~~Demand and pricing for our products;~~

~~Government policies;~~

~~Introduction of competing products; and~~

~~Our operating expenses which fluctuate due to growth of our business.~~

Our common stock may be thinly traded, so you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.

~~Prior to this Offering, you could not buy or sell our common stock publicly.~~Preferred Stock. We cannot predict the extent to which ~~investors’ interests~~investor interest in our company will lead to the development of a trading market in the Preferred Stock, or how liquid that market might be. If an active ~~trading~~ market ~~for~~does not develop, you may have difficulty selling your shares of Preferred Stock. The public offering price of the Preferred Stock was determined by negotiations between us and the underwriter and may not be indicative of prices that will prevail in the open market following the completion of this offering.

If our common stock is delisted, your ability to transfer or ~~whether~~sell your shares of Preferred Stock may be limited and the market value of the Preferred Stock will likely be materially adversely affected.

The Preferred Stock does not contain provisions that are intended to protect you if our common stock is delisted from the Nasdaq. Because the Preferred Stock has no stated maturity date, you may be forced to hold your shares of the Preferred Stock and receive stated dividends on the Preferred Stock when, as and if authorized by our Board of Directors and paid by us with no assurance as to ever receiving the liquidation value thereof. Also, if our common stock is delisted from the Nasdaq, it is likely that the Preferred Stock will be delisted from the Nasdaq as well. Accordingly, if our common stock is delisted from the Nasdaq, your ability to transfer or sell your shares of the Preferred Stock may be limited and the market value of the Preferred Stock will likely be materially and adversely affected.

General market conditions and unpredictable factors could adversely affect market prices for the Preferred Stock.

The market prices for the Preferred Stock may fluctuate from the public offering price. Several factors, many of which are beyond our control, will influence the market price of ~~our common stock will be volatile following this Offering. If an active trading market does not develop, investors may have difficulty selling any of our common stock~~the Preferred Stock. Factors that they buy. There may be limited market activity in our stock and we may be too small to attract the interest of many brokerage firms and analysts. We cannot give you any assurance that a public trading market for our common stock will develop or be sustained. The market price of our common stock could be subject to wide fluctuations in response to quarterly variations in our revenues and operating expenses, announcements of new products or services by us, significant sales of our common stock, including “short” sales, the operating and stock price performance of other companies that investors may deem comparable to us, and news reports relating to trends in our markets or general economic conditions.

Once our common stock begins trading,might influence the market price of the Preferred Stock include, but are not limited to:
● whether dividends have been declared and are likely to be declared on the Preferred Stock from time to time;
● our creditworthiness, financial condition, performance and prospects;
● prevailing interest rates;
● the annual yield from dividends on the Preferred Stock compared to yields on other financial instruments;
● the market for similar securities;
● our issuance of additional preferred equity or debt securities; and
● economic, financial, geopolitical, regulatory or judicial events that affect us and/or the insurance or financial markets generally.
If you purchase shares of Preferred Stock, the shares may fluctuate.

~~We cannot predict~~subsequently trade at a discount to the ~~prices at which our~~price that you paid for them.

As a holder of Preferred Stock, you will have extremely limited voting rights.

Other than the limited circumstances described in this prospectus and except to the extent from time to time provided by law, holders of Preferred Stock do not have any voting rights. Our shares of common stock are the only class of our securities that carry full voting rights. Voting rights for holders of Preferred Stock exist primarily with respect to voting on amendments to our certificate of incorporation or certificate of designations relating to the Preferred Stock that materially and adversely affects the rights of the holders of Preferred Stock or authorize, increase or create additional classes or series of our capital stock that are senior to the Preferred Stock. Please see the section entitled “Description of the Preferred Stock—Voting Rights.”

There are no voting rights for the holders of the Preferred Stock with respect to our issuance of securities that rank equally with the Preferred Stock.

Upon completion of this offering and the repurchase of 60,000 Shares of Series B Preferred Stock of the Company pursuant to a stock purchase agreement with IWS Acquisition Corporation, we will not have outstanding any shares of our capital stock that rank equally with or senior to the Preferred Stock. However, we may ~~trade~~issue additional securities that rank equally with the Preferred Stock without the vote of the holders of Preferred Stock. See “Description of the Preferred Stock — Voting Rights” in this prospectus. The issuance of securities ranking equally with the Preferred Stock may reduce the amount available for dividends and the amount recoverable by holders of the Preferred Stock in the event of our liquidation, dissolution or winding up.

