses totaling $11.5 million for 2013, comprised of $6.4 million in cash and $5.1 million in ownership equity, inclusive of $5.3 million recognized through September 30, 2013. The equity component was issued in the form of 389 ownership shares (97 equity shares and 292 redeemable shares classified as temporary equity) at a value of $13,125 per share. The per share value was determined based on an independent valuation and we evaluated the assumptions, methodologies and conclusions associated with such valuation.

Employment Agreement Redemption Provisions

On January 1, 2013 (the modification date), the Company executed employment agreements with three of its key executives each containing a provision requiring the Company to repurchase the executive’s stock if the executive is terminated for any reason. Because the redemption of the shares is subject to redemption at the option of the holder in an event that is outside of our control, these shares are required to be classified outside of permanent equity on the consolidated balance sheets and recorded at fair value as of the modification date with adjustments to fair value through the settlement date. Accordingly, this temporary equity is recorded as “redeemable shares” on our consolidated balance sheets at December 31, 2013.

The following summarizes the activity of the redeemable shares:

	(in thousands)
	Shares		Amount
Redeemable shares, Balance at December 31, 2012		—	$	—
Equity reclassification to temporary equity—January 2013		415		4,150
Issuance of temporary equity—January through March 2013		207		2,070
Issuance of temporary equity—October 2013		292		3,833
Warrants exercised—December 2013		3		45
Change in fair value of redeemable shares		—		10,823
Redeemable shares, Balance at December 31, 2013		917	$	20,921

Also see Note 18.

F-59

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

Warrants

At December 31, 2013 and December 31, 2012, the Company had 3,019 and 398 outstanding warrants, respectively, all of which are classified as equity (equity warrants). At issuance, equity warrants are recorded at their relative fair values, using the relative fair value method, in the members’ equity section of the consolidated balance sheets. Our equity warrants can only be settled through the issuance of shares and are not subject to anti-dilution provisions. Below is a summary of our outstanding warrants:

	Number of Warrants Outstanding			Number of Common Shares Issuable / (Issued) Upon Conversion
Warrants outstanding at August 7, 2012 (inception)		—			—
Warrants issued		398			398
Warrants exercised		—			—
Warrants outstanding at December 31, 2012		398			398
Warrants issued		2,624			2,624
Warrants exercised		(3	)		(3	)
Warrants outstanding at December 31, 2013		3,019			3,019

The warrants issued in 2013 and 2012 can be exercised at an exercise price equal to $15,000 per share on or before March 31, 2018. Three warrants have been exercised as of December 31, 2013. The aggregate intrinsic value of warrants was $23.6 million and $0 at December 31, 2013 and 2012, respectively.

17) Condensed Financial Information of Registrant

Heritage Insurance Holdings, LLC (the parent company only) has no long term debt obligations, guarantees or material contingencies as of December 31, 2013 and 2012. The following summarizes the major categories of the parent company’s financial statements:

Condensed Balance Sheets	As of December 31,
ASSETS	2013			2012
Cash and cash equivalents	$	10,744		$	2,084
Investment in and advances to subsidiaries		90,999			26,831
Other assets		132			244
Total Assets	$	101,875		$	29,159
LIABILITIES AND MEMBERS’ EQUITY
Other liabilities	$	970		$	40
Notes payable		—			1,000
Total Liabilities		970			1,040
Redeemable shares, 917 shares (Note 16)		20,921			—
Members’ Equity (Note 11):
Contributed members' capital		62,850			33,585
Accumulated other comprehensive income (loss)		(790	)
Retained earnings (deficit)		17,924			(5,466	)
Total Members’ Equity		79,984			28,119
Total Liabilities and Members’ Equity	$	101,875		$	29,159

F-60

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

Condensed Statements of Operations	For the Periods Ended December 31,
	2013			2012
REVENUE:
Other income	$	1,075		$	126
Total revenue		1,075			126
EXPENSES:
General and administrative expenses		4,119			5,971
Interest expense		16			828
Total expenses		4,135			6,799
Loss before income taxes and equity in net income of subsidiaries		(3,060	)		(6,673	)
Provision for income taxes (Note 2(m))		—			—
Loss before equity in net income of subsidiaries		(3,060	)		(6,673	)
Equity in net income of subsidiaries		37,273			1,207
Net income (loss)	$	34,213		$	(5,466	)
Weighted average shares outstanding
Basic		5,613			2,463
Diluted		5,676			2,463
Earnings (loss) per share
Basic	$	6,095		$	(2,219	)
Diluted	$	6,028		$	(2,219	)

Condensed Statements of Cash Flows	For the Periods Ended December 31,
	2013			2012
Net cash provided by (used in) operating activities	$	2,925		$	(577	)
Investing Activities
Investments and advances to subsidiaries		(26,895	)		(25,624	)
Net cash used in investing activities		(26,895	)		(25,624	)
Financing Activities
Proceeds (repayments) note payable—bank		(1,000	)		1,000
Proceeds from notes payable—members		—			3,900
Proceeds from issuance of equity and redeemable shares		33,630			23,385
Net cash provided by financing activities		32,630			28,285
Increase in cash and cash equivalents		8,660			2,084
Cash and cash equivalents at beginning of period		2,084			—
Cash and cash equivalents at end of year	$	10,744		$	2,084

18) Subsequent Events

We evaluated all subsequent events and transactions through April 2, 2014 (the date the financial statements were issued) for potential recognition or disclosure in our financial statements.

Subsequent to December 31, 2013, we entered into assumption reinsurance transactions with Citizens resulting in a collective assumption of approximately 13,000 policies and $27.3 million of annual premium. We

F-61

HERITAGE INSURANCE HOLDINGS, LLC

Notes to Consolidated Financial Statements

December 31, 2013 and 2012

will recognize the unearned premiums assumed into revenue beginning on the respective assumption effective dates over the remaining lives of the underlying policies assumed. We will incur losses as they occur on or after the effective dates of assumption.

On February 5, 2014, we adjusted all redeemable shares to fair value and reclassified those shares (Note 16) into contributed members’ capital on our consolidated balance sheets. The reclassifications resulted from the cancelation of the redeemable stock repurchase provision in the employment agreements of three company executives.

On February 19, 2014, we offered our existing investment unit holders an amendment to their existing warrant agreements to provide for either a cashless exercise of warrants or a cash based exercise of warrants based on a commitment by the investor communicated to us by March 31, 2014. If the investor commits to a cash based exercise, the investor must pay the exercise price by April 30, 2014 to be held in escrow until the exercise date, which will be immediately before an initial public offering of our shares. If the investor commits to a cashless exercise, the exercise will also occur immediately prior to the initial public offering. In the event we do not proceed with the initial public offering prior to December 31, 2014, the agreement will terminate and all escrowed funds will be returned to the investor. Approximately 95% of our existing investment unit holders have agreed to either exercise their warrants for an additional cash investment or accept the cashless exercise option offered.

On March 1, 2014, we acquired the assets of SVM Restoration Services, Inc., a Florida corporation providing water loss mitigation services in Florida, for $2.5 million. The acquired assets will be deployed by Contractors’ Alliance Network in the delivery of a broadened spectrum of services.

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             Shares

Heritage Insurance Holdings, Inc.

Common Stock

PRELIMINARY PROSPECTUS

                    , 2014

Citigroup

SunTrust Robinson Humphrey

Sandler O’Neill + Partners, L.P.

Dowling & Partners Securities LLC

JMP Securities

Willis Capital Markets & Advisory

Until                     , 2014 (25 days after the date of this prospectus), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth all expenses to be paid by the Registrant, other than estimated underwriting discounts and commissions, in connection with our initial public offering. All amounts shown are estimates except for the SEC registration fee and the FINRA filing fee:

SEC registration fee	$	*
FINRA filing fee	$	*
NYSE listing fee		*
Printing and engraving		*
Legal fees and expenses		*
Accounting fees and expenses		*
Blue sky fees and expenses (including legal fees)		*
Transfer agent and registrar fees		*
Miscellaneous		*
Total	$	*

* To be filed by amendment

Item 14. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law authorizes a corporation’s board of directors to grant, and authorizes a court to award, indemnity to officers, directors and other corporate agents.

As permitted by Section 102(b)(7) of the Delaware General Corporation Law, or DGCL, the registrant’s certificate of incorporation to be in effect upon the closing of this offering includes provisions that eliminate the personal liability of its directors and officers for monetary damages for breach of their fiduciary duty as directors and officers, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions or (iv) for any transaction from which the director derived an improper personal benefit. The registrant’s amended and restated certificate of incorporation provides for such limitation of liability.

In addition, as permitted by Section 145 of the DGCL, the bylaws of the registrant to be effective upon completion of this offering provide that:

• The registrant shall indemnify its directors and officers for serving the registrant in those capacities or for serving other business enterprises at the registrant’s request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful.

• The registrant may, in its discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.

• The registrant is required to advance expenses, as incurred, to its directors and officers in connection with defending a proceeding, except that such director or officer shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

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• The registrant will not be obligated pursuant to the bylaws to indemnify a person with respect to proceedings initiated by that person, except with respect to proceedings authorized by the registrant’s board of directors or brought to enforce a right to indemnification.

• The rights conferred in the bylaws are not exclusive, and the registrant is authorized to enter into indemnification agreements with its directors, officers, employees and agents and to obtain insurance to indemnify such persons.

• The registrant may not retroactively amend the bylaw provisions to reduce its indemnification obligations to directors, officers, employees and agents.

The registrant’s policy is to enter into separate indemnification agreements with each of its directors and officers that provide the maximum indemnity allowed to directors and executive officers by Section 145 of the DGCL and certain additional procedural protections. The registrant will also maintain directors and officers insurance to insure such persons against certain liabilities.

These indemnification provisions and the indemnification agreements entered into between the registrant and its officers and directors may be sufficiently broad to permit indemnification of the registrant’s officers and directors for liabilities (including reimbursement of expenses incurred) arising under the Securities Act.

The underwriting agreement to be filed as Exhibit 1.1 to this registration statement provides for indemnification by the underwriters of the registrant and its officers and directors for certain liabilities arising under the Securities Act and otherwise.

Item 15. Recent Sales of Unregistered Securities

Since January 1, 2011, we have issued and sold the following securities:

1. Between January 2012 and March 2012, we issued 2,329 shares to certain individuals and members of our management. The shares were sold at a price per share of $10,000 for aggregate consideration of $23.3 million.

2. Between September 2012 and December 2012, we issued $3.9 million aggregate principal amount of notes to certain investors, including members of our senior management. The notes provided for a 20% fee due upon repayment. We exchanged the notes for 398 investment units, each comprised of one share and one warrant to purchase one share, with a value of $12,500 per investment unit. The warrants expire on March 31, 2018 and have an exercise price of $15,000 per share.

3. Between January 2013 and March 2013, we issued 2,618 investment units, each comprised of one share and one warrant to purchase one share. The investment units were sold at a price of $12,500 per investment unit for aggregate consideration of $32.7 million. The warrants expire on March 31, 2018 and have an exercise price of $15,000 per share.

4. Between January 2013 and March 2013, we issued 115 shares at a fair value of $10,000 per share to certain members of our senior management. $5,000 per share was paid in cash, and we recognized compensation expense in respect of the remainder.

5. In December 2013 and March 2014, we issued six and seven investment units, respectively, to investors at a price of $12,500 per investment unit. The investors had committed to purchase these investment units in the first quarter of 2013, but due to an administrative oversight, the investment units were not issued until December 2013 and March 2014. The price of $12,500 per investment unit is consistent with the issuances during the first quarter of 2013, the time of the investor’s purchase commitment.

Other than the transactions listed immediately above, we have not issued and sold any unregistered securities in the three years preceding the filing of this registration statement. No underwriters were in involved in the foregoing issuances of securities.

Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act (or Regulation D or Regulation S promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an

II-2

issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.

Other than the transactions listed immediately above, we have not issued and sold any unregistered securities in the three years preceding the filing of this registration statement. No underwriters were in involved in the foregoing issuances of securities.

Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act (or Regulation D or Regulation S promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.

Item 16. Exhibits and Financial Statement Schedules

(3) Exhibits.    The following exhibits are included herein or incorporated herein by reference:

Exhibit Number	Description
1.1*	Form of Underwriting Agreement
3.1*	Form of Certificate of Conversion of Heritage Insurance Holdings, LLC
3.2*	Form of Certificate of Incorporation of Heritage Insurance Holdings, Inc. to become effective prior to the consummation of this offering
3.3*	Form of Bylaws of Heritage Insurance Holdings, Inc. to become effective prior to the consummation of this offering
4.1*	Form of Stock Certificate
4.2*	Form of Warrant
5.1*	Form of opinion of Winston & Strawn LLP
10.1	Purchase and Sale Agreement, dated February 28, 2013 by and between Heritage Insurance Holdings, LLC and McCormick Drive Holdings, LLC.
10.2**†	Property Catastrophe Excess of Loss Reinsurance Contract, effective June 1, 2013, issued to Heritage Property & Casualty Insurance Company to the Interests and Liabilities Agreements executed by the Subscribing Reinsurers.
10.3**†	Catastrophe Excess of Loss and Aggregate Reinsurance Contract, effective June 1, 2013, issued to Heritage Property & Casualty Insurance Company to the Interests and Liabilities Agreements executed by the Subscribing Reinsurers.
10.4**†	Second Aggregate Catastrophic Excess of Loss Reinsurance Contract, effective June 1, 2013, issued to Heritage Property & Casualty Insurance Company to the Interests and Liabilities Agreements executed by the Subscribing Reinsurers.
10.5**†	Second Catastrophe Excess of Loss and Aggregate Reinsurance Contract, effective June 1, 2013, issued to Heritage Property & Casualty Insurance Company to the Interests and Liabilities Agreements executed by the Subscribing Reinsurers.
10.6**†	Underlying Property Catastrophe Excess of Loss Reinsurance Contract, effective June 1, 2013, issued to Heritage Property & Casualty Insurance Company by Osprey Re Ltd.

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Exhibit Number	Description
10.7**†	Property Catastrophe Excess of Loss Reinsurance Contract, effective December 4, 2012, issued to Heritage Property & Casualty Insurance Company to the Interests and Liabilities Agreements executed by the Subscribing Reinsurers.
10.8	Reinsurance Trust Agreement, dated May 22, 2013, by and among Osprey Re Ltd., Heritage Property & Casualty Insurance Company and Bank of America, N.A.
10.9	PR-M Non-Bonus Assumption Agreement, dated October 18, 2012, between Heritage Property & Casualty Insurance Company and Citizens Property Insurance Corporation.
10.10	Assumption Agreement, dated May 22, 2013, between Heritage Property & Casualty Insurance Company and Citizens Property Insurance Corporation.
10.11	Property Reinsurance Contract, dated May 22, 2013, between Citizens Property Insurance Corporation and Heritage Property & Casualty Insurance Company.
10.12	Consent Order, dated July 31, 2012, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.13	Consent Order, dated October 17, 2012, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.14	Consent Order, dated November 19, 2012, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.15	Consent Order, dated February 7, 2013, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.16	Consent Order, dated May 17, 2013, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.17	Consent Order, dated August 23, 2013, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.18	Consent Order, dated September 27, 2013, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.19	Consent Order, dated October 25, 2013, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.20	Consent Order, dated November 22, 2013, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.21	Consent Order, dated January 7, 2014, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.22	Voluntary Agency Agreement, dated December 16, 2013, between Heritage MGA, LLC and FAIA Member Services Inc.
10.23	Administrative Services Agreement, dated January 1, 2014, between Florida Association of Insurance Agents, Inc. and Heritage Property & Casualty Insurance Company.
10.24	Marketing Services Agreement, dated January 1, 2014 between Heritage Property Casualty Insurance Company and FAIA Member Services, Inc.
10.25	Employment Agreement with Richard Widdicombe, dated as of January 1, 2014.
10.26	Employment Agreement with Bruce Lucas, dated as of January 1, 2014.

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Exhibit Number	Description
10.27	Employment Agreement with Kent Linder, dated as of January 1, 2014.
10.28**	Heritage Insurance Holdings, Inc. Omnibus Incentive Plan.
10.29	Form of Indemnification Agreement.
10.30	Property Catastrophe Excess of Loss Reinsurance Contract, effective April 17, 2014, by and among Heritage Property & Casualty Insurance Company and Citrus Re Ltd.
10.31	Property Catastrophe Excess of Loss Reinsurance Contract, effective April 24, 2014, by and among Heritage Property & Casualty Insurance Company and Citrus Re Ltd.
21.1**	List of subsidiaries of Heritage Insurance Holdings, LLC.
23.1	Consent of Grant Thornton LLP.
23.2*	Consent of Winston & Strawn LLP (included in Exhibit 5.1).
24.1	Powers of Attorney (see signature pages).

* Indicates to be filed by amendment.

** Previously filed.

† Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment, and this exhibit has been filed separately with the SEC.

(b) Financial Statement Schedules.    All financial statement schedules are omitted because they are not applicable or the information is included in the Registrant’s consolidated financial statements or related notes.

Item 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and

(2) for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized, in Clearwater, Florida, on this 30^th day of April, 2014.

HERITAGE INSURANCE HOLDINGS, LLC
By:	/s/ Richard Widdicombe

Name:	Richard Widdicombe
Title:	President, Chief Executive Officer and Director

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Richard Widdicombe and Bruce Lucas and each of them, as his true and lawful attorney in fact and agent with full power of substitution, for him in any and all capacities, to sign any and all amendments to this registration statement (including post effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney in fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney in fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/    Richard Widdicombe         Richard Widdicombe	President, Chief Executive Officer and Director (Principal Executive Officer)	April 30, 2014
* Bruce Lucas	Chairman and Chief Investment Officer and Director (Principal Executive Officer)	April 30, 2014
* Stephen Rohde	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	April 30, 2014
* Pete Apostolou	Director	April 30, 2014
* Trifon Houvardas	Director	April 30, 2014
* James Masiello	Director	April 30, 2014

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Signature	Title	Date
* Nicholas Pappas	Director	April 30, 2014
* Joseph Vattamattam	Director	April 30, 2014
/s/    Monica Vernon         Monica Vernon	Director	April 30, 2014
* Vijay Walvekar	Director	April 30, 2014

*By:	/s/    Richard Widdicombe
	Richard Widdicombe, as attorney-in-fact

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EXHIBIT INDEX

Exhibit Number	Description
1.1*	Form of Underwriting Agreement
3.1*	Certificate of Conversion of Heritage Insurance Holdings, LLC
3.2*	Form of Certificate of Incorporation of Heritage Insurance Holdings, Inc. to become effective prior to the consummation of this offering
3.3*	Form of Bylaws of Heritage Insurance Holdings, Inc. to be come effective prior to the consummation of this offering
4.1*	Form of Stock Certificate
4.2*	Form of Warrant
5.1*	Form of opinion of Winston & Strawn LLP
10.1	Purchase and Sale Agreement, dated February 28, 2013 by and between Heritage Insurance Holdings, LLC and McCormick Drive Holdings, LLC.
10.2**†	Property Catastrophe Excess of Loss Reinsurance Contract, effective June 1, 2013, issued to Heritage Property & Casualty Insurance Company to the Interests and Liabilities Agreements executed by the Subscribing Reinsurers.
10.3**†	Catastrophe Excess of Loss and Aggregate Reinsurance Contract, effective June 1, 2013, issued to Heritage Property & Casualty Insurance Company to the Interests and Liabilities Agreements executed by the Subscribing Reinsurers.
10.4**†	Second Aggregate Catastrophic Excess of Loss Reinsurance Contract, effective June 1, 2013, issued to Heritage Property & Casualty Insurance Company to the Interests and Liabilities Agreements executed by the Subscribing Reinsurers.
10.5**†	Second Catastrophe Excess of Loss and Aggregate Reinsurance Contract, effective June 1, 2013, issued to Heritage Property & Casualty Insurance Company to the Interests and Liabilities Agreements executed by the Subscribing Reinsurers.
10.6**†	Underlying Property Catastrophe Excess of Loss Reinsurance Contract, effective June 1, 2013, issued to Heritage Property & Casualty Insurance Company by Osprey Re Ltd.
10.7**†	Property Catastrophe Excess of Loss Reinsurance Contract, effective December 4, 2012, issued to Heritage Property & Casualty Insurance Company to the Interests and Liabilities Agreements executed by the Subscribing Reinsurers.
10.8	Reinsurance Trust Agreement, dated May 22, 2013, by and among Osprey Re Ltd., Heritage Property & Casualty Insurance Company and Bank of America, N.A.
10.9	PR-M Non-Bonus Assumption Agreement, dated October 18, 2012, between Heritage Property & Casualty Insurance Company and Citizens Property Insurance Corporation.
10.10	Assumption Agreement, dated May 22, 2013, between Heritage Property & Casualty Insurance Company and Citizens Property Insurance Corporation.
10.11	Property Reinsurance Contract, dated May 22, 2013, between Citizens Property Insurance Corporation and Heritage Property & Casualty Insurance Company.
10.12	Consent Order, dated July 31, 2012, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.13	Consent Order, dated October 17, 2012, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.14	Consent Order, dated November 19, 2012, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.

Exhibit Number	Description
10.15	Consent Order, dated February 7, 2013, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.16	Consent Order, dated May 17, 2013, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.17	Consent Order, dated August 23, 2013, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.18	Consent Order, dated September 27, 2013, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.19	Consent Order, dated October 25, 2013, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.20	Consent Order, dated November 22, 2013, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.21	Consent Order, dated January 7, 2014, between the Florida Office of Insurance Regulation and Heritage Property & Casualty Insurance Company.
10.22	Voluntary Agency Agreement, dated December 16, 2013, between Heritage MGA, LLC and FAIA Member Services Inc.
10.23	Administrative Services Agreement, dated January 1, 2014, between Florida Association of Insurance Agents, Inc. and Heritage Property & Casualty Insurance Company.
10.24	Marketing Services Agreement, dated January 1, 2014 between Heritage Property Casualty Insurance Company and FAIA Member Services, Inc.
10.25	Employment Agreement with Richard Widdicombe, dated as of January 1, 2014.
10.26	Employment Agreement with Bruce Lucas, dated as of January 1, 2014.
10.27	Employment Agreement with Kent Linder, dated as of January 1, 2014.
10.28**	Heritage Insurance Holdings, Inc. Omnibus Incentive Plan.
10.29	Form of Indemnification Agreement.
10.30	Property Catastrophe Excess of Loss Reinsurance Contract, effective April 17, 2014, by and among Heritage Property & Casualty Insurance Company and Citrus Re Ltd.
10.31	Property Catastrophe Excess of Loss Reinsurance Contract, effective April 24, 2014, by and among Heritage Property & Casualty Insurance Company and Citrus Re Ltd.
21.1**	List of subsidiaries of Heritage Insurance Holdings, LLC.
23.1	Consent of Grant Thornton LLP.
23.2*	Consent of Winston & Strawn LLP (included in Exhibit 5.1).
24.1	Powers of Attorney (see signature pages).

* Indicates to be filed by amendment.

** Previously filed.

† Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment, and this exhibit has been filed separately with the SEC.

EX-10.1

Exhibit 10.1

Auction Item No. FW-248

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) dated as of the date last signed (the “Effective Date”), is made by and between Heritage Insurance Holdings, LLC, a Florida limited liability company, having an address of 700 Central Ave., Suite 500, St. Petersburg, FL 33701 (hereinafter “Purchaser” or “Buyer”) and 2600 & 2650 McCormick Drive Holdings, LLC, a Maryland limited liability company, having an address c/o CWCapital Asset Management LLC, 7501 Wisconsin Avenue, Suite 500 West, Bethesda, Maryland 20814 (“Seller”).

RECITALS:

R-1. Seller desires to sell certain improved real property known and commonly referred to as the “Prestige Place I & II” located at 2600 and 2650 McCormick Drive, Clearwater, Pinellas County, Florida, along with certain related property described below, and Purchaser desires to purchase such real and other property from Seller.

R-2. Seller and Purchaser, intending to be bound by this Agreement, desire to set forth herein the terms, conditions and agreements under and by which Seller shall sell and Purchaser shall purchase the property described below.

AGREEMENTS:

NOW, THEREFORE, in consideration of the mutual agreements and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows:

1. THE PROPERTY.

1.1 Description. Subject to the terms and conditions of this Agreement, and for the consideration set forth herein, Seller hereby agrees to sell, assign and convey, and Purchaser hereby agrees to purchase and acquire, all of Seller’s respective right, title and interest in and to the following (the “Property”):

1.1.1 That certain parcel of land located in Pinellas County, Florida, having a street address of 2600 and 2650 McCormick Drive, Clearwater, Florida 33764, and being more specifically described on Schedule 1.1.1, attached hereto (the “Land”), along with all buildings (the “Buildings”) together with all other improvements, parking facilities and fixtures located on the Land (the Buildings and any and all other improvements located on the Land are hereinafter referred to collectively as the “Improvements”) and all easements, hereditaments, appurtenances, development rights, and other benefits, if any, pertaining to or affecting the Land (collectively, the “Easements”). The Land, Buildings, Improvements and Easements are hereinafter collectively referred to as the “Real Property”;

1

1.1.2 All furniture, furnishings, fixtures, equipment and other tangible personal property affixed to and/or located at the Real Property and used in connection with the Real Property, or replacements of those items permitted pursuant to this Agreement (the “Personal Property”);

1.1.3 Any and all written leases, tenancies, licenses and other rights of occupancy or use of or for any portion of the Real Property or the Personal Property (including all amendments, renewals and extensions thereof) (collectively, “Leases”) and contracts in effect on the Date of Closing, any and all permits and any and all warranties, telephone exchange numbers, architectural or engineering plans and specifications and development rights that exist as of the Date of Closing and relate to the Real Property or the Personal Property (collectively, the “Intangible Property”).

1.2 Agreement to Convey. Subject to the conditions set forth in Section 6, Seller agrees to sell and convey, and Purchaser agrees to purchase and accept, on the Date of Closing (defined in Section 2.4, below): (a) fee simple title to the Real Property by way of a Special Warranty Deed (defined in Section 8.1.1, below), to be executed and delivered by Seller in respect to the Property, and which shall be subject to the Permitted Exceptions (defined in Section 3.6, below) affecting or encumbering the Real Property; and (b) the remainder of the Property, by way of the assignment and assumption agreements, a quitclaim bill of sale and other instruments of conveyance described in this Agreement.

2. PURCHASE PRICE AND PAYMENT.

2.1 Purchase Price. The purchase price for the Property (the “Purchase Price”) is the Winning Bid Amount (defined below):

2.1.1 Winning Bid Amount. The winning bid amount for the Property (the “Winning Bid Amount” or “WBA”) is nine million, two hundred thousand and No/100 U.S. Dollars ($9,200,000.00).

2.1.2 Buyer’s Premium. The buyer’s premium for the Property (the “Buyer’s Premium”) is the greater of Five Percent (5%) of the WBA or $20,000.00. The Buyer’s Premium is four hundred and sixty thousand and No/100 U.S. Dollars ($460,000.00).

2.2 Earnest Money Deposit.

2.2.1 Deposit. As the initial deposit (the “Earnest Money Deposit”), Purchaser shall be required to pay ten percent (10%) of the Purchase Price, but not less than Twenty Thousand and No/100 Dollars ($20,000.00) to Title Company. The total amount of the Earnest Money Deposit due must be deposited with First American Title Insurance Company National Commercial Services, 1825 Eye Street NW, Suite 302, Washington, D.C. 20006, Attention: Brian A. Lobuts, Vice President (“Title Company”), no later than one (1) business day following Purchaser being declared the winning bidder (even if the sale is subject to confirmation). Regardless of the amount financed, if any, the Earnest Money Deposit will not be altered. The Earnest Money Deposit will be non-refundable (except upon a default by Seller or as specifically provided herein). If Purchaser shall fail to timely make the Earnest Money Deposit by 5:00 p.m. Eastern Time, as set forth herein, this Agreement shall automatically terminate and neither party shall thereafter have any further rights, obligations or liability hereunder, except as otherwise expressly set forth herein. Purchaser acknowledges that once posted, the Earnest Money Deposit shall be non-refundable to Purchaser, except as otherwise described herein.

2.2.2 Maintenance of Deposit. The Earnest Money Deposit shall be held by Title Company in an interest-bearing account subject to receipt of a form W-9 from Purchaser. All interest earned on the Deposit shall be added to the principal held in the escrow and shall constitute a part of the Deposit (hereinafter defined). The term “Deposit” as used herein shall mean the Earnest Money Deposit and any additional deposits as are described herein and all interest earned thereon. Interest earned on the Deposit shall be deemed earned by Purchaser.

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2.2.3 Purchaser agrees that the retention of the Deposit by Seller represents a reasonable estimation as of the Effective Date of Seller’s damages in the event of Purchaser’s Default hereunder, that actual damages would be impracticable or extremely difficult to ascertain, and that the provision for liquidated damages hereunder does not constitute a penalty. The parties acknowledge that these damages have been specifically negotiated between themselves and are, among other things, to compensate Seller for taking the Property off the market, for Seller’s costs and expenses associated with this Agreement and for Seller’s lost opportunity costs. Purchaser hereby waives the rights and benefits of any law, rule, regulation, or order now or hereafter existing that would allow Purchaser to claim a refund of the Deposit as unearned earnest money, a penalty, or for any other reason.

2.3 Payment. Purchaser shall pay to Seller the Purchase Price and shall pay to Auction.com (the “Auctioneer”) the Buyer’s Premium, on or before 3:00 p.m. Eastern Time, on the Date of Closing (as defined below), by causing Title Company to wire the Purchase Price to Seller and Buyer’s Premium to Auctioneer in immediately available funds to such bank account(s) as Seller and Auctioneer may designate. The Deposit shall be paid by Title Company to Seller at Closing and credited against the Purchase Price. The Purchase Price shall also be subject to further adjustments for prorations and credits required to be made in accordance with Section 7, below.

2.4 Closing. The purchase and sale of the Property shall be consummated at closing (the “Closing”) in escrow through Title Company on the date which is on or before Twenty-One (21) days after the Approval Date defined in Section 6.3.1 (the “Date of Closing”). Closing shall occur on the Date of Closing at Title Company, or at such other time and place as may be agreed to in writing by Seller and Purchaser.

3. INSPECTIONS, APPROVALS AND AUCTION TERMS.

3.1 Inspections. Purchaser acknowledges, understands and agrees that it has had reasonable opportunity to conduct inspections of the Property and further agrees that it waives any and all rights to any additional inspections of the Property.

3.2 Access to the Property and Indemnification by Purchaser. Prior to the Effective Date, Seller shall permit Purchaser and Purchaser’s agents and representatives access to the Land and Improvements for the purpose of conducting such physical and environmental inspections of the Land and Improvements (collectively, the “Inspections”) as Purchaser shall deem necessary prior to the commencement of bidding at the Auction. Before Purchaser enters the Land and Improvements to perform Inspections, Purchaser shall give Seller reasonable advance written notice and, at Seller’s option, a representative of Seller may accompany Purchaser and/or Purchaser’s representative. Purchaser agrees to be solely responsible for the conduct of Purchaser’s representatives on and adjacent to the Land and Improvements and shall assume and pay for all expenses incurred in connection with the Inspections. At all times during the presence of Purchaser or Purchaser’s representatives on the Land and Improvements, Purchaser agrees that Purchaser will not allow, and Purchaser’s representatives will not conduct, any physically invasive testing of, on, or under the Land or Improvements without first obtaining Seller’s written consent. Purchaser agrees to return the Land and Improvements to substantially the same condition and cleanliness existing before entry and/or occupation by Purchaser’s representatives, including, but not limited to, sealing wells or other similar subsurface investigations. Purchaser shall use reasonable efforts to minimize interference with Seller’s and any tenants’ use and occupancy of the Building. Purchaser shall keep confidential the information resulting from the Inspections. Purchaser may disclose confidential information to Purchaser’s representatives to the extent each needs to know confidential information for the sole purpose of evaluating the Land and Improvements, provided

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Purchaser takes all reasonable measures to assure that Purchaser’s representatives keep such information confidential. Purchaser shall indemnify and hold Seller harmless from any loss, injury, liability, damage or expense, including reasonable attorneys’ fees and costs, directly caused by Purchaser, which Seller may incur as a result of (a) any act or omission of Purchaser or its agents or representatives arising in connection with any tests or inspections conducted by Purchaser or its agents or representatives, or (b) the failure of Purchaser to restore the Property in accordance with this Section 3.2; provided, however, that Purchaser shall not be required to indemnify Seller if and to the extent that any such loss, injury, liability, damage or expense was caused by the negligence or misconduct of Seller, its employees or its agents. The foregoing shall survive termination of this Agreement or the Closing, as applicable. Furthermore, Purchaser shall, at its sole expense, keep and maintain a policy of comprehensive public liability insurance with a contractual liability endorsement that covers Purchaser’s indemnity obligation set forth above. This insurance policy shall name Seller, Seller’s Sole Member/Manager and CWCapital Asset Management LLC (“CWCapital”) as an additional insured and afford protection in limits of not less than One Million Dollars ($1,000,000) for bodily injury or death in any one accident, and not less than One Million Dollars ($1,000,000) for property damage. All insurance shall be effected under standard form policies, issued by insurers of recognized responsibility authorized to do business in the state in which the Property is located and having a national rating of A-XI or better. Within two (2) days after the Effective Date, Purchaser shall deliver to Seller certificates of such insurance coverage and, not less than thirty (30) days before the expiration of the policy, a certificate of the renewal of such coverage accompanied by evidence reasonably satisfactory to Seller of payment of premiums therefore. In addition, the insurance shall be primary, non-contributing, and contain a waiver of subrogation in favor of Seller, Seller’s sole member and CWCapital.

3.3 Inspection of Documents. Purchaser acknowledges receipt of the materials relating to the Land and Improvements (“Property Documents”).

3.3.1 Purchaser acknowledges, understands and agrees that the Property Documents may have been prepared by parties other than Seller and that Seller makes no representation or warranty whatsoever, express or implied, as to the completeness, content or accuracy of the Property Documents. Purchaser specifically releases Seller from all claims, demands, causes of action, judgments, losses, damages, liabilities, costs and expenses (including without limitation attorney’s fees whether suit is instituted or not), whether known or unknown, liquidated or contingent (collectively “Claims”) asserted against or incurred by Purchaser by reason of the information contained in, or that should have been contained in, the Property Documents. The provisions of this Section 3.3.1 shall survive Closing, or the early termination of this Agreement.

3.4 Survey. As part of the Property Documents, Purchaser acknowledges that Seller has delivered or made available for inspection, the most recent survey, if any, in its possession to Purchaser (the “Existing Survey”). Purchaser shall, within five (5) days after the Effective Date, at its sole cost and expense, order an update to the Existing Survey (or if there is no Existing Survey, a new survey) (the Existing Survey, as updated, or a new survey, the “Survey”).

3.5 Title Commitment. Within five (5) days after the Effective Date, Purchaser, at its sole cost and expense, shall order from Title Company, a Commitment for Title Insurance (the “Title Commitment”), setting forth the status of title to the Land and all exceptions which would appear in an Owner’s Policy of Title Insurance, specifying Purchaser as the named insured and showing the Purchase Price as the policy amount.

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3.6 Permitted Exceptions. Purchaser shall accept title to the Property, subject to the following exceptions (the “Permitted Exceptions”):

3.6.1 Those matters affecting or relating to the title to, or the survey of, the Property: (a) which are of record on the date of the Title Commitment or as shown on the Survey and (b) which Purchaser has otherwise approved in writing.

3.6.2 The lien of non-delinquent taxes, assessments and other usual and customary charges assessed against the owners of real property in the state in which the Land is located.

3.6.3 All matters disclosed by the Property Documents and Leases and Contracts not prohibited hereunder.

3.6.4 All building and zoning laws, codes and regulations affecting the Property, including all proffers, special exceptions, conditions, site plan approvals, and other similar matters, if any, relating to the zoning of the Property.

3.6.5 Any and all bankruptcy claims preserved or accruing to the Seller on or before the Effective Date against the prior owner or related to the Property.

3.7 Contracts. Purchaser shall assume all Contracts at Closing (such Contracts being herein referred to as the “Assumed Contracts”). As used herein, the term “Contracts” shall mean all service, maintenance, supply, or other contracts relating to the operation of the Property, and all other such assignable contracts or agreements in effect as of the Effective Date.

3.7.1 Consents to Transfer. Seller shall be responsible for securing any consent from third parties who have the right to consent to the transfer of any Contract, Permit, Intangible Property and/or Lease and Purchaser shall be responsible for paying any fee in connection therewith, including but not limited to, any termination fee. The consents shall provide that if the transaction contemplated by this Agreement is not consummated, the consent will not be effective. It is understood that a failure to obtain such consents is not a condition precedent to Purchaser’s obligation to close. Purchaser will assume all liability which arises as a result of failing to obtain any such consent and shall indemnify and hold harmless Seller from any liability, claims, actions, expenses, or damages incurred by Seller as a result of such failure, should Seller elect to waive the issuance of such consents as a precondition to Closing under Section 6; such indemnification shall survive Closing of this transaction.

3.8 Auction Terms & Conditions. The auction Terms and Conditions attached hereto as Exhibit A are hereby incorporated into this Agreement as fully as if copied herein verbatim. To the extent that any term or condition of the Terms and Conditions may be in conflict with this Agreement, it is the intention of Purchaser and Seller that this Agreement shall control.

4. SELLER’S OBLIGATIONS PRIOR TO CLOSING. Until Closing, Seller and/or Seller’s agents or representatives shall:

4.1 Insurance. Keep the Property insured, in an amount sufficient to satisfy any co-insurance requirement or stipulation, against fire and other hazards covered by extended coverage endorsement and comprehensive public liability insurance against claims for bodily injury, death and property damage occurring in, on or about the Property.

4.2 Operation. Maintain the Property in good condition and make repairs and/or replacements in the ordinary course of business in connection with any damage to the Property, and deliver the Property to Purchaser at Closing in the condition existing as of the Effective Date, normal wear and tear and damage by casualty excepted.

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4.3 Notices. Provide to Purchaser, immediately upon the receipt thereof, any and all written notices relating to the Property received by Seller or its agents or representatives from any governmental or quasi-governmental instrumentality, insurance company, vendor or other party under any of the Contracts, or from any other entity or party, which notices are of a type not normally received in the ordinary course of Seller’s business, or which may have a material effect upon the Property or result in a material change in a representation or warranty made by Seller hereunder.

4.4 Compliance with Agreements. Take all actions necessary to comply with all agreements, covenants, encumbrances and obligations affecting or relating to the Property and the ownership, operation and maintenance thereof. Seller shall pay all utility bills, tax bills and other invoices and expenses relating to the Property, as and when the same become due, except as otherwise expressly provided herein.

4.5 New Contracts. Seller may, without the prior consent of Purchaser, enter into any Contracts provided that Seller shall provide Purchaser written notice of such actions.

4.6 Leases. Seller may (a) amend or terminate any Leases; (b) consent to the assignment of any Leases or subleasing of any of the Property; or (c) enter into any new Lease of the Property or any portion thereof, provided that Seller provides Purchaser with written notice of such actions.

4.7 Personal Property Substitutions. Seller may remove any item included in the Personal Property provided that Seller substitutes therefor an item of like kind and comparable fair market value.

5. REPRESENTATIONS AND WARRANTIES.

5.1 By Seller. Seller represents and warrants to Purchaser, as of the Effective Date, that:

5.1.1 Seller has the power, right and authority to enter into and perform all of the obligations required of Seller under this Agreement and the instruments and documents referenced herein, and to consummate the transaction contemplated hereby.

5.1.2 This Agreement is, and all agreements, instruments and documents to be executed and delivered by Seller pursuant to this Agreement shall be duly authorized, executed and delivered by Seller. This Agreement is, and all agreements, instruments and documents to be executed and delivered by Seller pursuant to this Agreement shall be valid and legally binding upon Seller and enforceable in accordance with their respective terms.

5.1.3 Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby does now constitute or shall result in a breach of, or a default under, any agreement, document, instrument or other obligation to which Seller is a party or by which Seller may be bound.

5.1.4 Survival. The representations and warranties set forth in this Section 5 shall not survive Closing of this transaction, and no action or claim may be brought against Seller by Purchaser or any affiliate of Purchaser with respect to a breach of such representations or warranties or any action, suit or other proceedings commenced or pursued, for or in respect of any breach of any representation or warranty made by Seller in this Agreement from and after the Closing.

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5.1.5 Limitation on Remedies. Notwithstanding anything herein to the contrary, if Purchaser discovers prior to Closing that one or more of the representations and warranties under the provisions of this Section 5 are false or untrue as of the Date of Closing, Purchaser’s sole remedy will be to exercise its rights under the provisions of Section 10.4 hereof.

5.2 By Purchaser. Purchaser represents and warrants to Seller as of the Effective Date that:

5.2.1 Purchaser is a corporation, partnership, limited liability company, trust or other type of business organization that is duly organized, validly existing and in good standing under the laws of the state in which it was organized and Purchaser is qualified to do business in the jurisdiction in which the Property is located.

5.2.2 Purchaser has taken all requisite action and obtained all requisite consents, releases and permissions in connection with entering into this Agreement and the instruments and documents referenced herein or required under any covenant, agreement, encumbrance, law or regulation with respect to the obligations required hereunder, and no consent of any other party is required for the performance by Purchaser of its obligations hereunder.

5.2.3 This Agreement is, and all agreements, instruments and documents to be executed and delivered by Purchaser pursuant to this Agreement shall be, duly authorized, executed and delivered by Purchaser. This Agreement is, and all agreements, instruments and documents to be executed and delivered by Purchaser pursuant to this Agreement shall be, valid and legally binding upon Purchaser and enforceable in accordance with their respective terms.

5.2.4 Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby does now constitute or shall result in a breach of, or a default under, any agreement, document, instrument or other obligation to which Purchaser is a party or by which Purchaser may be bound, or any law, statute, ordinance, rule, governmental regulation or any writ, injunction, order or decree of any court or governmental body, applicable to Purchaser or to the Property.

5.2.5 No petition in bankruptcy (voluntary or otherwise), assignment for the benefit of creditors, or petition seeking reorganization or arrangement or other action under Federal or state bankruptcy law is pending against or, to the best of Purchaser’s knowledge, contemplated by Purchaser.

5.2.6 There are no actions, suits, claims or other proceedings (collectively, “Litigation”) pending or, to the best of Purchaser’s knowledge, contemplated or threatened against Purchaser that could affect Purchaser’s ability to perform its obligations when and as required under the terms of this Agreement.

5.3 Broker. Seller and Purchaser each represents to the other that it has had no dealings, negotiations, or consultations with any broker, representative, employee, agent or other intermediary in connection with the sale of the Property, except that Purchaser has retained the services of Foresight Property Services, Attn: Trifon Houvardas (the “Purchaser’s Broker”). Purchaser shall be solely responsible for paying the fees and commissions owed to Purchaser’s Broker, pursuant to a separate written agreement between Purchaser and Purchaser’s Broker. Seller agrees to pay a finder’s fee to Purchaser’s Broker upon the consummation of Closing, in an amount not to exceed 0.5% of the Winning Bid Amount. Purchaser’s Broker or any other broker shall not be entitled to any commission or finder’s fee if the broker is the Purchaser, an affiliate entity or an immediate family member. Seller and Purchaser agree that each will indemnify, defend and hold the other, as well as Auctioneer (including its affiliates and agents) free and harmless from the claims of any other broker(s),

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representative(s), employee(s), agent(s) or other intermediary(ies) claiming to have represented Seller or Purchaser, respectively, or otherwise to be entitled to compensation in connection with this Agreement or in connection with the sale of the Property. This mutual indemnity shall survive Closing and any termination of this Agreement.

5.4 Property Condition.

5.4.1 Disclaimer. THE PROPERTY IS BEING SOLD “AS IS”, “WHERE IS” AND “WITH ALL FAULTS” AS OF CLOSING, WITHOUT ANY REPRESENTATION OR WARRANTY WHATSOEVER AS TO ITS CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, MERCHANTABILITY OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED, EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT. SELLER SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST OR PRESENT, EXPRESS OR IMPLIED, CONCERNING THE PROPERTY, EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT. PURCHASER ACKNOWLEDGES THAT PURCHASER IS PURCHASING THE PROPERTY BASED SOLELY UPON PURCHASER’S OWN INDEPENDENT INVESTIGATIONS AND FINDINGS AND NOT IN RELIANCE UPON ANY INFORMATION PROVIDED BY SELLER OR SELLER’S AGENTS OR CONTRACTORS, EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT.

5.4.2 Release of Claims. Without limiting the provisions of Section 5.4.1, Purchaser releases Seller from any and all Claims (whether known or unknown, and whether contingent or liquidated) arising from or related to (a) any defects, errors or omissions in the design or construction of the Property, whether the same are a result of negligence or otherwise; or (b) other conditions (including environmental conditions) affecting the Property, whether the same are a result of negligence or otherwise. The release set forth in this Section specifically includes any Claims under any Environmental Laws, under the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101 et seq., or with respect to any environmental risk. “Environmental Laws” includes, but is not limited to, the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act (42 U.S.C. §§6901 et seq.), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.), the Emergency Planning and Community Right to Know Act (42 U.S.C. §§11001 et seq.), the Clean Air Act (42 U.S.C. §§7401 et seq.), the Clean Water Act (33 U.S.C. §§1251 et seq.), the Toxic Substances Control Act (15 U.S.C. §§2601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. §§1801 et seq.), the Occupational Safety and Health Act (29 U.S.C. §§651 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. §§136 et seq.), and the Safe Drinking Water Act (42 U.S.C. §§300f et seq.), as any of the same may be amended from time to time, and any state or local law dealing with environmental matters, and any regulations, orders, rules, procedures, guidelines and the like promulgated in connection therewith, regardless of whether the same are in existence on the date of this Agreement.

5.4.3 Acknowledgment of Inspection. Purchaser acknowledges and agrees that (a) Purchaser had an opportunity to inspect the Property and its operation prior to the Effective Date, (b) if this transaction is consummated, Purchaser will be purchasing the Property pursuant to Purchaser’s independent examination, study, inspection and knowledge of the Property, and (c) Purchaser is relying upon its own determination of the value and condition of the Property and not on any information provided or to be provided by Seller. Purchaser is relying solely upon its own inspections, investigations, research and analyses in entering into this Agreement and is not relying in any way upon any representations or warranties (except those expressly provided in Section 5), statements, plans, specifications, cost estimates, studies, reports, descriptions, guidelines or other information or material furnished by Seller or its representatives to Purchaser or its representatives, whether oral or written, express or implied, of any nature whatsoever regarding any such matters. With respect to any Personal Property being conveyed hereunder, Purchaser shall not rely on any list of such property compiled by Seller, but rather, Purchaser shall compile its own list for review by Seller.

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5.4.4 RELEASE. PURCHASER HEREBY RELEASES SELLER AND ANY SERVICER, AGENT, REPRESENTATIVE, MANAGER, AFFILIATE, OFFICER, PARTNER, SHAREHOLDER OR EMPLOYEE OF SELLER (A “SELLER RELATED PARTY”) FROM ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES WHICH PURCHASER OR ANY PARTY RELATED TO OR AFFILIATED WITH PURCHASER (A “PURCHASER RELATED PARTY”) HAS OR MAY HAVE ARISING FROM OR RELATED TO ANY MATTER OR THING RELATED TO THE PHYSICAL CONDITION OF THE PROPERTY, ANY CONSTRUCTION DEFECTS, ANY ERRORS OR OMISSIONS IN THE DESIGN OR CONSTRUCTION OF THE PROPERTY AND ANY ENVIRONMENTAL CONDITIONS AT, IN, ON OR UNDER THE PROPERTY, AND PURCHASER WILL NOT LOOK TO SELLER OR ANY SELLER RELATED PARTY IN CONNECTION WITH THE FOREGOING FOR ANY REDRESS OR RELIEF.

5.4.5 ASSUMPTION. EFFECTIVE AS OF THE DATE OF CLOSING, PURCHASER WILL ASSUME ALL OF SELLER’S LIABILITIES AND OBLIGATIONS WITH RESPECT TO THE LEASES, CONTRACTS, AND PERMITS (TO THE EXTENT SUCH PERMITS ARE ASSIGNED OR TRANSFERRED) ARISING AND ACCRUING FROM AND AFTER THE DATE OF CLOSING.

5.4.6 SURVIVAL. THE ACKNOWLEDGMENTS AND AGREEMENTS OF PURCHASER SET FORTH IN THIS SECTION 5 WILL SURVIVE THE CLOSING.

5.4.7 PERSONAL PROPERTY; INTANGIBLE PROPERTY. SELLER MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, AS TO SELLER’S TITLE TO THE PERSONAL PROPERTY OR THE INTANGIBLE PROPERTY.

6. CONDITIONS PRECEDENT TO CLOSING.

6.1 Conditions for the Benefit of Purchaser. The obligation of Purchaser to consummate the conveyance of the Property hereunder is subject to the full and complete satisfaction or waiver of the following condition precedent:

6.1.1 The representations and warranties of Seller contained in this Agreement shall be true, complete and accurate in all material respects, as of the Effective Date.

6.2 Waiver of Conditions. Purchaser shall have the right to waive some or all of the foregoing conditions in its sole and absolute discretion; provided, however, that no such waiver shall be effective or binding on Purchaser unless it is in writing and executed by an authorized officer of Purchaser.

6.3 Conditions for the Benefit of Seller. The obligation of Seller to consummate the conveyance of the Property hereunder is subject to the full and complete satisfaction or waiver of each of the following conditions precedent:

6.3.1 Receipt by Seller of all requisite approvals including, but not limited to, the approval of servicers to Seller or to Seller’s sole member, (including, without limitation, the necessary committee approvals of CWCapital), trustee approval and all other approvals that may be required pursuant to any documents which govern Seller; Seller shall provide written notice to Purchaser of satisfaction of this condition precedent designating the “Approval Date”; and

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6.3.2 Receipt by Seller of any and all required consents to the transfer of any Assumed Contract, permit and/or Lease to be assigned to Purchaser at Closing.

6.4 Waiver of Conditions. Seller shall have the right to waive some or all of the foregoing conditions in its sole and absolute discretion; provided, however, that no such waiver shall be effective or binding on Seller unless it is in writing and executed by an authorized officer of Seller.

6.5 Failure of a Condition. In the event any of the conditions set forth in this Section are not fulfilled or waived, this Agreement shall terminate and all rights and obligations hereunder of each party shall be at an end and the Deposit shall be returned to Purchaser, as Purchaser’s sole remedy and neither party shall have any obligations to the other.

7. CLOSING COSTS AND PRORATIONS.

7.1 Purchaser’s Costs. Purchaser will pay the following costs of closing this transaction:

7.1.1 All recording fees and any and all state and county recordation, documentary or transfer taxes;

7.1.2 All premiums, fees and costs associated with the issuance of any title policy as well as for all premiums, fees and costs associated with the issuance of a mortgagee title insurance policy, and all of the settlement fees and other charges of Title Company due in connection with the closing of this transaction;

7.1.3 The cost of the Survey;

7.1.4 The fees and disbursements of Purchaser’s counsel and any other expense(s) incurred by Purchaser or its representative(s) in inspecting or evaluating the Property or closing this transaction;

7.1.5 Any and all costs and expenses in connection with obtaining financing for the purchase of the Property, including without limitation any recordation or transfer taxes required to be paid upon the recordation of any deed of trust, mortgage or other security agreement executed and recorded in connection with such financing;

7.1.6 Any sales taxes payable with respect to any personal property included within the Property; and

7.1.7 All of the fees of Purchaser’s Broker referred to in Section 5.3 above.

7.2 Seller’s Costs. Seller will pay the following costs of closing this transaction:

7.2.1 The fees and disbursements of Seller’s counsel;

7.2.2 A finder’s fee to Purchaser’s Broker referred to in Section 5.3, above; and

7.2.3 All release fees and other charges required to be paid in order to release from the Property the lien of any mortgage or other security interest which Seller is obligated to remove pursuant to the terms of this Agreement.

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7.3 Prorations. All revenues due and payable, and all expenses, including, but not limited to rents and any other amounts paid by tenants, personal property taxes, installment payments of special assessment liens, vault charges, sewer charges, utility charges, reimbursement of maintenance and repair expenses and normally prorated operating expenses billed or paid as of the Date of Closing shall be prorated as of 11:59 p.m. Eastern Time, on the day before the Date of Closing and shall be adjusted against the Purchase Price due at Closing. Purchaser shall receive a credit against the Purchase Price at Closing in an amount equal to any and all refundable tenant security deposits in Seller’s possession with respect to the Leases.

7.3.1 Receivables. Purchaser shall purchase all accounts receivable due as of 11:59 p.m., Eastern Time, the day before the Date of Closing, in addition to the Purchase Price. As used herein, the term “Accounts Receivable” shall mean all outstanding debts one hundred twenty (120) days or less past due for tenants that are still tenants of the Property on the Effective Date.

7.4 Taxes. General real estate taxes and special assessments relating to the Property payable during the year in which Closing occurs shall be prorated with respect to the Property as of 11:59 p.m. Eastern Time, on the day before the Date of Closing. If Closing shall occur before the actual taxes and special assessments payable during such year are known, the apportionment of taxes shall be upon the basis of taxes for the Property payable during the immediately preceding year. If, as the result of an appeal of the assessed valuation of the Property for any real estate tax year prior to (or including) the Closing, there is issued after Closing an administrative ruling, judicial decision or settlement by which the assessed value of the Property for such tax year is reduced, and a real estate tax refund issued, Seller shall be entitled to all such refunds relating to the period prior to Closing. If the appeal is successfully culminated either prior to or after the proposed sale transaction, and Purchaser would benefit from such appeal for the current or subsequent tax year, then Purchaser shall pay a pro-rata share portion of the costs and expenses incurred by Seller in connection with the appeal.

7.5 Leasing Costs. Purchaser shall pay, in addition to the Purchase Price, any and all leasing costs due as of the Date of Closing, whenever accrued, including, but not limited to, all tenant improvement allowances and leasing commissions for Leases, and costs associated with preparing lease documents for the Property.

7.6 In General. Any other costs or charges of closing this transaction not specifically mentioned in this Agreement shall be paid and adjusted in accordance with local custom or ordinance in the jurisdiction in which the Property is located.

7.7 Purpose and Intent. Except as expressly provided herein, the purpose and intent as to the provisions of prorations and apportionments set forth in this Section 7 and elsewhere in this Agreement is that Seller shall bear all expenses of ownership and operation of the Property and shall receive all income therefrom accruing through midnight of the day preceding the Closing and Purchaser shall bear all such expenses and receive all such income accruing thereafter.

8. CLOSING AND ESCROW.

8.1 Seller’s Deliveries. Seller shall deliver either at the Closing or by making available at the Property, as appropriate, the following original documents, each executed and, if required, acknowledged:

8.1.1 A Special Warranty Deed, in the form attached hereto as Schedule 8.1.1 (the “Deed”), conveying title to Purchaser of the Property, subject only to the Permitted Exceptions.

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8.1.2 (a) Originals (to the extent in Seller’s possession) of all of the Assumed Contracts relating to the Property which Purchaser has elected to assume pursuant to the terms hereof; and (b) an assignment of such Assumed Contracts to Purchaser by way of an assignment and assumption agreement, in the form attached hereto as Schedule 8.1.2 (the “Assignment and Assumption Agreement”), conveying to Purchaser Seller’s rights, title and interest in and to the Assumed Contracts attributable to the Property.

8.1.3 (a) Originals (to the extent in Seller’s possession) of all warranties then in effect, if any, with respect to the Property or to the Improvements or any repairs or renovations to such Improvements and (b) an assignment of all such warranties being conveyed hereunder, conveying to Purchaser Seller’s rights, title and interests in and to the warranties attributable to the Property.

8.1.4 An affidavit pursuant to the Foreign Investment and Real Property Tax Act.

8.1.5 Appropriate evidence of authority, capacity and status of Seller as reasonably required by Title Company.

8.1.6 An “Owner’s Affidavit”, in form reasonably acceptable to Seller and Title Company and sufficient for Title Company to delete any exceptions for (a) mechanics’ or materialmen’s liens arising from work at the Property which is the responsibility of Seller hereunder, (b) parties in possession, other than tenants as tenants only, and, (c) matters not shown in the public records.

8.1.7 A settlement statement (the “Settlement Statement”), prepared by Title Company.

8.1.8 A quitclaim bill of sale in the form attached hereto as Schedule 8.1.8 (the “Bill of Sale”), transferring to Purchaser all of Seller’s right, title and interest in the Personal Property.

8.1.9 Such other documents, certificates and other instruments as may be reasonably required to consummate the transaction contemplated hereby.

8.2 Purchaser’s Deliveries. At the Closing, Purchaser shall (a) pay Seller the Purchase Price as required by, and in the manner described in, Section 2 hereof, (b) pay Auctioneer the Buyer’s Premium as required by, and in the manner described in, Section 2 hereof, and (c) execute and deliver the following documents:

8.2.1 The Assignment and Assumption Agreement and Bill of Sale.

8.2.2 Evidence of Purchaser’s authority, and the authority of the person executing any documents at Closing on behalf of Purchaser, acceptable to Seller and Title Company, to enter into the transactions contemplated by this Agreement.

8.2.3 The Settlement Statement.

8.2.4 Such other documents, certificates and other instruments as may be reasonably required to consummate the transaction contemplated hereby.

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8.3 Possession. Purchaser shall be entitled to possession of the Property at the conclusion of the Closing.

8.4 Escrow Closing. Purchaser and Seller (or their respective counsel on behalf of Purchaser and Seller) shall execute letters of escrow closing instructions (the “Closing Instructions”) which will provide that, on the Date of Closing: (a) Seller and Purchaser shall each deposit with Title Company all of the documents and instruments described in Sections 8.1 and 8.2, above (the “Closing Documents”); and (b) Purchaser shall deposit with Title Company the balance of the Purchase Price required to be paid after application of the Deposit thereto and all prorations, adjustments and credits required to be made under this Agreement, (the “Adjusted Purchase Price”) and the Buyer’s Premium, all of which shall be set forth on, and mutually agreeable pursuant to, a settlement statement executed by both Purchaser and Seller at Closing. Upon receipt of the Adjusted Purchase Price and the Buyer’s Premium, and the satisfaction of all other conditions set forth in the Closing Instructions, Title Company shall be authorized and directed to disburse the Adjusted Purchase Price to Seller or its designee(s) and the Buyer’s Premium to Auctioneer, record the Deed among the real property records of Pinellas County, Florida, and release the remaining Closing Documents to the appropriate parties, all in strict accordance with the Closing Instructions.

9. DAMAGE, DESTRUCTION AND CONDEMNATION.

9.1 Casualty. Except as provided herein, Seller assumes all risk of loss or damage to the Property by fire or other casualty until consummation of Closing, at which time all risk of loss or damage to the Property by fire or other casualty shall be transferred to Purchaser. If at any time on or prior to the Date of Closing any portion of the Property is destroyed or damaged as a result of fire or any other cause whatsoever, Seller shall promptly give written notice thereof to Purchaser. If the estimated cost to repair the damage or destruction exceeds $250,000 as reasonably estimated by Seller, Purchaser shall have the right to terminate this Agreement by written notice to Seller within ten (10) days following the date upon which Purchaser receives Seller’s written notice of the destruction or damage. If Purchaser does not elect to so terminate this Agreement within said ten (10) day period, or if the cost of repair is equal to or less than $250,000, this Agreement shall remain in full force and effect and the parties shall proceed to Closing without any reduction or adjustment in the Purchase Price, except that all insurance proceeds will be assigned to Purchaser and Seller will pay to Purchaser any deductible under Seller’s insurance policy.

9.2 Condemnation. In the event, at any time on or prior to the Date of Closing, any action or proceeding is filed, under which the Property, or any portion thereof, may be taken pursuant to any law, ordinance or regulation or by condemnation or the right of eminent domain, Seller shall promptly give written notice thereof (which notice shall describe the type of action being taken against the Property, and which portions of the Property will be affected thereby) to Purchaser. If the taking would substantially prevent Purchaser from continuing the existing use of the Property, then Purchaser shall have the right to terminate this Agreement by written notice to Seller within ten (10) days following the date upon which Purchaser receives Seller’s written notice of such action or proceeding. If Purchaser does not elect to so terminate this Agreement within said ten (10) day period, this Agreement shall remain in full force and effect and the parties shall proceed to closing without any reduction or adjustment in the Purchase Price, except that all condemnation proceeds will be assigned to Purchaser.

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10. FAILURE OF CONDITIONS PRECEDENT; DEFAULT AND REMEDIES.

10.1 Failure of Conditions Precedent. If any of the conditions precedent stated in Article 6 have not occurred or been satisfied on or before the Date of Closing, Purchaser or Seller may: (a) terminate this Agreement by written notice to the appropriate party on or before the Date of Closing, in which event the appropriate party shall be entitled to receive disbursement of the Deposit or (b) to waive such conditions precedent and proceed to Closing.

10.2 Purchaser Default. If Purchaser is in default of one or more of Purchaser’s obligations under this Agreement other than a failure to timely close, then Seller may give notice to Purchaser (with a copy to Title Company) specifying the nature of the default. Purchaser shall have five (5) business days after receiving that notice, but in no event beyond the Date of Closing, within which to cure that default. If Purchaser fails to cure that default within that period, then Seller’s sole remedy for such default shall be to terminate this Agreement by giving notice of such termination to Purchaser (with a copy to Title Company) and receive the Deposit as liquidated damages. If Seller does so terminate this Agreement, then Title Company shall pay the Deposit to Seller.

10.3 Liquidated Damages. SELLER AND PURCHASER AGREE THAT PAYMENT OF THE DEPOSIT TO SELLER UNDER THIS SECTION 10 SHALL BE AS LIQUIDATED DAMAGES AND NOT AS A PENALTY.

10.4 Seller Default. In the event Seller shall: (a) fail to sell, transfer and assign the Property to Purchaser in violation of the terms of this Agreement, and/or (b) fail to perform any other material obligation of Seller hereunder, and/or (c) intentionally breach any warranty made or granted by Seller under this Agreement, which breach is not cured by the Date of Closing and/or (d) have intentionally misrepresented any fact, or any of the representations of Seller contained herein are not true, accurate or complete in any material respect, Purchaser shall as its sole and exclusive remedy, be entitled to declare this Agreement to be null and void and demand and receive the return of the Deposit whereupon, neither party shall have any further rights, duties or obligations hereunder except as otherwise provided herein. Purchaser specifically waives any and all right (i) to file or record any lis pendens or any other lien or encumbrance against the Property; (ii) to specific performance or other equitable relief; or (iii) to consequential or punitive damages.

10.4.1 Waiver of Default. If Purchaser does not duly notify Seller of the default and does not give Seller a notice of termination hereunder, then (i) the default shall be treated as waived by Purchaser and (ii) at Closing, Purchaser shall accept the Property subject to the default without any reduction in the Purchase Price and without any Claims against Seller on account of the default.

10.5 Termination. Upon any termination of this Agreement pursuant to any right of a party to terminate set forth in this Agreement, (a) the Deposit shall be paid over to the party entitled to the same, (b) all documents deposited by Purchaser and Seller into escrow shall be returned by Title Company to the party depositing the same, and (c) all copies of all Property Documents provided to Purchaser by Seller shall be returned to Seller, whereupon the parties will have no continuing liability to each other unless otherwise expressly stated in any provision of this Agreement.

10.6 Attorneys’ Fees. Notwithstanding anything to the contrary in this Agreement, in the event that either Seller or Purchaser, as the case may be, shall bring a lawsuit against the other party for breach of such party’s obligations under this Agreement, the losing party shall pay the prevailing party’s costs and expenses incurred in connection with such litigation, including without limitation reasonable attorneys’ fees. The “prevailing party” shall be determined by the court hearing such matter.

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11. NOTICES. Any notice required or permitted to be given hereunder may be served by a party or its attorney and must be in writing and shall be deemed to be given (a) when hand delivered, (b) one (1) business day after pickup by Emery Air Freight, United Parcel Service (Overnight) or Federal Express, or another similar overnight express service, (c) when transmitted by telecopy or facsimile, provided that confirmation of the receipt of same is noted upon transmission of same by the sender’s telecopy machine, or (d) when transmitted by electronic correspondence, in any case addressed or sent to the parties at their respective addresses set forth below:

If to Seller:	2600 & 2650 McCormick Drive Holdings, LLC
	c/o CWCapital Asset Management LLC, Special Servicer
	7501 Wisconsin Avenue
	Suite 500 West
	Bethesda, MD 20814
	Attn: Legal Department
With a copy to:	Quilling, Selander, Lownds, Winslett & Moser, PC
	2001 Bryan Street, Suite 1800
	Dallas, Texas 75201
	Attn: Paul C. Webb, Esq.
	Phone: (214) 880-1881
	Fax: (214) 871-2111
	pwebb@qslwm.com
If to Purchaser:	Heritage Insurance Holdings, LLC
	700 Central Ave., Suite 500
	St. Petersburg, FL 33701
	Attn: Stephen L. Rohde
	Phone: 651-324-8523 / 727-362-7204
	Fax: none
	Email: srohde@heritagepci.com
With a copy to:	__________________________________________
	__________________________________________
	__________________________________________
	Attn:  _____________________________________
	Phone: ____________________________________
	Fax:  ______________________________________
	Email: _____________________________________

or in each case to such other address as either party may from time to time designate by giving notice in writing pursuant to this Section 11 to the other party. Telephone numbers are for informational purposes only. Effective notice will be deemed given only as provided above, except as otherwise expressly provided in this Agreement.

12. MISCELLANEOUS.

12.1 Entire Agreement. This Agreement, together with the Exhibit and Schedules attached hereto, all of which are incorporated by reference, is the entire agreement between the parties with respect to the subject matter hereof, and no alteration, modification or interpretation hereof shall be binding unless in writing and signed by both parties.

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12.2 Severability. If any provision of this Agreement or its application to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances, other than those as to which it is so determined invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be valid and shall be enforced to the fullest extent permitted by law.

12.3 Applicable Law. This Agreement shall be construed and enforced in accordance with the internal laws of the State of Florida. Purchaser irrevocably consents and submits to the nonexclusive jurisdiction of the courts of the state and federal district in which the Real Property is located and waives any objection based on venue of forum non conveniens with respect to any action instituted in those courts arising under this Agreement or in any way connected or related or incidental to the dealings of Purchaser and Seller in respect of this Agreement or any related transactions, in each case whether now existing or later arising, and whether in contract, tort, equity or otherwise, and agrees that any dispute with respect to any of those matters will be heard only in the courts described above.

12.4 Assignability. Purchaser may not directly or indirectly assign or transfer any of Purchaser’s rights, obligations and interests under this Agreement, to any person or entity without the prior written consent or approval of Seller, which consent or approval must be requested in writing and received by Seller not less than five (5) business days prior to the Date of Closing and which consent may be given in Seller’s sole and absolute discretion, provided, however, that Seller hereby consents to Purchaser’s assignment of Purchaser’s rights, obligations and interests under this Agreement to an entity in which Purchaser maintains a controlling economic interest, so long as notice of said assignment is provided not less than five (5) business days prior to the Date of Closing. Upon any such assignment or other transfer, Purchaser and such assignee or transferee shall be jointly and severally liable for the obligations of Purchaser under this Agreement, which liability shall survive the assignment or transfer and the Closing.

12.5 Successors Bound. This Agreement shall be binding upon and inure to the benefit of Purchaser and Seller and their respective successors and permitted assigns.

12.6 No Public Disclosure. Prior to Closing, all press releases or other dissemination of information to the media or responses to requests from the media for information relating to the transaction contemplated herein shall be subject to the prior written consent of Purchaser and Seller.

12.7 Captions; Interpretation. The captions in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this Agreement or the scope or content of any of its provisions. Whenever the context may require, words used in this Agreement shall include the corresponding feminine, masculine, or neuter forms, and the singular shall include the plural and vice versa. Unless the context expressly indicates otherwise, all references to “Section” are to sections of this Agreement.

12.8 No Partnership. Nothing contained in this Agreement shall be construed to create a partnership or joint venture between the parties or their successors in interest or permitted assigns.

12.9 Time of Essence. Time is of the essence with respect to the performance of the obligations of Seller and Purchaser under this Agreement.

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12.10 Counterparts and Electronic Signatures. This Agreement may be executed and delivered in any number of counterparts, each of which so executed and delivered shall be deemed to be an original and all of which shall constitute one and the same instrument. Facsimile, documents executed, scanned and transmitted electronically and electronic signatures shall be deemed original signatures for purposes of this Agreement and all matters related thereto, with such facsimile, scanned and electronic signatures having the same legal effect as original signatures. Seller and Purchaser agree that this Agreement, any Addendum thereto or any other document necessary for the consummation of the transaction contemplated by this Agreement may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act (“E-Sign Act”), Title 15, United States Code, Sections 7001 et seq., the Uniform Electronic Transaction Act (“UETA”) and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on both Seller and Purchaser the same as if it were physically executed and Purchaser hereby consents to the use of any third party electronic signature capture service providers as may be chosen by Seller or Auctioneer.

12.11 Recordation. Purchaser and Seller agree not to record this Agreement or any memorandum hereof.

12.12 Proper Execution. This Agreement shall have no binding force and effect on either party unless and until both Purchaser and Seller shall have executed and delivered this Agreement.

12.13 Waiver. No waiver of any breach of any agreement or provision contained herein shall be deemed a waiver of any preceding or succeeding breach of any other agreement or provision herein contained. No extension of time for the performance of any obligation or act shall be deemed an extension of time for the performance of any other obligation or act.

12.14 Business Days. If any date herein set forth for the performance of any obligations by Seller or Purchaser or for the delivery of any instrument or notice as herein provided should fall on a Saturday, Sunday or Legal Holiday (hereinafter defined), the compliance with such obligations or delivery shall be deemed acceptable on the next business day following such Saturday, Sunday or Legal Holiday. As used herein, the term “Legal Holiday” shall mean any local or federal holiday on which post offices are closed in the District of Columbia.

12.15 Limitation of Liability. No present or future partner, director, officer, member, shareholder, employee, advisor, affiliate, servicer or agent of or in Seller, Purchaser or any affiliate of any of the foregoing will have any personal liability, directly or indirectly, under or in connection with this Agreement or any agreement made or entered into under or in connection with the provisions of this Agreement, or any amendment or amendments to any of the foregoing made at any time or times, heretofore or hereafter. The limitations of liability contained in this paragraph will survive the termination of this Agreement or the Closing, as applicable, and are in addition to, and not in limitation of, any limitation on liability applicable to either party provided elsewhere in this Agreement or by law or by any other contract, agreement or instrument. In no event will Seller or Purchaser be liable for any consequential, exemplary or punitive damages under any circumstances in connection with this Agreement or the transaction contemplated hereby.

12.16 Back-Up Contracts. Notwithstanding anything herein to the contrary, Seller reserves the right to continue marketing the Property for sale and to entertain letters of intent regarding the sale of the Property while this Agreement is outstanding, provided Seller shall not enter into any binding back-up agreements with respect to the sale of the Property for so long as this Agreement is in force.

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12.17 WAIVER OF JURY TRIAL. PURCHASER WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT, (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF PURCHASER AND SELLER IN RESPECT OF THIS AGREEMENT OR RELATED TRANSACTIONS, IN EACH CASE WHETHER NOW EXISTING OR LATER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. PURCHASER AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION WILL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT SELLER MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF PURCHASER TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

12.18 No Third Party Beneficiary. This Agreement is solely for the benefit of Purchaser and Seller and Purchaser’s permitted assigns. No other person or entity is entitled to the benefit or may enforce any of the provisions of this Agreement, except where expressly provided herein to the contrary.

12.19 Purchaser Representation and Consent. Purchaser acknowledges and confirms that he has had every opportunity to obtain legal representation in this matter and has either not advised Seller of his representation or has intentionally declined to do so; further, Purchaser confirms that he is a sophisticated purchaser of similar commercial properties, is familiar with all rights and remedies of Florida law, and specifically waives any right to further representation. Purchaser confirms and acknowledges that he is not relying on any legal advice from Seller, Seller’s counsel, the Broker, or any other party in this matter.

12.20 Auction Sale/Process. Seller may select the winning bid in its sole and absolute discretion. No obligation to sell shall be binding on Seller unless and until this Agreement is countersigned by Seller and, if the sale is subject to confirmation as evidenced by an Addendum to Purchase and Sale Agreement “Subject To” executed by Seller and Purchaser, Seller has delivered its approval of the sale as required in said addendum. Seller may rescind any oral acceptance of a winning bid prior to the execution and delivery of this Agreement to Purchaser for any reason, including but not limited to, the receipt of a subsequent higher bid or offer to purchase whether such higher bid or offer to purchase was received pursuant to the Auction Terms and Conditions or otherwise.

12.21 Brochure. Purchaser represents and warrants that Purchaser has received, read and accepts the terms and conditions pertaining to the sale of the Property which may be set forth in an auction brochure (the “Brochure”), or on the auction website, www.auction.com, which terms and conditions are incorporated herein by reference. In the event of any conflict or inconsistency between the terms and conditions of the Agreement and the terms and conditions of the Brochure, the terms and conditions of this Agreement shall control and prevail in all respects.

12.22 Purchaser and Buyer. When used in this Agreement or any document concerning the parties to this Agreement, the terms “Purchaser” and “Buyer” shall have the same meaning and be used interchangeable.

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13. ESCROW AGREEMENT

13.1 Deposit. Title Company agrees to deposit the Deposit in an interest bearing account, subject to the receipt from Purchaser of a form W-9 for the purposes of investing said funds and to hold and disburse said funds, and any interest earned thereon, as hereinafter provided. Upon written notification from Seller or Purchaser in accordance with the terms of this Agreement, Title Company shall release the funds in accordance with and pursuant to the written instructions. In the event of a dispute between any of the parties hereto sufficient in the sole discretion of Title Company to justify its doing so, Title Company shall be entitled to tender unto the registry or custody of any court of competent jurisdiction all money or property in its hands held under the terms of this Agreement, together with such legal pleading as it deems appropriate, and thereupon be discharged.

13.2 Title Company. Seller and Purchaser covenant and agree that in performing any of its duties under this Agreement, Title Company shall not be liable for any loss, costs or damage which it may incur as a result of serving as Title Company hereunder, except for any loss, costs or damage arising out of its willful default or gross negligence. Accordingly, Title Company shall not incur any liability with respect to (i) any action taken or omitted to be taken in good faith upon advice of its counsel given with respect to any questions relating to its duties and responsibilities, or (ii) to any action taken or omitted to be taken in reliance upon any document, including any written notice of instruction provided for in this Agreement, not only as to its due execution and the validity and effectiveness of its provisions, but also to the truth and accuracy of any information contained therein, which Title Company shall in good faith believe to be genuine, to have been signed or presented by a proper person or persons and to conform with the provisions of this Agreement.

13.3 Indemnity. Seller and Purchaser hereby agree to indemnify and hold harmless Title Company against any and all losses, claims, damages, liabilities and expenses, including without limitation, reasonable costs of investigation and attorneys’ fees and disbursements which may be imposed upon or incurred by Title Company in connection with its serving as Title Company hereunder, except for any loss, costs or damage arising out of its willful default or gross negligence. The provisions of this Section 13.3 shall survive a termination of this Agreement.

[Signature Pages Follow]

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IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement on the dates set forth below, effective as of the date first set forth above.

SELLER:
2600 & 2650 McCormick Drive Holdings, LLC, a Maryland limited liability company
By:	U.S. Bank National Association, successor-in- interest to Bank of America, N.A., successor to Wells Fargo Bank, N.A., as Trustee for the Registered Holders of GS Mortgage Securities Corporation II, Commercial Mortgage Pass- Through Certificates, Series 2006-GG8 and Companion Loan Noteholders (the “Trust”), its Sole Member/Manager
By:	CWCapital Asset Management LLC, a Massachusetts limited liability company, solely in its capacity as Special Servicer to the Trust
By:
Date:	2/28/2013
PURCHASER:
Heritage Insurance Holdings, LLC, a Florida limited liability company
By:
Name:
Title:	Chief Financial Officer
Date:	2/27/2013

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ACKNOWLEDGEMENT BY TITLE COMPANY

IN WITNESS WHEREOF, Title Company has signed this Agreement for the limited purposes set forth herein.

TITLE COMPANY:
FIRST AMERICAN TITLE INSURANCE COMPANY
By:
Name:
Title:	Marketing Coordinator
Date:	2/28/2013

Address for Notices to Title Company:

First American Title Insurance Company

National Commercial Services

1825 Eye Street NW, Suite 302

Washington, D.C. 20006

Attention: Brian A. Lobuts, Vice President

blobuts@firstam.com

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EXHIBIT A

TERMS AND CONDITIONS OF SALE

IDENTIFICATION:

All Purchasers are required to have a Bidder’s Number to bid, giving full name, address, and phone number. Evidence of correct form of deposit must be made in order to register for the auction.

CONTRACTS AND DEPOSITS:

The successful bidder must sign all documents and contracts immediately upon conclusion of the auction. At the auction, in order to bid, a minimum non-refundable deposit in the amount of $10,000.00 shall be required at the time of registration in the form of a wire transfer, cashier’s or certified check. No third party checks will be accepted. Please note that the total required non-refundable deposit is the greater of 10% of the total Purchase Price or $20,000.00. The successful bidder will have 1 business day after the auction to provide any additional funds over and above the $10,000.00 to make the deposit equal to the greater of 10% of the total Purchase Price or $20,000.00. Please note: All cashier’s or certified checks should be made payable to First American Title Insurance Company when you are the successful bidder. See specific terms of the Agreement for actual deposit requirements.

BUYER’S PREMIUM:

A Buyer’s Premium equal to the greater of five percent (5%) of the Winning Bid Amount or $20,000.00 shall be paid to Auctioneer by Buyer at Closing.

PROPERTY SOLD “AS IS, WHERE IS, WITH ALL FAULTS” WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND:

The real property shall be sold subject to conditions, restrictions, right-of-way easements, and reservations, if any, of record, filed and unfiled mechanics and materialmen’s liens, if any, and all other matters of record taking priority, subject to the rights, if any, of tenants-in-possession, and further subject to all conditions announced at sale; and confirmation by Seller.

REAL ESTATE CLOSING:

Purchasers must close sales of real property on the Date of Closing (defined in the Purchase and Sale Agreement, or sooner if agreed by the parties.). Time is of the essence. The entire Purchase Price and Buyer’s Premium must be paid by cashier’s or certified check, attorney’s escrow check, or wired funds at closing. No purchase is contingent on financing. Purchaser is entitled to a deed for property upon full payment.

REAL ESTATE BROKERS:

Purchaser shall be solely responsible for paying the fees and commissions due to Purchaser’s Broker, and Seller agrees to pay a finder’s fee to Purchaser’s Broker upon the consummation of Closing, in an amount not to exceed 0.5% of the Winning Bid Amount, pursuant to Section 5.3 of the Agreement. Purchaser shall be solely responsible for paying the fees and commissions due to any other broker claiming to have represented Purchaser in the Auction should such a claim be made in connection with any transaction which may result of this Auction. A broker shall not be entitled to any commission or finder’s fee on any sale to an affiliated entity or an immediate family member.

ADDITION OR WITHDRAWAL FROM SALE; CONDITION OF SALE:

Property selling subject to motivated Seller’s confirmation. Auctioneer reserves the right to withdraw from sale the property listed and also reserves the right to group one or more properties into one or more selling lots or to subdivide into two or more selling lots. Auctioneer reserves the right to cancel the auction sale up to the time prior to the commencement of bidding. These properties are sold in gross in all cases. If a subsequent survey by Purchaser shows a greater or lesser number of acres or square footage this will not affect the purchase or Purchase Price.

Exhibit A

AGENCY:

Auctioneer is acting as agent on behalf of Seller only, and reserves the right to protect Seller’s interest by bidding as agent. Auctioneer is not responsible for the acts of the Principal’s agents or the Principal. During bidding, Auctioneer has the right to reject any raise that, in his opinion, is not commensurate with the property value. In the event of any dispute after the sale, Auctioneer record of final sale shall be conclusive.

RIGHTS:

All announcements made the day of sale take precedence over any prior written or verbal terms of sale. Purchasers will acquire properties subject to the rights of all parties in possession. If any conditions contained herein are not complied with by Purchaser, Auctioneer may, in addition to asserting all remedies available by law, including the right to hold defaulting Purchaser liable for the Purchase Price, either (a) cancel the sale, retaining as liquidated damages any payment made by such Purchaser; (b) resell the property at public auction; or (c) take such other action as it deems necessary or appropriate. The retention of the bidder’s deposit shall not limit any rights or remedies of Auctioneer or Seller with respect to Purchaser’s Default. If the property is resold, the original defaulting Purchaser shall be liable for payment of any deficiency in the Purchase Price and all costs and expenses, the expenses of both sales, reasonable attorney’s fees, commissions, incidental damages and all other charges due hereunder.

Exhibit A

SCHEDULE 1.1.1

Real Property Description

The land referred to herein below is situated in the County of Pinellas, State of Florida, and is described as follows:

Tracts 1 and 2, Prestige Place, according to the map or plat thereof recorded in Plat Book 93, Pages 17 and 18, of the Public Records of Pinellas County, Florida.

Schedule 1.1.1

Auction Item No. FW-248

Property Address: 2600 and 2650 McCormick Drive, Clearwater, Pinellas County, Florida 33764

ADDENDUM TO PURCHASE AND SALE AGREEMENT

“SUBJECT TO”

This Addendum to Purchase and Sale Agreement (this “Addendum”), is entered into by and between Seller and Purchaser(s), who are parties to that certain Purchase and Sale Agreement dated as of the date last signed by the parties (the “Agreement”).

This is a reserve auction and all Properties have a reserve price (“Reserve Price”), meaning the Seller of each Property can accept or reject any bid and has also established an unpublished, minimum selling price. The starting bid is not the Reserve Price. In order to become the Winning Bidder for a Property, a Bidder must meet or exceed the Reserve Price and have the highest bid, and such highest bid must be accepted by the Seller. Purchaser(s) and Seller agree that Seller may terminate the Agreement, in Seller’s sole and absolute discretion, in the event the Seller does not approve the sale. Seller shall make such election within fifteen (15) business days (excludes weekends and holidays) following the Effective Date of the Agreement (as that term is defined in the Agreement) unless extended in writing by Seller (the “Approval Period”) by electronic mail, overnight courier (FedEx, UPS or USPS Express Mail) or registered mail (return receipt requested) (“Notice”), with said Notice deemed given upon the date of sending of such Notice. If Seller or Seller’s designee does not provide Notice within the Approval Period then the Agreement shall be deemed rejected without further action. If accepted, Seller or Seller’s designee will provide written notice within the Approval Period to Purchaser(s).

If Seller elects NOT to approve the transaction and elects to reject the Agreement and terminate the escrow and transaction, Title Company (as that term is defined in the Agreement) shall return to Purchaser(s) any Earnest Money Deposit given by Purchaser(s) to Title Company, such return contingent upon the Title Company’s confirmation of the Earnest Money Deposit having been received as “good funds” and in accordance with the terms of the Agreement. Auctioneer is authorized to provide the necessary instruction to the Title Company directing the Title Company to return to Purchaser(s) any Earnest Money Deposit given by Purchaser(s) to Title Company and the Title Company shall release such monies to Purchaser(s) pursuant to this Addendum. Effective upon release of the Earnest Money Deposit to Purchaser(s), the Agreement and the transaction contemplated thereby shall be cancelled and Purchaser and Seller shall be relieved of any further liability and/or obligation to each other under the Agreement. Purchaser(s) agrees to release Seller, Seller’s Broker, Auctioneer, and the Title Company from and against any and all liabilities in connection with the transaction and the Agreement. Purchaser grants Seller the unilateral right to execute cancellation instructions in the event that Seller elects to cancel and terminate the transaction pursuant to the terms of this Addendum.

If Seller elects to approve and confirm the transaction, then the Agreement shall continue in full force and effect and the Date of Closing shall be in accordance with the terms of the Agreement.

[Signature Page Follows]

Addendum to Purchase Agreement (SUBJECT TO) Commercial 012013 Page | 1

Auction Item No. FW-248

Property Address: 2600 and 2650 McCormick Drive, Clearwater, Pinellas County, Florida 33764

SELLER:		PURCHASER(S):
2600 & 2650 McCormick Drive Holdings, LLC, a Maryland limited liability company
By:	U.S. Bank National Association, successor-in- interest to Bank of America, N.A., successor to Wells Fargo Bank, N.A., as Trustee for the Registered Holders of GS Mortgage Securities Corporation II, Commercial Mortgage Pass- Through Certificates, Series 2006-GG8 and Companion Loan Noteholders (the “Trust”), its Sole Member/Manager	Heritage Insurance Holdings, LLC, a Florida limited liability company
		By:
		Printed Name:
		Title:	Chief Financial Officer
		Date:	2/27/2013
By:	CWCapital Asset Management LLC, a Massachusetts limited liability company, solely in its capacity as Special Servicer to the Trust	IF INDIVIDUALS:
By:
		PRINTED NAME
Date:	2/28/2013	Date:
		PRINTED NAME
		Date:

Addendum to Purchase Agreement (SUBJECT TO) Commercial 012013 Page | 2

EX-10.8

Exhibit 10.8

REINSURANCE

TRUST AGREEMENT

THIS REINSURANCE TRUST AGREEMENT (this “Agreement”) is made effective as of the 22^nd day of May, 2013 (the “Effective Date”) by and among Osprey Re Ltd, an insurance company domiciled in Hamilton, Bermuda (the “Grantor”). Heritage Property and Casualty Insurance Company, an insurance company domiciled in the State of Florida (together with any successor thereof by operation of law, including, without limitation, any liquidator, rehabilitator, receiver, or conservator, the “Beneficiary”), and Bank of America, N.A., a banking association organized under the laws of the United States (the “Trustee”). Certain capitalized terms used herein are defined in Section 3.01.