We are able to redeem the Preferred Stock beginning , 202 , but are under no obligation to do so. If the Preferred Stock is redeemed, you may not be able to reinvest the redemption proceeds in a comparable security at a similar return on investment.

On and after , 202 , we may redeem the Preferred Stock. See “Description of the Preferred Stock — Redemption” in this ~~Offering.~~ prospectus. We have no obligation to redeem or repurchase the Preferred Stock under any circumstances. If shares of the Preferred Stock are redeemed at a time when prevailing interest rates or preferred stock dividends are lower than the dividend rate applicable to the Preferred Stock, you may not be able to reinvest the redemption proceeds in an investment with a comparable rate of return.

The Preferred Stock may be rated below investment grade.

We have not sought to obtain a rating for the Preferred Stock. However, we currently expect that the rating of the Preferred Stock, if obtained, would be below investment grade, which could adversely impact the market price of the Preferred Stock. Below investment-grade securities are subject to a higher risk of price volatility than similar, higher-rated securities. Furthermore, increases in leverage or deteriorating outlooks for an issuer, or volatile markets, could lead to significant deterioration in market prices of below-investment grade rated securities.

Ratings only reflect the views of the issuing rating agency and such ratings could at any time be revised downward or withdrawn entirely at the discretion of the issuing rating agency. Further, a rating is not a recommendation to purchase, sell or hold any particular security, including the Preferred Stock. In addition, ratings do not market prices or suitability of a security for a particular investor and any rating of the Preferred Stock may not reflect all risks related to us and our business, or the structure or market value of the Preferred Stock.

A classification of the Preferred Stock by NAIC may impact U.S. insurance companies that purchase Preferred Stock.

The NAIC may from time to time, in its discretion, classify securities in insurers’ portfolios as either debt, preferred equity or common ~~stock may fluctuate, depending upon many~~equity instruments. The NAIC’s written guidelines for classifying securities as debt, preferred equity or common equity include subjective factors ~~some of which~~that require the relevant NAIC examiner to exercise substantial judgment in making a classification. There is, therefore, a risk that the Preferred Stock may be ~~beyond our control, including, but not limited to:~~

~~A shift in our investor base;~~

~~Our quarterly~~classified by NAIC as common equity instead of preferred equity. The NAIC classification determines the amount of risk based capital, or ~~annual results of operations, or those of other~~RBC, charges incurred by insurance companies in ~~our industry;~~

~~Actual~~connection with an investment in a security. Securities classified as common equity by the NAIC carry RBC charges that can be significantly higher than the RBC requirement for debt or ~~anticipated fluctuations in our operating results due to factors related to our business;~~

~~Changes in accounting standards, policies, guidance, interpretations or principles;~~

~~The failure to maintain our listing or failure~~preferred equity. Therefore, any classification of ~~securities analysts to cover our~~the Preferred Stock as common ~~stock;~~

~~Changes in earnings estimates by securities analysts or our ability to meet those estimates;~~

~~The operating and stock price performance of other comparable companies;~~

~~Overall market fluctuations; and~~

~~General economic conditions.~~

~~Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations~~equity may adversely affect U.S. insurance companies that hold Preferred Stock. In addition, a determination by the NAIC to classify the Preferred Stock as common equity may adversely impact the trading ~~price~~of the Preferred Stock in the secondary market.

We will have broad discretion in using the proceeds of this offering, and we may not effectively spend the proceeds.

We expect to use $1.5 million of the net proceeds from this offering to complete the repurchase of the shares of our ~~common stock.~~Series B Preferred Stock from IWS Acquisition Corporation, an affiliate of KFSI, upon the completion of this offering. Following the repurchase of the shares, we expect to use the remainder of the net proceeds from this offering to support our organic growth, and for general corporate purposes, including spending for business development, sales and marketing and working capital, and for future potential acquisition opportunities. See “Use of Proceeds” in this prospectus for more information. We cannot specify with certainty the particular uses of the net proceeds stated above, and these allocations may change depending on the success of our planned initiatives. We will have significant flexibility and broad discretion in applying the net proceeds of this offering, and we may not apply these proceeds effectively. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds, and you will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking ~~statements. In some cases you can identify~~statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements are therefore entitled to the protection of the safe harbor provisions of these laws. These statements may be identified by the use of forward-looking ~~words~~terminology such as “anticipate,” “believe,” “budget,” “contemplate,” “continue,” “could,” “envision,” “estimate,” “expect,” “forecast,” “guidance,” “indicate,” “intend,” “may,” “might,” “outlook,” “plan,” “possibly,” “potential,” “predict,” “probably,” “pro-forma,” “project,” “seek,” “should,” “target,” “will,” “will ~~likely result,~~be,” ~~“should,~~“will continue,” ~~“anticipates,” “expects,” “intends,” “plans,” “seeks,” “estimates,” “potential,” “continue,” “believes”~~“would” or the negative thereof or other variations thereon or comparable terminology.

We have based these forward-looking statements on our current expectations, assumptions, estimates and ~~similar expressions, although some~~projections. While we believe these to be reasonable, such forward-looking statements are ~~expressed differently.~~

~~These forward-looking statements are based on current expectations~~only predictions and ~~assumptions that are subject to~~involve a number of risks and uncertainties, ~~that~~many of which are beyond our control. These and other important factors may cause our actual results, performance or achievements to differ materially from any ~~expected~~ future results, performance or achievements expressed or implied by ~~such~~these forward-looking statements. ~~All~~Management cautions that the forward-looking statements ~~other than statements of historical fact are statements that could be deemed forward-looking statements. These risks and uncertainties include, but~~in this prospectus are not ~~limited to:~~

guarantees of future performance, and we cannot assume that such statements will be realized or the ~~level of demand for our coverage~~forward-looking events and ~~the incidence of catastrophic events related to our coverage;~~

circumstances will occur. Factors that might cause such a difference include, without limitation:
● our limited operating history as a publicly-traded company;
● our ability to access additional capital;
● changes in economic, business and industry conditions;
● legal, regulatory, and tax developments;
● our ability to comply with regulations imposed by the states of Louisiana, Texas and Florida and the other states where we may do business in the future;
● Maison’s ability to meet minimum capital and surplus requirements;
● our ability to participate in take-out programs;
● our ability to expand our business to other states;
● the level of demand for our coverage and the incidence of catastrophic events related to our coverage;
● our ability to compete with other insurance companies;
● inadequate loss and loss adjustment expenses reserves;
● effects of emerging claim and coverage issues;
● the failure of third party adjusters to properly evaluate claims or the failure of our claims handling administrator to pay claims fairly;
● investment losses;
● climate change and increasing occurrences of weather-related events;
● increased litigation in the insurance industry;
● non-availability of reinsurance;
● our ability to recover amounts due from reinsurers;
● the accuracy of models used to predict future losses;
● failure of risk mitigation strategies and/or loss limitation methods;
● Maison’s failure to maintain certain rating levels;
● our ability to establish and maintain an effective system of internal controls;
● the impact of our status as an “emerging growth company”;
● conflicts of interest between us and KFSI and its affiliates or between us and FGI and its affiliates;
● different interests of controlling stockholders;
● failure of our information technology systems;
● the ability of our third-party policy administrator to properly handle our policy administration process;
● the requirements of being a public company;
~~our ability to grow and remain profitable in the competitive insurance industry;~~
~~our ability to access additional capital;~~
~~our ability to attract and retain qualified personnel;~~
~~changes in general economic, business and industry conditions;~~
~~legal, regulatory, and tax developments.~~
~~There is no assurance that~~
● the success of our acquisition strategy;
● our ability to develop and implement new technologies;
● our ability to accurately price the risks that we underwrite;
● the amount of operating resources necessary to develop future new insurance policies;
● assumptions related to the rate at which our existing policies will renew;
● our status as an insurance holding company;
● our ability to attract and retain qualified personnel, including independent agents; and
● restrictions imposed on our net operating loss carryforwards.
Our expectations ~~will~~may not be realized. If one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, actual results may vary materially from those expected, estimated or projected. Such risks and uncertainties also include those set forth under “Risk Factors” ~~herein.~~in this prospectus. Our forward-looking statements speak only as of the time that they are made and do not necessarily reflect our outlook at any other point in time. Except as required by law or regulation, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or for any other reason.

29

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OUR SEPARATION FROM KFSI

Our Relationship with KFSI

Our business began in February 2012 as part of KFSI when we began conducting market due diligence, establishing the infrastructure and seeking to obtain the necessary regulatory approvals to be able to assume and write homeowners' insurance policies focusing on catastrophes in the gulf states of the United States. On October 2, 2012, KFSI formed our company under the laws of the State of Delaware as a wholly-owned subsidiary, and contributed this business to us. Prior to the closing of this Offering, we have remained a wholly-owned subsidiary of KFSI.