WITNESSETH:

WHEREAS, the Grantor and the Beneficiary have entered into the Reinsurance Agreement whereby the Grantor, as reinsurer, has agreed to indemnify the Beneficiary, as cedant, against certain losses; and

WHEREAS, the Grantor and the Beneficiary desire to create a trust account to hold assets as security for the performance by the Grantor of its obligations from time to time due and owing under the Reinsurance Agreement;

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the Parties agree as follows:

ARTICLE I

PROVISIONS RELATING TO THE TRUST ACCOUNT

Section 1.01 Establishment of Trust Account. The Grantor hereby establishes a trust account (the “Trust Account”) with the Trustee to be held in the City of Chicago, Illinois or in another city within the United States in which the Trustee maintains an office for its trust business, for the sole use and benefit of the Beneficiary, upon the terms and conditions hereinafter set forth and agrees to deposit and maintain assets in an amount that at all times will equal or exceed the Security Amount. The Trustee has no obligation at any time to determine or verify if the amounts deposited in, or thereafter held in, the Trust Account are in excess of the Security Amount or at any other particular level. The Grantor and the Beneficiary agree that the trust created hereunder shall be treated as a “grantor trust” for federal income tax purposes, and the Grantor shall report all items of income, gain or loss with respect to the Authorized Investments (as defined below) on its federal income tax return, in accordance with Section 1.14.

Section 1.02 Deposit into Trust Account. The Trustee and its lawfully appointed successors is and are authorized and shall have power to receive such securities and other property as the Grantor and/or the Beneficiary from time to time may transfer or remit to or vest in the Trustee or place in the Trustee’s hands or under the Trustee’s control and to hold, invest, reinvest, manage and dispose of the same for the uses and purposes and in the manner and according to the provisions hereinafter set forth (the “Trust Assets”). All such Trust Assets at all times shall be maintained by the Trustee in the Trust Account, separate and distinct from all other assets on the books and records of the Trustee, and shall be continuously kept in a safe place within the United States. Within six (6) business days after this Agreement is fully executed, the Grantor shall

deliver to the Trustee, and deposit into the Trust Account, Trust Assets with such market value as agreed by and between the Grantor and the Beneficiary. The Trustee shall have no obligation to determine or verify such value. The Trustee shall be responsible only for those assets actually delivered by the Grantor; the Trustee shall have no obligation to seek or compel delivery of assets from the Grantor or any other person or entity.

Section 1.03 Authorized Investments. Unless otherwise approved in writing by the Beneficiary, assets deposited in the Trust Account by the Grantor and investments and reinvestments thereof, shall consist solely of cash, certificates of deposit issued by a United States bank and payable in United States legal tender, and those securities representing investments of the types specified in Part II of Chapter 625 of the Florida Statutes; provided, however that no such securities shall have been issued by a parent, a subsidiary, or an affiliate of either the Grantor or the Beneficiary (“Authorized Investments”). Any deposit or investment direction by the Grantor shall constitute a certification by the Grantor to the Beneficiary and the Trustee that the assets so deposited, or to be purchased pursuant to such investment direction, are Authorized Investments. The Trustee may rely upon such certification and shall have no independent obligation to verify that assets deposited in, or thereafter held in, the Trust Account constitute Authorized Investments.

Section 1.04 Negotiable Form. The Grantor hereby represents and warrants that all assets deposited in, or thereafter held in, the Trust Account shall be in such form that the Beneficiary or the Trustee, upon direction by the Beneficiary, may whenever necessary negotiate any such assets, without consent or signature from the Grantor or any other person or entity. The Grantor shall, upon execution of this Agreement, and from time to time thereafter as required, execute assignments or endorsements in blank of all securities or other property standing in the Grantor’s name which are delivered to the Trustee to form a part of the Trust Account so that, whenever necessary, the Trustee can negotiate any such asset without the consent or signature of the Grantor or any person or entity; any assets received by the Trustee which the Trustee determines are not in such proper negotiable form shall not be accepted by the Trustee and shall be returned to the Grantor as unacceptable.

Section 1.05 Holding of Registered Securities. The Trustee is directed to transfer into the name of nominees selected by it all registered securities from time to time held under this Agreement. The Trustee shall be responsible for the acts of its nominee with respect to such securities. Securities shall be held in a nominee name of the Trustee, by authorized officers of the Trustee to facilitate the holding and transfer of title on behalf of the Trustee. To effect the transfer of registered securities into the name of the Trustee’s nominee, to facilitate the collection of any payment thereon and to effect any other action in relation thereto or in order to meet any requirement thereof, the Grantor authorizes the Trustee to execute in the Grantor’s name, and to deliver, any instrument determined by the Trustee to be appropriate in furtherance of the purposes hereof, and to guarantee in the Trustee’s name as the signature of the Grantor any signature so placed on such instrument.

Section 1.06 Holding of Other Assets. The Trustee may utilize the services of any Federal Reserve Bank or The Depository Trust Company (“DTC”) for the purpose of maintaining security deposits in the Trust Account as described herein. All other assets, which are not in Federal Reserve book entry form or deposited at DTC, shall be held by the Trustee in bearer form or in the Trustee’s nominee name at the Trustee’s offices in certificated form within the United States.

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Section 1.07 Substitution of Trust Assets. The Trustee shall allow no substitutions of Trust Assets from the Trust Account except on written instructions from the Beneficiary; provided, however, that the Trustee may allow substitutions of Trust Assets upon written instructions from the Grantor if (i) such substitution is a substitution of Authorized Investments for other Authorized Investments or for United States legal tender and (ii) the then current market value of the Authorized Investments so substituted is not less than the then current market value of the Trust Assets withdrawn. Such written instructions from the Grantor shall be a certification by the Grantor that the immediately preceding items (i) and (ii) are satisfied. The Trustee is authorized to seek confirmation of such instructions by telephone call-back to the person or persons designated on Schedule 1 (such person verifying the instruction shall be different than the person initiating the instruction), and the Trustee may rely upon the confirmation of anyone purporting to be the person or persons so designated. The parties hereto aside from the Trustee agree that the Trustee may delay the initiation of any substitution until these security measures it deems to be necessary and appropriate have been completed and shall incur no liability on account of such delay. The Beneficiary and the Grantor agree that the Trustee will use prices furnished by standard industry pricing services in determining market values of Trust Assets in the Trust Account and further agree that the Trustee can conclusively rely on such prices. If no current price is available from standard industry pricing services for any security included among the Trust Assets, the Beneficiary and the Grantor agree that the Trustee shall be entitled to rely on written certification of the Grantor as to the market value of that security. If no current price is available from standard industry pricing services for any security included among the Trust Assets and the Grantor fails to provide written certification of the value of such security in sufficient time for the Trustee to include the price in the statement for the Trust Account, the Trustee will not be required to provide a current price for such security and shall not incur any liability by omitting a current price for such security on the statement. The Trustee shall not incur any liability in relying in good faith on market values determined in accordance with the above procedures.

Section 1.08 Investment and Reinvestment Directions.

(a) Responsibility for directing the Trustee to invest the assets in the Trust Account, and to reinvest maturing Trust Assets, interest, dividends, or the proceeds from the sale or redemption of any such Trust Assets, or any other distribution in respect thereof, shall be that of the Grantor, and, unless and until directed by the Grantor, the Trustee shall not be required to take any action with respect to the investment or reinvestment of the Trust Assets. The Trustee shall invest and reinvest the Trust Assets only as the Grantor shall direct in writing, subject to Sections 1.03 and 1.07, and the Trustee shall (1) have no liability for its reliance on said directions, and (2) have no duty or obligation under this Agreement or otherwise to confirm that investments in which it is directed to invest constitute Authorized Investments. If there are no investment instructions applicable to Trust Assets, the Trustee shall hold such amounts in cash until otherwise directed by the Grantor.

(b) Notwithstanding the requirements of Section 1.08(a), the Trustee is authorized to accept and act upon any investment direction from the Grantor delivered electronically in accordance with generally accepted and standard practices in the financial services industry, including investment instructions delivered via the SWIFT or DTC ID systems.

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(c) The Grantor may appoint one or more investment managers who shall have the authority to invest and reinvest all or a portion of the assets in the Trust Account pursuant to an investment management agreement between the Grantor and the investment manager. The Grantor is solely responsible for ensuring that all investment guidelines, restrictions and instructions that are given to the investment manager are permitted under the relevant provisions of this Agreement and applicable law, including, but not limited to, Florida Statutes. The Trustee shall have no investment authority or responsibility for the Trust Assets that the Grantor places under the authority of an investment manager. The Trustee shall not be liable for the acts or omissions or the insolvency of any such investment manager selected by the Grantor.

(d) To the extent the Trustee has advanced funds in connection with the settlement of purchases, sales, and maturities of Trust Assets, the Trustee shall have a security interest in the Trust Assets which are the subject of such purchase, sale or maturity and all the remedies of a secured party under the Uniform Commercial Code with respect to such Trust Assets until the Trustee has been repaid the amount of such advance, and the Trustee’s security interest in such Trust Assets shall be released upon repayment of such advance to the Trustee.

Section 1.09 Interest; Dividends. All interest or dividends received by the Trustee shall be deposited by the Trustee in the Trust Account and held and invested under the terms of this Agreement. To the extent the Trustee has advanced funds in connection with any interest, dividend and other income posted and credited on the payment date to the Trust Account which is not subsequently received by the Trustee, the Trustee may debit the Trust Account for this purpose. If there are no investment instructions applicable to such interest, dividends or other income, the Trustee shall hold such amounts in cash until otherwise directed by the Grantor.

Section 1.10 Withdrawals of Trust Assets.

(a) The Beneficiary shall have the right to withdraw Trust Assets from the Trust Account at any time, without notice to the Grantor, subject only to written notice from the Beneficiary to the Trustee. No other statement or document need be presented in order for the Beneficiary to withdraw Trust Assets, except the Beneficiary shall be required to acknowledge in writing to the Trustee receipt of the withdrawn Trust Assets. In addition, the Beneficiary may, at any time, designate a party to which all or part of the Trust Assets are to be transferred (the “Designee”), subject to the provisions of Section 1.11.

(b) The Parties acknowledge that this Agreement is established in conjunction with a Reinsurance Agreement covering risks other than life, annuities and accident and health. The Beneficiary shall use and apply any amounts withdrawn from the Trust Account, without diminution because of the insolvency of the Beneficiary or the Grantor, for the following purposes only:

(1) to pay or reimburse the Beneficiary for the Grantor’s share under the Reinsurance Agreement of any losses and allocated loss expenses paid by the Beneficiary but not recovered from the Grantor or for unearned premiums due to the Beneficiary, if not otherwise paid by the Grantor in accordance with the terms of such Reinsurance Agreement; or

(2) to make payment to the Grantor of any amounts held in the Trust Account that exceed 102 percent of the actual amount required to fund the Grantor’s entire Obligations (as defined below) under the Reinsurance Agreement; or

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(3) where the Beneficiary has received notification of the termination of the Trust Account, and where the Grantor’s Obligations under the Reinsurance Agreement remain unliquidated and undischarged ten (10) days prior to such termination date, to withdraw amounts equal to such Obligations and deposit such amounts in a separate account, in the name of the Beneficiary, in any United States bank or trust company, apart from its general assets, and in trust for such uses and purposes specified in items (1) and (2) immediately above as may remain executory after such withdrawal and for any period after such termination date.

For purposes of this Section 1.10(b), “Obligations” means: (i) losses and allocated loss expenses paid by the Beneficiary, but not recovered from the Grantor; (ii) reserves for losses reported and outstanding; (iii) reserves for losses incurred but not reported; (iv) reserves for allocated loss expenses; and (v) reserves for unearned premiums.

(c) The Trustee shall have no duty or responsibility whatsoever to determine that any withdrawal or transfer of Trust Assets pursuant to this Section 1.10 is in compliance herewith, or that any such withdrawn or transferred Trust Assets will be used and applied in the manner provided for by this Section 1.10 or the Reinsurance Agreement.

Section 1.11 Procedures Relating to Withdrawals

(a) If the Trust Account does not contain sufficient cash to permit withdrawal (or transfer to a Designee) of the full amount requested by the Beneficiary pursuant to Section 1.10 (a “Withdrawal Request”), the Trustee shall immediately notify the Grantor and the Beneficiary of such fact, and the Trustee shall take direction from the Grantor to settle a sale transaction and/or substitute (subject to and in accordance with Section 1.07 hereof) such Trust Assets as may be required in order to provide sufficient cash to satisfy the requirements of such Withdrawal Request. In the absence of timely direction from the Grantor to generate sufficient cash to satisfy the requirements of such Withdrawal Request, the Trustee’s sole obligation will be to comply with the Withdrawal Request then directed by the Beneficiary under this Section 1.11 to the extent cash or other Trust Assets are available.

(b) Upon receipt of a Withdrawal Request from the Beneficiary which specifies the withdrawal of specific assets from the Trust Account, the Trustee shall immediately take any and all steps necessary to transfer absolutely and unequivocally all right, title and interest in the Trust Assets specified in such Withdrawal Request to the Beneficiary or the applicable Designee, and shall deliver physical custody of such Trust Assets to or for the account of the Beneficiary or the Designee as specified in such Withdrawal Request. The Trustee shall not be liable for any actions taken in reliance upon any such Withdrawal Request or written demand of the Beneficiary for such withdrawal or transfer. The Trustee shall be protected in relying upon any written demand of the Beneficiary for such withdrawal or transfer.

(c) Except as provided in Sections 1.07, 1.08 and 1.09, no person other than the Beneficiary may direct a withdrawal or transfer of Trust Assets from the Trust Account. The Trustee shall have no independent obligation to verify that the value of the Trust Assets in the Trust Account, either before or after any withdrawal or transfer therefrom, is at any particular level or otherwise determine if it is higher or lower than the Security Amount.

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(d) Any sale or other conveyance of Trust Assets by the Trustee made pursuant to the terms of this Agreement shall bind the Grantor and the Beneficiary and shall be effective to transfer or convey all right, title and interest of the Trustee, the Grantor and the Beneficiary in and to such Trust Assets. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Trustee.

(e) The Beneficiary and the Grantor shall provide notice to the Florida Office of Insurance Regulation prior to any Trust Assets being withdrawn from the Trust Account.

Section 1.12 Notices From the Trustee.

(a) The Trustee shall furnish to the Grantor and the Beneficiary statements describing in reasonable detail all Trust Assets in the Trust Account upon its inception and thereafter at intervals no less frequent than as of the end of each calendar quarter. Each such accounting shall be given as soon as practicable.

(b) The Trustee shall furnish to the Grantor and the Beneficiary notice of any deposits to, substitutions of or permitted withdrawals from the Trust Account within ten (10) days of the occurrence of such event via a transmission method chosen by the Trustee.

Section 1.13 Corporate Actions Relating to Trust Assets; Voting Rights. The Trustee shall advise the Grantor and the Beneficiary upon receipt by the Trustee of notice of any corporate action affecting any Trust Assets in the Trust Account. The Trustee shall forward all corporate action materials, and such other materials it regularly sends to its customers relating to the securities its holds, to the Grantor, with a copy to the Beneficiary. The Trustee shall follow written instructions signed by the Grantor with regard to voting such corporate actions, and to the extent necessary, shall execute and deliver such corporate actions to the appropriate person or entity so long as any new Trust Assets or cash that results from the corporate action will be remitted to the Trust Account. If the corporate action will result in Trust Assets being delivered from the Trust Account without new Trust Assets or cash being delivered in exchange for such Trust Assets, then that delivery of Trust Assets shall be deemed a withdrawal from the Trust Account and shall require the written consent of the Beneficiary in addition to the written instructions of the Grantor. The Trustee shall accept and open all mail directed to the Grantor in care of the Trustee and shall promptly forward such mail, including all proxies and proxy materials relating to the Trust Assets in the Trust Account, to the Grantor.

Section 1.14 Income. The Grantor shall be responsible for net income of, and income taxes attributable to, the Trust Account as determined for federal or state income tax purposes (and each item of income, gain, loss and deduction entering into the computation thereof). The Grantor shall be responsible for causing to be prepared and filed in a timely fashion all tax returns of the Trust Account relating to the transactions contemplated by this Agreement, and the Grantor shall send a copy of each such tax return to the Trustee. The Trustee shall not be personally liable for any tax due and payable in connection with this Agreement.

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ARTICLE II

PROVISIONS RELATING TO THE TRUSTEE

Section 2.01 Trustee.

(a) The Trustee shall be a member of the Federal Reserve System of the United States of America or a New York State chartered bank or trust company.

(b) The Trustee shall not be the parent, subsidiary or affiliate of either the Grantor or the Beneficiary.

Section 2.02 Fees. The Trustee shall be entitled to receive as compensation for its services hereunder, fees, computed and payable quarterly, at such rates as specified in writing with the Grantor. The fee schedule may be amended from time to time without notice to the Beneficiary. The Grantor shall be solely responsible for the payment of the fees of the Trustee and all reasonable expenses of the Trustee, including reasonable fees of counsel. The Trustee shall submit to the Grantor a bill for such fees. The Trust Account shall not be utilized for payment of such fees. Notwithstanding the foregoing, the Trustee may charge the Trust Account, to the extent any amounts held therein exceed the Security Amount, with any unpaid fees and reasonable expenses of the Trustee that are not paid by the Grantor, or any out-of-pocket costs or expenses incurred by the Trustee in settling the purchase or sale of securities in accordance with this Agreement. The right to receive and collect the amounts payable pursuant to this Section 2.02 shall survive the termination of this Trust Agreement.

Section 2.03 No Obligation to Advance Funds. All payments to be made by the Trustee under this Agreement shall be made only from the Trust Account, and only to the extent that the Trustee shall have received sufficient funds from the Trust Account to make such payments in accordance with the terms hereof. The Trustee shall not be required to expend, advance, risk or disburse its own funds in the administration of the Trust Account. The Grantor and the Beneficiary agree that they will look solely to the Trust Account, to the extent Trust Assets are available for the distributions as herein provided.

Section 2.04 Liability of the Trustee. The Trustee shall be liable for the safekeeping and administration of the Trust Account in accordance with the provisions of this Agreement. The Trustee shall not be liable for any expense, cost, damage, claim, liability, fee or other obligation arising out of or related to the Trust Account or this Agreement, and shall not be responsible for any loss to the Trust Account, unless any such expense, cost, damage, claim, liability, fee, loss or other obligation is caused by the Trustee’s own negligence, willful misconduct or lack of good faith. Any loss incurred pursuant to the terms of Section 1.08 shall be borne exclusively by the Trust Account and the Grantor.

Section 2.05 Indemnification.

(a) The Trustee shall be protected in acting upon any statement, notice, direction, resolution, request, consent, order, certificate, report, appraisal, opinion, telegram, cablegram, radiogram, electronic mail, fax, or other communication believed by the Trustee to be genuine and to have been signed, sent or presented by the proper Party. All notices to the Trustee (unless otherwise provided therein) shall be deemed to be effective when received by the Trustee.

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(b) Whenever an action by the Trustee is authorized by an instruction pursuant to the provisions of this Agreement and such action is taken strictly in accordance with such instructions, the Party or Parties giving such instruction hereby agree to indemnify, jointly and severally, the Trustee, its officers, directors, and employees from and against all loses, damages, costs, and expenses, including reasonable attorneys fees and expenses, resulting from any action so taken by the Trustee, subject to Section 2.04.

(c) The Grantor hereby indemnifies the Trustee and its affiliates, successors, agents, assigns, officers, directors, shareholders, and employees for, and holds them harmless against, any loss, liability, costs or expenses (including reasonable attorneys’ fees and expenses) incurred or made without negligence, willful misconduct or lack of good faith on the part of the Trustee, arising out of or in connection with the performance of the Trustee’s obligations in accordance with the provisions of this Agreement, including any loss, liability, costs or expenses arising out of or in connection with the status of the Trustee and its nominee as the holder of record of the Trust Assets. The Grantor hereby acknowledges that the foregoing indemnities shall survive the resignation of the Trustee or the termination of this Agreement and hereby grants the Trustee a first priority lien, right of set-off and security interest in the funds in any amounts or investments in the Trust Account that exceed the Security Amount for the payment of any claim for compensation, reimbursement or indemnity hereunder; provided it is acknowledged that the obligation of the Grantor to pay the foregoing indemnities is not limited to such amounts or investments.

Section 2.06 Authorized Representatives. Except when otherwise expressly provided in this Trust Agreement, any statement, certificate, notice, direction, request, consent, approval, or other instrument to be delivered or furnished by the Grantor or the Beneficiary shall be sufficiently executed if executed in the name of the Grantor or the Beneficiary, as applicable, by such Party’s authorized representative. The Grantor and the Beneficiary shall provide the Trustee with a list of authorized representatives, initially authorized hereunder as set forth on Schedule 1, as such Schedule 1 may be amended or supplemented from time to time by delivery to the Trustee of a revised and re-executed Schedule 1. Such authorized representative of the Grantor may include a third party investment manager, if the Trustee receives documentation reasonably satisfactory to the Trustee of such investment manager’s authority to act on behalf of the Grantor. The Trustee is authorized to comply with and rely upon any notices, instructions or other communications believed by it to have been sent or given by the applicable Party or by a person or persons authorized by such Party. The Trustee shall be protected in acting upon any written statement or other instrument made by such authorized representative of the Grantor or the Beneficiary with respect to the authority conferred on him.

Section 2.07 Opinions of Counsel. The Trustee shall be entitled to rely on advice of or on an opinion of counsel concerning all matters of trust and its duty hereunder. The opinion of said counsel shall be full and complete authority and protection for the Trustee with respect to any action taken, suffered or omitted by it in good faith and in accordance with the opinion of said counsel other than with respect to the withdrawal of Trust Assets by the Beneficiary.

Section 2.08 Trust Account Records. The Trustee shall keep full and complete records of the administration of the Trust Account. The Grantor and the Beneficiary may examine such records upon reasonable notice at any time during business hours by any person duly authorized in writing by the Grantor or the Beneficiary.

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Section 2.09 No Implied Duties. The duties and obligations of the Trustee shall only be such as are specifically set forth in this Agreement, as it may from time to time be amended, and no implied duties or obligations shall be read into this Agreement against the Trustee.

Section 2.10 No Violation. No provisions of this Agreement shall require the Trustee to take any action, which, in the Trustee’s reasonable judgment, would result in any violation of this Agreement or any provision of law.

Section 2.11 Resignation.

(a) The Trustee hereby accepts the trust herein created and declared upon the terms herein expressed.

(b) The Trustee may resign, by written resignation, effective not less than ninety (90) days after receipt thereof by the Grantor and the Beneficiary, and the Grantor may remove the Trustee at any time without assigning any cause therefor, effective not less than ninety (90) days after receipt by the Trustee and the Beneficiary of notice thereof; provided, however, that no such resignation or removal shall be effective until a successor trustee has been appointed by the Grantor and approved by the Beneficiary (which approval shall not be unreasonably withheld) and has accepted such appointment, and all Trust Assets in the Trust Account have been duly transferred to such successor trustee. If no such appointment is made within the ninety (90) day period, the Trustee may file suit for the appointment of a successor trustee in a court of appropriate jurisdiction at the cost of the Grantor. In case of the appointment of a successor trustee all of the powers, rights and duties of the Trustee named herein shall survive and continue in the successor trustee and every successor trustee shall succeed to take and have all the estate, powers, rights and duties of the trustee named herein which belonged to or were held by its predecessor. A successor trustee shall have no duty, responsibility or obligation to investigate the prior acts or omissions of any prior trustee or to institute any action or file any claim against any prior trustee. In the case of the resignation or removal of the Trustee, the Trustee shall have the right to a final accounting with respect to the Trust Account.

(c) Any corporation or other entity into which the Trustee in its individual capacity may be merged or converted or with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion or consolidation to which the Trustee in its individual capacity shall be a party, or any corporation or other entity to which substantially all of the corporate trust business of the Trustee in its individual capacity may be transferred, shall, subject to the terms of paragraphs (a) and (b) of this Section 2.11, be the Trustee under this Agreement without further action.

Section 2.12 Insolvency. Notwithstanding any other provision in this Agreement, if Grantor has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, the Trustee shall comply with an order of the commissioner with regulatory oversight over the Trust Account or court of competent jurisdiction directing the Trustee to the transfer to the commissioner with regulatory oversight or other designated receiver all of the Trust Assets. Any distribution of Trust Assets shall be applied in accordance with the priority statutes and laws of the state in which the Trust Account is domiciled as applicable to the assets of insurance companies in liquidation. If the commissioner with regulatory oversight determines that the Trust Assets or any part thereof are not necessary to satisfy claims of the United States beneficiaries of the Trust Account, the Trustee will distribute the Trust Assets or any part of them in accordance with this Agreement upon the return of such Trust Assets to the Trustee.

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ARTICLE III

MISCELLANEOUS PROVISIONS

Section 3.01 Certain Definitions. For the purposes of this Trust Agreement, the following terms shall have the meanings set forth below:

“Party” shall mean the Grantor, the Beneficiary or the Trustee, when referred to individually, and collectively, as “Parties”.

“Reinsurance Agreement” shall mean the reinsurance agreement between the Grantor and the Beneficiary identified in Schedule 2 attached hereto.

“Security Amount” shall mean an amount equal to 100% of the Grantor’s outstanding obligations under the Reinsurance Agreement, less the value of the letter of credit issued by the Grantor to the Beneficiary and held by the Beneficiary. The Beneficiary shall at any time upon request by the Trustee certify to the Trustee the current Security Amount and the Trustee shall be fully protected in acting in reliance on such certification for any purpose.

Section 3.02 Term and Termination.

(a) This Agreement shall be effective as of the Effective Date and remain in full force and effect until one of the following events occurs:

(1) The Grantor and the Beneficiary mutually agree to terminate the Agreement and provide at least thirty (30) days written notice thereof to the Trustee and the Florida Office of Insurance Regulation at 200 East Gaines Street, Tallahassee, FL 32399 of a Termination Date at least sixty (60) days out. Upon receipt of such written notice, the Trustee shall, at least 30 days prior to the Termination Date, deliver written notification of such termination to the Grantor and the Beneficiary.

(2) The Security Amount is at any time less than $1,000,000 and at least sixty (60) days written notice thereof is provided to the Trustee jointly by the Grantor and the Beneficiary.

(3) The Reinsurance Agreement is terminated for any reason whatsoever, and at least sixty (60) days written notice thereof is provided to the Trustee jointly by the Grantor and the Beneficiary.

(4) Sixty (60) days after all Trust Assets in the Trust Account are withdrawn in accordance with Section 1.10.

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(b) The Trustee shall provide written notice of termination of the Trust Account to the Beneficiary, the Grantor and the Florida Office of Insurance Regulation at 200 East Gaines Street, Tallahassee, FL 32399 at least thirty (30) days, prior to the effective date of such termination (the “Termination Date”). Upon the termination of this Trust Agreement, if there are Trust Assets then remaining in the Trust Account, the Trustee shall, subject to the Beneficiary’s written consent and the Beneficiary’s right to make withdrawals in accordance with Section 1.10, transfer, pay over and deliver to the Grantor any and all of the remaining Trust Assets of the Trust Account, less all of the Trustee’s proper fees and expenses then owing in exchange for a written receipt from the Grantor. If the Beneficiary does not provide such written consent to the Trustee prior to the Termination Date, then the Trustee shall not disburse any of the Trust Assets to the Grantor on the Termination Date and shall be entitled to act pursuant to Section 2.07 and/or to resign pursuant to Section 2.11.

Section 3.03 Governing Law. The provisions of and validity and construction of this Agreement and any amendments hereto shall be governed by and construed in accordance with the internal laws of the State of Illinois with regard for its conflicts of law principles, and the Trust Account created hereunder shall be administered in accordance with the laws of said State.

Section 3.04 Amendment; Waiver. This Agreement may be amended at any time by written agreement signed by the Grantor and the Beneficiary and delivered to the Trustee; provided, however, that no such amendment shall be effective to in any way change the powers, rights or duties of the Trustee without the Trustee’s written consent. Any waiver or discharge must be in writing and signed by the Party against which the enforcement of such waiver or discharge is sought. The failure or delay of any Party at any time to require performance of any provision of this Agreement shall in no manner affect its right to enforce that provision. No single or partial waiver by any Party of any provision of this Agreement shall be construed or deemed to be a further or continuing waiver of any such provision or a waiver of any other provision.

Section 3.05 Severability. In the event any provision of this Agreement shall be held invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the remaining parts of this Agreement.

Section 3.06 Binding Effect. This Agreement shall be binding upon the successors and assigns of the parties hereto. This Agreement is not subject to any conditions or qualifications outside of this Agreement.

Section 3.07 Notices. Unless otherwise provided in this Agreement, all notices, directions, requests, demands, acknowledgments and other communications required or permitted to be given or made under the terms hereof shall be deemed to have been duly given upon receipt and made (a)(i) when delivered personally, or (ii) when sent by a nationally recognized overnight delivery service, or (iii) when sent by first class certified or registered mail return receipt requested, postage prepaid, and (b) when addressed as follows:

If to the Grantor:

Osprey Re Ltd

700 Central Ave., Suite 500

St. Petersburg, FI. 33701

Attn: Stephen Rohde

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with a copy (which shall not constitute notice) to:

Osprey Re Ltd

700 Central Ave., Suite 500

St. Petersburg, FI. 33701

Attn: Richard Widdicombe

If to the Beneficiary:

Heritage Property and Casualty Insurance Company

700 Central Ave., Suite 500

St. Petersburg, FI. 33701

Attn: Stephen Rohde

with a copy (which shall not constitute notice) to:

Heritage Property and Casualty Insurance Company

700 Central Ave., Suite 500

St. Petersburg, FI. 33701

Attn: Richard Widdicombe

If to the Trustee:

Bank of America, N.A.

Global Custody and Agency Services

135 South LaSalle Street

Mail Code IL4-135-14-01

Chicago, IL 60603

Attn: Nestor Policarpio

Each Party may from time to time designate a different address for notices, directions, requests, demands, acknowledgments and other communication by giving written notice of such change to the other Parties.

Section 3.08 Counterparts. This Agreement may be executed in any number of counter parts, each of which when so executed and delivered shall constitute but one and the same Agreement.

Section 3.09 Account Opening Procedures. The Grantor and the Beneficiary shall, as a condition of establishing this Trust Account with the Trustee, complete the attached Supplemental Documents and provide any supplemental information required by the Trustee in connection with its normal account opening procedures.

Section 3.10 Acknowledgement of Trustee Commercial Relations. The Trustee in its individual capacity, or any corporation in or with which the Trustee in its individual capacity or its stockholders may be interested or affiliated, or any officer or director of the Trustee in its individual capacity or of any other such corporation or any agent appointed by the Trustee, may have commercial relations and otherwise deal with the Grantor and the Beneficiary or with any other corporation having relations with the Grantor or the Beneficiary, and with any other corporation or entity, whether or not affiliated with the Trustee.

Section 3.11 Dispute Resolution. The parties acknowledge and agree that any Party may pursue judicial remedies at law or equity in the event of a dispute arising with respect to this Agreement.

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Section 3.12 Cooperation. Each Party shall cooperate with the other Parties and, individually or collectively, shall promptly take such further action and promptly execute such further documents, certificates, instruments, statements, filings, conveyances and agreements, as may be reasonably necessary to effectuate the purposes of this Agreement.

Section 3.13 No Third Party Beneficiaries. No person who is not a Party to this Agreement shall have standing to enforce this Agreement, nor any legal or equitable right, remedy or claim under this Agreement, nor have any third party beneficiary rights under this Agreement. Nothing contained in this Agreement is intended to confer upon any person other than the Parties and their respective successors and permitted assigns, any rights, remedies or obligations under, or by reason of this Agreement.

Section 3.14 Headings; Interpretation.

(a) The headings contained in this Agreement are for reference purposes only and are not part of this Agreement. All references herein to articles and sections shall be deemed references to such parts of this Agreement, unless the context shall otherwise require.

(b) Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine, or neuter, as the context requires. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed followed by the words “without limitation.” Any reference to number of days shall mean calendar days unless otherwise specified. Any reference to monetary amounts shall refer to United States Dollars unless otherwise specified.

(c) Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any Party, whether under any rule of construction or otherwise. No Party to this Agreement shall be considered the draftsman. This Agreement has been reviewed, negotiated and accepted by each of the Parties and their respective attorneys and shall be construed and interpreted according to the ordinary meaning of the words so as fairly to accomplish the purposes and intentions of all the Parties.

Section 3.15 USA Patriot Act; Illegal Activities.

(a) Neither the Grantor nor the Beneficiary is (or will be) a Person with whom the Trustee is restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury of the United States of America (including those Persons named on OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including, the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action, and is not and shall not engage in any dealings or transactions or otherwise be associated with such Persons. In addition, the Grantor and the Beneficiary hereby agree to provide to the Trustee any additional information that the Trustee deems necessary from time to time in order to ensure compliance with all applicable laws concerning money laundering and similar activities.

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(b) The Trustee shall have the right, in its sole discretion, to reject appointment as trustee and reject assets from the Grantor in the event that the Trustee has reason to believe that such assets violate applicable banking practices or applicable laws or regulations, including the USA Patriot Act of 2001, 31 U.S.C. § 5318. In the event of suspicious or illegal activity and pursuant to all applicable laws, regulations and practices, the Grantor and the Beneficiary will assist the Trustee and comply with any reviews, investigations and examinations directed against the Trust Assets.

[signatures on next page]

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IN WITNESS WHEREOF the parties hereto have executed this Trust Agreement as of the 22 day of May, 2013.

Osprey Re Ltd Grantor		Bank of America, N.A. Trustee
By:		By:	/s/ Illegible
Title:	President	Title:	Vice President
Heritage Property and Casualty Insurance Company Beneficiary
By:
Title:	CFO

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EX-10.9

Exhibit 10.9

PR-M Non-Bonus Assumption Agreement

THIS ASSUMPTION AGREEMENT (the “Agreement”) is executed as of the 18 day of October 2012 (“Execution Date”) by and between Heritage Property & Casualty Insurance Company a Florida licensed and authorized insurance company (“Insurer”) and Citizens Property Insurance Corporation, an entity created by the Legislature of the State of Florida pursuant to Subsection 627.351(6), and any successor entity (“CITIZENS”).

RECITALS

WHEREAS, CITIZENS desires to allow qualifying insurers to participate in the Program and remove policies from CITIZENS;

WHEREAS, Insurer has made application to CITIZENS to participate in the Program; and

WHEREAS, the Office of Insurance Regulation (“OIR”) has issued a Consent Order to this Insurer approving its Depopulation Plan.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the Parties hereto do covenant and agree as follows:

DEFINITIONS

For purposes of this Agreement:

A. “Aggregate Losses” shall mean those losses which include, but are not limited to, compensatory, punitive, bad faith and other damages arising from, and all loss adjustment expenses relating to, the adjustment or defense of any and all claims with respect to losses on policies of insurance of Citizens or Issuer.

B. “Assumed Premium” shall mean Initial Assumed Premium as adjusted by a monthly remittance and bordereau process developed by the Insurer and CITIZENS to account for policy cancellations, return premiums, policyholder requested coverage changes, and Returned Policies after the Assumption Date, with the positive and negative adjustments.

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PR-M Non-Bonus Assumption Agreement

C. “Assumption” shall mean the transference of risks from CITIZENS to the Insurer on a Removed Policy, whereby the Insurer is deemed to have directly issued the Removed Policy as provided in subparagraph (q)6 of Subsection 627.351(6) (as added by Chapter 2007-1 Laws of Florida).

D. “Assumption Date” shall mean that date upon which the Assumption of a Removed Policy occurs.

E. “Assumption Procedures” shall mean those procedures applicable to the depopulation of CITIZENS policies under subparagraphs (q) 3-6 of Subsection 627.351(6), Section 627.3511, and Section 627.3517, Florida Statutes, and this Agreement, as set forth in Exhibit C attached hereto.

F. “Independent Auditor” shall mean a certified public accountant or certified public accounting firm, licensed in the State of Florida, to perform professional auditing services and who is without bias with respect to the outcome of the audit services and with respect to the Insurer.

G. “Initial Assumed Premium” shall mean Written Premium, less the Written Premium earned by CITIZENS with respect to the Removed Policies as of the respective Assumption Dates of such policies.

H. “Initial Notice” shall mean a notice, in substantially form attached as Exhibit E, mailed to a policyholders more than thirty days prior to the Assumption Date of a Tagged Policy.

I. “Office” shall mean the Florida Office of Insurance Regulation.

J. “Parties” shall mean the Insurer and CITIZENS.

K. “Plan” shall mean the Plan of Operation of CITIZENS, as amended.

L “Rejected Policy” shall mean any Tagged Policy the offer of which has been rejected by a policyholder as provided in section 3.E. of this Agreement.

M. “Replacement Policy” shall mean a policy offered or issued by Insurer on its own policy forms, to take effect upon the expiration or cancellation of a Removed Policy.

N. “Removed Policy or “Removed Policies” shall mean a CITIZENS Policy that is assumed by the Insurer under this Agreement and is not a Rejected Policy.

O. “Program” shall mean any program for the depopulation of policies by assumption or other take-out as approved by CITIZENS and the Office pursuant to subparagraph (q)3-6 of Subsection 627.351(6).

P. “Returned Policy” shall mean a Removed Policy that is returned to Citizens as provided in section 3.F. of this Agreement.

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PR-M Non-Bonus Assumption Agreement

Q. “Subsection 627.351(6)” shall mean subsection 627.351(6), Florida Statutes (2006), which is Citizens’ enabling statute.

R. “Tagged Policies” shall mean the Policies identified by CITIZENS policy number and expiration date on Exhibit A or any supplement thereto.

S. “Written Premium” shall mean the gross written premium of CITIZENS on the Removed Policies, less policy cancellation and return premiums, as of the respective Assumption Dates of such polices. Written Premium shall not include fees or surcharges invoiced for collection by CITIZENS on the Policies, including a(n) (i) market equalization surcharge, (ii) CITIZENS policyholder surcharge, (iii) nonhomestead policyholder assessment, (iv) Citizens additional policyholder assessment, (v) regular assessment, (vi) emergency assessment, (vii) tax-exempt surcharge, (viii) reinsurance or catastrophe financing surcharge, or (ix) other fees, taxes, assessments, or surcharges imposed on CITIZENS policyholders as determined by CITIZENS.

TERMS AND CONDITIONS

1. Term of this Agreement. This Agreement shall terminate 18 months from the date it is signed. No Assumptions may occur after the Agreement terminates.

2. Agreement to Remove Policies.

A. The Insurer and CITIZENS shall, prior to an Assumption Date, agree upon those Tagged Policies eligible to be removed under the Program by the Insurer on the Assumption Date and shall set forth those Policies by CITIZENS policy number and expiration date on Exhibit A or any supplement thereto, which Exhibit A or supplement shall be attached hereto and made a part hereof by reference.

B. Pursuant to this Agreement and the Assumption Procedures, the Insurer shall remove by Assumption all of the Tagged Policies set forth on Exhibit A or supplements thereto, if available for removal on the Assumption Date pursuant to this Agreement and as approved by the Office.

3. Terms of Assumption.

A. Liabilities.

(i) With respect to a Removed Policy, the Insurer is liable and obligated to pay all Aggregate Losses occurring on or after 12:01 A.M. Eastern Standard Time on the Assumption Date of a Removed Policy and CITIZENS has no obligation or liability with respect to such Aggregate Losses.

(ii) The Insurer, in addition, agrees to assume and undertake all other obligations with respect to the Removed Policies in the manner provided herein. Such obligations include, but are not limited to, accepting that the policy as written, and assumed, may not accurately reflect the risk.

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PR-M Non-Bonus Assumption Agreement

(iii) CITIZENS shall remain liable for all Aggregate Losses for the Removed Policies occurring prior to the Assumption Date, and all Aggregate Losses for the Rejected Policies and the Returned Policies, and the Insurer shall have no responsibility with respect to such losses.

(iv) The Insurer shall comply with all applicable Assumption Procedures.

B. Notices.

(i) The cost of any notice and ancillary documentation to current CITIZENS policyholders to effectuate Assumption of the Policies shall be borne equally by the Parties, except that the cost of the Initial Notice shall be borne solely by the Insurer. If CITIZENS bears the cost for any expenditures, the Insurer agrees that its portion of such costs may be withheld from any Assumed Premium paid to Insurer by CITIZENS pursuant to this Agreement or any amendments or addenda to this Agreement. In the event CITIZENS, for whatever reason, does not withhold the Insurer’s portion of such cost from any Assumed Premium paid to Insurer, Insurer agrees to pay said sum to CITIZENS within thirty (30) days of its receipt of a billing statement from CITIZENS.

(ii) The parties shall coordinate the mailing of any documentation or notices required by this Agreement.

C. Assumed Premium.

(i) CITIZENS shall pay by wire transfer to the Insurer the Assumed Premium multiplied by 1.000 on or before the 20th day following the Assumption Date. Any subsequent amounts due to or from CITIZENS as a result of the monthly remittance and bordereau process shall be remitted to the appropriate Party within ten (10) days following the end of each month without interest.

D. Servicing of Policies. Commencing on the Assumption date of a Removed Policy:

(i) Until a Removed Policy is renewed onto an Insurers policy form, on behalf of the Insurer, CITIZENS shall process endorsements and cancellations and provide other policy services with respect to the Removed Policy.

(ii) The Insurer is responsible for offering and processing offers of renewal coverage with respect to its Replacement Policies, utilizing its approved rates and forms. Insurer is responsible for all policyholder services with respect to its Replacement Policies.

E. Rejected Policies.

Under current procedures, policyholders may reject Insurer’s offer of coverage and remain policyholders of Citizens. Insurers shall mail to policyholders the Initial Notice disclosing such option in a form substantially similar to Exhibit E.

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PR-M Non-Bonus Assumption Agreement

F. Returned Policies.

Any policyholder under a Removed Policy may return to CITIZENS within thirty days after the Assumption Date and shall be reinstated by CITIZENS. The insurer shall process all such received policyholder requests to return to CITIZENS and forward such requests, along with the appropriate unearned premium attributable to the Returned Policy, on a monthly basis to CITIZENS in an electronic format acceptable to CITIZENS. After the thirty-day period following an Assumption Date, but prior to the date on which they are renewed onto a Replacement Policy issued by the Insurer, any assumed policyholder that elects to return to CITIZENS may cancel their Policy with the Insurer, and may make application to CITIZENS for a new Policy, and shall be accepted for coverage by CITIZENS if otherwise eligible.

G. Claims Servicing.

(i) CITIZENS is solely responsible for the servicing of claims for losses occurring (a) prior to the Assumption Date under a Removed Policy, (b) at any time under a Rejected Policy, and (c) at any time under a Returned Policy.

(ii) Insurer is solely responsible for the servicing of claims for losses occurring on or after an Assumption Date under a Removed Policy. CITIZENS shall have no responsibility for payment of losses or loss adjustment expenses or for the servicing of claims with respect to losses occurring under any Removed Policy on or after the Assumption Date.

(iii) CITIZENS agrees that in instances where the sharing of information will facilitate the resolution of a claim which has occurred after the Assumption Date, and in accordance with applicable state and federal laws, it will share prior claims, underwriting and other information with the Insurer. CITIZENS reserves the right at any time to deny access to any and all such information or to seek the permission of the Policyholder for release of such information. Insurer agrees to treat all information provided to them as confidential and certifies that all such information provided to them by CITIZENS shall be used strictly to adjust a claim and for no other purpose.

(iv) With regard to losses occurring on Removed Policies after the Assumption Date, CITIZENS shall give notice promptly to the Insurer of any claim by a third party or the commencement of any legal proceedings against CITIZENS with respect to such claim. The Insurer shall have the exclusive right to control the contest and defense for any such claim incurred or litigation initiated as of the Assumption Date. The liability of the Insurer under the Removed Policies shall always follow that of CITIZENS, and any error or omission of CITIZENS or its agents shall in no way relieve the Insurer of its liability or obligations in respect of the matters affected by such errors or omissions, it being understood and agreed that the Insurer shall follow and share the same fortune as CITIZENS under all circumstances.

(v) CITIZENS agrees to assign to the Insurer any and all salvage and subrogation rights arising with respect to losses occurring on or after an Assumption Date, which CITIZENS may have with respect to the Removed Policies.

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PR-M Non-Bonus Assumption Agreement

H. Conditions to Closing.

The following conditions must be met prior to an Assumption Date:

(i) Approval by the Office of an Assumption by issuance of a Consent Order or letter, which Consent Order or letter shall be attached hereto as Exhibit B.

(ii) Satisfactory compliance with all requirements of CITIZENS for participation in the Assumption.

(iii) The mailing, more than thirty days in advance of the Assumption Date, of the Initial Notice to each putative Policyholder of a Tagged Policy.

I. Implementation.

(i) The parties hereto acknowledge that, pursuant to all applicable laws and this Agreement, CITIZENS will use its sole judgment and discretion in implementing the Assumption Procedures for participating Insurers.

(ii) Should the parties fail to agree on the Tagged Policies to be set forth on Exhibit A, no obligation shall be created pursuant to this Agreement.

(iii) The Insurer and CITIZENS agree to allow the Insurer to supplement Exhibit A from time to time with lists of additional Tagged Policies, but such additional Tagged Policies must be designated and assumed by the Insurer not later than eighteen (18) months from the initial Assumption Date. All Assumptions for each supplement to Exhibit A (e.g., Exhibit A-1, A-2, etc.) shall be in accordance with the terms and provisions of this Agreement and the Assumption Procedures. The Policies so identified in any such supplement to Exhibit A shall be treated as Removed Policies as of the date of their Assumption for the purposes of this Agreement. All such supplements to this Agreement shall be executed in writing by the Parties to effectuate and document such additional Assumptions.

(iv) CITIZENS shall not enter into an agreement with any other insurer for the removal of the Tagged Policies unless such policies are not removed by the Insurer in accordance with the terms and provisions of this Agreement, or are Rejected Policies or Returned Policies or are written new by Citizens after their removal by Insurer.

4. Conditions of Assumption.

A. The Insurer shall remove the Removed Policies by Assumption in accordance with this Agreement and the Assumption Procedures and shall offer to renew the Insurer’s Replacement Policy for a period of three (3) years subsequent to the expiration of the Removed Policy. During the aforenoted period, the Insurer’s renewals of the Replacement Policy shall be at the Insurer’s approved rates and on substantially similar terms or on such forms and rates as approved by the Office. No such Policy may be cancelled or nonrenewed by the Insurer during this period except for nonpayment of premium or in accordance with the provisions of the Consent Order attached as Exhibit B.

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PR-M Non-Bonus Assumption Agreement

B. CITIZENS shall provide, or has provided, to the Insurer, by electronic data transfer, or by such other means as is acceptable to CITIZENS, relevant information regarding the Tagged Policies available for assumption. The Insurer understands that CITIZENS cannot guarantee the reliability and accuracy of this data and the Insurer agrees that policies will not be cancelled upon discovery that this information was not accurate, unless such inaccuracy amounts to a material misrepresentation or fraud on behalf of the insured.

C. The Insurer understands that CITIZENS makes no guarantee that a Tagged Policy will be available for removal on the Assumption Date.

D. Thirty-six (36) months after the first Assumption Date, the Insurer shall provide to CITIZENS an Independent Auditor’s report performed in accordance with the instructions provided in the Audit Scope attached hereto and incorporated herein by reference as Exhibit D. At a minimum the Audit shall contain all pertinent data to verify the satisfactory completion of the Insurer’s performance pursuant to this agreement. Prior to commencing work, the Independent Auditor shall be approved by CITIZENS, which approval shall not be unreasonably withheld. All expenses of the Independent Auditor shall be paid by the Insurer. At the beginning of the Audit CITIZENS shall provide the approved auditor the procedures to be followed in meeting the requirements of Exhibit D.

E. The Insurer agrees that as of the Assumption Date, no bonus, incentive plan, or consideration beyond the assumed premium will be paid by CITIZENS for the Insurer’s removal of Removed Policies.

F. By signing this Agreement, Insurer certifies that its assumption of policies complies with Section 627.3517, Florida Statutes. It is the Insurer’s sole responsibility to contact all agents involved with the Tagged Policies in order to obtain their permission to include those particular policies in the Assumption.

5. Office Oversight. CITIZENS shall provide a fully executed copy of this Agreement to the Office. The Insurer shall respond to any requests for information by the Office regarding the proposal or this Agreement. The Insurer and CITIZENS are, and shall remain, subject to all applicable laws of the State of Florida and the supervision, rules, regulations and orders of the Office.

6. Right of Audit. CITIZENS or its representatives, upon reasonable advance written notice, shall be entitled to audit, at its own cost and expense, the relevant books and records of the Insurer during normal business hours to confirm the Insurer’s compliance with the terms and conditions of this Agreement.

7. Indemnification. Insurer shall indemnify CITIZENS, its Board of Governors, officers, agents and employees (“CITIZENS Indemnitees”) against any costs, expenses (including reasonable counsel fees and costs of litigation), claims, demands, actions, losses or liabilities that CITIZENS Indemnitees may suffer or that may be asserted or claimed against CITIZENS Indemnitees, caused by or arising directly out of any breach of this Agreement by the Insurer or Insurer’s Assumption of Removed Policies.

8. Insurer’s Continuing Status. The Insurer, during the period of this Agreement, shall remain duly licensed and authorized to transact property and casualty insurance business in the State of Florida and the lines of insurance applicable to Removed Policies and Replacement Policies.

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PR-M Non-Bonus Assumption Agreement

9. Breach, Default, Cure, Termination and Other Remedies.

A. Events of Default. A default under this Agreement occurs in the event of any material breach of an obligation, representation or undertaking of a party as set forth in this Agreement, including without limitation:

(i) (a) Insurer fails to maintain its authority and licensing to conduct its business as provided in Section 8 of this Agreement; or

(b) Insurer becomes subject to an adverse finding or an order of supervision, rehabilitation, or liquidation pursuant to Chapter 631, Florida Statutes; or

(c) The issuance of any other order of the Office or a court of competent jurisdiction that in any material form or manner limits or constrains the ability of the Insurer to engage in the business of property and casualty insurance, which results in the Insurer canceling or nonrenewing Removed Policies or Replaced Policies, other than the initial Consent Order issued by the Office in connection with this Agreement.

(d) No notice or curative period is required for a material breach occurring pursuant to this Section (i).

(ii) Insurer’s assumption of Tagged Policies, Replacement Policies, or Removed Policies at unapproved rates within one year of the Assumption Date.

(iii) The Insurer’s cancellation or non-renewal of a Removed Policy for an invalid reason. For purposes of this paragraph, an “invalid reason” shall be a cancellation of non-renewal not authorized by the terms of this Agreement or by the Consent Order attached as Exhibit B.

(iv) The Insurer fails to materially comply with Section 627.3517, Florida Statutes. In addition to any other remedies provided in this Agreement, if Section 627.3517 is violated, Insurer will be liable for any costs associated with CITIZENS re-assuming any Removed Policies, if Citizens in its sole discretion determines to do so. In addition, Insurer will be assessed a monetary penalty in the amount of $1000.00 per Policy for every Policy assumed without the permission of the agent, if Insurer fails to cure under the provision of Paragraph 9.B.

B. Cure. In the event of a default that may be cured, the non-defaulting party shall give the defaulting party written notice of the material breach or default. Failure of the defaulting party to cure the material breach or default within fifteen (15) days of the receipt of the written notice as herein provided shall constitute and be deemed a material breach and default of this Agreement unless the material breach or default is not capable of being cured within such period of time, and the defaulting party has commenced good faith efforts to cure such material breach or default within fifteen (15) days, and thereafter continues in good faith to diligently pursue curing until the material breach or default is cured to the reasonable satisfaction of the non-breaching party.

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PR-M Non-Bonus Assumption Agreement

C. Termination and Other Remedies. Should the Insurer materially breach or default in any obligation as set forth in this Agreement and not timely cure such material default and breach as set forth in this section, CITIZENS may in its sole discretion, take any or all of the follow actions:

(i) Terminate this Agreement or declare this Agreement canceled or void.

(ii) Prohibit Insurer from further assumption of policies pursuant to this Agreement or any future agreement.

(iii) Notify the Office of the violation of the Agreement and request that the Office take appropriate administrative action.

(iv) Forfeiture of up to the entire amount of any escrowed bonus instituted pursuant to Paragraph 4.E., which shall be set forth in detail in any addendum negotiated pursuant to Paragraph 4.E.

(v) In addition to any rights and remedies set forth in this Agreement, the non-defaulting party shall have all rights and remedies available at law and/or equity, including, but not being limited to, the right to specific performance, damages or injunctive relief.

D. Removed Policies. Notwithstanding any breach of this Agreement, the Insurer shall remain responsible for Removed Policies unless and until a judicial determination is rendered relieving, altering or limiting Insurer’s responsibility.

10. Attorney’s Fees. If either of the parties hereto shall bring a Court action alleging material breach of this Agreement or seeking to enforce, rescind, renounce, declare void or terminate this Agreement or any provisions thereof, the prevailing party shall be entitled to recover all of its legal expenses, including reasonable attorney’s fees and costs (including attorney’s fees and costs for any appeals taken), and to have the same awarded as part of the judgment in the proceeding in which such legal expenses and attorney’s fees and costs were incurred.

11. Benefits. This Agreement shall be binding upon the parties, their heirs, legal representatives, successors and assigns.

12. Captions. The paragraph captions as to contents of the particular paragraphs herein are inserted only for convenience and are in no way to be construed as part of this Agreement or as a limitation of the scope of the particular paragraph in which they are referred.

13. Construction of Agreement. Words of a gender used in this Agreement shall be held to include any other gender, and words in a singular number shall be held to include the plural, when the sentence so requires.

14. Entire Agreement. This Agreement contains all of the oral and/or previously written agreements, representations, and arrangements between the parties hereto concerning the Program, and all rights which the respective parties may have had under any prior written or oral agreements are hereby canceled and terminated, and all parties agree that there are no representations or warranties other than those set forth herein.

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PR-M Non-Bonus Assumption Agreement

15. Florida Law and jurisdiction. It is acknowledged that this Agreement was executed in and shall be construed and governed in accordance with the laws of the State of Florida and the rules, orders and regulations of the Office in effect at the time of the execution of this Agreement. In the event of any conflict between such laws, rules, orders and regulations and Subsection 627.351(6), the provisions of that Subsection govern, If any legal action is filed pursuant to this agreement such action must be filed in a court of competent jurisdiction in Leon County Florida.

16. Assignment. The Insurer may not assign or transfer this Agreement, or any benefit or right under this Agreement without Citizens’ prior written consent. Any change in control or ownership is deemed a transfer of this Agreement requiring Citizens’ written consent.

17. Invalidation. In the event any provision of this Agreement is determined to be invalid by a court of competent jurisdiction, the remaining provisions of this Agreement remain in full force and effect.

18. No Intermediary. The Insurer represents and warrants that it has not, and CITIZENS represents and warrants that it has not, incurred an obligation to make payment of any fees to any intermediary with respect to the obligations afforded under this Agreement.

19. Modification. No change or modification of this Agreement shall be valid unless the same shall be in writing and signed by all of the parties hereto and not disapproved by the Office.

20. Notices. Any and all notices, designations, consents, offers, acceptances, or any other communications provided for herein shall be given in writing, by hand delivery, by overnight mail, by registered or certified mail, or by facsimile transmission and shall be addressed as follows:

Notice to Insurer:

Mr. Rich Widdicombe

President/CEO

Heritage Property & Casualty Insurance Company

700 Central Avenue, Suite 304

St. Petersburg, FL 33701

Notice to CITIZENS:

Mr. Barry Gilway

President/CEO and Executive Director

CITIZENS Property Insurance Corporation

2312 Killearn Center Boulevard

Tallahassee, Florida 32309

(850) 513-3780

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PR-M Non-Bonus Assumption Agreement

Notices sent by hand delivery shall be deemed delivered on the date of hand delivery. Notices sent by overnight Insurer shall be deemed delivered on the next business day after being placed into the hands of the overnight Insurer. Notices sent by registered or certified mail shall be deemed delivered on the third business day after being deposited into the post office. Notices sent by facsimile transmission shall be deemed to be delivered on the day when sent if sent prior to 4:30 p.m. (the time being determined by the time zone of the recipient) otherwise they shall be deemed delivered on the next business day.

21. Parties Represented. The parties acknowledge that each party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto.

22. Survival of Terms. Sections 3, 4, 5, 6, 7, 10, 15, 16, 17, and 20 shall survive the termination of this Agreement.

IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of the day and year first above set forth.

Citizens Property Insurance Corporation
BY:	/s/ Barry Gilway
	Mr. Barry Gilway
	President/CEO and Executive Director

Heritage Property & Casualty Insurance Company
BY:	/s/ Rich Widdicombe
	Mr. Rich Widdicombe
	President/CEO

11

EX-10.10

Exhibit 10.10

Assumption Agreement

Heritage Property and Casualty Insurance Company

THIS ASSUMPTION AGREEMENT (the “Agreement”) is effective as of the 22^nd day of May, 2013 by and between Heritage Property and Casualty Insurance Company, a Florida licensed and authorized insurance company (“Heritage”), and Citizens Property Insurance Corporation, an entity created by the Legislature of the State of Florida pursuant to Subsection 627.351(6), Florida Statutes (“Citizens”).

WHEREAS, Citizens has adopted a depopulation program pursuant to Section 627.35l(6)(q)(3), Florida Statutes, whereby qualified insurers assume policies from Citizens (the “Program”);

WHEREAS, Heritage has applied to Citizens to participate in the Program and submitted a depopulation plan and wishes to assume policies on a direct basis from Citizens such that Citizens will no longer be responsible as to liability or, except as expressly set forth in this Agreement, servicing of such assumed policies;

WHEREAS, Citizens has approved Heritage for the Program based on Heritage meeting certain conditions and in reliance on all representations made by Heritage;

WHEREAS, the Office of Insurance Regulation (“OIR”) has issued a Consent Order dated May 17, 2013, in Case No. 135124-13-CO (the “Consent Order”) approving Heritage’s depopulation plan; and

WHEREAS, Heritage and Citizens entered into that certain Property Reinsurance Contract which is an interim 100% facultative quota share reinsurance agreement effective for losses as of January 1, 2013 (the “Quota Share Agreement”),

Citizens Property Insurance Corporation	Page 1 of 12
Heritage Property & Casualty Insurance Company

NOW THEREFORE, in consideration of the mutual rights and obligations stated herein, Citizens and Heritage agree as follows:

1. Term, Conditions.

A. Term of Agreement. This Agreement shall remain in effect until the completion of all of Heritage’s obligations as set forth herein.

B. Conditions to Agreement. The Consent Order contains certain conditions to the assumption. Heritage warrants that it has complied and agrees to maintain its compliance with such conditions for so long as required by the OIR and this Agreement.

2. Commitment to Remove Policies.

Heritage agrees to assume certain insurance policies from Citizens identified in Exhibit A to the Quota Share Agreement (the “Assumed Policies”) hereto in accordance with the terms of this Agreement, the Consent Order and the Quota Share Agreement. Heritage agrees to use its best efforts to successfully assume a minimum of 60,000 policies gross of opt-outs.

3. Terms of Assumption.

A. Liabilities. With respect to each of the Assumed Policies which do not opt-out and except as expressly stated herein, commencing on the date the Assumed Policies are transferred to Heritage (the “Assumption Date”) which date the parties anticipate to be June 28, 2013, Heritage shall be responsible for all insurer obligations related to the Assumed Policies, including but not limited to the servicing of such policies to the individual policyholders. For each Assumed Policy, Citizens shall remain liable for all losses occurring prior to the Assumption Date, except as provided in the Quota Share Agreement.

B. Notices; Costs. The parties shall coordinate the mailing of policyholder notices and documentation required to effectuate the assumption. The cost of all notices of assumption to the policyholders of the Assumed Policies shall be borne solely by Heritage. If Citizens pays any such costs on Heritage’s behalf, Citizens may withhold such costs from any funds payable to Heritage by Citizens. Otherwise, Heritage shall reimburse Citizens for such costs within thirty (30) days of Heritage’s receipt of a billing statement from Citizens.

Citizens Property Insurance Corporation	Page 2 of 12
Heritage Property & Casualty Insurance Company

C. Assumed Premium. Citizens shall direct the release of the unearned premium on the Assumed Policies less all taxes, fees, or surcharges invoiced for collection on such policies as determined by Citizens (the “Assumed Premium”) within 15 days of the end of the last opt-out period relevant to the Policies. Upon receipt of Assumed Premiums from Citizens, Heritage shall hold 5% thereof (the “Holdback”) in a segregated account until a mutually-agreed true-up date anticipated to occur in December 2013, after which true up the Holdback funds shall be released in accordance herewith. This Holdback shall be used to secure Heritage’s performance of its obligations stated in this Agreement. If Heritage is in breach of this Agreement and such breach can be cured, Heritage shall have thirty days to cure. If the breach is not cured within the thirty-day period or if the breach cannot be cured, Heritage shall pay the Holdback to Citizens. Heritage shall not use the Holdback funds for any purpose until release unless agreed by Citizens. Citizens may audit this account at any time.

D. Servicing of Policies. Commencing on the Assumption Date of an Assumed Policy:

(i) Until the first renewal date after assumption, Citizens shall process endorsements and cancellations and provide other routine policy services with respect to each of the Assumed Policies.

(ii) Heritage shall offer and process offers of renewal coverage with respect to Assumed Policies, and shall be solely responsible for all servicing activities as of the first renewal thereof.

E. Returned Policies. Any policyholder under an Assumed Policy may elect to return to Citizens (also referred to as opting out of the assumption) under the conditions stated in the Consent Order (a “Returned Policy”). Heritage shall process all timely requests to return to Citizens and forward such requests, along with all unearned premiums after the Assumption Date, received on such Returned Policies, to Citizens in a format acceptable to Citizens.

F. Claims Servicing.

(i) Citizens shall be solely responsible for the payment and servicing of claims for losses occurring prior to the Assumption Date for Assumed Policies, except as provided in the Quota Share Agreement, and for Returned Policies as of such date Heritage notifies Citizens of the return and sends the policy and claims documentation to Citizens.

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Heritage Property & Casualty Insurance Company

(ii) Heritage is solely responsible for the payment and servicing of claims for losses occurring on or after the Assumption Date for all Assumed Policies, and is further responsible for servicing Returned Policies until such time that each such policy and claim documentation has been returned to Citizens.

(iii) Citizens agrees that in instances where the sharing of information will facilitate the resolution of a claim occurring after the Assumption Date, and in accordance with applicable state and federal laws, it may share claims, underwriting and other information with Heritage.

(iv) With regard to losses occurring on Assumed Policies on or after the Assumption Date, Citizens shall give notice promptly to Heritage of any claim or the commencement of any legal proceedings against Citizens with respect to such claim. Citizens shall have the exclusive right to control the defense of any claim for loss occurring prior to the Assumption Date and Heritage shall have the exclusive right to control the defense of any claim for loss occurring on or after the Assumption Date, other than for Returned Policies and except as provided in the Quota Share Agreement.

(v) With regard to Returned Policies, Heritage shall immediately notify Citizens of any claims thereon and immediately communicate all policy and claim information to Citizens. To the extent that Heritage has incurred loss adjustment expenses on claims for Returned Policies, Citizens will reimburse Heritage for such expenses only to the extent and amount that Citizens would have paid for such expenses. All claims for such reimbursement must be made within 30 days of when such policies return to Citizens.

G. Implementation.

(i) The parties hereto acknowledge that, pursuant to all applicable laws and this Agreement, Citizens will use its sole judgment and discretion in creating and implementing the assumption procedure. There may be multiple assumption rounds which together implement the entire assumption commitment described in this Agreement.

(ii) Heritage agrees to assume the policies from Citizens as described in Paragraph 2 above between the execution hereof and June 28, 2013.

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Heritage Property & Casualty Insurance Company

(iii) Heritage agrees to use its best efforts to replace policies lost due to opt-outs as necessary to meets its minimum assumption commitment as expeditiously as possible.

(iv) Agent Appointments. Heritage represents that all of the Assumed Policies currently have an agent of record who is appointed with Heritage. Heritage agrees to comply with the requirements of Sect. 627.351(6), Florida Statutes, concerning its obligation to affected agents. Both parties acknowledge policyholder rights under Section 627.3517, Florida Statutes.

(v) Assumption Notices. At Citizens’ direction, Heritage shall provide the assumption notice to policyholders using Heritage’s letterhead with logo and signature at Heritage’s sole expense.

4. Consent Order, Quota Share Agreement.

Heritage shall comply with the terms of the Consent Order and Quota Share Agreement.

5. Heritage’s Ongoing Obligations Regarding Assumed Policies.

A. Heritage shall offer to renew each Assumed Policy for a minimum of three years from its Assumption Date. For three years beginning January 1, 2013, Heritage’s renewals of Assumed Policies shall be written on Heritage’s policy forms, offering at least the same deductible and coverage options as Citizens’ forms, and shall include an average annual rate equal to Citizens’ then-current comparable rate for such Policies, plus an increase no greater than the higher of any approved average rate increases for comparable risks granted to Citizens or 10% (the “glide path”), unless otherwise approved by the OIR due to exigent circumstances, or the policyholder voluntarily elects another policy form offered by Heritage and pays the manual premium for such coverage.

B. Notwithstanding (A) above, Heritage may cancel or non-renew an Assumed Policy for nonpayment of premium, material misstatement, fraud or full payment of policy limits, subject to its duty to replace such Assumed Policy as described below.

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Heritage Property & Casualty Insurance Company

C. Ongoing Policy Assumption Reporting. Heritage’s retention of the Assumed Policies under this Agreement is a fundamental component of the consideration for this Agreement. It is recognized that through the period of time Heritage is obligated to retain the Assumed Policies, there may be attrition for various reasons. To assure that any loss of an Assumed Policy is promptly addressed, the following reporting procedures will be followed as long as Heritage is required to retain the Assumed Policies:

(i) Citizens will establish a process whereby, on a monthly basis, Heritage identifies all Assumed Policies which have discontinued coverage with Heritage for any reason (the “Monthly Report”). This Monthly Report shall contain the policy number, former Citizens policy number (if different), TIV, zip code of insured premises, Citizens rating territory, assumption date, date of discontinuation of coverage, and reason for discontinuation of coverage for each affected policy. The Monthly Report shall be in an electronic format determined by Citizens.

(ii) Heritage will communicate the Monthly Report to Citizens on or before the fifteenth day of each month for the prior month.

(iii) Citizens will audit Heritage’s reporting of such policies no less than annually. Such audit will be solely at Heritage’s expense.

(iv) Commencing on January 1, 2013 and continuing for a period of three years, Heritage will use its best efforts to replace either through assumption of Citizens’ policies or writing of similar policies in the voluntary market each Assumed Policy which discontinues coverage with Heritage within the first 60 days of the calendar quarter following the quarter in which the Assumed Policy is reported to have discontinued coverage with Heritage.

D. Replacement of Policies. Because Heritage must retain the Assumed Policies under this Agreement for a period of three years, it is expected that there will be attrition in the Assumed Policies for a variety of reasons. Regardless of the reason for such attrition, policies lost through attrition must be replaced by Heritage in order to remain compliant with the terms of this Agreement (“Replacement Policies”). It is the express intent of this Agreement that Assumed Policies and any Replacement Policies be taken out of Citizens for the agreed three-year period. To assure that the new policy matches the policy to be replaced to the optimum extent feasible, the following progression will be used in selecting a Replacement Policy:

(i) Heritage shall identify a policy in the same Citizens account and rating territory and Florida Hurricane Catastrophe Fund premium and shall assume a Replacement Policy meeting those criteria.

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Heritage Property & Casualty Insurance Company

(ii) If Heritage is unable to identify a Citizens policy as provided above, Heritage may replace the policy with a private market policy in the same Citizens rating territory that has at least the same Florida Hurricane Catastrophe Fund premium as the policy to be replaced calculated as of the date of replacement.

Any Replacement Policy must be treated the same as the Assumed Policy it replaced, and must be offered a renewal during the remainder of the three-year period for the original Assumed Policy measured from the original Assumption Date for the policy replaced.

6. Right of Access, Inspection or Audit. Citizens or its representatives, upon one business day’s advance written notice, shall be entitled to access, review, or audit, at Heritage’s expense, the relevant books and records of Heritage during normal business hours to confirm Heritage’s compliance with the terms and conditions of this Agreement. Such audit will be at Heritage’s sole expense. To the extent necessary to carry out the terms of this Agreement, Heritage, at its sole expense, shall be entitled to access and review of Citizens’ records as they pertain to the Assumed Policies.

7. Heritage’s Continuing Obligations. Heritage, during the period of this Agreement, shall remain duly licensed and authorized as an admitted insurer to transact property and casualty insurance business in the State of Florida and to transact the lines of insurance applicable to the Assumed Policies, and in compliance with Florida statutes, rules, and regulations governing its insurance business, and with this Agreement. If Heritage becomes subject to any regulatory discipline, financial impairment or insolvency issues, Heritage must report such issues to Citizens immediately. Additionally, Heritage agrees to refrain from paying dividends or other share of profits to any person or entity for three years from the effective date of this Agreement unless the OIR expressly approves such dividend.

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Heritage Property & Casualty Insurance Company

8. Breach, Default, Cure and Other Remedies.

A. Events of Default. A default under this Agreement occurs in the event of any material breach of an obligation, representation or warranty of a party as set forth in this Agreement or the Quota Share Agreement. Further, the following regulatory events shall constitute a default:

(i) Heritage fails to maintain its authority and licensing to conduct its business as provided in this Agreement;

(ii) Heritage becomes subject to an order of administrative supervision, rehabilitation, or liquidation pursuant to Chapter 631, Florida Statutes;

(iii) The issuance of any other order of the OIR or the Department of Financial Services or a court of competent jurisdiction that in any material form or manner limits or constrains the ability of Heritage to engage in the business of property and casualty insurance, or which results in Heritage canceling or nonrenewing its non-assumed and Assumed Policies; or

(iv) Heritage violates any term or condition of the Consent Order.

B. Cure. In the event of a breach that may be cured, the non-breaching party shall give the breaching party written notice of the material breach. Failure of the defaulting party to cure such material breach or default within fifteen (15) days of the receipt of such notice shall constitute default of this Agreement. In the case of a default caused by the occurrence of a regulatory event described above, there shall be no right to cure.

C. Remedies. Should Heritage default and not timely cure such default, if applicable, Citizens may prohibit Heritage from further assumption of policies pursuant to this Agreement or any future agreement. In addition to any rights and remedies set forth in this Agreement, the non-defaulting party shall have all rights and remedies available at law and equity. Moreover, any material breach of this Agreement shall constitute a violation of the Consent Order.

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Heritage Property & Casualty Insurance Company

9. Attorney’s Fees. If either of the parties hereto brings an administrative or court action arising out of or related to this Agreement, the prevailing party shall be entitled to recover its legal expenses, including reasonable attorney’s fees and costs, including attorney’s fees and costs for any appeals taken.

10. Underwriting Information and Procedures. Heritage understands and agrees that Citizens does not warrant the accuracy of policy information provided to Citizens including without limitation that the application information provided to Citizens is accurate. Moreover, Citizens does not warrant the accuracy or completeness of underwriting procedures used in relation to the Assumed Policies.

11. Survival of Obligations. This Agreement shall be binding upon the parties, their legal representatives, successors and assigns.

12. Florida Law and Jurisdiction. It is acknowledged that this Agreement is executed in and shall be construed and governed exclusively by and in accordance with the laws of the State of Florida. The state courts in Leon County, Florida, shall have exclusive jurisdiction over any controversy between the parties arising out of or related to this Agreement.

13. Assignment. Heritage may not assign or transfer this Agreement, or any benefit or right under this Agreement without Citizens’ prior written consent. Any change in control as defined in the Florida Insurance Code of Heritage is deemed a transfer of this Agreement requiring Citizens’ written consent.

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Heritage Property & Casualty Insurance Company

14. Invalidation. In the event any provision of this Agreement is determined to be invalid by a court of competent jurisdiction, the remaining provisions of this Agreement remain in full force and effect.

15. Modification. No change or modification of this Agreement shall be valid unless the same shall be in writing and signed by all of the parties hereto and such changed terms have after submissions to, not been disapproved by the OIR. The parties agree that no oral modification of this provision is enforceable or valid. To the extent there is any conflict between the terms of this Agreement and the Quota Share Agreement, the provisions of the Quota Share Agreement shall control.

16. Notices. Any and all notices, designations, consents, offers, acceptances, or any other communications provided for herein shall be given in writing, by hand delivery, by overnight mail, by registered or certified mail, or by facsimile transmission and shall be addressed as follows:

Notice to Heritage:

Richard Widdicombe

Chief Executive Officer

Heritage Property & Casualty Insurance Company

700 Central Ave # 500

St Petersburg, FL 33701

Notice to Citizens:

Mr. Barry Gilway

President/CEO and Executive Director

Citizens Property Insurance Corporation

2312 Killearn Center Boulevard

Tallahassee, Florida 32309

(850) 513-3780

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Heritage Property & Casualty Insurance Company

Notices sent by hand delivery shall be deemed delivered on the date of hand delivery. Notices sent by overnight carrier shall be deemed delivered on the second business day after being placed into the hands of the overnight carrier. Notices sent by registered or certified mail shall be deemed delivered on the fifth business day after being deposited into the post office. Notices sent by facsimile transmission shall be deemed to be delivered on the day when sent if sent prior to 4:30 p.m. (the time being determined by the time zone of the recipient) otherwise they shall be deemed delivered on the next business day.

17. Compliance with Laws. Heritage agrees to comply with all applicable laws, regulations, and directives of the OIR.

18. Parties Represented. The parties acknowledge that each party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto.

19. Confidentiality. Heritage agrees to treat all policyholder information provided as confidential and certifies that all such information provided by Citizens shall be used strictly to adjust claims and service Assumed Policies and not for any other purpose.

20. Non-Waiver. The failure of Citizens to insist on strict compliance with this Agreement or exercise any right or remedy hereunder to enforce any provision of this Agreement shall not constitute a waiver of any rights contained herein nor stop the Parties from thereafter demanding full and complete compliance or from exercising any remedy in the future. The waiver of any breach or default shall not constitute a waiver of any different or subsequent breach or default.

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Heritage Property & Casualty Insurance Company

IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of the day and year first above set forth.

Citizens Property Insurance Corporation
BY:
	Barry J. Gilway
	President/CEO and Executive Director

Heritage Property & Casualty Insurance Company
BY:
	Richard Widdicombe
	President

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Heritage Property & Casualty Insurance Company

EX-10.11

Exhibit 10.11

PROPERTY REINSURANCE CONTRACT

Component Transaction to a Depopulation Plan

issued to

CITIZENS PROPERTY INSURANCE CORPORATION

TABLE OF CONTENTS

	Page
Art. 1: Validity of Contract		3
Art. 2: Business Covered		4
Art. 3: Territory		5
Art. 4: Term		5
Art. 5: Special Termination		6
Art. 6: Definitions		8
Art. 7: Exclusions		11
Art. 8: Payment of Losses		13
Art. 9: Reinsurance Premium		14
Art. 10: Reports and Remittances		14
Art. 11: Access to Records		15
Art. 12: Arbitration		15
Art. 13: Confidentiality		18
Art. 14: Currency		19
Art. 15: Entire Agreement		19
Art. 16: Extra-Contractual Obligations/Excess of Policy Limits		19
Art. 17: Federal Excise Tax		20
Art. 18: Governing Law		21
Art. 19: Errors and Omissions		21
Art. 20: Insolvency		21
Art. 21: Reinsurer’s Representations		22
Art. 22: Non-Waiver		23
Art. 23: Offset		23
Art. 24: Salvage and Subrogation		23
Art. 25: Severability		24
Art. 26: Tax		24
Art. 27: Reinsurance Collateral		24
Art. 28: No Third Party Rights		25
Art. 29: Costs of Transaction		25
Art. 30: Mode of Execution		26
Exhibit A: List of Policies		29

Page 2

PROPERTY REINSURANCE CONTRACT

(the “Contract”)

issued to

CITIZENS PROPERTY INSURANCE CORPORATION

Tallahassee, Florida (the “Company”)

by

HERITAGE PROPERTY AND CASUALTY INSURANCE COMPANY

(“the Reinsurer”)

The Parties hereto agree as herein below, in consideration of the mutual covenants contained in the following Articles and upon the terms and conditions set forth therein:

ARTICLE 1

VALIDITY OF CONTRACT

The occurrence of all of the events set forth in this Article 1 are conditions precedent to the validity of this Contract.

A. The Reinsurer and the Company sign this Contract and any exhibits to this Contract that require signature.

B. The Reinsurer has and maintains a Certificate of Authority from the Florida Office of Insurance Regulation that is sufficient, in the sole judgment of the Company, to permit it to carry out its responsibilities under this Contract.

C. The Reinsurer receives a ratings letter providing a financial strength rating from Demotech Financial Stability Rating of “A” or higher. The Reinsurer shall provide the Company with a copy of a ratings letter confirming such rating.

D. The Reinsurer receives an Order from the Florida Office of Insurance Regulation approving a depopulation from the Company of at least 60,000 Policies (prior to any opt outs). The Reinsurer shall provide a list of all Policies tagged in any manner as part of the depopulation plan that have not opted-out as of June 28, 2013, and shall attach such list as Exhibit A to this Contract (the “Policies”). The Reinsurer shall provide the Company with a copy of such Order promptly upon its receipt by the Reinsurer.

E. Approval of this Contract by the Board of Directors of the Company.

Prior to the commencement of the Contract, the Company in its sole discretion will acknowledge that all conditions precedent to the inception of the Contract have occurred.

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ARTICLE 2

BUSINESS COVERED

A. This Contract is to indemnify the Company in respect of liabilities that the Company may incur as a result of loss or losses pertaining to Loss Occurrences on and after January 1, 2013 with respect to the Policies, which are listed on Exhibit A attached hereto and made a part of this Contract. The Company hereby cedes to the Reinsurer and the Reinsurer accepts a 100% quota share reinsurance of the Policies that are in effect on or after the Effective Date of this Contract, with respect to losses under such Policies. Policies that opt out of the Depopulation Plan will not be assumed by the Reinsurer, and the Reinsurer shall not earn any premium on such policies. The Reinsurer’s liability under the Policies extends to all coverages under the Policies and Extra-Contractual Obligations/Excess of Policy Limits as described in Article 16 that the Company would be liable for in the absence of this Contract.

B. This cession is part of a program pursuant to which it is intended that the Policies will be transferred to the Reinsurer by an Assumption Agreement as part of a depopulation plan under Section 627.3511, Florida Statutes with such transfer to be effective no later than June 28, 2013, subject to statutory opt-out rights (the “Depopulation Plan”). Once the depopulation is completed, the Reinsurer will become the direct insurer for the Policies, replacing the Company in that capacity and will be solely liable for any Loss Occurrences under such Policies. The parties recognize that Florida law provides policy owners with certain rights to keep their policies with the Company rather than have them transferred to another insurer as part of a depopulation plan. With respect to policies that opt-out of the Depopulation Plan, the reinsurance premium ceded with respect to those opted- out Policies with all earnings thereon shall revert to the Company. All reinsurance premium on assumed Policies that do not opt-out shall be fully earned by the Reinsurer for the Term. Any losses attributable to Loss Occurrences during the Term on those Policies not transferred to the Reinsurer by June 28, 2013 shall be the sole responsibility of the Company, and to the extent any such losses have been paid by the Reinsurer, the Reinsurer shall be entitled to full reimbursement by the Company within ten (10) days of receipt by the Company of the later of (i) proof of payment by the Reinsurer of losses attributable to such Loss Occurrences and (ii) proof that the losses paid by the Reinsurer were for Loss Occurrences on Policies that the Reinsurer attempted to assume on a direct basis but the policyholders opted not to transfer the Policies.

C. The Reinsurer’s liability shall be subject in all respects to the same risks, terms, conditions, interpretations, waivers, modifications, alterations, and cancellations as the respective Policies of the Company, subject to the exclusions and the other terms, conditions, and limits of this Contract as set forth herein.

Page 4

ARTICLE 3

TERRITORY

The territorial scope of this Contract shall be limited to Policies covering property located within the territorial limits of the State of Florida, but this limitation shall not apply to moveable property if the Company’s Policies provide coverage when said moveable property is outside the territorial limits of the State of Florida.

ARTICLE 4

TERM

A. This Contract applies to losses pertaining to Loss Occurrences on all Policies subject to this Contract on the date of loss, commencing on January 1, 2013 and ending on June 28, 2013 (the “Term”), except and only to the extent the Contract is terminated or the Policies are transferred to the Reinsurer pursuant to the Depopulation Plan prior to that date.

B. Subject to the other conditions of this Contract, the Reinsurer will indemnify the Company for all losses pertaining to any Loss Occurrence which occurs during the Coverage Period, even if some of such losses, as more fully defined under the Loss Occurrence definition, occur after the Coverage Period.

C. Notwithstanding the expiration or termination of this Contract, the provisions of this Contract will continue to apply to all obligations and liabilities of the parties incurred hereunder to the extent necessary so that all such obligations and liabilities under this Contract will be fully performed and discharged.

D. If the Policies that are the subject of this Contract have been assumed on a direct basis by the Reinsurer, the premium being held in accordance with Article 9 hereof with any interest which has accrued for those Policies shall be paid over to the Reinsurer. For those policyholders of the Policies who opt out of the Reinsurer’s assumption within the time allowed by Florida law, the premium related to such Policies and the concomitant interest shall revert to the Company. As soon as a final accounting for all Policies that are the subject of this Contract has been completed, this Contract shall be terminated but in no event later than June 28, 2013.

Page 5

ARTICLE 5

SPECIAL TERMINATION

A. The Reinsurer shall notify the Company within five (5) business days of the occurrence of any of the circumstances listed in subparagraphs 1-6 of this Paragraph A. The Company shall have the sole option to terminate this Contract at any time by giving written notice to the Reinsurer in the event of the occurrence of any of the following circumstances, which termination shall be effective as of the date of the notice of termination:

1. The Reinsurer ceases to have an effective Certificate of Authority in the State of Florida, or the Certificate of Authority is conditioned in a manner that the Company determines, in its sole discretion, renders the Reinsurer incapable of performing its obligations under this Contract appropriately.

2. The Reinsurer ceases underwriting operations.

3. A state insurance department or other legal authority orders the Reinsurer to cease writing business, or the Reinsurer is placed under regulatory supervision.

4. The Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations.

5. The Reinsurer has merged with or has become acquired or controlled by any company, corporation, or individual(s) not controlling or affiliated with the Reinsurer’s operations at the inception of this Contract. The term “Control” means the acquisition of ten (10) percent or more of the Reinsurer’s or the Reinsurer’s ultimate parent entity’s voting securities, if applicable.

6. It is determined by the Company, in its sole discretion, that any of the representations made by the Reinsurer set forth in Article 21 of this Contract were untrue as of the execution date of this Contract, or became untrue at any time after the execution date of this Contract.

B. Termination shall be effected on a cut-off basis and the Reinsurer shall have no liability hereunder with respect to Loss Occurrences commencing at and after termination. In the event this Contract is terminated in accordance with the provisions of this clause, and if the Contract is loss free as of the effective date of termination, the reinsurance premium payable shall be pro rata (as to both time and participation). In the event this Contract is terminated in accordance with the provisions of this clause, and if a loss or losses are ceded to the Contract, the reinsurance premium payable shall be calculated as follows:

1. If from Contract inception until termination the incurred loss (including Loss Adjustment Expense) is greater than the reinsurance premium, the full reinsurance premium is payable to the Reinsurer from the Company.

Page 6

2. If from Contract inception until termination the incurred loss (including Loss Adjustment Expense) is below or equal to the reinsurance premium, the reinsurance premium payable to the Reinsurer from the Company shall be the greater of:

a. Incurred loss and loss expense as a ratio of the reinsurance premium multiplied by the reinsurance premium; or

b. Pro rata as to time on risk of the full reinsurance premium.

The Company shall immediately, but in no event later than ten (10) days of receipt of written notice, pay to the Company any reinsurance premium which is allocable, to the unexpired portion of the Coverage Period after the termination date of this Contract.

C. Alternatively, in the event of any of the circumstances listed in paragraph A of this Article, the Company has the sole option to require the Reinsurer to immediately fully collateralize its liabilities (the “Reinsurer’s Obligations”) as set forth in the Reinsurance Collateral Article. This Article does not apply to the Reinsurer to the extent that the Reinsurer provides full collateral under the Reinsurance Collateral Article for the obligations that it assumes.

D. Additionally, in the event any of the circumstances listed in paragraph A of this Article occurs, the Company shall have the option to commute the Reinsurer’s liability for losses incurred on Policies covered by this Contract. In the event the Company and the Reinsurer cannot agree on the commutation amount, they shall appoint an actuary to determine such amount and shall share equally any expense of the actuary. Such actuary must be a member of the Casualty Actuarial Society, and must have experience with catastrophic risks. If the Company and the Reinsurer cannot agree on an actuary, the Company and the Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. Payment by the Reinsurer of the amount of liability ascertained shall constitute a complete and final release of both parties in respect of liability arising from the Reinsurer’s participation under this Contract.

E. The Company’s option to require commutation under paragraph D above shall survive the termination or expiration of this Contract.

Page 7

F. In the event of termination, the Reinsurer will be responsible for all losses pertaining to Loss Occurrences from January 1, 2013 through the date of termination inclusive. The Company will pay, as the sole premium for the risks assumed by the Reinsurer during the period this Contract has been in effect, premium net of any surcharges, taxes and assessments as calculated in accordance with Schedule A of this Contract and the earnings on such premium for the time period this Contract was effective subject to a cap of five million ($5,000,000) dollars. Any premium funds remaining after payment to the Reinsurer under this paragraph (including interest) shall revert to the Company. For the avoidance of doubt, in the event of termination under this Article, the Company shall not owe the Reinsurer any amount as premium other than whatever payment may be made pursuant to this paragraph.

ARTICLE 6

DEFINITIONS

A. “Coverage Period” as used in this Contract means from January 1, 2013 through June 28, 2013, both days inclusive.

B. “Effective Date” as used in this Contract means the date on which the last of the requirements of paragraphs A., B. and C. of Article 1 have been fulfilled, or January 1, 2013, whichever is earlier.

C. “Loss Occurrence” as used in this Contract means the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event that occurs within the State of Florida or another area which results in loss or damage in the Territory (as defined in Article 3 of this Contract). However, the duration and extent of any one “Loss Occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event except that the term “Loss Occurrence” shall be further defined as follows:

a. As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 96 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.

b. As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous

Page 8

thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses that occur beyond such 72 consecutive hours during the continued occupation of an assured’s premises by strikers, provided such occupation commenced during the aforesaid period.

c. As regards earthquake (the epicenter of which need not necessarily be within the territorial confines referred to above) and fire following directly occasioned by the earthquake, only those earthquake losses and individual fire losses that commence during the period of 168 consecutive hours may be included in the Company’s “Loss Occurrence.”

d. As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting of frozen pipes and tanks and/or melting snow or sleet) may be included in the Company’s “Loss Occurrence.”

e. As respects firestorms, brush fires and any other fires or series of fires, irrespective of origin (except as provided in subparagraphs (a), (b) and (c) above), which spread through trees, grassland or other vegetation, all individual losses sustained by the Company which commence during any period of 168 consecutive hours within a 150-mile radius of any fixed point selected by the Company may be included in the Company’s “Loss Occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “Loss Occurrence.”

The Company may choose the date and time when any such period of consecutive hours commences provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.

Only one period of consecutive hours shall apply with respect to one event, except that, as respects those “Loss Occurrences” referred to above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “Loss Occurrences” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.

Losses arising from a combination of two or more perils as a result of the same event shall be considered as having arisen from one “Loss Occurrence.” Notwithstanding the foregoing, the hourly limitations stated above shall not be exceeded as respects the applicable perils, and no single “Loss Occurrence” shall encompass a time period greater than 168 consecutive hours.

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For the avoidance of doubt, and in accordance with Article 2 hereof, “Business Covered,” the Reinsurer agrees that this is a 100% Quota Share Reinsurance Contract, and the Reinsurer shall be obligated to pay all (100%) losses resulting from Loss Occurrences under the Policies during the Coverage Period of this Contract unless it is earlier terminated.

D. “Loss Adjustment Expense” as used in this Contract means costs and expenses incurred by the Company in connection with the investigation, appraisal, adjustment, settlement, litigation, defense or appeal of a specific claim or loss, or alleged loss, including but not limited to:

1. court costs;

2. costs of supersedes and appeal bonds;

3. monitoring counsel expenses;

4. legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, including but not limited to declaratory judgment actions;

5. post-judgment interest;

6. pre-judgment interest, unless included as part of an award or judgment;

7. a pro rata share of salaries and expenses of Company field employees, calculated in accordance with the time occupied in adjusting such loss, and expenses of other Company employees who have been temporarily diverted from their normal and customary duties and assigned to the field adjustment of losses covered by this Contract; and

8. subrogation, salvage and recovery expenses.

“Loss Adjustment Expense” does not include salaries and expenses of the Company’s employees, except as provided in subparagraph (7) above, and office and other overhead expenses.

E. “Policies” as used in this Contract means the insurance policies listed or referred to in Exhibit A to this Contract.

F. “Ultimate Net Loss” as used in this Contract means the actual loss paid by the Company or which the Company becomes liable to pay, such loss to include the sum of any prejudgment interest which is part of an award or judgment, Loss Adjustment Expense, 100% of any Extra Contractual Obligation and 100% of any Loss in Excess of Policy Limits as defined in the Extra Contractual Obligations/Excess of Policy Limits Article.

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Salvages and all recoveries, shall be first deducted from such loss to arrive at the amount of liability attaching hereunder.

All salvages, recoveries or payments recovered or received subsequent to loss settlement hereunder shall be applied as if recovered or received prior to the aforesaid settlement, and all necessary adjustments shall be made by the parties hereto.

The Company shall be deemed to be “liable to pay” a loss when a judgment has been rendered that the Company does not plan to appeal, and/or the Company has obtained a release, and/or the Company has accepted a proof of loss which the Company has determined is sufficient to justify payment.

Nothing in this Contract shall be construed to mean that losses are not recoverable hereunder until the Company’s “Ultimate Net Loss” has been ascertained.

ARTICLE 7

EXCLUSIONS

A. This Contract shall not apply to and specifically excludes:

1. All excess of loss reinsurance assumed by the Company.

2. Reinsurance assumed by the Company under obligatory reinsurance agreements, except agency reinsurance where the policies involved are to be underwritten in accordance with the underwriting standards of the Company and reissued as Company Policies at the next anniversary or expiration date.

3. Financial guarantee and insolvency.

4. Boiler and Machinery.

5. Flood and/or earthquake, when written as such.

6. Mortgage Impairment insurances and similar kinds of insurances, however styled.

7. Losses excluded by the Nuclear Incident Exclusion Clause – Physical Damage – Reinsurance – U.S.A.

8. Loss or damage caused by or resulting from war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority, but this exclusion shall not apply to loss or damage which would be covered under a standard Policy form containing a standard war exclusion clause.

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9. Liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any Insolvency Fund. “Insolvency Fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, that provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, that has been declared by any competent authority to be insolvent, or that is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.

10. Loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25% of the Company’s property loss under the applicable original Policy.

11. Loss, damage, cost or expense arising out of or in connection with any Act of Terrorism involving biological, chemical, radioactive or nuclear pollution or contamination explosion. For purposes of this exclusion, “Act of Terrorism” means an act, including but not limited to the use of force or violence and/or the threat thereof, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organization(s), committed for political, religious, ideological or similar purposes including the intention to influence any government and/or to put the public, or any section of the public, in fear.

12. Loss or damage arising out of mold, unless caused by an otherwise covered peril.

13. Difference in conditions insurance and similar kinds of insurances, however styled, insofar as they may provide coverage for losses from the following causes:

a. Flood, surface water, waves, tidal water or tidal waves, overflow of streams or other bodies of water or spray from any of the foregoing, all whether wind driven or not, except when covering property in transit; or

b. Earthquake, landslide, subsidence or other earth movement or volcanic eruption, except when covering property in transit.

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14. Losses in respect of overhead transmission and distribution lines and their supporting structures other than those on or within 500 feet of the insured premises; however, public utilities extension and/or suppliers extension and/or contingent business interruption coverage are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ Policy.

15. Any assessment or similar demand for payment related to the Florida Hurricane Catastrophe Fund.

B. If the Company inadvertently issues a Policy falling within the scope of one or more of the preceding exclusions, except as respects the exclusions set forth in subparagraphs A(7), A(8) and A(11), such Policy shall be covered hereunder, provided that the Company issues, or causes to be issued, the required notice of cancellation within 30 days after a member of the executive or managerial staff at the Company’s home office having underwriting authority in the class of business involved becomes aware that the Policy applies to excluded classes, unless the Company is prevented from canceling said Policy within such period by applicable statute or regulation, in which case such Policy shall be covered hereunder until the earliest date on which the Company may cancel.

ARTICLE 8

PAYMENT OF LOSSES

A. The Company shall advise the Reinsurer promptly of all Loss Occurrences with respect to the Policies that, in the opinion of the Company, may result in a claim for the payment of losses hereunder and of all subsequent developments thereto that may materially affect the position of the Reinsurer.

B. The Company alone and at its sole discretion shall adjust, settle or compromise all claims and losses with respect to the Policies.

C. The Company shall be the sole judge as to:

1. what shall constitute a claim or loss covered under any Policy;

2. the Company’s liability thereunder;

3. the amount or amounts that it shall be proper for the Company to pay thereunder.

D. As respects losses subject to this Contract, all loss settlements made by the Company within the terms and conditions of its underlying Policy and within the terms and conditions of this Contract, whether under strict Policy terms or by way of compromise, and 100% of any Extra Contractual Obligations and/or Loss in Excess of Policy Limits, shall be binding upon the Reinsurer.

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E. Notwithstanding any provision of this Contract, the Reinsurer agrees to make loss payments to the Company in the amount of the Ultimate Net Loss for each Loss Occurrence within ten (10) days of being notified by the Company of the amount the Reinsurer is obligated to pay under this Contract. This payment period shall not be extended or enlarged due to a requested or pending audit or review of records.

F. Any other reinsurance applicable to the Policies for which the Company paid the reinsurance premium shall inure solely to the benefit of the Company, and shall not be considered in calculating loss amounts due under this Contract.

ARTICLE 9

REINSURANCE PREMIUM

A. As reinsurance premium for the reinsurance provided hereunder, the Company shall pay 100% of the Company’s net retained premium during the Term applicable to the Policies ceded under Exhibit A with respect to the Coverage Period. As used herein, the term “net retained premium” shall mean earned premium from January 1, 2013 until the date this Contract is executed by both Parties (the “Execution Date”) and unearned premium from the Execution Date through June 28, 2013. In each case, net retained premium shall be net of taxes and surcharges.

B. The reinsurance premium will be held by the Company in a segregated account to partially collateralize the Reinsurer’s Obligations under this Contract as defined and set forth in Article 27 - Reinsurance Collateral. Such premium shall be released on or before the earlier of the 15^th day following the end of the last opt-out period related to the Policies or as otherwise provided for in this Contract.

C. The Reinsurer understands that under the Florida Insurance Law, the depopulation plan is not considered final as to any Policy until the policyholder has had the opportunity to reject the take-out offer thirty (30) days prior to the effective date of the Policy’s assumption by the Reinsurer, and the policyholder has not rejected the take-out offer within thirty (30) days after the effective date of the assumption.

ARTICLE 10

REPORTS AND REMITTANCES

A. Within seven (7) days after the close of each month that this Contract remains in effect, the Company will furnish the Reinsurer with a report summarizing the following:

1. Ceded Premium for that month.

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2. Paid Loss and Loss Adjustment Expense (net of any “cash call” amounts recovered under the provisions of the Payment of Losses Article);

3. Reserves for outstanding Loss (including reserves for IBNR loss, if any);

4. Reserves for outstanding Loss Adjustment Expense

5. Reserves for unearned premium as of the end of the month.

B. The positive balance of subparagraph 1 less subparagraph 2, net of any previously transferred net retained premium as set forth in Article 9.A. above, shall be remitted by the Company with its report. Any balance shown to be due the Company shall be remitted by the Reinsurer to the Company immediately after receipt of said report.

C. The Company will furnish the Reinsurer with any information as may be required by the Reinsurer for completion of its National Association of Insurance Commissioners’ interim and/or annual statements.

ARTICLE 11

ACCESS TO RECORDS

A. The Company and the Reinsurer or their respective, duly authorized representatives shall have the right to visit the offices of the other party to inspect, examine, audit, and verify any of the Policy, accounting or claim files (“Records”) relating to business reinsured under this Contract during regular business hours after giving five working days’ prior notice. This right shall be exercisable during the term of this Contract or after the expiration of this Contract.

B. Notwithstanding the above, the Reinsurer shall not have any right of access to the Records of the Company if it is not current in all undisputed payments due the Company. The inspecting party may obtain copies of any of the Records tendered for inspection at its own expense.

ARTICLE 12

ARBITRATION

A. Binding Arbitration. Any dispute relating in any way to the formation, scope, implementation, performance or enforcement of this Contract, or which arises out of or relates to this Contract, shall be resolved through binding arbitration in accordance with this Article. The provisions of this Article are intended to control in the event that other provisions of this Contract or of any other contract are in conflict with the provisions of this Article. No provision of this Contract or of any other contract or understanding shall result in the provisions of this Article being interpreted as being permissive or optional.

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B. Initiation of Arbitration. To initiate arbitration, a party to this Contract shall notify the other party in writing by certified or registered mail, return receipt requested, of its desire to arbitrate. The notice shall refer to this section of the Contract and state the nature of the dispute and the remedy sought. The Party to which the notice is sent shall respond to it in writing within ten (10) Business Days after receipt thereof.

C. Arbitrator Appointment Process. The dispute shall be resolved by a panel of three arbitrators. Subject to the qualification requirements set forth in the following sections, each Party shall appoint one of the arbitrators within thirty (30) days after the notification of initiation of arbitration is received. If a Party fails to appoint an arbitrator within such thirty (30) days, the other Party may appoint the second arbitrator.

D. Umpire Selection Process. Within thirty (30) calendar days after completion of their appointments, the two party-appointed arbitrators shall each provide the other the names of three candidates for the third arbitrator, who shall act as umpire, chairing the arbitration panel. Each named candidate shall be asked to complete and return, within ten (10) business days, a questionnaire similar to the Neutral Selection Questionnaire found on the ARIAS-US website. Any candidate whose responses in the questionnaire indicate a conflict of interest shall be disqualified from consideration as umpire, but may be replaced by another candidate by the party which named the disqualified candidate within ten (10) business days. If the party-appointed arbitrators do not, within twenty (20) business days of the return of the completed umpire questionnaires, agree on an umpire from among the persons named and not disqualified by the questionnaires, then within a further period of ten (10) business days, each party-named arbitrator shall strike two names from those suggested by the other party-appointed arbitrator, and the umpire shall be selected from the remaining two candidates (one of whom being designated as the “even” candidate, and one the “odd” candidate), using the first digit to the left of the decimal point of the closing Dow industrial average on the next business day (said digit being either “even” or “odd”), subject to the provisions of this Article.

E. Arbitrator Qualifications. Each of the two party-appointed arbitrators (i) shall be a current or former officer of a property and casualty insurance or reinsurance company, (ii) shall have not less than ten (10) years experience in property and casualty insurance or reinsurance, and (iii) shall not be a current or former employee, officer, or director of a Party or any of their respective affiliates. The umpire (i) shall be a current or former officer of a property and casualty insurance or reinsurance company, (ii) shall have not less than ten (10) years experience in property and casualty insurance or reinsurance, and (iii) shall not be a current or former employee, officer, or director of a Party or any of their respective affiliates. If an appointed arbitrator or umpire dies, develops a conflict of interest, becomes disabled or is otherwise unable or unwilling to serve, a substitute shall be selected in the same manner as the departing member was chosen, and the arbitration shall continue.

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F. Place and Time; Procedure. Within thirty (30) calendar days after both arbitrators and the umpire have been appointed or selected, the panel shall hold an organizational meeting to determine and notify the Parties of the procedure to be filed, what discovery will be permitted and the date of the final hearing. The arbitration hearing and any pre-hearing conferences shall be held in Tallahassee, Florida, on the date(s) fixed by the arbitrators, provided that the arbitrators may call for pre-hearing conferences by means of teleconference or videoconference as they may deem appropriate. The arbitrators shall establish pre-hearing and hearing procedures as warranted by the facts and issues of the dispute. The arbitrators may consider any relevant evidence and shall give the evidence such weight as they deem appropriate after consideration of any objections raised. Each Party may examine any witnesses who testify at the arbitration hearing. The arbitrators may allow discovery limited to that discovery reasonably necessary to facilitate the effective presentation of the dispute to the arbitrators. If the arbitrators elect to allow discovery, they shall distribute a discovery plan which shall set forth the scope of permissible discovery and the time frame during which discovery shall be conducted. All arbitration proceedings shall be conducted in the English language. The arbitrators shall base their decision on the terms and conditions of this Contract and applicable law. The arbitrators shall decide all substantive and procedural issues by majority vote. The arbitration proceedings and the outcome thereof shall be kept strictly confidential. The panel is empowered to grant interim relief as it may deem appropriate. If the reinsurance agreement is accompanied by any collateral requirements, the panel shall enforce the collateral requirements pending the final hearing.

G. Costs. Each Party shall bear the cost of its appointed arbitrator, and shall jointly and severally bear the cost of the umpire. The remaining costs of arbitration shall be allocated by the panel as part of its final award. The arbitrators may not award attorneys’ fees to any Party.

H. Award. The award of the arbitration panel shall be in writing and shall be binding upon the Parties. If either Party fails to carry out any aspect of the award, the other Party may seek enforcement of the award in a court of competent jurisdiction, as specified in this Contract, under the Federal Arbitration Act.

I. Consolidation. Any claims asserted by a Party against the other Party with respect to this Contract or any agreement related to this Contract or the reinsurance program to which this Contract pertains shall be asserted in a single arbitration proceeding, and it is agreed that if such claims are asserted in more than one arbitration proceeding, that the claims shall be consolidated in a single arbitration proceeding, to be heard by the first arbitration panel that is appropriately selected and constituted. The Parties further agree that any arbitration under this Contract shall, at the sole option of either Party, be consolidated with any other arbitration relating to the reinsurance program to which this Contract pertains.

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ARTICLE 13

CONFIDENTIALITY

A. The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Company, whether directly or through an authorized agent, in connection with the placement and execution of this Contract (“Confidential Information”) are proprietary and confidential to the Company. Confidential Information shall not include documents, information or data that the Reinsurer can show:

1. are publicly known or have become publicly known through no unauthorized act of the Reinsurer;

2. have been rightfully received from a third person without obligation of confidentiality; or

3. were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

B. Absent the written consent of the Company, the Reinsurer shall not disclose any Confidential Information to any third parties, except:

1. when required by retrocessionaires subject to the business ceded to this Contract, and when the retrocessionaires have agreed to the confidentiality provisions of this Contract;

2. when required by governmental regulators performing an audit of the Reinsurer’s records and/or financial condition;

3. when required by external auditors performing an audit of the Reinsurer’s records in the normal course of business and when the external auditors have agreed to the confidentiality provisions of this Contract; or

4. situations where required by law or court order.

Further, the Reinsurer agrees not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Contract.

C. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the Confidential Information, the Reinsurer agrees to provide the Company with written notice of same at least ten (10) days prior to such release or disclosure and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.

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D. The provisions of this Article shall extend to the officers, directors, employees and agents of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.

ARTICLE 14

CURRENCY

A. Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall mean United States Dollars.

B. For purposes of this Contract, where the Company receives premiums or pays losses in currencies other than United States Dollars, such premiums or losses shall be converted into United States Dollars at the actual rates of exchange at which these premiums or losses are entered in the Company’s books.

ARTICLE 15

ENTIRE AGREEMENT

A. This Contract including any documents expressly incorporated by reference herein, constitutes the entire agreement between the Parties and there are no understandings or agreements between the Parties other than those expressed in this Contract. No amendment, alteration, or modification of this Contract shall be valid unless made by written amendment to this Contract and duly executed by each of the Parties hereto.

B. Notwithstanding the foregoing, in the event of any dispute between the Parties to this Contract, this Article shall not, in any way, form, or manner, prevent, preclude, bar, and/or hinder the introduction and/or admission into evidence of any correspondence between the Parties regarding the intent of the Parties to this Contract, including, but not limited to, placement correspondence between the Parties and/or underwriting representations made to the Reinsurer.

ARTICLE 16

EXTRA CONTRACTUAL OBLIGATIONS/EXCESS OF POLICY LIMITS

A. This Contract shall cover 100% of Extra Contractual Obligations. “Extra Contractual Obligations” shall be defined as those liabilities not covered under any other provision of this Contract and that arise from the handling of any claim on business covered hereunder, such liabilities arising because of, but not limited to, the following: failure by the Company to settle within the Policy limit, or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action.

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B. This Contract shall cover 100% of Loss in Excess of Policy Limits. “Loss in Excess of Policy Limits” shall be defined as Loss in excess of the Policy limit, having been incurred because of, but not limited to, failure by the Company to settle within the Policy limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action.

C. An Extra Contractual Obligation and/or Loss in Excess of Policy Limits shall be deemed to have occurred on the same date as the loss covered under the Company’s Policy, and shall constitute part of the original loss.

D. For the purposes of the Loss in Excess of Policy Limits coverage hereunder, the word “Loss” shall mean any amounts for which the Company would have been legally liable to pay had it not been for the limit of the original Policy.

E. Loss Adjustment Expense in respect of Extra Contractual Obligations and/or Loss in Excess of Policy Limits shall be covered hereunder in the same manner as other Loss Adjustment Expense.

F. However, this Article shall not apply where the loss has been incurred due to fraud of a member of the Board of Directors or a corporate officer of the Company acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder.

G. In no event shall coverage be provided to the extent not permitted under law.

ARTICLE 17

FEDERAL EXCISE TAX

Reinsurer represents that it domiciled in the United States of America and is not subject to Federal Excise Tax. However, in the event that Reinsurer becomes subject thereto:

A. The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax 1% of the premium payable hereon to the extent such premium is subject to Federal Excise Tax.

B. In the event of any return of premium becoming due hereunder the Reinsurer will deduct 1% from the amount of the return and the Company or its agent should take steps to recover the Tax from the United States Government.

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ARTICLE 18

GOVERNING LAW

This Contract shall be governed by and construed according to the laws of the State of Florida without regard to its conflict of law principles.

ARTICLE 19

ERRORS AND OMISSIONS

Any inadvertent error, omission or delay in complying with the terms and conditions of this Contract shall not be held to relieve either Party hereto from any liability that would attach to it hereunder if such error, omission or delay had not been made, provided such error, omission or delay is rectified immediately upon discovery.

ARTICLE 20

INSOLVENCY

A. This Article and the laws of the State of Florida shall apply in the event of the insolvency of any company covered hereunder.

B. In the event of the insolvency of the Company, this reinsurance (or the portion of any risk or obligation assumed by the Reinsurer, if required by applicable law) shall be payable directly to the Company, or to its liquidator, receiver, conservator or statutory successor, either: (1) on the basis of the liability of the Company, or (2) on the basis of claims filed and allowed in the liquidation proceeding, whichever may be required by applicable statute, without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of a claim against the Company indicating the Policy or bond reinsured, which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the court, against the Company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.

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C. Where two or more reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Contract as though such expense had been incurred by the Company.

D. As to all reinsurance made, ceded, renewed or otherwise becoming effective under this Contract, the reinsurance shall be payable as set forth above by the Reinsurer to the Company or to its liquidator, receiver, conservator or statutory successor, except (1) where the Contract specifically provides another payee in the event of the insolvency of the Company, and (2) where the Reinsurer, with the consent of both the Florida Office of Insurance Regulation and the direct insured or insureds, has assumed such Policy obligations of the Company as direct obligations of the Reinsurer to the payees under such Policies and in substitution for the obligations of the Company to such payees. In that event only, and if the Company is entirely released from its obligations under such Policies, the Reinsurer shall pay any loss directly to payees under such Policies.

ARTICLE 21

REINSURER’S REPRESENTATIONS

The Reinsurer makes the following representations to the Company, which representations are material to the Company in entering into this Contract:

A. Heritage shall offer to renew each Assumed Policy for a minimum of three years from its Assumption Date. For three years beginning January 1, 2013, Heritage’s renewals of Assumed Policies shall be written on Heritage’s policy forms, offering at least the same deductible and coverage options as Citizens’ forms, and shall include an average annual rate equal to Citizens’ current or future comparable rate for such Policies, plus an increase no greater than the higher of any approved rate increases for comparable risks granted to Citizens or 10% (the “glide path”), unless otherwise approved by the OIR due to exigent circumstances, or the policyholder voluntarily elects another policy form offered by Heritage and pays the manual premium for such coverage B. The Reinsurer has agreed for a period of at least three (3) years from the effective date of this Contract, to maintain a volume of in-force gross written premium for the subject business lines located in Florida equal to or exceeding the amount of premium assumed from Citizens via depopulation between January 1, 2013 and June 28, 2013 that are subject to this Contract.

C. The Reinsurer has agreed to not pay any dividends whatsoever from Heritage Property and Casualty Insurance Company to any individual or entity for a period of at least three (3) years from the effective date of this Contract unless such dividend is expressly approved by the Florida Office of Insurance Regulation.

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D. This Contract is one step in a plan for Heritage Property and Casualty Insurance to depopulate the Policies written by the Company. The Depopulation Plan for these policies has been approved by the Florida Office of Insurance Regulation (“OIR”). This Contract is of limited time duration because it is intended to provide reinsurance for the Policies only until the OIR approved Depopulation Plan for such Policies is implemented. Once the Depopulation Plan is implemented, the Reinsurer will become the insurer under the Policies, this Contract will terminate as regards Policies as they are assumed and the Company will have no further responsibilities with respect to the Policies covered under this Contract. If for any reason the approved Depopulation Plan is not implemented by June 28, 2013, the depopulation effort will cease, this Contract will terminate and the Company will remain the insurer under the Policies. The Reinsurer will use its best efforts to fully implement the approved Depopulation Plan which includes assuming a minimum of 60,000 policies, gross of opt-outs. The Reinsurer will replace opted-out policies as necessary to meet this minimum commitment.

The representations contained in this Article shall survive the term of this Article and remain in effect for the stated periods in each of the respective paragraphs.

ARTICLE 22

NON-WAIVER

The failure of the Company or the Reinsurer to insist on compliance with this Contract or to exercise any right or remedy hereunder shall not constitute a waiver of any rights contained in this Contract nor prevent either Party from thereafter demanding full and complete compliance nor prevent either party from exercising such remedy in the future.

ARTICLE 23

OFFSET

The Company and the Reinsurer may offset any balance or amount due from one Party to the other under this Contract. However, in the event of the insolvency of any party hereto, offset will only be allowed in accordance with the Insolvency Article, or where in conflict with applicable law, such law will govern.

ARTICLE 24

SALVAGE AND SUBROGATION

The Reinsurer shall be credited with salvage or subrogation recoveries (i.e., reimbursement obtained or recovery made by the Company, less Loss Adjustment Expense incurred in obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder. Salvage and subrogation recoveries thereon shall always be used to reimburse the excess carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss. The Company hereby agrees to enforce its rights to salvage or subrogation whenever the costs related thereto appear, in the opinion of the Company, to be economically feasible in relation to the potential reduction in reinsurance recovery hereunder.

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ARTICLE 25

SEVERABILITY

If any provision of this Contract shall be rendered illegal or unenforceable by the laws, regulations or public policy of any jurisdiction, such provision shall be considered void in such jurisdiction, but this shall not affect the validity or enforceability of any other provision of this Contract or the validity or enforceability of such provision in any other jurisdiction.

ARTICLE 26

TAX

In consideration of the terms under which this Contract is issued, the Company undertakes not to claim any deduction of the premium hereon if it files any Canadian tax returns or if it files any tax returns, other than Income or Profits Tax returns, to any State or Territory of the United States or to the District of Columbia.

Notwithstanding the above paragraph, the Company does not intend to waive any immunities that are applicable to it. Nor is the above paragraph intended to imply that the Company believes it is subject to any tax obligation.

ARTICLE 27

REINSURANCE COLLATERAL

A. The Company agrees, in respect of its Policies falling within the scope of this Contract, that when it sets up liabilities on its books, it shall forward to the Reinsurer a statement showing the liabilities applicable to the Reinsurer. The “Reinsurer’s Obligations” shall be defined as follows:

1. unearned premium;

2. known outstanding losses that have been reported to the Reinsurer and Loss Adjustment Expense relating thereto;

3. Losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer;

4. Losses incurred but not reported and Loss Adjustment Expense relating thereto;

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5. all other amounts due from the Reinsurer to the Company under this Contract, but only to the extent the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer.

B. The Reinsurer’s obligation to pay claims under this Contract shall be collateralized by the reinsurance premiums held by the Company. The Parties agree that the Company may use such funds at any time for the following purposes:

1. to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and that has not been otherwise paid;

2. to refund the Company any amounts related to those Policies that have opted out of the Depopulation Plan. The Company will determine in its sole discretion the amounts to be refunded to it from such Policies;

3. to fund an account with the Company for the Reinsurer’s Obligations;

4. to pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.

C. If the amount drawn by the Company is in excess of the actual amount determined to be due, the Company shall promptly return to the segregated account the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.

D. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.

ARTICLE 28

NO THIRD PARTY RIGHTS

This Contract is solely between the Company and the Reinsurer, and in no instance shall any insured, claimant or other third party have any rights under or in any way with respect to this Contract.

ARTICLE 29

COSTS OF TRANSACTION

The Reinsurer agrees to reimburse the Company for the reasonable and documented actual attorneys’ fees and other costs and expenses incurred and paid by the Company related to the preparation, execution and implementation of this Contract and any related transactions which implement the Depopulation Plan. Such reimbursement will be paid by Reinsurer within 20 days of its receipt from the Company statements for such costs and expenses.

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ARTICLE 30

MODE OF EXECUTION

A. This Contract may be executed by:

1. An original written ink signature of paper documents;

2. An exchange of facsimile copies showing the original written ink signature of paper documents;

3. Electronic signature technology employing computer software and a digital signature or digitizer pen pad to capture a person’s handwritten signature in such a manner that the signature is unique to the person signing, is under the sole control of the person signing, is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed, such signature is invalidated.

B. The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this contract. This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

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IN WITNESS WHEREOF, the Company by its duly authorized representative has executed this Contract as of the date specified below:

Signed in Tallahassee, Florida, this 22^nd day of May, 2013.

CITIZENS PROPERTY INSURANCE CORPORATION

By:
	Barry Gilway
	Title: President/CEO and Executive Director

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IN WITNESS WHEREOF, the Reinsurer by its duly authorized representative has executed this Contract as of the date specified below:

Signed in Tallahassee, Florida this 22^nd day of May, 2013.

HERITAGE PROPERTY AND CASUALTY INSURANCE COMPANY

By:
Title:	President

Reference No.

Share: 100% part of 100%

Page 28

EX-10.12

Exhibit 10.12

KEVIN M. MCCARTY COMMISSIONER  

IN THE MATTER OF: CASE NO: 127438-12-CO

Application for the issuance of a Permit to

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY

to form an authorized Domestic Insurer and for the

subsequent issuance of a Certificate of Authority

                                                                                  /

CONSENT ORDER

THIS CAUSE came on for consideration upon the filing of an application with the OFFICE OF INSURANCE REGULATION (hereinafter referred to as the “OFFICE”) for the issuance of a Permit and subsequent Certificate of Authority to HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY (hereinafter referred to as “APPLICANT”) to form and operate as an authorized domestic insurer, pursuant to Sections 624.401, 624,404, 624.413, 628.051, 628.061, 628.071, and 628.081, Florida Statutes, to write the following lines of insurance coverage in this state: (0010) Fire, (0020) Allied Lines, (0040) Homeowners Multi Peril and (0170) Other Liability. Following a complete review of the entire record, and upon consideration thereof, and being otherwise fully advised in the premises, the OFFICE hereby finds, as follows:

1. The OFFICE has jurisdiction over the subject matter and of the parties herein.

2. APPLICANT has applied for and, subject to the present and continuing satisfaction of the requirements, terms, and conditions established herein, met all of the conditions precedent to the granting of a Permit to APPLICANT to form a domestic insurer in Florida, pursuant to the requirements set forth for licensure by the Florida Insurance Code.

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3. The application represents that prior to the issuance of a Certificate of Authority, APPLICANT will become a newly formed Florida stock corporation. The application further represents that APPLICANT’s issued and outstanding stock will be wholly owned by HERITAGE INSURANCE HOLDINGS, LLC (hereinafter referred to as “HERITAGE HOLDINGS”), a Florida limited liability company. The application represents no individual or entity owns ten percent (10%) or more of the issued and outstanding voting shares of HERITAGE HOLDINGS. Said representations are material to the issuance of this Consent Order.

4. Except as disclosed in the application, APPLICANT and HERITAGE HOLDINGS have made material representations that none of the incorporators, officers, and directors of APPLICANT, and none of the officers and directors of HERITAGE HOLDINGS have been found guilty of, or pleaded guilty or nolo contendere to, a felony or a misdemeanor, other than a minor traffic violation, without regard to whether a judgment of conviction was entered by the Court.

5. APPLICANT and/or HERITAGE HOLDINGS shall provide legible and complete fingerprint cards for all individuals as noted in paragraph four (4) above. If the completed fingerprint cards of any said person furnished to the OFFICE or other sources utilized by the OFFICE in its investigation process reveal that the representations made in paragraph four (4) above are inaccurate, any individual involved shall be removed as officer, director and/or shareholder of said company within thirty (30) days after notification by the OFFICE and replaced with a person or persons acceptable to the OFFICE.

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6. APPLICANT and/or HERITAGE HOLDINGS shall, within thirty (30) days of the execution of this Consent Order, submit or cause to be submitted, a background investigative report to the OFFICE that is less than one (1) year old for the Chief Financial Officer and the Executive Vice President of APPLICANT. If the background information on such individuals furnished to the OFFICE or other sources utilized by the OFFICE in its investigation process reveal that the representations made in paragraph four (4) above are inaccurate, the individual involved shall be removed within thirty (30) days after notification by the OFFICE and replaced with a person or persons acceptable to the OFFICE.

7. APPLICANT and HERITAGE HOLDINGS further represent that, except as provided in paragraphs five (5) and six (6) above, they have submitted complete information on each of the above individuals, and that if material information has not been provided to the OFFICE, any such individual(s) shall be removed within thirty (30) days of receipt of notification from the OFFICE.

8. If, upon receipt of notification from the OFFICE, pursuant to paragraphs five (5), six (6) and/or seven (7) above, APPLICANT or HERITAGE HOLDINGS does not timely take the required corrective action, APPLICANT and HERITAGE HOLDINGS agree that such failure to act would constitute an immediate danger to the public, and the OFFICE immediately may suspend, revoke, or take other administrative action as it deems appropriate upon the Permit of APPLICANT without further proceedings, pursuant to Sections 120.569(2)(n) and 120.60(6), Florida Statutes. Such failure by APPLICANT to take corrective action shall further constitute grounds to deny APPLICANT a Certificate of Authority.

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9. APPLICANT has filed an application with the OFFICE consisting of a Plan of Operation, biographical information, legal documents, and other supporting documents for the purpose of obtaining a Permit and subsequent Certificate of Authority (hereinafter referred to as “Application”). In making a determination regarding the issuance of a Permit to APPLICANT, the OFFICE has relied on the accuracy and truthfulness of the documents and reports provided by APPLICANT and/or HERITAGE HOLDINGS in this matter. APPLICANT represents that the Application filed with the OFFICE and all related submissions and responses have been reviewed by APPLICANT and/or HERITAGE HOLDINGS and that these documents, as amended to date, are complete and correct in all respects. APPLICANT and HERITAGE HOLDINGS further represent that they have disclosed and provided, or will provide to the OFFICE, copies of all current understandings and agreements relating to the formation, funding, and future transaction of insurance by APPLICANT, which will be entered into by APPLICANT, or any of its incorporators, officers, directors, or ten percent (10%) or greater shareholders for such purposes. Said representations are material to the issuance of this Consent Order.

10. APPLICANT and HERITAGE HOLDINGS affirm that all explanations, representations, and documents provided to the OFFICE in connection with APPLICANT’s Application, including all attachments and supplements thereto, are true, and all representations and requirements set forth herein are material to the issuance of this Consent Order, and fully describe all transactions, agreements, and understandings regarding the formation and operation of APPLICANT.

11. APPLICANT represents that it plans to assume approximately thirty-five thousand (35,000) residential policies from Citizens Property Insurance Corporation (“CITIZENS”) in 2012 under one or more depopulation plans. The depopulation plan(s) is/are subject to separate approval by CITIZENS and the OFFICE.

Page 4 of 21

12. APPLICANT acknowledges that entry of this Consent Order does not constitute approval by CITIZENS or the OFFICE of the APPLICANT’s depopulation plan(s). APPLICANT further acknowledges that entry of this Consent Order does not constitute a guarantee that the policies referred to in paragraph eleven (11) above will ultimately be available to APPLICANT for removal from CITIZENS, as the availability for removal may vary over time.

13. If APPLICANT is able to effectuate an assumption of policies from CITIZENS in accordance with its depopulation plan(s), APPLICANT acknowledges the following specified requirements as a condition to the granting of a Permit and subsequent Certificate of Authority to APPLICANT:

a) APPLICANT, at its own expense, shall give at least thirty (30) days advance notice to affected policyholders, which notice will inform policyholders of the need to contact APPLICANT before the removal date if the policyholder desires to stay with CITIZENS;

b) APPLICANT shall accumulate any objections, and facilitate the return of any policyholder who desires to stay in CITIZENS if that policyholder expresses the desire to stay in CITIZENS within the thirty (30) day notice period prior to the removal of the policy, or within thirty (30) days after the date of the policy removal. APPLICANT shall not require policyholders to make additional payments, nor take any action other than to express the desire to remain with CITIZENS in writing, by electronic mail, or by telephone on or before thirty (30) days following the date of their policy removal; and

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c) All communications with agents and policyholders regarding any policies to be removed from CITIZENS must be done in accordance with instructions by CITIZENS and the OFFICE. APPLICANT shall obtain prior approval from the OFFICE of any letters sent to policyholders regarding any policies to be removed from CITIZENS.

14. APPLICANT acknowledges the separate review of the depopulation plan as referenced in paragraphs eleven (11), twelve (12) and thirteen (13) above may result in the need for additional surplus and/or reinsurance as deemed appropriate by the OFFICE.

15. APPLICANT shall comply with its Plan of Operation and supporting documents as submitted with the Application. Written approval must be secured from the OFFICE prior to any material deviation from said Plan of Operation. APPLICANT shall not exceed the direct, assumed, and/or net premiums written as projected in the Pro Forma Statement for years 2012, 2013, and 2014 submitted by APPLICANT with the Application, without the prior written approval of the OFFICE,

16. HERITAGE HOLDINGS shall not make distributions to equity members for a period of three (3) years from the execution date of this Consent Order except such distributions as are required to offset its members’ tax obligations resulting from membership in HERITAGE HOLDINGS or such distributions as may be approved by the OFFICE in advance in writing.

17. APPLICANT represents that its initial capital of eighteen million U.S. Dollars ($18,000,000) in cash will be funded by HERITAGE HOLDINGS. Three hundred thousand U.S. Dollars ($300,000) of the initial capital will be used to complete the statutory deposit requirement with the Bureau of Collateral Management.

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18. Final approval and issuance of APPLICANT’s Certificate of Authority shall be granted in writing by the OFFICE at such time as the OFFICE is satisfied that APPLICANT has complied with all provisions of this Consent Order and the OFFICE has received the following documents on or before September 30, 2012, unless otherwise specified herein, and the OFFICE is satisfied that the documents meet the requisite statutory and rule requirements:

a) Proof of the deposit of seventeen million seven hundred thousand U.S. Dollars ($17,700,000) in cash into APPLICANT’s account in a Florida banking institution which is a member of the Federal Reserve System, with a written certification from the bank, signed by an officer of the bank, stating the deposited funds are not hypothecated, encumbered, or pledged in any way;

b) Proof of the deposit of three hundred thousand U.S. Dollars ($300,000) placed with the Bureau of Collateral Management, as required by Section 624.411 and Chapter 625, Part III, Florida Statutes;

c) Completed and executed National Association of Insurance Commissioners Company Code Application;

d) Certificate of Status from the Florida Secretary of State;

e) Federal Employers Identification Number (FEIN) of APPLICANT;

f) Executed and notarized copies of the Articles of Incorporation of APPLICANT;

g) Board Resolution for the adoption of the Bylaws of APPLICANT;

h) Acknowledgement that for the three (3) years immediately following the issuance of a Certificate of Authority, APPLICANT shall file with the OFFICE, on an annual basis, no later than June 1 of each year or earlier at the OFFICE’s request, a Catastrophe Loss Model with Probable Maximum Loss estimate amounts for a one hundred-year storm, or as otherwise required by the OFFICE, based upon APPLICANT’s exposure information on policies in force as of May 15 of the then current year. The OFFICE reserves the right to require

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APPLICANT to provide additional modeling at the sole discretion of the OFFICE. APPLICANT shall include in the filings any update to its exposure management plan which will identify the company’s ability to provide satisfactory financial capacity to cover the company’s exposure to catastrophic hurricane loss. APPLICANT shall also include specific plans that will limit exposure to a level within the company’s financial capacity. Based upon the OFFICE’S review of said models and plans, the OFFICE may require APPLICANT to take corrective action to cure any overexposure identified by the OFFICE, including, but not limited to, the purchase of additional reinsurance;

i) Evidence that APPLICANT’s Board of Directors has ratified the execution of this Consent Order on APPLICANT’s behalf by Richard Widdicombe, as President and one of its incorporators, and indicated its willingness to be bound by the terms, conditions, and representations stated herein; and

j) Executed copies of all agreements, with all addendums, relating to the operations and management of the company, including but not limited to, the Managing Agency Contract, the Policy Administration Services Agreement, the Agreement for Claims Services, the Claims Administration Agreement with Aplin Peer & Associates, Inc., and the Cost Allocation Agreement.

19. APPLICANT shall, within ten (10) days of receiving its Certificate of Authority, submit to the OFFICE its National Association of insurance Commissioners Company Code assignment.

20. If at the time of submitting documents for its Certificate of Authority, there are any new officers or directors of APPLICANT, or new officers, directors, or shareholders holding a ten percent (10%) or greater ownership in HERITAGE HOLDINGS, then APPLICANT shall

Page 8 of 21

file with the OFFICE biographical affidavits, fingerprint cards, authority for release of information forms, and background investigation reports for these individuals at such time. If the completed fingerprint cards of any said person furnished to the OFFICE or other sources utilized by the OFFICE in its investigation process reveal that the representations made in paragraph four (4) above are inaccurate, any Individual involved shall be removed as officer, director, and/or ten percent (10%) or greater shareholder of said company within thirty (30) days after notification by the OFFICE and replaced with a person or persons acceptable to the OFFICE.

21. APPLICANT and HERITAGE HOLDINGS acknowledge and agree that, if the OFFICE determines that the documentation specified in paragraph eighteen (18) above is not submitted as required, is incomplete, or does not meet the requisite statutory or rule requirements, the OFFICE shall hold the Certificate of Authority component of the Application in abeyance, and withdraw the Application from consideration, until such time as the required documentation has been submitted to the OFFICE for review.

22. Upon the issuance of the Certificate of Authority to APPLICANT, APPLICANT shall further comply with the following:

a) APPLICANT shall not transact business until APPLICANT’s forms and rates have been approved in writing by the OFFICE.

b) APPLICANT agrees that any managerial, administrative, or cost-sharing arrangements involving APPLICANT shall be in accordance with a formal written agreement and contain, at a minimum, the following:

(1) A requirement of monthly cash settlement of any expenses incurred for the month; and

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(2) A clear delineation of the financial boundaries of each operation. Further, APPLICANT shall not bear any occupancy expenses for space which is occupied by any other entity and, upon examination, shall be prepared to demonstrate how the occupancy cost and space is allocated among co-located entities.

c) Any agreements that APPLICANT enters into with any affiliated person, entity or related party, as defined in Statement of Statutory Accounting Principles No. 25 of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, shall be in writing and shall be submitted to the OFFICE for the OFFICE’s review and prior written approval. For purposes of this paragraph, an affiliated person or entity is any officer or director of APPLICANT, or any officer, director, or five percent (5%) or more shareholder of any of APPLICANT’s immediate, intermediate, or ultimate parents.

d) APPLICANT agrees that any arrangement or agreement with an affiliated party for the provision of administrative services shall further comply with the following requirements:

(1) APPLICANT must have the right to terminate the contract for cause;

(2) The contract shall contain a provision with respect to the underwriting or other standards pertaining to the business underwritten by APPLICANT;

(3) The contract shall be retained as part of the official records of both the affiliate and APPLICANT for the term of the contract and five (5) years afterward;

(4) Payment to the affiliate of any premiums or charges for insurance by or on behalf of the insured shall be deemed to have been received by APPLICANT, and return premiums or claims payments forwarded by APPLICANT to the affiliate shall not be deemed to have been paid to the insured or claimant until such payments are received by the insured or claimant;

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(5) The affiliate shall hold all funds collected on behalf of or for APPLICANT as well as all return premiums received from APPLICANT in a fiduciary capacity in trust accounts;

(6) The affiliate shall adhere to underwriting standards, rules, procedures and manuals setting forth the rates to be charged, and the conditions for the acceptance or rejection of risks as determined by APPLICANT;

(7) All fees and charges must be specified in the contract and they must be comparable to fees charged to any other insurer for which similar contracted services are provided by the affiliate. If the affiliate does not perform such services for other insurers, the fees charged must be reasonable in rotation to the services provided;

(8) All claims paid by the affiliate from funds collected on behalf of APPLICANT shall be paid only on drafts of, and as authorized by, APPLICANT;

(9) APPLICANT shall retain the right of continuing access to books and records maintained by the affiliate sufficient to permit APPLICANT to fulfill all of its contractual obligations to insured persons, subject to any restrictions in the written agreement between APPLICANT and the affiliate on the proprietary rights of the parties in such books and records;

(10) The affiliate shall provide written notice approved by APPLICANT to insured individuals advising them of the identity of, and relationship among, the affiliate, the policyholder, and APPLICANT; and

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(11) Any policies, certificates, booklets, termination notices, or other written communications delivered by APPLICANT to the affiliate for delivery to its policyholders shall be delivered by the affiliate promptly after receipt of instructions from APPLICANT to deliver them.

e) APPLICANT shall maintain its principal place of business in Florida and shall make available to the OFFICE complete records of its affairs. APPLICANT shall also maintain its office, records, and assets in Florida as required by Section 628.271, Florida Statutes. The physical form, if any, of the assets shall also be maintained in Florida, or in compliance with Section 628.511, Florida Statutes.

f) APPLICANT shall not expand its operations outside the state of Florida without prior written approval from the OFFICE.

g) APPLICANT shall file with the OFFICE the quarterly supplemental reports as required by Section 624.424(10), Florida Statutes.

h) APPLICANT shall file updates to its Holding Company Registration Statement as required by Section 628.801, Florida Statutes, and Rule 690-143.046, Florida Administrative Code.

i) APPLICANT shall file a completed and executed copy of any custody account agreement(s), which shall contain all of the required provisions of Rule 690-143.042, Florida Administrative Code, and investment management agreement(s).

j) APPLICANT shall maintain sufficient and adequate internal controls and supervision of any external contractor(s) providing services in connection with the insurance transactions of APPLICANT, and shall further assume responsibility for the actions of said contractor(s) as they relate to any performance under the service agreements.

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k) APPLICANT shall maintain an anti-fraud plan that complies with Section 626.9891, Florida Statutes, and Rule 69D-2, Florida Administrative Code.

l) As a condition of the OFFICE’s issuance of a Certificate of Authority to APPLICANT, APPLICANT shall maintain a deposit with the Burcau of Collateral Management, in the amount of at least three hundred thousand U.S. Dollars ($300,000), as required by Section 624.411, Florida Statutes.

m) APPLICANT shall take necessary steps to effectuate membership of APPLICANT in the associations and/or funds, as required by the following statutes, and to comply with the conditions contained in such entities’ Plan of Operation. Further, APPLICANT agrees to pay any and all assessments levied by such entities and/or applicable laws. APPLICANT acknowledges full responsibility for determining the associations and/or funds APPLICANT is required to join pursuant to, but not limited to, Sections 215.555, 627.311(4), 627.351(1), 627.351(4), 627.351(6), 627.3515, 627.6488, 631.55, 631.715, and 631.911, Florida Statutes. APPLICANT further acknowledges its statutory obligations pursuant to, but not limited to, the aforementioned statutes and will continually monitor the various associations and/or funds that it is required to join as determined by the lines of business on the Certificate of Authority of APPLICANT. Further, APPLICANT shall, based upon the lines of business on its Certificate of Authority, continually monitor and comply with statutory requirements regarding APPLICANT’s membership in the associations and funds which are identified herein or which may be established in the future.

n) APPLICANT shall submit to the OFFICE, no less than annually, all required filings, pursuant to Section 627.0645, Florida Statutes, and Rule 690-170.007, Florida Administrative Code.

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o) APPLICANT shall file with the OFFICE all premium growth reports as required by Section 624.4243, Florida Statutes, in a complete and timely manner.

p) During the five (5) years following the entry of this Consent Order, APPLICANT shall pay only those dividends that have been approved in advance and in writing by the OFFICE.

q) Any managing general agent and related contracts entered into by APPLICANT following the issuance of a Certificate of Authority shall meet the requirements of Sections 626.015(14) and 626.7451, Florida Statutes.

r) APPLICANT shall obtain written approval from the OFFICE prior to contracting with any managing general agent or charging any policy fees related to contracting with, or services provided by, a managing general agent other than that approved by the OFFICE with this Application.

s) APPLICANT shall obtain the prior written approval of the OFFICE before amending, updating, or changing any managing general agent contracts entered into by APPLICANT.

t) For the first year following APPLICANT’s receipt of a Certificate of Authority, any change in the officers and directors of APPLICANT shall be subject to the prior written approval of the OFFICE.

u) APPLICANT acknowledges that it shall not enter into a reinsurance arrangement with a captive and/or affiliated entity without the prior written approval of the OFFICE.

v) APPLICANT acknowledges that it shall maintain compliance with Section 624.404(4), Florida Statutes.

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w) Prior to effectuating an assumption of policies from CITIZENS, APPLICANT shall provide to the OFFICE fully executed reinsurance agreements or confirmation acceptable to the OFFICE at the OFFICE’S sole discretion, that all reinsurance agreements have been placed, including any Reinstatement Premium Protection Agreement(s), to the OFFICE for its review, and said agreements have been determined to meet all statutory and rule requirements. If acceptable confirmation has been submitted to the OFFICE, APPLICANT shall submit a copy of the fully-executed reinsurance agreements, including the Reinstatement Premium Protection Agreement(s), within five (5) days of receipt of same by APPLICANT.

x) At such time reinsurance coverage becomes necessary to support the 2012 voluntary writing, APPLICANT shall provide fully executed reinsurance agreements and/or related documents, including agreements relating to stub period cover, to the OFFICE for its review and said agreements shall meet all statutory and rule requirements. In addition, APPLICANT acknowledges that it shall provide any other fully executed reinsurance agreements to the OFFICE on a going-forward basis, and otherwise comply with the provisions of Section 624.610, Florida Statutes.

23. Following the placement of APPLICANT’s reinsurance program, APPLICANT shall submit to the OFFICE any necessary revision to its three-year Pro Forma Financial Statements reflective of the actual costs of reinsurance obtained if any deviation should occur from the Pro Form Financial Statements submitted with the Application. APPLICANT agrees that the OFFICE’s review of said Pro Forma Financial Statements may result in the need for additional surplus and/or other financial requirements, as deemed appropriate by the OFFICE;

24. APPLICANT shall report to the OFFICE, Property and Casualty Financial Oversight, any time that it is named as a party defendant in a class action lawsuit, within fifteen (15) days after the class is certified, and APPLICANT shall include a copy of the complaint at the time it reports the class action lawsuit to the OFFICE.

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25. APPLICANT and HERITAGE HOLDINGS further affirm that all representations are true and all representations and requirements set forth herein are material to the issuance of this Consent Order.

26. Executive Order 13224, signed by President George W. Bush on September 23, 2001, blocks the assets of terrorists and terrorist support organizations identified by the United States Department of the Treasury, Office of Foreign Assets Control. The Executive Order also prohibits any transactions by U.S. persons involved in the blocked assets and interests. The list of identified terrorists and terrorist support organizations is periodically updated at the Treasury Department’s Office of Foreign Assets Control website, http://www.treas.gov/ofac. APPLICANT shall maintain and adhere to procedures necessary to detect and prevent prohibited transactions with individuals and entities which have been identified at the Treasury Department’s Office of Foreign Assets Control website.

27. Pursuant to Section 628.071, Florida Statutes, if the OFFICE has not issued APPLICANT a Certificate of Authority within one (1) year of the date of filing this Consent Order, APPLICANT’s Permit shall no longer be valid.

28. APPLICANT and HERITAGE HOLDINGS agree that, if a Certificate of Authority has been issued to APPLICANT, failure to adhere to one or more of the terms and conditions contained herein shall result without further proceedings, in the revocation of APPLICANT’s Certificate of Authority in this state in accordance with Sections 120.569(2)(n) and 120.60(6), Florida Statutes.

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29. The deadlines set forth in this Consent Order may be extended by written approval of the OFFICE. Approval of any deadline extension is subject to statutory or administrative regulation limitations.

30. APPLICANT shall report to the OFFICE within sixty (60) days from the date of the execution of this Consent Order a certification evidencing compliance with all of the requirements of this Consent Order. Any exceptions shall be so noted and contained in the certification. Exceptions noted in the certification shall also include a timeline defining when the outstanding requirements of the Consent Order will be complete. Said certification shall be submitted to the OFFICE via electronic mail and directed to the attention of the Assistant General Counsel representing the OFFICE in this matter and as named in this Consent Order.

31. APPLICANT and HERITAGE HOLDINGS expressly waive a hearing in this matter, the making of Findings of Fact and Conclusions of Law by the OFFICE, and all further and other proceedings herein to which the parties may be entitled by law or rules of the OFFICE. APPLICANT and HERITAGE HOLDINGS hereby knowingly and voluntarily waive all rights to challenge or to contest this Consent Order, in any forum now or in the future available to it, including the right to any administrative proceeding, circuit or federal court action, or any appeal.

32. Each party to this action shall bear its own costs and fees.

33. The parties agree that this Consent Order shall be deemed to be executed when the OFFICE has executed a copy of this Consent Order bearing the signature of APPLICANT or its authorized representative and HERITAGE HOLDINGS or its authorized representative, notwithstanding the fact that the copy may have been transmitted to the OFFICE electronically. Further, APPLICANT and HERITAGE HOLDINGS agree that their signatures as affixed to this Consent Order shall be under the seal of a Notary Public.

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WHEREFORE, the agreement between HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY, HERITAGE INSURANCE HOLDINGS, LLC, and the OFFICE OF INSURANCE REGULATION, the terms and conditions of which are set forth above, is APPROVED, and the Application for the issuance of a Permit to HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY, pursuant to Sections 628.051, 628.061, 628.071, and 628.081, Florida Statutes, is APPROVED.

FURTHER, all terms and conditions contained herein are hereby ORDERED.

DONE and ORDERED this 31^st day of July, 2012.

	Kevin M. McCarty, Commissioner Office of Insurance Regulation

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By execution hereof, Richard Widdicombe, as incorporator and proposed President of the proposed insurer, HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY consents to entry of this Consent Order, agrees without reservation to all of the above terms and conditions and shall be bound by all provisions herein. The undersigned represents that he has the authority to bind HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY to the terms and conditions of this Consent Order.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY
By:
Print Name:	Richard A. Widdicombe
Title:	President

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 31^st day of July, 2012,

by	Richard Widdicombe	as	President
	(name of person)		(type of authority.... e.g. officer, trustee attorney in fact)
for	Heritage Property & Casualty
	(company name)

	(Signature of the Notary)
	Lori Ballis
	(Print, type or Stamp Commissioned Name of Notary)

Personally Known            OR Produced Identification ü

Type of Identification Produced FL Drivers License

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By execution hereof, HERITAGE INSURANCE HOLDINGS, LLC consents to entry of this Consent Order, agrees without reservation to all of the above terms and conditions and shall be bound by all provisions herein. The undersigned represents that he/she has the authority to bind HERITAGE INSURANCE HOLDINGS, LLC to the terms and conditions of this Consent Order.

	HERITAGE INSURANCE HOLDINGS, LLC
	By:
Corporate Seal	Print Name:	RICHARD A. WIDDICOMBE
	Title:	DIRECTOR

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 31^st day of July, 2012,

by	Richard Widdicombe	as	Director
	(name of person)		(type of authority.... e.g. officer, trustee attorney in fact)
for	Heritage Insurance Holdings LLC
	(company name)

	(Signature of the Notary)
	Lori Ballis
	(Print, type or Stamp Commissioned Name of Notary)

Personally Known            OR Produced Identification ü

Type of Identification Produced FL Drivers License

Page 20 of 21

COPIES FURNISHED TO:

RICHARD WIDDICOMBE, PRESIDENT

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY

301 South Bronough St., Suite 200

Tallahassee, FL 32301

TRAVIS MILLER, ESQUIRE

Radey, Thomas, Yon and Clark

301 South Bronough St., Suite 200

Tallahassee, FL 32301

E-Mail: tmiller@radeylaw.com

CATHARINE SCHOENECKER, ASSISTANT GENERAL COUNSEL

Office of Insurance Regulation

200 East Gaines Street

Tallahassee, Florida 32399-4206

Telephone: (850) 413-4169

Facsimile: (850) 922-2543

E-Mail: catharine.schoenecker@floir.com

JANE NELSON, INSURANCE EXAMINER II

Office of Insurance Regulation

200 East Gaines Street

Tallahassee, Florida 32399

Telephone: (850) 413-5282

E-Mail: jane.nelson@floir.com

Page 21 of 21

EX-10.13

Exhibit 10.13

KEVIN MCCARTY COMMISSIONER

IN THE MATTER OF: CASE NO.: 129389-12-CO

HERITAGE PROPERTY & CASUALTY

INSURANCE COMPANY

                                                                              /

CONSENT ORDER

THIS CAUSE came on for consideration as a result of HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY’S (hereinafter referred to as “HERITAGE”) proposal to remove selected personal residential policies from CITIZENS PROPERTY INSURANCE CORPORATION (hereinafter referred to as “CITIZENS”), which was submitted to the OFFICE OF INSURANCE REGULATION (hereinafter referred to as “OFFICE”) for its review on September 20, 2012. After a complete review of the entire record and upon consideration thereof, and otherwise being fully advised in the premises, the OFFICE hereby finds as follows:

1. The OFFICE has jurisdiction over the subject matter and of the parties herein.

2. CITIZENS has been established in accordance with the provisions of Section 627.351(6), Florida Statutes, as amended, to provide insurance for residential and commercial property qualified risks under circumstances specified in the Statute.

Page 1 of 12

3. The Legislature of the State of Florida has enacted Section 627.3511, Florida Statutes, to encourage and provide a means for the depopulation of CITIZENS. CITIZENS submitted and the OFFICE adopted by Order No. 94539-08 a plan of depopulation, the terms and conditions upon which this proposed Consent Order is predicated. HERITAGE shall abide by the terms and conditions of the CITIZENS depopulation plan as a condition of issuance of this Consent Order.

4. HERITAGE is a Florida domiciled property and casualty insurance company authorized to transact insurance in the State of Florida.

5. On or about September 19, 2012, HERITAGE submitted a proposal to remove selected personal residential policies from CITIZENS. The plan provides for an assumption of up to sixty thousand (60,000) multiple peril policies from CITIZENS’ personal lines account. HERITAGE plans to assume the CITIZENS’s policies over a period of time, subject to the approval by the OFFICE.

6. HERITAGE understands that the selected policies to be removed from CITIZENS on or about December 4, 2012, or at a later date approved by the OFFICE and CITIZENS, will not be subject to any incentive or bonus plan pursuant to Section 627.3511, Florida Statutes, unless and until the OFFICE approves such a plan for use by CITIZENS provided such plan would be retroactive to policies subject to this Consent Order. If the OFFICE approves a bonus plan for use by other take-out companies or for other transactions during the 2012 policy year, the bonus may be paid to HERITAGE in accordance with that plan and agreements between HERITAGE and CITIZENS. HERITAGE shall enter into appropriate agreements with CITIZENS to provide the following:

a. HERITAGE, at its own expense, shall give at least thirty (30) days advance notice to affected policyholders, which notice will inform policyholders of the need to contact HERITAGE before the removal date if the policyholder desires to stay with CITIZENS.

Page 2 of 12

b. HERITAGE shall accumulate any objections, and shall facilitate the return of any policyholder who desires to stay in CITIZENS if that policyholder expresses the desire to stay in CITIZENS within the thirty (30) day notice period prior to the removal of the policy, or within thirty (30) days after the date of the policy removal. Policyholders shall not be required to make additional payments, nor take any action other than to express the desire to remain with CITIZENS in writing, by electronic mail, or by telephone on or before thirty (30) days following the date of their policy removal.

c. All communications with agents and policyholders regarding any policies to be removed from CITIZENS must be done in accordance with instructions by CITIZENS and the OFFICE. HERITAGE shall obtain prior approval from the OFFICE of any letters sent to policyholders regarding any policies to be removed from CITIZENS.

7. HERITAGE acknowledges neither approval by CITIZENS, nor entry into this Consent Order by the OFFICE, constitutes a guarantee the above referenced policies will ultimately be available to HERITAGE for removal from CITIZENS, as the availability of policies for removal may vary over time.

8. HERITAGE shall limit its actual removal of policies from CITIZENS to the number and type of policies authorized by the OFFICE. The OFFICE will base its review on HERITAGE’S reinsurance program, catastrophe modeling, and financial statement projections, as well as the impact on policyholders. Such reinsurance program, catastrophe modeling, and financial statement profiles shall be based upon HERITAGE’S current in-force book of residential property policies, HERITAGE’S projected voluntary market writings, and actual number of policies available in CITIZENS prior to the anticipated assumption date identified by HERITAGE as satisfying it’s filed and approved underwriting guidelines.

Page 3 of 12

9. HERITAGE has submitted the proposed reinsurance documentation and financial projections for assumption of up to sixty thousand (60,000) multiple peril policies, expected to be assumed on December 4, 2012 or on subsequent dates approved by the OFFICE and CITIZENS. Each additional assumption of CITIZENS policies by HERITAGE shall be subject to advance written approval by the OFFICE.

10. HERITAGE’S acquisition of adequate reinsurance and maintenance of executed reinsurance agreements is material to the OFFICE’S review and analysis of HERITAGE’S proposal to remove selected policies from CITIZENS and to the OFFICE’S approval of the proposal.

11. HERITAGE expressly waives its rights to any hearing in this matter, the making of findings of fact and conclusions of law by the OFFICE, and all other and further proceedings herein to which it may be entitled by law or by rules of the OFFICE. HERITAGE agrees not to appeal or otherwise contest this Consent Order in any forum now, or in the future, available to it.

12. HERITAGE represents all explanations and documents made or submitted to the OFFICE as part of its proposal to remove selected policies from CITIZENS, including all attachments and supplements thereto, fully describe all transactions, agreements, and understandings relating to the removal of policies from CITIZENS by HERITAGE. However, all draft documents and non-executed agreements relating to HERITAGE’S plan shall not be deemed approved by this Consent Order until such time as executed agreements or final documents are submitted and approved by the OFFICE.

13. The parties agree this Consent Order will be deemed executed when the OFFICE has signed a copy of this Consent Order bearing signature of HERITAGE, or its authorized representative, notwithstanding the fact the copy was transmitted to the OFFICE electronically. HERITAGE agrees the signature of its representative as affixed to this Consent Order shall be under seal of a Notary Public.

Page 4 of 12

14. Each party to this action shall bear its own costs and attorney fees.

IT IS THEREFORE ORDERED that:

1. Upon consideration of the proposal to remove selected policies from CITIZENS, including its attachments, the OFFICE approves the proposal to remove selected policies from CITIZENS, subject to adherence to the terms and conditions of this Consent Order by HERITAGE.

2. The OFFICE approves the assumption of up to sixty thousand (60,000) multiple peril policies, consisting of sixty thousand (60,000) policies from the personal lines account, for the initial assumption starting on or about December 4, 2012, in accordance with the proposal to remove selected policies from CITIZENS, any agreement(s) between HERITAGE and CITIZENS, and this Consent Order.

3. Regarding all reinsurance matters relating to policies removed from CITIZENS, for a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall:

a. Maintain substantially the same reinsurance coverage as evidenced to the OFFICE in the proposal to remove selected policies from CITIZENS;

b. Submit to the OFFICE any and all replacement or additional reinsurance agreement(s), or amendment(s) to reinsurance agreement(s) that materially change the reinsurance coverage in 3.a. The agreement(s), amendment(s) or plans shall be submitted to the OFFICE for review, and approval, sixty (60) days prior to the date of effectuation of any such agreement(s) or amendment(s);

Page 5 of 12

c. Notify the OFFICE of any termination of any of its reinsurance agreements. The notification shall be made to the OFFICE in writing sixty (60) days prior to the effective date of any such termination;

d. Submit in writing to the OFFICE the proposed utilization of any substitute or additional reinsurers for the OFFICE’S review and approval sixty (60) days prior to the companies being utilized within HERITAGE’S reinsurance program. HERITAGE shall further, immediately submit to the OFFICE all information as requested which the OFFICE deems necessary for the OFFICE to complete its review; and

e. Cede reinsurance, or otherwise contract for reinsurance, only with reinsurers who are authorized and/or approved by the OFFICE, or such other reinsurers as may be approved in advance and in writing by the OFFICE. HERITAGE shall comply with the requirements of Section 624.610, Florida Statutes, with regard to all of its reinsurance arrangements.

4. For the three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall file with the OFFICE, on an annual basis no later than June 1 of each year, a catastrophe loss model with probable maximum loss estimate amounts from a one hundred-year storm based upon the exposure information gathered from all of its policies in force as of April 15 of each year which would be affected by a catastrophe. HERITAGE shall include in this filing an exposure management plan, which will identify the company’s ability to provide satisfactory financial capacity to cover the company’s exposure to catastrophic hurricane loss. The plan shall identify the reinsurance coverage and surplus levels being utilized to maintain a satisfactory financial capacity with regard to catastrophe exposure. HERITAGE shall also include within the plan specific actions intended to limit catastrophic exposures to the

Page 6 of 12

company’s financial capacity. Based upon the OFFICE’s review of the models and plans, HERITAGE may be required at the OFFICE’s sole discretion to take corrective action to cure any overexposure identified by the OFFICE. Such action may also include obtaining additional amounts of reinsurance coverage as directed by the OFFICE or suspend writing of any additional business, including the CITIZENS policies;

5. Any and all policies removed from CITIZENS by HERITAGE shall provide coverage substantially equivalent to that afforded by CITIZENS. Any and all policies removed from CITIZENS by HERITAGE, pursuant to its proposal to remove selected policies from CITIZENS, must be renewable by the policyholder at approved rates and upon the same terms at the first such renewal onto HERITAGE’S policy form, unless such policies are canceled by HERITAGE for a lawful reason;

6. At the time HERITAGE removes any policy of insurance from CITIZENS, HERITAGE shall either obtain a new policy application from each affected policyholder or maintain in its files a copy of the policyholder’s application on file with CITIZENS. If HERITAGE chooses the latter option, HERITAGE shall nevertheless be required to obtain a new policy application from each affected policyholder no later than twenty-four (24) months from the effective date of any policy of insurance removed from CITIZENS. HERITAGE may not initiate any retrospective increase in rates or the premium or any retrospective decrease in coverage provided under the assumed CITIZENS policy (if applicable) as a result of the information obtained from or through the new policy applications;

7. For a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall abide by the proposal to remove selected policies from CITIZENS in all material respects. Further, HERITAGE shall abide by all terms and provisions of any agreement(s) entered into with CITIZENS; and;

Page 7 of 12

8. Regarding required documentation to be maintained by HERITAGE relating to policies removed from CITIZENS:

a. HERITAGE is required to track all agents, as well as the related policy information, who have declined to participate in the takeout process. This information shall be submitted to Citizens by the deadline published in the Citizens Assumption Calendar. Citizens will then mail out notices informing the policyholders of the agent’s declination. This will allow the affected policyholders the opportunity to address the declination with their agent and possibly receive their agent’s approval in time to be included in the current takeout;

b. HERITAGE is required to track all agents, as well as the related policy information, who after discussing with the policyholder, decide to participate in the takeout process and submit this information to Citizens by the deadline published in the revised 2012 Assumption Calendar;

c. HERITAGE is required to keep a record of all agents who decline participation along with an explanation for the declination; and

d. When contacting an agent regarding a potential takeout policy, HERITAGE is required to provide each agent with the policy form to be used, appointment contract and a copy of HERITAGE’S most currently available financial statement.

9. HERITAGE is required to comply with the following requirements when soliciting an agent’s permission to participate in the assumption process:

a. HERITAGE must utilize email and at least one other method for contact (i.e. call, fax or regular mail);

Page 8 of 12

b. HERITAGE must send out a direct solicitation to the agent of record and copy the agency principal;

c. HERITAGE must provide all agents a minimum of 14 days to review the solicitation. This will allow agents adequate time to research the company and make an informed decision;

d. HERITAGE must provide a copy of the appointment contract. HERITAGE may opt to provide the agent a link to its website containing the required information;

e. HERITAGE must provide a copy of the policy form. HERITAGE may opt to provide the agent a link to its website containing the required information;

f. HERITAGE must provide a chart identifying any differences in coverage from Citizens, which will help both the agent and the policyholder in making an informed decision;

g. HERITAGE must provide a list of policies specific to the agent that it would like to assume;

h. HERITAGE must provide a contact number of qualified staff to answer agent’s questions; and

i. HERITAGE must provide an overview of its strategy for handling claims (cat and non-cat);

10. Should the OFFICE determine HERITAGE has failed to materially comply with terms of this Consent Order, the proposal to remove selected policies from CITIZENS, including its attachments, and amendments thereto as submitted to the OFFICE, or terms of any agreement(s) with CITIZENS, HERITAGE shall, upon receipt of notice of such material

Page 9 of 12

non-compliance, have sixty (60) days to cure its material non-compliance. In the event HERITAGE fails to cure any such material non-compliance within the sixty (60) day period, HERITAGE expressly agrees the OFFICE may enter an order directing it to immediately cease writing personal lines residential property coverage or other lines of insurance within the State of Florida, or imposing such other sanctions authorized by statute, rule or restrictions, as may be deemed appropriate by the OFFICE.

WHEREFORE, the proposal to remove up to sixty thousand (60,000) multiple peril policies, consisting of sixty thousand (60,000) policies from the personal lines account, for the initial assumption starting on or about December 4, 2012, subject to the terms and conditions of this Consent Order, are hereby APPROVED.

FURTHER, all terms and conditions contained herein are hereby ORDERED.

DONE and ORDERED this 17TH day of OCTOBER, 2012.

	Kevin M. McCarty, Commissioner Office of Insurance Regulation

Page 10 of 12

By execution hereof HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY consents to entry of this Consent Order, agrees without reservation to all of the above terms and conditions, and shall be bound by all provisions herein. The undersigned represents that he has the authority to bind HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY to the terms and conditions of this Consent Order.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY
Richard Widdicombe, President
Date:	10/16/2012

Corporate Seal

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 16 day of October 2012,

by	Richard Widdicombe	as	President
	(name of person)		(type of authority..... e.g. officer, trustee attorney in fact)
for	Heritage Property & Casualty Insurance Company
	(company name)

(Signature of the Notary)

Anastasia Apostolou

(Print, Type or Stamp Commissioned Name of Notary)

Personally Known                 OR Produced Identification                

Type of Identification Produced                                

Page 11 of 12

COPIES FURNISHED TO:

Bobbi Scott, Depopulation Manager

Citizens Property Insurance Corporation

Corporate Offices

101 North Monroe Street, Suite 1000

Tallahassee, FL 32301

Bobbi.Scott@citizensfla.com

Travis Miller

Radey Thomas Yon & Clark, PA

301 S. Bronough Street

Tallahassee, FL 32301

tmiller@radeylaw.com

Richard Widdicombe, President

Heritage Property & Casualty Insurance Company

700 Central Ave Ste 330

St. Petersburg, FL 33701

Carolyn Morgan, Director

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

David Altmaier, Chief Analyst

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda Rudock, Financial Examiner/Analyst II

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda.Rudock@floir.com

Virginia A. Christy, Assistant General Counsel

Office of Insurance Regulation

Legal Services Office

200 East Gaines Street

Tallahassee, FL 32399-0333

Virginia.Christy@floir.com

Page 12 of 12

EX-10.14

Exhibit 10.14

KEVIN MCCARTY

COMMISSIONER

IN THE MATTER OF: CASE NO.: 129960-12-CO

HERITAGE PROPERTY & CASUALTY

INSURANCE COMPANY

                                                                 /

CONSENT ORDER

THIS CAUSE came on for consideration as a result of HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY’S (hereinafter referred to as “HERITAGE”) proposal to remove selected personal residential policies from CITIZENS PROPERTY INSURANCE CORPORATION (hereinafter referred to as “CITIZENS”), which was submitted to the OFFICE OF INSURANCE REGULATION (hereinafter referred to as “OFFICE”) for its review on November 1, 2012. After a complete review of the entire record and upon consideration thereof, and otherwise being fully advised in the premises, the OFFICE hereby finds as follows:

1. The OFFICE has jurisdiction over the subject matter and of the parties herein.

2. CITIZENS has been established in accordance with the provisions of Section 627.351(6), Florida Statutes, as amended, to provide insurance for residential and commercial property qualified risks under circumstances specified in the Statute.

Page 1 of 12

3. The Legislature of the State of Florida has enacted Section 627.3511, Florida Statutes, to encourage and provide a means for the depopulation of CITIZENS. CITIZENS submitted and the OFFICE adopted by Order No. 125161-12 a plan of depopulation, the terms and conditions upon which this proposed Consent Order is predicated. HERITAGE shall abide by the terms and conditions of the CITIZENS depopulation plan as a condition of issuance of this Consent Order.

4. HERITAGE is a Florida domiciled property and casualty insurance company authorized to transact insurance in the State of Florida.

5. On or about November 1, 2012, HERITAGE submitted a proposal to remove selected personal residential policies from CITIZENS. The plan provides for an assumption of up to twenty thousand (20,000) multiple peril policies from CITIZENS’ personal lines account. HERITAGE plans to assume the CITIZENS’S policies over a period of time, subject to the approval by the OFFICE.

6. HERITAGE understands that the selected policies to be removed from CITIZENS on or about January 8, 2013, or at a later date approved by the OFFICE and CITIZENS, will not be subject to any incentive or bonus plan pursuant to Section 627.3511, Florida Statutes, unless and until the OFFICE approves such a plan for use by CITIZENS provided such plan would be retroactive to policies subject to this Consent Order. If the OFFICE approves a bonus plan for use by other take-out companies or for other transactions during the 2013 policy year, the bonus may be paid to HERITAGE in accordance with that plan and agreements between HERITAGE and CITIZENS. HERITAGE shall enter into appropriate agreements with CITIZENS to provide the following:

a. HERITAGE, at its own expense, shall give at least thirty (30) days advance notice to affected policyholders, which notice will inform policyholders of the need to contact HERITAGE before the removal date if the policyholder desires to stay with CITIZENS.

Page 2 of 12

b. HERITAGE shall accumulate any objections, and shall facilitate the return of any policyholder who desires to stay in CITIZENS if that policyholder expresses the desire to stay in CITIZENS within the thirty (30) day notice period prior to the removal of the policy, or within thirty (30) days after the date of the policy removal. Policyholders shall not be required to make additional payments, nor take any action other than to express the desire to remain with CITIZENS in writing or by electronic mail on or before thirty (30) days following the date of their policy removal.

c. All communications with agents and policyholders regarding any policies to be removed from CITIZENS must be done in accordance with instructions by CITIZENS and the OFFICE. HERITAGE shall obtain prior approval from the OFFICE of any letters sent to policyholders regarding any policies to be removed from CITIZENS.

7. HERITAGE acknowledges neither approval by CITIZENS, nor entry into this Consent Order by the OFFICE, constitutes a guarantee the above referenced policies will ultimately be available to HERITAGE for removal from CITIZENS, as the availability of policies for removal may vary over time.

8. HERITAGE shall limit its actual removal of policies from CITIZENS to the number and type of policies authorized by the OFFICE. The OFFICE will base its review on HERITAGE’S reinsurance program, catastrophe modeling, and financial statement projections, as well as the impact on policyholders. Such reinsurance program, catastrophe modeling, and financial statement profiles shall be based upon HERITAGE’S current in-force book of residential property policies, HERITAGE’S projected voluntary market writings, and actual number of policies available in CITIZENS prior to the anticipated assumption date identified by HERITAGE as satisfying its filed and approved underwriting guidelines.

Page 3 of 12

9. HERITAGE has submitted the proposed reinsurance documentation and financial projections for assumption of up to twenty thousand (20,000) multiple peril policies, expected to be assumed on January 8, 2013 or on subsequent dates approved by the OFFICE and CITIZENS. Each additional assumption of CITIZENS policies by HERITAGE shall be subject to advance written approval by the OFFICE.

10. HERITAGE’S acquisition of adequate reinsurance and maintenance of executed reinsurance agreements is material to the OFFICE’S review and analysis of HERITAGE’S proposal to remove selected policies from CITIZENS and to the OFFICE’S approval of the proposal.

11. HERITAGE expressly waives its rights to any hearing in this matter, the making of findings of fact and conclusions of law by the OFFICE, and all other and further proceedings herein to which it may be entitled by law or by rules of the OFFICE. HERITAGE agrees not to appeal or otherwise contest this Consent Order in any forum now, or in the future, available to it, including the right to any administrative proceeding, circuit or federal court action, or any appeal.

12. HERITAGE represents all explanations and documents made or submitted to the OFFICE as part of its proposal to remove selected policies from CITIZENS, including all attachments and supplements thereto, fully describe all transactions, agreements, and understandings relating to the removal of policies from CITIZENS by HERITAGE. However, all draft documents and non-executed agreements relating to HERITAGE’S plan shall not be deemed approved by this Consent Order until such time as executed agreements or final documents are submitted and approved by the OFFICE.

Page 4 of 12

13. The parties agree this Consent Order will be deemed executed when the OFFICE has signed a copy of this Consent Order bearing signature of HERITAGE, or its authorized representative, notwithstanding the fact the copy was transmitted to the OFFICE electronically. HERITAGE agrees the signature of its representative as affixed to this Consent Order shall be under seal of a Notary Public.

14. Each party to this action shall bear its own costs and attorney fees.

IT IS THEREFORE ORDERED that:

1. Upon consideration of the proposal to remove selected policies from CITIZENS, including its attachments, the OFFICE approves the proposal to remove selected policies from CITIZENS, subject to adherence to the terms and conditions of this Consent Order by HERITAGE.

2. The OFFICE approves the assumption of up to twenty thousand (20,000) multiple peril policies, consisting of twenty thousand (20,000) policies from the personal lines account, for the initial assumption starting on or about January 8, 2013, in accordance with the proposal to remove selected policies from CITIZENS, any agreement(s) between HERITAGE and CITIZENS, and this Consent Order.

3. Regarding all reinsurance matters relating to policies removed from CITIZENS, for a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall:

a. Maintain substantially the same reinsurance coverage as evidenced to the OFFICE in the proposal to remove selected policies from CITIZENS;

Page 5 of 12

b. Submit to the OFFICE any and all replacement or additional reinsurance agreement(s), or amendment(s) to reinsurance agreement(s) that materially change the reinsurance coverage in 3.a. The agreement(s), amendment(s) or plans shall be submitted to the OFFICE for review, and approval, sixty (60) days prior to the date of effectuation of any such agreement(s) or amendment(s);

c. Notify the OFFICE of any termination of any of its reinsurance agreements. The notification shall be made to the OFFICE in writing sixty (60) days prior to the effective date of any such termination;

d. Submit in writing to the OFFICE the proposed utilization of any substitute or additional reinsurers for the OFFICE’S review and approval sixty (60) days prior to the companies being utilized within HERITAGE’S reinsurance program. HERITAGE shall further immediately submit to the OFFICE all information as requested which the OFFICE deems necessary for the OFFICE to complete its review; and

e. Cede reinsurance, or otherwise contract for reinsurance, only with reinsurers who are authorized and/or approved by the OFFICE, or such other reinsurers as may be approved in advance and in writing by the OFFICE. HERITAGE shall comply with the requirements of Section 624.610, Florida Statutes, with regard to all of its reinsurance arrangements.

4. For the three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall file with the OFFICE, on an annual basis no later than June 1 of each year, a catastrophe loss model with probable maximum loss estimate amounts from a one hundred-year storm based upon the exposure information gathered from all of its policies in force as of April 15 of each year which would be affected by a catastrophe. HERITAGE shall include in this filing an exposure management plan, which will identify the company’s ability to provide satisfactory financial capacity to cover the company’s exposure to catastrophic hurricane

Page 6 of 12

loss. The plan shall identify the reinsurance coverage and surplus levels being utilized to maintain a satisfactory financial capacity with regard to catastrophe exposure. HERITAGE shall also include within the plan specific actions intended to limit catastrophic exposures to the company’s financial capacity. Based upon the OFFICE’S review of the models and plans, HERITAGE may be required at the OFFICE’S sole discretion to take corrective action to cure any overexposure identified by the OFFICE. Such action may also include obtaining additional amounts of reinsurance coverage as directed by the OFFICE or suspend writing of any additional business, including the CITIZENS policies.

5. Any and all policies removed from CITIZENS by HERITAGE shall provide coverage substantially equivalent to that afforded by CITIZENS. Any and all policies removed from CITIZENS by HERITAGE, pursuant to its proposal to remove selected policies from CITIZENS, must be renewable by the policyholder at approved rates and upon the same terms at the first such renewal onto HERITAGE’S policy form, unless such policies are canceled by HERITAGE for a lawful reason.

6. At the time HERITAGE removes any policy of insurance from CITIZENS, HERITAGE shall either obtain a new policy application from each affected policyholder or maintain in its files a copy of the policyholder’s application on file with CITIZENS. If HERITAGE chooses the latter option, HERITAGE shall nevertheless be required to obtain a new policy application from each affected policyholder no later than twenty-four (24) months from the effective date of any policy of insurance removed from CITIZENS. HERITAGE may not initiate any retrospective increase in rates or the premium or any retrospective decrease in coverage provided under the assumed CITIZENS policy (if applicable) as a result of the information obtained from or through the new policy applications.

Page 7 of 12

7. For a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall abide by the proposal to remove selected policies from CITIZENS in all material respects. Further, HERITAGE shall abide by all terms and provisions of any agreement(s) entered into with CITIZENS.

8. Regarding required documentation to be maintained by HERITAGE relating to policies removed from CITIZENS:

a. HERITAGE is required to track all agents, as well as the related policy information, who have declined to participate in the takeout process. This information shall be submitted to Citizens by the deadline published in the Citizens Assumption Calendar. Citizens will then mail out notices informing the policyholders of the agent’s declination. This will allow the affected policyholders the opportunity to address the declination with their agent and possibly receive their agent’s approval in time to be included in the current takeout;

b. HERITAGE is required to track all agents, as well as the related policy information, who after discussing with the policyholder, decide to participate in the takeout process and submit this information to Citizens by the deadline published in the revised 2013 Assumption Calendar;

c. HERITAGE is required to keep a record of all agents who decline participation along with an explanation for the declination; and

d. When contacting an agent regarding a potential takeout policy, HERITAGE is required to provide each agent with the policy form to be used, appointment contract and a copy of HERITAGE’S most currently available financial statement.

Page 8 of 12

9. HERITAGE is required to comply with the following requirements when soliciting an agent’s permission to participate in the assumption process:

a. HERITAGE must utilize email and at least one other method for contact (i.e. call, fax or regular mail);

b. HERITAGE must send out a direct solicitation to the agent of record and copy the agency principal;

c. HERITAGE must provide all agents a minimum of 14 days to review the solicitation. This will allow agents adequate time to research the company and make an informed decision;

d. HERITAGE must provide a copy of the appointment contract. HERITAGE may opt to provide the agent a link to its website containing the required information;

e. HERITAGE must provide a copy of the policy form. HERITAGE may opt to provide the agent a link to its website containing the required information;

f. HERITAGE must provide a chart identifying any differences in coverage from Citizens, which will help both the agent and the policyholder in making an informed decision;

g. HERITAGE must provide a list of policies specific to the agent that it would like to assume;

h. HERITAGE must provide a contact number of qualified staff to answer agent’s questions; and

i. HERITAGE must provide an overview of its strategy for handling claims (cat and non-cat).

Page 9 of 12

10. Should the OFFICE determine HERITAGE has failed to materially comply with terms of this Consent Order, the proposal to remove selected policies from CITIZENS, including its attachments, and amendments thereto as submitted to the OFFICE, or terms of any agreement(s) with CITIZENS, HERITAGE shall, upon receipt of notice of such material non-compliance, have sixty (60) days to cure its material non-compliance. In the event HERITAGE fails to cure any such material non-compliance within the sixty (60) day period, HERITAGE expressly agrees the OFFICE may enter an order directing it to immediately cease writing personal lines residential property coverage or other lines of insurance within the State of Florida, or imposing such other sanctions authorized by statute, rule or restrictions, as may be deemed appropriate by the OFFICE.

WHEREFORE, the proposal to remove up to twenty thousand (20,000) multiple peril policies, consisting of twenty thousand (20,000) policies from the personal lines account, for the initial assumption starting on or about January 8, 2013, subject to the terms and conditions of this Consent Order, are hereby APPROVED.