Immediately following this Offering and the conversion of the Preferred Shares as described herein, KFSI will own approximately 33.3% of our outstanding common stock (or 30.8% if the underwriters exercise their over-allotment option in full) but will no longer be responsible for funding our operations following the closing of this Offering. KFSI is expected to be one of our largest stockholders after this Offering.

~~Two of our directors, Larry G. Swets, Jr. and Hassan R. Baqar, are currently executive officers of KFSI. Mr. Swets is the Chief Executive Officer of KFSI and Mr. Baqar is a Vice President of KFSI.~~

For several reasons enumerated in “Benefits of Separation” below, KFSI has decided to separate its homeowners’ insurance business, and authorized us to raise capital in the public market through this Offering. Upon the completion of this Offering, we will enter into agreements with KFSI and certain affiliates and/or subsidiaries thereof that will govern the separation of our businesses from KFSI and various relationships with KFSI under a comprehensive set of transaction agreements, including the Transition Services Agreement with KFSI or an affiliate or subsidiary thereof, which will be executed upon completion of the Offering. We have already entered into the Management Services Agreement with 1347 Advisors. The Management Services Agreement establishes certain services that we will receive from 1347 Advisors, on a permanent basis, unless terminated under the terms thereof. The Transition Services Agreement is subject to the approval of our management and the management of KFSI. See “~~Certain Relationships and Related Transactions — Agreements with KFSI~~~~” for a more detailed discussion of these agreements and for detailed discussion on risks related to separation from KFSI see “~~~~Risk Factors — Risks Relating to Separation from KFSI.~~”

Benefits of Separation

~~We believe that the business benefits that will occur as a result of this Offering include:~~

•

~~Market recognition of the value of our business.~~ As we will be a separate public company after this Offering, potential investors will be able to invest directly in our business. The disclosure requirements applicable to public companies will afford our stockholders with access to standardized and comparable information about us.

•

~~Focused management attention.~~ Our management will be better able to focus its attention on our business. As a company dedicated to the homeowners’ insurance industry, we expect to be in a better position to grow our business and to serve our customers more effectively through more efficient deployment of resources, increased operational flexibility and enhanced responsiveness to customers.

•

~~Improved access to capital.~~ As a separate public company, we will avoid conflicts in the allocation of capital between us and other KFSI businesses. We will have direct access to the capital markets to issue equity or debt securities, which we expect will improve our access to capital and increase our flexibility to invest in product development, and marketing, as well as to pursue strategic acquisitions.

•

~~Liquidity for Investors.~~ ~~Our common stock will be publicly traded on NASDAQ and have enhanced liquidity and transferability, which will benefit both our current and prospective investors.~~

•

~~Incentives for employees more directly linked to our performance.~~ We expect to enhance employee motivation and to strengthen our management’s focus on our business through incentive compensation programs specifically tied to the results of our business operations and the market performance of our common stock, including our Equity Incentive Plan. We believe that these incentives will enhance our ability to attract and retain qualified personnel.

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USE OF PROCEEDS

We ~~estimate we~~ will receive net proceeds from this ~~Offering~~offering of approximately ~~$11.3~~$ million, ~~(or approximately $13.1 million if~~based on the ~~underwriters exercise their over-allotment option in full),~~public offering price of $ per share, after deducting the underwriting discounts and commissions and estimated expenses of this ~~Offering, assuming an initial public offering price of $8.00 per share, which is the estimated price set forth on the cover page of~~offering. See “Underwriting” in this prospectus. ~~See “Underwriting.”~~

~~The principal purposes of this offering are to obtain additional capital and to create a public market for our common stock.~~

We expect to use $1.5 million of the net proceeds from this offering to complete the repurchase of the shares of our Series B Preferred Stock from IWS Acquisition Corporation, an affiliate of KFSI, upon completion of this ~~Offering as follows: approximately $5.0 million~~offering. Following the repurchase of the shares, we expect to ~~provide further capital~~use the remainder of the net proceeds from this offering to support our ~~existing insurance underwriting subsidiary Maison Insurance, approximately $2.0 million~~organic growth, and for ~~other~~ general corporate purposes, including ~~settlement of payables,~~ spending for business development, sales and marketing and working capital, and ~~the remainder used~~ for ~~the formation of a new subsidiary, which will allow for the expansion of our insurance products in new markets. We may also use a portion of the net proceeds from this offering to pursue acquisitions,~~future potential acquisition opportunities. However, we do not have any current plans, arrangements or ~~to capitalize an offshore reinsurance subsidiary that we intend to form; however, we have no commitments~~understandings with respect to any such acquisition or investment, and we are currently not ~~currently~~ involved in any negotiations with respect to any such transaction. We cannot specify with certainty the particular uses of the net proceeds stated above, and ~~these allocations~~our allocation of the proceeds may change depending on the success of our planned initiatives. We will have broad discretion in using these proceeds. Pending the use of proceeds from this ~~Offering~~offering as described above, we plan to invest the net proceeds that we receive in this ~~Offering~~offering in high quality, short- and long-term investments.