FURTHER, all terms and conditions contained herein are hereby ORDERED.

DONE and ORDERED this 19th day of November, 2012.

/s/ Kevin M. McCarty

Kevin M. McCarty, Commissioner

Office of Insurance Regulation

Page 10 of 12

By execution hereof, HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY consents to entry of this Consent Order, agrees without reservation to all of the above terms and conditions and shall be bound by all provisions therein. The undersigned represents that he has the authority to bind HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY to the terms and conditions of this Consent Order.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY

Richard Widdicombe, President

Corporate Seal

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 19 day of November 2012,

by	Richard Widdicombe	as	President
	(name of person)		(type of authority ..... e.g. officer, trustee attorney in fact)
for	Heritage Property & Casualty Insurance Company
	(company name)
		(Signature of the Notary)
		Anastasia Apostolou
		(Print, Type or Stamp Commissioned Name of Notary)

Personally Known                OR Produced Identification                

Type of Identification Produced                        

Page 11 of 12

COPIES FURNISHED TO:

Bobbi Scott, Depopulation Manager

Citizens Property Insurance Corporation

Corporate Offices

2312 Killearn Center Boulevard

Tallahassee, FL 32309

Bobbi.Scott@citizensfla.com

Richard Widdicombe, President

Heritage Property & Casualty Insurance Company

700 Central Ave Ste 330

St. Petersburg, FL 33701

Carolyn Morgan, Director

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

David Altmaier, Chief Analyst

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda Rudock, Financial Examiner/Analyst II

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda.Rudock@floir.com

Jason B. Nelson, Assistant General Counsel

Office of Insurance Regulation

Legal Services Office

200 East Gaines Street

Tallahassee, FL 32399-0333

Jason.Nelson@floir.com

Page 12 of 12

EX-10.15

Exhibit 10.15

KEVIN MCCARTY COMMISSIONER

IN THE MATTER OF: CASE NO.: 130975-13-CO

HERITAGE PROPERTY & CASUALTY

INSURANCE COMPANY

                                                                              /

CONSENT ORDER

THIS CAUSE came on for consideration as a result of HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY’S (hereinafter “HERITAGE”) proposal to remove selected personal residential policies from CITIZENS PROPERTY INSURANCE CORPORATION (hereinafter “CITIZENS”), which was submitted to the OFFICE OF INSURANCE REGULATION (hereinafter “OFFICE”) for its review on January 10, 2013. After a complete review of the entire record and upon consideration thereof, and otherwise being fully advised in the premises, the OFFICE hereby finds as follows:

1. The OFFICE has jurisdiction over the subject matter and of the parties herein.

2. CITIZENS has been established in accordance with the provisions of Section 627.351(6), Florida Statutes, as amended, to provide insurance for residential and commercial property qualified risks under circumstances specified in the Statute.

3. The Legislature of the State of Florida has enacted Section 627.351(6)(q)3.a., Florida Statutes, to encourage and provide a means for the depopulation of CITIZENS, CITIZENS submitted and the OFFICE adopted by Order No. 125161-12 a plan of depopulation, the terms and conditions upon which this proposed Consent Order is predicated. HERITAGE shall abide by the terms and conditions of the CITIZENS depopulation plan as a condition of issuance of this Consent Order.

Page 1 of 12

4. HERITAGE is a Florida domiciled property and casualty insurance company authorized to transact insurance in the State of Florida.

5. On or about January 10, 2013, HERITAGE submitted a proposal to remove selected personal residential policies from CITIZENS. The plan provides for an assumption of up to ten thousand (10,000) multiple peril policies from CITIZENS’ personal lines account and coastal account. HERITAGE plans to assume the CITIZENS’S policies over a period of time, subject to the approval by the OFFICE.

6. HERITAGE understands that the selected policies to be removed from CITIZENS on or about April 9, 2013, or at a later date approved by the OFFICE and CITIZENS, will not be subject to any incentive or bonus plan pursuant to Section 627.3511, Florida Statutes, unless and until the OFFICE approves such a plan for use by CITIZENS provided such plan would be retroactive to policies subject to this Consent Order. If the OFFICE approves a bonus plan for use by other take-out companies or for other transactions during the 2013 policy year, the bonus may be paid to HERITAGE in accordance with that plan and agreements between HERITAGE and CITIZENS. HERITAGE shall enter into appropriate agreements with CITIZENS to provide the following:

a. HERITAGE, at its own expense, shall give at least thirty (30) days advance notice to affected policyholders, which notice will inform policyholders of the need to contact HERITAGE before the removal date if the policyholder desires to stay with CITIZENS.

Page 2 of 12

b. HERITAGE shall accumulate any objections, and shall facilitate the return of any policyholder who desires to stay in CITIZENS if that policyholder expresses the desire to stay in CITIZENS within the thirty (30) day notice period prior to the removal of the policy, or within thirty (30) days after the date of the policy removal. Policyholders shall not be required to make additional payments, nor take any action other than to express the desire to remain with CITIZENS in writing or by electronic mail on or before thirty (30) days following the date of their policy removal.

c. All communications with agents and policyholders regarding any policies to be removed from CITIZENS must be done in accordance with instructions by CITIZENS and the OFFICE. HERITAGE shall obtain prior approval from the OFFICE of any letters sent to policyholders regarding any policies to be removed from CITIZENS.

7. HERITAGE acknowledges neither approval by CITIZENS, nor entry into this Consent Order by the OFFICE, constitutes a guarantee the above referenced policies will ultimately be available to HERITAGE for removal from CITIZENS, as the availability of policies for removal may vary over time.

8. HERITAGE shall limit its actual removal of policies from CITIZENS to the number and type of policies authorized by the OFFICE. The OFFICE will base its review on HERITAGE’S reinsurance program, catastrophe modeling, and financial statement projections, as well as the impact on policyholders. Such reinsurance program, catastrophe modeling, and financial statement profiles shall be based upon HERITAGE’S current in-force book of residential property policies, HERITAGE’S projected voluntary market writings, and actual number of policies available in CITIZENS prior to the anticipated assumption date identified by HERITAGE as satisfying its filed and approved underwriting guidelines.

Page 3 of 12

9. HERITAGE has submitted the proposed reinsurance documentation and financial projections for assumption of up to ten thousand (10,000) multiple peril policies, expected to be assumed on April 9, 2013 or on subsequent dates approved by the OFFICE and CITIZENS. Each additional assumption of CITIZENS policies by HERITAGE shall be subject to advance written approval by the OFFICE.

10. HERITAGE’S acquisition of adequate reinsurance and maintenance of executed reinsurance agreements is material to the OFFICE’S review and analysis of HERITAGE’S proposal to remove selected policies from CITIZENS and to the OFFICE’S approval of the proposal.

11. HERITAGE expressly waives its rights to any hearing in this matter, the making of findings of fact and conclusions of law by the OFFICE, and all other and further proceedings herein to which it may be entitled by law or by rules of the OFFICE, HERITAGE agrees not to appeal or otherwise contest this Consent Order in any forum now, or in the future, available to it.

12. HERITAGE represents all explanations and documents made or submitted to the OFFICE as part of its proposal to remove selected policies from CITIZENS, including all attachments and supplements thereto, fully describe all transactions, agreements, and understandings relating to the removal of policies from CITIZENS by HERITAGE. However, all draft documents and non-executed agreements relating to HERITAGE’S plan shall not be deemed approved by this Consent Order until such time as executed agreements or final documents are submitted and approved by the OFFICE.

13. The parties agree this Consent Order will be deemed executed when the OFFICE has signed a copy of this Consent Order bearing signature of HERITAGE, or its authorized representative, notwithstanding the fact the copy was transmitted to the OFFICE electronically, HERITAGE agrees the signature of its representative as affixed to this Consent Order shall be under seal of a Notary Public.

Page 4 of 12

14. Each party to this action shall bear its own costs and attorney fees.

IT IS THEREFORE ORDERED that:

(A) Upon consideration of the proposal to remove selected policies from CITIZENS, including its attachments, the OFFICE approves the proposal to remove selected policies from CITIZENS, subject to adherence to the terms and conditions of this Consent Order by HERITAGE.

(B) The OFFICE approves the assumption of up to ten thousand (10,000) multiple peril policies, consisting of eight thousand two hundred (8,200) policies from the personal lines account and one thousand eight hundred (1,800) policies from the coastal account, for the initial assumption starting on or about April 9, 2013, in accordance with the proposal to remove selected policies from CITIZENS, any agreement(s) between HERITAGE and CITIZENS, and this Consent Order.

(C) Regarding all reinsurance matters relating to policies removed from CITIZENS, for a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall:

(i) Maintain substantially the same reinsurance coverage as evidenced to the OFFICE in the proposal to remove selected policies from CITIZENS;

(ii) Submit to the OFFICE any and all replacement or additional reinsurance agreement(s), or amendment(s) to reinsurance agreement(s) that materially change the reinsurance coverage in (c)(i). The agreement(s), amendment(s) or plans shall be submitted to the OFFICE for review, and approval, sixty (60) days prior to the date of effectuation of any such agreement(s) or amendment(s);

Page 5 of 12

(iii) Notify the OFFICE of any termination of any of its reinsurance agreements. The notification shall be made to the OFFICE in writing sixty (60) days prior to the effective date of any such termination;

(iv) Submit in writing to the OFFICE the proposed utilization of any substitute or additional reinsurers for the OFFICE’S review and approval sixty (60) days prior to the companies being utilized within HERITAGE’S reinsurance program. HERITAGE shall further immediately submit to the OFFICE all information as requested which the OFFICE deems necessary for the OFFICE to complete its review; and

(v) Cede reinsurance, or otherwise contract for reinsurance, only with reinsurers who are authorized and/or approved by the OFFICE, or such other reinsurers as may be approved in advance and in writing by the OFFICE. HERITAGE shall comply with the requirements of Section 624,610, Florida Statutes, with regard to all of its reinsurance arrangements.

(D) For the three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall file with the OFFICE, on an annual basis no later than June 1 of each year, a catastrophe loss model with probable maximum loss estimate amounts from a one hundred-year storm based upon the exposure information gathered from all of its policies in force as of April 15 of each year which would be affected by a catastrophe. HERITAGE shall include in this filing an exposure management plan, which will identify the company’s ability to provide satisfactory financial capacity to cover the company’s exposure to catastrophic hurricane loss. The plan shall identify the reinsurance coverage and surplus levels being utilized to maintain a satisfactory financial capacity with regard to catastrophe exposure. HERITAGE shall also include within the plan specific actions intended to limit catastrophic exposures to the

Page 6 of 12

company’s financial capacity. Based upon the OFFICE’S review of the models and plans, HERITAGE may be required at the OFFICE’S sole discretion to take corrective action to cure any overexposure identified by the OFFICE. Such action may also include obtaining additional amounts of reinsurance coverage as directed by the OFFICE or suspend writing of any additional business, including the CITIZENS policies;

(E) Any and all policies removed from CITIZENS by HERITAGE shall provide coverage substantially equivalent to that afforded by CITIZENS. Any and all policies removed from CITIZENS by HERITAGE, pursuant to its proposal to remove selected policies from CITIZENS, must be renewable by the policyholder at approved rates and upon the same terms at the first such renewal onto HERITAGE’S policy form, unless such policies are canceled by HERITAGE for a lawful reason;

(F) At the time HERITAGE removes any policy of insurance from CITIZENS, HERITAGE shall either obtain a new policy application from each affected policyholder or maintain in its files a copy of the policyholder’s application on file with CITIZENS. If HERITAGE chooses the latter option, HERITAGE shall nevertheless be required to obtain a new policy application from each affected policyholder no later than twenty-four (24) months from the effective date of any policy of insurance removed from CITIZENS, HERITAGE may not initiate any retrospective increase in rates or the premium or any retrospective decrease in coverage provided under the assumed CITIZENS policy (if applicable) as a result of the information obtained from or through the new policy applications;

(G) For a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall abide by the proposal to remove selected policies from CITIZENS in all material respects. Further, HERITAGE shall abide by all terms and provisions of any agreement(s) entered into with CITIZENS; and;

Page 7 of 12

(H) Regarding required documentation to be maintained by HERITAGE relating to policies removed from CITIZENS:

(i) HERITAGE is required to track all agents, as well as the related policy information, who have declined to participate in the takeout process. This information shall be submitted to Citizens by the deadline published in the Citizens Assumption Calendar. Citizens will then mail out notices informing the policyholders of the agent’s declination. This Will allow the affected policyholders the opportunity to address the declination with their agent and possibly receive their agent’s approval in time to be included in the current takeout.

(ii) HERITAGE is required to track all agents, as well as the related policy information, who after discussing with the policyholder, decide to participate in the takeout process and submit this information to Citizens by the deadline published in the revised 2013 Assumption Calendar.

(iii) HERITAGE is required to keep a record of all agents who decline participation along with an explanation for the declination.

(iv) When contacting an agent regarding a potential takeout policy, HERITAGE is required to provide each agent with the policy form to be used, appointment contract and a copy of HERITAGE’S most currently available financial statement.

(I) HERITAGE is required to comply with the following requirements when soliciting an agent’s permission to participate in the assumption process:

(i) HERITAGE must utilize email and at least one other method for contact (i.e. call, fax or regular mail);

Page 8 of 12

(ii) HERITAGE must send out a direct solicitation to the agent of record and copy the agency principal;

(iii) HERITAGE must provide all agents a minimum of 14 days to review the solicitation. This will allow agents adequate time to research the company and make an informed decision;

(iv) HERITAGE must provide a copy of the appointment contract. HERITAGE may opt to provide the agent a link to its website containing the required information;

(v) HERITAGE must provide a copy of the policy form. HERITAGE may opt to provide the agent a link to its website containing the required information;

(vi) HERITAGE must provide a chart identifying any differences in coverage from Citizens, which will help both the agent and the policyholder in making an informed decision;

(vii) HERITAGE must provide a list of policies specific to the agent that it would like to assume;

(viii) HERITAGE must provide a contact number of qualified staff to answer agent’s questions;

(ix) HERITAGE must provide an overview of its strategy for handling claims (cat and non-cat);

(J) Should the OFFICE determine HERITAGE has failed to materially comply with terms of this Consent Order, the proposal to remove selected policies from CITIZENS, including its attachments, and amendments thereto as submitted to the OFFICE, or terms of any agreement(s) with CITIZENS, HERITAGE shall, upon receipt of notice of such

Page 9 of 12

material non-compliance, have sixty (60) days to cure its material non-compliance. In the event HERITAGE fails to cure any such material non-compliance within the sixty (60) day period, HERITAGE expressly agrees the OFFICE may enter an order directing it to immediately cease writing personal lines residential property coverage or other lines of insurance within the State of Florida, or imposing such other sanctions authorized by statute, rule or restrictions, as may be deemed appropriate by the OFFICE.

WHEREFORE, the proposal to remove up to ten thousand (10,000) multiple peril policies, consisting of eight thousand two hundred (8,200) policies from the personal lines account and one thousand eight hundred (1,800) policies from the coastal account, for the initial assumption starting on or about April 9, 2013, subject to the terms and conditions of this Consent Order, are hereby APPROVED.

FURTHER, all terms and conditions contained herein are hereby ORDERED.

DONE and ORDERED this 7^th day of February, 2013.

	Kevin M. McCarty, Commissioner Office of Insurance Regulation

Page 10 of 12

By execution hereof, HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY consents to entry of this Consent Order, agrees without reservation to all of the above terms and conditions and shall be bound by all provisions therein. The undersigned represents that he has the authority to bind HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY to the terms and conditions of this Consent Order.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY

Richard Widdicombe, President

Corporate Seal

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 6 day of Feb 2013,

by	Richard Widdicombe	as	President
	(name of person)		(type of authority ..... e.g. officer, trustee attorney in fact)
for	Heritage Property & Casualty Insurance Company
	(company name)

Personally Known ü OR Produced Identification                                    

Type of Identification Produced                                                                 

Page 11 of 12

COPIES FURNISHED TO:

Bobbi Scott, Depopulation Manager

Citizens Property Insurance Corporation

Corporate Offices

2312 Killearn Center Boulevard

Tallahassee, FL 32309

Bobbi.Scott@citizensfla.com

Richard Widdicombe, President

Heritage Property & Casualty Insurance Company

700 Central Ave Ste 330

St. Petersburg, FL 33701

Carolyn Morgan, Director

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

David Altmaier, Chief Analyst

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda Rudock, Financial Examiner/Analyst II

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda.Rudock@floir.com

Catharine Schoenecker, Assistant General Counsel

Office of Insurance Regulation

Legal Services Office

200 East Gaines Street

Tallahassee, FL 32399-0333

catharine.schoenecker@floir.com

Page 12 of 12

EX-10.16

Exhibit 10.16

  KEVIN MCCARTY COMMISSIONER

IN THE MATTER OF:   HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY                                                                                   /                                                  CASE NO.: 135124-13-CO

CONSENT ORDER

THIS CAUSE came on for consideration as a result of HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY’S (hereinafter “HERITAGE”) proposal to remove selected personal residential policies from CITIZENS PROPERTY INSURANCE CORPORATION (hereinafter “CITIZENS”), which was submitted to the OFFICE OF INSURANCE REGULATION (hereinafter “OFFICE”) for its review on March 29, 2013. After a complete review of the entire record and upon consideration thereof, and otherwise being fully advised in the premises, the OFFICE hereby finds as follows:

1. The OFFICE has jurisdiction over the subject matter and of the parties herein.

2. CITIZENS has been established in accordance with the provisions of Section 627.351(6), Florida Statutes, as amended, to provide insurance for residential and commercial property qualified risks under circumstances specified in the Statute.

3. The Legislature of the State of Florida has enacted Section 627.35l(6)(q)3.a., Florida Statutes, to encourage and provide a means for the depopulation of CITIZENS. CITIZENS submitted and the OFFICE adopted by Order No. 125161-12 a plan of depopulation, the terms and conditions upon which this proposed Consent Order is predicated. HERITAGE shall abide by the terms and conditions of the CITIZENS depopulation plan as a condition of issuance of this Consent Order.

Page 1 of 13

4. HERITAGE is a Florida domiciled property and casualty insurance company authorized to transact insurance in the State of Florida.

5. On or about March 29, 2013, HERITAGE submitted a proposal to remove selected personal residential policies from CITIZENS. The plan provides for an assumption of up to sixty thousand (60,000) multi-peril policies from CITIZENS’ personal lines account and coastal account. HERITAGE plans to assume the CITIZENS’ policies over a period of time, subject to the approval by the OFFICE.

6. HERITAGE understands that the selected policies to be removed from CITIZENS on or about June 28, 2013, or at a later date approved by the OFFICE and CITIZENS, will not be subject to any incentive or bonus plan pursuant to Section 627.3511, Florida Statutes, unless and until the OFFICE approves such a plan for use by CITIZENS provided such plan would be retroactive to policies subject to this Consent Order. If the OFFICE approves a bonus plan for use by other take-out companies or for other transactions during the 2013 policy year, the bonus may be paid to HERITAGE in accordance with that plan and agreements between HERITAGE and CITIZENS.

7. HERITAGE shall enter into appropriate agreements with CITIZENS to provide the following:

a. HERITAGE, at its own expense, shall give at least thirty (30) days advance notice to affected policyholders, which notice will inform policyholders of the need to contact HERITAGE before the removal date if the policyholder desires to stay with CITIZENS.

Page 2 of 13

b. HERITAGE shall accumulate any objections, and shall facilitate the return of any policyholder who desires to stay in CITIZENS if that policyholder expresses the desire to stay in CITIZENS within the thirty (30) day notice period prior to the removal of the policy, or within thirty (30) days after the date of the policy removal. Policyholders shall not be required to make additional payments, nor take any action other than to express the desire to remain with CITIZENS in writing, by electronic mail, or by telephone on or before thirty (30) days following the date of their policy removal.

c. All communications with agents and policyholders regarding any policies to be removed from CITIZENS must be done in accordance with instructions by CITIZENS and the OFFICE. HERITAGE shall obtain prior approval from the OFFICE of any letters sent to policyholders regarding any policies to be removed from CITIZENS. HERITAGE agrees that once opt out notices have been mailed to consumers; HERITAGE cannot terminate the offer of coverage for any reason other than a consumer opt out. HERITAGE agrees that subsequent non-renewals of policies assumed via this assumption will be in accordance with the Florida Insurance Code.

d. HERITAGE shall at all times submit to CITIZENS any information required by the published revised 2013 Assumption Calendar. This information shall at all times be submitted timely, in accordance with the deadlines published by CITIZENS.

8. HERITAGE acknowledges neither approval by CITIZENS, nor entry into this Consent Order by the OFFICE, constitutes a guarantee the above referenced policies will ultimately be available to HERITAGE for removal from CITIZENS, as the availability of policies for removal may vary over time.

Page 3 of 13

9. HERITAGE shall limit its actual removal of policies from CITIZENS to the number and type of policies authorized by the OFFICE. The OFFICE will base its review on HERITAGE’S reinsurance program, catastrophe modeling, and financial statement projections, as well as the impact on policyholders. Such reinsurance program, catastrophe modeling, and financial statement profiles shall be based upon HERITAGE’S current in-force book of residential property policies, HERITAGE’S projected voluntary market writings, and actual number of policies available in CITIZENS prior to the anticipated assumption date identified by HERITAGE as satisfying its filed and approved underwriting guidelines.

10. HERITAGE has submitted the proposed reinsurance documentation and financial projections for assumption of up to sixty thousand (60,000) multiple peril policies, expected to be assumed on June 28, 2013 or on subsequent dates approved by the OFFICE and CITIZENS. Each additional assumption of CITIZENS policies by HERITAGE shall be subject to advance written approval by the OFFICE.

11. HERITAGE will not remove any policy from CITIZENS or contact any potential policyholder, including sending communication regarding this depopulation, until such time that HERITAGE has certified to the OFFICE and the OFFICE has acknowledged in writing the following:

a. HERITAGE and CITIZENS have entered and executed an interim 100% Facultative Quota Share Reinsurance Agreement commencing on January 1, 2013 and ending on June 28, 2013.

b. HERITAGE has issued a ten million U.S. Dollar ($10,000,000) surplus note, and has received OFFICE approval of such note, as contemplated in the Pro Forma Financial Statements submitted by HERITAGE.

Page 4 of 13

12. HERITAGE’s acquisition of adequate reinsurance and maintenance of executed reinsurance agreements is material to the OFFICE’s review and analysis of HERITAGE’s proposal to remove selected policies from CITIZENS and to the OFFICE’S approval of the proposal.

13. HERITAGE expressly waives its rights to any hearing in this matter, the making of findings of fact and conclusions of law by the OFFICE, and all other and further proceedings herein to which it may be entitled by law or by rules of the OFFICE. HERITAGE agrees not to appeal or otherwise contest this Consent Order in any forum now or in the future available to it, including their right to any administrative proceeding, circuit or federal court action, or any appeal.

14. HERITAGE represents all explanations and documents made or submitted to the OFFICE as part of its proposal to remove selected policies from CITIZENS, including all attachments and supplements thereto, fully describe all transactions, agreements, and understandings relating to the removal of policies from CITIZENS by HERITAGE. However, all draft documents and non-executed agreements relating to HERITAGE’s plan shall not be deemed approved by this Consent Order until such time as executed agreements or final documents are submitted and approved by the OFFICE.

15. The parties agree this Consent Order will be deemed executed when the OFFICE has signed a copy of this Consent Order bearing signature of HERITAGE, or its authorized representative, notwithstanding the fact the copy was transmitted to the OFFICE electronically. HERITAGE agrees the signature of its representative as affixed to this Consent Order shall be under seal of a Notary Public.

16. Each party to this action shall bear its own costs and attorney fees.

Page 5 of 13

IT IS THEREFORE ORDERED that:

(A) Upon consideration of the proposal to remove selected policies from CITIZENS, including its attachments, the OFFICE approves the proposal to remove selected policies from CITIZENS, subject to adherence to the terms and conditions of this Consent Order by HERITAGE.

(B) The OFFICE approves the assumption of up to sixty thousand (60,000) multi-peril policies, consisting of fifty-five thousand, one hundred and seventy-four (55,174) policies from the personal lines account and four thousand, eight hundred and twenty-six (4,826) policies from the coastal account, for the initial assumption starting on or about June 28, 2013, in accordance with the proposal to remove selected policies from CITIZENS, any agreement(s) between HERITAGE and CITIZENS, and this Consent Order.

(C) Regarding all reinsurance matters relating to policies removed from CITIZENS, for a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall:

(i) Maintain substantially the same reinsurance coverage as evidenced to the OFFICE in the proposal to remove selected policies from CITIZENS;

(ii) Submit to the OFFICE any and all replacement or additional reinsurance agreement(s), or amendment(s) to reinsurance agreement(s) that materially change the reinsurance coverage in (C)(i). The agreement(s), amendment(s) or plans shall be submitted to the OFFICE for review, and approval, sixty (60) days prior to the date of effectuation of any such agreement(s) or amendment(s);

Page 6 of 13

(iii) Notify the OFFICE of any termination of any of its reinsurance agreements. The notification shall be made to the OFFICE in writing sixty (60) days prior to the effective date of any such termination;

(iv) Submit in writing to the OFFICE the proposed utilization of any substitute or additional reinsurers for the OFFICE’S review and approval sixty (60) days prior to the companies being utilized within HERITAGE’S reinsurance program. HERITAGE shall further immediately submit to the OFFICE all information as requested which the OFFICE deems necessary for the OFFICE to complete its review; and

(v) Cede reinsurance, or otherwise contract for reinsurance, only with reinsurers who are authorized and/or approved by the OFFICE, or such other reinsurers as may be approved in advance and in writing by the OFFICE. HERITAGE shall comply with the requirements of Section 624.610, Florida Statutes, with regard to all of its reinsurance arrangements.

(D) For the three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall file with the OFFICE, on an annual basis no later than June 1 of each year, a catastrophe loss model with probable maximum loss estimate amounts from a one hundred-year storm based upon the exposure information gathered from all of its policies in force as of April 15 of each year which would be affected by a catastrophe. HERITAGE shall include in this filing an exposure management plan, which will identify the company’s ability to provide satisfactory financial capacity to cover the company’s exposure to catastrophic hurricane loss. The plan shall identify the reinsurance coverage and surplus levels being utilized to maintain a satisfactory financial capacity with regard to catastrophe exposure. HERITAGE shall also include within the plan specific actions intended to limit catastrophic exposures to the

Page 7 of 13

company’s financial capacity. Based upon the OFFICE’S review of the models and plans, HERITAGE may be required at the OFFICE’S sole discretion to take corrective action to cure any overexposure identified by the OFFICE. Such action may also include obtaining additional amounts of reinsurance coverage as directed by the OFFICE or suspend writing of any additional business, including the CITIZENS policies;

(E) Any and all policies removed from CITIZENS by HERITAGE shall provide coverage substantially equivalent to that afforded by CITIZENS. Any and all policies removed from CITIZENS by HERITAGE, pursuant to its proposal to remove selected policies from CITIZENS, must be renewable by the policyholder at approved rates and upon the same terms at the first such renewal onto HERITAGE’S policy form, unless such policies are canceled by HERITAGE for a lawful reason;

(F) At the time HERITAGE removes any policy of insurance from CITIZENS, HERITAGE shall either obtain a new policy application from each affected policyholder or maintain in its files a copy of the policyholder’s application on file with CITIZENS. If HERITAGE chooses the latter option, HERITAGE shall nevertheless be required to obtain a new policy application from each affected policyholder no later than twenty-four (24) months from the effective date of any policy of insurance removed from CITIZENS. HERITAGE may not initiate any retrospective increase in rates or the premium or any retrospective decrease in coverage provided under the assumed CITIZENS policy (if applicable) as a result of the information obtained from or through the new policy applications;

(G) For a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall abide by the proposal to remove selected policies from CITIZENS in all material respects. Further, HERITAGE shall abide by all terms and provisions of any agreement(s) entered into with CITIZENS; and;

Page 8 of 13

(H) Regarding required documentation to be maintained by HERITAGE relating to policies removed from CITIZENS:

(i) HERITAGE is required to track all agents, as well as the related policy information, who have declined to participate in the takeout process. This information shall be submitted to Citizens by the deadline published in the Citizens Assumption Calendar. Citizens will then mail out notices informing the policyholders of the agent’s declination. This will allow the affected policyholders the opportunity to address the declination with their agent and possibly receive their agent’s approval in time to be included in the current takeout. At no time shall HERITAGE contact a potential policyholder without the agent’s appointment;

(ii) HERITAGE is required to track all agents, as well as the related policy information, who after discussing with the policyholder, decide to participate in the takeout process and submit this information to Citizens by the deadline published in the revised 2013 Assumption Calendar;

(iii) HERITAGE is required to keep a record of all agents who decline participation along with an explanation for the declination; and

(iv) When contacting an agent regarding a potential takeout policy, HERITAGE is required to provide each agent with the policy form to be used, appointment contract and a copy of HERITAGE’S most currently available financial statement.

Page 9 of 13

(I) HERITAGE is required to comply with the following requirements when soliciting an agent’s permission to participate in the assumption process:

(i) HERITAGE must utilize email and at least one other method for contact (i.e. call, fax or regular mail);

(ii) HERITAGE must send out a direct solicitation to the agent of record and copy the agency principal;

(iii) HERITAGE must provide all agents a minimum of 14 days to review the solicitation. This will allow agents adequate time to research the company and make an informed decision;

(iv) HERITAGE must provide a copy of the appointment contract. HERITAGE may opt to provide the agent a link to its website containing the required information;

(v) HERITAGE must provide a copy of the policy form. HERITAGE may opt to provide the agent a link to its website containing the required information;

(vi) HERITAGE must provide a chart identifying any differences in coverage from Citizens, which will help both the agent and the policyholder in making an informed decision;

(vii) HERITAGE must provide a list of policies specific to the agent that it would like to assume;

(viii) HERITAGE must provide a contact number of qualified staff to answer agent’s questions; and

(ix) HERITAGE must provide an overview of its strategy for handling claims (cat and non-cat).

Page 10 of 13

(J) Should the OFFICE determine HERITAGE has failed to materially comply with terms of this Consent Order, the proposal to remove selected policies from CITIZENS, including its attachments, and amendments thereto as submitted to the OFFICE, or terms of any agreement(s) with CITIZENS, HERITAGE shall, upon receipt of notice of such material non-compliance, have sixty (60) days to cure its material non-compliance. In the event HERITAGE fails to cure any such material non-compliance within the sixty (60) day period, HERITAGE expressly agrees the OFFICE may enter an order directing it to immediately cease writing personal lines residential property coverage or other lines of insurance within the State of Florida, or imposing such other sanctions authorized by statute, rule or restrictions, as may be deemed appropriate by the OFFICE.

WHEREFORE, the proposal to remove up to sixty thousand (60,000) multi-peril policies, consisting of fifty-five thousand, one hundred and seventy-four (55,174) policies from the personal lines account and four thousand, eight hundred and twenty-six (4,826) policies from the coastal account, for the initial assumption starting on or about June 28, 2013, subject to the terms and conditions of this Consent Order, are hereby APPROVED.

FURTHER, all terms and conditions contained herein are hereby ORDERED.

DONE and ORDERED this 17^th day of May, 2013.

	Kevin M. McCarty, Commissioner Office of Insurance Regulation

Page 11 of 13

By execution hereof, HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY consents to entry of this Consent Order, agrees without reservation to all of the above terms and conditions and shall be bound by all provisions therein. The undersigned represents that he has the authority to bind HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY to the terms and conditions of this Consent Order.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY

Richard Widdicombe, President

Corporate Seal

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 17 day of May 2013,

by	Richard Widdicombe	as	President
	(name of person)		(type of authority..... e.g. officer, trustee attorney in fact)
for	Heritage Property & Casualty Insurance Company
	(company name)
Personally Known ü OR Produced Identification                     Type of Identification Produced

Page 12 of 13

COPIES FURNISHED TO:

Bobbi Scott, Depopulation Manager

Citizens Property Insurance Corporation

Corporate Offices

101 North Monroe Street, Suite 1000

Tallahassee, FL 32301

Bobbi.Scott@citizensfla.com

Fred E. Karlinsky, Esq.

Colodny, Fass, Talenfeld, Karlinsky & Abate, P.A.

100 Southeast 3^rd Avenue, 23^rd Floor

Fort Lauderdale, FL 33394

Telephone: (954) 492-4010

Email: fkarlinsky@cftlaw.com

Richard Widdicombe, President

Heritage Property & Casualty Insurance Company

700 Central Ave Ste 330

St. Petersburg, FL 33701

Carolyn Morgan, Director

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

David Altmaier, Chief Analyst

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda Rudock, Reinsurance/Financial Specialist

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda.Rudock@floir.com

Jason B. Nelson, Assistant General Counsel

Office of Insurance Regulation

Legal Services Office

200 East Gaines Street

Tallahassee, FL 32399-0333

Jason.Nelson@floir.com

Page 13 of 13

EX-10.17

Exhibit 10.17

KEVIN MCCARTY COMMISSIONER

IN THE MATTER OF: CASE NO.: 140066-13-CO

HERITAGE PROPERTY & CASUALTY

INSURANCE COMPANY

                                                                          /

CONSENT ORDER

THIS CAUSE came on for consideration as a result of HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY’S (hereinafter “HERITAGE”) proposal to remove selected personal residential policies from CITIZENS PROPERTY INSURANCE CORPORATION (hereinafter “CITIZENS”), which was submitted to the OFFICE OF INSURANCE REGULATION (hereinafter “OFFICE”) for its review on August 2, 2013. After a complete review of the entire record and upon consideration thereof, and otherwise being fully advised in the premises, the OFFICE hereby finds as follows:

1. The OFFICE has jurisdiction over the subject matter and of the parties herein.

2. CITIZENS has been established in accordance with the provisions of Section 627.351(6), Florida Statutes, as amended, to provide insurance for residential and commercial property qualified risks under circumstances specified in the Statute.

3. The Legislature of the State of Florida has enacted Section 627.351(6)(q)3.a., Florida Statutes, to encourage and provide a means for the depopulation of CITIZENS. CITIZENS submitted and the OFFICE adopted by Order No. 125161-12 a plan of depopulation, the terms and conditions upon which this proposed Consent Order is predicated. HERITAGE shall abide by the terms and conditions of the CITIZENS depopulation plan as a condition of issuance of this Consent Order.

Page 1 of 13

4. HERITAGE is a Florida domiciled property and casualty insurance company authorized to transact insurance in the State of Florida.

5. On or about August 2, 2013, HERITAGE submitted a proposal to remove selected personal residential policies from CITIZENS. The plan provides for an assumption of up to fifty thousand (50,000) multiple-peril policies from CITIZENS’ personal lines account and coastal account. HERITAGE plans to assume the CITIZENS’ policies over a period of time, subject to the approval by the OFFICE.

6. HERITAGE understands that the selected policies to be removed from CITIZENS on or about November 5, 2013, or at a later date approved by the OFFICE and CITIZENS, will not be subject to any incentive or bonus plan pursuant to Section 627.3511, Florida Statutes, unless and until the OFFICE approves such a plan for use by CITIZENS provided such plan would be retroactive to policies subject to this Consent Order. If the OFFICE approves a bonus plan for use by other take-out companies or for other transactions during the 2013 policy year, the bonus may be paid to HERITAGE in accordance with that plan and agreements between HERITAGE and CITIZENS.

7. HERITAGE shall enter into appropriate agreements with CITIZENS to provide the following:

a. HERITAGE, at its own expense, shall give at least thirty (30) days advance notice to affected policyholders, which notice will inform policyholders of the need to contact HERITAGE before the removal date if the policyholder desires to stay with CITIZENS.

Page 2 of 13

b. HERITAGE shall accumulate any objections, and shall facilitate the return of any policyholder who desires to stay in CITIZENS if that policyholder expresses the desire to stay in CITIZENS within the thirty (30) day notice period prior to the removal of the policy, or within thirty (30) days after the date of the policy removal. Policyholders shall not be required to make additional payments, nor take any action other than to express the desire to remain with CITIZENS in writing or by electronic mail on or before thirty (30) days following the date of their policy removal.

c. All communications with agents and policyholders regarding any policies to be removed from CITIZENS must be done in accordance with instructions by CITIZENS and the OFFICE. HERITAGE shall obtain prior approval from the OFFICE of any letters sent to policyholders regarding any policies to be removed from CITIZENS. HERITAGE agrees that once opt out notices have been mailed to consumers; HERITAGE cannot terminate the offer of coverage for any reason other than a consumer opt out. HERITAGE agrees that subsequent non-renewals of policies assumed via this assumption will be in accordance with the Florida Insurance Code.

d. HERITAGE shall at all times submit to CITIZENS any information required by the published revised 2013 Assumption Calendar. This information shall at all times be submitted timely, in accordance with the deadlines published by CITIZENS.

8. HERITAGE acknowledges neither approval by CITIZENS, nor entry into this Consent Order by the OFFICE, constitutes a guarantee the above referenced policies will ultimately be available to HERITAGE for removal from CITIZENS, as the availability of policies for removal may vary over time.

Page 3 of 13

9. HERITAGE shall limit its actual removal of policies from CITIZENS to the number and type of policies authorized by the OFFICE. The OFFICE will base its review on HERITAGE’S reinsurance program, catastrophe modeling, and financial statement projections, as well as the impact on policyholders. Such reinsurance program, catastrophe modeling, and financial statement profiles shall be based upon HERITAGE’S current in-force book of residential property policies, HERITAGE’S projected voluntary market writings, and actual number of policies available in CITIZENS prior to the anticipated assumption date identified by HERITAGE as satisfying its filed and approved underwriting guidelines.

10. HERITAGE has submitted the proposed reinsurance documentation and financial projections for assumption of up to fifty thousand (50,000) multiple-peril policies, expected to be assumed on November 5, 2013 or on subsequent dates approved by the OFFICE and CITIZENS. Each additional assumption of CITIZENS policies by HERITAGE shall be subject to advance written approval by the OFFICE.

11. HERITAGE’S acquisition of adequate reinsurance and maintenance of executed reinsurance agreements is material to the OFFICE’S review and analysis of HERITAGE’S proposal to remove selected policies from CITIZENS and to the OFFICE’S approval of the proposal.

12. HERITAGE expressly waives its rights to any hearing in this matter, the making of findings of fact and conclusions of law by the OFFICE, and all other and further proceedings herein to which it may be entitled by law or by rules of the OFFICE. HERITAGE agrees not to appeal or otherwise contest this Consent Order in any forum now or in the future available to it, including their right to any administrative proceeding, circuit or federal court action, or any appeal.

Page 4 of 13

13. HERITAGE represents all explanations and documents made or submitted to the OFFICE as part of its proposal to remove selected policies from CITIZENS, including all attachments and supplements thereto, fully describe all transactions, agreements, and understandings relating to the removal of policies from CITIZENS by HERITAGE. However, all draft documents and non-executed agreements relating to HERITAGE’S plan shall not be deemed approved by this Consent Order until such time as executed agreements or final documents are submitted and approved by the OFFICE.

14. The parties agree this Consent Order will be deemed executed when the OFFICE has signed a copy of this Consent Order bearing signature of HERITAGE, or its authorized representative, notwithstanding the fact the copy was transmitted to the OFFICE electronically. HERITAGE agrees the signature of its representative as affixed to this Consent Order shall be under seal of a Notary Public.

15. Each party to this action shall bear its own costs and attorney fees.

IT IS THEREFORE ORDERED that:

(A) Upon consideration of the proposal to remove selected policies from CITIZENS, including its attachments, the OFFICE approves the proposal to remove selected policies from CITIZENS, subject to adherence to the terms and conditions of this Consent Order by HERITAGE.

(B) The OFFICE approves the assumption of up to fifty thousand (50,000) multiple-peril policies, consisting of forty-five thousand, two hundred and twenty-five (45,225) policies from the personal lines account and four thousand, seven hundred and seventy-five (4,775) policies from the coastal account, for the initial assumption starting on or about November 5, 2013, in accordance with the proposal to remove selected policies from CITIZENS, any agreement(s) between HERITAGE and CITIZENS, and this Consent Order.

Page 5 of 13

(C) Regarding all reinsurance matters relating to policies removed from CITIZENS, for a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall:

(i) Maintain substantially the same reinsurance coverage as evidenced to the OFFICE in the proposal to remove selected policies from CITIZENS;

(ii) Submit to the OFFICE any and all replacement or additional reinsurance agreement(s), or amendment(s) to reinsurance agreement(s) that materially change the reinsurance coverage in (C)(i). The agreement(s), amendment(s) or plans shall be submitted to the OFFICE for review, and approval, sixty (60) days prior to the date of effectuation of any such agreement(s) or amendment(s);

(iii) Notify the OFFICE of any termination of any of its reinsurance agreements. The notification shall be made to the OFFICE in writing sixty (60) days prior to the effective date of any such termination;

(iv) Submit in writing to the OFFICE the proposed utilization of any substitute or additional reinsurers for the OFFICE’S review and approval sixty (60) days prior to the companies being utilized within HERITAGE’S reinsurance program. HERITAGE shall further immediately submit to the OFFICE all information as requested which the OFFICE deems necessary for the OFFICE to complete its review; and

(v) Cede reinsurance, or otherwise contract for reinsurance, only with reinsurers who are authorized and/or approved by the OFFICE, or such other reinsurers as may be approved in advance and in writing by the OFFICE. HERITAGE shall comply with the requirements of Section 624.610, Florida Statutes, with regard to all of its reinsurance arrangements.

Page 6 of 13

(D) For the three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall file with the OFFICE, on an annual basis no later than June 1 of each year, a catastrophe loss model with probable maximum loss estimate amounts from a one hundred-year storm based upon the exposure information gathered from all of its policies in force as of April 15 of each year which would be affected by a catastrophe. HERITAGE shall include in this filing an exposure management plan, which will identify the company’s ability to provide satisfactory financial capacity to cover the company’s exposure to catastrophic hurricane loss. The plan shall identify the reinsurance coverage and surplus levels being utilized to maintain a satisfactory financial capacity with regard to catastrophe exposure. HERITAGE shall also include within the plan specific actions intended to limit catastrophic exposures to the company’s financial capacity. Based upon the OFFICE’S review of the models and plans, HERITAGE may be required at the OFFICE’S sole discretion to take corrective action to cure any overexposure identified by the OFFICE. Such action may also include obtaining additional amounts of reinsurance coverage as directed by the OFFICE or suspend writing of any additional business, including the CITIZENS policies;

(E) Any and all policies removed from CITIZENS by HERITAGE shall provide coverage substantially equivalent to that afforded by CITIZENS. Any and all policies removed from CITIZENS by HERITAGE, pursuant to its proposal to remove selected policies from CITIZENS, must be renewable by the policyholder at approved rates and upon the same terms at the first such renewal onto HERITAGE’S policy form, unless such policies are canceled by HERITAGE for a lawful reason;

Page 7 of 13

(F) At the time HERITAGE removes any policy of insurance from CITIZENS, HERITAGE shall either obtain a new policy application from each affected policyholder or maintain in its files a copy of the policyholder’s application on file with CITIZENS. If HERITAGE chooses the latter option, HERITAGE shall nevertheless be required to obtain a new policy application from each affected policyholder no later than twenty-four (24) months from the effective date of any policy of insurance removed from CITIZENS. HERITAGE may not initiate any retrospective increase in rates or the premium or any retrospective decrease in coverage provided under the assumed CITIZENS policy (if applicable) as a result of the information obtained from or through the new policy applications;

(G) For a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall abide by the proposal to remove selected policies from CITIZENS in all material respects. Further, HERITAGE shall abide by all terms and provisions of any agreement(s) entered into with CITIZENS; and;

(H) Regarding required documentation to be maintained by HERITAGE relating to policies removed from CITIZENS:

(i) HERITAGE is required to track all agents, as well as the related policy information, who have declined to participate in the takeout process. This information shall be submitted to Citizens by the deadline published in the Citizens Assumption Calendar. Citizens will then mail out notices informing the policyholders of the agent’s declination. This will allow the affected policyholders the opportunity to address the declination with their agent and possibly receive their agent’s approval in time to be included in the current takeout. At no time shall HERITAGE contact a potential policyholder without the agent’s appointment;

Page 8 of 13

(ii) HERITAGE is required to track all agents, as well as the related policy information, who after discussing with the policyholder, decide to participate in the takeout process and submit this information to Citizens by the deadline published in the revised 2013 Assumption Calendar;

(iii) HERITAGE is required to keep a record of all agents who decline participation along with an explanation for the declination; and

(iv) When contacting an agent regarding a potential takeout policy, HERITAGE is required to provide each agent with the policy form to be used, appointment contract and a copy of HERITAGE’S most currently available financial statement.

(I) HERITAGE is required to comply with the following requirements when soliciting an agent’s permission to participate in the assumption process:

(i) HERITAGE must utilize email and at least one other method for contact (i.e. call, fax or regular mail);

(ii) HERITAGE must send out a direct solicitation to the agent of record and copy the agency principal;

(iii) HERITAGE must provide all agents a minimum of 14 days to review the solicitation. This will allow agents adequate time to research the company and make an informed decision;

(iv) HERITAGE must provide a copy of the appointment contract. HERITAGE may opt to provide the agent a link to its website containing the required information;

(v) HERITAGE must provide a copy of the policy form. HERITAGE may opt to provide the agent a link to its website containing the required information;

Page 9 of 13

(vi) HERITAGE must provide a chart identifying any differences in coverage from Citizens, which will help both the agent and the policyholder in making an informed decision;

(vii) HERITAGE must provide a list of policies specific to the agent that it would like to assume;

(viii) HERITAGE must provide a contact number of qualified staff to answer agent’s questions; and

(ix) HERITAGE must provide an overview of its strategy for handling claims (cat and non-cat).

(J) Should the OFFICE determine HERITAGE has failed to materially comply with terms of this Consent Order, the proposal to remove selected policies from CITIZENS, including its attachments, and amendments thereto as submitted to the OFFICE, or terms of any agreement(s) with CITIZENS, HERITAGE shall, upon receipt of notice of such material non-compliance, have sixty (60) days to cure its material non-compliance. In the event HERITAGE fails to cure any such material non-compliance within the sixty (60) day period, HERITAGE expressly agrees the OFFICE may enter an order directing it to immediately cease writing personal lines residential property coverage or other lines of insurance within the State of Florida, or imposing such other sanctions authorized by statute, rule or restrictions, as may be deemed appropriate by the OFFICE.

WHEREFORE, the proposal to remove up to fifty thousand (50,000) multiple peril policies, consisting of forty-five thousand, two hundred and twenty-five (45,225) policies from the personal lines account and four thousand, seven hundred and seventy-five (4,775) policies from the coastal account, for the initial assumption starting on or about November 5, 2013, subject to the terms and conditions of this Consent Order, are hereby APPROVED.

Page 10 of 13

FURTHER, all terms and conditions contained herein are hereby ORDERED.

DONE and ORDERED this 23^rd day of August, 2013.

	Kevin M. McCarty, Commissioner
	Office of Insurance Regulation

Page 11 of 13

By execution hereof, HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY consents to entry of this Consent Order, agrees without reservation to all of the above terms and conditions and shall be bound by all provisions therein. The undersigned represents that he has the authority to bind HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY to the terms and conditions of this Consent Order.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY
	Richard Widdicombe, President

Corporate Seal

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 23 day of August 2013,

by	Richard Widdicombe	as	President
	(name of person)		(type of authority ..... e.g. officer, trustee attorney in fact)
for	Heritage Property & Casualty Insurance.
	(company name)

	(Signature of the Notary)
	(Print, Type or Stamp Commissioned Name of Notary)

Personally Known ü OR Produced Identification                                    

Type of Identification Produced                                                                 

Page 12 of 13

COPIES FURNISHED TO:

Bobbi Scott, Depopulation Manager

Citizens Property Insurance Corporation

Corporate Offices

101 North Monroe Street, Suite 1000

Tallahassee, FL 32301

Bobbi.Scott@citizensfla.com

Richard Widdicombe, President

Heritage Property & Casualty Insurance Company

700 Central Ave Ste 330

St. Petersburg, FL 33701

Rwiddicombe@heritagepci.com

Carolyn Morgan, Director

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

David Altmaier, Chief Analyst

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda Rudock, Reinsurance/Financial Specialist

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda.Rudock@floir.com

Catharine Schoenecker, Assistant General Counsel

Office of Insurance Regulation

Legal Services Office

200 East Gaines Street

Tallahassee, FL 32399-0333

Catharine.Schoenecker@floir.com

Page 13 of 13

EX-10.18

Exhibit 10.18

KEVIN MCCARTY

COMMISSIONER

IN THE MATTER OF: CASE NO.: 141771-13-CO

HERITAGE PROPERTY & CASUALTY

INSURANCE COMPANY

                                                         /

CONSENT ORDER

THIS CAUSE came on for consideration as a result of HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY’S (hereinafter “HERITAGE”) proposal to remove selected personal residential policies from CITIZENS PROPERTY INSURANCE CORPORATION (hereinafter “CITIZENS”), which was submitted to the OFFICE OF INSURANCE REGULATION (hereinafter “OFFICE”) for its review on August 29, 2013. After a complete review of the entire record and upon consideration thereof, and otherwise being fully advised in the premises, the OFFICE hereby finds as follows:

1. The OFFICE has jurisdiction over the subject matter and of the parties herein.

2. CITIZENS has been established in accordance with the provisions of Section 627.351(6), Florida Statutes, as amended, to provide insurance for residential and commercial property qualified risks under circumstances specified in the Statute.

Page 1 of 13

3. The Legislature of the State of Florida has enacted Section 627.351(6)(q)3.a., Florida Statutes, to encourage and provide a means for the depopulation of CITIZENS. CITIZENS submitted and the OFFICE adopted by Order No. 125161-12 a plan of depopulation, the terms and conditions upon which this proposed Consent Order is predicated. HERITAGE shall abide by the terms and conditions of the CITIZENS depopulation plan as a condition of issuance of this Consent Order.

4. HERITAGE is a Florida domiciled property and casualty insurance company authorized to transact insurance in the State of Florida.

5. On or about August 29, 2013, HERITAGE submitted a proposal to remove selected personal residential policies from CITIZENS. The plan provides for an assumption of up to fifty thousand (50,000) multiple peril policies from CITIZENS’ personal lines account and coastal account. HERITAGE plans to assume the CITIZENS’ policies over a period of time, subject to the approval by the OFFICE.

6. HERITAGE understands that the selected policies to be removed from CITIZENS on or about December 10, 2013, or at a later date approved by the OFFICE and CITIZENS, will not be subject to any incentive or bonus plan pursuant to Section 627.3511, Florida Statutes, unless and until the OFFICE approves such a plan for use by CITIZENS provided such plan would be retroactive to policies subject to this Consent Order. If the OFFICE approves a bonus plan for use by other take-out companies or for other transactions during the 2013 policy year, the bonus may be paid to HERITAGE in accordance with that plan and agreements between HERITAGE and CITIZENS.

Page 2 of 13

7. HERITAGE shall enter into appropriate agreements with CITIZENS to provide the following:

a. HERITAGE, at its own expense, shall give at least thirty (30) days advance notice to affected policyholders, which notice will inform policyholders of the need to contact HERITAGE before the removal date if the policyholder desires to stay with CITIZENS;

b. HERITAGE shall accumulate any objections, and shall facilitate the return of any policyholder who desires to stay in CITIZENS if that policyholder expresses the desire to stay in CITIZENS within the thirty (30) day notice period prior to the removal of the policy, or within thirty (30) days after the date of the policy removal. Policyholders shall not be required to make additional payments, nor take any action other than to express the desire to remain with CITIZENS in writing or by electronic mail on or before thirty (30) days following the date of their policy removal;

c. All communications with agents and policyholders regarding any policies to be removed from CITIZENS must be done in accordance with instructions by CITIZENS and the OFFICE. HERITAGE shall obtain prior approval from the OFFICE of any letters sent to policyholders regarding any policies to be removed from CITIZENS. HERITAGE agrees that once opt out notices have been mailed to consumers; HERITAGE cannot terminate the offer of coverage for any reason other than a consumer opt out. HERITAGE agrees that subsequent non-renewals of policies assumed via this assumption will be in accordance with the Florida Insurance Code; and

d. HERITAGE shall at all times submit to CITIZENS any information required by the published revised 2013 Assumption Calendar. This information shall at all times be submitted timely, in accordance with the deadlines published by CITIZENS.

Page 3 of 13

8. HERITAGE acknowledges neither approval by CITIZENS, nor entry into this Consent Order by the OFFICE, constitutes a guarantee the above referenced policies will ultimately be available to HERITAGE for removal from CITIZENS, as the availability of policies for removal may vary over time.

9. HERITAGE shall limit its actual removal of policies from CITIZENS to the number and type of policies authorized by the OFFICE. The OFFICE will base its review on HERITAGE’S reinsurance program, catastrophe modeling, and financial statement projections, as well as the impact on policyholders. Such reinsurance program, catastrophe modeling, and financial statement profiles shall be based upon HERITAGE’S current in-force book of residential property policies, HERITAGE’S projected voluntary market writings, and actual number of policies available in CITIZENS prior to the anticipated assumption date identified by HERITAGE as satisfying its filed and approved underwriting guidelines.

10. HERITAGE has submitted the proposed reinsurance documentation and financial projections for assumption of up to fifty thousand (50,000) multiple peril policies from CITIZENS’ personal and coastal lines accounts, expected to be assumed on December 10, 2013 or on subsequent dates approved by the OFFICE and CITIZENS. Each additional assumption of CITIZENS policies by HERITAGE shall be subject to advance written approval by the OFFICE.

11. HERITAGE’S acquisition of adequate reinsurance and maintenance of executed reinsurance agreements is material to the OFFICE’S review and analysis of HERITAGE’S proposal to remove selected policies from CITIZENS and to the OFFICE’S approval of the proposal.

Page 4 of 13

12. HERITAGE expressly waives its rights to any hearing in this matter, the making of findings of fact and conclusions of law by the OFFICE, and all other and further proceedings herein to which it may be entitled by law or by rules of the OFFICE. HERITAGE agrees not to appeal or otherwise contest this Consent Order in any forum now or in the future available to it, including their right to any administrative proceeding, circuit or federal court action, or any appeal.

13. HERITAGE represents all explanations and documents made or submitted to the OFFICE as part of its proposal to remove selected policies from CITIZENS, including all attachments and supplements thereto, fully describe all transactions, agreements, and understandings relating to the removal of policies from CITIZENS by HERITAGE. However, all draft documents and non-executed agreements relating to HERITAGE’S plan shall not be deemed approved by this Consent Order until such time as executed agreements or final documents are submitted and approved by the OFFICE.

14. The parties agree this Consent Order will be deemed executed when the OFFICE has signed a copy of this Consent Order bearing signature of HERITAGE, or its authorized representative, notwithstanding the fact the copy was transmitted to the OFFICE electronically. HERITAGE agrees the signature of its representative as affixed to this Consent Order shall be under seal of a Notary Public.

15. Each party to this action shall bear its own costs and attorney fees.

IT IS THEREFORE ORDERED that:

(A) Upon consideration of the proposal to remove selected policies from CITIZENS, including its attachments, the OFFICE approves the proposal to remove selected policies from CITIZENS, subject to adherence to the terms and conditions of this Consent Order by HERITAGE.

Page 5 of 13

(B) The OFFICE approves the assumption of up to fifty thousand (50,000) multiple peril policies, consisting of forty-five thousand, two hundred and twenty-five (45,225) policies from the personal lines account and four thousand, seven hundred and seventy-five (4,775) policies from the coastal account, for the initial assumption starting on or about December 10, 2013, in accordance with the proposal to remove selected policies from CITIZENS, any agreement(s) between HERITAGE and CITIZENS, and this Consent Order.

(C) Regarding all reinsurance matters relating to policies removed from CITIZENS, for a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall:

(i) Maintain substantially the same reinsurance coverage as evidenced to the OFFICE in the proposal to remove selected policies from CITIZENS;

(ii) Submit to the OFFICE any and all replacement or additional reinsurance agreement(s), or amendment(s) to reinsurance agreement(s) that materially change the reinsurance coverage in (C)(i). The agreement(s), amendment(s) or plans shall be submitted to the OFFICE for review, and approval, sixty (60) days prior to the date of effectuation of any such agreement(s) or amendment(s);

(iii) Notify the OFFICE of any termination of any of its reinsurance agreements. The notification shall be made to the OFFICE in writing sixty (60) days prior to the effective date of any such termination;

(iv) Submit in writing to the OFFICE the proposed utilization of any substitute or additional reinsurers for the OFFICE’S review and approval sixty (60) days prior to the companies being utilized within HERITAGE’S reinsurance program. HERITAGE shall further immediately submit to the OFFICE all information as requested which the OFFICE deems necessary for the OFFICE to complete its review; and

Page 6 of 13

(v) Cede reinsurance, or otherwise contract for reinsurance, only with reinsurers who are authorized and/or approved by the OFFICE, or such other reinsurers as may be approved in advance and in writing by the OFFICE. HERITAGE shall comply with the requirements of Section 624.610, Florida Statutes, with regard to all of its reinsurance arrangements.

(D) For the three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall file with the OFFICE, on an annual basis no later than June 1 of each year, a catastrophe loss model with probable maximum loss estimate amounts from a one hundred-year storm based upon the exposure information gathered from all of its policies in force as of April 15 of each year which would be affected by a catastrophe. HERITAGE shall include in this filing an exposure management plan, which will identify the company’s ability to provide satisfactory financial capacity to cover the company’s exposure to catastrophic hurricane loss. The plan shall identify the reinsurance coverage and surplus levels being utilized to maintain a satisfactory financial capacity with regard to catastrophe exposure. HERITAGE shall also include within the plan specific actions intended to limit catastrophic exposures to the company’s financial capacity. Based upon the OFFICE’S review of the models and plans, HERITAGE may be required at the OFFICE’S sole discretion to take corrective action to cure any overexposure identified by the OFFICE. Such action may also include obtaining additional amounts of reinsurance coverage as directed by the OFFICE or suspend writing of any additional business, including the CITIZENS policies.

Page 7 of 13

(E) Any and all policies removed from CITIZENS by HERITAGE shall provide coverage substantially equivalent to that afforded by CITIZENS. Any and all policies removed from CITIZENS by HERITAGE, pursuant to its proposal to remove selected policies from CITIZENS, must be renewable by the policyholder at approved rates and upon the same terms at the first such renewal onto HERITAGE’S policy form, unless such policies are canceled by HERITAGE for a lawful reason.

(F) At the time HERITAGE removes any policy of insurance from CITIZENS, HERITAGE shall either obtain a new policy application from each affected policyholder or maintain in its files a copy of the policyholder’s application on file with CITIZENS. If HERITAGE chooses the latter option, HERITAGE shall nevertheless be required to obtain a new policy application from each affected policyholder no later than twenty-four (24) months from the effective date of any policy of insurance removed from CITIZENS. HERITAGE may not initiate any retrospective increase in rates or the premium or any retrospective decrease in coverage provided under the assumed CITIZENS policy (if applicable) as a result of the information obtained from or through the new policy applications.

(G) For a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall abide by the proposal to remove selected policies from CITIZENS in all material respects. Further, HERITAGE shall abide by all terms and provisions of any agreement(s) entered into with CITIZENS.

Page 8 of 13

(H) Regarding required documentation to be maintained by HERITAGE relating to policies removed from CITIZENS:

(i) HERITAGE is required to track all agents, as well as the related policy information, who have declined to participate in the takeout process. This information shall be submitted to Citizens by the deadline published in the Citizens Assumption Calendar. Citizens will then mail out notices informing the policyholders of the agent’s declination. This will allow the affected policyholders the opportunity to address the declination with their agent and possibly receive their agent’s approval in time to be included in the current takeout. At no time shall HERITAGE contact a potential policyholder without the agent’s appointment;

(ii) HERITAGE is required to track all agents, as well as the related policy information, who after discussing with the policyholder, decide to participate in the takeout process and submit this information to Citizens by the deadline published in the revised 2013 Assumption Calendar;

(iii) HERITAGE is required to keep a record of all agents who decline participation along with an explanation for the declination; and

(iv) When contacting an agent regarding a potential takeout policy, HERITAGE is required to provide each agent with the policy form to be used, appointment contract and a copy of HERITAGE’S most currently available financial statement.

(I) HERITAGE is required to comply with the following requirements when soliciting an agent’s permission to participate in the assumption process:

(i) HERITAGE must utilize email and at least one other method for contact (i.e. call, fax or regular mail);

(ii) HERITAGE must send out a direct solicitation to the agent of record and copy the agency principal;

(iii) HERITAGE must provide all agents a minimum of 14 days to review the solicitation. This will allow agents adequate time to research the company and make an informed decision;

Page 9 of 13

(iv) HERITAGE must provide a copy of the appointment contract. HERITAGE may opt to provide the agent a link to its website containing the required information;

(v) HERITAGE must provide a copy of the policy form. HERITAGE may opt to provide the agent a link to its website containing the required information;

(vi) HERITAGE must provide a chart identifying any differences in coverage from Citizens, which will help both the agent and the policyholder in making an informed decision;

(vii) HERITAGE must provide a list of policies specific to the agent that it would like to assume;

(viii) HERITAGE must provide a contact number of qualified staff to answer agent’s questions; and

(ix) HERITAGE must provide an overview of its strategy for handling claims (cat and non-cat).

(J) Should the OFFICE determine HERITAGE has failed to materially comply with terms of this Consent Order, the proposal to remove selected policies from CITIZENS, including its attachments, and amendments thereto as submitted to the OFFICE, or terms of any agreement(s) with CITIZENS, HERITAGE shall, upon receipt of notice of such material non-compliance, have sixty (60) days to cure its material non-compliance. In the event HERITAGE fails to cure any such material non-compliance within the sixty (60) day period, HERITAGE expressly agrees the OFFICE may enter an order directing it to immediately cease writing personal lines residential property coverage or other lines of insurance within the State of Florida, or imposing such other sanctions authorized by statute, rule or restrictions, as may be deemed appropriate by the OFFICE.

Page 10 of 13

WHEREFORE, the proposal to remove up to fifty thousand (50,000) multiple peril policies, consisting of forty-five thousand, two hundred and twenty-five (45,225) policies from the personal lines account and four thousand, seven hundred and seventy-five (4,775) policies from the coastal account, for the initial assumption starting on or about December 10, 2013, subject to the terms and conditions of this Consent Order, are hereby APPROVED.

FURTHER, all terms and conditions contained herein are hereby ORDERED.

DONE and ORDERED this 27 day of September, 2013.

/s/ Kevin M. McCarty

Kevin M. McCarty, Commissioner

Office of Insurance Regulation

Page 11 of 13

By execution hereof, HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY consents to entry of this Consent Order, agrees without reservation to all of the above terms and conditions and shall be bound by all provisions therein. The undersigned represents that he has the authority to bind HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY to the terms and conditions of this Consent Order.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY

Richard Widdicombe, President

Corporate Seal

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 27 day of September 2013,

by	Richard Widdicombe	as	President
	(name of person)		(type of authority..... e.g. officer, trustee attorney in fact)
for	Heritage Property & Casualty Insurance Company.
	(company name)
		(Signature of the Notary)
		Heather Wagoner
		(Print, Type or Stamp Commissioned Name of Notary)

Personally Known ü OR Produced Identification                     

Type of Identification Produced                                                  

Page 12 of 13

COPIES FURNISHED TO:

Bobbi Scott, Depopulation Manager

Citizens Property Insurance Corporation

Corporate Offices

2312 Killearn Center Boulevard

Tallahassee, FL 32309

Bobbi.Scott@citizensfla.com

Richard Widdicombe, President

Heritage Property & Casualty Insurance Company

700 Central Ave Ste 330

St. Petersburg, FL 33701

Rwiddicombe@heritagepci.com

Carolyn Morgan, Director

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

David Altmaier, Chief Analyst

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda Rudock, Reinsurance/Financial Specialist

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda.Rudock@floir.com

Virginia A. Christy, Assistant General Counsel

Office of Insurance Regulation

Legal Services Office

200 East Gaines Street

Tallahassee, FL 32399-0333

Virginia.Christy@floir.com

Page 13 of 13

EX-10.19

Exhibit 10.19

KEVIN MCCARTY COMMISSIONER

IN THE MATTER OF: CASE NO.: 143282-13-CO

HERITAGE PROPERTY & CASUALTY

INSURANCE COMPANY

                                                                              /

CONSENT ORDER

THIS CAUSE came on for consideration as a result of HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY’S (hereinafter “HERITAGE”) proposal to remove selected personal residential policies from CITIZENS PROPERTY INSURANCE CORPORATION (hereinafter “CITIZENS”), which was submitted to the OFFICE OF INSURANCE REGULATION (hereinafter “OFFICE”) for its review on September 27, 2013. After a complete review of the entire record and upon consideration thereof, and otherwise being fully advised in the premises, the OFFICE hereby finds as follows:

1. The OFFICE has jurisdiction over the subject matter and of the parties herein.

2. CITIZENS has been established in accordance with the provisions of Section 627.351(6), Florida Statutes, as amended, to provide insurance for residential and commercial property qualified risks under circumstances specified in the Statute.

Page 1 of 13

3. The Legislature of the State of Florida has enacted Section 627.351(6)(q)3.a., Florida Statutes, to encourage and provide a means for the depopulation of CITIZENS. CITIZENS submitted and the OFFICE adopted by Order No. 125161-12 a plan of depopulation, the terms and conditions upon which this proposed Consent Order is predicated. HERITAGE shall abide by the terms and conditions of the CITIZENS depopulation plan as a condition of issuance of this Consent Order.

4. HERITAGE is a Florida domiciled property and casualty insurance company authorized to transact insurance in the State of Florida.

5. On or about September 27, 2013, HERITAGE submitted a proposal to remove selected personal residential policies from CITIZENS. The proposal provides for an assumption to occur on or about January 7, 2014 of up to twenty thousand (20,000) multiple peril policies from CITIZENS’ personal lines account and coastal account. HERITAGE plans to assume the CITIZENS’ policies over a period of time, subject to the approval by the OFFICE.

6. HERITAGE understands that the selected policies to be removed from CITIZENS on or about January 7, 2014, or at a later date approved by the OFFICE and CITIZENS, will not be subject to any incentive or bonus plan pursuant to Section 627.3511, Florida Statutes, unless and until the OFFICE approves such a plan for use by CITIZENS provided such plan would be retroactive to policies subject to this Consent Order. If the OFFICE approves a bonus plan for use by other take-out companies or for other transactions during the 2014 policy year, the bonus may be paid to HERITAGE in accordance with that plan and agreements between HERITAGE and CITIZENS.

Page 2 of 13

7. HERITAGE shall enter into appropriate agreements with CITIZENS to provide the following:

a. HERITAGE, at its own expense, shall give at least thirty (30) days advance notice to affected policyholders, which notice will inform policyholders of the need to contact HERITAGE before the removal date if the policyholder desires to stay with CITIZENS.

b. HERITAGE shall accumulate any objections, and shall facilitate the return of any policyholder who desires to stay in CITIZENS if that policyholder expresses the desire to stay in CITIZENS within the thirty (30) day notice period prior to the removal of the policy, or within thirty (30) days after the date of the policy removal. Policyholders shall not be required to make additional payments, nor take any action other than to express the desire to remain with CITIZENS in writing or by electronic mail on or before thirty (30) days following the date of their policy removal.

c. All communications with agents and policyholders regarding any policies to be removed from CITIZENS must be done in accordance with instructions by CITIZENS and the OFFICE. HERITAGE shall obtain prior approval from the OFFICE of any letters sent to policyholders regarding any policies to be removed from CITIZENS. HERITAGE agrees that once opt out notices have been mailed to consumers; HERITAGE cannot terminate the offer of coverage for any reason other than a consumer opt out. HERITAGE agrees that subsequent non-renewals of policies assumed via this assumption will be in accordance with the Florida Insurance Code.

d. HERITAGE shall at all times submit to CITIZENS any information required by the published revised 2014 Assumption Calendar. This information shall at all times be submitted timely, in accordance with the deadlines published by CITIZENS.

Page 3 of 13

8. HERITAGE acknowledges neither approval by CITIZENS, nor entry into this Consent Order by the OFFICE, constitutes a guarantee the above referenced policies will ultimately be available to HERITAGE for removal from CITIZENS, as the availability of policies for removal may vary over time.

9. HERITAGE shall limit its actual removal of policies from CITIZENS to the number and type of policies authorized by the OFFICE. The OFFICE will base its review on HERITAGE’S reinsurance program, catastrophe modeling, and financial statement projections, as well as the impact on policyholders. Such reinsurance program, catastrophe modeling, and financial statement profiles shall be based upon HERITAGE’S current in-force book of residential property policies, HERITAGE’S projected voluntary market writings, and actual number of policies available in CITIZENS prior to the anticipated assumption date identified by HERITAGE as satisfying its filed and approved underwriting guidelines.

10. HERITAGE has submitted the proposed reinsurance documentation and financial projections for assumption of up to twenty thousand (20,000) multiple peril policies, expected to be assumed on January 7, 2014 or on subsequent dates approved by the OFFICE and CITIZENS. Each additional assumption of CITIZENS policies by HERITAGE shall be subject to advance written approval by the OFFICE.

11. HERITAGE’S acquisition of adequate reinsurance and maintenance of executed reinsurance agreements is material to the OFFICE’S review and analysis of HERITAGE’S proposal to remove selected policies from CITIZENS and to the OFFICE’S approval of the proposal.

Page 4 of 13

12. HERITAGE expressly waives its rights to any hearing in this matter, the making of findings of fact and conclusions of law by the OFFICE, and all other and further proceedings herein to which it may be entitled by law or by rules of the OFFICE. HERITAGE agrees not to appeal or otherwise contest this Consent Order in any forum now or in the future available to it, including their right to any administrative proceeding, circuit or federal court action, or any appeal.

13. HERITAGE represents all explanations and documents made or submitted to the OFFICE as part of its proposal to remove selected policies from CITIZENS, including all attachments and supplements thereto, fully describe all transactions, agreements, and understandings relating to the removal of policies from CITIZENS by HERITAGE. However, all draft documents and non-executed agreements relating to HERITAGE’S plan shall not be deemed approved by this Consent Order until such time as executed agreements or final documents are submitted and approved by the OFFICE.

14. The parties agree this Consent Order will be deemed executed when the OFFICE has signed a copy of this Consent Order bearing signature of HERITAGE, or its authorized representative, notwithstanding the fact the copy was transmitted to the OFFICE electronically. HERITAGE agrees the signature of its representative as affixed to this Consent Order shall be under seal of a Notary Public.

15. Each party to this action shall bear its own costs and attorney fees.

IT IS THEREFORE ORDERED that:

(A) Upon consideration of the proposal to remove selected policies from CITIZENS, including its attachments, the OFFICE approves the proposal to remove selected policies from CITIZENS, subject to adherence to the terms and conditions of this Consent Order by HERITAGE.

Page 5 of 13

(B) The OFFICE approves the assumption of up to twenty thousand (20,000) multiple peril policies, consisting of sixteen thousand (16,000) policies from the personal lines account and four thousand (4,000) policies from the coastal account, for the initial assumption starting on or about January 7, 2014, in accordance with the proposal to remove selected policies from CITIZENS, any agreement(s) between HERITAGE and CITIZENS, and this Consent Order.

(C) Regarding all reinsurance matters relating to policies removed from CITIZENS, for a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall:

(i) Maintain substantially the same reinsurance coverage as evidenced to the OFFICE in the proposal to remove selected policies from CITIZENS;

(ii) Submit to the OFFICE any and all replacement or additional reinsurance agreement(s), or amendment(s) to reinsurance agreement(s) that materially change the reinsurance coverage in (C)(i). The agreement(s), amendment(s) or plans shall be submitted to the OFFICE for review, and approval, sixty (60) days prior to the date of effectuation of any such agreement(s) or amendment(s);

(iii) Notify the OFFICE of any termination of any of its reinsurance agreements. The notification shall be made to the OFFICE in writing sixty (60) days prior to the effective date of any such termination;

(iv) Submit in writing to the OFFICE the proposed utilization of any substitute or additional reinsurers for the OFFICE’S review and approval sixty (60) days prior to the companies being utilized within HERITAGE’S reinsurance program. HERITAGE shall further immediately submit to the OFFICE all information as requested which the OFFICE deems necessary for the OFFICE to complete its review; and

Page 6 of 13

(v) Cede reinsurance, or otherwise contract for reinsurance, only with reinsurers who are authorized and/or approved by the OFFICE, or such other reinsurers as may be approved in advance and in writing by the OFFICE. HERITAGE shall comply with the requirements of Section 624.610, Florida Statutes, with regard to all of its reinsurance arrangements.

(D) For the three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall file with the OFFICE, on an annual basis no later than June 1 of each year, a catastrophe loss model with probable maximum loss estimate amounts from a one hundred-year storm based upon the exposure information gathered from all of its policies in force as of April 15 of each year which would be affected by a catastrophe. HERITAGE shall include in this filing an exposure management plan, which will identify the company’s ability to provide satisfactory financial capacity to cover the company’s exposure to catastrophic hurricane loss. The plan shall identify the reinsurance coverage and surplus levels being utilized to maintain a satisfactory financial capacity with regard to catastrophe exposure. HERITAGE shall also include within the plan specific actions intended to limit catastrophic exposures to the company’s financial capacity. Based upon the OFFICE’S review of the models and plans, HERITAGE may be required at the OFFICE’S sole discretion to take corrective action to cure any overexposure identified by the OFFICE. Such action may also include obtaining additional amounts of reinsurance coverage as directed by the OFFICE or suspend writing of any additional business, including the CITIZENS policies.

Page 7 of 13

(E) Any and all policies removed from CITIZENS by HERITAGE shall provide coverage substantially equivalent to that afforded by CITIZENS. Any and all policies removed from CITIZENS by HERITAGE, pursuant to its proposal to remove selected policies from CITIZENS, must be renewable by the policyholder at approved rates and upon the same terms at the first such renewal onto HERITAGE’S policy form, unless such policies are canceled by HERITAGE for a lawful reason.

(F) At the time HERITAGE removes any policy of insurance from CITIZENS, HERITAGE shall either obtain a new policy application from each affected policyholder or maintain in its files a copy of the policyholder’s application on file with CITIZENS. If HERITAGE chooses the latter option, HERITAGE shall nevertheless be required to obtain a new policy application from each affected policyholder no later than twenty-four (24) months from the effective date of any policy of insurance removed from CITIZENS. HERITAGE may not initiate any retrospective increase in rates or the premium or any retrospective decrease in coverage provided under the assumed CITIZENS policy (if applicable) as a result of the information obtained from or through the new policy applications.

(G) For a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall abide by the proposal to remove selected policies from CITIZENS in all material respects. Further, HERITAGE shall abide by all terms and provisions of any agreement(s) entered into with CITIZENS.

(H) Regarding required documentation to be maintained by HERITAGE relating to policies removed from CITIZENS:

(i) HERITAGE is required to track all agents, as well as the related policy information, who have declined to participate in the takeout process. This information shall be submitted to Citizens by the deadline published in the Citizens Assumption Calendar. Citizens will then mail out notices informing the policyholders of the agent’s declination. This will allow the affected policyholders the opportunity to address the declination with their agent and possibly receive their agent’s approval in time to be included in the current takeout. At no time shall HERITAGE contact a potential policyholder without the agent’s appointment;

Page 8 of 13

(ii) HERITAGE is required to track all agents, as well as the related policy information, who after discussing with the policyholder, decide to participate in the takeout process and submit this information to Citizens by the deadline published in the revised 2014 Assumption Calendar;

(iii) HERITAGE is required to keep a record of all agents who decline participation along with an explanation for the declination; and

(iv) When contacting an agent regarding a potential takeout policy, HERITAGE is required to provide each agent with the policy form to be used, appointment contract and a copy of HERITAGE’S most currently available financial statement.

(I) HERITAGE is required to comply with the following requirements when soliciting an agent’s permission to participate in the assumption process:

(i) HERITAGE must utilize email and at least one other method for contact (i.e. call, fax or regular mail);

(ii) HERITAGE must send out a direct solicitation to the agent of record and copy the agency principal;

(iii) HERITAGE must provide all agents a minimum of fourteen (14) days to review the solicitation. This will allow agents adequate time to research the company and make an informed decision;

(iv) HERITAGE must provide a copy of the appointment contract. HERITAGE may opt to provide the agent a link to its website containing the required information;

Page 9 of 13

(v) HERITAGE must provide a copy of the policy form. HERITAGE may opt to provide the agent a link to its website containing the required information;

(vi) HERITAGE must provide a chart identifying any differences in coverage from Citizens, which will help both the agent and the policyholder in making an informed decision;

(vii) HERITAGE must provide a list of policies specific to the agent that it would like to assume;

(viii) HERITAGE must provide a contact number of qualified staff to answer agent’s questions; and

(ix) HERITAGE must provide an overview of its strategy for handling claims (cat and non-cat).

(J) Should the OFFICE determine HERITAGE has failed to materially comply with terms of this Consent Order, the proposal to remove selected policies from CITIZENS, including its attachments, and amendments thereto as submitted to the OFFICE, or terms of any agreement(s) with CITIZENS, HERITAGE shall, upon receipt of notice of such material non-compliance, have sixty (60) days to cure its material non-compliance. In the event HERITAGE fails to cure any such material non-compliance within the sixty (60) day period, HERITAGE expressly agrees the OFFICE may enter an order directing it to immediately cease writing personal lines residential property coverage or other lines of insurance within the State of Florida, or imposing such other sanctions authorized by statute, rule or restrictions, as may be deemed appropriate by the OFFICE.

Page 10 of 13

WHEREFORE, the proposal to remove up to twenty thousand (20,000) multiple peril policies, consisting of sixteen thousand (16,000) policies from the personal lines account and four thousand (4,000) policies from the coastal account, for the initial assumption starting on or about January 7, 2014, subject to the terms and conditions of this Consent Order, are hereby APPROVED.

FURTHER, all terms and conditions contained herein are hereby ORDERED.

DONE and ORDERED this 25^th day of October, 2013.

	Kevin M. McCarty, Commissioner Office of Insurance Regulation

Page 11 of 13

By execution hereof, HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY consents to entry of this Consent Order, agrees without reservation to all of the above terms and conditions, and shall be bound by all provisions therein. The undersigned represents that he has the authority to bind HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY to the terms and conditions of this Consent Order.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY

Richard Widdicombe, President

Corporate Seal

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 24 day of October, 2013,

by	Richard Widdicombe	as	President
	(name of person)		(type of authority..... e.g. officer, trustee attorney in fact)
for	Heritage Property & Casualty Insurance Company.
	(company name)

Personally Known ü OR Produced Identification             

Type of Identification Produced                                                  

Page 12 of 13

COPIES FURNISHED TO:

Bobbi Scott, Depopulation Manager

Citizens Property Insurance Corporation

2312 Killearn Center Boulevard

Tallahassee, FL 32309

Bobbi.Scott@citizensfla.com

Claude Mueller

Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb, P.A.

215 South Monroe Street, Suite 701

Tallahassee, FL 32301

cmueller@cftlaw.com

Richard Widdicombe, President

Heritage Property & Casualty Insurance Company

700 Central Ave Ste 330

St. Petersburg, FL 33701

Rwiddicombe@heritagepci.com

Carolyn Morgan, Director

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

David Altmaier, Chief Analyst

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda Rudock, Reinsurance/Financial Specialist

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda.Rudock@floir.com

Virginia A. Christy, Assistant General Counsel

Office of Insurance Regulation

Legal Services Office

200 East Gaines Street

Tallahassee, FL 32399-0333

Virginia.Christy@floir.com

Page 13 of 13

EX-10.20

Exhibit 10.20

KEVIN MCCARTY

COMMISSIONER

IN THE MATTER OF: CASE NO.: 144855-13-CO

HERITAGE PROPERTY & CASUALTY

INSURANCE COMPANY

                                                                              /

CONSENT ORDER

THIS CAUSE came on for consideration as a result of HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY’S (hereinafter “HERITAGE”) proposal to remove selected personal residential policies from CITIZENS PROPERTY INSURANCE CORPORATION (hereinafter “CITIZENS”), which was submitted to the OFFICE OF INSURANCE REGULATION (hereinafter “OFFICE”) for its review on October 18, 2013. After a complete review of the entire record and upon consideration thereof, and otherwise being fully advised in the premises, the OFFICE hereby finds as follows:

1. The OFFICE has jurisdiction over the subject matter and of the parties herein.

2. CITIZENS has been established in accordance with the provisions of Section 627.351(6), Florida Statutes, as amended, to provide insurance for residential and commercial property qualified risks under circumstances specified in the Statute.

Page 1 of 14

3. The Legislature of the State of Florida has enacted Section 627.35l (6)(q)3.a., Florida Statutes, to encourage and provide a means for the depopulation of CITIZENS. CITIZENS submitted and the OFFICE adopted by Order No. 125161 - 12 a plan of depopulation, the terms and conditions upon which this proposed Consent Order is predicated. HERITAGE shall abide by the terms and conditions of the CITIZENS depopulation plan as a condition of issuance of this Consent Order.

4. HERITAGE is a Florida domiciled property and casualty insurance company authorized to transact insurance in the State of Florida.

5. On or about October 18, 2013, HERITAGE submitted a proposal to remove selected personal residential policies from CITIZENS. The proposal provides for an assumption to occur on or about February 4, 2014 of up to twenty thousand (20,000) multiple peril policies from CITIZENS’ personal lines account and coastal account. HERITAGE plans to assume the CITIZENS policies over a period of time, subject to the approval by the OFFICE.

6. HERITAGE understands that the selected policies to be removed from CITIZENS on or about February 4, 2014, or at a later date approved by the OFFICE and CITIZENS, will not be subject to any incentive or bonus plan pursuant to Section 627.3511, Florida Statutes, unless and until the OFFICE approves such a plan for use by CITIZENS provided such plan would be retroactive to policies subject to this Consent Order. If the OFFICE approves a bonus plan for use by other take-out companies or for other transactions during the 2014 policy year, the bonus may be paid to HERITAGE in accordance with that plan and agreements between HERITAGE and CITIZENS.

Page 2 of 14

7. HERITAGE shall enter into appropriate agreements with CITIZENS to provide the following:

a. HERITAGE, at its own expense, shall give at least thirty (30) days advance notice to affected policyholders, which notice will inform policyholders of the need to contact HERITAGE before the removal date if the policyholder desires to stay with CITIZENS.

b. HERITAGE shall accumulate any objections, and shall facilitate the return of any policyholder who desires to stay in CITIZENS if that policyholder expresses the desire to stay in CITIZENS within the thirty (30) day notice period prior to the removal of the policy, or within thirty (30) days after the date of the policy removal. Policyholders shall not be required to make additional payments, nor take any action other than to express the desire to remain with CITIZENS in writing or by electronic mail on or before thirty (30) days following the date of their policy removal.

c. All communications with agents and policyholders regarding any policies to be removed from CITIZENS must be done in accordance with instructions by CITIZENS and the OFFICE. HERITAGE shall obtain prior approval from the OFFICE of any letters sent to policyholders regarding any policies to be removed from CITIZENS. HERITAGE agrees that once opt out notices have been mailed to consumers, HERITAGE cannot terminate the offer of coverage for any reason other than a consumer opt out. HERITAGE agrees that subsequent non-renewals of policies assumed via this assumption will be in accordance with the Florida Insurance Code.

d. HERITAGE shall at all times submit to CITIZENS any information required by the published revised 2014 Assumption Calendar. This information shall at all times be submitted timely, in accordance with the deadlines published by CITIZENS.

Page 3 of 14

8. HERITAGE acknowledges neither approval by CITIZENS, nor entry into this Consent Order by the OFFICE, constitutes a guarantee the above referenced policies will ultimately be available to HERITAGE for removal from CITIZENS, as the availability of policies for removal may vary over time.

9. HERITAGE shall limit its actual removal of policies from CITIZENS to the number and type of policies authorized by the OFFICE. The OFFICE will base its review on HERITAGE’s reinsurance program, catastrophe modeling, and financial statement projections, as well as the impact on policyholders. Such reinsurance program, catastrophe modeling, and financial statement profiles shall be based upon HERITAGE’s current in-force book of residential property policies, HERITAGE’s projected voluntary market writings, and actual number of policies available in CITIZENS prior to the anticipated assumption date identified by HERITAGE as satisfying its filed and approved underwriting guidelines.

10. HERITAGE has submitted the proposed reinsurance documentation and financial projections for assumption of up to twenty thousand (20,000) multiple peril policies, expected to be assumed on February 4, 2014 or on subsequent dates approved by the OFFICE and CITIZENS. Each additional assumption of CITIZENS’ policies by HERITAGE shall be subject to advance written approval by the OFFICE.

11. HERITAGE’s acquisition of adequate reinsurance and maintenance of executed reinsurance agreements is material to the OFFICE’s review and analysis of HERITAGE’s proposal to remove selected policies from CITIZENS and to the OFFICE’s approval of the proposal.

Page 4 of 14

12. HERITAGE expressly waives its rights to any hearing in this matter, the making of findings of fact and conclusions of law by the OFFICE, and all other and further proceedings herein to which it may be entitled by law or by rules of the OFFICE. HERITAGE agrees not to appeal or otherwise contest this Consent Order in any forum now or in the future available to it, including their right to any administrative proceeding, circuit or federal court action, or any appeal.

13. HERITAGE represents all explanations and documents made or submitted to the OFFICE as part of its proposal to remove selected policies from CITIZENS, including all attachments and supplements thereto, fully describe all transactions, agreements, and understandings relating to the removal of policies from CITIZENS by HERITAGE. However, all draft documents and non-executed agreements relating to HERITAGE’s plan shall not be deemed approved by this Consent Order until such time as executed agreements or final documents are submitted and approved by the OFFICE.

14. The parties agree this Consent Order will be deemed executed when the OFFICE has signed a copy of this Consent Order bearing signature of HERITAGE, or its authorized representative, notwithstanding the fact the copy was transmitted to the OFFICE electronically. HERITAGE agrees the signature of its representative as affixed to this Consent Order shall be under seal of a Notary Public.

15. Each party to this action shall bear its own costs and attorney fees.

IT IS THEREFORE ORDERED that:

(A) Upon consideration of the proposal to remove selected policies from CITIZENS, including its attachments, the OFFICE approves the proposal to remove selected policies from CITIZENS, subject to adherence to the terms and conditions of this Consent Order by HERITAGE.

Page 5 of 14

(B) The OFFICE approves the assumption of up to twenty thousand (20,000) multiple peril policies, consisting of twelve thousand, five hundred (12,500) policies from the personal lines account and seven thousand, five hundred (7,500) policies from the coastal account, for the initial assumption starting on or about February 4, 2014, in accordance with the proposal to remove selected policies from CITIZENS, any agreement(s) between HERITAGE and CITIZENS, and this Consent Order.

(C) Regarding all reinsurance matters relating to policies removed from CITIZENS, for a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall:

(i) Maintain substantially the same reinsurance coverage as evidenced to the OFFICE in the proposal to remove selected policies from CITIZENS;

(ii) Submit to the OFFICE any and all replacement or additional reinsurance agreement(s), or amendment(s) to reinsurance agreement(s) that materially change the reinsurance coverage in (C)(i). The agreement(s), amendment(s) or plans shall be submitted to the OFFICE for review, and approval, sixty (60) days prior to the date of effectuation of any such agreement(s) or amendment(s);

(iii) Notify the OFFICE of any termination of any of its reinsurance agreements. The notification shall be made to the OFFICE in writing sixty (60) days prior to the effective date of any such termination;

(iv) Submit in writing to the OFFICE the proposed utilization of any substitute or additional reinsurers for the OFFICE’s review and approval sixty (60) days prior to the companies being utilized within HERITAGE’s reinsurance program. HERITAGE shall further immediately submit to the OFFICE all information as requested which the OFFICE deems necessary for the OFFICE to complete its review; and

Page 6 of 14

(v) Cede reinsurance, or otherwise contract for reinsurance, only with reinsurers who are authorized and/or approved by the OFFICE, or such other reinsurers as may be approved in advance and in writing by the OFFICE. HERITAGE shall comply with the requirements of Section 624.610, Florida Statutes, with regard to all of its reinsurance arrangements.

(D) For the three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall file with the OFFICE, on an annual basis no later than June 1 of each year, a catastrophe loss model with probable maximum loss estimate amounts from a one hundred-year storm based upon the exposure information gathered from all of its policies in force as of April 15 of each year which would be affected by a catastrophe. HERITAGE shall include in this filing an exposure management plan, which will identify the company’s ability to provide satisfactory financial capacity to cover the company’s exposure to catastrophic hurricane loss. The plan shall identify the reinsurance coverage and surplus levels being utilized to maintain a satisfactory financial capacity with regard to catastrophe exposure. HERITAGE shall also include within the plan specific actions intended to limit catastrophic exposures to the company’s financial capacity. Based upon the OFFICE’s review of the models and plans, HERITAGE may be required at the OFFICE’s sole discretion to take corrective action to cure any overexposure identified by the OFFICE. Such action may also include obtaining additional amounts of reinsurance coverage as directed by the OFFICE or suspend writing of any additional business, including the CITIZENS’ policies.

Page 7 of 14

(E) Any and all policies removed from CITIZENS by HERITAGE shall provide coverage substantially equivalent to that afforded by CITIZENS. Any and all policies removed from CITIZENS by HERITAGE, pursuant to its proposal to remove selected policies from CITIZENS, must be renewable by the policyholder at approved rates and upon the same terms at the first such renewal onto HERITAGE’s policy form, unless such policies are canceled by HERITAGE for a lawful reason.

(F) At the time HERITAGE removes any policy of insurance from CITIZENS, HERITAGE shall either obtain a new policy application from each affected policyholder or maintain in its files a copy of the policyholder’s application on file with CITIZENS. If HERITAGE chooses the latter option, HERITAGE shall nevertheless be required to obtain a new policy application from each affected policyholder no later than twenty-four (24) months from the effective date of any policy of insurance removed from CITIZENS. HERITAGE may not initiate any retrospective increase in rates or the premium or any retrospective decrease in coverage provided under the assumed CITIZENS policy (if applicable) as a result of the information obtained from or through the new policy applications.

(G) For a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall abide by the proposal to remove selected policies from CITIZENS in all material respects. Further, HERITAGE shall abide by all terms and provisions of any agreement(s) entered into with CITIZENS.

Page 8 of 14

(H) Regarding required documentation to be maintained by HERITAGE relating to policies removed from CITIZENS:

(i) HERITAGE is required to track all agents, as well as the related policy information, who have declined to participate in the takeout process. This information shall be submitted to CITIZENS by the deadline published in the Citizens Assumption Calendar. CITIZENS will then mail out notices informing the policyholders of the agent’s declination. This will allow the affected policyholders the opportunity to address the declination with their agent and possibly receive their agent’s approval in time to be included in the current takeout. At no time shall HERITAGE contact a potential policyholder without the agent’s appointment;

(ii) HERITAGE is required to track all agents, as well as the related policy information, who after discussing with the policyholder, decide to participate in the takeout process and submit this information to CITIZENS by the deadline published in the revised 2014 Assumption Calendar;

(iii) HERITAGE is required to keep a record of all agents who decline participation along with an explanation for the declination; and

(iv) When contacting an agent regarding a potential takeout policy, HERITAGE is required to provide each agent with the policy form to be used, appointment contract, and a copy of HERITAGE’s most currently available financial statement.

(I) HERITAGE is required to comply with the following requirements when soliciting an agent’s permission to participate in the assumption process:

(i) HERITAGE must utilize email and at least one other method for contact (i.e. call, fax or regular mail);

(ii) HERITAGE must send out a direct solicitation to the agent of record and copy the agency principal;

(iii) HERITAGE must provide all agents a minimum of fourteen (14) days to review the solicitation. This will allow agents adequate time to research the company and make an informed decision;

Page 9 of 14

(iv) HERITAGE must provide a copy of the appointment contract. HERITAGE may opt to provide the agent a link to its website containing the required information;

(v) HERITAGE must provide a copy of the policy form. HERITAGE may opt to provide the agent a link to its website containing the required information;

(vi) HERITAGE must provide a chart identifying any differences in coverage from Citizens, which will help both the agent and the policyholder in making an informed decision;

(vii) HERITAGE must provide a list of policies specific to the agent that it would like to assume;

(viii) HERITAGE must provide a contact number of qualified staff to answer agent’s questions; and

(ix) HERITAGE must provide an overview of its strategy for handling claims (cat and non-cat).

(J) Should the OFFICE determine HERITAGE has failed to materially comply with terms of this Consent Order, the proposal to remove selected policies from CITIZENS, including its attachments, and amendments thereto as submitted to the OFFICE, or terms of any agreement(s) with CITIZENS, HERITAGE shall, upon receipt of notice of such material non-compliance, have sixty (60) days to cure its material non-compliance. In the event HERITAGE fails to cure any such material non-compliance within the sixty (60) day period, HERITAGE expressly agrees the OFFICE may enter an order directing it to immediately cease writing personal lines residential property coverage or other lines of insurance within the State of Florida, or imposing such other sanctions authorized by statute, rule, or restrictions, as may be deemed appropriate by the OFFICE.

Page 10 of 14

WHEREFORE, the proposal to remove up to twenty thousand (20,000) multiple peril policies, consisting of twelve thousand, five hundred (12,500) policies from the personal lines account and seven thousand, five hundred (7,500) policies from the coastal account, for the initial assumption starting on or about February 4, 2014, subject to the terms and conditions of this Consent Order, are hereby APPROVED.

FURTHER, all terms and conditions contained herein are hereby ORDERED.

DONE and ORDERED this 22 day of November, 2013.

/s/ Kevin M. McCarty

Kevin M. McCarty, Commissioner

Office of Insurance Regulation

Page 11 of 14

By execution hereof, HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY consents to entry of this Consent Order, agrees without reservation to all of the above terms and conditions and shall be bound by all provisions therein. The undersigned represents that he has the authority to bind HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY to the terms and conditions of this Consent Order.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY

Stephen L. Rohde, Chief Financial Officer

Corporate Seal

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 22 day of November 2013,

by	Stephen Rohde	as	CFO
	(name of person)		(type of authority..... e.g. officer, trustee attorney in fact)
for	Heritage Property & Casualty Ins
	(company name)
		(Signature of the Notary)
		(Print, Type or Stamp Commissioned Name of Notary)
Personally Known ü OR Produced Identification                      Type of Identification Produced

Page 12 of 14

COPIES FURNISHED TO:

Bobbi Scott, Depopulation Manager

Citizens Property Insurance Corporation

2312 Killearn Center Boulevard

Tallahassee, FL 32309

Bobbi.Scott@citizensfla.com

Claude Mueller

Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb, P.A.

215 South Monroe Street, Suite 701

Tallahassee, FL 32301

cmueller@cftlaw.com

Fred Karlinsky

Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb, P.A.

215 South Monroe Street, Suite 701

Tallahassee, FL 32301

fkarlinsky@cftlaw.com

Richard Widdicombe, President

Heritage Property & Casualty Insurance Company

700 Central Ave Ste 330

St. Petersburg, FL 33701

Rwiddicombe@heritagepci.com

Carolyn Morgan, Director

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

David Altmaier, Chief Analyst

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda Rudock, Reinsurance/Financial Specialist

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda.Rudock@floir.com

Page 13 of 14

Virginia A. Christy, Assistant General Counsel

Office of Insurance Regulation

Legal Services Office

200 East Gaines Street

Tallahassee, FL 32399-0333

Virginia.Christy@floir.com

Page 14 of 14

EX-10.21

Exhibit 10.21

KEVIN MCCARTY COMMISSIONER

IN THE MATTER OF: CASE NO.: 146563-14-CO        

HERITAGE PROPERTY & CASUALTY

INSURANCE COMPANY

                                                                                      /

CONSENT ORDER

THIS CAUSE came on for consideration as a result of HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY’S (hereinafter “HERITAGE”) proposal to remove selected personal residential policies from CITIZENS PROPERTY INSURANCE CORPORATION (hereinafter “CITIZENS”), which was submitted to the OFFICE OF INSURANCE REGULATION (hereinafter “OFFICE”) for its review on December 6, 2013. After a complete review of the entire record and upon consideration thereof, and otherwise being fully advised in the premises, the OFFICE hereby finds as follows:

1. The OFFICE has jurisdiction over the subject matter and of the parties herein.

2. CITIZENS has been established in accordance with the provisions of Section 627.351(6), Florida Statutes, as amended, to provide insurance for residential and commercial property qualified risks under circumstances specified in the Statute.

Page 1 of 13

3. The Legislature of the State of Florida has enacted Section 627.351(6)(q)3.a., Florida Statutes, to encourage and provide a means for the depopulation of CITIZENS. CITIZENS submitted and the OFFICE adopted by Order No. 125161-12 a plan of depopulation, the terms and conditions upon which this proposed Consent Order is predicated. HERITAGE shall abide by the terms and conditions of the CITIZENS depopulation plan as a condition of issuance of this Consent Order.

4. HERITAGE is a Florida domiciled property and casualty insurance company authorized to transact insurance in the State of Florida.

5. On or about December 6, 2013, HERITAGE submitted a proposal to remove selected personal residential policies from CITIZENS. The proposal provides for an assumption to occur on or about March 18, 2014 of up to twenty thousand (20,000) multiple peril policies from CITIZENS’ personal lines account and coastal account. HERITAGE plans to assume the CITIZENS’ policies over a period of time, subject to the approval by the OFFICE.

6. HERITAGE understands that the selected policies to be removed from CITIZENS on or about March 18, 2014, or at a later date approved by the OFFICE and CITIZENS, will not be subject to any incentive or bonus plan pursuant to Section 627.3511, Florida Statutes, unless and until the OFFICE approves such a plan for use by CITIZENS provided such plan would be retroactive to policies subject to this Consent Order. If the OFFICE approves a bonus plan for use by other take-out companies or for other transactions during the 2014 policy year, the bonus may be paid to HERITAGE in accordance with that plan and agreements between HERITAGE and CITIZENS.

Page 2 of 13

7. HERITAGE shall enter into appropriate agreements with CITIZENS to provide the following:

a. HERITAGE, at its own expense, shall give at least thirty (30) days advance notice to affected policyholders, which notice will inform policyholders of the need to contact HERITAGE before the removal date if the policyholder desires to stay with CITIZENS.

b. HERITAGE shall accumulate any objections, and shall facilitate the return of any policyholder who desires to stay in CITIZENS if that policyholder expresses the desire to stay in CITIZENS within the thirty (30) day notice period prior to the removal of the policy, or within thirty (30) days after the date of the policy removal. Policyholders shall not be required to make additional payments, nor take any action other than to express the desire to remain with CITIZENS in writing or by electronic mail on or before thirty (30) days following the date of their policy removal.

c. All communications with agents and policyholders regarding any policies to be removed from CITIZENS must be done in accordance with instructions by CITIZENS and the OFFICE. HERITAGE shall obtain prior approval from the OFFICE of any letters sent to policyholders regarding any policies to be removed from CITIZENS. HERITAGE agrees that once opt out notices have been mailed to consumers; HERITAGE cannot terminate the offer of coverage for any reason other than a consumer opt out. HERITAGE agrees that subsequent non-renewals of policies assumed via this assumption will be in accordance with the Florida Insurance Code.

d. HERITAGE shall at all times submit to CITIZENS any information required by the published revised 2014 Assumption Calendar. This information shall at all times be submitted timely, in accordance with the deadlines published by CITIZENS.

Page 3 of 13

8. HERITAGE acknowledges neither approval by CITIZENS, nor entry into this Consent Order by the OFFICE, constitutes a guarantee the above referenced policies will ultimately be available to HERITAGE for removal from CITIZENS, as the availability of policies for removal may vary over time.

9. HERITAGE shall limit its actual removal of policies from CITIZENS to the number and type of policies authorized by the OFFICE. The OFFICE will base its review on HERITAGE’S reinsurance program, catastrophe modeling, and financial statement projections, as well as the impact on policyholders. Such reinsurance program, catastrophe modeling, and financial statement profiles shall be based upon HERITAGE’S current in-force book of residential property policies, HERITAGE’S projected voluntary market writings, and actual number of policies available in CITIZENS prior to the anticipated assumption date identified by HERITAGE as satisfying its filed and approved underwriting guidelines.

10. HERITAGE has submitted the proposed reinsurance documentation and financial projections for assumption of up to twenty thousand (20,000) multiple peril policies, expected to be assumed on March 18, 2014 or on subsequent dates approved by the OFFICE and CITIZENS. Each additional assumption of CITIZENS policies by HERITAGE shall be subject to advance written approval by the OFFICE.

11. HERITAGE’S acquisition of adequate reinsurance and maintenance of executed reinsurance agreements is material to the OFFICE’S review and analysis of HERITAGE’S proposal to remove selected policies from CITIZENS and to the OFFICE’S approval of the proposal.

Page 4 of 13

12. HERITAGE expressly waives its rights to any hearing in this matter, the making of findings of fact and conclusions of law by the OFFICE, and all other and further proceedings herein to which it may be entitled by law or by rules of the OFFICE. HERITAGE agrees not to appeal or otherwise contest this Consent Order in any forum now or in the future available to it, including their right to any administrative proceeding, circuit or federal court action, or any appeal.

13. HERITAGE represents all explanations and documents made or submitted to the OFFICE as part of its proposal to remove selected policies from CITIZENS, including all attachments and supplements thereto, fully describe all transactions, agreements, and understandings relating to the removal of policies from CITIZENS by HERITAGE. However, all draft documents and non-executed agreements relating to HERITAGE’S plan shall not be deemed approved by this Consent Order until such time as executed agreements or final documents are submitted and approved by the OFFICE.

14. The parties agree this Consent Order will be deemed executed when the OFFICE has signed a copy of this Consent Order bearing signature of HERITAGE, or its authorized representative, notwithstanding the fact the copy was transmitted to the OFFICE electronically. HERITAGE agrees the signature of its representative as affixed to this Consent Order shall be under seal of a Notary Public.

15. Each party to this action shall bear its own costs and attorney fees.

IT IS THEREFORE ORDERED that:

(A) Upon consideration of the proposal to remove selected policies from CITIZENS, including its attachments, the OFFICE approves the proposal to remove selected policies from CITIZENS, subject to adherence to the terms and conditions of this Consent Order by HERITAGE.

Page 5 of 13

(B) The OFFICE approves the assumption of up to twenty thousand (20,000) multiple peril policies, consisting of sixteen thousand (16,000) policies from the personal lines account and four thousand (4,000) policies from the coastal account, for the initial assumption starting on or about March 18, 2014, in accordance with the proposal to remove selected policies from CITIZENS, any agreement(s) between HERITAGE and CITIZENS, and this Consent Order.

(C) Regarding all reinsurance matters relating to policies removed from CITIZENS, for a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall:

(i) Maintain substantially the same reinsurance coverage as evidenced to the OFFICE in the proposal to remove selected policies from CITIZENS;

(ii) Submit to the OFFICE any and all replacement or additional reinsurance agreement(s), or amendment(s) to reinsurance agreement(s) that materially change the reinsurance coverage in (C)(i). The agreement(s), amendment(s) or plans shall be submitted to the OFFICE for review, and approval, sixty (60) days prior to the date of effectuation of any such agreement(s) or amendment(s);

(iii) Notify the OFFICE of any termination of any of its reinsurance agreements. The notification shall be made to the OFFICE in writing sixty (60) days prior to the effective date of any such termination;

(iv) Submit in writing to the OFFICE the proposed utilization of any substitute or additional reinsurers for the OFFICE’S review and approval sixty (60) days prior to the companies being utilized within HERITAGE’S reinsurance program. HERITAGE shall further immediately submit to the OFFICE all information as requested which the OFFICE deems necessary for the OFFICE to complete its review; and

Page 6 of 13

(v) Cede reinsurance, or otherwise contract for reinsurance, only with reinsurers who are authorized and/or approved by the OFFICE, or such other reinsurers as may be approved in advance and in writing by the OFFICE. HERITAGE shall comply with the requirements of Section 624.610, Florida Statutes, with regard to all of its reinsurance arrangements.

(D) For the three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall file with the OFFICE, on an annual basis no later than June 1 of each year, a catastrophe loss model with probable maximum loss estimate amounts from a one hundred-year storm based upon the exposure information gathered from all of its policies in force as of April 15 of each year which would be affected by a catastrophe. HERITAGE shall include in this filing an exposure management plan, which will identify the company’s ability to provide satisfactory financial capacity to cover the company’s exposure to catastrophic hurricane loss. The plan shall identify the reinsurance coverage and surplus levels being utilized to maintain a satisfactory financial capacity with regard to catastrophe exposure. HERITAGE shall also include within the plan specific actions intended to limit catastrophic exposures to the company’s financial capacity. Based upon the OFFICE’S review of the models and plans, HERITAGE may be required at the OFFICE’S sole discretion to take corrective action to cure any overexposure identified by the OFFICE. Such action may also include obtaining additional amounts of reinsurance coverage as directed by the OFFICE or suspend writing of any additional business, including the CITIZENS policies.

(E) Any and all policies removed from CITIZENS by HERITAGE shall provide coverage substantially equivalent to that afforded by CITIZENS. Any and all policies removed from CITIZENS by HERITAGE, pursuant to its proposal to remove selected policies from CITIZENS, must be renewable by the policyholder at approved rates and upon the same terms at the first such renewal onto HERITAGE’S policy form, unless such policies are canceled by HERITAGE for a lawful reason.

Page 7 of 13

(F) At the time HERITAGE removes any policy of insurance from CITIZENS, HERITAGE shall either obtain a new policy application from each affected policyholder or maintain in its files a copy of the policyholder’s application on file with CITIZENS. If HERITAGE chooses the latter option, HERITAGE shall nevertheless be required to obtain a new policy application from each affected policyholder no later than twenty-four (24) months from the effective date of any policy of insurance removed from CITIZENS. HERITAGE may not initiate any retrospective increase in rates or the premium or any retrospective decrease in coverage provided under the assumed CITIZENS policy (if applicable) as a result of the information obtained from or through the new policy applications.

(G) For a period of three (3) years immediately following the date of entry of this Consent Order, HERITAGE shall abide by the proposal to remove selected policies from CITIZENS in all material respects. Further, HERITAGE shall abide by all terms and provisions of any agreement(s) entered into with CITIZENS.

(H) Regarding required documentation to be maintained by HERITAGE relating to policies removed from CITIZENS:

(i) HERITAGE is required to track all agents, as well as the related policy information, who have declined to participate in the takeout process. This information shall be submitted to Citizens by the deadline published in the Citizens Assumption Calendar. Citizens will then mail out notices informing the policyholders of the agent’s declination. This will allow the affected policyholders the opportunity to address the declination with their agent and possibly receive their agent’s approval in time to be included in the current takeout. At no time shall HERITAGE contact a potential policyholder without the agent’s appointment;

Page 8 of 13

(ii) HERITAGE is required to track all agents, as well as the related policy information, who after discussing with the policyholder, decide to participate in the takeout process and submit this information to Citizens by the deadline published in the revised 2014 Assumption Calendar;

(iii) HERITAGE is required to keep a record of all agents who decline participation along with an explanation for the declination; and

(iv) When contacting an agent regarding a potential takeout policy, HERITAGE is required to provide each agent with the policy form to be used, appointment contract and a copy of HERITAGE’S most currently available financial statement.

(I) HERITAGE is required to comply with the following requirements when soliciting an agent’s permission to participate in the assumption process:

(i) HERITAGE must utilize email and at least one other method for contact (i.e. call, fax or regular mail);

(ii) HERITAGE must send out a direct solicitation to the agent of record and copy the agency principal;

(iii) HERITAGE must provide all agents a minimum of fourteen (14) days to review the solicitation. This will allow agents adequate time to research the company and make an informed decision;

(iv) HERITAGE must provide a copy of the appointment contract. HERITAGE may opt to provide the agent a link to its website containing the required information;

Page 9 of 13

(v) HERITAGE must provide a copy of the policy form. HERITAGE may opt to provide the agent a link to its website containing the required information;

(vi) HERITAGE must provide a chart identifying any differences in coverage from Citizens, which will help both the agent and the policyholder in making an informed decision;

(vii) HERITAGE must provide a list of policies specific to the agent that it would like to assume;

(viii) HERITAGE must provide a contact number of qualified staff to answer agent’s questions; and

(ix) HERITAGE must provide an overview of its strategy for handling claims (cat and non-cat).

(J) Should the OFFICE determine HERITAGE has failed to materially comply with terms of this Consent Order, the proposal to remove selected policies from CITIZENS, including its attachments, and amendments thereto as submitted to the OFFICE, or terms of any agreement(s) with CITIZENS, HERITAGE shall, upon receipt of notice of such material non-compliance, have sixty (60) days to cure its material non-compliance. In the event HERITAGE fails to cure any such material non-compliance within the sixty (60) day period, HERITAGE expressly agrees the OFFICE may enter an order directing it to immediately cease writing personal lines residential property coverage or other lines of insurance within the State of Florida, or imposing such other sanctions authorized by statute, rule or restrictions, as may be deemed appropriate by the OFFICE.

Page 10 of 13

WHEREFORE, the proposal to remove up to twenty thousand (20,000) multiple peril policies, consisting of sixteen thousand (16,000) policies from the personal lines account and four thousand (4,000) policies from the coastal account, for the initial assumption starting on or about March 18, 2014, subject to the terms and conditions of this Consent Order, are hereby APPROVED.

FURTHER, all terms and conditions contained herein are hereby ORDERED.

DONE and ORDERED this 7^th day of January, 2014.

	Kevin M. McCarty, Commissioner Office of Insurance Regulation

Page 11 of 13

By execution hereof, HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY consents to entry of this Consent Order, agrees without reservation to all of the above terms and conditions and shall be bound by all provisions therein. The undersigned represents that he has the authority to bind HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY to the terms and conditions of this Consent Order.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY

Richard Widdicombe, President

Corporate Seal

STATE OF FLORIDA

COUNTY OF PINELLAS

The foregoing instrument was acknowledged before me this 06 day of January, 2014,

by	Richard Widdicombe	as	President
	(name of person)		(type of authority..... e.g. officer, trustee attorney in fact)
for	Heritage Property & Casualty Insurance Company
	(company name)
		(Signature of the Notary)
		Heather Wagoner
		(Print, Type or Stamp Commissioned Name of Notary)
Personally Known ü OR Produced Identification
Type of Identification Produced

Page 12 of 13

COPIES FURNISHED TO:
Bobbi Scott, Depopulation Manager Citizens Property Insurance Corporation 2312 Killearn Center Boulevard Tallahassee, FL 32309 Bobbi.Scott@citizensfla.com	Claude Mueller Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb, P.A. 215 South Monroe Street, Suite 701 Tallahassee, FL 32301 cmueller@cftlaw.com

Fred Karlinsky

Colodny, Fass, Talenfeld, Karlinsky,

Abate & Webb, P.A.

215 South Monroe Street, Suite 701

Tallahassee, FL 32301

fkarlinsky@cftlaw.com

Richard Widdicombe, President

Heritage Property & Casualty Insurance Company

700 Central Ave Ste 330

St. Petersburg, FL 33701

Rwiddicombe@heritagepci.com

Carolyn Morgan, Director

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

David Altmaier, Chief Analyst

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda Rudock, Reinsurance/Financial Specialist

Office of Insurance Regulation

P&C Financial Oversight

200 East Gaines Street

Tallahassee, FL 32399-0329

Amanda.Rudock@floir.com

Virginia A. Christy, Assistant General Counsel

Office of Insurance Regulation

Legal Services Office

200 East Gaines Street

Tallahassee, FL 32399-0333

Virginia.Christy@floir.com

Page 13 of 13

EX-10.22

Exhibit 10.22

VOLUNTARY AGENCY AGREEMENT

with

Heritage MGA, LLC

This AGREEMENT made and entered into as of the 16^th day of December, 2013 by and between Heritage MGA, LLC (“HMGA”), A Florida Limited Liability Company with its principal office at: 700 Central Avenue, Suite 304, Saint Petersburg, FL 33701; and Faia Member Services Inc. (hereinafter ‘Agent’), whose principal address is 3159 Shamrock South Tallahassee, FL 32309.

I. Agent Representations, Warranties, Duties, Authorities, and Limitations on Authority

1. Agent Representations and Warranties.

1.1 Agent includes but is not limited to Agent’s owners, officers, directors, employees, representative, customer service representatives and insurance agents.

1.2 Agent possesses the skillset and licenses required to solicit, receive and accept proposals, bind, and provide all usual and customary services of an insurance agent on all insurance contracts placed by the agent as it pertains to property and casualty insurance.

1.3 Agent is and will be for the term of this agreement, licensed by, and in good standing with the Florida Department of Financial Services, and entitled to engage in the business of property and casualty insurance and appropriately licensed for the functions they perform under all applicable insurance laws, rules and regulations of the territories assigned pursuant to the terms hereof, for the lines and classes of insurance business for which it is authorized hereunder, and that its business is and shall be conducted in full compliance with such laws, rules and regulations.

1.4 There are no lawsuits, claims, administrative proceedings or investigations pending or threatened against Agent.

1.5 Agent’s license as an insurance agent has never been revoked, suspended or terminated in any jurisdiction, or threatened to be revoked, suspended, or terminated in any jurisdiction and Agent has never been subject to any disciplinary proceeding as it pertains to its license as an insurance agent or insurance agency.

1.6 The execution and delivery of this agreement by Agent, and Agent’s performance of this agreement will not violate any law, rule, regulation, judgment, decree, order, agreement, and/or contract which Agent is subject or bound.

2. Agents Authorities and Duties.

2.1 Appointment.

2.1 (a) Agent is authorized to transact insurance on behalf of HMGA in accordance with any state, federal, or other applicable law, in accordance with this agreement, and the underwriting rules and guidelines set forth by HMGA and as they may be amended from time to time.

2.1 (b) Agent is authorized bind, receive and accept proposals for insurance contracts as permitted for HMGA and within the lines of business authorized in Schedule 1, Section A and within limits and underwriting guidelines established by the HMGA.

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2.1 (c) Agent is authorized bind, receive and accept proposals for insurance contracts as permitted for HMGA and within the lines of business authorized in Schedule 1, Section B when those lines of business become available and within limits and underwriting guidelines established by the HMGA.

2.1 (d) It is Agents duty to provide all usual and customary services of an insurance agent on all insurance contracts placed by the Agent, including but not limited to, servicing, delivering, and forwarding renewals and endorsements.

2.2 Territory. Agent is authorized to transact insurance on behalf of HMGA in the territories approved by HMGA. The approved territory includes the state of Florida but may be further limited to specific counties, zip codes, and any other geographical restrictions set forth in the underwriting guidelines and may be subject to change at the discretion of HMGA. Agent is not the exclusive agent for HMGA, and this territory is not assigned exclusively to Agent.

2.3 Claims. Agent shall fully report to HMGA all losses and claims immediately upon receiving knowledge thereof. Agent has no power or authority to settle or adjust claims or losses unless specifically authorized by HMGA in writing.

2.4 Insurance.

2.4 (a) The Agent shall have and maintain Errors and Omissions coverage for the Agent and all Agency staff, agents and representatives thereof in an amount not less than $500,000 per occurrence and not less than $1,000,000 on an annual aggregate basis.

2.4 (b) The Agent shall continue to maintain Errors and Omissions coverage with at least the same minimum limits during the original term and any renewals of this Agreement covering the Agent and representatives.

2.4 (c) The Agent shall notify HMGA within three (3) days of any cancellations, terminations, or modifications to the coverage.

2.4 (d) The Errors and Omissions coverage shall be issued by an insurer with at least a “A-” rating authorized to do business in the State in which the Agent is licensed and produces policies.

2.4 (e) Proof of the Errors and Omissions coverage required by this provision shall be provided by the Agent to HMGA upon request by HMGA. HMGA reserves the right to verify coverage at any time.

2.4 (d) Agent agrees it will maintain worker’s compensation insurance and other appropriate coverages as required by law.

2.5 Record and Accounts.

2.5 (a) Agent shall ensure that all original documents and applications are signed by the prospective insured and shall be kept under the Agent’s control for any minimum period that may be required by the rules and regulations of the state in which Agency is producing business.

2.5 (b) All books, accounts, correspondence and other records of Agency relating to business transacted pursuant to this Agreement shall, at all times, be open to inspection by HMGA or their designated representative, and HMGA may make copies thereof before or after the termination of this Agreement.

2.6 Fiduciary Responsibility. All premiums received by Agent and due to HMGA shall be held by Agent in a fiduciary capacity and as trustee for HMGA until delivered to HMGA. Agent shall perform faithfully its duties as Agent, and shall protect and further at all times the best interests of HMGA. In the event that an agent shall collect or receive any such premiums or monies, the Agent shall thereupon promptly account for such amount and deliver the same, within 24 hours to HMGA without offset or deduction. No policy, certificate, or endorsement shall directly or indirectly be sold, issued or delivered at any rate other than the approved rates authorized in HMGA’s underwriting guidelines.

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3. Limitations on Agent’s Authority.

3.1 Agent may only bind insurance within HMGA’s binding restrictions, which may be revoked or limited at any time by HMGA.

3.2 Agent agrees to be bound by the prevailing published underwriting guidelines in force at the time that the insurance to which such underwriting guidelines relate is placed by Agent under this Agreement. If any other term of this Agreement limits Agent’s authority to specific coverage’s or otherwise restricts Agent, receipt by Agent of any underwriting guidelines shall not operate to expand Agent’s authority.

3.3 The agent shall have no authority to waive or modify any term of the insurance policy.

3.4 Agent shall have no authority to broker any business hereunder, or to share Commission with another broker or agent not employed by or associated with Agent. No employee of Agent shall bind or place any application for insurance with any Insurance Company unless appointed by that company as required by law.

3.5 All of the foregoing authority and powers shall be subject at all times to compliance by HMGA and Agent with all local, state, and federal laws, and to all terms and conditions of the Agreement hereinafter set forth.

3.6 Agent agrees that he will not use the name, trade name, logo, trademark or other intellectual property of HMGA in any advertising without prior written approval by HMGA.

3.7 Cancellation.

3.7 (a) Agent shall have no authority to send a notice of non-renewal or cancellation. Agent shall request from HMGA cancellation for causes inherent in the particular risk or risks insured where such cancellation is deemed by Agent to be for the best interest of HMGA.

3.7 (b) Nothing in this Agreement shall require HMGA to cancel or non-renew any policy in contravention of applicable law or regulatory directives.

II. HMGA Representations, Warranties, Duties, Authorities, and Limitations on Authority

1. HMGA Representations and Warranties

1.1 HMGA is a Florida Corporation duly licensed and authorized by the Florida Office of Insurance Regulation as an insurer and authorized to issue insurance policies in the State of Florida in the lines of business outlined in Schedule 1, Section A to this agreement.

1.2 HMGA expects to be authorized, at a future date, to issue insurance policies in the state of Florida in the lines of business outlined in Schedule 1, Section B to this agreement. Agent is hereby authorized to transact insurance business on behalf of HMGA in the following lines of business at the future date in which HMGA is authorized by the State of Florida to offers such lines of business.

1.3 The execution and delivery of this agreement by HMGA, and HMGA’s performance of this agreement will not violate any law, rule, or regulation, judgment, decree, order, agreement, or contract which HMGA is subject or bound.

2. HMGA Authorities and Duties

2.1 HMGA shall provide underwriting guidelines to Agent for the lines or classes of insurance with respect to which HMGA has authorized Agent. HMGA may at any time change or alter any underwriting guidelines or place restrictions on binding authority.

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2.2 HMGA will furnish to Agent, at HMGA’s expense, such policies, forms, stationery, advertising materials, registers, and other supplies, as HMGA may deem necessary. All such materials and instruments shall remain the property of HMGA, and shall be returned by Agent to HMGA upon demand by HMGA.

2.3 Direct Pay. HMGA reserves the right to directly bill the policyholder for all renewal premiums, and/or additional premiums, and to collect payment for and such premiums. Upon initially binding a new policyholder, Agent may collect premiums in such form as approved by HMGA. Unless otherwise agreed to in writing by HMGA, the agent shall not have any ongoing right or authority to receive or collect premiums or other monies for or on behalf of HMGA in those instances in which HMGA has exercised its right to directly bill the policy holder.

2.4 Agent Compensation and Commission.

2.4 (a) Agent will be paid commission by HMGA upon compliance by Agent with the terms of this Agreement. Agent will receive compensation as a commissions based on the “Net Premiums Written” pursuant to the commission schedule attached as Schedule 2 to this agreement. “Net Premiums Written” shall mean gross premiums written less return premiums on cancellations or endorsements.

2.4 (b) HMGA has the right to offset any outstanding balances including, but not limited to, unearned commissions on return premiums or any other liability or obligation whatsoever of the Agent to HMGA against future compensation under this Agreement.

2.4 (c) HMGA reserves the right to change the commission at any time, in its sole discretion upon forty-five (45) days notice to Agent. As soon as practicable after the close of each month, HMGA will forward to Agent a monthly statement of transactions completed during the month and payment for commissions due on the “Net Premiums Written”. If return commissions are due, Agent will promptly remit payment in full to HMGA.

2.5 Cancellations. HMGA reserves the right to cancel or non-renew any policy without the agent’s approval or involvement by direct notice to the insured duly furnished in accordance with applicable law. The agent is deemed to have waived any right to receive notice of intent to cancel or non-renew a policy prior to mailing or delivery of such notice to the insured. Nothing in this Agreement shall require HMGA to cancel or non-renew any policy in contravention of applicable law or regulatory directives.

III. Termination, Succession, and/or Assigns of Agency

1. Termination

1.1 This Agreement is continuous until canceled or terminated as follows:

1.1 (a) immediately upon cancellation, suspension or revocation of Agent or Agency’s insurance license with respect to any state by governmental or regulatory authority having jurisdiction; or

1.1 (b) immediately upon failure to comply with the laws, rules or regulations of any governmental or regulatory authority having jurisdiction; or

1.1 (c) immediately upon the effective date of the sale or transfer of the Agent’s business unless HMGA has given prior written consent; or

1.1 (d) immediately upon an event of “change of control” as defined in Section III, 2.2 unless HMGA has given its prior written consent; or

1.1 (e) immediately upon written notice by HMGA in the event that the Agent has failed to promptly comply with any of its duties and obligations under this Agreement; or

1.1 (f) immediately upon either party giving written notice to the other of abandonment, bankruptcy, receivership, liquidation, assignment, fraud, insolvency or perceived threat of insolvency, gross, willful or negligent misconduct on the part of such other party or of insecurity of either party with the business operations of the other party; or

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1.1 (g) immediately upon dissolution of Agency; or

1.1 (h) 45 days immediately following death of Agent or Agency principal unless HMGA gives written consent to its successors; or

1.1 (i) by either party giving written notice of termination to the other party not less than 45 days prior to the effective date of termination.

1.2 All notices mentioned shall be furnished in accordance with Section VI, 3 of this agreement.

1.3 Upon termination of this Agreement all privileges theretofore granted to the Agent by HMGA shall be automatically and simultaneously terminated. However, the Agent shall continue to fulfill its duties and obligations under this Agreement as to policies written prior to termination of this Agreement until all of such policies written have been non-renewed or canceled.

1.4 The Agent shall immediately pay to HMGA any return commissions which may thereafter become due to HMGA upon subsequent cancellation or reduction of liability or of any other funds or premium on risks written by and credited to the Agent during the term of this Agreement.

1.5 Upon termination of this Agreement, the Agent shall immediately cause to be delivered to HMGA all property of HMGA including, but not limited to, unused drafts, policies, manuals, forms, etc. If the Agent fails to deliver such items, the Agent shall bear any expenses which HMGA may incur in obtaining such items and shall be liable for losses resulting in whole or in part from the Agent’s failure to immediately deliver such property to HMGA. In the event unused or canceled policies, or unused drafts, cannot be accounted for by the Agent, the Agent hereby agrees to protect, indemnify, hold harmless and forever defend the HMGA against all persons and claims whatsoever on said policies and drafts.

1.6 If Agent has, within forty five (45) days of the termination of this Agreement, accounted for and paid HMGA all premiums for which it may be liable, Agent’s records and the use and control of expirations shall be vested in Agent; provided that if Agent has not within such forty five (45) day period accounted for and paid HMGA all premiums for which it may be liable, then Agent will be liable for all costs incurred by HMGA to collect outstanding balances together with interest, and ownership of all Agent’s records and use and control of all policies placed under this Agreement shall be the sole and exclusive properly of HMGA. If the Agent either is in default under any provision of this Agreement or fails upon termination of this Agreement to satisfy all of its obligations to HMGA, all expirations and renewals shall be the property of HMGA.

2. Succession to the Agency

2.1 If Agent has succeeded to and carries on any agency formerly owned or conducted by another, Agent shall pay return commissions on return premiums on such business in the same manner and to the same extent as upon Agent’s own business unless the parties have specifically otherwise agreed, and the written consent of HMGA to such agreement has been endorsed hereon.

2.2 Agency shall notify HMGA in writing at least thirty (30) days in advance of any of the following occurrences, each of which shall be deemed a “Change of Control”:

2.2 (a) A sale, transfer or pledge, or the issuance to a new shareholder, of 10% or more of the voting stock of the Agency; or

2.2 (b) A sale, transfer or pledge of a substantial portion of the material assets of the Agency, or any merger or consolidation of the Agency with another entity or entities; or

2.2 (c) A change in any director or principal officer of the Agency.

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2.3 If Agent sells said Agency prior to notice and written consent of HMGA, the Agent remains liable for unauthorized acts of the new owners. Until HMGA has consented to such change in ownership, the authority of Agent pursuant to the terms hereof is suspended.

3. Assigns

3.1 All terms and conditions of this Agreement shall inure to the benefit of and be binding upon, the parties hereto, their successors, heirs, administrators and assigns; provided however, that Agent may not assign this Agreement without the prior written consent of HMGA.

IV. Applicable Law, Venue, and Attorneys Fees

1. Applicable Law

1.1 This Agreement and performance hereunder shall be construed with and governed by the laws of the State of Florida, without regard to choice of law provisions. Any provision in this Agreement which is contrary to applicable law is hereby deemed to be amended to bring it in compliance with that law.

2. Venue

2.1 Venue for any dispute arising under or relating to this Agreement shall properly lie in the circuit court for Pinellas County, Florida (and in the United States District Court for the Middle District of Florida in the event that any suit may be properly brought in federal court).

3. Attorneys Fees

3.1 If Agent or HMGA should bring a Court action alleging breach of this Agreement or seeking to enforce, rescind, renounce, declare void or terminate this Agreement or any provisions thereof; the prevailing party shall be entitled to recover all of its legal expenses, including reasonable attorney’s fees and costs (including legal expenses for any appeals taken), and to have the same award included in the judgment in the proceeding(s) in which such legal expenses and attorney’s fees were incurred. If Agent fails to pay funds due to HMGA as anywhere provided in this Agreement, including but not limited to premiums, Agent shall pay HMGA (in addition to all sums otherwise due) interest which shall accrue at 1.5% per month on such delinquency from the date as provided herein; provided that if such rate of interest is greater than the maximum allowable by law, this provision shall be deemed to be modified to provide for interest at the highest rate allowable by law.

V. Indemnity & Confidentiality

1. Indemnification

1.1 Agent shall indemnify and hold harmless HMGA, their officers, directors, employees, representatives and designees from any liability, damage, claims or causes of action with regard to any and all losses, claims, damages, fees and expenses, including legal or other expenses reasonably incurred or paid by HMGA on account of any negligent or intentional wrongful act, error or omission of the Agent or its agents and representatives in the rendering of services pursuant to this Agreement or any breach or default hereof.

1.2 HMGA shall indemnify and hold harmless Agent and its officers, employees and representatives from any liability, damage, claims or causes of action with regard to any and all losses, claims, damages, fees and expenses, reasonably incurred or paid by the Agent on account of any grossly negligent act of HMGA in the performance of any duty set forth in this Agreement or any breach or default hereof except to the extent that the Agent or its representatives caused such liability or damage.

2. Confidentiality

2.1 Disclosure of Non-Public Personal Information. Agent agrees and covenants that Agent will safeguard nonpublic personal information (“Customer Information”) consistent with the terms of this Agreement and as modified by state and federal privacy rules and regulations, including Title V of Gramm-Leach-Bliley (“Privacy Laws”), from

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improper or illegal use, or exposure to, or appropriation by, unauthorized persons. “Customer Information” is generally defined as information that is provided by a consumer or customer, obtained by HMGA or Agent, or that results from the customer or consumer’s transactions with HMGA or Agent. Customer Information does not include information available to the general public. Agent agrees to maintain physical, electronic and procedural safeguards that comply with applicable Privacy Laws in order to protect Customer Information. Agent also agrees to restrict access to Customer Information to only those individuals who need to know that information and only in those circumstances authorized by Privacy Laws in order to provide products or services to a customer or consumer. Agent warrants that it and all its employees, agents, affiliates, and third parties will adhere to Privacy Laws and privacy standards of HMGA, and Agent will use Customer Information only for legitimate business purposes. Agent shall not disclose any Customer Information about customers, consumers, or former customers or consumers to anyone, except as permitted by law. Agent agrees it will not use or share any personally identifiable health information about a customer or consumer except as authorized by law. Personal Information to affiliates or third parties on a need-to-know basis only to enable the Agent to perform its contractual obligations hereunder.

2.2 Security of Commercial Information. All confidential and proprietary information, including but not limited to: trade secrets, financial data, claims information, fees, computer software, business procedures and manuals, this Agreement, data, review criteria, contract rates, customers, policyholders, agents or other information or data related to HMGA (the “Confidential Information”) shall not be disclosed, except as provided herein, without the express written approval of HMGA. Such Confidential Information shall be disclosed only to those persons or entities that have a need to know and only to the extent necessary to carry out the terms of this Agreement.

VI. Miscellaneous Provisions

1. Independent Contractor Status

1.1 Nothing herein shall create the relationship of employer and employee between HMGA and Agent or its employees or representatives. The relationship between Agent and HMGA shall be that of independent contractor.

1.2 Agent shall have no power or authority to incur any expenses in the name of or on behalf of HMGA. All expenses of the Agent, including but not limited to, rentals, salaries, supplies not furnished by HMGA, postage, advertising, appointment fees, local license fees, attorney’s fees, utilities, and the cost of equipment shall be borne solely by the Agent.

2. Alterations

2.1 This Agreement may be amended at any time by the mutual agreement of the Agent and HMGA except as provided in Section VI, 2.2. No such mutually agreed amendment shall be effective unless and until reduced to writing, on paper, and signed with a mutual wet ink signature.

2.2 The commission schedule may be revised by mutual agreement between HMGA and Agent, or unilaterally by HMGA upon written notice to Agent. The revision shall act as an amendment to the Commission Schedule and shall be effective on the date specified in the notice for all policies or endorsements written or renewed after the date specified in such notice, without further action required by HMGA or Agent.

2.3 The Agent hereby agrees, in the interest of record-keeping, to sign a copy of any revisions to this Agreement provided by HMGA if so requested by HMGA. However, the signing of such revisions or failure to do so shall not be a condition to their effectiveness or otherwise alter this Agreement.

3. Notices

3.1 Any and all notices, designations, consents, offers, acceptances or any other communication provided for herein (“notice”), shall be given in writing by certified mail, by hand delivery, express overnight courier or by facsimile transmission.

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3.2 All notices sent by certified mail shall be deemed delivered on the second regular business day after the postmark. All notices sent by express overnight courier shall be deemed delivered on the business day after pickup by the courier. All notices sent by hand delivery, or facsimile transaction shall be deemed delivered on the day of hand delivery, or facsimile transmission unless delivered or transmitted after 5:00 p.m., whereupon, delivery shall be deemed effective on the next regular business day.

3.3 All notices shall be addressed to Agent or HMGA at their respective address and facsimile number as indicated in this Agreement, or to such other respective address and facsimile number as HMGA or Agent shall designate to the other by notice in writing, provided that notice of a change of address or facsimile number shall be effective only upon receipt.

4. Electronic Signatures

4.1 Agent agrees that by using any E-mail, Internet or other electronic medium for quotes or other transactions with HMGA, Agent is agreeing to conduct the transaction of insurance in electronic form. Agent understands and agrees that Agent is signing and authenticating the E-mail or Internet form and agreeing to be legally bound to the same extent as if Agent had manually signed and delivered to HMGA a signed form. Agent also understands and agrees that a record of any E-mail or Internet form or transaction may be stored in electronic form by HMGA. Agent intends those transmissions of any E-mail or Internet transactions or inquiries, and any electronic records of them, to be Agent’s legal signature. Agent expressly waives any claim or defense that any E-mail or Internet form or transaction does not constitute an original and authentic written signature, duly executed and delivered by Agent. Agent will ensure compliance substantially similar to provisions herein and with federal and state laws for any electronic documents and transactions with its customers or consumers.

5. Invalidation

5.1 Should any part of this Agreement for any reason be declared invalid, such decision shall not affect the validity of any remaining portion, which remaining portion shall remain in full force and effect as if the Agreement had been executed with the invalid portion thereof eliminated.

6. Construction of Agreement

6.1 Words of a gender used in this Agreement shall be held to include any other gender, the words in a singular number held to include the plural and vice versa, when the sentence so requires.

7. Entire Agreement

7.1 This Agreement, along with the attached schedules and any other supplemental addendums, schedules, or attachments contains the entire and complete agreement among the parties and each of the parties hereto agree that there are no prior or contemporaneous agreements, promises, or representations that are not set forth herein.

IN WITNESS WHEREOF, the parties have executed this Agreement or caused this Agreement to be duly executed by a corporate officer on the aforementioned date.

Agent:	Faia Member Services, Inc.	Heritage MGA, LLC, A Florida Limited Liability Company
	/s/ David D. Burt	/s/ Kent Linder
Name:	David D. Burt	Name:	Kent Linder
Title:	VP & Managing Director	Title:	Chief Operating Officer

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EX-10.23

Exhibit 10.23

ADMINISTRATIVE SERVICES AGREEMENT

This Administrative Services Agreement (“Agreement”) is entered into this 1^st day of January, 2014 (the “Effective Date”) by and between FLORIDA ASSOCIATION OF INSURANCE AGENTS, INC. (“FAIA”) and HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY (“Heritage”).

1. PURPOSE, SCOPE AND BACKGROUND.

(a) The principle purpose of this Agreement is for FAIA to permit, under certain conditions, the use of its trade name, logo, and trademark(s) by Heritage in connection with a program (the “Program”) in which Heritage may promote the following insurance products (the “Products”) to members of FAIA (“Members”): Homeowners and Dwelling Fire.

(b) FAIA’s duties and responsibilities under this Agreement and under the Program shall be limited to FAIA permitting the use of its trade name, logo, and trademark(s) for the Program. In return, FAIA will receive royalties for the use of its trade name, logo, and trademark(s).

2. RESPONSIBILITIES OF HERITAGE. (a) Heritage agrees to fulfill any and all of its obligations, duties, and undertakings contained in and throughout the term of that certain Marketing Services Agreement (“Marketing Services Agreement”) executed contemporaneously with this Agreement by and between Heritage and FAIA Member Services, Inc. (“FMS”).

(b) Heritage agrees to maintain the confidentiality of the terms and conditions of this Program unless disclosure is required by law.

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(c) Heritage shall be responsible for compliance with state and federal laws and regulations relating in any way to the Program.

(d) Heritage agrees to pay the Royalty Fees as outlined in section 4 hereof.

3. RESPONSIBILITIES OF FAIA.

(a) During the term of this Agreement and so long as Heritage complies with the terms and conditions of this Agreement including, but not limited to, all of its obligations as described in Section 2 of this Agreement, FAIA agrees to grant a limited, nonexclusive license to use FAIA’s trade name, logo, and trademark(s) solely in connection with promotion of the Program.

(b) Heritage shall use FAIA’s trade name, logo, and trademark(s) solely to promote the products of Heritage to the Members of FAIA, and for no other purposes. It is understood by Heritage that the trade name, logo, and trademark(s) of FAIA are proprietary to FAIA and nothing in this Agreement constitutes a grant of a general license to use said rights.

(c) FAIA agrees to maintain the confidentiality of the terms and conditions of this Program unless disclosure is required by law.

4. ROYALTY FEE.

(a) In consideration of the use of FAIA’s name and logo as provided in this Agreement, during the Term of this Agreement Heritage shall remit to FAIA on a quarterly basis, a royalty fee on premiums collected by Heritage on the sale of its products (the “Premiums”) as follows:

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(b) The royalty fee shall be paid to FAIA only after deducting $600 per quarter to pay for certain expenses incurred by FAIA Member Services, Inc. in marketing the Program and the royalty fee shall be paid within fifteen days of the end of a calendar quarter such that payments will be due on April 15, July 15, October 15, and January 15 of each year. In any quarter in which this contract is not in effect for the entire quarter, payment shall be made on the above referenced date (corresponding with the shortened quarter) based upon the period of time (during such quarter) that the contract was in effect.

5. INDEPENDENT CONTRACTORS. FAIA and Heritage are independent contractors, and as such have to maintain control over all their respective employees, agents and operations. Neither party shall be the agent, representative, employee or servant of the other party.

6. TERM OF AGREEMENT; TERMINATION.

(a) This Agreement will begin on January 1, 2014, and continue in force until December 31, 2014 (the “Initial Term”). The Agreement will automatically renew for consecutive 12 month periods thereafter unless either party notifies the other in writing no less than 90 days prior to the expiration date that it wishes to terminate this Agreement effective at the end of the then-current term. Notwithstanding the foregoing sentence, the Agreement may be terminated immediately by FAIA if any monies due to FAIA under Section 4 of this Agreement are not paid in full and within ten (10) days of Heritage’s receipt of written notice from FAIA of Heritage’s failure to pay the amount due and within the time frames provided by Section 4.

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(b) This Agreement may be terminated at any time by Heritage by written notice to FAIA specifying the effective date of such termination, which shall not be less than 10 days thereafter, for the breach, non-performance, or violation by FAIA, or any person for who FAIA may be responsible, of any material provision, term or condition hereof. Heritage must permit FAIA to rectify such breach, non-performance, or violation within ten business days after receipt of written notice from FAIA or where cure would take longer, to commence to cure within five (5) business days and continue in good faith to cure thereafter to the satisfaction of Heritage. However, in no event shall the right to cure referenced above be extended beyond a thirty (30) day period, which period shall begin on the date that written notice is provided under this section 6(b).

(c) This Agreement may be terminated at any time by FAIA by written notice to Heritage specifying the effective date of such termination, which shall not be less than ten days thereafter, for breach, non-performance, or violation by Heritage or any person for whom Heritage may be responsible, of any material provision, term, or condition hereof. FAIA must permit Heritage to rectify such breach, non-performance, or violation within ten business days after receipt of written notice from FAIA or, where cure would take longer, to commence to cure within five (5) business days and continue in good faith to cure thereafter to the satisfaction of FAIA. However, in no event shall the right to cure referenced above be extended beyond a thirty (30) day period, which period shall begin on the date that written notice is provided under this section 6(c).

(d) This Agreement shall be terminated immediately in the event that FAIA or Heritage shall become insolvent or bankrupt or commit an act of bankruptcy, make an assignment for the benefit of creditors or enter into rehabilitation by its domicile state.

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(e) This Agreement shall terminate upon any termination of the Marketing Services Agreement entered into by and between Heritage and FMS relating to the Program.

(f) In the event of sale, transfer or merger of FAIA, upon prior written notice, and at Heritage’s sole option, Heritage may consent to the transfer and assumption of this Agreement to a successor organization. Consideration of such request will be timely and consent will not be unreasonably withheld. In the absence of such consent from Heritage, this Agreement shall terminate automatically upon the effective date of the sale, transfer or merger of FAIA.

(g) In the event of sale, transfer or merger of Heritage, upon prior written notice, and at FAIA’s sole option, FAIA may consent to the transfer and assumption of this Agreement to a successor organization. Consideration of such request will be timely and consent will not be unreasonably withheld. In the absence of such consent from FAIA, this Agreement shall terminate automatically upon the effective date of the sale, transfer or merger of Heritage.

(h) All termination provisions of this section are subject to the laws of Florida and any dispute under this agreement will be resolved in Florida under the laws of the State of Florida.

(i) Should the parties wish to modify this Agreement, no such modification is effective unless made in writing and signed by both parties.

(j) The relationship between the parties hereto shall be limited to the performance of services agreed to herein. No liability shall be incurred by any of the parties except that of the performance of the responsibilities outlined in this Agreement.

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(k) If this Administrative Services Agreement is terminated pursuant to any subsection of this Section 6, any royalty fees or other compensation earned as of the effective date of the termination shall be paid.

(l) Notwithstanding the foregoing, should Heritage terminate this Administrative Services Agreement during the Initial Term for any reason other than as provided in subsection (b) or (f) of this section 6, Heritage shall pay to FAIA an amount equal to Twelve Thousand Five Hundred and 00/100 dollars ($12,500.00) less all royalty fees paid by Heritage to FAIA from the Effective Date to the termination date (not to fall below zero dollars).

(m) Upon expiration or termination of this agreement by Heritage for any reason, or FAIA for good cause, Heritage (or its successors) agrees to continue paying FAIA the percentage royalty set forth in the “Section 4” of this Agreement for a period of twenty-four months; this provision shall survive termination or expiration of this agreement. In the event that FAIA terminates this agreement for any reason other than good cause, the payment obligation of Heritage will terminate with the effective date of the termination of this Agreement. Termination of a separate administrating and marketing agreement with FMS for good cause shall justify termination of this Agreement for good cause. This provision shall survive termination or expiration of this Agreement.

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7. Notices.

All notices, requests, demands and other communications under this Agreement shall be given in writing. Such notices shall be deemed to have been given when delivered in person or three (3) business days after being sent via certified mail (Return Receipt Requested) and signed for by an authorized representative of receiving party or upon delivery if sent via a reputable overnight delivery service and addressed to the appropriate party at its mailing address set forth below:

If to FAIA:	Florida Association of Insurance Agents, Inc.
	3159 Shamrock South
	Tallahassee, FL 32309
	Attn: Jeffrey W. Grady, President and C.E.O
If to Company:	Heritage Property & Casualty Insurance Company
	700 Central Ave., Ste. 500
	St. Petersburg, FL 33701
	Attn: Mel A. Russell, EVP/Chief Underwriting Officer

8. Dispute Resolution.

Each party commits that in the event a dispute should arise under this Agreement or relating in any manner hereto, the parties agree to attempt to mediate their dispute prior to the commencement of formal litigation (i.e., the filing of a lawsuit or other legal proceeding), using a third party mediator. Any mediation shall take place in Leon County, Florida, unless otherwise agreed to by both parties. The costs of such mediation shall be equally divided between the parties. Such mediation shall be conducted by each party designating a duly

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authorized officer or other representative to represent the party, with authority to bind the party, and that the parties agree to exchange informally such information as is reasonably necessary and relevant to the issues being mediated. If such mediation is unsuccessful, then either party shall have the right to initiate litigation in accordance with section 8 below. All mediation proceedings shall be confidential and no information exchanged in such mediation shall be discoverable or admissible in any litigation involving the parties. In the event a party seeks equitable relief (such as injunctive relief or specific performance), or in the event of an approaching deadline prescribed by an applicable statute of limitations, then there shall be no requirement that such party utilize the mediation process referred to herein.

9. Choice of Law and Forum.

This Agreement shall be construed and governed in accordance with the laws of the State of Florida, without regard to conflict of laws principles. In the event the parties are unable to mediate their dispute to a satisfactory resolution the parties agree that the Circuit Court in and for Leon County, Florida shall have exclusive jurisdiction to hear and determine any claims or disputes between the parties arising out of or related to this Agreement.

10. Attorney’s Fees:

In the event of any litigation between the parties hereto with respect to this Agreement, the prevailing party (the party entitled to recover costs of suit, at such time as all appeal rights have expired or the time for taking such appeals has expired) shall be entitled to recover reasonable attorney’s fees, in addition to such other relief as a court of competent jurisdiction may award.

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11. Amendment and Waiver

No amendment to any provision of this agreement shall be effective unless in writing and signed by both parties. The waiver by either party of a breach or a default of any provision of this agreement by the other party shall not be construed as a waiver of any succeeding breach of the same or any other provision.

12. Force Majeure.

Neither party to this Agreement shall be considered in default in the performance of its obligations to the extent that the performance of any such obligation is prevented or delayed by any cause that is beyond the reasonable control of such party.

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13. INDEMNIFICATION.

(a) FAIA agrees to indemnify and hold Heritage and its officers, directors and employees harmless for losses, costs, expenses, fines, penalties, including punitive or exemplary damages and all costs of defense:

(i) resulting from any act, error or omission, whether intentional or unintentional by FAIA and its officers, directors, agents, employees and independent contractors, related to or which arise out of the performance of duties for which it was appointed to perform, except to the extent caused by Heritage; or

(ii) resulting from any obligation, act, or transaction created or performed by FAIA in violation of, in excess of, or in contravention of the power and authority of FAIA set forth in this Agreement, except to the extent caused by Heritage.

(b) Heritage agrees to indemnify and hold FAIA and its officers, directors and employees harmless for losses, costs, expenses, fines, penalties, including punitive or exemplary damages and all costs of defense:

(i) resulting from any act, error or omission, whether intentional or unintentional by Heritage and its officers, directors, agents employees and independent contractors, related to or which arise out of the performance of duties for which it was appointed to perform, except to the extent caused by FAIA; or

(ii) resulting from any obligation, act, or transaction created or performed by Heritage in violation of, in excess of, or in contravention of the power and authority of Heritage set forth in this Agreement, except to the extent caused by FAIA.

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14. NO PARTNERSHIP. Nothing herein contained shall be construed to constitute the parties as partners, nor to constitute any party as the general agent of the other, or in any manner to limit the parties in the conduct of their respective businesses or activities, in the making of other contacts, or in the performance of other work.

15. DIVISIBLE AGREEMENT. Each provision of this Agreement shall be held reviewed as separate and divisible, and should any provisions to be held invalid or unenforceable; the remaining provisions shall continue to be in full force and effect.

16. ENTIRE AGREEMENT. This Agreement, together with all exhibits, schedules and attachments, constitutes the entire agreement between the parties with respect to the subject matter hereof. This agreement supersedes, and the terms of this agreement govern, any prior agreements with respect to the subject matter hereof, including the previously signed ASA and MSA, with the exception of any prior confidentiality agreements between the parties, provided further that FAIA acknowledges and agrees that it does not, nor does, Heritage, have any outstanding monies owed and any other payments or amounts due, to one another in connection with the previously signed ASA and MSA. This Agreement may only be changed by mutual agreement of authorized representatives of the parties in writing.

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17. RECORDS. FAIA or its agents shall during normal business hours be entitled at its cost to review at Heritage’s offices those records applicable to this Program upon five (5) days written notice to Heritage to verify that it has received the correct payments hereunder, subject to state and federal laws, rules and regulations. Should FAIA determine that Heritage has understated amounts due to FAIA under this Section 2, it shall notify Heritage of its position in writing stating the basis and computation of its position, and Heritage shall have thirty (30) days to examine such writing and its records and respond. If Heritage agrees with the position, Heritage shall pay the difference within ten (10) days of its decision. If Heritage disagrees with the position, the parties shall negotiate in good faith to select a mutually acceptable accounting firm (the “CPAs”) to resolve the dispute. The determination of the CPAs as to the amounts owing to FAIA shall be conclusive and binding on all parties hereto. If the CPAs determine that Heritage owes additional monies hereunder, Heritage shall pay such additional monies to FAIA within ten (10) days of the determination and shall pay the fees and expenses of the CPAs in connection with its examination hereunder. In addition, should it be finally determined that the amount properly payable by Heritage exceeds that reported and paid by more than 10%, Heritage shall pay all reasonable costs of the CPA’s examination and FAIA’s examination of such records. If the CPAs determine that Heritage does not owe additional monies hereunder, FAIA shall pay the fees and expenses of the CPAs in connection with its examination hereunder.

18. CONFIDENTIALITY. Both parties acknowledge that in the course of performance of this Agreement the parties and Members may be provided with confidential information, including but not limited to certain personally identifiable financial information of customers and consumers of Heritage and of the Members. The parties agree to maintain the

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confidentiality of the confidential information and not disclose such information to any persons other than as may be necessary to conduct transactions under this Agreement, and further to treat and maintain such confidential information with the same degree of care accorded the parties own confidential information. All Members that receive confidential information pursuant to this Agreement shall be bound by its terms to the same extent as of they were parties hereto. The obligations of this subsection with respect to confidential information shall survive any termination of this Agreement. Each recipient of confidential information agrees to return all confidential information, including any copies thereof, to the source of said confidential information within 30 days of termination of this Agreement.

19. BINDING EFFECT. This Agreement shall be binding upon and inure not only to the parties but also upon and to their successors and assigns.

20. ASSIGNMENT. The Agreement may not be assigned by either party hereto without the prior written consent of the other party hereto.

21. ENFORCEABILITY. In the event that any provision of this Agreement shall be declared void, unlawful or unenforceable, that provision shall be deemed stricken from this Agreement and the remaining provisions of this Agreement shall continue in full force and effect.

22. CAPTIONS. The section and subsection headings in this Agreement are inserted for convenience only and do not define, limit or describe the scope or intent of this Agreement.

23. CONSTRUCTION. Although the provisions of this Agreement may be drafted by FAIA, this Agreement shall not be construed either for or against any party hereto but shall be interpreted in accordance with the general tenor and plain meaning of its language.

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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by their respective officers duly authorized, as of the above written date.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY
By:

Print Name: Mel A. Russell, CIC

Its: Chief Underwriting Officer & Executive Vice President

FLORIDA ASSOCIATION OF INSURANCE AGENTS
By:

Print Name: Jeffrey W. Grady                                              

Its: Pres/CEO                                                                        

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EX-10.24

Exhibit 10.24

MARKETING SERVICES AGREEMENT

This Marketing Services Agreement (“Agreement”) is made this 1^st day of January, 2014 (the “Effective Date”) by and between HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY, a Florida corporation (“Heritage”) and FAIA MEMBER SERVICES, INC., a Florida corporation (“FMS”).

WHEREAS, FMS is a Florida corporation which, among other things, provides economic service programs to members of the insurance industry, including members (“Members”) of the Florida Association of Insurance Agents (“FAIA”); and

WHEREAS, Heritage offers certain insurance products (the “Products”); and

WHEREAS, FMS desires to assist in the marketing of Heritage’s Products to FAIA Members;

NOW, THEREFORE, Heritage and FMS agree as follows:

1. Establishment of Program.

(a) Heritage agrees to establish and provide to FMS, and FMS agrees to utilize and promote to the extent FMS is not limited by law, a program of Products (hereinafter the “Program”) developed by Heritage, which provides a high quality, cost effective product or service that adds intrinsic value to FAIA’s membership.

(b) FAIA has, as members, insurance agencies in Florida and FMS seeks to be the exclusive agents’ association representing Heritage in the marketing of this Program in Florida.

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2. Responsibilities of FMS

(a) FMS will assist in the recommendation, promotion, and distribution of promotional materials for the Program to all FAIA Members including performance of the following tasks:

(i) FMS will issue a notice (in e-mail or letter format) to the Members of FAIA explaining FMS’s endorsement of the Program.

(ii) FMS will provide Heritage advertising space in its newsletters and other publications distributed to the Members of FAIA.

(iii) FMS will advertise and promote Heritage on its website and insert a hotlink for easy access to Heritage’s web page.

(iv) FMS will introduce and promote the Program on agency visits by FMS marketing representatives.

(v) To the extent that FMS is promoting its FMS endorsed programs at the FAIA annual meeting and planning session, reference to the Heritage Program will be included.

(vii) FMS shall provide leads and referrals to Heritage that are generated by its inside and outside marketing activities.

(b) From time to time upon the request of Heritage, FMS will provide Heritage with updated mailing lists containing the names, addresses, and telephone numbers of all FAIA members.

(c) FMS shall have the right to approve all advertising materials and correspondence to be forwarded to the Members of FAIA, prior to use by Heritage, which approval shall not be unreasonably withheld. FMS shall notify Heritage in writing of any objections within ten (10) business days of receipt of material from Heritage. Failure to so object shall be deemed approval of the materials. Approval shall be obtained prior to mailing or other distribution thereof by Heritage to Members of FAIA.

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(d) Upon termination of this Agreement, FMS shall return to Heritage any and all unused Heritage materials in connection with the Program, and any copies thereof.

(e) FMS shall be responsible for all expenses incurred by it in the performance of its obligation under this Marketing Services Agreement, including, but not limited to, rentals, transportation, facilities, and remuneration of employees and independent contractors. The conduct by FMS of its business shall be its own cost, credit, risk and expense.

(f) FMS shall not charge or commit Heritage to any expense, agreement, payment, debt or obligation.

(g) FMS will not, during the term of this contract, assist any other insurance provider in marketing a similar Program in Florida.

3. Responsibilities of Heritage.

(a) Heritage shall use the mailing lists provided by FMS solely for the purposes contemplated by this Agreement and shall not duplicate or use such mailing lists, or permit any other party to examine or use such mailing lists, for any other purpose whatsoever except as may be required for regulatory or audit purposes. In the event that any Member of FAIA or any other person or entity contained on the mailing lists provided by FMS to Heritage requests to be excluded from future solicitations, FMS shall notify Heritage of such request and Heritage agrees to remove such Member, individual or entity from the list(s) and to exclude such Member, individual or entity from future mailings, contacts or other solicitations.

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(b) Heritage will be responsible for compliance with all state and federal laws and regulations relating to any aspect of the Program.

(c) Upon termination of this Agreement, Heritage shall return to FMS all FMS and FAIA materials, including all mailing lists, past and current, and any copies thereof. Notwithstanding the above, Heritage shall not be required to return or disgorge any information held by Heritage prior to the date of this Agreement or developed by Heritage during the term of this agreement, but independently.

(d) Heritage shall be responsible for all expenses incurred by it in the performance of its obligation under this Marketing Services Agreement, including, but not limited to, rentals, transportation, facilities, and remuneration of employees and independent contractors. The conduct by Heritage of its business shall be its own cost, credit, risk and expense.

(e) Heritage shall be responsible for all aspects of the Program (except as provided in Section 2 of this Agreement) including, but not limited to, the application process, underwriting, processing and all other duties necessary to bind and issue policies.

(f) Heritage shall be responsible for printing and distribution of any material related to the Program.

(g) Heritage shall not charge or commit FMS to any expense, agreement, payment, debt or obligation.

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4. Compensation to FMS.

(a) In consideration of the performance of the foregoing responsibilities by FMS, Heritage agrees to remit to FMS during the term of this Agreement (50%) of the excess monthly commission paid in accordance to the Agency Agreement executed contemporaneously with the Agreement on a monthly basis.

(b) Unless otherwise agreed, the fee set forth in paragraph 4(a) above, includes the complete compensation to FMS for its services hereunder.

5. Indemnification.

(a) FMS agrees to indemnify and hold Heritage and its officers, directors and employees harmless to the extent that FMS is legally liable to do so for losses, costs, expenses, fines, penalties, including punitive or exemplary damages and all costs of defense:

(i) resulting from any act, error or omission, whether intentional or unintentional by FMS and its officers, directors, agents, employees and independent contractors, related to or which arise out of the performance of duties for which it was appointed to perform, except to the extent caused by Heritage, or

(ii) resulting from any obligation, act, or transaction created or performed by FMS in violation of, in excess of, or in contravention of the power and authority of FMS set forth in this Marketing Services Agreement, except to the extent caused by Heritage.

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(b) Heritage agrees to indemnify and hold FMS and its officers, directors and employees harmless to the extent that Heritage is legally liable to do so for losses, costs, expenses, fines, penalties, including punitive or exemplary damages and all costs of defense:

(i) resulting from any act, error or omission, whether intentional or unintentional by Heritage and its officers, directors, agents, employees and independent contractors, related to or which arise out of the performance of duties for which it was appointed to perform, except to the extent caused by FMS, or

(ii) resulting from any obligation, act, or transaction created or performed by Heritage in violation of, in excess of, or in contravention of the power and authority of Heritage set forth in this Marketing Services Agreement, except to the extent caused by FMS.

6. Term and Termination of Agreement.

(a) This Agreement will begin on January 1, 2014, and continue in force until December 31, 2015. This Agreement will automatically renew for consecutive 12 month periods thereafter unless either party notifies the other in writing no less than 90 days prior to the expiration date of the Agreement that it wishes to terminate this Agreement effective at the end of the then-current term. Notwithstanding the foregoing sentence, the Agreement may be terminated immediately by FMS if any monies due to FMS under Section 4 of this Agreement are not paid in full and within ten (10) days of Heritage’s receipt of written notice from FMS of Heritage’s failure to pay in the amount due and within the time frames provided by Section 4.

(b) This Marketing Services Agreement may be terminated at any time by Heritage by written notice to FMS specifying the effective date of such termination, which shall not be less than 10 days thereafter, for the breach, non-performance, or violation by FMS or any person for whom FMS may be responsible, of any material provision, term or condition hereof. Heritage

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must permit FMS to rectify such breach, non-performance, or violation within 10 business days after receipt of written notice from Heritage or where cure would take longer, to commence to cure within five (5) business days and continue in good faith to cure thereafter to the satisfaction of Heritage. However, in no event shall the right to cure referenced above be extended beyond a thirty (30) day period beginning upon the date that written notice is provided under this section 6(b).

(c) This Marketing Services Agreement may be terminated at any time by FMS by written notice to Heritage specifying the effective date of such termination, which shall not be less than ten (10) days thereafter, for breach, non-performance, or violation by Heritage or any person for whom Heritage may be responsible, of any material provision, term, or condition hereof. FMS must permit Heritage to rectify such breach, non-performance, or violation within ten business days after receipt of written notice from FMS or, where cure would take longer, to commence to cure within five (5) business days and continue in good faith to cure thereafter to the satisfaction of FMS. However, in no event shall the right to cure referenced above be extended beyond a thirty (30) day period, which period shall begin on the date that written notice is provided under this section 6(c).

(d) This Marketing Services Agreement shall be terminated immediately in the event that FMS or Heritage shall become insolvent or bankrupt or commit an act of bankruptcy or make an assignment for the benefit of creditors or enters into rehabilitation by its domicile state.

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(e) In the event of sale, transfer or merger of FMS, upon prior written notice, and at Heritage’s sole option, Heritage may consent to the transfer and assumption of this Marketing Services Agreement to a successor organization. Consideration of such request will be timely and consent will not be unreasonably withheld. In the absence of such consent from Heritage, this Marketing Services Agreement shall terminate automatically upon the effective date of the sale, transfer or merger of FMS.

(f) All termination provisions of this section are subject to the laws of Florida and any dispute under this agreement will be resolved in Florida under the laws of the State of Florida.

(g) If this Marketing Services Agreement is terminated pursuant to any subsection of this Section 6, and any compensation earned as of the effective date of the termination shall be paid.

(h) Future Compensation.

Upon termination of this Agreement by Heritage for any reason, or by FMS for good cause, Heritage (or its successors) agrees to continue paying FMS the percentage override set forth in Section 4 of this Agreement for a period of twenty-four months on products and services sold to FMS’s customers; this provision shall survive termination or expiration of this Agreement.

7. Notices

All notices, requests, demands and other communications under this Agreement shall be given in writing. Such notices shall be deemed to have been given when delivered in person or three (3) business days after being sent via certified mail (Return Receipt Requested)

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and signed for by an authorized representative of receiving party or upon delivery if sent via a reputable overnight delivery service and addressed to the appropriate party at its mailing address set forth below:

If to FAIA Member Services:	FAIA Member Services Inc.
	3159 Shamrock South Tallahassee, FL 32309 Attn: David D. Burt, Managing Director - FAIA Member Services
If to Company:	Heritage Property & Casualty Insurance Company 700 Central Ave., Ste. 500 St. Petersburg, FL 33701 Attn: Mel A. Russell, EVP/Chief Underwriting Officer

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8. Dispute Resolution.

Each party commits that in the event a dispute should arise under this Agreement or relating in any manner hereto, the parties agree to attempt to mediate their dispute prior to the commencement of formal litigation (i.e., the filing of a lawsuit or other legal proceeding), using a third party mediator. Any mediation shall take place in Leon County, Florida, unless otherwise agreed to by both parties. The costs of such mediation shall be equally divided between the parties. Such mediation shall be conducted by each party designating a duly authorized officer or other representative to represent the party, with authority to bind the party, and that the parties agree to exchange informally such information as is reasonably necessary and relevant to the issues being mediated. If such mediation is unsuccessful, then either party shall have the right to initiate litigation in accordance with section 8 below. All mediation proceedings shall be confidential and no information exchanged in such mediation shall be discoverable or admissible in any litigation involving the parties. In the event a party seeks equitable relief (such as injunctive relief or specific performance), or in the event of an approaching deadline prescribed by an applicable statute of limitations, then there shall be no requirement that such party utilize the mediation process referred to herein.

9. Choice of Law and Forum.

This Agreement shall be construed and governed in accordance with the laws of the State of Florida, without regard to conflict of laws principles. In the event the parties are unable to mediate their dispute to a satisfactory resolution the parties agree that the Circuit Court in and for Leon County, Florida shall have exclusive jurisdiction to hear and determine any claims or disputes between the parties arising out of or related to this Agreement.

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10. Attorney’s Fees:

In the event of any litigation between the parties hereto with respect to this Agreement, the prevailing party (the party entitled to recover costs of suit, at such time as all appeal rights have expired or the time for taking such appeals has expired) shall be entitled to recover reasonable attorney’s fees, in addition to such other relief as a court of competent jurisdiction may award.

11. Amendment and Waiver

No amendment to any provision of this agreement shall be effective unless in writing and signed by both parties. The waiver by either party of a breach or a default of any provision of this agreement by the other party shall not be construed as a waiver of any succeeding breach of the same or any other provision.

12. Relationship of the Parties.

Nothing herein contained shall be construed to create the relationship of employer and employee between Heritage and FMS or between Heritage and any FMS employees or representatives. It is the express intent of the parties hereto that FMS is not an employee of Heritage for any purpose, but they are independent contractors for all purposes and in all situations. FMS shall not represent that they are employees of Heritage, nor shall they in any manner hold themselves out to be an employee of Heritage.

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13. Confidentiality.

Both parties acknowledge that in the course of performance of this Agreement the parties and Members may be provided with confidential information, including but not limited to certain personally identifiable financial information of customers and consumers of Heritage and of the Members. The parties agree to maintain the confidentiality of the confidential information and not disclose such information to any persons other than as may be necessary to conduct transactions under this Agreement, and further to treat and maintain such confidential information with the same degree of care accorded the parties own confidential information. All Members that receive confidential information pursuant to this Agreement shall be bound by its terms to the same extent as of they were parties hereto. The obligations of this subsection with respect to confidential information shall survive any termination of this Agreement. Each recipient of confidential information agrees to return all confidential information, including any copies thereof, to the source of said confidential information within 30 days of termination of this Agreement.

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14. Force Majeure.

Neither party to this Agreement shall be considered in default in the performance of its obligations to the extent that the performance of any such obligation is prevented or delayed by any cause that is beyond the reasonable control of such party.

15. Miscellaneous Provisions.

(a) Binding Effect of Agreement. This Agreement shall be binding upon and inure not only to the parties but also upon and to their successors and assigns.

(b) Books and Records. Heritage and FMS shall keep complete and accurate record of business transacted by it under this Marketing Services Agreement. Heritage and FMS shall each have the right to inspect the others relevant records during business hours and after written notice of not less than five (5) working days in advance.

(c) Assignment.

The Agreement may not be assigned by either party hereto without the prior written consent of the other party hereto.

(d) Enforceability.

In the event that any provision of this Agreement shall be declared void, unlawful or unenforceable, that provision shall be deemed stricken from this Agreement and the remaining provisions of this Agreement shall continue in full force and effect.

(e) Captions.

The section and subsection headings in this Agreement are inserted for convenience only and do not define, limit or describe the scope or intent of this Agreement.

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(f) Construction.

Although the provisions of this Agreement may be drafted by FMS, this Agreement shall not be construed either for or against any party hereto but shall be interpreted in accordance with the general tenor and plain meaning of its language.

16. Entire Agreement.

This Agreement, together with all exhibits, schedules and attachments, constitutes the entire agreement between the parties with respect to the subject matter hereof. This agreement supersedes, and the terms of this agreement govern, any prior agreements with respect to the subject matter hereof, including the previously signed ASA and MSA, with the exception of any prior confidentiality agreements between the parties, provided further that FMS acknowledges and agrees that it does not, nor does, Heritage, have any outstanding monies owed and any other payments or amounts due, to one another in connection with the previously signed ASA and MSA. This Agreement may only be changed by mutual agreement of authorized representatives of the parties in writing.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date indicated below.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY
By:
Print Name: Mel A. Russell, CIC
Its:	Chief Underwriting Officer & Executive Vice President
FAIA MEMBERS SERVICES, INC.
By:
Print Name: David D. Burt
Its:	VP & Managing Director

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EX-10.25

Exhibit 10.25

Heritage Property & Casualty Insurance Company

A FLORIDA CORPORATION

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of January 1, 2014 by and between HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY, INC., Florida corporation, and any of its parent or subsidiary companies (collectively, the “Company”), and Richard Widdicombe (the “Executive”).

RECITALS

1. The Company is a homeowner’s insurance company that operates in the State of Florida.

2. The Executive has the requisite experience to assist with the operation of the Insurance Entity.

3. The Executive, while assisting with the operation of the Company will obtain intimate knowledge of the business plan and modeling for the Company.

4. The Executive will be the President and Chief Executive Officer of the Company.

5. The Executive, in his duties, will come to possess intimate knowledge of the business and affairs of the Company and its Subsidiaries their policies, methods and personnel.

6. The Board of Directors (the “Board”) of the Company recognizes that the Executive’s contribution, as President and CEO of the Company, to the growth and success of the Company and its Subsidiaries will be substantial and desires to assure the Company of the Executive’s employment in an executive capacity and to compensate him therefore.

7. The Board has determined that this Agreement will reinforce and encourage the Executive’s continued attention and dedication to the Company and its Subsidiaries.

8. The Executive is willing to make his services available to the Company and its Subsidiaries on the terms and conditions hereinafter set forth.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties hereby agree as follows:

Section I. Term

1. Term of Employment. The Company shall continue to employ the Executive and the Executive shall continue to serve the Company and its Subsidiaries, on the terms and conditions set forth herein, until the fifth (5^th) anniversary of the date of this agreement, unless terminated as hereinafter set forth.

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2. Duties of Executive. The Executive shall serve as President & CEO and shall perform the duties of an executive commensurate with such position, shall diligently perform all services as may be reasonably designated by the Board and shall exercise such power and authority as is necessary and customary to the performance of such duties and services. The Executive shall devote his services on a fulltime basis to the business and affairs of the Company and the Subsidiaries.

Section II. Compensation and Benefits

1. Base Salary. During the Employment Term, the Executive shall receive a base salary at the annual rate of $680,000.00 for 2014. If the Company reports a consolidated EBITDA for 2014 of at least $25 million, the base salary shall be increased in 2015 to $750,000 for the remainder of the Employment Term. The base salary shall be payable in substantially equal installments consistent with the Company’s normal payroll schedule, subject to applicable withholding and other taxes.

2. Additional Cash Compensation. During the Employment Term, Executive shall participate in the Company’s annual bonus pool, as determined by the Chairman of the Board, but not in an amount less than 10% of the bonus pool awarded to management, or such additional amount as determined by the Board.

3. Expense Reimbursement. During the Employment Term, the Company, upon the submission of supporting documentation by the Executive, and in accordance with Company policies for its executives, shall reimburse the Executive for all expenses actually paid or incurred by the Executive in the course of and pursuant to the business of the Company and the Subsidiaries, including a reasonable car allowance, full funding of health savings account expenses, and expenses for travel and entertainment, for which the Executive shall have an expense allowance as set by the Board from time to time.

4. Insurance. During the Employment Term, the Company shall obtain comprehensive major medical, hospitalization and disability insurance coverage, either group or individual, for the Executive and his dependents, and may obtain or may continue in force life (“key man”) insurance on the Executive for the benefit of the Company (collectively, the “Policies”), which Policies the Company shall keep in effect at its sole expense throughout the Term. The Policies to be provided by the Company shall be on terms as determined by the Board. Within 30 days following any termination of this Agreement, at the Executive’s option, the Company shall assign to the Executive all insurance policies on the life of the Executive then owned by the Company in consideration of the payment by the Executive of the cash surrender value, if any, and the Executive’s agreement to assume the Company liability to pay the premiums accruing thereon after the date of such termination.

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5. Disability. During the Employment Term, the Company shall maintain long-term disability insurance coverage on Executive in an amount equal to sixty percent (60%) of Executive’s base salary during the Employment Term of this Agreement. In the case of a disability of Executive, all benefits provided for under the above-described coverage shall be paid directly to Executive. Executive represents and warrants that, to the best of his knowledge, he has no disability which would impair his ability to perform the duties called for under this Agreement.

6. Working Facilities. During the Employment Term, the Company shall furnish the Executive with an office, and such other facilities and services suitable to his position and adequate for the performance of his duties hereunder.

7. Vacation. During the Employment Term, Executive shall be entitled to reasonable vacations during each year of the Term, the time and duration thereof to be determined by mutual agreement between Executive and the Company.

Section III. Termination.

1. Termination for Cause. Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated by the Company for Cause. As used in this Agreement “Cause” shall only mean (i) any action or omission of the Executive which constitutes a breach of this Agreement, (ii) fraud, breach of fiduciary duty, gross negligence, embezzlement or misappropriation as against the Company. Upon any determination by the Company’s Board that Cause exists under clause (i) of the preceding sentence, the Company shall cause a special meeting of the Board to be called and held at a time mutually convenient to the Board and Executive. Executive shall have the right to appear before such special meeting of the Board to refute any determination of Cause specified in such notice, and any termination of Executive’s employment by reason of such Cause determination shall not be effective until Executive is afforded such opportunity to appear. Any termination shall be made in writing to Executive, which notice shall set forth in detail all acts or omissions upon which the Company is relying for such termination. Upon any termination for cause, the Company shall have no obligation to pay the Executive any compensation or benefits under this Agreement. If Executive is terminated without cause, the Executive shall be entitled to the remaining, regularly scheduled Base Salary under this Agreement. If this Agreement expires and the Company does not offer the Executive a new employment contract, at a compensation level similar to the final year of this agreement, the Company shall pay the Executive severance equal to the Base Salary received in the final year.

2. Death. In the event of the death of Executive during the Employment Term of this Agreement, the Company shall pay to Executive’s legal representative, 50% of any unpaid Base Salary through the expiration of the contract term and shall have no further liability hereunder other than for reimbursement for reasonable business expenses incurred prior to the date of the Executive’s death.