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DIVIDEND POLICY

~~We have never~~

Holders of our Preferred Stock will be entitled to per annum of the $ per share liquidation preference (equivalent to $ per annum per share), accruing from , 201 . Dividends will be payable to holders of our Preferred Stock quarterly on or about the 15th day of March, June, September and December of each year, commencing on , 201 . The record date for dividend payment will be March 1, June 1, September 1 and December 1 of each year, whether or not a business day, immediately preceding the applicable dividend payment date. The first dividend record date will be , 2018. Dividends on the Preferred Stock will accumulate whether or not the Company has earnings, whether or not there are funds legally available for the payment of those dividends and whether or not those dividends are declared ~~or paid cash dividends.~~by the Board of Directors. We ~~do not~~ intend to ~~pay cash~~declare regular quarterly dividends on ~~our common stock~~the shares of Preferred Stock following the offering. As of December 31, 2017, prior to the receipt of any net proceeds from this offering, we had $1.6 million available for the ~~foreseeable~~payment of dividends. The declaration, payment and amount of future ~~and currently intend~~dividends will be subject to ~~retain~~the discretion of our board of directors. Our board of directors expects to take into account a variety of factors when determining whether to declare any future dividends on the Preferred Stock, including (i) our financial condition, liquidity, results of operations, retained earnings, ~~to fund the development~~ and ~~growth of~~capital requirements, (ii) general business conditions, (iii) legal, tax and regulatory limitations, including those placed on our ~~business. Moreover, our ability to pay dividends if~~subsidiary companies, and ~~when~~(iv) any other factors that our board of directors determines to do so may be restricted by regulatory limits on the amount of dividends which Maison Insurance is permitted to pay to us. Also, if we were to borrow against any credit facility that we may enter into, we may be prohibited from paying cash dividends. In addition to the above considerations, the payment of cash dividends, if any, on our common stock will depend, among other things, upon our earnings, capital requirements, financial condition, legal requirements, and other relevant factors as determined by our board of directors. Theredeems relevant. Accordingly, there can be no assurance that we will ~~continue~~declare dividends on our preferred shares in the future.

We have never declared or paid any cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. It is the present policy of our board of directors to ~~pay dividends~~retain earnings, if ~~we commence~~any, for use in developing and expanding our business. In the future, our payment of ~~dividends.~~dividends on our common stock will also depend on the amount of funds available, our financial condition, capital requirements and such other factors as our board of directors may consider.

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CAPITALIZATION

The following table sets forth our capitalization as of ~~December 31, 2013 in thousands (except share amounts):~~September 30, 2017:

~~our capitalization on an actual basis;~~

our capitalization on a pro forma basis to give effect to (i) the conversion of the Preferred Shares and the issuance of shares of common stock upon the exercise of warrants held by FMG and (ii) the issuance of shares of common stock to Mr. Raucy upon exercise of the stock option granted to him and the concurrent one-for-one matching of the shares of common stock issued upon exercise of his stock option; and

our capitalization on a pro forma as adjusted basis to give effect to the issuance of shares of our common stock at a public offering price of $8.00 per share of common stock (the estimated price set forth on the cover page of this prospectus) assuming no exercise of the over-allotment option by the underwriters, including the effect of (i) the conversion of the Preferred Shares and the issuance of shares of common stock upon the exercise of warrants held by FMG and (ii) the issuance of shares of common stock to Mr. Raucy upon exercise of the stock option granted to him and the concurrent one-for-one matching of the shares of common stock issued upon exercise of his stock option; and

our capitalization on a pro forma as adjusted basis to give effect to the issuance of shares of our common stock at a public offering price of $8.00 per share of common stock (the estimated price set forth on the cover page of this prospectus) assuming full exercise of the over-allotment option by the underwriters, including the effect of (i) the conversion of the Preferred Shares and the issuance of shares of common stock upon the exercise of warrants held by FMG and (ii) the issuance of shares of common stock to Mr. Raucy upon exercise of the stock option granted to him and the concurrent one-for-one matching of the shares of common stock issued upon exercise of his stock option.