3. Voluntary. Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated by the Executive for any reason by giving no less than 90 days notice. The Company shall not be responsible for any further compensation of any kind to the Executive beyond 90 days from the date the Executive provides notice of his intent to terminate his employment.

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4. Stock Repurchase. If the Executive leaves the Company for any reason, the Company shall, at the Executive’s option, repurchase all or part of the shares in the Company owned/controlled by the Executive at book value as determined by an independent third party appraiser. The Company shall pay 50% in a lump sum payment and the rest in 12 monthly installments.

5. Change of Control. For the purposes of this Agreement, a “Change of Control” shall be deemed to have taken place if: (i) any person, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, becomes the owner or beneficial owner of Company securities, after the Commencement Date, having greater than 50% of the combined voting power of the then outstanding shares of the Company that may be cast for the election of Managers of the Company (other than as a result of an issuance of securities initiated by the Company, or open market purchases approved by the Board, as long as the majority of the Board approving the purchases is the majority at the time the purchases are made), or (ii) the persons who were Directors of the Company before such transactions shall cease to constitute a majority of the Board, or any successor to the Company, as the direct or indirect result of or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions.

6. Change of Control Payments. During the remaining Employment Term hereof after the Change of Control Date, the Company (or the Subsidiaries) will (i) continue to pay Executive a salary at not less than the level applicable to Executive on the Change of Control Date, (ii) pay Executive bonuses in amounts not less in amount than those paid during the 12 month period preceding the Change of Control Date, and (iii) continue employee benefit programs as to Executive at levels in effect on the Change of Control Date (but subject to such reductions as may be required to maintain such plans in compliance with applicable federal law regulating employee benefit programs). In the event of a proposed Change in Control, the Company will allow Executive to participate in all meetings and negotiations related thereto.

Section IV. Restrictive Covenants

1. Confidentiality/Non-Disclosure. “Confidential Information” shall mean any intellectual property, information, or trade secrets (whether or not specifically labeled or identified as “confidential” or “private”), in any form or medium, that is disclosed to, or developed or learned by, the Executive, and that relates to the business plan, underwriting, products, services, research, or development of or by the Company or its Subsidiaries, suppliers, distributors, customers, investors, partners, and/or other business associates, and that has not become publicly known. Confidential Information includes, but is not limited to, the following:

a. Internal business information (including but not limited to information relating to strategy, staffing, financial data, training, marketing, promotional and sales plans and practices, costs, bidding activities and strategies, rate and pricing structures, and accounting and business methods);

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b. Identities of, negotiations with, individual requirements of, specific contractual arrangements with, and information about, the Company’s or its Subsidiaries’ suppliers, distributors, customers, investors, partners and/or other business associates, their contact information, and their confidential information;

c. Compilations of data and analyses, underwriting process and parameters, material processes, technical data, specific program information, trade or industrial practices, computer programs, formulae, systems, research, records, reports, manuals, documentation, customer and supplier lists, data and databases relating thereto, and technology and methodology regarding specific projects; and

d. Intellectual Property not generally available to the public, or published by the Company or its Subsidiaries. “Intellectual Property,” or “IP,” shall mean (1) inventions or devices, whether patentable or not; (2) original works of authorship produced by or on behalf of the Company or its Subsidiaries; (3) trade secrets; (4) know-how; (5) customer lists and confidential information; and (6) any other intangible property protectable under federal, state or foreign law. Other examples of Intellectual Property include, but are not limited to, patent applications, patents, copyrighted works, technical data, computer software, knowledge of suppliers or business partnerships, documentation, processes, and methods and results of research.

2. Acknowledgements.

a. The Executive acknowledges and agrees with the representations of the Company that Confidential Information and IP is proprietary and valuable to the Company, and that any disclosure or unauthorized use thereof may cause irreparable harm and loss to the Company. It is further acknowledged by the Executive that if the general public or competitors (now existing or to be created in the future) learn of these ongoing discussions and negotiations with potential investors and of the formation of the Company, the Insurance Entity and other Subsidiaries as a result of the Executive’s failure to comply hereunder, irreparable harm and substantial financial loss may occur to the Company’s, the Insurance Entity or other Subsidiary’s viability and future revenues. The Executive acknowledges and agrees that the knowledge and experience the Executive shall acquire by virtue of assisting with the formation of the Insurance Entity and application to the FOIR for approval of the Insurance Entity to write homeowner’s insurance coverage in the State of Florida during the Employment Term and by virtue of employment by the Company during the Employment Term is of a special, unique and extraordinary character and that such position allows the Executive access to Confidential Information and Intellectual Property.

b. The Executive acknowledges and agrees that (a) the nature and periods of restrictions imposed by the covenants contained in this Agreement are fair, reasonable and necessary to protect and preserve for the Company and its Subsidiaries their viability and future revenues; (b) the Company or its Subsidiaries would sustain great and irreparable loss and damage if

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the Executive were to breach any of such covenants set forth herein; (c) the Company and its Subsidiaries intend to conduct business actively in the entire territory that is the subject of this Agreement (as defined below) and beyond; and (d) the covenants herein set forth are made as an inducement to and have been relied upon by the Company in entering into this Agreement. The Executive acknowledges and agrees this Agreement is binding on the Executive’s heirs, executors, successors, administrators, representatives and agents.

c. The Executive agrees to receive and to treat Confidential Information and the knowledge of IP on a confidential and restricted basis and to undertake the following additional obligation with respect thereto:

i. To use the Confidential Information for the singular purpose of benefiting the Company and its Subsidiaries, and specifically not use the Company’s and its Subsidiaries’ customer or prospective customer data to conduct marketing, or otherwise undertake personal contacts, to solicit, divert or appropriate customers or prospective customers of the Company or its Subsidiaries, whether for the benefit of the Executive or any Person;

ii. Not to disclose Confidential Information, except to the extent the Executive is required to disclose or use such Confidential Information in the performance of the Executive’s assigned duties for the Company or its Subsidiaries, to any Person without the prior express written consent of the Member-Managers of the Company, or their successors, including Manager(s), as an action permitted under the operating agreement of the Company;

iii. To tender all Confidential Information to the Company, and destroy any of the Executive’s additional notes or records made from such Confidential Information, immediately upon request by the Company or upon termination of this Agreement either during the Initial Term or Employment Term;

iv. To promptly disclose and assign any right, title and interest to the Company all IP authored, made, conceived or actually reduced to practice, alone or jointly with others, (a) while performing duties for the Company or its Subsidiaries, or (b) during the Initial Term or Employment Term of this Agreement, or ( c) which results or is suggested by any work done for or at the request of the Company or its Subsidiaries, or (d) which was aided by the use of trade secret information, whether or not during working hours and regardless of location;

v. To use best efforts to safeguard the Confidential Information and protect it against disclosure, misuse, espionage, loss, misappropriation and theft;

vi. Immediately notify the Members and Manager(s) of the Company of any breach of this Agreement; and

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vii. Assist the Company or its Subsidiaries, both during and after the termination of this Agreement, in obtaining and enforcing any legal rights in IP of the Company or its Subsidiaries, or assigned or to be assigned by the Executive to the Company or its Subsidiaries.

3. Non-Solicitation. For a period of two years after the Executive leaves the employment of the Company, the Executive covenants and agrees with the Company that the Executive will not, directly or indirectly, attempt to employ, divert away an employee, or enter into any contractual arrangement with any employee or former employee, of the Company or its Subsidiaries, unless such employee or former employee has not been employed by the Company or its Subsidiaries for a period in excess of one (1) year.

4. Non-Compete. For a period of two years after the Executive leaves the employment of the Company, the Executive covenants and agrees with the Company that the Executive will not, directly or indirectly, work for or consult with any competing insurance companies that do business in the same states in which the Company does business.

Section V. Miscellaneous

1. Severability. In the event that the provisions of this Agreement should ever be deemed to exceed the time or geographic limitations permitted by applicable law, then the provisions will be reformed to the maximum time or geographic limitations permitted by applicable law. Every provision of this Agreement is intended to be severable, and, if any term or provision is determined to be illegal, invalid or unenforceable for any reason whatsoever, and cannot be reformed, such illegal, invalid or unenforceable provision shall be deemed severed here from and shall not affect the validity, legality or enforceability of the remainder of this Agreement.

2. Books and Records. All books, records, accounts and similar repositories of Confidential Information of the Company and its Subsidiaries, whether prepared by the Executive or otherwise coming into the Executive’s possession, shall be the exclusive property of the Company and shall be returned immediately to the Company and its Subsidiaries on termination of this Agreement or on the Board’s request at any time.

3. Survival. The restrictions and obligations of this Section IV shall survive any expiration, termination, or cancellation of either the Initial Term or Employment Term of this Agreement and shall continue to bind the Executive and the Executive’s respective heirs, executors, successors, administrators, representatives and agents.

4. Consolidation, Merger or Sale of Assets. Nothing in this Agreement shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation which assumes this Agreement, and all obligations of the Company hereunder, in writing. Upon such consolidation, merger, or transfer of assets and assumption, the term “the Company” as used herein, shall mean such other corporation and this Agreement shall continue in full force and effect, subject to the provisions of Paragraph 6 hereof.

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5. Binding Effect. Except as herein otherwise provided, this Agreement shall inure to the benefit of and shall be binding upon the parties hereto, their personal representatives, successors, heirs and assigns. The obligations of Company and the Subsidiaries to Executive are joint and several. All provisions of this Agreement are specifically enforceable by the Subsidiaries in addition to Company. Each of the Subsidiaries shall be considered a third party beneficiary under the provisions of this Agreement.

6. Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and vice versa. Titles of Paragraphs are for convenience only, and neither limit nor amplify the provisions of the Agreement itself.

7. Further Assurances. At any time, and from time to time, each party will take such action as may be reasonably requested by the other party to carry out the intent and purposes of this Agreement.

8. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. It supersedes all prior negotiations, letters and understandings relating to the subject matter hereof.

9. Amendment. This Agreement may not be amended, supplemented or modified in whole or in part except by an instrument in writing signed by the party or parties against whom enforcement of any such amendment, supplement or modification is sought.

10. Assignment. This Agreement may not be assigned by the Executive, and may not be assigned by the Company except as described in above.

11. Choice of Law. This Agreement will be interpreted, construed and enforced in accordance with the laws of the State of Florida, without giving effect to the application of the principles pertaining to conflicts of laws.

12. Effect of Waiver. The failure of any party at any time or times to require performance of any provision of this Agreement will in no manner affect the right to enforce the same. The waiver by any party of any breach of any provision of this Agreement will not be construed to be a waiver by any such party of any succeeding breach of that provision or a waiver by such party of any breach of any other provision.

13. Construction. The parties hereto and their respective legal counsel participated in the preparation of this Agreement; therefore, this Agreement shall be construed neither against nor in favor of any of the parties hereto, but rather in accordance with the fair meaning thereof.

14. Venue. Should it become necessary for any party to institute legal action to enforce the terms and conditions of this Agreement, the successful party will be awarded reasonable attorneys’ fees at all trial and appellate levels, expenses and costs. Any suit, action or proceeding seeking equitable remedies with respect to this Agreement shall be brought in the courts of the State of Florida, County of Pinellas. The parties hereto hereby accept the exclusive jurisdiction of those courts for the purpose of any such suit, action or proceeding.

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15. Arbitration. The parties agree that all disputes related to this Agreement, other than disputes seeking equitable remedies, shall be submitted to arbitration in Pinellas County, Florida pursuant to the rules of the American Arbitration Association.

16. Equitable Remedy. The parties hereto acknowledge and agree that any party’s remedy at law for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and such breach or threatened breach shall be per se deemed as causing irreparable harm to such party. Therefore, in the event of such breach or threatened breach, the parties hereto agree that, in addition to any available remedy at law, including but not limited to monetary damages, an aggrieved party, without posting any bond, shall be entitled to obtain, and the offending party agrees to oppose the aggrieved party’s request for, equitable relief in the form of specific enforcement, temporary restraining order, temporary or permanent injunction, or any other equitable remedy that may then be available to the aggrieved party.

17. Binding Nature. This Agreement will be binding upon and will inure to the benefit of any successor or successors of the parties hereto.

18. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original.

19. Notice. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered when sent by facsimile with receipt confirmed or when deposited in the United States mail, postage prepaid, registered or certified mail, return receipt requested, or by overnight courier, addressed to the parties at the address first stated herein, or to such other address as either party hereto shall from time to time designate.

Agreed to by:

Heritage Property & Casualty Insurance Company

By:
	Bruce Lucas, Chairman & CIO
By:
	Richard Widdicombe, President and CEO

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EX-10.26

Exhibit 10.26

Heritage Property & Casualty Insurance Company

A FLORIDA CORPORATION

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of January 1, 2014 by and between HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY, INC., Florida corporation, and any of its parent or subsidiary companies (collectively, the “Company”), and Bruce Lucas (the “Executive”).

RECITALS

1. The Company is a homeowner’s insurance company that operates in the State of Florida.

2. The Executive has the requisite experience to assist with the operation of the Insurance Entity.

3. The Executive, while assisting with the operation of the Company will obtain intimate knowledge of the business plan and modeling for the Company.

4. The Executive will be the Chief Investment Officer of the Company.

5. The Executive, in his duties, will come to possess intimate knowledge of the business and affairs of the Company and its Subsidiaries their policies, methods and personnel.

6. The Board of Directors (the “Board”) of the Company recognizes that the Executive’s contribution, as CIO of the Company, to the growth and success of the Company and its Subsidiaries will be substantial and desires to assure the Company of the Executive’s employment in an executive capacity and to compensate him therefore.

7. The Board has determined that this Agreement will reinforce and encourage the Executive’s continued attention and dedication to the Company and its Subsidiaries.

8. The Executive is willing to make his services available to the Company and its Subsidiaries on the terms and conditions hereinafter set forth.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties hereby agree as follows:

Section I. Term

1. Term of Employment. The Company shall continue to employ the Executive and the Executive shall continue to serve the Company and its Subsidiaries, on the terms and conditions set forth herein, until the fifth (5^th) anniversary of the date of this agreement, unless terminated as hereinafter set forth.

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2. Duties of Executive. The Executive shall serve as CIO and shall perform the duties of an executive commensurate with such position, shall diligently perform all services as may be reasonably designated by the Board and shall exercise such power and authority as is necessary and customary to the performance of such duties and services. The Executive shall devote his services on a fulltime basis to the business and affairs of the Company and the Subsidiaries.

Section II. Compensation and Benefits

1. Base Salary. During the Employment Term, the Executive shall receive a base salary at the annual rate of $680,000.00 for 2014. If the Company reports a consolidated EBITDA for 2014 of at least $25 million, the base salary shall be increased in 2015 to $750,000 for the remainder of the Employment Term. The base salary shall be payable in substantially equal installments consistent with the Company’s normal payroll schedule, subject to applicable withholding and other taxes.

2. Additional Cash Compensation. During the Employment Term, Executive shall participate in the Company’s annual bonus pool, as determined by the Chairman of the Board and CEO, but not in an amount less than 30% of the Company’s bonus pool paid to management, or such additional amount as determined by the Company.

3. Expense Reimbursement. During the Employment Term, the Company, upon the submission of supporting documentation by the Executive, and in accordance with Company policies for its executives, shall reimburse the Executive for all expenses actually paid or incurred by the Executive in the course of and pursuant to the business of the Company and the Subsidiaries, including a reasonable car allowance, full funding of health savings account expenses, and expenses for travel and entertainment, for which the Executive shall have an expense allowance as set by the Board from time to time.

4. Insurance. During the Employment Term, the Company shall obtain comprehensive major medical, hospitalization and disability insurance coverage, either group or individual, for the Executive and his dependents, and may obtain or may continue in force life (“key man”) insurance on the Executive for the benefit of the Company/Executive (collectively, the “Policies”), which Policies the Company shall keep in effect at its sole expense throughout the Term. The Policies to be provided by the Company shall be on terms as determined by the Board. Within 30 days following any termination of this Agreement, at the Executive’s option, the Company shall assign to the Executive all insurance policies on the life of the Executive then owned by the Company in consideration of the payment by the Executive of the premiums accruing after the date of such termination.

5. Disability. During the Employment Term, the Company shall maintain long-term disability insurance coverage on Executive in an amount equal to sixty percent (60%) of Executive’s base salary during the Employment Term of this Agreement. In the case of a disability of Executive, all benefits provided for under the above-described coverage shall be paid directly to Executive. Executive represents and warrants that, to the best of his knowledge, he has no disability which would impair his ability to perform the duties called for under this Agreement.

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6. Working Facilities. During the Employment Term, the Company shall furnish the Executive with an office, and such other facilities and services suitable to his position and adequate for the performance of his duties hereunder.

7. Vacation. During the Employment Term, Executive shall be entitled to reasonable vacations during each year of the Term, the time and duration thereof to be determined by mutual agreement between Executive and the Company.

Section III. Termination.

1. Termination for Cause. Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated by the Company for Cause. As used in this Agreement “Cause” shall only mean (i) any action or omission of the Executive which constitutes a breach of this Agreement, (ii) fraud, breach of fiduciary duty, gross negligence, embezzlement or misappropriation as against the Company. Upon any determination by the Company’s Board that Cause exists under clause (i) of the preceding sentence, the Company shall cause a special meeting of the Board to be called and held at a time mutually convenient to the Board and Executive. Executive shall have the right to appear before such special meeting of the Board to refute any determination of Cause specified in such notice, and any termination of Executive’s employment by reason of such Cause determination shall not be effective until Executive is afforded such opportunity to appear. Any termination shall be made in writing to Executive, which notice shall set forth in detail all acts or omissions upon which the Company is relying for such termination. Upon any termination for cause, the Company shall have no obligation to pay the Executive any compensation or benefits under this Agreement. If Executive is terminated without cause, the Executive shall be entitled to the remaining, regularly scheduled Base Salary under this Agreement. If this Agreement expires and the Company does not offer the Executive a new employment contract, at a compensation level similar to the final year of this agreement, the Company shall pay the Executive severance equal to the Base Salary received in the final year.

2. Death. In the event of the death of Executive during the Employment Term of this Agreement, the Company shall pay to Executive’s legal representative, 50% of any unpaid Base Salary through the expiration of the contract term and shall have no further liability hereunder other than for reimbursement for reasonable business expenses incurred prior to the date of the Executive’s death.

3. Voluntary. Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated by the Executive for any reason by giving no less than 90 days notice. The Company shall not be responsible for any further compensation of any kind to the Executive beyond 90 days from the date the Executive provides notice of his intent to terminate his employment.

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4. Stock Repurchase. If the Executive leaves the Company for any reason, the Company shall, at the Executive’s option, repurchase all or part of the shares in the Company owned/controlled by the Executive at book value as determined by an independent third party appraiser. The Company shall pay 50% in a lump sum payment and the rest in 12 monthly installments.

5. Change of Control. For the purposes of this Agreement, a “Change of Control” shall be deemed to have taken place if: (i) any person, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, becomes the owner or beneficial owner of Company securities, after the Commencement Date, having greater than 50% of the combined voting power of the then outstanding shares of the Company that may be cast for the election of Managers of the Company (other than as a result of an issuance of securities initiated by the Company, or open market purchases approved by the Board, as long as the majority of the Board approving the purchases is the majority at the time the purchases are made), or (ii) the persons who were Directors of the Company before such transactions shall cease to constitute a majority of the Board, or any successor to the Company, as the direct or indirect result of or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions.

6. Change of Control Payments. During the remaining Employment Term hereof after the Change of Control Date, the Company (or the Subsidiaries) will (i) continue to pay Executive a salary at not less than the level applicable to Executive on the Change of Control Date, (ii) pay Executive bonuses in amounts not less in amount than those paid during the 12 month period preceding the Change of Control Date, and (iii) continue employee benefit programs as to Executive at levels in effect on the Change of Control Date (but subject to such reductions as may be required to maintain such plans in compliance with applicable federal law regulating employee benefit programs). In the event of a proposed Change in Control, the Company will allow Executive to participate in all meetings and negotiations related thereto.

Section IV. Restrictive Covenants

1. Confidentiality/Non-Disclosure. “Confidential Information” shall mean any intellectual property, information, or trade secrets (whether or not specifically labeled or identified as “confidential” or “private”), in any form or medium, that is disclosed to, or developed or learned by, the Executive, and that relates to the business plan, underwriting, products, services, research, or development of or by the Company or its Subsidiaries, suppliers, distributors, customers, investors, partners, and/or other business associates, and that has not become publicly known. Confidential Information includes, but is not limited to, the following:

a. Internal business information (including but not limited to information relating to strategy, staffing, financial data, training, marketing, promotional and sales plans and practices, costs, bidding activities and strategies, rate and pricing structures, and accounting and business methods);

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b. Identities of, negotiations with, individual requirements of, specific contractual arrangements with, and information about, the Company’s or its Subsidiaries’ suppliers, distributors, customers, investors, partners and/or other business associates, their contact information, and their confidential information;

c. Compilations of data and analyses, underwriting process and parameters, material processes, technical data, specific program information, trade or industrial practices, computer programs, formulae, systems, research, records, reports, manuals, documentation, customer and supplier lists, data and databases relating thereto, and technology and methodology regarding specific projects; and

d. Intellectual Property not generally available to the public, or published by the Company or its Subsidiaries. “Intellectual Property,” or “IP,” shall mean (1) inventions or devices, whether patentable or not; (2) original works of authorship produced by or on behalf of the Company or its Subsidiaries; (3) trade secrets; (4) know-how; (5) customer lists and confidential information; and (6) any other intangible property protectable under federal, state or foreign law. Other examples of Intellectual Property include, but are not limited to, patent applications, patents, copyrighted works, technical data, computer software, knowledge of suppliers or business partnerships, documentation, processes, and methods and results of research.

2. Acknowledgements.

a. The Executive acknowledges and agrees with the representations of the Company that Confidential Information and IP is proprietary and valuable to the Company, and that any disclosure or unauthorized use thereof may cause irreparable harm and loss to the Company. It is further acknowledged by the Executive that if the general public or competitors (now existing or to be created in the future) learn of these ongoing discussions and negotiations with potential investors and of the formation of the Company, the Insurance Entity and other Subsidiaries as a result of the Executive’s failure to comply hereunder, irreparable harm and substantial financial loss may occur to the Company’s, the Insurance Entity or other Subsidiary’s viability and future revenues. The Executive acknowledges and agrees that the knowledge and experience the Executive shall acquire by virtue of assisting with the formation of the Insurance Entity and application to the FOIR for approval of the Insurance Entity to write homeowner’s insurance coverage in the State of Florida during the Employment Term and by virtue of employment by the Company during the Employment Term is of a special, unique and extraordinary character and that such position allows the Executive access to Confidential Information and Intellectual Property.

b. The Executive acknowledges and agrees that (a) the nature and periods of restrictions imposed by the covenants contained in this Agreement are fair, reasonable and necessary to protect and preserve for the Company and its Subsidiaries their viability and future revenues; (b) the Company or its Subsidiaries would sustain great and irreparable loss and damage if the Executive were to breach any of such covenants set forth herein; (c) the Company and its Subsidiaries intend to conduct business actively in the entire territory that is the subject of this Agreement (as defined below) and beyond; and (d) the covenants herein set forth are made as an inducement to and have been relied upon by the Company in entering into this Agreement. The Executive acknowledges and agrees this Agreement is binding on the Executive’s heirs, executors, successors, administrators, representatives and agents.

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c. The Executive agrees to receive and to treat Confidential Information and the knowledge of IP on a confidential and restricted basis and to undertake the following additional obligation with respect thereto:

i. To use the Confidential Information for the singular purpose of benefiting the Company and its Subsidiaries, and specifically not use the Company’s and its Subsidiaries’ customer or prospective customer data to conduct marketing, or otherwise undertake personal contacts, to solicit, divert or appropriate customers or prospective customers of the Company or its Subsidiaries, whether for the benefit of the Executive or any Person;

ii. Not to disclose Confidential Information, except to the extent the Executive is required to disclose or use such Confidential Information in the performance of the Executive’s assigned duties for the Company or its Subsidiaries, to any Person without the prior express written consent of the Member-Managers of the Company, or their successors, including Manager(s), as an action permitted under the operating agreement of the Company:

iii. To tender all Confidential Information to the Company, and destroy any of the Executive’s additional notes or records made from such Confidential Information, immediately upon request by the Company or upon termination of this Agreement either during the Initial Term or Employment Term;

iv. To promptly disclose and assign any right, title and interest to the Company all IP authored, made, conceived or actually reduced to practice, alone or jointly with others, (a) while performing duties for the Company or its Subsidiaries, or (b) during the Initial Term or Employment Term of this Agreement, or (c) which results or is suggested by any work done for or at the request of the Company or its Subsidiaries, or (d) which was aided by the use of trade secret information, whether or not during working hours and regardless of location;

v. To use best efforts to safeguard the Confidential Information and protect it against disclosure, misuse, espionage, loss, misappropriation and theft;

vi. Immediately notify the Members and Manager(s) of the Company of any breach of this Agreement; and

vii. Assist the Company or its Subsidiaries, both during and after the termination of this Agreement, in obtaining and enforcing any legal rights in IP of the Company or its Subsidiaries, or assigned or to be assigned by the Executive to the Company or its Subsidiaries.

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3. Non-Solicitation. For a period of two years after the Executive leaves the employment of the Company, the Executive covenants and agrees with the Company that the Executive will not, directly or indirectly, attempt to employ, divert away an employee, or enter into any contractual arrangement with any employee or former employee, of the Company or its Subsidiaries, unless such employee or former employee has not been employed by the Company or its Subsidiaries for a period in excess of one (1) year.

4. Non-Compete. For a period of two years after the Executive leaves the employment of the Company, the Executive covenants and agrees with the Company that the Executive will not, directly or indirectly, work for or consult with any competing insurance companies that do business in the same states in which the Company does business.

Section V. Miscellaneous

1. Severability. In the event that the provisions of this Agreement should ever be deemed to exceed the time or geographic limitations permitted by applicable law, then the provisions will be reformed to the maximum time or geographic limitations permitted by applicable law. Every provision of this Agreement is intended to be severable, and, if any term or provision is determined to be illegal, invalid or unenforceable for any reason whatsoever, and cannot be reformed, such illegal, invalid or unenforceable provision shall be deemed severed here from and shall not affect the validity, legality or enforceability of the remainder of this Agreement.

2. Books and Records. All books, records, accounts and similar repositories of Confidential Information of the Company and its Subsidiaries, whether prepared by the Executive or otherwise coming into the Executive’s possession, shall be the exclusive property of the Company and shall be returned immediately to the Company and its Subsidiaries on termination of this Agreement or on the Board’s request at any time.

3. Survival. The restrictions and obligations of this Section IV shall survive any expiration, termination, or cancellation of either the Initial Term or Employment Term of this Agreement and shall continue to bind the Executive and the Executive’s respective heirs, executors, successors, administrators, representatives and agents.

4. Consolidation, Merger or Sale of Assets. Nothing in this Agreement shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation which assumes this Agreement, and all obligations of the Company hereunder, in writing. Upon such consolidation, merger, or transfer of assets and assumption, the term “the Company” as used herein, shall mean such other corporation and this Agreement shall continue in full force and effect, subject to the provisions of Paragraph 6 hereof.

5. Binding Effect. Except as herein otherwise provided, this Agreement shall inure to the benefit of and shall be binding upon the parties hereto, their personal representatives, successors, heirs and assigns. The obligations of Company and the Subsidiaries to Executive are joint and several. All provisions of this Agreement are specifically enforceable by the Subsidiaries in addition to Company. Each of the Subsidiaries shall be considered a third party beneficiary under the provisions of this Agreement.

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6. Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and vice versa. Titles of Paragraphs are for convenience only, and neither limit nor amplify the provisions of the Agreement itself.

7. Further Assurances. At any time, and from time to time, each party will take such action as may be reasonably requested by the other party to carry out the intent and purposes of this Agreement.

8. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. It supersedes all prior negotiations, letters and understandings relating to the subject matter hereof.

9. Amendment. This Agreement may not be amended, supplemented or modified in whole or in part except by an instrument in writing signed by the party or parties against whom enforcement of any such amendment, supplement or modification is sought.

10. Assignment. This Agreement may not be assigned by the Executive, and may not be assigned by the Company except as described in above.

11. Choice of Law. This Agreement will be interpreted, construed and enforced in accordance with the laws of the State of Florida, without giving effect to the application of the principles pertaining to conflicts of laws.

12. Effect of Waiver. The failure of any party at any time or times to require performance of any provision of this Agreement will in no manner affect the right to enforce the same. The waiver by any party of any breach of any provision of this Agreement will not be construed to be a waiver by any such party of any succeeding breach of that provision or a waiver by such party of any breach of any other provision.

13. Construction. The parties hereto and their respective legal counsel participated in the preparation of this Agreement; therefore, this Agreement shall be construed neither against nor in favor of any of the parties hereto, but rather in accordance with the fair meaning thereof.

14. Venue. Should it become necessary for any party to institute legal action to enforce the terms and conditions of this Agreement, the successful party will be awarded reasonable attorneys’ fees at all trial and appellate levels, expenses and costs. Any suit, action or proceeding seeking equitable remedies with respect to this Agreement shall be brought in the courts of the State of Florida, County of Pinellas. The parties hereto hereby accept the exclusive jurisdiction of those courts for the purpose of any such suit, action or proceeding.

15. Arbitration. The parties agree that all disputes related to this Agreement, other than disputes seeking equitable remedies, shall be submitted to arbitration in Pinellas County, Florida pursuant to the rules of the American Arbitration Association.

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16. Equitable Remedy. The parties hereto acknowledge and agree that any party’s remedy at law for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and such breach or threatened breach shall be per se deemed as causing irreparable harm to such party. Therefore, in the event of such breach or threatened breach, the parties hereto agree that, in addition to any available remedy at law, including but not limited to monetary damages, an aggrieved party, without posting any bond, shall be entitled to obtain, and the offending party agrees to oppose the aggrieved party’s request for, equitable relief in the form of specific enforcement, temporary restraining order, temporary or permanent injunction, or any other equitable remedy that may then be available to the aggrieved party.

17. Binding Nature. This Agreement will be binding upon and will inure to the benefit of any successor or successors of the parties hereto.

18. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original.

19. Notice. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered when sent by facsimile with receipt confirmed or when deposited in the United States mail, postage prepaid, registered or certified mail, return receipt requested, or by overnight courier, addressed to the parties at the address first stated herein, or to such other address as either party hereto shall from time to time designate.

Agreed to by:

Heritage Property & Casualty Insurance Company

By:
	Richard Widdicombe, President & CEO

By:
	Bruce Lucas, CIO

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EX-10.27

Exhibit 10.27

Heritage Property & Casualty Insurance Company

A FLORIDA CORPORATION

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of January 1, 2014 by and between HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY, INC., Florida corporation, and any of its parent or subsidiary companies (collectively, the “Company”), and Kent Linder (the “Executive”).

RECITALS

1. The Company is a homeowner’s insurance company that operates in the State of Florida.

2. The Executive has the requisite experience to assist with the operation of the Insurance Entity.

3. The Executive, while assisting with the operation of the Company will obtain intimate knowledge of the business plan and modeling for the Company.

4. The Executive will be the Chief Operating Officer of the Company.

5. The Executive, in his duties, will come to possess intimate knowledge of the business and affairs of the Company and its Subsidiaries their policies, methods and personnel.

6. The Board of Directors (the “Board”) of the Company recognizes that the Executive’s contribution, as COO of the Company, to the growth and success of the Company and its Subsidiaries will be substantial and desires to assure the Company of the Executive’s employment in an executive capacity and to compensate him therefore.

7. The Board has determined that this Agreement will reinforce and encourage the Executive’s continued attention and dedication to the Company and its Subsidiaries.

8. The Executive is willing to make his services available to the Company and its Subsidiaries on the terms and conditions hereinafter set forth.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties hereby agree as follows:

Section I. Term

1. Term of Employment. The Company shall continue to employ the Executive and the Executive shall continue to serve the Company and its Subsidiaries, on the terms and conditions set forth herein, until the fifth (5^th) anniversary of the date of this agreement, unless terminated as hereinafter set forth.

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2. Duties of Executive. The Executive shall serve as COO and shall perform the duties of an executive commensurate with such position, shall diligently perform all services as may be reasonably designated by the Board and shall exercise such power and authority as is necessary and customary to the performance of such duties and services. The Executive shall devote his services on a fulltime basis to the business and affairs of the Company and the Subsidiaries.

Section II. Compensation and Benefits

1. Base Salary. During the Employment Term, the Executive shall receive a base salary at the annual rate of $600,000.00 for 2014. If the Company reports a consolidated EBITDA for 2014 of at least $25 million, the base salary shall be increased in 2015 to $700,000 for the remainder of the Employment Term. The base salary shall be payable in substantially equal installments consistent with the Company’s normal payroll schedule, subject to applicable withholding and other taxes.

2. Additional Cash Compensation. During the Employment Term, Executive shall participate in the Company’s annual bonus pool, as determined by the Chairman of the Board, but not in an amount less than 10% of the bonus pool awarded to management, or such additional amount as determined by the Board.

3. Expense Reimbursement. During the Employment Term, the Company, upon the submission of supporting documentation by the Executive, and in accordance with Company policies for its executives, shall reimburse the Executive for all expenses actually paid or incurred by the Executive in the course of and pursuant to the business of the Company and the Subsidiaries, including a reasonable car allowance, full funding of health savings account expenses, and expenses for travel and entertainment, for which the Executive shall have an expense allowance as set by the Board from time to time.

4. Insurance. During the Employment Term, the Company shall obtain comprehensive major medical, hospitalization and disability insurance coverage, either group or individual, for the Executive and his dependents, and may obtain or may continue in force life (“key man”) insurance on the Executive for the benefit of the Company (collectively, the “Policies”), which Policies the Company shall keep in effect at its sole expense throughout the Term. The Policies to be provided by the Company shall be on terms as determined by the Board. Within 30 days following any termination of this Agreement, at the Executive’s option, the Company shall assign to the Executive all insurance policies on the life of the Executive then owned by the Company in consideration of the payment by the Executive of the cash surrender value, if any, and the Executive’s agreement to assume the Company liability to pay the premiums accruing thereon after the date of such termination.

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5. Disability. During the Employment Term, the Company shall maintain long-term disability insurance coverage on Executive in an amount equal to sixty percent (60%) of Executive’s base salary during the Employment Term of this Agreement. In the case of a disability of Executive, all benefits provided for under the above-described coverage shall be paid directly to Executive. Executive represents and warrants that, to the best of his knowledge, he has no disability which would impair his ability to perform the duties called for under this Agreement.

6. Working Facilities. During the Employment Term, the Company shall furnish the Executive with an office, and such other facilities and services suitable to his position and adequate for the performance of his duties hereunder.

7. Vacation. During the Employment Term, Executive shall be entitled to reasonable vacations during each year of the Term, the time and duration thereof to be determined by mutual agreement between Executive and the Company.

Section III. Termination.

1. Termination for Cause. Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated by the Company for Cause. As used in this Agreement “Cause” shall only mean (i) any action or omission of the Executive which constitutes a breach of this Agreement, (ii) fraud, breach of fiduciary duty, gross negligence, embezzlement or misappropriation as against the Company. Upon any determination by the Company’s Board that Cause exists under clause (i) of the preceding sentence, the Company shall cause a special meeting of the Board to be called and held at a time mutually convenient to the Board and Executive. Executive shall have the right to appear before such special meeting of the Board to refute any determination of Cause specified in such notice, and any termination of Executive’s employment by reason of such Cause determination shall not be effective until Executive is afforded such opportunity to appear. Any termination shall be made in writing to Executive, which notice shall set forth in detail all acts or omissions upon which the Company is relying for such termination. Upon any termination for cause, the Company shall have no obligation to pay the Executive any compensation or benefits under this Agreement. If Executive is terminated without cause, the Executive shall be entitled to the remaining, regularly scheduled Base Salary under this Agreement. If this Agreement expires and the Company does not offer the Executive a new employment contract, at a compensation level similar to the final year of this agreement, the Company shall pay the Executive severance equal to the Base Salary received in the final year.

2. Death. In the event of the death of Executive during the Employment Term of this Agreement, the Company shall pay to Executive’s legal representative, 50% of any unpaid Base Salary through the expiration of the contract term and shall have no further liability hereunder other than for reimbursement for reasonable business expenses incurred prior to the date of the Executive’s death.

3. Voluntary. Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated by the Executive for any reason by giving no less than 90 days notice. The Company shall not be responsible for any further compensation of any kind to the Executive beyond 90 days from the date the Executive provides notice of his intent to terminate his employment.

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4. Stock Repurchase. If the Executive leaves the Company for any reason, the Company shall, at the Executive’s option, repurchase all or part of the shares in the Company owned/controlled by the Executive at book value as determined by an independent third party appraiser. The Company shall pay 50% in a lump sum payment and the rest in 12 monthly installments.

5. Change of Control. For the purposes of this Agreement, a “Change of Control” shall be deemed to have taken place if: (i) any person, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, becomes the owner or beneficial owner of Company securities, after the Commencement Date, having greater than 50% of the combined voting power of the then outstanding shares of the Company that may be cast for the election of Managers of the Company (other than as a result of an issuance of securities initiated by the Company, or open market purchases approved by the Board, as long as the majority of the Board approving the purchases is the majority at the time the purchases are made), or (ii) the persons who were Directors of the Company before such transactions shall cease to constitute a majority of the Board, or any successor to the Company, as the direct or indirect result of or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions.

6. Change of Control Payments. During the remaining Employment Term hereof after the Change of Control Date, the Company (or the Subsidiaries) will (i) continue to pay Executive a salary at not less than the level applicable to Executive on the Change of Control Date, (ii) pay Executive bonuses in amounts not less in amount than those paid during the 12 month period preceding the Change of Control Date, and (iii) continue employee benefit programs as to Executive at levels in effect on the Change of Control Date (but subject to such reductions as may be required to maintain such plans in compliance with applicable federal law regulating employee benefit programs). In the event of a proposed Change in Control, the Company will allow Executive to participate in all meetings and negotiations related thereto.

Section IV. Restrictive Covenants

1. Confidentiality/Non-Disclosure. “Confidential Information” shall mean any intellectual property, information, or trade secrets (whether or not specifically labeled or identified as “confidential” or “private”), in any form or medium, that is disclosed to, or developed or learned by, the Executive, and that relates to the business plan, underwriting, products, services, research, or development of or by the Company or its Subsidiaries, suppliers, distributors, customers, investors, partners, and/or other business associates, and that has not become publicly known. Confidential Information includes, but is not limited to, the following:

a. Internal business information (including but not limited to information relating to strategy, staffing, financial data, training, marketing, promotional and sales plans and practices, costs, bidding activities and strategies, rate and pricing structures, and accounting and business methods);

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b. Identities of, negotiations with, individual requirements of, specific contractual arrangements with, and information about, the Company’s or its Subsidiaries’ suppliers, distributors, customers, investors, partners and/or other business associates, their contact information, and their confidential information;

c. Compilations of data and analyses, underwriting process and parameters, material processes, technical data, specific program information, trade or industrial practices, computer programs, formulae, systems, research, records, reports, manuals, documentation, customer and supplier lists, data and databases relating thereto, and technology and methodology regarding specific projects; and

d. Intellectual Property not generally available to the public, or published by the Company or its Subsidiaries. “Intellectual Property,” or “IP,” shall mean (1) inventions or devices, whether patentable or not; (2) original works of authorship produced by or on behalf of the Company or its Subsidiaries; (3) trade secrets; (4) know-how; (5) customer lists and confidential information; and (6) any other intangible property protectable under federal, state or foreign law. Other examples of Intellectual Property include, but are not limited to, patent applications, patents, copyrighted works, technical data, computer software, knowledge of suppliers or business partnerships, documentation, processes, and methods and results of research.

2. Acknowledgements.

a. The Executive acknowledges and agrees with the representations of the Company that Confidential Information and IP is proprietary and valuable to the Company, and that any disclosure or unauthorized use thereof may cause irreparable harm and loss to the Company. It is further acknowledged by the Executive that if the general public or competitors (now existing or to be created in the future) learn of these ongoing discussions and negotiations with potential investors and of the formation of the Company, the Insurance Entity and other Subsidiaries as a result of the Executive’s failure to comply hereunder, irreparable harm and substantial financial loss may occur to the Company’s, the Insurance Entity or other Subsidiary’s viability and future revenues. The Executive acknowledges and agrees that the knowledge and experience the Executive shall acquire by virtue of assisting with the formation of the Insurance Entity and application to the FOIR for approval of the Insurance Entity to write homeowner’s insurance coverage in the State of Florida during the Employment Term and by virtue of employment by the Company during the Employment Term is of a special, unique and extraordinary character and that such position allows the Executive access to Confidential Information and Intellectual Property.

b. The Executive acknowledges and agrees that (a) the nature and periods of restrictions imposed by the covenants contained in this Agreement are fair, reasonable and necessary to protect and preserve for the Company and its Subsidiaries their viability and future revenues; (b) the Company or its Subsidiaries would sustain great and irreparable loss and damage if the Executive were to breach any of such covenants set forth herein; (c) the Company and its Subsidiaries intend to conduct business actively in the entire territory that is the subject of this Agreement (as defined below) and beyond; and (d) the covenants herein set forth are

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made as an inducement to and have been relied upon by the Company in entering into this Agreement. The Executive acknowledges and agrees this Agreement is binding on the Executive’s heirs, executors, successors, administrators, representatives and agents.

c. The Executive agrees to receive and to treat Confidential Information and the knowledge of IP on a confidential and restricted basis and to undertake the following additional obligation with respect thereto:

i. To use the Confidential Information for the singular purpose of benefiting the Company and its Subsidiaries, and specifically not use the Company’s and its Subsidiaries’ customer or prospective customer data to conduct marketing, or otherwise undertake personal contacts, to solicit, divert or appropriate customers or prospective customers of the Company or its Subsidiaries, whether for the benefit of the Executive or any Person;

ii. Not to disclose Confidential Information, except to the extent the Executive is required to disclose or use such Confidential Information in the performance of the Executive’s assigned duties for the Company or its Subsidiaries, to any Person without the prior express written consent of the Member-Managers of the Company, or their successors, including Manager(s), as an action permitted under the operating agreement of the Company;

iii. To tender all Confidential Information to the Company, and destroy any of the Executive’s additional notes or records made from such Confidential Information, immediately upon request by the Company or upon termination of this Agreement either during the Initial Term or Employment Term;

iv. To promptly disclose and assign any right, title and interest to the Company all IP authored, made, conceived or actually reduced to practice, alone or jointly with others, (a) while performing duties for the Company or its Subsidiaries, or (b) during the Initial Term or Employment Term of this Agreement, or ( c) which results or is suggested by any work done for or at the request of the Company or its Subsidiaries, or (d) which was aided by the use of trade secret information, whether or not during working hours and regardless of location;

v. To use best efforts to safeguard the Confidential Information and protect it against disclosure, misuse, espionage, loss, misappropriation and theft;

vi. Immediately notify the Members and Manager(s) of the Company of any breach of this Agreement; and

vii. Assist the Company or its Subsidiaries, both during and after the termination of this Agreement, in obtaining and enforcing any legal rights in IP of the Company or its Subsidiaries, or assigned or to be assigned by the Executive to the Company or its Subsidiaries.

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3. Non-Solicitation. For a period of two years after the Executive leaves the employment of the Company, the Executive covenants and agrees with the Company that the Executive will not, directly or indirectly, attempt to employ, divert away an employee, or enter into any contractual arrangement with any employee or former employee, of the Company or its Subsidiaries, unless such employee or former employee has not been employed by the Company or its Subsidiaries for a period in excess of one (1) year.

4. Non-Compete. For a period of two years after the Executive leaves the employment of the Company, the Executive covenants and agrees with the Company that the Executive will not, directly or indirectly, work for or consult with any competing insurance companies that do business in the same states in which the Company does business.

Section V. Miscellaneous

1. Severability. In the event that the provisions of this Agreement should ever be deemed to exceed the time or geographic limitations permitted by applicable law, then the provisions will be reformed to the maximum time or geographic limitations permitted by applicable law. Every provision of this Agreement is intended to be severable, and, if any term or provision is determined to be illegal, invalid or unenforceable for any reason whatsoever, and cannot be reformed, such illegal, invalid or unenforceable provision shall be deemed severed here from and shall not affect the validity, legality or enforceability of the remainder of this Agreement.

2. Books and Records. All books, records, accounts and similar repositories of Confidential Information of the Company and its Subsidiaries, whether prepared by the Executive or otherwise coming into the Executive’s possession, shall be the exclusive property of the Company and shall be returned immediately to the Company and its Subsidiaries on termination of this Agreement or on the Board’s request at any time.

3. Survival. The restrictions and obligations of this Section IV shall survive any expiration, termination, or cancellation of either the Initial Term or Employment Term of this Agreement and shall continue to bind the Executive and the Executive’s respective heirs, executors, successors, administrators, representatives and agents.

4. Consolidation, Merger or Sale of Assets. Nothing in this Agreement shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation which assumes this Agreement, and all obligations of the Company hereunder, in writing. Upon such consolidation, merger, or transfer of assets and assumption, the term “the Company” as used herein, shall mean such other corporation and this Agreement shall continue in full force and effect, subject to the provisions of Paragraph 6 hereof.

5. Binding Effect. Except as herein otherwise provided, this Agreement shall inure to the benefit of and shall be binding upon the parties hereto, their personal representatives, successors, heirs and assigns. The obligations of Company and the Subsidiaries to Executive are joint and several. All provisions of this Agreement are specifically enforceable by the Subsidiaries in addition to Company. Each of the Subsidiaries shall be considered a third party beneficiary under the provisions of this Agreement.

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6. Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and vice versa. Titles of Paragraphs are for convenience only, and neither limit nor amplify the provisions of the Agreement itself.

7. Further Assurances. At any time, and from time to time, each party will take such action as may be reasonably requested by the other party to carry out the intent and purposes of this Agreement.

8. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. It supersedes all prior negotiations, letters and understandings relating to the subject matter hereof.

9. Amendment. This Agreement may not be amended, supplemented or modified in whole or in part except by an instrument in writing signed by the party or parties against whom enforcement of any such amendment, supplement or modification is sought.

10. Assignment. This Agreement may not be assigned by the Executive, and may not be assigned by the Company except as described in above.

11. Choice of Law. This Agreement will be interpreted, construed and enforced in accordance with the laws of the State of Florida, without giving effect to the application of the principles pertaining to conflicts of laws.

12. Effect of Waiver. The failure of any party at any time or times to require performance of any provision of this Agreement will in no manner affect the right to enforce the same. The waiver by any party of any breach of any provision of this Agreement will not be construed to be a waiver by any such party of any succeeding breach of that provision or a waiver by such party of any breach of any other provision.

13. Construction. The parties hereto and their respective legal counsel participated in the preparation of this Agreement; therefore, this Agreement shall be construed neither against nor in favor of any of the parties hereto, but rather in accordance with the fair meaning thereof.

14. Venue. Should it become necessary for any party to institute legal action to enforce the terms and conditions of this Agreement, the successful party will be awarded reasonable attorneys’ fees at all trial and appellate levels, expenses and costs. Any suit, action or proceeding seeking equitable remedies with respect to this Agreement shall be brought in the courts of the State of Florida, County of Pinellas. The parties hereto hereby accept the exclusive jurisdiction of those courts for the purpose of any such suit, action or proceeding.

15. Arbitration. The parties agree that all disputes related to this Agreement, other than disputes seeking equitable remedies, shall be submitted to arbitration in Pinellas County, Florida pursuant to the rules of the American Arbitration Association.

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16. Equitable Remedy. The parties hereto acknowledge and agree that any party’s remedy at law for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and such breach or threatened breach shall be per se deemed as causing irreparable harm to such party. Therefore, in the event of such breach or threatened breach, the parties hereto agree that, in addition to any available remedy at law, including but not limited to monetary damages, an aggrieved party, without posting any bond, shall be entitled to obtain, and the offending party agrees to oppose the aggrieved party’s request for, equitable relief in the form of specific enforcement, temporary restraining order, temporary or permanent injunction, or any other equitable remedy that may then be available to the aggrieved party.

17. Binding Nature. This Agreement will be binding upon and will inure to the benefit of any successor or successors of the parties hereto.

18. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original.

19. Notice. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered when sent by facsimile with receipt confirmed or when deposited in the United States mail, postage prepaid, registered or certified mail, return receipt requested, or by overnight courier, addressed to the parties at the address first stated herein, or to such other address as either party hereto shall from time to time designate.

Agreed to by:
Heritage Property & Casualty Insurance Company
By:	/s/ Richard Widdicombe
	Richard Widdicombe, President & CEO
By:	/s/ Kent Linder
	Kent Linder, Chief Operating Officer

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EX-10.29

Exhibit 10.29

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“Agreement”) is made effective as of this      day of             , 2014 by and between Heritage Insurance Holdings, Inc., a Delaware corporation (the “Company”), and the undersigned officer, director or employee of the Company (“Indemnitee”).

WHEREAS, the Company and Indemnitee recognize the increasing difficulty in obtaining directors’ and officers’ liability insurance, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance;

WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting officers, directors and employees to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited;

WHEREAS, the Company desires to attract and retain the services of highly qualified individuals such as Indemnitee to serve as officers, directors or employees of the Company;

WHEREAS, it is reasonable, prudent and in the best interests of the Company and its stockholders for the Company contractually to obligate itself to indemnify persons serving as officers, directors or employees of the Company to the fullest extent permitted by applicable law in order that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and

WHEREAS, this Agreement is being entered into as part of the Indemnitee’s total compensation for serving as an officer, director or employee of the Company, as applicable.

NOW THEREFORE, in consideration for Indemnitee’s services as an officer, director or employee of the Company and the covenants contained herein, the Company and Indemnitee hereby agree as follows:

1. Indemnification.

(a) Third Party Proceedings. The Company shall indemnify Indemnitee if Indemnitee is or was a party or is threatened to be made a party or otherwise involved (including involvement as a witness) to any threatened, pending or completed action, suit, proceeding or any alternative dispute resolution mechanism, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, by reason of any action or inaction on the part of Indemnitee while a director, officer, employee or agent of the Company or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against all expenses (including attorneys’ fees), judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred or suffered by Indemnitee in connection with such action, suit or proceeding if Indemnitee acted

in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, either (i) had reasonable cause to believe Indemnitee’s conduct was lawful or (ii) had no reasonable cause to believe Indemnitee’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or proceeding, either did not have reasonable cause to believe that Indemnitee’s conduct was lawful or had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(b) Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party or otherwise involved (including involvement as a witness) to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, by reason of any action or inaction on the part of Indemnitee while a director, officer, employee or agent of the Company or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against all expenses (including attorneys’ fees) and, to the fullest extent permitted by law, amounts paid in settlement actually and reasonably incurred or suffered by Indemnitee in connection with the defense or settlement of such action or suit if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper.

(c) Actions where Indemnitee is Deceased. If Indemnitee was or is a party, or is threatened to be made a party, to any proceeding by reason of the fact that he or she is or was a director, officer or employee of the Company or by reason of anything done or not done by Indemnitee in any such capacity, and prior to, during the pendency of, or after completion of, such proceeding, Indemnitee shall die, then the Company shall indemnify, defend and hold harmless the estate, heirs and legatees of Indemnitee against any and all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by such estate, heirs or legatees in connection with the investigation, defense, settlement or appeal of such proceeding on the same basis as provided for Indemnitee in subsections (a) and (b) of this Section 1.

(d) Mandatory Payment of Expenses. To the extent that Indemnitee has served as a witness on behalf of the Company or has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this Section 1, or in defense of any claim, issue or matter therein, Indemnitee shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by Indemnitee in connection therewith.

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2. Agreement to Serve. In consideration of the protection afforded by this Agreement, if Indemnitee is a director of the Company, he or she agrees to serve at least for the six months after the effective date of this Agreement as a director and not to resign voluntarily during such period without the written consent of a majority of the Board of Directors of the Company. If Indemnitee is an officer of the Company not serving under an employment contract, he or she agrees to serve in such capacity at least for the balance of the current fiscal year of the Company and not to resign voluntarily during such period without the written consent of a majority of the Board of Directors of the Company. Following the applicable period set forth above, Indemnitee agrees to continue to serve in such capacity at the will of the Company (or under separate agreement, if such agreement exists) so long as he or she is duly appointed or elected and qualified in accordance with the applicable provisions of the Bylaws of the Company or until such time as he or she tenders his or her resignation in writing. Nothing contained in this Agreement is intended to create in Indemnitee any right to continued employment.

3. Expenses; Indemnification Procedure.

(a) Advancement of Expenses. The Company shall advance all expenses incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or criminal action, suit or proceeding referenced in Section 1(a) or (b) (but not amounts actually paid in settlement of any such action, suit or proceeding). Indemnitee hereby undertakes to repay such amounts advanced (without interest) only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company as authorized hereby. The advances to be made hereunder shall be paid by the Company to Indemnitee within twenty (20) days following delivery of a written request therefor by Indemnitee to the Company. Such request shall reasonably evidence the expenses and costs incurred by the Indemnitee in connection therewith. The Company’s obligation to provide an advancement of expenses is subject to the following conditions: (a) if the proceeding arose in connection with Indemnitee’s service as a director or officer, as applicable, then the Indemnitee or his or her representative shall have executed and delivered to the Company an undertaking, which need not be secured and shall be accepted without reference to Indemnitee’s financial ability to make repayment, by or on behalf of Indemnitee to repay all advances if and to the extent that it shall ultimately be determined by a final, unappealable decision rendered by a court having jurisdiction over the parties and the question that Indemnitee is not entitled to be indemnified for such advances under this Agreement or otherwise; (b) Indemnitee shall give the Company such information and cooperation as it may reasonably request and as shall be within Indemnitee’s power; and (c) Indemnitee shall furnish, upon request by the Company and if required under applicable law, a written affirmation of Indemnitee’s good faith belief that any applicable standards of conduct have been met by Indemnitee. Indemnitee’s entitlement to such advances shall include those incurred in connection with any proceeding by Indemnitee seeking an adjudication pursuant to this Agreement.

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(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to his or her right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Financial Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). Notice shall be deemed received three (3) business days after the date postmarked if sent by domestic certified or registered mail, properly addressed; or five (5) business days if sent by airmail from a country outside of North America; otherwise, notice shall be deemed received when such notice shall actually be received by the Company. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

(c) Procedure. Any indemnification and advances provided for in Section 1 and this Section 3 shall be made no later than forty-five (45) days (or, in the case of an advance of expenses, twenty (20) days) after receipt of the written request of Indemnitee. If the Company fails to respond within sixty (60) days of a written request for indemnification, the Company shall be deemed to have approved the request. If a claim under this Agreement, under any statute or under any provision of the Company’s Certificate of Incorporation or Bylaws providing for indemnification is not paid in full by the Company within forty-five (45) days (or, in the case of an advance of expenses, twenty (20) days) after a written request for payment thereof has first been received by the Company, Indemnitee may, but need not, at any time thereafter, bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 14 of this Agreement, Indemnitee shall also be entitled to be paid for the expenses (including attorneys’ fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action, suit or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed. However, Indemnitee shall be entitled to receive interim payments of expenses pursuant to Section 3(a) unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties’ intention that if the Company contests Indemnitee’s right to indemnification the question of Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of its Board of Directors, independent legal counsel or its stockholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of its Board of Directors, independent legal counsel or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct.

(d) Notice to Insurers. If, at the time of the receipt of a notice of a claim pursuant to Section 3(b), the Company has directors and officers liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

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(e) Selection of Counsel. In the event the Company shall be obligated under Section 3(a) to advance the expenses of any proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee of written notice of its election and approval of counsel by Indemnitee, which approval shall not be unreasonably withheld. After the delivery of such notice, approval of such counsel by Indemnitee and retention of such counsel by the Company, the Company shall not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, except as provided below. The Indemnitee shall have the right to employ his or her own counsel in any such proceeding at Indemnitee’s expense unless: (i) the employment of counsel by Indemnitee has been previously authorized by the Company, (ii) Indemnitee shall have reasonably concluded that there may be a material conflict of interest between the Company and Indemnitee in the conduct of any such defense or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, in each of which cases the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.

4. Additional Indemnification Rights; Nonexclusivity.

(a) Scope. Notwithstanding any other provision of this Agreement, the Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, by the Company’s Certificate of Incorporation or Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer or employee of the Company, such changes shall be, ipso facto, within the purview of Indemnitee’s rights and the Company’s obligations under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer or employee of the Company, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder.

(b) Nonexclusivity. The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s Certificate of Incorporation or Bylaws, any agreement, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware (the “DGCL”) or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while holding such office. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though he or she may have ceased to serve in such capacity at the time of any action, suit or other covered proceeding.

5. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties actually or reasonably incurred by him or her in the investigation, defense, appeal or settlement of any civil or criminal action, suit or proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such actual and reasonable expenses, judgments, fines or penalties to which Indemnitee is entitled.

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6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge that in certain instances Federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers and employees under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

7. Directors and Officers Liability Insurance.

(a) The Company shall obtain and maintain a policy or policies of insurance (“D&O Liability Insurance”) with reputable insurance companies providing liability insurance for directors and officers of the Company in their capacities as such (and for any capacity in which any director or officer of the Company serves any other person or entity at the request of the Company), in respect of acts or omissions occurring while serving in such capacity, on terms with respect to coverage and amount (including with respect to the payment of expenses) no less favorable than those of such policy in effect on the date hereof except for any changes approved by the Board of Directors of the Company.

(b) Indemnitee shall be covered by the Company’s D&O Liability Insurance policies as in effect from time to time in accordance with the applicable terms to the maximum extent of the coverage available for any other director or officer under such policies. The Company shall, promptly after receiving notice of a proceeding as to which Indemnitee is a party or a participant (as a witness or otherwise), give notice of such proceeding to the insurers under the Company’s D&O Liability Insurance policies in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable actions to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies. The failure or refusal of any such insurer to pay any such amount shall not affect or impair the obligations of the Company under this Agreement.

(c) Upon request by Indemnitee, the Company shall provide to Indemnitee copies of the D&O Liability Insurance policies as in effect from time to time. The Company shall promptly notify Indemnitee of any material changes in such insurance coverage.

8. Presumptions and Burdens of Proof; Effect of Certain Proceedings.

(a) In making any determination as to Indemnitee’s entitlement to indemnification hereunder, Indemnitee shall be entitled to a presumption that he or she is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 3(c), and the Company shall have the burdens of coming forward with evidence and of persuasion to overcome that presumption.

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(b) The termination of any proceeding or of any claim, issue or matter therein by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption (i) that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company, (ii) that with respect to any criminal proceeding, Indemnitee either did not have reasonable cause to believe that Indemnitee’s conduct was lawful or had reasonable cause to believe that his or her conduct was unlawful or (iii) that Indemnitee did not otherwise satisfy the applicable standard of conduct to be indemnified pursuant to this Agreement.

(c) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Company or other person or entity, as applicable, including financial statements, or on information supplied to Indemnitee by the officers of such person or entity in the course of their duties, or on the advice of legal counsel for such entity or on information or records given or reports made to such entity by an independent certified public accountant, appraiser or other expert selected with reasonable care by such entity. The provisions of this Section 8(c) shall not be deemed to be exclusive or to limit in any way other circumstances in which Indemnitee may be deemed or found to have met the applicable standard of conduct to be indemnified pursuant to this Agreement.

(d) The knowledge or actions or failure to act of any other director, officer, employee or agent of the Company or other person or entity, as applicable, shall not be imputed to Indemnitee for purposes of determining Indemnitee’s right to indemnification under this Agreement.

9. Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 9. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the fullest extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

10. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

(a) Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145 of the DGCL, but such indemnification or advancement of expenses may be provided by the Company in specific cases if its Board of Directors has approved the initiation or bringing of such suit; or

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(b) Lack of Good Faith. To indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous; or

(c) Insured Claims. To indemnify Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) which have been paid directly to Indemnitee by an insurance carrier under a policy of directors and officers liability insurance maintained by the Company;

(d) Claims under Section 16(b). To indemnify Indemnitee for the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, or any similar successor statute; or

(e) Claims under the Sarbanes-Oxley Act. To indemnify Indemnitee for any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act “), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act).

11. Construction of Certain Terms and Phrases.

(a) For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger with the Company, which constituent corporation, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that if Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

(b) For purposes of this Agreement, references to “other enterprises” shall include employee benefit plans; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan or its participants or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

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12. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

13. Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and Indemnitee’s estate, heirs, legal representatives and assigns. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

14. Attorneys’ Fees. In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee’s material defenses to such action was made not in good faith or was frivolous.

15. Non-Disclosure of Payments. Except as expressly required by law, neither the Indemnitee nor the Company shall disclose any payments under this Agreement unless prior approval of the other party is obtained.

16. Notice. Except as provided in Section 3(b), all notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee, on the date of such receipt, or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice.

17. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the state courts of the State of Delaware.

18. Choice of Law. This Agreement shall be governed by and its provisions construed in accordance with the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware without regard to the conflict of law principles thereof.

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19. Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee’s estate, spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern.

20. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

21. Primary Responsibility. The Company acknowledges that Indemnitee has or may from time to time obtain certain rights to indemnification and advancement of expenses provided by one or more third parties (collectively, the “Secondary Indemnitors”). The Company agrees that, as between the Company and the Secondary Indemnitors, the Company is primarily responsible for amounts required to be indemnified or advanced under the Company’s certificate of incorporation or bylaws or this Agreement and any obligation of the Secondary Indemnitors to provide indemnification or advancement for the same amounts is secondary to those Company obligations. To the extent not in contravention of any insurance policy or policies providing liability or other insurance for the Company or any director, trustee, general partner, managing member, officer, employee, agent or fiduciary of the Company or any other enterprise, the Company waives any right of contribution or subrogation against the Secondary Indemnitors with respect to the liabilities for which the Company is primarily responsible under this Section 21. In the event of any payment by the Secondary Indemnitors of amounts otherwise required to be indemnified or advanced by the Company under the Company’s certificate of incorporation or bylaws or this Agreement, the Secondary Indemnitors shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee for indemnification or advancement of expenses under the Company’s certificate of incorporation or bylaws or this Agreement or, to the extent such subrogation is unavailable and contribution is found to be the applicable remedy, shall have a right of contribution with respect to the amounts paid. The Secondary Indemnitors are express third-party beneficiaries of the terms of this Section 21.

22. Retroactivity. This Agreement shall be deemed to have been in effect during all periods that Indemnitee was a director, officer or employee of the Company, regardless of the date of this Agreement.

23. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in a writing signed by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.

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24. Integration and Entire Agreement. Subject to the provisions of Section 4, this Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

HERITAGE INSURANCE HOLDINGS,

INC.

a Delaware corporation

By:

Name:

Title:

Address for notice:

2600 McCormick Drive, Suite 300

Clearwater, Florida 33759

AGREED TO AND ACCEPTED:

INDEMNITEE:

By:

Name:

Title:

Address for notice:

EX-10.30

Exhibit 10.30

EXECUTION VERSION

PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE AGREEMENT

issued to

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY

TABLE OF CONTENTS

		Page
ARTICLE 1	DEFINITIONS		1
ARTICLE 2	BUSINESS COVERED		13
ARTICLE 3	TERM		14
ARTICLE 4	TERRITORY		15
ARTICLE 5	ESTIMATED PAYABLE LOSS AND PAYMENT OF LOSSES		15
ARTICLE 6	REINSURANCE PREMIUM		18
ARTICLE 7	EARLY TERMINATION		21
ARTICLE 8	EXTENSION		23
ARTICLE 9	INTEREST		24
ARTICLE 10	REINSURANCE TRUST ACCOUNT		26
ARTICLE 11	RESET AGENT		28
ARTICLE 12	FEDERAL TERRORISM EXCESS RECOVERY		31
ARTICLE 13	NET RETAINED LIABILITY		31
ARTICLE 14	ORIGINAL CONDITIONS		31
ARTICLE 15	NO THIRD PARTY RIGHTS		31
ARTICLE 16	OFFSET		31
ARTICLE 17	LIMITED RECOURSE		32
ARTICLE 18	NO PETITION		32
ARTICLE 19	LOSS SETTLEMENTS		32
ARTICLE 20	SALVAGE AND SUBROGATION		33
ARTICLE 21	REPORTS AND NOTICES		33
ARTICLE 22	AGENT		33
ARTICLE 23	CURRENCY		33
ARTICLE 24	ACCESS TO RECORDS		33

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TABLE OF CONTENTS

(continued)

		Page
ARTICLE 25	CONFIDENTIALITY		34
ARTICLE 26	EXCLUSIONS		35
ARTICLE 27	NOTICES		36
ARTICLE 28	ADDITIONAL CEDENTS		37
ARTICLE 29	ERRORS AND OMISSIONS		37
ARTICLE 30	INSOLVENCY		38
ARTICLE 31	ARBITRATION		39
ARTICLE 32	SERVICE OF SUIT		40
ARTICLE 33	GOVERNING LAW AND JURISDICTION		41
ARTICLE 34	ENTIRE AGREEMENT		41
ARTICLE 35	NON-WAIVER		41
ARTICLE 36	MODE OF EXECUTION		42

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TABLE OF CONTENTS

(continued)

EXHIBITS

Exhibit A	Form of Reset Agent Agreement
Exhibit B	Form of Proof of Loss Claim
Exhibit C	Form of Reduced Interest Spread Statement
Exhibit D	Form of Informational Loss Estimate Notice
Exhibit E	Form of Issuance Premium Payment Certificate
Exhibit F	Form of Supplemental Premium Payment Certificate
Exhibit G	Form of Early Termination Notice
Exhibit H	Form of Notice of Non-Payment
Exhibit I	Form of Extension Notice
Exhibit J	Form of Reduced Extension Spread Statement
Exhibit K	Form of Certificate of Additional Cedent
Exhibit L	Form of Extension Termination Notice
Exhibit M	Form of Substitute Reset Statement

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PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE AGREEMENT

(this “Agreement”)

by and among

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY, together with any other affiliate who becomes a party hereto in accordance with the terms hereof

(the “Ceding Insurer”)

and

CITRUS RE LTD.

(the “Reinsurer”)

W I T N E S S E T H

The Reinsurer hereby reinsures the Ceding Insurer to the extent and on the terms and conditions and subject to the exceptions, exclusions and limitations hereinafter set forth in this Agreement.

ARTICLE 1

Definitions

“30-Day Amount” means, on the date of any Proof of Loss Claim, the amount of Loss Reserves that are estimated and scheduled by the Ceding Insurer to become Paid Losses within 30 calendar days following such date; provided, that the 30-Day Amount may not exceed the lower of (i) 100% of the Ceding Insurer’s Loss Reserves as of such date and (ii) 100% of the Ceding Insurer’s Paid Losses for the immediately preceding 30-day period.

“30-Day Reimbursement Amount” means, as of each Payment Date, if the Loss Payment as of a Payment Date is less than $0, the absolute value of such result.

“Accrual Period” means, with respect to a Payment Date, the period from and including the immediately preceding Payment Date (or the Effective Date, in the case of the First Payment Date) to, but not including, such Payment Date.

“Accrual Period True-Up Interest Amount” has the meaning set forth in Article 9.A.

“Actual Growth Factor” means, for any Loss Event, the ratio of (i) the Average Annual Loss as of the later of the May 31 and the August 31 immediately preceding the Named Storm End Date to (ii) the Average Annual Loss of the Projected Exposure Data as of the most recent Calculation Date.

“Actual Payable Loss” means for each Loss Event, the Estimated Payable Loss for such Loss Event as set forth in the True-Up Interest Statement, which as been subject to the Claims Procedures and assessment of the estimated Loss Reserves by the Loss Reserve Specialist.

“Actual Reduced Principal Amount” has the meaning set forth in Article 9.A.

“Annual Risk Period” means the following consecutive risk periods within the Risk Period: the first period will begin at 12:00:00 a.m., Eastern Time, on June 1, 2014 and end at 11:59:59 p.m., Eastern Time, on May 31, 2015; each of the subsequent consecutive periods will begin at 12:00:00 a.m., Eastern Time, on June 1 and end at 11:59:59 p.m., Eastern Time, on May 31 and the last such consecutive period will end at 11:59:59 p.m., Eastern Time, on April 17, 2017. Loss Events that being during an Annual Risk Period will be deemed to have occurred in such Annual Risk Period in their entirety even if the Annual Risk Period expires while the Loss Event is in progress.

“Attachment Point” means the Initial Attachment Point and, following any Reset, the applicable Updated Attachment Point.

“Available Information” has the meaning ascribed to it in the Series Supplement.

“Average Annual Loss” means the annual modeled expected Loss to the Layer of the Subject Business as calculated by the Reset Agent suing the Escrow Model with 100% Insurance Percentage and application of the Attachment Point and the Exhaustion Point.

“Basic Documents” has the meaning ascribed to it in the Series Supplement.

“Business Day” means a day other than (i) a Saturday, (ii) a Sunday or (iii) a day on which banking institutions or trust companies in any of Bermuda, the City of London or the City of New York are authorized or required by applicable law, regulation or executive order to remain closed.

“Calculation Date” has the meaning set forth in Article 11.C.

“Ceding Insurer” has the meaning set forth in the preamble.

“Ceding Insurer Additional Withdrawal” has the meaning set forth in Article 10.G.

“Ceding Insurer Additional Withdrawal Amount” has the meaning set forth in Article 10.G.

“Ceding Insurer Additional Withdrawal Interest” has the meaning set forth in Article 10.G.

“Ceding Insurer Additional Withdrawal Return Amount” has the meaning set forth in Article 10.G.

“Certificate of Additional Cedent” has the meaning set forth in Article 28.

“Change in Law or Tax Event” has the meaning set forth in Article 7.D.

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“Claims Procedures” means the arithmetical agreed upon procedures to be performed in accordance with the Agreed Upon Procedures Standards of the American Institute of Certified Public Accountants, pursuant to the Claims Reviewer Agreement on each Proof of Loss Claim, Reduced Extension Spread Statement and True-Up Interest Statement.

“Claims Reviewer” means KPMG Audit Limited or its successor, or any replacement claims reviewer appointed pursuant to the Claims Reviewer Agreement.

“Claims Reviewer Agreement” means the claims reviewer agreement between the Reinsurer and the Claims Reviewer dated as of the date hereof (as it may be duly amended, supplemented or otherwise modified from time to time).

“Clean Up Termination Event” has the meaning set forth in Article 7.B.

“Commutation” has the meaning set forth in Article 3.D.

“Commutation Date” has the meaning set forth in Article 3.D.

“Confidential Information “ has the meaning set forth in Article 25.A.

“Coverage Limit” has the meaning set forth in Article 2.C.

“Covered Area” means the Initial Covered Area and, following a Reset, the applicable Updated Covered Area.

“Data Review Procedures” has the meaning set forth in Article 11.F.

“Early Termination” has the meaning set forth in Article 7.A.

“Early Termination Date” has the meaning set forth in Article 7.A.

“Early Termination Event” means any of a Clean Up Termination Event, a Service Provider Failure Event, a Reinsurance Agreement Default Event, a Change in Law or Tax Event, or a Supplemental Premium Termination Event, as applicable.

“Early Termination Notice” has the meaning set forth in Article 7.A.

“Effective Date” means April 17, 2014.

“Escrow Agent” means Innovasafe, Inc. or its successor.

“Escrow Loss Probability Model” has the meaning set forth in Article 11.H.

“Estimated Payable Loss” has the meaning set forth in Article 5.A.

“Estimated Reduced Interest Principal Amount” means, for each Accrual Period, an amount equal to the lesser of (i) the sum of each of the most recent Net Estimated Payable Losses for each Loss Event for which a Reduced Interest Spread Statement was delivered and (ii) the Outstanding Principal Amount as of the first day of such Accrual Period after giving effect to any Principal Reduction applied to the Series 2014-1 Notes on such date.

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“Event Loss Payment” means, with respect to each Loss Event, (a) the Net Payable Loss as of such Payment Date minus (b) the Net Payable Loss as of the immediately preceding Payment Date.

“Event Notice” means a written notice from the Ceding Insurer to the Reinsurer, the Indenture Trustee, the Claims Reviewer and the Loss Reserve Specialist of the occurrence of a Loss Event, which may contain a Proof of Loss Claim.

“Exclusion” has the meaning set forth in Article 26.

“Exhaustion Point” means the Initial Exhaustion Point and, following any Reset, the applicable Updated Exhaustion Point.

“Exposure Data” has the meaning set forth in Article 11.C.

“Extended Termination Date” means the date (or, as the context requires, any interim date) to which this Agreement is extended upon receipt by the Reinsurer from the Ceding Insurer of an Extension Notice, as such date may be re-extended from time to time as set forth herein, but in no event shall such date be later than the Final Extended Termination Date.

“Extension Determination Date” means the date which is three (3) Business Days prior to the Scheduled Termination Date or any Extended Termination Date, as the case may be.

“Extension Event” means either an Extension Event I or an Extension Event II.

“Extension Event I” has the meaning set forth in Article 8.D.

“Extension Event II” has the meaning set forth in Article 8.D.

“Extension Notice” has the meaning set forth in Article 8.B.

“Extension Period” has the meaning set forth in Article 8.A.

“Extension Spread” means a per annum rate equal to (i) 3.00% for an Extension Event I and (ii) 0.50% for an Extension Event II.

“Extension Termination Notice” means a notice delivered by the Ceding Insurer to the Reinsurer, substantially in the form of Exhibit L hereto, on or prior to any Extension Determination Date to terminate the extension of the term of this Agreement on the immediately following Extended Termination Date; provided that if the Ceding Insurer has at any time delivered a Reduced Interest Spread Statement and paid an Interest Spread Amount calculated in whole or in part at the Reduced Interest Spread, such extension will terminate on the immediately following Extended Termination Date only if the Ceding Insurer has delivered a True-Up Interest Statement to the Reinsurer at least 32 Business Days prior to such Extended Termination Date.

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“FHCF Reinsurance” means the Ceding Insurer’s mandatory participation in the Florida Hurricane Catastrophe Fund.

“Final Extended Termination Date” means April 17, 2019 (or if such day is not a Business Day, the immediately following Business Day).

“Final Loss Payment Date” means the earlier to occur of (i) the Commutation Date and (ii) the Final Extended Termination Date.

“Final Loss Reserve Certificate” has the meaning set forth in Article 5.E.

“Final Proof of Loss Claim” means a final Proof of Loss Claim.

“First Payment Date” means July 17, 2014 (or if such day is not a Business Day, the immediately following Business Day).

“Growth Allowance Factor” means 1.10.

“Growth Limitation Factor” means, for a Loss Event, the lesser of 1.00 and the ratio of the Growth Allowance Factor to the applicable Actual Growth Factor.

“Indenture” means the Indenture, dated as of the date hereof, between the Reinsurer and the Indenture Trustee, as supplemented by the Series Supplement dated as of the date hereof.

“Indenture Trustee” means Citibank, N.A. or its successors or assigns or any appointed replacement under the Indenture.

“Informational Loss Estimate” has the meaning set forth in the Article 5.D.

“Informational Loss Estimate Notice” has the meaning set forth in Article 5.D.

“Initial Attachment Point” means $200,000,000.

“Initial Covered Area” means Florida.

“Initial Exhaustion Point” means $350,000,000.

“Initial Exposure Data” has the meaning set forth in Article 11.C.

“Initial Insurance Percentage” means 100%.

“Initial Issuance Premium Payment” has the meaning set forth in Section 6.B.

“Initial Issuance Premium Payment Certificate” has the meaning set forth in Section 6.B.

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“Initial Loss Adjustment Expense Factor” means 1.06.

“Initial Modeled Projected Attachment Probability” means 1.69%

“Initial Modeled Projected Expected Loss” means 1.31%.

“Initial Projected Exposure Data” has the meaning set forth in Article 11.C.

“Initial Risk Interest Spread” means 4.25% per annum.

“Initial Stated Reinsurance” means the initial stated reinsurance, which includes the mandatory FHCF Reinsurance.

“Installment Premium” has the meaning set forth in Article 6.A.

“Insurance Management Agreement” means the insurance management agreement between the Reinsurer and the Insurance Manager dated as of the date hereof (as it may be duly amended, supplemented or otherwise modified from time to time).

“Insurance Manager” means Kane (Bermuda) Limited or its successors or assigns.

“Insurance Percentage” means the Initial Insurance Percentage and, following any Reset, the applicable Updated Insurance Percentage.

“Interest Calculation Convention” means all payments of interest calculated using the Risk Interest Spread, Reduced Interest Spread, Extension Spread or True-Up Spread, as the case may be, will be calculated on the basis of the actual number of days elapsed in the related Accrual Period (or partial Accrual Period) and a 360-day year.

“Interest Spread Amount” has the meaning set forth in the Series Supplement.

“Layer” means the difference between the Attachment Point and the Exhaustion Point.

“Loss Adjustment Expense Factor” means the Initial Loss Adjustment Expense Factor and, following any Reset, the applicable Updated Loss Adjustment Expense Factor; provided, however, such factor may not be less than 1.04 nor greater than 1.08.

“Loss Event” means any Named Storm that begins during an Annual Risk Period and results in Losses under one or more Policies.

“Loss Payment” means, as of each Payment Date, the sum of all Event Loss Payments due and payable as of a Payment Date with respect to all Loss Events; provided, that any Loss Payment shall not be greater than the Outstanding Principal Amount on the immediately prior Payment Date or the Effective Date, as applicable.

“Loss Payment Report” has the meaning specified in the Claims Reviewer Agreement.

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“Loss Reserve Certificate” means any Preliminary Loss Reserve Certificate or Final Loss Reserve Certificate.

“Loss Reserves” means the liability established by the Ceding Insurer to reflect the estimated unpaid Losses resulting from a Loss Event (including Incurred But Not Reported Losses) that the Ceding Insurer will ultimately be required to pay under the Policies, excluding any losses excluded by the Exclusions, except for the 30-Day Amount which will be considered Paid Losses; provided, however, that for the purpose of calculating Net Payable Loss on the Commutation Date, Loss Reserves will mean the amount estimated by the Ceding Insurer and, if the Loss Reserve Specialist concludes that the Loss Reserves specified by the Ceding Insurer is not reasonable, then Loss Reserves will mean the lower of the amount estimated by the Ceding Insurer and the amount that represents the best point estimate of the Loss Reserves by the Loss Reserve Specialist as set forth in the applicable Loss Reserve Certificate.

“Loss Reserve Procedures” has the meaning specified in the Loss Reserve Specialist Agreement.

“Loss Reserve Specialist” means KPMG Advisory Limited or its successor, or any replacement loss reserve specialist appointed pursuant to the terms of the Loss Reserve Specialist Agreement.

“Loss Reserve Specialist Agreement” means the loss reserve specialist agreement between the Reinsurer and the Loss Reserve Specialist dated as of the date hereof (as it may be duly amended, supplemented or otherwise modified from time to time).

“Losses” means the sum of (i) Paid Losses and (ii) if applicable, Loss Reserves. Losses do not include the Exclusions (except as covered by the Loss Adjustment Expense Factor).

“Max Modeled Projected Attachment Probability” means 2.10%.

“Max Modeled Projected Expected Loss” means 1.65%.

“Modeling Agent” means AIR Worldwide Corporation or its successor.

“Named Storm” means any storm or storm system that has been declared by the Reporting Service to be a tropical cyclone, tropical storm, or hurricane at any time and any place (whether inside or outside the Covered Area) and may include, by way of example, wind, gusts, rough waves, hail, rain, tornadoes, cyclones, storm surge and/or flood, and further includes all ensuing damage caused thereby, resulting therefrom, or as a consequence thereof (including the merging with one or more separate storms or storm systems into a combined storm or storm system). The duration of the Named Storm includes the time period: (i) beginning on the date when a “watch”, “warning”, advisory or bulletin in respect of such Named Storm is first issued by the Reporting Service; (ii) continuing for the time period thereafter during which such Named Storm continues, regardless of its category rating and regardless of whether a “watch”, “warning”, advisory or bulleting remains in effect for such Named Storm; and (iii) ending at 11:59:59 p.m. on the fourth calendar day following the day of issuance of the last “watch”, “warning”, advisory or bulletin in respect of such Named Storm issued by the Reporting Service (“Named Storm End Date”).

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“Net Actual Payable Loss” has the meaning set forth in Article 9.A.

“Net Estimated Payable Loss” means, for each Accrual Period and for each Loss Event, the greater of (i) zero and (ii) an amount equal to (a) the Estimated Payable Loss for such Loss Event stated in the Reduced Interest Spread Statement most recently received by the Reinsurer at least four Business Days prior to the first day of such Accrual Period minus (b) the sum of all Event Loss Payments paid to the Ceding Insurer arising from such Loss Event up to and including the first day of such Accrual Period.

“Net Payable Loss” has the meaning set forth in Article 2.C.

“Note Payment Account” has the meaning ascribed to it in the Indenture.

“Notes” means the Series 2014-1 Class A Principal-at-Risk Variable Rate Notes due April 18, 2017.

“Original Principal Amount” means $150,000,000.

“Outstanding Principal Amount” means, as of any Payment Date, the Original Principal Amount as reduced by the aggregate of all Principal Reductions, if any, applied to the Series 2014-1 Notes on all Payment Dates prior to such Payment Date (or, if the context requires, on or prior to such Payment Date) and as increased by the aggregate of all 30-Day Reimbursement Amounts; provided that the Outstanding Principal Amount will not be less than zero nor greater than the Original Principal Amount.

“Paid Claims Rate” means, as determined in good faith in the sole discretion of the Ceding Insurer, the ratio of Ultimate Net Losses for a Loss Event calculated using only Paid Losses divided by Ultimate Net Loss calculated using both Paid Losses and the Loss Reserves, if any, for such Loss Event.

“Paid Losses” means the amount of losses actually paid by the Ceding Insurer in settlement of claims or liability under the Policies from a Loss Event.

“Partial Extension” has the meaning set forth in Article 8.C.

“Partial Repayment Amount” means, to the extent Series 2014-1 Notes are extended pursuant to a Partial Extension, the portion of the Outstanding Principal Amount not extended pursuant to such Partial Extension, as redeemed on a pro rata basis.

“Payment Date” means (i) each July 17, October 17, January 17 and April 17 (except for April 17, 2017) commencing on the First Payment Date and continuing to, but excluding the Scheduled Termination Date; provided, however, that the Payment Date will be on the 17th day of each month for Accrual Periods commencing on the next Payment Date occurring at least five (5) Business Days after a Loss Payment, (ii) the Scheduled Termination Date and (iii) if there are one or more Extension Events, the 17th day of each

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month during the Extension Period; provided, that, in each case, if any such day is not a Business Day, on the immediately following Business Day; provided, further, that if an Early Termination Event occurs, the final Payment Date will be on the Early Termination Date.

“Permitted Investments” has the meaning ascribed to it in the Reinsurance Trust Agreement.

“Permitted Investments Yield” has the meaning ascribed in the Series Supplement.

“Policy” means all policies, contracts and agreements of insurance issued or contracted by the Ceding Insurer and comprising the Subject Business.

“Preliminary Loss Reserve Certificate” has the meaning given in Article 5.E.

“Premium Deposit Account” has the meaning set forth in Article 6.C.

“Premium Deposit Account Withdrawal Date” has the meaning set forth in Article 6.C.

“Principal Reduction” means, on each Payment Date, an amount equal to the sum of (i) all Loss Payments, if any, paid or payable by the Reinsurer to the Ceding Insurer on such Payment Date under this Agreement and (ii) any Partial Repayment Amount applied to the Series 2014-1 Notes on such Payment Date.

“Projected Exposure Data” has the meaning set forth in Article 11.C.

“Proof of Loss Claim” means a letter from the Ceding Insurer to the Reinsurer, substantially in the form of Exhibit B hereto, the Claims Reviewer and, if applicable, the Loss Reserve Specialist in the form specified in the Reinsurance Agreement, which sets out the following calculations for the related Loss Event: (i) the Ultimate Net Loss; (ii) the Net Payable Loss; (iii) the Event Loss Payment; (iv) the Loss Payment payable on the applicable Payment Date; (v) the corresponding Principal Reduction; and (vi) the corresponding Outstanding Principal Amount.

“Records” has the meaning set forth in Article 24.

“Reduced Extension Spread Event” has the meaning specified in Article 9.A. “Reduced Extension Spread Report” has the meaning specified in Article 9.A. “Reduced Extension Spread Statement” has the meaning specified in Article 9.A. “Reduced Interest Spread” means 0.50% per annum.

“Reduced Interest Spread Statement” has the meaning set forth in Article 5.B. “Reinsurance Agreement Default Event” has the meaning set forth in 7.F. “Reinsurance Agreement Default Event Premium” has the meaning set forth in 7.G.

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“Reinsurance Trust Account” has the meaning set forth in the Reinsurance Trust Agreement.

“Reinsurance Trust Agreement” means the reinsurance trust agreement among the Reinsurer, as grantor, the Ceding Insurer, as sole beneficiary, the Reinsurance Trustee, as trustee, pursuant to which a reinsurance trust will be established in connection with this Agreement for the benefit of the Ceding Insurer on the Effective Date.

“Reinsurance Trustee” means Citibank, N.A. or its successors or assigns, as trustee under the Reinsurance Trust Agreement.

“Reinsurer” has the meaning set forth in the preamble.

“Reporting Service” means the National Hurricane Center, Weather Prediction Center or other support center or agency of the National Weather Service or their successor(s).

“Reset” has the meaning set forth in Article 11.A.

“Reset Agent” has the meaning set forth in the Reset Agent Agreement.

“Reset Agent Failure Event” means a failure by the Reset Agent to deliver a Reset Report pursuant to the terms of the Reset Agent Agreement.

“Reset Effective Date” means the first day of the applicable Annual Risk Period.

“Reset Report” has the meaning specified in Article 11.I.

“Residual Interest Amount” means an amount equal to the sum of the present value, discounted at an annual rate of the Initial Risk Interest Spread, of each of the scheduled payments of the Interest Spread Amount that would have been payable for the remaining portion of the relevant Accrual Period days during the period from the Payment Date when the Outstanding Principal Amount (including the effect of any Principal Reduction to the Series 2014-1 Notes on such date) has been reduced to zero to and excluding the first anniversary date of the Effective Date.

“Risk Interest Principal Amount” means, for each Accrual Period, an amount equal to (i) the Outstanding Principal Amount as of the first day of such Accrual Period after giving effect to any Principal Reduction allocated to the Series 2014-1 Notes on such date minus (ii) the Estimated Reduced Interest Principal Amount for such Accrual Period; provided, that the Risk Interest Principal Amount shall not be less than zero.

“Risk Interest Spread” means the Initial Risk Interest Spread; provided that if the Ceding Insurer elects a Variable Reset with respect to an Annual Risk Period, the applicable Updated Risk Interest Spread will apply for each Accrual Period that begins in such Annual Risk Period. If a Substitute Reset occurs with respect to an Annual Risk Period, no Risk Spread Calculation will be performed and the Risk Interest Spread that will apply for each Accrual Period that beings in such Annual Risk Period will be the Risk Interest Spread that was applicable for the immediately preceding Annual Risk Period.

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“Risk Period” means the period commencing at 12:00:00 a.m., Eastern Time, on June 1, 2014 to and including the earlier of (i) 11:59:59 p.m., Eastern Time, on April 17, 2017 or (ii) in the event of an Early Termination Event, 11:59:59 p.m., Eastern Time, on the date on which an Early Termination Event occurs.

“Risk Spread Calculation” has the meaning set forth in the Reset Agent Agreement.

“Scheduled Termination Date” means April 18, 2017 (or if such day is not a Business Day, on the immediately following Business Day).

“Series 2014-1 Notes” means the Reinsurer’s Series 2014-1 Class A Principal-at-Risk Variable Rate Notes due April 18, 2017.

“Series Supplement” means the separate supplement to the Indenture which sets forth specific terms with respect to the Notes, dated as of the date hereof, between the Reinsurer and the Indenture Trustee.

“Service Provider Failure Event” has the meaning set forth in Article 7.C.

“Stated Reinsurance” has the meaning set forth in Article 2.D.

“Subject Business” has the meaning given in Article 2.B.

“Substitute Reset” has the meaning set forth in Article 11.J.

“Substitute Reset Report” has the meaning set forth in Article 11.K.

“Substitute Reset Statement” has the meaning set forth in Article 11.K.

“Supplemental Premium Payment” has the meaning set forth in Article 6.B.

“Supplemental Premium Payment Certificate” has the meaning set forth in Article 6.B.

“Supplemental Premium Termination Event” has the meaning set forth in 7.E.

“Termination Date” means (i) the earlier to occur of the Early Termination Date, if any, and the Scheduled Termination Date or (ii) following receipt by the Reinsurer from the Ceding Insurer of an Extension Notice, the earlier to occur of the Extended Termination Date or Early Termination Date, as the case may be.

“Total Insured Value” means the sum of the full value of the insured’s covered property, business income values and any other covered property interests.

“True-Up Interest Amount” has the meaning set forth in Article 9.A.

“True-Up Interest Payment Date” has the meaning set forth in Article 9.A.

“True-Up Interest Report” has the meaning set forth in Article 9.A.

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“True-Up Interest Statement” has the meaning set forth in Article 9.A.

“True-Up Principal Amount” has the meaning set forth in Article 9.A.

“True-Up Spread” means, for each Accrual Period, a rate equal to the applicable Risk Interest Spread for such Accrual Period minus the Reduced Interest Spread.

“Ultimate Net Loss” means, for each Loss Event, the result of the following calculation:

Step 1 – Determine Policies covered and calculate applicable Losses under such Policies;

Step 2 – Multiply the amount determined in Step 1 by the applicable Growth Limitation Factor;

Step 3 – Multiply the amount determined in Step 2 by the applicable Loss Adjustment Expense Factor;

Step 4 – Determine the applicable FHCF Reinsurance determined by the losses in Step 1 and subtract it from the losses in Step 3;

Step 5 – Subtract the applicable amount of Stated Reinsurance (other than the FHCF Reinsurance applied in Step 5) from the amount in Step 4;

provided, that the Ultimate Net Loss (i) will be based only on Paid Losses and shall include the 30-Day Amount for purposes of calculating any Loss Payment to be made prior to the Commutation Date; and (ii) will be based on Paid Losses and Loss Reserves (excluding any 30-Day Amount) for (A) calculating the Loss Payment on the Commutation Date, (B) any Reduced Interest Spread Statement, and (C) any Reduced Extension Spread Statement.

“Updated Attachment Point” has the meaning set forth in Article 11.A.

“Updated Covered Area” means, following a Reset, any of any of Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, West Virginia and the District of Columbia, as specified by the Ceding Insurer on or prior to the April 15 immediately following each Calculation Date.

“Updated Exhaustion Point” has the meaning set forth in Article 11.A.

“Updated Exposure Data” has the meaning set forth in Article 11.C.

“Updated Insurance Percentage” has the meaning set forth in Article 11.A.

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“Updated Loss Adjustment Expense Factor” means, if applicable in connection with a Reset, any updated Loss Adjustment Expense Factor provided by the Ceding Insurer for the Layer, provided, however, that such figure shall not be less than 1.04 or greater than 1.08.

“Updated Projected Exposure Data” has the meaning set forth in Article 11.C.

“Updated Risk Interest Spread” has the meaning set forth in the Reset Agent Agreement.

“Updated Stated Reinsurance” has the meaning set forth in Article 2.D.

“Variable Reset” means the Ceding Insurer’s election to provide an Updated Attachment Point that changes the Modeled Projected Attachment Probability.

“Variable Reset Notice” means a written notice from the Ceding Insurer to the Reinsurer electing a Variable Reset and setting the Updated Attachment Point for the next Annual Risk Period.

ARTICLE 2

Business Covered

A. Coverage. Subject to the Coverage Limit set forth in clause C of this Article 2, and the other terms and conditions of this Agreement, the Reinsurer will indemnify the Ceding Insurer from time to time on each Payment Date for certain losses to the Subject Business in excess of the Layer, resulting from one or more Loss Events during the Risk Period. For the avoidance of doubt, if a Loss Event occurs after the Extension Determination Date and prior to the Scheduled Termination Date and the Ceding Insurer has not delivered an Extension Notice prior to such Extension Termination Date, the Reinsurer shall not be liable under this Agreement for such Loss Event. If the Risk Period expires while a Loss Event is in progress, subject to the conditions to coverage contained in this Agreement, such Loss Event will be covered under this Agreement.

B. Subject Business. The subject business reinsured hereunder (“Subject Business”) shall be comprised of the overall insurance portfolio of the Ceding Insurer relating to its commercial, including commercial residential, and residential property insurance business and will consist of Policies in force as of the commencement of the Risk Period and new and renewal Policies becoming effective thereafter during the Risk Period covering risks located in the Covered Area.

C. Coverage Limit. The aggregate of all Loss Payments to be made by the Reinsurer to the Ceding Insurer under this Agreement may not exceed the Original Principal Amount as reduced by the aggregate of all Partial Repayment Amounts and as increased by the aggregate of all 30-Day Reimbursement Amounts (“Coverage Limit”). The net payable loss under this Agreement (the “Net Payable Loss”) will be, with respect to each Loss Event, the applicable Insurance Percentage multiplied by the amount, if any, by which the Ultimate Net Loss exceeds the applicable Attachment Point, up to the applicable Exhaustion Point. Any Net Payable Loss will be based on Paid Losses and 30-Day Amounts only and will be the

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amount calculated under a Proof of Loss Claim which has been subjected to the Claims Procedures by the Claims Reviewer subject to limited exceptions, except for payments due on the Final Loss Payment Date, in which case the final settlement of all liabilities in respect of such Loss Event under the Reinsurance Agreement may include payment for any Loss Reserves on the Final Loss Payment Date. Additionally, the Ceding Insurer may provide an estimate of Net Payable Loss for the purposes of calculating the Estimated Payable Loss, which will not be subjected to the Claims Procedures and will take into account Paid Losses as well as Loss Reserves estimates. Furthermore, for the purpose of calculating the Actual Payable Loss set forth in the True-Up Interest Statement, Net Payable Loss will be calculated based on the Paid Losses set forth in the most recently provided Proof of Loss Claim with respect to each applicable Loss Event and subjected to the Claims Procedures by the Claims Reviewer and Loss Reserves reviewed by the Loss Reserve Specialist.

D. Stated Reinsurance. The Ceding Insurer has provided to the Reinsurer and the Modeling Agent the Initial Stated Reinsurance as of the date of the Initial Exposure Data, which is applicable for the first Annual Risk Period. For subsequent Annual Risk Periods, the Ceding Insurer may provide updated stated reinsurance to the Reinsurer and the Reset Agent on or prior to the April 15 immediately following each Calculation Date (“Updated Stated Reinsurance”, and when referred to along with the Initial Stated Reinsurance, “Stated Reinsurance”). Following determination of the actual FHCF Reinsurance, the Net Payable Loss will be recalculated accordingly, which may result in a Loss Payment or a 30-Day Reimbursement Amount. The applicable Stated Reinsurance will inure (whether or not such Stated Reinsurance is actually collected or otherwise in effect) to the benefit of the Layer for such Annual Risk Period; provided, that the Stated Reinsurance may be eroded by prior Loss Events (except for any per risk reinsurance actually in effect, which will inure to the benefit of this Agreement and erode in accordance with its terms). The parties hereto acknowledge and agree that the Stated Reinsurance may not match the actual reinsurance purchased by the Ceding Insurer.

E. Follow the Fortunes. Coverage under this Agreement will be subject in all respects to the same interpretations (whether judicial or otherwise), terms, conditions, waivers, alterations and modifications as the Policies comprising the Subject Business, the true intent being that the Reinsurer will in every respect follow the fortunes of the Ceding Insurer in respect of risks the Ceding Insurer has with respect to the Subject Business. All Paid Losses and Losses with respect to the Policies, whether under strict terms or by way of compromise, shall be binding on the Reinsurer, subject, as applicable, to the Claims Procedures and Loss Reserve Procedures, if applicable.

ARTICLE 3

Term

A. Term. This Agreement shall take effect on the Effective Date and shall remain in effect until terminated as provided herein. This Agreement may not be cancelled or terminated prior to the later of (a) the Scheduled Termination Date or (b) an Extended Termination Date (but in no event later than the Final Extended Termination Date), except upon the occurrence of an Early Termination Event.

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B. Early Termination. In the event of an Early Termination Event, this Agreement shall terminate on the Early Termination Date.

C. Extension. The Ceding Insurer may, at its option, on or prior to any Extension Termination Date, deliver an Extension Notice to the Reinsurer to extend the term of this Agreement in accordance with Article 8. Notwithstanding any Extension Event, the Risk Period will not be extended and the Reinsurer shall not be liable for losses related to any Loss Event with a Date of Loss after the end of the Risk Period.

D. Commutation. The Ceding Insurer may elect to settle (“Commutation”) all remaining claims and obligations with respect to each and every Loss Event (i) on the Scheduled Termination Date or any Extended Termination Date of (A) at least 18 months have elapsed since the last occurring Named Storm End Date and (B) the Paid Claims Rate is at least 95% for such Loss Event, with such Commutation to be effective on the first Payment Date at least 32 Business Days after the date of election of Commutation by the Ceding Insurer (“Commutation Date”) or (ii) on the Final Extended Termination Date. Upon Commutation, no further Event Loss Payments will be owed to the Ceding Insurer under this Agreement.

ARTICLE 4

Territory

The territorial limit of this Agreement is the Covered Area.

ARTICLE 5

Estimated Payable Loss and Payment of Losses

A. Estimated Payable Loss. As of any Payment Date, the “Estimated Payable Loss” for a Loss Event is an amount equal to the Ceding Insurer’s estimate of the Net Payable Loss (taking into account estimated Loss Reserves) with respect to such Loss Event.

B. Reduced Interest Spread Statement. The Ceding Insurer may from time to time deliver a written letter (each such notice, a “Reduced Interest Spread Statement”) to the Reinsurer. A Reduced Interest Spread Statement will be substantially in the form attached hereto as Exhibit C and will contain the following information:

1. the Ceding Insurer’s estimate of the Estimated Payable Loss;

2. the Net Estimated Payable Loss for the applicable Accrual Period with respect to such Loss Event (calculated using the Estimated Payable Loss set forth pursuant to clause (1) above);

3. the Estimated Reduced Interest Principal Amount as of the date of such Reduced Interest Spread Statement; and

4. the updated Risk Interest Principal Amount as of the date of such Reduced Interest Spread Statement.

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C. Once a Reduced Interest Spread Statement is delivered in respect of a Loss Event, each subsequent Reduced Interest Spread Statement, if any, must include the then-current (i) Estimated Payable Loss, (ii) Net Estimated Payable Loss, (iii) Estimated Reduced Interest Principal Amount and (iv) Risk Interest Principal Amount. Each Reduced Interest Spread Statement will take into account each Loss Payment Report (including any Loss Payment specified therein that is to be paid as of the immediately following Payment Date) delivered by the Claims Reviewer at least two Business Days prior to the date of such Reduced Interest Spread Statement if such Loss Payment Report is applicable to a Loss Event accounted for in any Reduced Interest Spread Statement. If in respect of any Loss Events accounted for in a Reduced Interest Spread Statement, there are to be any Loss Payments made on a Payment Date that is prior to the Scheduled Termination Date that were not accounted for in a prior Reduced Interest Spread Statement, the Ceding Insurer will deliver to the Reinsurer, no later than four Business Days prior to such Payment Date, an updated Reduced Interest Spread Statement.

D. Informational Loss Estimate. If following any Loss Event the estimate of Ultimate Net Loss, including Paid Losses and estimated Loss Reserves (as determined by the Ceding Insurer), in respect of such Loss Event (“Informational Loss Estimate”) is greater than either (a) 75% of the applicable attachment point of any Stated Reinsurance which may be eroded by such Loss Event, or (b) 75% of the applicable Attachment Point, then within thirty (30) calendar days after the Ceding Insurer publicly discloses its estimate of Losses in connection with such Loss Event and at each Payment Date thereafter on which such publicly disclosed estimate has changed by more than 5% from that reflected in the previous public disclosure, the Ceding Insurer will notify the Reinsurer, the Indenture Trustee, the Claims Reviewer and the Loss Reserve Specialist of such estimate (each such notice, an “Informational Loss Estimate Notice”). Each Informational Loss Estimate Notice will be substantially in the form attached hereto as Exhibit D. Notwithstanding the foregoing, at the end of any Annual Risk Period only Loss Events subject to clause (b) above in this paragraph will require continued Informational Loss Estimate Notices.

E. Proof of Loss Claim.

1. The Reinsurer shall not be liable for any Loss Payment unless and until the Reinsurer has received a Proof of Loss Claim (or a final Proof of Loss Claim) from the Ceding Insurer setting out the calculation of the Event Loss Payment for a Loss Event, the Loss Payment and corresponding Principal Reduction in respect of a Payment Date, the 30-Day Reimbursement Amount and the resulting Outstanding Principal Amount; provided, however, that each Proof of Loss Claim submitted by the Ceding Insurer under this Agreement (except as otherwise set forth herein) will be subject to the Claims Procedures performed by the Claims Reviewer and, in connection with the Commutation Date, the Loss Reserves Procedures performed by the Loss Reserve Specialist.

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2. A Proof of Loss Claim with respect to a certain Payment Date must be submitted by the Ceding Insurer to the Claims Reviewer on the date which is at least 32 Business Days prior to the relevant Payment Date, and with respect to the Commutation Date, to the Loss Reserve Specialist, at least 52 Business Days prior to the Commutation Date. If a Proof of Loss Claim is submitted less than 32 Business Days prior to a Payment Date, no Loss Payment or 30-Day Reimbursement Amount will be paid until the immediately following Payment Date.

3. In connection with each Proof of Loss Claim submitted on a timely basis by the Ceding Insurer, including in connection with the Commutation Date, the Reinsurer shall cause the Claims Reviewer to submit to the Reinsurer, with information only copies provided to the Ceding Insurer, the Reinsurance Trustee and the Indenture Trustee, a Loss Payment Report with respect to each submitted Proof of Loss Claim at least 32 Business Days prior to the applicable Payment Date, subject to the Claims Reviewer’s ability to achieve the confidence level and error rate level required in the Claims Reviewer Agreement, unless (a) a prior Proof of Loss Claim was previously subject to the Claims Procedures by the Claims Reviewer and such Proof of Loss Claim resulted in a Loss Payment Report with a reviewed amount of Paid Losses without exceptions and (b) the increase in the claimed Paid Losses and 30-Day Amount since the last reviewed Proof of Loss Claim using the Claims Procedures (as described in clause (a) above), notwithstanding the number of intervening Proof of Loss Claim, if any, is $50 million or less.

4. A Final Proof of Loss Claim in connection with the Commutation Date shall be presented by the Ceding Insurer to the Reinsurer, the Indenture Trustee, the Reinsurance Trustee, the Claims Reviewer and the Loss Reserve Specialist, if applicable, on the date which is no later than 52 Business Days prior to the Commutation Date, which Proof of Loss Claim shall include a claim for Loss Reserves as well as for Paid Losses (unlike Proof of Loss Claims delivered with respect to any other Payment Date (which may include only Paid Losses and the 30-Day Amount)). Subject to the Claims Procedures, the Reinsurer will cause the Claims Reviewer to submit to the Reinsurer, with information only copies provided to the Indenture Trustee and the Ceding Insurer, no later than seven Business Days prior to the applicable Payment Date, a Loss Payment Report stating the results of its agreed upon procedures for each Loss Event included in the applicable Proof of Loss Claim on the following amounts: (i) Paid Losses; (ii) the 30-Day Amount, if applicable; (iii) Losses; (iv) Ultimate Net Loss; and (v) the amount of any Loss Payment or 30-Day Reimbursement Amount due and payable.

5. In connection with the final Proof of Loss Claim submitted on a timely basis by the Ceding Insurer in connection with the Commutation Date, the Reinsurer shall cause the Loss Reserve Specialist to issue a preliminary loss reserve certificate (the “Preliminary Loss Reserve Certificate”), at least 12 Business Days prior to the Commutation Date, and a final loss reserve certificate (the “Final Loss Reserve Certificate”), at least nine Business Days prior to the Commutation Date, to the Reinsurer, with copies provided to the Ceding Insurer and the Indenture Trustee. Such certificates shall state whether, in the Loss Reserve Specialist’s professional judgment, the Loss Reserves estimated by the Ceding Insurer have been computed and fairly state in

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accordance with the Loss Reserving Standards and represent a reasonable estimate of Loss Reserves for the Policies covered by this Agreement. Loss Reserves will be assessed for reasonableness by the Loss Reserve Specialist in accordance with the Loss Reserve Procedures and, if determined to be unreasonable by the Loss Reserve Specialist, the Loss Reserves will be equal to the lower of the amount estimated by the Ceding Insurer and the amount that represents the best point estimate of Loss Reserves by the Loss Reserve Specialist. The Loss Reserve Specialist Agreement shall provide that, at the Ceding Insurer’s request, following the provision of a Preliminary Loss Reserve Certificate, the Loss Reserve Specialist will meet with representatives of the Ceding Insurer and the Insurance Manager to discuss any of the Ceding Insurer’s questions in respect of such Preliminary Loss Reserve Certificate, with the goal of resolving in good faith any issues or disputes with respect to the Loss Reserve Specialist’s assessment of the Ceding Insurer’s Loss Reserves.

6. If the Final Loss Reserve Certificate is not received by the Reinsurer and the Ceding Insurer at least seven Business Days prior to the Commutation Date (other than because of failure of the Ceding Insurer to comply with the terms of this Agreement), the Loss Reserves specified by the Ceding Insurer in the Final Proof of Loss Claim will be binding on the Reinsurer and the Ceding Insurer for all purposes under this Agreement.

F. Payment of Losses.

1. For each Proof of Loss Claim (or a final Proof of Loss Claim) together with such other documentation and procedures required by this Article 5, the Reinsurer will pay to the Ceding Insurer on the next applicable Payment Date, an amount equal to the Ultimate Net Loss.

2. Any Loss Payment due to the Ceding Insurer will be satisfied either by the Reinsurer’s payment of such Loss Payment to the Ceding Insurer or by the Ceding Insurer’s withdrawal of funds equal to such Loss Payment from the Reinsurance Trust Account on the Payment Date on which such Loss Payment is due.

G. No Liability for Payments under this Agreement. The parties hereto agree that neither the Claims Reviewer nor the Loss Reserve Specialist is obligated in any way to make payments under this Agreement. The Claims Reviewer will be engaged by the Reinsurer under the Claims Reviewer Agreement solely to provide to the Reinsurer the services described in the Claims Reviewer Agreement.

ARTICLE 6

Reinsurance Premium

A. Premiums. The Ceding Insurer shall make the following premium payments (“Installment Premium”) to the Reinsurer, calculated with respect to each applicable Accrual Period, on the Business Day immediately preceding each Payment Date:

1. for each Accrual Period up to and including the earlier of an Early Termination Date or the Scheduled Termination Date, an amount for such Accrual Period equal to the applicable Interest Spread Amount payable by the Reinsurer for such Accrual Period;

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2. for each Accrual Period during the Extension Period, if any, an amount for such Accrual Period equal to the applicable Extension Spread Amount payable by the Reinsurer for such Accrual Period;

3. the True-Up Interest Amount, if any;

4. the Residual Interest Amount, if any;

5. the Reinsurance Agreement Default Event Premium, if any; and

6. the 30-Day Reimbursement Amount, if any.

The Installment Premium will be calculated on the basis of the actual number of days elapsed in the related period and a 360-day year.

B. Initial Issuance and Supplemental Premiums. The Ceding Insurer will also make a payment to the Reinsurer (i) on the Effective Date in an amount equal to the expenses incurred by the Reinsurer in connection with the establishment of the Reinsurer and the program, the original issuance of the Series 2014-1 Notes and certain anticipated operating expenses payable to third parties by the Reinsurer in connection herewith (the “Initial Issuance Premium Payment”) as set forth in a certificate from the Reinsurer, substantially in the form attached hereto as Exhibit E (each, an “Initial Issuance Premium Payment Certificate”), and (ii) on each anniversary of the Effective Date, and from time to time if required, in an amount equal to the operating expenses to be incurred by the Reinsurer, including relating to the Insurance Manager, the Indenture Trustee, the Reinsurance Trust Trustee, the Reset Agent, the Claims Reviewer, the Loss Reserve Specialist, the Escrow Agent and other service providers, each as applicable (each payment pursuant to this clause (ii), an “Supplemental Premium Payment”) as set forth in a certificate from the Reinsurer, substantially in the form attached hereto as Exhibit F (each, a “Supplemental Premium Payment Certificate”). The Reinsurer shall also provide the Ceding Insurer with all documentation reasonably necessary to substantiate any expenses contributing to the Initial Issuance Premium Payment or any Supplemental Premium Payment.

C. Premium Deposit Account.

1. On the Effective Date, the Ceding Insurer will establish a separate cash account (a “Premium Deposit Account”) with Citibank, N.A. (“Citibank”) and deposit into such account an amount equal to the Installment Premiums payable for the first two Accrual Periods. The Premium Deposit Account will be an account in the name of the Ceding Insurer and will be assigned and pledged to the Reinsurer as security for the payment of Installment Premiums for the Series 2014-1 Notes. At least 60 calendar days before each Payment Date, the Ceding Insurer (a) will deposit any amount necessary so that the amount in the Premium Deposit Account as of such date is at least equal to the Installment Premium payments due on the next two succeeding Payment Dates, or (b)

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may withdraw any amount held in the Premium Deposit Account in excess of the Installment Premium payment due on the next two succeeding Payment Dates in each case subject to paragraph 3 below. Following the calculation of any Updated Risk Interest Spread, within 5 Business Days of such calculation, the Ceding Insurer (i) will deposit any amount necessary so that the amount in the Premium Deposit Account as of such date is at least equal to the Installment Premium Payment due on the next two succeeding Payment Dates (based on the Updated Risk Interest Spread) or (ii) may withdraw any amount held in the Premium Deposit Account in excess of the Installment Premium payment due on the next two succeeding Payment Dates (based on the Updated Risk Interest Spread).

2. In the event that the Ceding Insurer fails to pay any Installment Premium when due, then within four Business Days of the relevant Payment Date (“Premium Deposit Account Withdrawal Date”), the Reinsurer will be authorized to have an amount equal to the Installment Premium due withdrawn from the Premium Deposit Account and paid to the Reinsurer. Any payment by the Ceding Insurer of Installment Premium on or after the Premium Deposit Account Withdrawal Date will be deposited in the Premium Deposit Account; provided, that a payment to the Premium Deposit Account will only cure a default under this Agreement if received on or before the Premium Deposit Account Withdrawal Date.

3. If the Ceding Insurer elects an Extension Event, on the Extension Determination Date immediately prior to the Scheduled Termination Date, the Ceding Insurer will deposit into the Premium Deposit Account an amount equal to the Installment Premium anticipated to be due at the end of the next two Accrual Periods. At least 60 days before each Payment Date during the Extension Period, the Ceding Insurer will deposit any amount necessary so that the amount in the Premium Deposit Account as of such date is at least equal to the Installment Premium payments due on the two next succeeding Payment Dates; except that with respect to the Payment Date immediately preceding the Commutation Date, no additional deposit will be due.

4. Any accrued interest earned on the Premium Deposit Account shall be credited to the Ceding Insurer and such interest shall not be subject to any right of set-off under this Agreement.

5. The Ceding Insurer shall charge in favor of the Reinsurer the Premium Deposit Account to secure its obligations to make Installment Premium payments under this Agreement and shall cause Citibank to provide account balance information to the Reinsurer on a monthly basis and on request.

D. U.S. Federal Excise Tax. The Ceding Insurer shall timely pay the U.S. federal excise tax due with respect to all premiums paid hereunder to the extent such premium is subject to the U.S. federal tax excise without deduction from Installment Premiums paid to the Reinsurer and shall have the sole right to any refunds of such payments.

E. Taxes. All payments by the Ceding Insurer to the Reinsurer under this Agreement, including, for the avoidance of doubt, the Ceding Insurer Additional Withdrawal Interest payable

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in accordance with Article 10.G, will be made free and clear of, and without deduction or withholding for or on account of, any and all present and future withholding taxes, unless required by law. If the Ceding Insurer is required by law to deduct or withhold for or on account of any tax from or in respect of any amount payable under this Agreement:

1. the Ceding Insurer shall make all such deductions and withholdings in respect of such tax;

2. the Ceding Insurer shall pay the full amount deducted or withheld in respect of any taxes (including the full amount required to be deducted or withheld from any additional amount paid under clause (3) below) to the relevant taxation or governmental authority in accordance with the applicable law promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed; and

3. the sum payable by the Ceding Insurer to the Reinsurer shall be increased as may be necessary so that, after the Ceding Insurer has made all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this paragraph), the Reinsurer shall receive an amount equal to the sum it would have received had no such deductions or withholdings been made in respect of any taxes.

ARTICLE 7

Early Termination

A. Early Termination. Pursuant to Sections B, C, D and F of this Article 7, the Ceding Insurer shall have the right to give notice of early termination of this Agreement to the Reinsurer substantially in the form attached hereto as Exhibit G (“Early Termination Notice”), which shall cause an Early Termination Event to occur as set forth herein (other than a Reinsurance Agreement Default Event, which is effected pursuant to Section F of this Article 7). If an Early Termination Event has occurred, this Agreement will be terminated prior to the Scheduled Termination Date or, if applicable, on the Extended Termination Date immediately following the Early Termination Event (an “Early Termination”). The date of an Early Termination will be the first Payment Date that occurs (i)(a) if an Early Termination Event occurs less than 35 calendar days prior to the Scheduled Termination Date or any Extended Termination Date, the Scheduled Termination Date or such Extended Termination Date, as the case may be, or otherwise (b) 35 calendar days after the date of such Early Termination Event and (ii) if the Ceding Insurer has at any time delivered a Reduced Interest Spread Statement and paid (or will pay as of the immediately following Payment Date) an Interest Spread Amount calculated in whole or in part at the Reduced Interest Spread, the date that is 32 Business Days after the date the Ceding Insurer has delivered a True-Up Interest Statement to the Reinsurer (“Early Termination Date”).

B. Clean Up Termination Event. A “Clean Up Termination Event” shall occur on the date on which the Outstanding Principal Amount is equal to or less than 10% of the Original Principal Amount and the Ceding Insurer, at its option, delivers to the Reinsurer written notice to terminate this Agreement (effective as of the Early Termination Date); provided, that such termination notice may not be given during the period from and including the Effective Date to but not including the first anniversary date of the Effective Date.

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C. Service Provider Failure Event. A “Service Provider Failure Event” shall occur on the date on which the Ceding Insurer gives written notice to the Reinsurer (with a copy to the Indenture Trustee) that it elects to terminate this Agreement effective as of the Effective Date (i) if (a) a Service Provider becomes incapable of performing, or fails to perform, its duties and obligations (and fails to remedy such nonperformance within the applicable cure period) under the applicable Service Provider Agreement (other than as a result of the failure of the Ceding Insurer to comply with the terms of the applicable Service Provider Agreement); (b) the Reinsurer is unable to identify a replacement for such Service Provider with the cooperation of the Ceding Insurer within forty-five (45) calendar days following such Service Provider Failure Event; and (c) in the case of a Service Provider Failure Event with respect to the Reset Agent in respect of any Reset, the Claims Reviewer does not perform certain specified procedures in relation to a Substitute Reset in accordance with the Claims Reviewer Agreement (and fails to remedy such nonperformance within the applicable cure period). For the purpose of a Service Provider Failure Event, “Service Provider” means each of the Insurance Manager and the Reset Agent, and “Service Provider Agreement” means the Insurance Management Agreement and the Reset Agent Agreement, as the case may be.

D. Change in Law or Tax Event. A “Change in Law or Tax Event” shall occur on the date on which the Ceding Insurer, at its option, delivers to the Reinsurer written notice to terminate this Agreement (effective as of the Early Termination Date) if, in the Ceding Insurer’s sole judgment (following written advice of the Ceding Insurer’s legal counsel with a copy provided to the Reinsurer and the Indenture Trustee), there is an amendment to, or change in, the laws or regulations of any relevant jurisdiction (including laws or regulations affecting taxation), or the issuance of, or an amendment to, or change in, or clarification of, an official interpretation or application of such laws or regulations, which (x) would impair the ability of the Ceding Insurer or the Reinsurer to lawfully perform, or would result in material adverse consequences or materially increase the regulatory burden for the Ceding Insurer or the Reinsurer if it continued to perform, its obligations under this Agreement, the Series 2014-1 Notes or the Indenture, as applicable or (y) would materially increase the taxes paid by the Ceding Insurer by disallowing all or part of the deduction for U.S. federal tax purposes for the Premium payable by the Ceding Insurer to the Reinsurer under this Agreement.

E. Supplemental Premium Termination Event. A “Supplemental Premium Termination Event” shall occur on the date on which the Ceding Insurer, at its option, delivers to the Reinsurer written notice to terminate this Agreement (effective as of the Early Termination Date) if the Supplemental Premium Payment exceeds $750,000 in any calendar year.

F. Reinsurance Agreement Default Event. A “Reinsurance Agreement Default Event” shall occur on the date on which an event of default has arisen under this Agreement from a failure of the Ceding Insurer to make any Installment Premium payment, Premium Deposit Account deposit or 30-Day Reimbursement Amount payment when due under this Agreement and such failure to pay or make a deposit continues for five Business Days after the receipt of notice, substantially in the form attached hereto as Exhibit H, of such failure from the Reinsurer. Unless such failure to pay or make a deposit is cured within five Business Days of the receipt of

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such notice, such failure shall cause a Reinsurance Agreement Default Event. A Reinsurance Agreement Default Event shall occur on the date that the Reinsurer submits a notice, substantially in the form attached hereto as Exhibit H, of the occurrence of a Reinsurance Agreement Default Event to the Ceding Insurer and the Indenture Trustee.

G. Reinsurance Agreement Default Event Premium. Upon the occurrence of Reinsurance Agreement Default Event, an additional amount will be payable with by the Ceding Insurer to the Reinsurer, which will be equal to the sum of the present values, discounted at the Risk Interest Spread in effect as of the Early Termination Date, of each of the scheduled payments of interest at such Risk Interest Spread calculated on the Risk Interest Principal Amount determined as of the Early Termination Date for each Accrual Period that would have occurred during the period from the Early Termination Date to the Scheduled Termination Date.

ARTICLE 8

Extension

A. Extension. The Ceding Insurer may, at its option, require the Reinsurer to extend the term of this Agreement past the Scheduled Termination Date to one or more Extended Termination Dates if the requirements for an Extension Event are satisfied by providing an Extension Notice to the Reinsurer on or prior to the Extension Determination Date preceding the Scheduled Termination Date. If the Ceding Insurer has at any time delivered a Reduced Interest Spread Statement and paid (or will pay as of the immediately following Payment Date) an Installment Premium calculated in whole or in part at the Reduced Interest Spread, the Ceding Insurer must provide an Extension Notice to the Reinsurer on or prior to the Extension Determination Date immediately preceding the Scheduled Termination Date unless the Ceding Insurer has delivered a True-Up Interest Statement to the Reinsurer at least 32 Business Days prior to the Scheduled Termination Date. Prior to the date that is three Business Days prior to the then-current Termination Date, the Ceding Insurer may elect to require the Reinsurer to extend the term of this Agreement only with respect to the portion of the Outstanding Principal Amount that is being extended pursuant to a Partial Extension, as specified in the relevant Extension Notice. Each one-month period from and including the Scheduled Termination Date or the relevant Extended Termination Date, as the case may be, to and including the immediately succeeding Extended Termination Date is referred to as the “Extension Period”.

B. Extension Notice. The “Extension Notice” shall be a written notice, in substantially the form attached hereto as Exhibit I, from the Ceding Insurer to the Reinsurer and the Indenture Trustee of the Ceding Insurer’s election to extend the term of this Agreement beyond the Scheduled Termination Date (or, in the case of a Partial Extension, beyond the Scheduled Termination Date or Extended Termination Date, as applicable). Each Extension Notice must specify (i) which Extension Event is elected and (ii) whether a Partial Extension has occurred and, if so, the portion of the Outstanding Principal Amount that is being extended pursuant to such Partial Extension.

C. Partial Extension. In connection with each Extension Event, if any, the Ceding Insurer may elect to require the Reinsurer to extend the maturity of the Series 2014-1 Notes with respect to a portion of the Outstanding Principal Amount by specifying in the relevant Extension Notice the occurrence of a partial extension and the portion of the Outstanding Principal Amount subject thereto (each such partial extension, a “Partial Extension”).

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D. Extension Events. An “Extension Event” shall be either an Extension Event I or an Extension Event II. An Extension Event II may occur without the occurrence of an Extension Event I. An Extension Event I may be followed by an Extension Event II if the conditions for an Extension Event II have been satisfied.

1. The Ceding Insurer may elect to require the Reinsurer to extend the term of this Agreement beyond the Scheduled Termination Date to the Payment Date immediately following the Scheduled Termination Date by providing an Extension Notice to the Reinsurer on or prior to the Extension Determination Date immediately preceding the Scheduled Termination Date. Thereafter, the extension will remain in effect to automatically extend further the terms of this Agreement to each subsequent Payment Date for up to twenty-three additional periods of one month each unless and until the Ceding Insurer elects to terminate the Extension Event I by providing an Extension Termination Notice on or prior to the applicable Extension Determination Date or converting the Extension Event I into an Extension Event II if the conditions for an Extension Event II have been satisfied; provided that the term shall not be extended beyond the Final Extended Termination Date (“Extension Event I”).

2. The Ceding Insurer may elect to require the Reinsurer to extend the term of this Agreement beyond the Scheduled Termination Date or any Extended Termination Date to the Payment Date immediately following the Scheduled Termination Date or such Extended Termination Date, as applicable, if (i) an Extension Notice is provided by the Ceding Insurer to the Reinsurer on or prior to the applicable Extension Determination Date; and (ii) a Reduced Extension Spread Event has occurred prior to the Scheduled Termination Date. Thereafter, the extension will remain in effect to automatically extend further the term of this Agreement to each subsequent Payment Date for up to twenty-three additional periods of one month each, unless and until the Ceding Insurer elects to terminate the Extension Event II by providing an Extension Termination Notice on or prior to the applicable Extension Determination Date; provided that the term shall not be extended beyond the Final Extended Termination Date (“Extension Event II”).

ARTICLE 9

Interest

A. Reserve True-Up Calculation.

1. True-Up Interest Statement. If the Ceding Insurer has submitted at any time a Reduced Interest Spread Statement and paid (or will pay as of the immediately following Payment Date) any Installment Premium at the applicable Reduced Interest Spread, then no later than 32 Business Days prior to the Termination Date, the Ceding Insurer shall submit to the Reinsurer, Claims Reviewer and Loss Reserve Specialist a written letter (“True-Up Interest Statement”) that sets forth (i) the Estimated Payable Loss for each Loss Event with respect to which the Ceding Insurer submitted at any time

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a Reduced Interest Spread Statement and paid (or will pay as of the immediately following Payment Date) any Installment Premium at the Reduced Interest Spread and (ii) the True-Up Interest Amount payable to the Reinsurer.

2. True-Up Interest Report. The True-Up Interest Statement will be subjected to the Claims Procedures by the Claims Reviewer and the assessment of the Ceding Insurer’s estimates of Loss Reserves by the Loss Reserve Specialist. The Claims Reviewer will deliver to the Reinsurer, with information only copies provided to the Ceding Insurer, a report (“True-Up Interest Report”) in respect of its agreed upon claims procedures on a True-Up Interest Statement.

3. The True-Up Interest Amount. If a Reduced Interest Event has occurred, then the True-Up Interest Amount, as set forth in the True-Up Interest Report, will be payable on the Termination Date. The “True-Up Interest Amount” as of the Termination Date shall be calculated as follows:

Step 1 — determine the Net Actual Payable Loss for each Accrual Period and each Loss Event for which an Estimated Payable Loss greater than zero for such Loss Event was applied to such Accrual Period, where “Net Actual Payable Loss” is an amount equal to (i) the Actual Payable Loss for such Loss Event minus (ii) the sum of all Event Loss Payments paid to the Ceding Insurer in respect of such Loss Event up to and including the first day of such Accrual Period;

Step 2 — for each Accrual Period, aggregate all Net Actual Payable Losses determined for such Accrual Period in step 1; provided that such amount may not be greater than the Outstanding Principal Amount as of the first day of such Accrual Period after giving effect to any Principal Reduction to the Series 2014-1 Notes on such date (“Actual Reduced Principal Amount”);

Step 3 — for each Accrual Period, subtract the Actual Reduced Principal Amount determined for such Accrual Period in step 2 from the Estimated Reduced Interest Principal Amount for such Accrual Period (“True-Up Principal Amount”);

Step 4 — for each Accrual Period, determine the amount of interest the Ceding Insurer overpaid or underpaid for such Accrual Period and interest thereon by multiplying the True-Up Principal Amount for such Accrual Period by the True-Up Spread for such Accrual Period (using the Interest Calculation Convention) and accruing interest on each such result for the period beginning on the first day of the subsequent Accrual Period and ending on the True-Up Interest Payment Date, compounded at the first day of each such subsequent Accrual Period at the applicable Risk Interest Spread or Extension Spread, as applicable, for such subsequent Accrual Period, (“Accrual Period True-Up Interest Amount”); and

Step 5 — determine the “True-Up Interest Amount” by aggregating all Accrual Period True-Up Interest Amounts.

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If the True-Up Interest Amount is positive, the True-Up Interest Amount will be paid to the Noteholders on the first Payment Date at least three Business Days following the delivery of a True-Up Interest Report (“True-Up Interest Payment Date”). If such True-Up Interest Amount is not positive, no payment will be made.

4. Reduced Extension Spread. A “Reduced Extension Spread Event” will occur upon satisfaction of all of the following conditions: (i) receipt by the Reinsurer from the Ceding Insurer under this Agreement of a written letter, substantially in the form of Exhibit J hereto (a “Reduced Extension Spread Statement”), to the effect that the Ultimate Net Loss (including both Paid Losses and Loss Reserves) arising from a Loss Event during any Annual Risk Period is estimated by the Ceding Insurer to be greater than 75% of the Attachment Point in effect for such Annual Risk Period and (ii) the delivery to the Reinsurer by the Claims Reviewer of a Claims Review Letter and a report (a “Reduced Extension Spread Report”) in respect of the Claim’s Reviewer’s agreed upon procedures of the Paid Losses specified in such Reduced Extension Spread Statement. The Reduced Extension Spread Statement shall contain a certification by the Ceding Insurer that the Loss Reserves included in the Reduced Extension Spread Statement, as of the date of the certification, has been estimated in a manner consistent with the Ceding Insurer’s reserving practices as applied in the preparation of its published financial statements.

ARTICLE 10

Reinsurance Trust Account

A. Reinsurance Trust Account. On or before the Effective Date, the Reinsurer, as grantor, shall enter into the Reinsurance Trust Agreement, and establish the Reinsurance Trust Account with the Reinsurance Trustee for the benefit of the Ceding Insurer, as beneficiary.

B. Transfer to Reinsurance Trust Account. On the Effective Date, the Reinsurer shall irrevocably deposit all of the gross proceeds from the sale of the Series 2014-1 Notes into the Note Payment Account and immediately transfer such proceeds into the Reinsurance Trust Account. Assets in the Reinsurance Trust Account shall be invested only in Permitted Investments. Assets in the Reinsurance Trust Account shall be held in trust by the Reinsurance Trustee for the benefit of the Ceding Insurer as security for the payment of the Reinsurer’s obligations to the Ceding Insurer under this Agreement.

C. Title of Assets in Reinsurance Trust Account. The Reinsurer shall cause the Indenture Trustee, prior to depositing assets with the Reinsurance Trustee, to execute assignments, endorsements in blank, or transfer legal title to the Reinsurance Trustee of all shares, obligations or any other assets requiring assignments, in order that the Ceding Insurer, or the Reinsurance Trustee upon the direction of the Ceding Insurer, may whenever necessary transfer, assign or negotiate any such assets without consent or signature from the Reinsurer or any other person.

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D. Income. The Reinsurer shall be entitled to all interest, earned discount and other income resulting from the investment of the assets, including Permitted Investments Yield, in the Reinsurance Trust Account.

E. Withdrawal from Reinsurance Trust Account.

1. The assets held in the Reinsurance Trust Account will be available to satisfy any obligations of the Reinsurer to the Ceding Insurer under this Agreement, without diminution because of the insolvency of the Ceding Insurer or the Reinsurer.

2. The Reinsurer and the Ceding Insurer agree that the assets in the Reinsurance Trust Account may be withdrawn by the Ceding Insurer at any time, notwithstanding any other provisions in this Agreement and shall be utilized and applied by the Ceding Insurer or its successor by operation of law, including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Ceding Insurer, without diminution because of insolvency on the part of the Ceding Insurer or the Reinsurer, only for the following purposes:

a. to pay or reimburse the Ceding Insurer for any Loss Payments payable by the Reinsurer to the Ceding Insurer under this Agreement, if not otherwise paid by the Reinsurer in accordance with the terms of this Agreement; or

b. where the Ceding Insurer has received notification of termination of the Reinsurance Trust Account and where the Reinsurer’s entire obligation with respect to the Principal Outstanding Amount in effect under this Agreement remains unliquidated and non-discharged, then 10 calendar days prior to such termination date, to withdraw amounts equal to such unliquidated and any non-discharged obligations and deposit such amounts in a separate account, in the name of the Ceding Insurer, in any U.S. bank or trust company, apart from its general assets, in trust for the uses and purposes specified in (a) above as may remain executory after such withdrawal and for any period after such termination date and subject to all of the same terms and conditions set forth in the Reinsurance Trust Agreement.

F. Release Upon Termination. The Ceding Insurer shall instruct the Reinsurance Trustee to liquidate and release to the Reinsurer for deposit into the Note Payment Account one Business Day prior to the Payment Date which coincides with the Termination Date all assets projected to be remaining in the Reinsurance Trust Account, if any, as of the Termination Date (after all transactions (including Loss Payments) affecting the Reinsurance Trust Account to occur on such date). The Reinsurer and the Ceding Insurer shall cooperate with each other and take all actions required by the Reinsurance Trust Agreement and the Reinsurance Trustee to terminate the Reinsurance Trust Account on the Payment Date which coincides with the Termination Date following all transactions affecting the Reinsurance Trust Account to occur on such date.

G. Return of Assets. In the event that the Ceding Insurer withdraws assets from the Reinsurance Trust Account for the purposes set forth in Article 10.E.2.a in excess of actual

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amounts required to meet the Reinsurer’s obligations to the Ceding Insurer under this Agreement (in each case, a “Ceding Insurer Additional Withdrawal” and such amount withdrawn, the “Ceding Insurer Additional Withdrawal Amount”), the Ceding Insurer will pay interest on the Ceding Insurer Additional Withdrawal Amount (the “Ceding Insurer Additional Withdrawal Interest”) at a per annum rate equal to the prime rate of interest as published in The Wall Street Journal, calculated by the Ceding Insurer on the basis of the actual number of days elapsed and a 360-day year, until such amounts are returned to the Reinsurance Trust Account (the “Ceding Insurer Additional Withdrawal Return Amount”).

ARTICLE 11

Reset Agent

A. Reset. Using the Updated Projected Exposure Data as of the applicable Calculation Date, the Updated Stated Reinsurance, if any, the Updated Loss Adjustment Expense Factor, if any, and the Escrow Loss Probability Model (based on the Base Case analysis), the Reset Agent will reset (each, a “Reset”) effective as of the Reset Effective Date, the Attachment Point, Exhaustion Point, Risk Interest Spread, if applicable, and Insurance Percentage, using the following procedures. A Substitute Reset will also be deemed a Reset.

1. Reset Effective Date. Each Reset will be effective as of the first day of the applicable Annual Risk Period.

2. Attachment Point. If the Ceding Insurer does not elect a Variable Reset, the Reset Agent will provide (a) an updated Attachment Point (“Updated Attachment Point”) to the nearest one million dollars such that the modeled projected exceedance probability is the highest percentage equal to or less than the Initial Modeled Projected Attachment Probability, (b) an updated Exhaustion Point (“Updated Exhaustion Point”) to the nearest one million dollars such that the modeled projected expected loss is the highest percentage equal to or less than the Initial Modeled Projected Expected Loss for the Layer for such Annual Risk Period and (c) an updated Insurance Percentage (“Updated Insurance Percentage”) equal to the Outstanding Principal Amount on the Payment Date immediately preceding the Reset Date divided by the Layer for such Annual Risk Period, provided, that such percentage will not be greater than 100%. If the Ceding Insurer elects a Variable Reset, the Reset Agent will provide (a) an updated Attachment Point designated by the Ceding Insurer and the modeled projected attachment probability, which shall be an amount equal to or less than the Max Modeled Projected Attachment Probability for such Annual Risk Period, (b) an updated Exhaustion Point designated by the Ceding Insurer and the modeled projected expected loss, which shall be an amount equal to or less than the Max Modeled Projected Expected Loss for the applicable Layer and such Annual Risk Period and (c) an updated Insurance Percentage equal to the Outstanding Principal Amount on the Payment Date immediately preceding the Reset Date divided by the Layer for such Annual Risk Period, provided, that such percentage will not be greater than 100%.

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B. Reset Agent Agreement. On the Effective Date, the Reinsurer shall enter into the Reset Agent Agreement with the Reset Agent pursuant to which the Reset Agent will perform a Risk Spread Calculation, as described in and pursuant to the Reset Agent Agreement.

C. Exposure Data. The Ceding Insurer has provided to the Reinsurer and the Modeling Agent exposure data as of February 28, 2014 concerning the Policies in-force in respect of the Subject Business (“Initial Exposure Data”) and the Ceding Insurer’s best estimate of growth of Policies in-force in respect of the Subject Business as projected to August 31, 2014 (“Initial Projected Exposure Data”). The Ceding Insurer will provide updated exposure data as of March 31, 2015 and March 31, 2016 (each, a “Calculation Date”) (“Updated Exposure Data” along with and when referred to along with the Initial Exposure Data, “Exposure Data”) and updated projected exposure data and/or a measure of expected exposure growth to August 31 of the applicable year (“Updated Projected Exposure Data”, and when referred to along with the Initial Projected Exposure Data, “Projected Exposure Data”) to the Reinsurer and the Reset Agent no later than the April 15 immediately following each Calculation Date in conformity with the Initial Exposure Data and Initial Projected Exposure Data. The Ceding Insurer will also provide a list of the states to be included in the Covered Area for the next Annual Risk Period. Upon receipt of Updated Exposure Data and Updated Projected Exposure Data, the Reset Agent will perform the Data Review Procedures.

D. No payments will be made to the Ceding Insurer in respect of any Annual Risk Period (except in the first Annual Risk Period) unless the Reset Agent, or in the case of a Substitute Reset, the Ceding Insurer, subject to agreed arithmetical calculation procedures performed by the Claims Reviewer, has established and confirmed to the Reinsurer, the Claims Reviewer and, if applicable, the Ceding Insurer, for such Annual Risk Period, the applicable Updated Attachment Point, the applicable Updated Exhaustion Point and the applicable Updated Insurance Percentage, as revised following a Reset or Substitute Reset, as applicable.

E. Updated Loss Adjustment Expense Factor. The Ceding Insurer may, at its option, update the Loss Adjustment Expense Factor; provided, however, that such factor may not be less than 1.04 nor greater than 1.08. The Updated Loss Adjustment Expense Factor, if any, will be provided by the Ceding Insurer to the Reinsurer and the Reset Agent no later than the April 15 immediately following each Calculation Date. The Updated Loss Adjustment Expense Factor will be applied during the Reset and will become effective as of the Reset Effective Date.

F. Data Review Procedures. Pursuant to the Reset Agent Agreement, the Reset Agent will review the Updated Exposure Data by verifying that locations, policy types, and construction classes can be mapped to formats appropriate to the Escrow Loss Probability Model, that values for coverage limits and deductibles are provided, and that there are no obvious errors in such values (together, the “Data Review Procedures”). The Reset Agent will also confirm the Average Annual Loss of the Updated Projected Exposure Data is not less than the Average Annual Loss of the applicable Updated Exposure Data. If the Average Annual Loss of the applicable Projected Exposure Data is less than the Average Annual Loss of the applicable Exposure Data, then the Updated Projected Exposure Data will be the Updated Exposure Data. The Reset Agent must document the Data Review Procedures, along with options to be used in the analysis.

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G. Changes to Escrow Loss Probability Model. In performing a Reset, the Reset Agent will be required on a timely basis, to the extent possible, and with notice to the Reinsurer and the Ceding Insurer, to make such formatting and other changes to the Escrow Loss Probability Model as may be necessary, in its discretion, to reflect changes in the Updated Exposure Data, data inputs and formats, computer and operating systems and other such factors that would otherwise invalidate the use of the Escrow Loss Probability Model; provided, however, that the scientific, engineering and probabilistic assumptions underlying the Escrow Loss Probability Model may not be changed, the impact of any such changes will not affect the validity of the engineering assumptions previously used by the Modeling Agent in the Escrow Loss Probability Model, and the Escrow Loss Probability Model will generate the same results for the Initial Exposure Data regardless of any such changes.

H. Escrow Loss Probability Model. The Modeling Agent has developed a computer simulation model to estimate loss probabilities. To perform each Reset, the Reset Agent will use version 14.0.1 of the AIR Hurricane Model for the United States and version 4.0 of the AIR Hurricane Model for Hawaii, as implemented in Touchstone 1.5.2 and CATRADER 15.0.2, the same models, which will be held in escrow, as used to determine the Initial Modeled Projected Expected Loss (“Escrow Loss Probability Model”), which term will include a certified copy of such model provided by the Reset Agent in the event of a failure to obtain release of the escrowed materials from the Escrow Agent in a timely manner for any reason.

I. Reset Report. The Reset Agent will notify the Reinsurer and the Ceding Insurer of the respective Updated Attachment Point, Updated Exhaustion Point, Updated Insurance Percentage and Updated Modeled Projected Attachment Probability, and in the case of a Variable Reset, the respective Updated Modeled Projected Expected Loss and Updated Risk Interest Spread, no later than the May 10 immediately prior to the relevant Reset Effective Date (each, a “Reset Report”).

J. Substitute Reset. If, in respect of a Calculation Date, a Reset Failure Event occurs and a Replacement Reset Agent cannot be identified within 45 days of such Reset Failure Event, the Ceding Insurer will update the applicable Attachment Point, the applicable Exhaustion Point and the applicable Insurance Percentage (“Substitute Reset”).

K. The Ceding Insurer will calculate the Substitute Reset as follows: (i) the Updated Attachment Point will be calculated, for the applicable Annual Risk Period, by dividing the projected Total Insured Value as of August 31 of the applicable year by the Total Insured Value as of the previous August 31 and multiplying the resulting quotient by the corresponding Attachment Point then in-force; (ii) the Updated Exhaustion Point will increase or decrease by the same dollar amount that the corresponding Updated Attachment Point increased or decreased; and (iii) the Insurance Percentage will be the percentage derived from dividing the Outstanding Principal Amount as of the Payment Date immediately preceding the applicable Reset Effective Date (after giving effect to any Principal Reduction on such Payment Date) by the Layer (provided that such percentage will not be less than 100%). The Claims Reviewer will perform arithmetical recalculation agreed upon procedures to the Substitute Reset Statement provided by the Ceding Insurer in substantially the form attached hereto as Exhibit M (“Substitute Reset Statement”) and deliver to the Reinsurer, with information only copies to the Ceding Insurer, a report (“Substitute Reset Report”) in respect of its agreed upon procedures on a Substitute Reset Statement.

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ARTICLE 12

Federal Terrorism Excess Recovery

Any loss reimbursement or payment made by the Ceding Insurer under the Terrorism Risk Insurance Act of 2002, including the Terrorism Risk Insurance Extension Act of 2005, the Terrorism Risk Insurance Program Reauthorization Act of 2007, and any amendments or extension thereof, shall be entirely disregarded in applying all of the provisions of this Agreement.

ARTICLE 13

Net Retained Liability

The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Ceding Insurer to collect from any other reinsurer(s), whether specific or general, any amounts that may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

ARTICLE 14

Original Conditions

All reinsurance under this Agreement shall be subject to the same terms, conditions, waivers and interpretations, and to the same modifications and alterations as the respective Policies of the Ceding Insurer. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Agreement.

ARTICLE 15

No Third Party Rights

This Agreement is solely between the Ceding Insurer and the Reinsurer, and in no instance shall an, insured, claimant or other third party have any rights under this Agreement except as may be expressly provided otherwise herein.

ARTICLE 16

Offset

Neither the Ceding Insurer nor the Reinsurer shall have the right to offset any balance or balances, on account of premiums or on account of a Loss Event, due from one party to the other under this Agreement, against any balance or balances due and payable to one party from the other whether under this Agreement, any other contract or reinsurance agreement or otherwise.

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ARTICLE 17

Limited Recourse

Notwithstanding anything to the contrary in this Agreement, all financial obligations of, and any claims against, the Reinsurer hereunder shall be limited recourse obligations of the Reinsurer payable solely from the Reinsurance Trust Account and shall be extinguished if, at any time, the assets in the Reinsurance Trust Account are exhausted and reduced to zero. Without prejudice to the foregoing, the proceeds of the Reinsurer’s share capital ($1) and any proceeds earned thereon shall not form part of the assets available to satisfy the Reinsurer’s obligations hereunder. The Ceding Insurer, by entering into this Agreement, agrees that no claim may be brought against the Reinsurer, its directors, officers, employees, agents, members, shareholders or administrators for any shortfall in the Reinsurance Trust Account, except in the case of fraud or actions taken in bad faith by any such person. This Article 17 shall survive the termination of this Agreement.

ARTICLE 18

No Petition

The Ceding Insurer, by entering into this Agreement covenants and agrees that it will not at any time institute against the Reinsurer, or join in any commencement or institution against the Reinsurer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any federal, state or foreign law (including under Part IV A of the Bermuda Conveyancing Act 1983) until the expiration of one year (or if longer, the applicable preference period or transaction avoidance period then in effect, including any period established pursuant to the laws of Bermuda) and one day from the day when (i) no Notes are outstanding under the Indenture and (ii) the reinsurance agreements related to such Notes have been terminated in accordance with their terms. The provisions of this Article 18 shall survive the termination of this Agreement.

ARTICLE 19

Loss Settlements

A. The Ceding Insurer alone and at its sole discretion shall adjust, settle or compromise all claim and losses.

B. As respects losses subject to this Agreement, all loss settlements made by the Ceding Insurer within the terms and conditions of its underlying Policy and within the terms and conditions of this Agreement, whether under strict Policy terms or by way of compromise, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay or allow, as the case may be, its share of each such settlement as provided in this Agreement. This payment period shall not be extended or enlarged due to a requested or pending audit or review of records.

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ARTICLE 20

Salvage and Subrogation

The Ceding Insurer hereby agrees to enforce its rights to salvage or subrogation relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.

ARTICLE 21

Reports and Notices

So long as the Principal Outstanding Amount is greater than zero, the Reinsurer shall promptly deliver, or cause to be delivered, to the Ceding Insurer copies of all reports and notices given or received by the Reinsurer under the Basic Documents (including Available Information), except for reports and notices given or received under this Agreement.

ARTICLE 22

Agent

Heritage Property & Casualty Insurance Company will act as agent of the companies comprising the Ceding Insurer for purposes of remitting or receiving any monies due to or from the Reinsurer under this Agreement and for the purposes of sending and receiving notices required or permitted under this Agreement. Heritage Property & Casualty Insurance Company will not act as agent (or be deemed to so act) for any other purpose under this Agreement, including with respect to insolvency, regulatory supervision or conservatorship.

ARTICLE 23

Currency

Where the word “Dollars” and/or the sign “$” appear in this Agreement, they shall mean United States Dollars.

ARTICLE 24

Access To Records

The Ceding Insurer shall give the Reinsurer and its designated representatives (including the Claims Reviewer and the Loss Reserve Specialist) free access at any reasonable time to all records of the Ceding Insurer that pertain in any way to this Agreement, including, without limitation, the Subject Business (“Records”). This right shall be exercisable during the term of this Agreement or after the expiration of this Agreement as long as either party hereto has a claim against the other arising out of this Agreement. Notwithstanding the above, the Reinsurer shall not have any right of access to the Records of the Ceding Insurer if it is not current in all undisputed payments due the Ceding Insurer. The inspecting party may obtain copies of any of the Records tendered for inspection at its own expense.

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ARTICLE 25

Confidentiality

A. The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Ceding Insurer, whether directly or through an authorized agent, in connection with the negotiation and execution of this Agreement (“Confidential Information”) are proprietary and confidential to the Ceding Insurer. Confidential Information shall not include documents, information or data that the Reinsurer can show:

1. are publicly known or have become publicly known through no unauthorized act of the Reinsurer;

2. have been rightfully received from a third person without obligation of confidentiality; or

3. were known by the Reinsurer prior to the placement of this Agreement without an obligation of confidentiality.

B. Absent the written consent of the Ceding Insurer, the Reinsurer shall not disclose any Confidential Information to any third parties, except:

1. when required by governmental regulators performing an audit of the Reinsurer’s records and/or financial condition;

2. when required by external auditors performing an audit of the Reinsurer’s records in the normal course of business and when the external auditors have agreed to the confidentiality provisions of this Agreement; or

3. situations where required by law or court order.

Further, the Reinsurer agrees not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Agreement.

C. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory or self-regulatory authority to release or disclose any or all of the Confidential Information, the Reinsurer agrees to provide the Ceding Insurer with written notice of same at least 10 calendar days prior to such release or disclosure and to use its best efforts to assist the Ceding Insurer in maintaining the confidentiality provided for in this Article 25.

D. The provisions of this Article 25 shall extend to the officers, directors, employees and agents of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.

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ARTICLE 26

Exclusions

Losses relating to the Subject Business shall not include any property or associated losses subject to any of the following items (each, an “Exclusion”) (except as covered by the Loss Adjustment Expense Factor):

A. All excess of loss reinsurance assumed by the Ceding Insurer;

B. Reinsurance assumed by the Ceding Insurer under obligatory reinsurance agreements;

C. Financial guarantee and insolvency business;

D. Third party liability and medical payments business;

E. Certain losses of pools, associations and syndicates;

F. All liability of the Ceding Insurer arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund;

G. All accident and health, fidelity and surety, boiler and machinery, workers’ compensation and credit business;

H. All ocean marine business;

I. Fidelity;

J. All aviation, aerospace and satellite business;

K. All railroad business;

L. All insurances on growing or standing crops;

M. Flood and/or earthquake, when written as such;

N. Difference in conditions insurances and similar kinds of insurances, however styled, insofar as they may provide coverage for losses from the following causes:

a. Flood, surface water, waves, tidal water or tidal waves, overflow of streams or other bodies of water or spray from any of the foregoing, all whether wind driven or not, except when covering property in transit; or

b. Earthquake, landslide, subsidence or other earth movement or volcanic eruption, except when covering property in transit.

O. Mortgage impairment insurances and similar kinds of insurances, however styled;

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P. Loss or damage caused by or resulting from war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard war exclusion clause;

Q. Certain nuclear risks;

R. Loss arising from pollution or environment impairment;

S. Losses in respect of overhead transmission and distribution lines and their supporting structures other than those on or within 150 meters (or 500 feet) of the insured premises. It is understood and agreed that public utilities extension and/or suppliers’ extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ policy;

T. Terrorism;

U. Mold;

V. All assessments from the FHCF;

W. Extra contractual obligations and amounts in excess of policy limits; and

X. Loss adjustment expenses incurred in investigating, processing and settling losses under the Subject Business, which will be covered only through the application of the Loss Adjustment Expense Factor.

ARTICLE 27

Notices

Any notices required to be provided under this Agreement shall be effective if provided in writing by facsimile transmission or by physical delivery to:

If to the Ceding Insurer:

Heritage Property & Casualty Insurance Company

700 Central Ave., Ste. 500

St. Petersburg, FL 33701

Attn: Bruce Lucas, Chairman & Chief Investment Officer

Phone: 727.362.7202

Email: blucas@heritagepci.com

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If to the Reinsurer:

Citrus Re Ltd.

c/o Kane (Bermuda) Limited

6^th Floor, Cumberland House

1 Victoria Street

Hamilton HM 11, Bermuda

Attn: Managing Director

Telephone No.: (441) 292-7505

Facsimile No.: (441) 292-1243

ARTICLE 28

Additional Cedents

The Ceding Insurer will have the right to add as ceding parties to this Agreement any entity that becomes a subsidiary or affiliate of Heritage Property & Casualty Insurance Company, only (i) to the extent the business to be ceded by such subsidiary is substantially similar to the Subject Business, (ii) only as of the beginning of each Annual Risk Period (other than the first Annual Risk Period following inclusion in the relevant Reset of Updated Exposure Data relating to the Policies of such entity included in the Subject Business), and (iii) the Ceding Insurer has delivered a certification substantially in the form attached hereto as Exhibit K (a “Certificate of Additional Cedent”) to the Reinsurer. Upon the Ceding Insurer’s compliance with clauses (i) - (iii) above, this Agreement shall cover policies written by such affiliate. The Ceding Insurer shall promptly provide notice to the Bermuda Monetary Authority of the addition of any affiliate to this Agreement. Any new such affiliate added to this Agreement pursuant to this Article 28 will be entitled to all of the rights and privileges of the Ceding Insurer and subject to all of the Ceding Insurer’s obligations hereunder.

ARTICLE 29

Errors and Omissions

A. The Reinsurer is reinsuring, subject to the terms and conditions of this Agreement, the obligations of the Ceding Insurer arising under or in conjunction with any Policy. The Ceding Insurer shall be the sole judge as to:

1. what shall constitute a claim or loss covered under any Policy;

2. the Ceding Insurer’s liability thereunder;

3. the amount or amounts that it shall be proper for the Ceding Insurer to pay thereunder.

B. The Reinsurer shall be bound by the judgment of the Ceding Insurer as to the obligation(s) and liability(ies) of the Ceding Insurer under any Policy.

C. Any inadvertent error, omission or delay in complying with the terms and conditions of this Agreement shall not be held to relieve either party hereto from any liability that would attach to it hereunder if such error, omission or delay had not been made; provided, that such act, delay, omission or error shall not impose any greater liability on the Reinsurer than would have attached hereunder if such act, delay, omission or error had not occurred, and such error, omission or delay is rectified immediately upon discovery by the responsible party.

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ARTICLE 30

Insolvency

A. This Article 30 and the laws of the domiciliary state shall apply in the event of insolvency of either party to this Agreement. In the event of a conflict between provision of this Article and the laws of the domiciliary state of any company covered hereunder, that domiciliary state’s laws shall prevail.

B. In the event of the insolvency of the Ceding Insurer, this reinsurance (or the portion of any risk or obligation assumed by the Reinsurer, if required by applicable law) shall be payable directly to the Ceding Insurer, or to its liquidator, receiver, conservator or statutory successor, either: (i) on the basis of the liability of the Ceding Insurer, or (ii) on the basis of claims filed and allowed in the liquidation proceeding, whichever may be required by applicable statute without diminution because of the insolvency of the Ceding Insurer or because the liquidator, receiver, conservator or statutory successor of the Ceding Insurer has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Ceding Insurer shall give written notice to the Reinsurer of the pendency of a claim against the Ceding Insurer indicating the Policy reinsured, which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses that it may deem available to the Ceding Insurer or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the court, against the Ceding Insurer as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to the Ceding Insurer solely as a result of the defense undertaken by the Reinsurer.

C. Where two or more reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Agreement as though such expense had been incurred by the Ceding Insurer.

D. As to all reinsurance made, ceded, renewed or otherwise becoming effective under this Agreement, the reinsurance shall be payable as set forth above by the Reinsurer to the Ceding Insurer or to its liquidator, receiver, conservator or statutory successor, except (i) where the Agreement specifically provides another payee in the event of the insolvency of the Ceding Insurer, and (ii) where the Reinsurer, with any consent required by any insurance regulatory body and the direct insured or insureds, has assumed such Policy obligations of the Ceding Insurer as direct obligations of the Reinsurer to the payees under such Policies and in substitution for the obligations of the Ceding Insurer to such payees. In that event only, and if the Ceding Insurer is entirely released from its obligations under such Policies, the Reinsurer shall pay any loss directly to payees under such Policies.

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ARTICLE 31

Arbitration

A. As a condition precedent to any right of action hereunder, any irreconcilable dispute arising out of the interpretation, performance or breach of this Agreement, including the formation or validity thereof, whether arising before or after the expiry or termination of this Agreement, shall be submitted for decision to a panel of three arbitrators. Notice requesting arbitration will be in writing and sent by certified mail, return receipt requested, or such reputable courier service as is capable of returning proof of receipt of such notice by the recipient to the party demanding arbitration.

B. One arbitrator shall be appointed by each party. If either party fails to appoint its arbitrator within 30 days after being requested to do so by the other party, the latter, after 10 days notice by certified mail or reputable courier as provided above of its intention to do so, may appoint the second arbitrator.

C. The two arbitrators shall, before instituting the hearing, appoint an impartial third arbitrator who shall preside at the hearing. If the two arbitrators are unable to agree upon the third arbitrator within 30 days of their appointment, the Ceding Insurer shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days of being requested to do so, either party may request a district court judge of the federal district court having jurisdiction over the geographical area in which the arbitration is to take place, or if the federal court declines to act, the state court having general jurisdiction in such area to select the third arbitrator from a list of six individuals (three named by each arbitrator previously appointed). All arbitrators shall be disinterested active or former senior executives of insurance or reinsurance companies or Underwriters at Lloyd’s, London.

D. Within 30 days after notice of appointment of all arbitrators, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules for hearings. The panel shall be relieved of all judicial formality and shall not be bound by the strict rules of procedure and evidence. Unless the panel agrees otherwise, arbitration shall take place in St. Petersburg, Florida, but the venue may be changed when deemed by the panel to be in the best interest of the arbitration proceeding. Insofar as the arbitration panel looks to substantive law, it shall consider the law of the State of Florida. The decision of any two arbitrators when rendered in writing shall be final and binding. The panel is empowered to grant interim relief as it may deem appropriate.

E. The panel shall make its decision considering the custom and practice of the applicable insurance and reinsurance business as promptly as possible following the termination of the hearings. Judgment upon the award may be entered in any court having jurisdiction thereof.

F. Any claims asserted by a party against any other party with respect to this Agreement or any agreement related to this Agreement shall be asserted in a single arbitration proceeding, and it is agreed that if such claims are asserted in more than one arbitration proceeding, that the

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claims shall be consolidated in a single arbitration proceeding, to be heard by the first arbitration panel that is appropriately selected and constituted. The parties hereto further agree that any arbitration under this Agreement shall, at the sole option of any party, be consolidated with any other arbitration relating to the reinsurance program to which this Agreement pertains.

G. Each party shall bear the expense of the arbitrator appointed by or for it and shall jointly and equally bear with the other party the cost of the third arbitrator. The remaining costs of the arbitration shall be allocated by the panel. The panel may, at its discretion, award such further costs and expenses as it considers appropriate, including but not limited to attorneys fees, to the extent permitted by law. However, the panel may not award any exemplary or punitive damages.

ARTICLE 32

Service of Suit

(Notwithstanding anything else in this Article, this Article is not intended to conflict with or override the obligation of the parties to arbitrate their disputes in accordance with the Arbitration Article.)

A. In the event of the failure of the Reinsurer to perform its obligations hereunder, the Reinsurer, at the request of the Ceding Insurer, shall submit to the exclusive jurisdiction of any federal or Florida State court located in the State of Florida. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Reinsurer, once the appropriate court is selected, whether such court is the one originally chosen by the Ceding Insurer and accepted by the Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, shall comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against the Reinsurer upon this Agreement, shall abide by the final decision of such court or of any appellate court in the event of an appeal.

B. Service of process in such suit may be made upon the agent for the service of process named below. CT Corporation System, 1200 S Pine Island Rd # 250, Plantation, FL 33324, is hereby appointed as attorney-in-fact for the Reinsurer and shall be authorized and directed to accept service of process on behalf of the Reinsurer in any such suit.

C. Further, pursuant to any statute of any state, territory or district of the United States that makes provision therefor, the Reinsurer hereby designates the Insurance Commissioner of the State of Florida, or other officer specified for that purpose in the statute, or his successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceedings instituted by or on behalf of the Ceding Insurer or any beneficiary hereunder arising out of this Agreement, and hereby designates the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.

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ARTICLE 33

Governing Law and Jurisdiction

A. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Florida, exclusive of conflict of law rules.

B. Jurisdiction. With respect to any suit, action or proceeding relating to this Agreement, each party hereto irrevocably:

1. submits to the exclusive jurisdiction of any federal or Florida State court located in the State of Florida;

2. waives any objection which it may have at any time to the laying of venue of any suit, action or proceeding brought in any such court, waives any claim that such proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such suit, action or proceeding, that such court does not have any jurisdiction over such party; and

3. waives any claim to punitive, exemplary or multiplied damages from the other.

ARTICLE 34

Entire Agreement

This Agreement and the Basic Documents set forth all of the rights, duties and obligations between the Ceding Insurer and the Reinsurer with respect to the subject matter hereof and supersede any and all prior or contemporaneous negotiations, commitments, agreements and understandings, both written and oral, between the parties with respect to matters referred to in this Agreement. This Agreement may not be modified or changed except by an amendment to this Agreement in writing signed by both parties.

ARTICLE 35

Non-Waiver

The failure of the Ceding Insurer or the Reinsurer to insist on compliance with this Agreement or to exercise any right or remedy hereunder shall not constitute a waiver of any rights contained in this Agreement nor prevent either party from thereafter demanding full and complete compliance nor prevent either party from exercising such remedy in the future.

41

ARTICLE 36

Mode of Execution

A. This Agreement may be executed by:

1. an original written ink signature of paper documents;

2. an exchange of facsimile or .pdf copies showing the original written ink signature of paper documents; or

3. electronic signature technology employing computer software and a digital signature or digitizer pen pad to capture a person’s handwritten signature in such a manner that the signature is unique to the person signing, is under the sole control of the person signing, is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed, such signature is invalidated.

B. The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Agreement. This Agreement may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original, but such counterparts shall together constitute but one and the same instrument.

[Signature pages follow]

42

IN WITNESS WHEREOF, the Reinsurer and Ceding Insurer have caused this Agreement to be executed by its duly authorized representative(s) this 17^th day of April, in the year of 2014.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY
By:
Name:	RICHARD A. WIDDICOMBE
Title:	PRESIDENT
CITRUS RE LTD.
By:
Name:
Title:

Signature page to Property Catastrophe Excess of Loss Reinsurance Agreement

IN WITNESS WHEREOF, the Reinsurer and Ceding Insurer have caused this Agreement to be executed by its duly authorized representative(s) this 17^th day of April, in the year of 2014.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY
By:
Name:
Title:
CITRUS RE LTD.
By:
Name:	Emma Atherton
Title:	Alternate Director

Signature page to Property Catastrophe Excess of Loss Reinsurance Agreement

EX-10.31

Exhibit 10.31

EXECUTION VERSION

PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE AGREEMENT

issued to

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY

TABLE OF CONTENTS

		Page
ARTICLE 1	DEFINITIONS		1
ARTICLE 2	BUSINESS COVERED		13
ARTICLE 3	TERM		15
ARTICLE 4	TERRITORY		15
ARTICLE 5	ESTIMATED PAYABLE LOSS AND PAYMENT OF LOSSES		15
ARTICLE 6	REINSURANCE PREMIUM		19
ARTICLE 7	EARLY TERMINATION		21
ARTICLE 8	EXTENSION		23
ARTICLE 9	INTEREST		25
ARTICLE 10	REINSURANCE TRUST ACCOUNT		26
ARTICLE 11	RESET AGENT		28
ARTICLE 12	FEDERAL TERRORISM EXCESS RECOVERY		31
ARTICLE 13	NET RETAINED LIABILITY		31
ARTICLE 14	ORIGINAL CONDITIONS		31
ARTICLE 15	NO THIRD PARTY RIGHTS		31
ARTICLE 16	OFFSET		32
ARTICLE 17	LIMITED RECOURSE		32
ARTICLE 18	NO PETITION		32
ARTICLE 19	LOSS SETTLEMENTS		32
ARTICLE 20	SALVAGE AND SUBROGATION		33
ARTICLE 21	REPORTS AND NOTICES		33
ARTICLE 22	AGENT		33
ARTICLE 23	CURRENCY		33
ARTICLE 24	ACCESS TO RECORDS		34

-i-

TABLE OF CONTENTS

(continued)

		Page
ARTICLE 25	CONFIDENTIALITY		34
ARTICLE 26	EXCLUSIONS		35
ARTICLE 27	NOTICES		36
ARTICLE 28	ADDITIONAL CEDENTS		37
ARTICLE 29	ERRORS AND OMISSIONS		37
ARTICLE 30	INSOLVENCY		38
ARTICLE 31	ARBITRATION		39
ARTICLE 32	SERVICE OF SUIT		40
ARTICLE 33	GOVERNING LAW AND JURISDICTION		41
ARTICLE 34	ENTIRE AGREEMENT		41
ARTICLE 35	NON-WAIVER		41
ARTICLE 36	MODE OF EXECUTION		42

-ii-

TABLE OF CONTENTS

(continued)

EXHIBITS

Exhibit A	Form of Reset Agent Agreement
Exhibit B	Form of Proof of Loss Claim
Exhibit C	Form of Reduced Interest Spread Statement
Exhibit D	Form of Informational Loss Estimate Notice
Exhibit E	Form of Issuance Premium Payment Certificate
Exhibit F	Form of Supplemental Premium Payment Certificate
Exhibit G	Form of Early Termination Notice
Exhibit H	Form of Notice of Non-Payment
Exhibit I	Form of Extension Notice
Exhibit J	Form of Reduced Extension Spread Statement
Exhibit K	Form of Certificate of Additional Cedent
Exhibit L	Form of Extension Termination Notice
Exhibit M	Form of Substitute Reset Statement

-iii-

PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE AGREEMENT

(this “Agreement”)

by and among

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY, together with any

other affiliate who becomes a party hereto in accordance with the terms hereof

(the “Ceding Insurer”)

and

CITRUS RE LTD.

(the “Reinsurer”)

W I T N E S S E T H

The Reinsurer hereby reinsures the Ceding Insurer to the extent and on the terms and conditions and subject to the exceptions, exclusions and limitations hereinafter set forth in this Agreement.

ARTICLE 1

Definitions

“30-Day Amount” means, on the date of any Proof of Loss Claim, the amount of Loss Reserves that are estimated and scheduled by the Ceding Insurer to become Paid Losses within 30 calendar days following such date; provided, that the 30-Day Amount may not exceed the lower of (i) 100% of the Ceding Insurer’s Loss Reserves as of such date and (ii) 100% of the Ceding Insurer’s Paid Losses for the immediately preceding 30-day period.

“30-Day Reimbursement Amount” means, as of each Payment Date, if the Loss Payment as of a Payment Date is less than $0, the absolute value of such result.

“Accrual Period” means, with respect to a Payment Date, the period from and including the immediately preceding Payment Date (or the Effective Date, in the case of the First Payment Date) to, but not including, such Payment Date.

“Accrual Period True-Up Interest Amount” has the meaning set forth in Article 9.A.

“Actual Growth Factor” means, for any Loss Event, the ratio of (i) the Average Annual Loss as of the later of the May 31 and the August 31 immediately preceding the Named Storm End Date to (ii) the Average Annual Loss of the Projected Exposure Data as of the most recent Calculation Date.

“Actual Payable Loss” means for each Loss Event, the Estimated Payable Loss for such Loss Event as set forth in the True-Up Interest Statement, which as been subject to the Claims Procedures and assessment of the estimated Loss Reserves by the Loss Reserve Specialist.

“Actual Reduced Principal Amount” has the meaning set forth in Article 9.A.

“Annual Risk Period” means the following consecutive risk periods within the Risk Period: the first period will begin at 12:00:00 a.m., Eastern Time, on June 1, 2014 and end at 11:59:59 p.m., Eastern Time, on May 31, 2015; each of the subsequent consecutive periods will begin at 12:00:00 a.m., Eastern Time, on June 1 and end at 11:59:59 p.m., Eastern Time, on May 31 and the last such consecutive period will end at 11:59:59 p.m., Eastern Time, on April 17, 2017. Loss Events that being during an Annual Risk Period will be deemed to have occurred in such Annual Risk Period in their entirety even if the Annual Risk Period expires while the Loss Event is in progress.

“Attachment Point” means the Initial Attachment Point and, following any Reset, the applicable Updated Attachment Point.

“Available Information” has the meaning ascribed to it in the Series Supplement.

“Average Annual Loss” means the annual modeled expected Loss to the Layer of the Subject Business as calculated by the Reset Agent suing the Escrow Model with 100% Insurance Percentage and application of the Attachment Point and the Exhaustion Point.

“Basic Documents” has the meaning ascribed to it in the Series Supplement.

“Business Day” means a day other than (i) a Saturday, (ii) a Sunday or (iii) a day on which banking institutions or trust companies in any of Bermuda, the City of London or the City of New York are authorized or required by applicable law, regulation or executive order to remain closed.

“Calculation Date” has the meaning set forth in Article 11.C.

“Ceding Insurer” has the meaning set forth in the preamble.

“Ceding Insurer Additional Withdrawal” has the meaning set forth in Article 10.G.

“Ceding Insurer Additional Withdrawal Amount” has the meaning set forth in Article 10.G.

“Ceding Insurer Additional Withdrawal Interest” has the meaning set forth in Article 10.G.

“Ceding Insurer Additional Withdrawal Return Amount” has the meaning set forth in Article 10.G.

“Certificate of Additional Cedent” has the meaning set forth in Article 28.

“Change in Law or Tax Event” has the meaning set forth in Article 7.D.

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“Claims Procedures” means the arithmetical agreed upon procedures to be performed in accordance with the Agreed Upon Procedures Standards of the American Institute of Certified Public Accountants, pursuant to the Claims Reviewer Agreement on each Proof of Loss Claim, Reduced Extension Spread Statement and True-Up Interest Statement.

“Claims Reviewer” means KPMG Audit Limited or its successor, or any replacement claims reviewer appointed pursuant to the Claims Reviewer Agreement.

“Claims Reviewer Agreement” means the claims reviewer agreement between the Reinsurer and the Claims Reviewer dated as of the date hereof (as it may be duly amended, supplemented or otherwise modified from time to time).

“Clean Up Termination Event” has the meaning set forth in Article 7.B.

“Commutation” has the meaning set forth in Article 3.D.

“Commutation Date” has the meaning set forth in Article 3.D.

“Confidential Information” has the meaning set forth in Article 25.A.

“Coverage Limit” has the meaning set forth in Article 2.C.

“Covered Area” means the Initial Covered Area and, following a Reset, the applicable Updated Covered Area.

“Data Review Procedures” has the meaning set forth in Article 11.F.

“Early Termination” has the meaning set forth in Article 7.A.

“Early Termination Date” has the meaning set forth in Article 7.A.

“Early Termination Event” means any of a Clean Up Termination Event, a Service Provider Failure Event, a Reinsurance Agreement Default Event, a Change in Law or Tax Event, or a Supplemental Premium Termination Event, as applicable.

“Early Termination Notice” has the meaning set forth in Article 7.A.

“Effective Date” means April 24, 2014.

“Escrow Agent” means Innovasafe, Inc. or its successor.

“Escrow Loss Probability Model” has the meaning set forth in Article 11.H.

“Estimated Payable Loss” has the meaning set forth in Article 5.A.

“Estimated Reduced Interest Principal Amount” means, for each Accrual Period, an amount equal to the lesser of (i) the sum of each of the most recent Net Estimated Payable Losses for each Loss Event for which a Reduced Interest Spread Statement was delivered and (ii) the Outstanding Principal Amount as of the first day of such Accrual Period after giving effect to any Principal Reduction applied to the Series 2014-2 Notes on such date.

3

“Event Loss Payment” means, with respect to each Loss Event, (a) the Net Payable Loss as of such Payment Date minus (b) the Net Payable Loss as of the immediately preceding Payment Date.

“Event Notice” means a written notice from the Ceding Insurer to the Reinsurer, the Indenture Trustee, the Claims Reviewer and the Loss Reserve Specialist of the occurrence of a Loss Event, which may contain a Proof of Loss Claim.

“Exclusion” has the meaning set forth in Article 26.

“Exhaustion Point” means the Initial Exhaustion Point and, following any Reset, the applicable Updated Exhaustion Point.

“Exposure Data” has the meaning set forth in Article 11.C.

“Extended Termination Date” means the date (or, as the context requires, any interim date) to which this Agreement is extended upon receipt by the Reinsurer from the Ceding Insurer of an Extension Notice, as such date may be re-extended from time to time as set forth herein, but in no event shall such date be later than the Final Extended Termination Date.

“Extension Determination Date” means the date which is three (3) Business Days prior to the Scheduled Termination Date or any Extended Termination Date, as the case may be.

“Extension Event” means either an Extension Event I or an Extension Event II.

“Extension Event I” has the meaning set forth in Article 8.D.

“Extension Event II” has the meaning set forth in Article 8.D.

“Extension Notice” has the meaning set forth in Article 8.B.

“Extension Period” has the meaning set forth in Article 8.A.

“Extension Spread” means a per annum rate equal to (i) 3.00% for an Extension Event I and (ii) 0.50% for an Extension Event II.

“Extension Termination Notice” means a notice delivered by the Ceding Insurer to the Reinsurer, substantially in the form of Exhibit L hereto, on or prior to any Extension Determination Date to terminate the extension of the term of this Agreement on the immediately following Extended Termination Date; provided that if the Ceding Insurer has at any time delivered a Reduced Interest Spread Statement and paid an Interest Spread Amount calculated in whole or in part at the Reduced Interest Spread, such extension will terminate on the immediately following Extended Termination Date only if the Ceding Insurer has delivered a True-Up Interest Statement to the Reinsurer at least 32 Business Days prior to such Extended Termination Date.

4

“FHCF Reinsurance” means the Ceding Insurer’s mandatory participation in the Florida Hurricane Catastrophe Fund.

“Final Extended Termination Date” means April 24, 2019 (or if such day is not a Business Day, the immediately following Business Day).

“Final Loss Payment Date” means the earlier to occur of (i) the Commutation Date and (ii) the Final Extended Termination Date.

“Final Loss Reserve Certificate” has the meaning set forth in Article 5.E.

“Final Proof of Loss Claim” means a final Proof of Loss Claim.

“First Payment Date” means July 17, 2014 (or if such day is not a Business Day, the immediately following Business Day).

“Growth Allowance Factor” means 1.10.

“Growth Limitation Factor” means, for a Loss Event, the lesser of 1.00 and the ratio of the Growth Allowance Factor to the applicable Actual Growth Factor.

“Indenture” means the Indenture, dated as of the date hereof, between the Reinsurer and the Indenture Trustee, as supplemented by the Series Supplement dated as of the date hereof.

“Indenture Trustee” means Citibank, N.A. or its successors or assigns or any appointed replacement under the Indenture.

“Informational Loss Estimate” has the meaning set forth in the Article 5.D.

“Informational Loss Estimate Notice” has the meaning set forth in Article 5.D.

“Initial Attachment Point” means $350,000,000.

“Initial Covered Area” means Florida.

“Initial Exhaustion Point” means $450,000,000.

“Initial Exposure Data” has the meaning set forth in Article 11.C.

“Initial Insurance Percentage” means 50%.

“Initial Issuance Premium Payment” has the meaning set forth in Section 6.B.

“Initial Issuance Premium Payment Certificate” has the meaning set forth in Section 6.B.

5

“Initial Loss Adjustment Expense Factor” means 1.06.

“Initial Modeled Projected Attachment Probability” means 1.10%

“Initial Modeled Projected Expected Loss” means 1.04%.

“Initial Projected Exposure Data” has the meaning set forth in Article 11.C.

“Initial Risk Interest Spread” means 3.75% per annum.

“Initial Stated Reinsurance” means the initial stated reinsurance, which includes the mandatory FHCF Reinsurance.

“Installment Premium” has the meaning set forth in Article 6.A.

“Insurance Management Agreement” means the insurance management agreement between the Reinsurer and the Insurance Manager dated as of the date hereof (as it may be duly amended, supplemented or otherwise modified from time to time).

“Insurance Manager” means Kane (Bermuda) Limited or its successors or assigns.

“Insurance Percentage” means the Initial Insurance Percentage and, following any Reset, the applicable Updated Insurance Percentage.

“Interest Calculation Convention” means all payments of interest calculated using the Risk Interest Spread, Reduced Interest Spread, Extension Spread or True-Up Spread, as the case may be, will be calculated on the basis of the actual number of days elapsed in the related Accrual Period (or partial Accrual Period) and a 360-day year.

“Interest Spread Amount” has the meaning set forth in the Series Supplement.

“Layer” means the difference between the Attachment Point and the Exhaustion Point.

“Loss Adjustment Expense Factor” means the Initial Loss Adjustment Expense Factor and, following any Reset, the applicable Updated Loss Adjustment Expense Factor; provided, however, such factor may not be less than 1.04 nor greater than 1.08.

“Loss Event” means any Named Storm that begins during an Annual Risk Period and results in Losses under one or more Policies.

“Loss Payment” means, as of each Payment Date, the sum of all Event Loss Payments due and payable as of a Payment Date with respect to all Loss Events; provided, that any Loss Payment shall not be greater than the Outstanding Principal Amount on the immediately prior Payment Date or the Effective Date, as applicable.

“Loss Payment Report” has the meaning specified in the Claims Reviewer Agreement.

6

“Loss Reserve Certificate” means any Preliminary Loss Reserve Certificate or Final Loss Reserve Certificate.

“Loss Reserves” means the liability established by the Ceding Insurer to reflect the estimated unpaid Losses resulting from a Loss Event (including Incurred But Not Reported Losses) that the Ceding Insurer will ultimately be required to pay under the Policies, excluding any losses excluded by the Exclusions, except for the 30-Day Amount which will be considered Paid Losses; provided, however, that for the purpose of calculating Net Payable Loss on the Commutation Date, Loss Reserves will mean the amount estimated by the Ceding Insurer and, if the Loss Reserve Specialist concludes that the Loss Reserves specified by the Ceding Insurer is not reasonable, then Loss Reserves will mean the lower of the amount estimated by the Ceding Insurer and the amount that represents the best point estimate of the Loss Reserves by the Loss Reserve Specialist as set forth in the applicable Loss Reserve Certificate.

“Loss Reserve Procedures” has the meaning specified in the Loss Reserve Specialist Agreement.

“Loss Reserve Specialist” means KPMG Advisory Limited or its successor, or any replacement loss reserve specialist appointed pursuant to the terms of the Loss Reserve Specialist Agreement.

“Loss Reserve Specialist Agreement” means the loss reserve specialist agreement between the Reinsurer and the Loss Reserve Specialist dated as of the date hereof (as it may be duly amended, supplemented or otherwise modified from time to time).

“Losses” means the sum of (i) Paid Losses and (ii) if applicable, Loss Reserves. Losses do not include the Exclusions (except as covered by the Loss Adjustment Expense Factor).

“Max Modeled Projected Attachment Probability” means 1.37%.

“Max Modeled Projected Expected Loss” means 1.31%.

“Modeling Agent” means AIR Worldwide Corporation or its successor.

“Named Storm” means any storm or storm system that has been declared by the Reporting Service to be a tropical cyclone, tropical storm, or hurricane at any time and any place (whether inside or outside the Covered Area) and may include, by way of example, wind, gusts, rough waves, hail, rain, tornadoes, cyclones, storm surge and/or flood, and further includes all ensuing damage caused thereby, resulting therefrom, or as a consequence thereof (including the merging with one or more separate storms or storm systems into a combined storm or storm system). The duration of the Named Storm includes the time period: (i) beginning on the date when a “watch”, “warning”, advisory or bulletin in respect of such Named Storm is first issued by the Reporting Service; (ii) continuing for the time period thereafter during which such Named Storm continues, regardless of its category rating and regardless of whether a “watch”, “warning”, advisory or bulleting remains in effect for such Named Storm; and (iii) ending at 11:59:59 p.m. on the fourth calendar day following the day of issuance of the last “watch”, “warning”, advisory or bulletin in respect of such Named Storm issued by the Reporting Service (“Named Storm End Date”).

7

“Net Actual Payable Loss” has the meaning set forth in Article 9.A.

“Net Estimated Payable Loss” means, for each Accrual Period and for each Loss Event, the greater of (i) zero and (ii) an amount equal to (a) the Estimated Payable Loss for such Loss Event stated in the Reduced Interest Spread Statement most recently received by the Reinsurer at least four Business Days prior to the first day of such Accrual Period minus (b) the sum of all Event Loss Payments paid to the Ceding Insurer arising from such Loss Event up to and including the first day of such Accrual Period.

“Net Payable Loss” has the meaning set forth in Article 2.C.

“Note Payment Account” has the meaning ascribed to it in the Indenture.

“Notes” means the Series 2014-2 Class 1 Principal-at-Risk Variable Rate Notes due April 24, 2017.

“Original Principal Amount” means $50,000,000.

“Outstanding Principal Amount” means, as of any Payment Date, the Original Principal Amount as reduced by the aggregate of all Principal Reductions, if any, applied to the Series 2014-2 Notes on all Payment Dates prior to such Payment Date (or, if the context requires, on or prior to such Payment Date) and as increased by the aggregate of all 30-Day Reimbursement Amounts; provided that the Outstanding Principal Amount will not be less than zero nor greater than the Original Principal Amount.

“Paid Claims Rate” means, as determined in good faith in the sole discretion of the Ceding Insurer, the ratio of Ultimate Net Losses for a Loss Event calculated using only Paid Losses divided by Ultimate Net Loss calculated using both Paid Losses and the Loss Reserves, if any, for such Loss Event.

“Paid Losses” means the amount of losses actually paid by the Ceding Insurer in settlement of claims or liability under the Policies from a Loss Event.

“Partial Extension” has the meaning set forth in Article 8.C.

“Partial Repayment Amount” means, to the extent Series 2014-2 Notes are extended pursuant to a Partial Extension, the portion of the Outstanding Principal Amount not extended pursuant to such Partial Extension, as redeemed on a pro rata basis.

“Payment Date” means (i) each July 17, October 17, January 17 and April 17 (except for April 17, 2017) commencing on the First Payment Date and continuing to, but excluding the Scheduled Termination Date; provided, however, that the Payment Date will be on the 17th day of each month for Accrual Periods commencing on the next Payment Date occurring at least five (5) Business Days after a Loss Payment, (ii) the Scheduled Termination Date and (iii) if there are one or more Extension Events, the 17th day of each

8

month during the Extension Period (except for April 17, 2019) and the Final Extended Redemption Date; provided, that, in each case, if any such day is not a Business Day, on the immediately following Business Day; provided, further, that if an Early Termination Event occurs, the final Payment Date will be on the Early Termination Date.

“Permitted Investments” has the meaning ascribed to it in the Reinsurance Trust Agreement.

“Permitted Investments Yield” has the meaning ascribed in the Series Supplement.

“Policy” means all policies, contracts and agreements of insurance issued or contracted by the Ceding Insurer and comprising the Subject Business.

“Preliminary Loss Reserve Certificate” has the meaning given in Article 5.E.

“Premium Deposit Account” has the meaning set forth in Article 6.C.

“Premium Deposit Account Withdrawal Date” has the meaning set forth in Article 6.C.

“Principal Reduction” means, on each Payment Date, an amount equal to the sum of (i) all Loss Payments, if any, paid or payable by the Reinsurer to the Ceding Insurer on such Payment Date under this Agreement and (ii) any Partial Repayment Amount applied to the Series 2014-2 Notes on such Payment Date.

“Projected Exposure Data” has the meaning set forth in Article 11.C.

“Proof of Loss Claim” means a letter from the Ceding Insurer to the Reinsurer, substantially in the form of Exhibit B hereto, the Claims Reviewer and, if applicable, the Loss Reserve Specialist in the form specified in the Reinsurance Agreement, which sets out the following calculations for the related Loss Event: (i) the Ultimate Net Loss; (ii) the Net Payable Loss; (iii) the Event Loss Payment; (iv) the Loss Payment payable on the applicable Payment Date; (v) the corresponding Principal Reduction; and (vi) the corresponding Outstanding Principal Amount.

“Records” has the meaning set forth in Article 24.

“Reduced Extension Spread Event” has the meaning specified in Article 9.A.

“Reduced Extension Spread Report” has the meaning specified in Article 9.A.

“Reduced Extension Spread Statement” has the meaning specified in Article 9.A.

“Reduced Interest Spread” means 0.50% per annum.

“Reduced Interest Spread Statement” has the meaning set forth in Article 5.B.

“Reinsurance Agreement Default Event” has the meaning set forth in 7.F.

9

“Reinsurance Agreement Default Event Premium” has the meaning set forth in 7.G.

“Reinsurance Trust Account” has the meaning set forth in the Reinsurance Trust Agreement.

“Reinsurance Trust Agreement” means the reinsurance trust agreement among the Reinsurer, as grantor, the Ceding Insurer, as sole beneficiary, the Reinsurance Trustee, as trustee, pursuant to which a reinsurance trust will be established in connection with this Agreement for the benefit of the Ceding Insurer on the Effective Date.

“Reinsurance Trustee” means Citibank, N.A. or its successors or assigns, as trustee under the Reinsurance Trust Agreement.

“Reinsurer” has the meaning set forth in the preamble.

“Reporting Service” means the National Hurricane Center, Weather Prediction Center or other support center or agency of the National Weather Service or their successor(s).

“Reset” has the meaning set forth in Article 11.A.

“Reset Agent” has the meaning set forth in the Reset Agent Agreement.

“Reset Agent Failure Event” means a failure by the Reset Agent to deliver a Reset Report pursuant to the terms of the Reset Agent Agreement.

“Reset Effective Date” means the first day of the applicable Annual Risk Period.

“Reset Report” has the meaning specified in Article 11.I.

“Residual Interest Amount” means an amount equal to the sum of the present value, discounted at an annual rate of the Initial Risk Interest Spread, of each of the scheduled payments of the Interest Spread Amount that would have been payable for the remaining portion of the relevant Accrual Period days during the period from the Payment Date when the Outstanding Principal Amount (including the effect of any Principal Reduction to the Series 2014-2 Notes on such date) has been reduced to zero to and excluding the first anniversary date of the Effective Date.

“Risk Interest Principal Amount” means, for each Accrual Period, an amount equal to (i) the Outstanding Principal Amount as of the first day of such Accrual Period after giving effect to any Principal Reduction allocated to the Series 2014-2 Notes on such date minus (ii) the Estimated Reduced Interest Principal Amount for such Accrual Period; provided, that the Risk Interest Principal Amount shall not be less than zero.

“Risk Interest Spread” means the Initial Risk Interest Spread; provided that if the Ceding Insurer elects a Variable Reset with respect to an Annual Risk Period, the applicable Updated Risk Interest Spread will apply for each Accrual Period that begins in such Annual Risk Period. If a Substitute Reset occurs with respect to an Annual Risk Period, no Risk Spread Calculation will be performed and the Risk Interest Spread that will apply for each Accrual Period that beings in such Annual Risk Period will be the Risk Interest Spread that was applicable for the immediately preceding Annual Risk Period.

10

“Risk Period” means the period commencing at 12:00:00 a.m., Eastern Time, on June 1, 2014 to and including the earlier of (i) 11:59:59 p.m., Eastern Time, on April 17, 2017 or (ii) in the event of an Early Termination Event, 11:59:59 p.m., Eastern Time, on the date on which an Early Termination Event occurs.

“Risk Spread Calculation” has the meaning set forth in the Reset Agent Agreement.

“Scheduled Termination Date” means April 24, 2017 (or if such day is not a Business Day, on the immediately following Business Day).

“Series 2014-2 Notes” means the Reinsurer’s Series 2014-2 Class 1 Principal-at-Risk Variable Rate Notes due April 24, 2017.

“Series Supplement” means the separate supplement to the Indenture which sets forth specific terms with respect to the Notes, dated as of the date hereof, between the Reinsurer and the Indenture Trustee.

“Service Provider Failure Event” has the meaning set forth in Article 7.C.

“Stated Reinsurance” has the meaning set forth in Article 2.D.

“Subject Business” has the meaning given in Article 2.B.

“Substitute Reset” has the meaning set forth in Article 11.J.

“Substitute Reset Report” has the meaning set forth in Article 11.K.

“Substitute Reset Statement” has the meaning set forth in Article 11.K.

“Supplemental Premium Payment” has the meaning set forth in Article 6.B.

“Supplemental Premium Payment Certificate” has the meaning set forth in Article 6.B.

“Supplemental Premium Termination Event” has the meaning set forth in 7.E.

“Termination Date” means (i) the earlier to occur of the Early Termination Date, if any, and the Scheduled Termination Date or (ii) following receipt by the Reinsurer from the Ceding Insurer of an Extension Notice, the earlier to occur of the Extended Termination Date or Early Termination Date, as the case may be.

“Total Insured Value” means the sum of the full value of the insured’s covered property, business income values and any other covered property interests.

“True-Up Interest Amount” has the meaning set forth in Article 9.A.

11

“True-Up Interest Payment Date” has the meaning set forth in Article 9.A.

“True-Up Interest Report” has the meaning set forth in Article 9.A.

“True-Up Interest Statement” has the meaning set forth in Article 9.A.

“True-Up Principal Amount” has the meaning set forth in Article 9.A.

“True-Up Spread” means, for each Accrual Period, a rate equal to the applicable Risk Interest Spread for such Accrual Period minus the Reduced Interest Spread.

“Ultimate Net Loss” means, for each Loss Event, the result of the following calculation:

Step 1 – Determine Policies covered and calculate applicable Losses under such Policies;

Step 2 – Multiply the amount determined in Step 1 by the applicable Growth Limitation Factor;

Step 3 – Multiply the amount determined in Step 2 by the applicable Loss Adjustment Expense Factor;

Step 4 – Determine the applicable FHCF Reinsurance determined by the losses in Step 1 and subtract it from the losses in Step 3;

Step 5 – Subtract the applicable amount of Stated Reinsurance (other than the FHCF Reinsurance applied in Step 5) from the amount in Step 4;

provided, that the Ultimate Net Loss (i) will be based only on Paid Losses and shall include the 30-Day Amount for purposes of calculating any Loss Payment to be made prior to the Commutation Date; and (ii) will be based on Paid Losses and Loss Reserves (excluding any 30-Day Amount) for (A) calculating the Loss Payment on the Commutation Date, (B) any Reduced Interest Spread Statement, and (C) any Reduced Extension Spread Statement.

“Updated Attachment Point” has the meaning set forth in Article 11.A.

“Updated Covered Area” means, following a Reset, any of any of Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, West Virginia and the District of Columbia, as specified by the Ceding Insurer on or prior to the April 15 immediately following each Calculation Date.

“Updated Exhaustion Point” has the meaning set forth in Article 11.A.

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“Updated Exposure Data” has the meaning set forth in Article 11.C.

“Updated Insurance Percentage” has the meaning set forth in Article 11.A.

“Updated Loss Adjustment Expense Factor” means, if applicable in connection with a Reset, any updated Loss Adjustment Expense Factor provided by the Ceding Insurer for the Layer, provided, however, that such figure shall not be less than 1.04 or greater than 1.08.

“Updated Projected Exposure Data” has the meaning set forth in Article 11.C.

“Updated Risk Interest Spread” has the meaning set forth in the Reset Agent Agreement.

“Updated Stated Reinsurance” has the meaning set forth in Article 2.D.

“Variable Reset” means the Ceding Insurer’s election to provide an Updated Attachment Point that changes the Modeled Projected Attachment Probability.

“Variable Reset Notice” means a written notice from the Ceding Insurer to the Reinsurer electing a Variable Reset and setting the Updated Attachment Point for the next Annual Risk Period.

ARTICLE 2

Business Covered

A. Coverage. Subject to the Coverage Limit set forth in clause C of this Article 2, and the other terms and conditions of this Agreement, the Reinsurer will indemnify the Ceding Insurer from time to time on each Payment Date for certain losses to the Subject Business in excess of the Layer, resulting from one or more Loss Events during the Risk Period. For the avoidance of doubt, if a Loss Event occurs after the Extension Determination Date and prior to the Scheduled Termination Date and the Ceding Insurer has not delivered an Extension Notice prior to such Extension Termination Date, the Reinsurer shall not be liable under this Agreement for such Loss Event. If the Risk Period expires while a Loss Event is in progress, subject to the conditions to coverage contained in this Agreement, such Loss Event will be covered under this Agreement.

B. Subject Business. The subject business reinsured hereunder (“Subject Business”) shall be comprised of the overall insurance portfolio of the Ceding Insurer relating to its commercial, including commercial residential, and residential property insurance business and will consist of Policies in force as of the commencement of the Risk Period and new and renewal Policies becoming effective thereafter during the Risk Period covering risks located in the Covered Area.

C. Coverage Limit. The aggregate of all Loss Payments to be made by the Reinsurer to the Ceding Insurer under this Agreement may not exceed the Original Principal Amount as reduced by the aggregate of all Partial Repayment Amounts and as increased by the aggregate of all 30-Day Reimbursement Amounts (“Coverage Limit”). The net payable loss

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under this Agreement (the “Net Payable Loss”) will be, with respect to each Loss Event, the applicable Insurance Percentage multiplied by the amount, if any, by which the Ultimate Net Loss exceeds the applicable Attachment Point, up to the applicable Exhaustion Point. Any Net Payable Loss will be based on Paid Losses and 30-Day Amounts only and will be the amount calculated under a Proof of Loss Claim which has been subjected to the Claims Procedures by the Claims Reviewer subject to limited exceptions, except for payments due on the Final Loss Payment Date, in which case the final settlement of all liabilities in respect of such Loss Event under the Reinsurance Agreement may include payment for any Loss Reserves on the Final Loss Payment Date. Additionally, the Ceding Insurer may provide an estimate of Net Payable Loss for the purposes of calculating the Estimated Payable Loss, which will not be subjected to the Claims Procedures and will take into account Paid Losses as well as Loss Reserves estimates. Furthermore, for the purpose of calculating the Actual Payable Loss set forth in the True-Up Interest Statement, Net Payable Loss will be calculated based on the Paid Losses set forth in the most recently provided Proof of Loss Claim with respect to each applicable Loss Event and subjected to the Claims Procedures by the Claims Reviewer and Loss Reserves reviewed by the Loss Reserve Specialist.

D. Stated Reinsurance. The Ceding Insurer has provided to the Reinsurer and the Modeling Agent the Initial Stated Reinsurance as of the date of the Initial Exposure Data, which is applicable for the first Annual Risk Period. For subsequent Annual Risk Periods, the Ceding Insurer may provide updated stated reinsurance to the Reinsurer and the Reset Agent on or prior to the April 15 immediately following each Calculation Date (“Updated Stated Reinsurance”, and when referred to along with the Initial Stated Reinsurance, “Stated Reinsurance”). Following determination of the actual FHCF Reinsurance, the Net Payable Loss will be recalculated accordingly, which may result in a Loss Payment or a 30-Day Reimbursement Amount. The applicable Stated Reinsurance will inure (whether or not such Stated Reinsurance is actually collected or otherwise in effect) to the benefit of the Layer for such Annual Risk Period; provided, that the Stated Reinsurance may be eroded by prior Loss Events (except for any per risk reinsurance actually in effect, which will inure to the benefit of this Agreement and erode in accordance with its terms). The parties hereto acknowledge and agree that the Stated Reinsurance may not match the actual reinsurance purchased by the Ceding Insurer.

E. Follow the Fortunes. Coverage under this Agreement will be subject in all respects to the same interpretations (whether judicial or otherwise), terms, conditions, waivers, alterations and modifications as the Policies comprising the Subject Business, the true intent being that the Reinsurer will in every respect follow the fortunes of the Ceding Insurer in respect of risks the Ceding Insurer has with respect to the Subject Business. All Paid Losses and Losses with respect to the Policies, whether under strict terms or by way of compromise, shall be binding on the Reinsurer, subject, as applicable, to the Claims Procedures and Loss Reserve Procedures, if applicable.

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ARTICLE 3

Term

A. Term. This Agreement shall take effect on the Effective Date and shall remain in effect until terminated as provided herein. This Agreement may not be cancelled or terminated prior to the later of (a) the Scheduled Termination Date or (b) an Extended Termination Date (but in no event later than the Final Extended Termination Date), except upon the occurrence of an Early Termination Event.

B. Early Termination. In the event of an Early Termination Event, this Agreement shall terminate on the Early Termination Date.

C. Extension. The Ceding Insurer may, at its option, on or prior to any Extension Termination Date, deliver an Extension Notice to the Reinsurer to extend the term of this Agreement in accordance with Article 8. Notwithstanding any Extension Event, the Risk Period will not be extended and the Reinsurer shall not be liable for losses related to any Loss Event with a Date of Loss after the end of the Risk Period.

D. Commutation. The Ceding Insurer may elect to settle (“Commutation”) all remaining claims and obligations with respect to each and every Loss Event (i) on the Scheduled Termination Date or any Extended Termination Date of (A) at least 18 months have elapsed since the last occurring Named Storm End Date and (B) the Paid Claims Rate is at least 95% for such Loss Event, with such Commutation to be effective on the first Payment Date at least 32 Business Days after the date of election of Commutation by the Ceding Insurer (“Commutation Date”) or (ii) on the Final Extended Termination Date. Upon Commutation, no further Event Loss Payments will be owed to the Ceding Insurer under this Agreement.

ARTICLE 4

Territory

The territorial limit of this Agreement is the Covered Area.

ARTICLE 5

Estimated Payable Loss and Payment of Losses

A. Estimated Payable Loss. As of any Payment Date, the “Estimated Payable Loss” for a Loss Event is an amount equal to the Ceding Insurer’s estimate of the Net Payable Loss (taking into account estimated Loss Reserves) with respect to such Loss Event.

B. Reduced Interest Spread Statement. The Ceding Insurer may from time to time deliver a written letter (each such notice, a “Reduced Interest Spread Statement”) to the Reinsurer. A Reduced Interest Spread Statement will be substantially in the form attached hereto as Exhibit C and will contain the following information:

1. the Ceding Insurer’s estimate of the Estimated Payable Loss;

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2. the Net Estimated Payable Loss for the applicable Accrual Period with respect to such Loss Event (calculated using the Estimated Payable Loss set forth pursuant to clause (1) above);

3. the Estimated Reduced Interest Principal Amount as of the date of such Reduced Interest Spread Statement; and

4. the updated Risk Interest Principal Amount as of the date of such Reduced Interest Spread Statement.

C. Once a Reduced Interest Spread Statement is delivered in respect of a Loss Event, each subsequent Reduced Interest Spread Statement, if any, must include the then-current (i) Estimated Payable Loss, (ii) Net Estimated Payable Loss, (iii) Estimated Reduced Interest Principal Amount and (iv) Risk Interest Principal Amount. Each Reduced Interest Spread Statement will take into account each Loss Payment Report (including any Loss Payment specified therein that is to be paid as of the immediately following Payment Date) delivered by the Claims Reviewer at least two Business Days prior to the date of such Reduced Interest Spread Statement if such Loss Payment Report is applicable to a Loss Event accounted for in any Reduced Interest Spread Statement. If in respect of any Loss Events accounted for in a Reduced Interest Spread Statement, there are to be any Loss Payments made on a Payment Date that is prior to the Scheduled Termination Date that were not accounted for in a prior Reduced Interest Spread Statement, the Ceding Insurer will deliver to the Reinsurer, no later than four Business Days prior to such Payment Date, an updated Reduced Interest Spread Statement.

D. Informational Loss Estimate. If following any Loss Event the estimate of Ultimate Net Loss, including Paid Losses and estimated Loss Reserves (as determined by the Ceding Insurer), in respect of such Loss Event (“Informational Loss Estimate”) is greater than either (a) 75% of the applicable attachment point of any Stated Reinsurance which may be eroded by such Loss Event, or (b) 75% of the applicable Attachment Point, then within thirty (30) calendar days after the Ceding Insurer publicly discloses its estimate of Losses in connection with such Loss Event and at each Payment Date thereafter on which such publicly disclosed estimate has changed by more than 5% from that reflected in the previous public disclosure, the Ceding Insurer will notify the Reinsurer, the Indenture Trustee, the Claims Reviewer and the Loss Reserve Specialist of such estimate (each such notice, an “Informational Loss Estimate Notice”). Each Informational Loss Estimate Notice will be substantially in the form attached hereto as Exhibit D. Notwithstanding the foregoing, at the end of any Annual Risk Period only Loss Events subject to clause (b) above in this paragraph will require continued Informational Loss Estimate Notices.

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E. Proof of Loss Claim.

1. The Reinsurer shall not be liable for any Loss Payment unless and until the Reinsurer has received a Proof of Loss Claim (or a final Proof of Loss Claim) from the Ceding Insurer setting out the calculation of the Event Loss Payment for a Loss Event, the Loss Payment and corresponding Principal Reduction in respect of a Payment Date, the 30-Day Reimbursement Amount and the resulting Outstanding Principal Amount; provided, however, that each Proof of Loss Claim submitted by the Ceding Insurer under this Agreement (except as otherwise set forth herein) will be subject to the Claims Procedures performed by the Claims Reviewer and, in connection with the Commutation Date, the Loss Reserves Procedures performed by the Loss Reserve Specialist.

2. A Proof of Loss Claim with respect to a certain Payment Date must be submitted by the Ceding Insurer to the Claims Reviewer on the date which is at least 32 Business Days prior to the relevant Payment Date, and with respect to the Commutation Date, to the Loss Reserve Specialist, at least 52 Business Days prior to the Commutation Date. If a Proof of Loss Claim is submitted less than 32 Business Days prior to a Payment Date, no Loss Payment or 30-Day Reimbursement Amount will be paid until the immediately following Payment Date.

3. In connection with each Proof of Loss Claim submitted on a timely basis by the Ceding Insurer, including in connection with the Commutation Date, the Reinsurer shall cause the Claims Reviewer to submit to the Reinsurer, with information only copies provided to the Ceding Insurer, the Reinsurance Trustee and the Indenture Trustee, a Loss Payment Report with respect to each submitted Proof of Loss Claim at least 32 Business Days prior to the applicable Payment Date, subject to the Claims Reviewer’s ability to achieve the confidence level and error rate level required in the Claims Reviewer Agreement, unless (a) a prior Proof of Loss Claim was previously subject to the Claims Procedures by the Claims Reviewer and such Proof of Loss Claim resulted in a Loss Payment Report with a reviewed amount of Paid Losses without exceptions and (b) the increase in the claimed Paid Losses and 30-Day Amount since the last reviewed Proof of Loss Claim using the Claims Procedures (as described in clause (a) above), notwithstanding the number of intervening Proof of Loss Claim, if any, is $50 million or less.

4. A Final Proof of Loss Claim in connection with the Commutation Date shall be presented by the Ceding Insurer to the Reinsurer, the Indenture Trustee, the Reinsurance Trustee, the Claims Reviewer and the Loss Reserve Specialist, if applicable, on the date which is no later than 52 Business Days prior to the Commutation Date, which Proof of Loss Claim shall include a claim for Loss Reserves as well as for Paid Losses (unlike Proof of Loss Claims delivered with respect to any other Payment Date (which may include only Paid Losses and the 30-Day Amount)). Subject to the Claims Procedures, the Reinsurer will cause the Claims Reviewer to submit to the Reinsurer, with information only copies provided to the Indenture Trustee and the Ceding Insurer, no later than seven Business Days prior to the applicable Payment Date, a Loss Payment Report stating the results of its agreed upon procedures for each Loss Event included in the applicable Proof of Loss Claim on the following amounts: (i) Paid Losses; (ii) the 30-Day Amount, if applicable; (iii) Losses; (iv) Ultimate Net Loss; and (v) the amount of any Loss Payment or 30-Day Reimbursement Amount due and payable.

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5. In connection with the final Proof of Loss Claim submitted on a timely basis by the Ceding Insurer in connection with the Commutation Date, the Reinsurer shall cause the Loss Reserve Specialist to issue a preliminary loss reserve certificate (the “Preliminary Loss Reserve Certificate”), at least 12 Business Days prior to the Commutation Date, and a final loss reserve certificate (the “Final Loss Reserve Certificate”), at least nine Business Days prior to the Commutation Date, to the Reinsurer, with copies provided to the Ceding Insurer and the Indenture Trustee. Such certificates shall state whether, in the Loss Reserve Specialist’s professional judgment, the Loss Reserves estimated by the Ceding Insurer have been computed and fairly state in accordance with the Loss Reserving Standards and represent a reasonable estimate of Loss Reserves for the Policies covered by this Agreement. Loss Reserves will be assessed for reasonableness by the Loss Reserve Specialist in accordance with the Loss Reserve Procedures and, if determined to be unreasonable by the Loss Reserve Specialist, the Loss Reserves will be equal to the lower of the amount estimated by the Ceding Insurer and the amount that represents the best point estimate of Loss Reserves by the Loss Reserve Specialist. The Loss Reserve Specialist Agreement shall provide that, at the Ceding Insurer’s request, following the provision of a Preliminary Loss Reserve Certificate, the Loss Reserve Specialist will meet with representatives of the Ceding Insurer and the Insurance Manager to discuss any of the Ceding Insurer’s questions in respect of such Preliminary Loss Reserve Certificate, with the goal of resolving in good faith any issues or disputes with respect to the Loss Reserve Specialist’s assessment of the Ceding Insurer’s Loss Reserves.

6. If the Final Loss Reserve Certificate is not received by the Reinsurer and the Ceding Insurer at least seven Business Days prior to the Commutation Date (other than because of failure of the Ceding Insurer to comply with the terms of this Agreement), the Loss Reserves specified by the Ceding Insurer in the Final Proof of Loss Claim will be binding on the Reinsurer and the Ceding Insurer for all purposes under this Agreement.

F. Payment of Losses.

1. For each Proof of Loss Claim (or a final Proof of Loss Claim) together with such other documentation and procedures required by this Article 5, the Reinsurer will pay to the Ceding Insurer on the next applicable Payment Date, an amount equal to the Ultimate Net Loss.

2. Any Loss Payment due to the Ceding Insurer will be satisfied either by the Reinsurer’s payment of such Loss Payment to the Ceding Insurer or by the Ceding Insurer’s withdrawal of funds equal to such Loss Payment from the Reinsurance Trust Account on the Payment Date on which such Loss Payment is due.

G. No Liability for Payments under this Agreement. The parties hereto agree that neither the Claims Reviewer nor the Loss Reserve Specialist is obligated in any way to make payments under this Agreement. The Claims Reviewer will be engaged by the Reinsurer under the Claims Reviewer Agreement solely to provide to the Reinsurer the services described in the Claims Reviewer Agreement.

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ARTICLE 6

Reinsurance Premium

A. Premiums. The Ceding Insurer shall make the following premium payments (“Installment Premium”) to the Reinsurer, calculated with respect to each applicable Accrual Period, on the Business Day immediately preceding each Payment Date:

1. for each Accrual Period up to and including the earlier of an Early Termination Date or the Scheduled Termination Date, an amount for such Accrual Period equal to the applicable Interest Spread Amount payable by the Reinsurer for such Accrual Period;

2. for each Accrual Period during the Extension Period, if any, an amount for such Accrual Period equal to the applicable Extension Spread Amount payable by the Reinsurer for such Accrual Period;

3. the True-Up Interest Amount, if any;

4. the Residual Interest Amount, if any;

5. the Reinsurance Agreement Default Event Premium, if any; and

6. the 30-Day Reimbursement Amount, if any.

The Installment Premium will be calculated on the basis of the actual number of days elapsed in the related period and a 360-day year.

B. Initial Issuance and Supplemental Premiums. The Ceding Insurer will also make a payment to the Reinsurer (i) on the Effective Date in an amount equal to the expenses incurred by the Reinsurer in connection with the establishment of the Reinsurer and the program, the original issuance of the Series 2014-2 Notes and certain anticipated operating expenses payable to third parties by the Reinsurer in connection herewith (the “Initial Issuance Premium Payment”) as set forth in a certificate from the Reinsurer, substantially in the form attached hereto as Exhibit E (each, an “Initial Issuance Premium Payment Certificate”), and (ii) on each anniversary of the Effective Date, and from time to time if required, in an amount equal to the operating expenses to be incurred by the Reinsurer, including relating to the Insurance Manager, the Indenture Trustee, the Reinsurance Trust Trustee, the Reset Agent, the Claims Reviewer, the Loss Reserve Specialist, the Escrow Agent and other service providers, each as applicable (each payment pursuant to this clause (ii), an “Supplemental Premium Payment”) as set forth in a certificate from the Reinsurer, substantially in the form attached hereto as Exhibit F (each, a “Supplemental Premium Payment Certificate”). The Reinsurer shall also provide the Ceding Insurer with all documentation reasonably necessary to substantiate any expenses contributing to the Initial Issuance Premium Payment or any Supplemental Premium Payment.

C. Premium Deposit Account.

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1. On the Effective Date, the Ceding Insurer will establish a separate cash account (a “Premium Deposit Account”) with Citibank, N.A. (“Citibank”) and deposit into such account an amount equal to the Installment Premiums payable for the first two Accrual Periods. The Premium Deposit Account will be an account in the name of the Ceding Insurer and will be assigned and pledged to the Reinsurer as security for the payment of Installment Premiums for the Series 2014-2 Notes. At least 60 calendar days before each Payment Date, the Ceding Insurer (a) will deposit any amount necessary so that the amount in the Premium Deposit Account as of such date is at least equal to the Installment Premium payments due on the next two succeeding Payment Dates, or (b) may withdraw any amount held in the Premium Deposit Account in excess of the Installment Premium payment due on the next two succeeding Payment Dates in each case subject to paragraph 3 below. Following the calculation of any Updated Risk Interest Spread, within 5 Business Days of such calculation, the Ceding Insurer (i) will deposit any amount necessary so that the amount in the Premium Deposit Account as of such date is at least equal to the Installment Premium Payment due on the next two succeeding Payment Dates (based on the Updated Risk Interest Spread) or (ii) may withdraw any amount held in the Premium Deposit Account in excess of the Installment Premium payment due on the next two succeeding Payment Dates (based on the Updated Risk Interest Spread).

2. In the event that the Ceding Insurer fails to pay any Installment Premium when due, then within four Business Days of the relevant Payment Date (“Premium Deposit Account Withdrawal Date”), the Reinsurer will be authorized to have an amount equal to the Installment Premium due withdrawn from the Premium Deposit Account and paid to the Reinsurer. Any payment by the Ceding Insurer of Installment Premium on or after the Premium Deposit Account Withdrawal Date will be deposited in the Premium Deposit Account; provided, that a payment to the Premium Deposit Account will only cure a default under this Agreement if received on or before the Premium Deposit Account Withdrawal Date.

3. If the Ceding Insurer elects an Extension Event, on the Extension Determination Date immediately prior to the Scheduled Termination Date, the Ceding Insurer will deposit into the Premium Deposit Account an amount equal to the Installment Premium anticipated to be due at the end of the next two Accrual Periods. At least 60 days before each Payment Date during the Extension Period, the Ceding Insurer will deposit any amount necessary so that the amount in the Premium Deposit Account as of such date is at least equal to the Installment Premium payments due on the two next succeeding Payment Dates; except that with respect to the Payment Date immediately preceding the Commutation Date, no additional deposit will be due.

4. Any accrued interest earned on the Premium Deposit Account shall be credited to the Ceding Insurer and such interest shall not be subject to any right of set-off under this Agreement.

5. The Ceding Insurer shall charge in favor of the Reinsurer the Premium Deposit Account to secure its obligations to make Installment Premium payments under this Agreement and shall cause Citibank to provide account balance information to the Reinsurer on a monthly basis and on request.

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D. U.S. Federal Excise Tax. The Ceding Insurer shall timely pay the U.S. federal excise tax due with respect to all premiums paid hereunder to the extent such premium is subject to the U.S. federal tax excise without deduction from Installment Premiums paid to the Reinsurer and shall have the sole right to any refunds of such payments.

E. Taxes. All payments by the Ceding Insurer to the Reinsurer under this Agreement, including, for the avoidance of doubt, the Ceding Insurer Additional Withdrawal Interest payable in accordance with Article 10.G, will be made free and clear of, and without deduction or withholding for or on account of, any and all present and future withholding taxes, unless required by law. If the Ceding Insurer is required by law to deduct or withhold for or on account of any tax from or in respect of any amount payable under this Agreement:

1. the Ceding Insurer shall make all such deductions and withholdings in respect of such tax;

2. the Ceding Insurer shall pay the full amount deducted or withheld in respect of any taxes (including the full amount required to be deducted or withheld from any additional amount paid under clause (3) below) to the relevant taxation or governmental authority in accordance with the applicable law promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed; and

3. the sum payable by the Ceding Insurer to the Reinsurer shall be increased as may be necessary so that, after the Ceding Insurer has made all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this paragraph), the Reinsurer shall receive an amount equal to the sum it would have received had no such deductions or withholdings been made in respect of any taxes.

ARTICLE 7

Early Termination

A. Early Termination. Pursuant to Sections B, C, D and F of this Article 7, the Ceding Insurer shall have the right to give notice of early termination of this Agreement to the Reinsurer substantially in the form attached hereto as Exhibit G (“Early Termination Notice”), which shall cause an Early Termination Event to occur as set forth herein (other than a Reinsurance Agreement Default Event, which is effected pursuant to Section F of this Article 7). If an Early Termination Event has occurred, this Agreement will be terminated prior to the Scheduled Termination Date or, if applicable, on the Extended Termination Date immediately following the Early Termination Event (an “Early Termination”). The date of an Early Termination will be the first Payment Date that occurs (i)(a) if an Early Termination Event occurs less than 35 calendar days prior to the Scheduled Termination Date or any Extended Termination Date, the Scheduled Termination Date or such Extended Termination Date, as the case may be, or otherwise (b) 35

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calendar days after the date of such Early Termination Event and (ii) if the Ceding Insurer has at any time delivered a Reduced Interest Spread Statement and paid (or will pay as of the immediately following Payment Date) an Interest Spread Amount calculated in whole or in part at the Reduced Interest Spread, the date that is 32 Business Days after the date the Ceding Insurer has delivered a True-Up Interest Statement to the Reinsurer (“Early Termination Date”).

B. Clean Up Termination Event. A “Clean Up Termination Event” shall occur on the date on which the Outstanding Principal Amount is equal to or less than 10% of the Original Principal Amount and the Ceding Insurer, at its option, delivers to the Reinsurer written notice to terminate this Agreement (effective as of the Early Termination Date); provided, that such termination notice may not be given during the period from and including the Effective Date to but not including the first anniversary date of the Effective Date.

C. Service Provider Failure Event. A “Service Provider Failure Event” shall occur on the date on which the Ceding Insurer gives written notice to the Reinsurer (with a copy to the Indenture Trustee) that it elects to terminate this Agreement effective as of the Effective Date (i) if (a) a Service Provider becomes incapable of performing, or fails to perform, its duties and obligations (and fails to remedy such nonperformance within the applicable cure period) under the applicable Service Provider Agreement (other than as a result of the failure of the Ceding Insurer to comply with the terms of the applicable Service Provider Agreement); (b) the Reinsurer is unable to identify a replacement for such Service Provider with the cooperation of the Ceding Insurer within forty-five (45) calendar days following such Service Provider Failure Event; and (c) in the case of a Service Provider Failure Event with respect to the Reset Agent in respect of any Reset, the Claims Reviewer does not perform certain specified procedures in relation to a Substitute Reset in accordance with the Claims Reviewer Agreement (and fails to remedy such nonperformance within the applicable cure period). For the purpose of a Service Provider Failure Event, “Service Provider” means each of the Insurance Manager and the Reset Agent, and “Service Provider Agreement” means the Insurance Management Agreement and the Reset Agent Agreement, as the case may be.

D. Change in Law or Tax Event. A “Change in Law or Tax Event” shall occur on the date on which the Ceding Insurer, at its option, delivers to the Reinsurer written notice to terminate this Agreement (effective as of the Early Termination Date) if, in the Ceding Insurer’s sole judgment (following written advice of the Ceding Insurer’s legal counsel with a copy provided to the Reinsurer and the Indenture Trustee), there is an amendment to, or change in, the laws or regulations of any relevant jurisdiction (including laws or regulations affecting taxation), or the issuance of, or an amendment to, or change in, or clarification of, an official interpretation or application of such laws or regulations, which (x) would impair the ability of the Ceding Insurer or the Reinsurer to lawfully perform, or would result in material adverse consequences or materially increase the regulatory burden for the Ceding Insurer or the Reinsurer if it continued to perform, its obligations under this Agreement, the Series 2014-2 Notes or the Indenture, as applicable or (y) would materially increase the taxes paid by the Ceding Insurer by disallowing all or part of the deduction for U.S. federal tax purposes for the Premium payable by the Ceding Insurer to the Reinsurer under this Agreement.

E. Supplemental Premium Termination Event. A “Supplemental Premium Termination Event” shall occur on the date on which the Ceding Insurer, at its option, delivers to the Reinsurer written notice to terminate this Agreement (effective as of the Early Termination Date) if the Supplemental Premium Payment exceeds $750,000 in any calendar year.

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F. Reinsurance Agreement Default Event. A “Reinsurance Agreement Default Event” shall occur on the date on which an event of default has arisen under this Agreement from a failure of the Ceding Insurer to make any Installment Premium payment, Premium Deposit Account deposit or 30-Day Reimbursement Amount payment when due under this Agreement and such failure to pay or make a deposit continues for five Business Days after the receipt of notice, substantially in the form attached hereto as Exhibit H, of such failure from the Reinsurer. Unless such failure to pay or make a deposit is cured within five Business Days of the receipt of such notice, such failure shall cause a Reinsurance Agreement Default Event. A Reinsurance Agreement Default Event shall occur on the date that the Reinsurer submits a notice, substantially in the form attached hereto as Exhibit H, of the occurrence of a Reinsurance Agreement Default Event to the Ceding Insurer and the Indenture Trustee.

G. Reinsurance Agreement Default Event Premium. Upon the occurrence of Reinsurance Agreement Default Event, an additional amount will be payable with by the Ceding Insurer to the Reinsurer, which will be equal to the sum of the present values, discounted at the Risk Interest Spread in effect as of the Early Termination Date, of each of the scheduled payments of interest at such Risk Interest Spread calculated on the Risk Interest Principal Amount determined as of the Early Termination Date for each Accrual Period that would have occurred during the period from the Early Termination Date to the Scheduled Termination Date.

ARTICLE 8

Extension

A. Extension. The Ceding Insurer may, at its option, require the Reinsurer to extend the term of this Agreement past the Scheduled Termination Date to one or more Extended Termination Dates if the requirements for an Extension Event are satisfied by providing an Extension Notice to the Reinsurer on or prior to the Extension Determination Date preceding the Scheduled Termination Date. If the Ceding Insurer has at any time delivered a Reduced Interest Spread Statement and paid (or will pay as of the immediately following Payment Date) an Installment Premium calculated in whole or in part at the Reduced Interest Spread, the Ceding Insurer must provide an Extension Notice to the Reinsurer on or prior to the Extension Determination Date immediately preceding the Scheduled Termination Date unless the Ceding Insurer has delivered a True-Up Interest Statement to the Reinsurer at least 32 Business Days prior to the Scheduled Termination Date. Prior to the date that is three Business Days prior to the then-current Termination Date, the Ceding Insurer may elect to require the Reinsurer to extend the term of this Agreement only with respect to the portion of the Outstanding Principal Amount that is being extended pursuant to a Partial Extension, as specified in the relevant Extension Notice. Each one-month period from and including the Scheduled Termination Date or the relevant Extended Termination Date, as the case may be, to and including the immediately succeeding Extended Termination Date is referred to as the “Extension Period”.

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B. Extension Notice. The “Extension Notice” shall be a written notice, in substantially the form attached hereto as Exhibit I, from the Ceding Insurer to the Reinsurer and the Indenture Trustee of the Ceding Insurer’s election to extend the term of this Agreement beyond the Scheduled Termination Date (or, in the case of a Partial Extension, beyond the Scheduled Termination Date or Extended Termination Date, as applicable). Each Extension Notice must specify (i) which Extension Event is elected and (ii) whether a Partial Extension has occurred and, if so, the portion of the Outstanding Principal Amount that is being extended pursuant to such Partial Extension.

C. Partial Extension. In connection with each Extension Event, if any, the Ceding Insurer may elect to require the Reinsurer to extend the maturity of the Series 2014-2 Notes with respect to a portion of the Outstanding Principal Amount by specifying in the relevant Extension Notice the occurrence of a partial extension and the portion of the Outstanding Principal Amount subject thereto (each such partial extension, a “Partial Extension”).

D. Extension Events. An “Extension Event” shall be either an Extension Event I or an Extension Event II. An Extension Event II may occur without the occurrence of an Extension Event I. An Extension Event I may be followed by an Extension Event II if the conditions for an Extension Event II have been satisfied.

1. The Ceding Insurer may elect to require the Reinsurer to extend the term of this Agreement beyond the Scheduled Termination Date to the Payment Date immediately following the Scheduled Termination Date by providing an Extension Notice to the Reinsurer on or prior to the Extension Determination Date immediately preceding the Scheduled Termination Date. Thereafter, the extension will remain in effect to automatically extend further the terms of this Agreement to each subsequent Payment Date for up to twenty-three additional periods of one month each unless and until the Ceding Insurer elects to terminate the Extension Event I by providing an Extension Termination Notice on or prior to the applicable Extension Determination Date or converting the Extension Event I into an Extension Event II if the conditions for an Extension Event II have been satisfied; provided that the term shall not be extended beyond the Final Extended Termination Date (“Extension Event I”).

2. The Ceding Insurer may elect to require the Reinsurer to extend the term of this Agreement beyond the Scheduled Termination Date or any Extended Termination Date to the Payment Date immediately following the Scheduled Termination Date or such Extended Termination Date, as applicable, if (i) an Extension Notice is provided by the Ceding Insurer to the Reinsurer on or prior to the applicable Extension Determination Date; and (ii) a Reduced Extension Spread Event has occurred prior to the Scheduled Termination Date. Thereafter, the extension will remain in effect to automatically extend further the term of this Agreement to each subsequent Payment Date for up to twenty-three additional periods of one month each, unless and until the Ceding Insurer elects to terminate the Extension Event II by providing an Extension Termination Notice on or prior to the applicable Extension Determination Date; provided that the term shall not be extended beyond the Final Extended Termination Date (“Extension Event II”).

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ARTICLE 9

Interest

A. Reserve True-Up Calculation.

1. True-Up Interest Statement. If the Ceding Insurer has submitted at any time a Reduced Interest Spread Statement and paid (or will pay as of the immediately following Payment Date) any Installment Premium at the applicable Reduced Interest Spread, then no later than 32 Business Days prior to the Termination Date, the Ceding Insurer shall submit to the Reinsurer, Claims Reviewer and Loss Reserve Specialist a written letter (“True-Up Interest Statement”) that sets forth (i) the Estimated Payable Loss for each Loss Event with respect to which the Ceding Insurer submitted at any time a Reduced Interest Spread Statement and paid (or will pay as of the immediately following Payment Date) any Installment Premium at the Reduced Interest Spread and (ii) the True-Up Interest Amount payable to the Reinsurer.

2. True-Up Interest Report. The True-Up Interest Statement will be subjected to the Claims Procedures by the Claims Reviewer and the assessment of the Ceding Insurer’s estimates of Loss Reserves by the Loss Reserve Specialist. The Claims Reviewer will deliver to the Reinsurer, with information only copies provided to the Ceding Insurer, a report (“True-Up Interest Report”) in respect of its agreed upon claims procedures on a True-Up Interest Statement.

3. The True-Up Interest Amount. If a Reduced Interest Event has occurred, then the True-Up Interest Amount, as set forth in the True-Up Interest Report, will be payable on the Termination Date. The “True-Up Interest Amount” as of the Termination Date shall be calculated as follows:

Step 1 — determine the Net Actual Payable Loss for each Accrual Period and each Loss Event for which an Estimated Payable Loss greater than zero for such Loss Event was applied to such Accrual Period, where “Net Actual Payable Loss” is an amount equal to (i) the Actual Payable Loss for such Loss Event minus (ii) the sum of all Event Loss Payments paid to the Ceding Insurer in respect of such Loss Event up to and including the first day of such Accrual Period;

Step 2 — for each Accrual Period, aggregate all Net Actual Payable Losses determined for such Accrual Period in step 1; provided that such amount may not be greater than the Outstanding Principal Amount as of the first day of such Accrual Period after giving effect to any Principal Reduction to the Series 2014-2 Notes on such date (“Actual Reduced Principal Amount”);

Step 3 — for each Accrual Period, subtract the Actual Reduced Principal Amount determined for such Accrual Period in step 2 from the Estimated Reduced Interest Principal Amount for such Accrual Period (“True-Up Principal Amount”);

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Step 4 — for each Accrual Period, determine the amount of interest the Ceding Insurer overpaid or underpaid for such Accrual Period and interest thereon by multiplying the True-Up Principal Amount for such Accrual Period by the True-Up Spread for such Accrual Period (using the Interest Calculation Convention) and accruing interest on each such result for the period beginning on the first day of the subsequent Accrual Period and ending on the True-Up Interest Payment Date, compounded at the first day of each such subsequent Accrual Period at the applicable Risk Interest Spread or Extension Spread, as applicable, for such subsequent Accrual Period, (“Accrual Period True-Up Interest Amount”); and

Step 5 — determine the “True-Up Interest Amount” by aggregating all Accrual Period True-Up Interest Amounts.

If the True-Up Interest Amount is positive, the True-Up Interest Amount will be paid to the Noteholders on the first Payment Date at least three Business Days following the delivery of a True-Up Interest Report (“True-Up Interest Payment Date”). If such True-Up Interest Amount is not positive, no payment will be made.

4. Reduced Extension Spread. A “Reduced Extension Spread Event” will occur upon satisfaction of all of the following conditions: (i) receipt by the Reinsurer from the Ceding Insurer under this Agreement of a written letter, substantially in the form of Exhibit J hereto (a “Reduced Extension Spread Statement”), to the effect that the Ultimate Net Loss (including both Paid Losses and Loss Reserves) arising from a Loss Event during any Annual Risk Period is estimated by the Ceding Insurer to be greater than 75% of the Attachment Point in effect for such Annual Risk Period and (ii) the delivery to the Reinsurer by the Claims Reviewer of a Claims Review Letter and a report (a “Reduced Extension Spread Report”) in respect of the Claim’s Reviewer’s agreed upon procedures of the Paid Losses specified in such Reduced Extension Spread Statement. The Reduced Extension Spread Statement shall contain a certification by the Ceding Insurer that the Loss Reserves included in the Reduced Extension Spread Statement, as of the date of the certification, has been estimated in a manner consistent with the Ceding Insurer’s reserving practices as applied in the preparation of its published financial statements.

ARTICLE 10

Reinsurance Trust Account

A. Reinsurance Trust Account. On or before the Effective Date, the Reinsurer, as grantor, shall enter into the Reinsurance Trust Agreement, and establish the Reinsurance Trust Account with the Reinsurance Trustee for the benefit of the Ceding Insurer, as beneficiary.

B. Transfer to Reinsurance Trust Account. On the Effective Date, the Reinsurer shall irrevocably deposit all of the gross proceeds from the sale of the Series 2014-2 Notes into the Note Payment Account and immediately transfer such proceeds into the Reinsurance Trust Account. Assets in the Reinsurance Trust Account shall be invested only in Permitted Investments. Assets in the Reinsurance Trust Account shall be held in trust by the Reinsurance Trustee for the benefit of the Ceding Insurer as security for the payment of the Reinsurer’s obligations to the Ceding Insurer under this Agreement.

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C. Title of Assets in Reinsurance Trust Account. The Reinsurer shall cause the Indenture Trustee, prior to depositing assets with the Reinsurance Trustee, to execute assignments, endorsements in blank, or transfer legal title to the Reinsurance Trustee of all shares, obligations or any other assets requiring assignments, in order that the Ceding Insurer, or the Reinsurance Trustee upon the direction of the Ceding Insurer, may whenever necessary transfer, assign or negotiate any such assets without consent or signature from the Reinsurer or any other person.

D. Income. The Reinsurer shall be entitled to all interest, earned discount and other income resulting from the investment of the assets, including Permitted Investments Yield, in the Reinsurance Trust Account.

E. Withdrawal from Reinsurance Trust Account.

1. The assets held in the Reinsurance Trust Account will be available to satisfy any obligations of the Reinsurer to the Ceding Insurer under this Agreement, without diminution because of the insolvency of the Ceding Insurer or the Reinsurer.

2. The Reinsurer and the Ceding Insurer agree that the assets in the Reinsurance Trust Account may be withdrawn by the Ceding Insurer at any time, notwithstanding any other provisions in this Agreement and shall be utilized and applied by the Ceding Insurer or its successor by operation of law, including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Ceding Insurer, without diminution because of insolvency on the part of the Ceding Insurer or the Reinsurer, only for the following purposes:

a. to pay or reimburse the Ceding Insurer for any Loss Payments payable by the Reinsurer to the Ceding Insurer under this Agreement, if not otherwise paid by the Reinsurer in accordance with the terms of this Agreement; or

b. where the Ceding Insurer has received notification of termination of the Reinsurance Trust Account and where the Reinsurer’s entire obligation with respect to the Principal Outstanding Amount in effect under this Agreement remains unliquidated and non-discharged, then 10 calendar days prior to such termination date, to withdraw amounts equal to such unliquidated and any non-discharged obligations and deposit such amounts in a separate account, in the name of the Ceding Insurer, in any U.S. bank or trust company, apart from its general assets, in trust for the uses and purposes specified in (a) above as may remain executory after such withdrawal and for any period after such termination date and subject to all of the same terms and conditions set forth in the Reinsurance Trust Agreement.

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F. Release Upon Termination. The Ceding Insurer shall instruct the Reinsurance Trustee to liquidate and release to the Reinsurer for deposit into the Note Payment Account one Business Day prior to the Payment Date which coincides with the Termination Date all assets projected to be remaining in the Reinsurance Trust Account, if any, as of the Termination Date (after all transactions (including Loss Payments) affecting the Reinsurance Trust Account to occur on such date). The Reinsurer and the Ceding Insurer shall cooperate with each other and take all actions required by the Reinsurance Trust Agreement and the Reinsurance Trustee to terminate the Reinsurance Trust Account on the Payment Date which coincides with the Termination Date following all transactions affecting the Reinsurance Trust Account to occur on such date.

G. Return of Assets. In the event that the Ceding Insurer withdraws assets from the Reinsurance Trust Account for the purposes set forth in Article 10.E.2.a in excess of actual amounts required to meet the Reinsurer’s obligations to the Ceding Insurer under this Agreement (in each case, a “Ceding Insurer Additional Withdrawal” and such amount withdrawn, the “Ceding Insurer Additional Withdrawal Amount”), the Ceding Insurer will pay interest on the Ceding Insurer Additional Withdrawal Amount (the “Ceding Insurer Additional Withdrawal Interest”) at a per annum rate equal to the prime rate of interest as published in The Wall Street Journal, calculated by the Ceding Insurer on the basis of the actual number of days elapsed and a 360-day year, until such amounts are returned to the Reinsurance Trust Account (the “Ceding Insurer Additional Withdrawal Return Amount”).

ARTICLE 11

Reset Agent

A. Reset. Using the Updated Projected Exposure Data as of the applicable Calculation Date, the Updated Stated Reinsurance, if any, the Updated Loss Adjustment Expense Factor, if any, and the Escrow Loss Probability Model (based on the Base Case analysis), the Reset Agent will reset (each, a “Reset”) effective as of the Reset Effective Date, the Attachment Point, Exhaustion Point, Risk Interest Spread, if applicable, and Insurance Percentage, using the following procedures. A Substitute Reset will also be deemed a Reset.

1. Reset Effective Date. Each Reset will be effective as of the first day of the applicable Annual Risk Period.

2. Attachment Point. If the Ceding Insurer does not elect a Variable Reset, the Reset Agent will provide (a) an updated Attachment Point (“Updated Attachment Point”) to the nearest one million dollars such that the modeled projected exceedance probability is the highest percentage equal to or less than the Initial Modeled Projected Attachment Probability, (b) an updated Exhaustion Point (“Updated Exhaustion Point”) to the nearest one million dollars such that the modeled projected expected loss is the highest percentage equal to or less than the Initial Modeled Projected Expected Loss for the Layer for such Annual Risk Period and (c) an updated Insurance Percentage (“Updated Insurance Percentage”) equal to the Outstanding Principal Amount on the Payment Date immediately preceding the Reset Date divided by the Layer for such Annual Risk Period, provided, that such percentage will not be greater than 100%. If the Ceding Insurer elects a Variable Reset, the Reset Agent will provide (a) an updated

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Attachment Point designated by the Ceding Insurer and the modeled projected attachment probability, which shall be an amount equal to or less than the Max Modeled Projected Attachment Probability for such Annual Risk Period, (b) an updated Exhaustion Point designated by the Ceding Insurer and the modeled projected expected loss, which shall be an amount equal to or less than the Max Modeled Projected Expected Loss for the applicable Layer and such Annual Risk Period and (c) an updated Insurance Percentage equal to the Outstanding Principal Amount on the Payment Date immediately preceding the Reset Date divided by the Layer for such Annual Risk Period, provided, that such percentage will not be greater than 100%.

B. Reset Agent Agreement. On the Effective Date, the Reinsurer shall enter into the Reset Agent Agreement with the Reset Agent pursuant to which the Reset Agent will perform a Risk Spread Calculation, as described in and pursuant to the Reset Agent Agreement.

C. Exposure Data. The Ceding Insurer has provided to the Reinsurer and the Modeling Agent exposure data as of February 28, 2014 concerning the Policies in-force in respect of the Subject Business (“Initial Exposure Data”) and the Ceding Insurer’s best estimate of growth of Policies in-force in respect of the Subject Business as projected to August 31, 2014 (“Initial Projected Exposure Data”). The Ceding Insurer will provide updated exposure data as of March 31, 2015 and March 31, 2016 (each, a “Calculation Date”) (“Updated Exposure Data” along with and when referred to along with the Initial Exposure Data, “Exposure Data”) and updated projected exposure data and/or a measure of expected exposure growth to August 31 of the applicable year (“Updated Projected Exposure Data”, and when referred to along with the Initial Projected Exposure Data, “Projected Exposure Data”) to the Reinsurer and the Reset Agent no later than the April 15 immediately following each Calculation Date in conformity with the Initial Exposure Data and Initial Projected Exposure Data. The Ceding Insurer will also provide a list of the states to be included in the Covered Area for the next Annual Risk Period. Upon receipt of Updated Exposure Data and Updated Projected Exposure Data, the Reset Agent will perform the Data Review Procedures.

D. No payments will be made to the Ceding Insurer in respect of any Annual Risk Period (except in the first Annual Risk Period) unless the Reset Agent, or in the case of a Substitute Reset, the Ceding Insurer, subject to agreed arithmetical calculation procedures performed by the Claims Reviewer, has established and confirmed to the Reinsurer, the Claims Reviewer and, if applicable, the Ceding Insurer, for such Annual Risk Period, the applicable Updated Attachment Point, the applicable Updated Exhaustion Point and the applicable Updated Insurance Percentage, as revised following a Reset or Substitute Reset, as applicable.

E. Updated Loss Adjustment Expense Factor. The Ceding Insurer may, at its option, update the Loss Adjustment Expense Factor; provided, however, that such factor may not be less than 1.04 nor greater than 1.08. The Updated Loss Adjustment Expense Factor, if any, will be provided by the Ceding Insurer to the Reinsurer and the Reset Agent no later than the April 15 immediately following each Calculation Date. The Updated Loss Adjustment Expense Factor will be applied during the Reset and will become effective as of the Reset Effective Date.

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F. Data Review Procedures. Pursuant to the Reset Agent Agreement, the Reset Agent will review the Updated Exposure Data by verifying that locations, policy types, and construction classes can be mapped to formats appropriate to the Escrow Loss Probability Model, that values for coverage limits and deductibles are provided, and that there are no obvious errors in such values (together, the “Data Review Procedures”). The Reset Agent will also confirm the Average Annual Loss of the Updated Projected Exposure Data is not less than the Average Annual Loss of the applicable Updated Exposure Data. If the Average Annual Loss of the applicable Projected Exposure Data is less than the Average Annual Loss of the applicable Exposure Data, then the Updated Projected Exposure Data will be the Updated Exposure Data. The Reset Agent must document the Data Review Procedures, along with options to be used in the analysis.

G. Changes to Escrow Loss Probability Model. In performing a Reset, the Reset Agent will be required on a timely basis, to the extent possible, and with notice to the Reinsurer and the Ceding Insurer, to make such formatting and other changes to the Escrow Loss Probability Model as may be necessary, in its discretion, to reflect changes in the Updated Exposure Data, data inputs and formats, computer and operating systems and other such factors that would otherwise invalidate the use of the Escrow Loss Probability Model; provided, however, that the scientific, engineering and probabilistic assumptions underlying the Escrow Loss Probability Model may not be changed, the impact of any such changes will not affect the validity of the engineering assumptions previously used by the Modeling Agent in the Escrow Loss Probability Model, and the Escrow Loss Probability Model will generate the same results for the Initial Exposure Data regardless of any such changes.

H. Escrow Loss Probability Model. The Modeling Agent has developed a computer simulation model to estimate loss probabilities. To perform each Reset, the Reset Agent will use version 14.0.1 of the AIR Hurricane Model for the United States and version 4.0 of the AIR Hurricane Model for Hawaii, as implemented in Touchstone 1.5.2 and CATRADER 15.0.2, the same models, which will be held in escrow, as used to determine the Initial Modeled Projected Expected Loss (“Escrow Loss Probability Model”), which term will include a certified copy of such model provided by the Reset Agent in the event of a failure to obtain release of the escrowed materials from the Escrow Agent in a timely manner for any reason.

I. Reset Report. The Reset Agent will notify the Reinsurer and the Ceding Insurer of the respective Updated Attachment Point, Updated Exhaustion Point, Updated Insurance Percentage and Updated Modeled Projected Attachment Probability, and in the case of a Variable Reset, the respective Updated Modeled Projected Expected Loss and Updated Risk Interest Spread, no later than the May 10 immediately prior to the relevant Reset Effective Date (each, a “Reset Report”).

J. Substitute Reset. If, in respect of a Calculation Date, a Reset Failure Event occurs and a Replacement Reset Agent cannot be identified within 45 days of such Reset Failure Event, the Ceding Insurer will update the applicable Attachment Point, the applicable Exhaustion Point and the applicable Insurance Percentage (“Substitute Reset”).

K. The Ceding Insurer will calculate the Substitute Reset as follows: (i) the Updated Attachment Point will be calculated, for the applicable Annual Risk Period, by dividing the projected Total Insured Value as of August 31 of the applicable year by the Total Insured Value as of the previous August 31 and multiplying the resulting quotient by the corresponding Attachment Point then in-force; (ii) the Updated Exhaustion Point will increase or decrease by

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the same dollar amount that the corresponding Updated Attachment Point increased or decreased; and (iii) the Insurance Percentage will be the percentage derived from dividing the Outstanding Principal Amount as of the Payment Date immediately preceding the applicable Reset Effective Date (after giving effect to any Principal Reduction on such Payment Date) by the Layer (provided that such percentage will not be less than 100%). The Claims Reviewer will perform arithmetical recalculation agreed upon procedures to the Substitute Reset Statement provided by the Ceding Insurer in substantially the form attached hereto as Exhibit M (“Substitute Reset Statement”) and deliver to the Reinsurer, with information only copies to the Ceding Insurer , a report (“Substitute Reset Report”) in respect of its agreed upon procedures on a Substitute Reset Statement.

ARTICLE 12

Federal Terrorism Excess Recovery

Any loss reimbursement or payment made by the Ceding Insurer under the Terrorism Risk Insurance Act of 2002, including the Terrorism Risk Insurance Extension Act of 2005, the Terrorism Risk Insurance Program Reauthorization Act of 2007, and any amendments or extension thereof, shall be entirely disregarded in applying all of the provisions of this Agreement.

ARTICLE 13

Net Retained Liability

The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Ceding Insurer to collect from any other reinsurer(s), whether specific or general, any amounts that may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

ARTICLE 14

Original Conditions

All reinsurance under this Agreement shall be subject to the same terms, conditions, waivers and interpretations, and to the same modifications and alterations as the respective Policies of the Ceding Insurer. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Agreement.

ARTICLE 15

No Third Party Rights

This Agreement is solely between the Ceding Insurer and the Reinsurer, and in no instance shall an, insured, claimant or other third party have any rights under this Agreement except as may be expressly provided otherwise herein.

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ARTICLE 16

Offset

Neither the Ceding Insurer nor the Reinsurer shall have the right to offset any balance or balances, on account of premiums or on account of a Loss Event, due from one party to the other under this Agreement, against any balance or balances due and payable to one party from the other whether under this Agreement, any other contract or reinsurance agreement or otherwise.

ARTICLE 17

Limited Recourse

Notwithstanding anything to the contrary in this Agreement, all financial obligations of, and any claims against, the Reinsurer hereunder shall be limited recourse obligations of the Reinsurer payable solely from the Reinsurance Trust Account and shall be extinguished if, at any time, the assets in the Reinsurance Trust Account are exhausted and reduced to zero. Without prejudice to the foregoing, the proceeds of the Reinsurer’s share capital ($1) and any proceeds earned thereon shall not form part of the assets available to satisfy the Reinsurer’s obligations hereunder. The Ceding Insurer, by entering into this Agreement, agrees that no claim may be brought against the Reinsurer, its directors, officers, employees, agents, members, shareholders or administrators for any shortfall in the Reinsurance Trust Account, except in the case of fraud or actions taken in bad faith by any such person. This Article 17 shall survive the termination of this Agreement.

ARTICLE 18

No Petition

The Ceding Insurer, by entering into this Agreement covenants and agrees that it will not at any time institute against the Reinsurer, or join in any commencement or institution against the Reinsurer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any federal, state or foreign law (including under Part IV A of the Bermuda Conveyancing Act 1983) until the expiration of one year (or if longer, the applicable preference period or transaction avoidance period then in effect, including any period established pursuant to the laws of Bermuda) and one day from the day when (i) no notes are outstanding under the Indenture and (ii) the reinsurance agreements related to such notes have been terminated in accordance with their terms. The provisions of this Article 18 shall survive the termination of this Agreement.

ARTICLE 19

Loss Settlements

A. The Ceding Insurer alone and at its sole discretion shall adjust, settle or compromise all claim and losses.

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B. As respects losses subject to this Agreement, all loss settlements made by the Ceding Insurer within the terms and conditions of its underlying Policy and within the terms and conditions of this Agreement, whether under strict Policy terms or by way of compromise, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay or allow, as the case may be, its share of each such settlement as provided in this Agreement. This payment period shall not be extended or enlarged due to a requested or pending audit or review of records.

ARTICLE 20

Salvage and Subrogation

The Ceding Insurer hereby agrees to enforce its rights to salvage or subrogation relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.

ARTICLE 21

Reports and Notices

So long as the Principal Outstanding Amount is greater than zero, the Reinsurer shall promptly deliver, or cause to be delivered, to the Ceding Insurer copies of all reports and notices given or received by the Reinsurer under the Basic Documents (including Available Information), except for reports and notices given or received under this Agreement.

ARTICLE 22

Agent

Heritage Property & Casualty Insurance Company will act as agent of the companies comprising the Ceding Insurer for purposes of remitting or receiving any monies due to or from the Reinsurer under this Agreement and for the purposes of sending and receiving notices required or permitted under this Agreement. Heritage Property & Casualty Insurance Company will not act as agent (or be deemed to so act) for any other purpose under this Agreement, including with respect to insolvency, regulatory supervision or conservatorship.

ARTICLE 23

Currency

Where the word “Dollars” and/or the sign “$” appear in this Agreement, they shall mean United States Dollars.

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ARTICLE 24

Access To Records

The Ceding Insurer shall give the Reinsurer and its designated representatives (including the Claims Reviewer and the Loss Reserve Specialist) free access at any reasonable time to all records of the Ceding Insurer that pertain in any way to this Agreement, including, without limitation, the Subject Business (“Records”). This right shall be exercisable during the term of this Agreement or after the expiration of this Agreement as long as either party hereto has a claim against the other arising out of this Agreement. Notwithstanding the above, the Reinsurer shall not have any right of access to the Records of the Ceding Insurer if it is not current in all undisputed payments due the Ceding Insurer. The inspecting party may obtain copies of any of the Records tendered for inspection at its own expense.

ARTICLE 25

Confidentiality

A. The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Ceding Insurer, whether directly or through an authorized agent, in connection with the negotiation and execution of this Agreement (“Confidential Information”) are proprietary and confidential to the Ceding Insurer. Confidential Information shall not include documents, information or data that the Reinsurer can show:

1. are publicly known or have become publicly known through no unauthorized act of the Reinsurer;

2. have been rightfully received from a third person without obligation of confidentiality; or

3. were known by the Reinsurer prior to the placement of this Agreement without an obligation of confidentiality.

B. Absent the written consent of the Ceding Insurer, the Reinsurer shall not disclose any Confidential Information to any third parties, except:

1. when required by governmental regulators performing an audit of the Reinsurer’s records and/or financial condition;

2. when required by external auditors performing an audit of the Reinsurer’s records in the normal course of business and when the external auditors have agreed to the confidentiality provisions of this Agreement; or

3. situations where required by law or court order.

Further, the Reinsurer agrees not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Agreement.

C. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory or self-regulatory authority to release or disclose any or all of the Confidential Information, the Reinsurer agrees to provide the Ceding Insurer with written notice of same at least 10 calendar days prior to such release or disclosure and to use its best efforts to assist the Ceding Insurer in maintaining the confidentiality provided for in this Article 25.

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D. The provisions of this Article 25 shall extend to the officers, directors, employees and agents of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.

ARTICLE 26

Exclusions

Losses relating to the Subject Business shall not include any property or associated losses subject to any of the following items (each, an “Exclusion”) (except as covered by the Loss Adjustment Expense Factor):

A. All excess of loss reinsurance assumed by the Ceding Insurer;

B. Reinsurance assumed by the Ceding Insurer under obligatory reinsurance agreements;

C. Financial guarantee and insolvency business;

D. Third party liability and medical payments business;

E. Certain losses of pools, associations and syndicates;

F. All liability of the Ceding Insurer arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund;

G. All accident and health, fidelity and surety, boiler and machinery, workers’ compensation and credit business;

H. All ocean marine business;

I. Fidelity;

J. All aviation, aerospace and satellite business;

K. All railroad business;

L. All insurances on growing or standing crops;

M. Flood and/or earthquake, when written as such;

N. Difference in conditions insurances and similar kinds of insurances, however styled, insofar as they may provide coverage for losses from the following causes:

a. Flood, surface water, waves, tidal water or tidal waves, overflow of streams or other bodies of water or spray from any of the foregoing, all whether wind driven or not, except when covering property in transit; or

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b. Earthquake, landslide, subsidence or other earth movement or volcanic eruption, except when covering property in transit.

O. Mortgage impairment insurances and similar kinds of insurances, however styled;

P. Loss or damage caused by or resulting from war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard war exclusion clause;

Q. Certain nuclear risks;

R. Loss arising from pollution or environment impairment;

S. Losses in respect of overhead transmission and distribution lines and their supporting structures other than those on or within 150 meters (or 500 feet) of the insured premises. It is understood and agreed that public utilities extension and/or suppliers’ extension and/or contingent business interruption coverages are not subject to this exclusion, provided that these are not part of a transmitters’ or distributors’ policy;

T. Terrorism;

U. Mold;

V. All assessments from the FHCF;

W. Extra contractual obligations and amounts in excess of policy limits; and

X. Loss adjustment expenses incurred in investigating, processing and settling losses under the Subject Business, which will be covered only through the application of the Loss Adjustment Expense Factor.

ARTICLE 27

Notices

Any notices required to be provided under this Agreement shall be effective if provided in writing by facsimile transmission or by physical delivery to:

If to the Ceding Insurer:

Heritage Property & Casualty Insurance Company

700 Central Ave., Ste. 500

St. Petersburg, FL 33701

Attn: Bruce Lucas, Chairman & Chief Investment Officer

Phone: 727.362.7202

Email: blucas@heritagepci.com

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If to the Reinsurer:

Citrus Re Ltd.

c/o Kane (Bermuda) Limited

6^th Floor, Cumberland House

1 Victoria Street

Hamilton HM 11, Bermuda

Attn: Managing Director

Telephone No.: (441) 292-7505

Facsimile No.: (441) 292-1243

ARTICLE 28

Additional Cedents

The Ceding Insurer will have the right to add as ceding parties to this Agreement any entity that becomes a subsidiary or affiliate of Heritage Property & Casualty Insurance Company, only (i) to the extent the business to be ceded by such subsidiary is substantially similar to the Subject Business, (ii) only as of the beginning of each Annual Risk Period (other than the first Annual Risk Period following inclusion in the relevant Reset of Updated Exposure Data relating to the Policies of such entity included in the Subject Business), and (iii) the Ceding Insurer has delivered a certification substantially in the form attached hereto as Exhibit K (a “Certificate of Additional Cedent”) to the Reinsurer. Upon the Ceding Insurer’s compliance with clauses (i)—(iii) above, this Agreement shall cover policies written by such affiliate. The Ceding Insurer shall promptly provide notice to the Bermuda Monetary Authority of the addition of any affiliate to this Agreement. Any new such affiliate added to this Agreement pursuant to this Article 28 will be entitled to all of the rights and privileges of the Ceding Insurer and subject to all of the Ceding Insurer’s obligations hereunder.

ARTICLE 29

Errors and Omissions

A. The Reinsurer is reinsuring, subject to the terms and conditions of this Agreement, the obligations of the Ceding Insurer arising under or in conjunction with any Policy. The Ceding Insurer shall be the sole judge as to:

1. what shall constitute a claim or loss covered under any Policy;

2. the Ceding Insurer’s liability thereunder;

3. the amount or amounts that it shall be proper for the Ceding Insurer to pay thereunder.

B. The Reinsurer shall be bound by the judgment of the Ceding Insurer as to the obligation(s) and liability(ies) of the Ceding Insurer under any Policy.

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C. Any inadvertent error, omission or delay in complying with the terms and conditions of this Agreement shall not be held to relieve either party hereto from any liability that would attach to it hereunder if such error, omission or delay had not been made; provided, that such act, delay, omission or error shall not impose any greater liability on the Reinsurer than would have attached hereunder if such act, delay, omission or error had not occurred, and such error, omission or delay is rectified immediately upon discovery by the responsible party.

ARTICLE 30

Insolvency

A. This Article 30 and the laws of the domiciliary state shall apply in the event of insolvency of either party to this Agreement. In the event of a conflict between provision of this Article and the laws of the domiciliary state of any company covered hereunder, that domiciliary state’s laws shall prevail.

B. In the event of the insolvency of the Ceding Insurer, this reinsurance (or the portion of any risk or obligation assumed by the Reinsurer, if required by applicable law) shall be payable directly to the Ceding Insurer, or to its liquidator, receiver, conservator or statutory successor, either: (i) on the basis of the liability of the Ceding Insurer, or (ii) on the basis of claims filed and allowed in the liquidation proceeding, whichever may be required by applicable statute without diminution because of the insolvency of the Ceding Insurer or because the liquidator, receiver, conservator or statutory successor of the Ceding Insurer has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Ceding Insurer shall give written notice to the Reinsurer of the pendency of a claim against the Ceding Insurer indicating the Policy reinsured, which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses that it may deem available to the Ceding Insurer or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the court, against the Ceding Insurer as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to the Ceding Insurer solely as a result of the defense undertaken by the Reinsurer.

C. Where two or more reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Agreement as though such expense had been incurred by the Ceding Insurer.

D. As to all reinsurance made, ceded, renewed or otherwise becoming effective under this Agreement, the reinsurance shall be payable as set forth above by the Reinsurer to the Ceding Insurer or to its liquidator, receiver, conservator or statutory successor, except (i) where the Agreement specifically provides another payee in the event of the insolvency of the Ceding Insurer, and (ii) where the Reinsurer, with any consent required by any insurance regulatory body and the direct insured or insureds, has assumed such Policy obligations of the Ceding

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Insurer as direct obligations of the Reinsurer to the payees under such Policies and in substitution for the obligations of the Ceding Insurer to such payees. In that event only, and if the Ceding Insurer is entirely released from its obligations under such Policies, the Reinsurer shall pay any loss directly to payees under such Policies.

ARTICLE 31

Arbitration

A. As a condition precedent to any right of action hereunder, any irreconcilable dispute arising out of the interpretation, performance or breach of this Agreement, including the formation or validity thereof, whether arising before or after the expiry or termination of this Agreement, shall be submitted for decision to a panel of three arbitrators. Notice requesting arbitration will be in writing and sent by certified mail, return receipt requested, or such reputable courier service as is capable of returning proof of receipt of such notice by the recipient to the party demanding arbitration.

B. One arbitrator shall be appointed by each party. If either party fails to appoint its arbitrator within 30 days after being requested to do so by the other party, the latter, after 10 days notice by certified mail or reputable courier as provided above of its intention to do so, may appoint the second arbitrator.

C. The two arbitrators shall, before instituting the hearing, appoint an impartial third arbitrator who shall preside at the hearing. If the two arbitrators are unable to agree upon the third arbitrator within 30 days of their appointment, the Ceding Insurer shall petition the American Arbitration Association to appoint the third arbitrator. If the American Arbitration Association fails to appoint the third arbitrator within 30 days of being requested to do so, either party may request a district court judge of the federal district court having jurisdiction over the geographical area in which the arbitration is to take place, or if the federal court declines to act, the state court having general jurisdiction in such area to select the third arbitrator from a list of six individuals (three named by each arbitrator previously appointed). All arbitrators shall be disinterested active or former senior executives of insurance or reinsurance companies or Underwriters at Lloyd’s, London.

D. Within 30 days after notice of appointment of all arbitrators, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules for hearings. The panel shall be relieved of all judicial formality and shall not be bound by the strict rules of procedure and evidence. Unless the panel agrees otherwise, arbitration shall take place in St. Petersburg, Florida, but the venue may be changed when deemed by the panel to be in the best interest of the arbitration proceeding. Insofar as the arbitration panel looks to substantive law, it shall consider the law of the State of Florida. The decision of any two arbitrators when rendered in writing shall be final and binding. The panel is empowered to grant interim relief as it may deem appropriate.

E. The panel shall make its decision considering the custom and practice of the applicable insurance and reinsurance business as promptly as possible following the termination of the hearings. Judgment upon the award may be entered in any court having jurisdiction thereof.

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F. Any claims asserted by a party against any other party with respect to this Agreement or any agreement related to this Agreement shall be asserted in a single arbitration proceeding, and it is agreed that if such claims are asserted in more than one arbitration proceeding, that the claims shall be consolidated in a single arbitration proceeding, to be heard by the first arbitration panel that is appropriately selected and constituted. The parties hereto further agree that any arbitration under this Agreement shall, at the sole option of any party, be consolidated with any other arbitration relating to the reinsurance program to which this Agreement pertains.

G. Each party shall bear the expense of the arbitrator appointed by or for it and shall jointly and equally bear with the other party the cost of the third arbitrator. The remaining costs of the arbitration shall be allocated by the panel. The panel may, at its discretion, award such further costs and expenses as it considers appropriate, including but not limited to attorneys fees, to the extent permitted by law. However, the panel may not award any exemplary or punitive damages.

ARTICLE 32

Service of Suit

(Notwithstanding anything else in this Article, this Article is not intended to conflict with or override the obligation of the parties to arbitrate their disputes in accordance with the Arbitration Article.)

A. In the event of the failure of the Reinsurer to perform its obligations hereunder, the Reinsurer, at the request of the Ceding Insurer, shall submit to the exclusive jurisdiction of any federal or Florida State court located in the State of Florida. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Reinsurer, once the appropriate court is selected, whether such court is the one originally chosen by the Ceding Insurer and accepted by the Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, shall comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against the Reinsurer upon this Agreement, shall abide by the final decision of such court or of any appellate court in the event of an appeal.

B. Service of process in such suit may be made upon the agent for the service of process named below. CT Corporation System, 1200 S Pine Island Rd # 250, Plantation, FL 33324, is hereby appointed as attorney-in-fact for the Reinsurer and shall be authorized and directed to accept service of process on behalf of the Reinsurer in any such suit.

C. Further, pursuant to any statute of any state, territory or district of the United States that makes provision therefor, the Reinsurer hereby designates the Insurance Commissioner of the State of Florida, or other officer specified for that purpose in the statute, or his successor or

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successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceedings instituted by or on behalf of the Ceding Insurer or any beneficiary hereunder arising out of this Agreement, and hereby designates the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.

ARTICLE 33

Governing Law and Jurisdiction

A. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Florida, exclusive of conflict of law rules.

B. Jurisdiction. With respect to any suit, action or proceeding relating to this Agreement, each party hereto irrevocably:

1. submits to the exclusive jurisdiction of any federal or Florida State court located in the State of Florida;

2. waives any objection which it may have at any time to the laying of venue of any suit, action or proceeding brought in any such court, waives any claim that such proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such suit, action or proceeding, that such court does not have any jurisdiction over such party; and

3. waives any claim to punitive, exemplary or multiplied damages from the other.

ARTICLE 34

Entire Agreement

This Agreement and the Basic Documents set forth all of the rights, duties and obligations between the Ceding Insurer and the Reinsurer with respect to the subject matter hereof and supersede any and all prior or contemporaneous negotiations, commitments, agreements and understandings, both written and oral, between the parties with respect to matters referred to in this Agreement. This Agreement may not be modified or changed except by an amendment to this Agreement in writing signed by both parties.

ARTICLE 35

Non-Waiver

The failure of the Ceding Insurer or the Reinsurer to insist on compliance with this Agreement or to exercise any right or remedy hereunder shall not constitute a waiver of any rights contained in this Agreement nor prevent either party from thereafter demanding full and complete compliance nor prevent either party from exercising such remedy in the future.

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ARTICLE 36

Mode of Execution

A. This Agreement may be executed by:

1. an original written ink signature of paper documents;

2. an exchange of facsimile or .pdf copies showing the original written ink signature of paper documents; or

3. electronic signature technology employing computer software and a digital signature or digitizer pen pad to capture a person’s handwritten signature in such a manner that the signature is unique to the person signing, is under the sole control of the person signing, is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed, such signature is invalidated.

B. The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Agreement. This Agreement may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original, but such counterparts shall together constitute but one and the same instrument.

[Signature pages follow]

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IN WITNESS WHEREOF, the Reinsurer and Ceding Insurer have caused this Agreement to be executed by its duly authorized representative(s) this 21^th day of April, in the year of 2014.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY
By:
Name:	Stephen Rohde
Title:	CFO
CITRUS RE LTD.
By:
Name:
Title:

Signature page to Property Catastrophe Excess of Loss Reinsurance Agreement

IN WITNESS WHEREOF, the Reinsurer and Ceding Insurer have caused this Agreement to be executed by its duly authorized representative(s) this 24^th day of April, in the year of 2014.

HERITAGE PROPERTY & CASUALTY INSURANCE COMPANY
By:
Name:
Title:
CITRUS RE LTD.
By:
Name:	Emma Atherton
Title:	Alternate Director

Signature page to Property Catastrophe Excess of Loss Reinsurance Agreement

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated April 2, 2014, with respect to the consolidated financial statements of Heritage Insurance Holdings, LLC and subsidiaries contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption “Experts.”

/s/ GRANT THORNTON LLP

Tampa, Florida

April 30, 2014

CORRESP

SEC Correspondence