●

on an actual basis; and

●

on an as adjusted basis to give effect to the issuance of the Preferred Stock in this offering, after deducting underwriting discounts and commissions and other offering expenses payable by us, and assuming no exercise of the underwriters’ option to purchase additional shares from us.

You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.

Actual Pro Forma Pro forma
as adjusted
Without Over-
Allotment Pro forma
as adjusted
With Over-
Allotment
Total long-term debt 0 0 0 0
Stockholders' equity

Common stock, no par value, 1,000,000 authorized shares, 1,000,000 shares issued and outstanding, actual; $0.001 par value, 10,000,000 authorized shares, 1,691,066 shares issued and outstanding pro forma, 3,316,066 shares issued and outstanding pro forma as adjusted without over-allotment, 3,559,816 shares issued and outstanding pro forma as adjusted with over-allotment⁽¹⁾ 0 2 3 4
Additional paid in capital 8,750 14,013 25,271 27,084
Retained Deficit (868 ) (868 ) (868 ) (868 )
Total Stockholders' Equity 7,882 13,146 24,406 26,220
Total Capitalization 7,882 13,146 24,406 26,220

~~(1)~~

~~All share amounts give effect to the 1,000:1 stock split of our common stock, which occurred on March 19, 2014 and increased KFSI’s holdings of shares of our common stock to 1,000,000 shares.~~

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As of September 30, 2017
(unaudited)

Actual As adjusted
Cash and cash equivalents $ 25,679 $ —
Series B Preferred Stock, $25.00 par value, 1,000,000 authorized shares, 120,000 shares issued and outstanding on an actual, and pro forma as adjusted basis⁽¹⁾ 2,744
Stockholders’ equity:
Common stock, $0.001 par value, 10,000,000 authorized shares, 6,136,125 shares issued and 5,984,766 shares outstanding on an actual, and pro forma as adjusted basis 6 6
Cumulative Preferred Stock, $25.00 par value, 1,000,000 authorized shares, shares issued and outstanding on an actual basis; shares issued and outstanding on a pro forma and pro forma as adjusted basis —
Additional paid in capital 47,052 47,052
Retained deficit (480 ) (480 )
Accumulated other comprehensive income 29 29
Total stockholders’ equity 45,598
Total capitalization $ 48,342 $

DILUTION

~~Dilution represents the difference between the initial offering~~

(1) On January 2, 2018, we entered into a stock purchase agreement with 1347 Advisors and IWS Acquisition Corporation, both affiliates of KFSI, pursuant to which we repurchased 60,000 shares of our Series B Preferred Stock from 1347 Advisors for an aggregate purchase price ~~and the net tangible book value~~of $1,740,000, representing (i) $1,500,000, comprised of $25 per share ~~immediately after completion~~ of ~~this Offering. Net tangible book value is the amount that results from subtracting total liabilities~~Series B Preferred Stock, and ~~intangible assets from total assets. Dilution~~(ii) declared and unpaid dividends in respect of the ~~value of~~dividend payment due on February 23, 2018 amounting to $240,000 in the aggregate. We also agreed to repurchase pursuant to the stock purchase agreement 60,000 shares of ~~common stock that you purchase is a result of the lower book value of the shares of common stock held by our existing stockholder, KFSI as well as the conversion of the~~Series B Preferred Stock held by ~~FMG at a discounted~~IWS Acquisition Corporation, upon completion of this offering, for an aggregate purchase price ~~to the price paid~~of $1,500,000, comprised of $25 per share of Series B Preferred Stock, without any dividend or interest payment.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

All dollar amounts are in thousands, except share and per share data.

Overview

Maison Insurance Holdings, Inc. was incorporated on October 2, 2012 in the ~~Offering.~~

~~At December 31,~~State of Delaware. On November 19, 2013, the ~~net tangible book value~~Company changed its legal name from Maison Insurance Holdings, Inc. to 1347 Property Insurance Holdings, Inc. The Company is a holding company and is engaged, through its subsidiaries, in the property and casualty insurance business.

Prior to March 31, 2014, the Company operated as a wholly owned subsidiary of ~~our shares~~Kingsway America, Inc., or KAI. KAI, in turn, is a wholly owned subsidiary of Kingsway Financial Services, Inc., or KFSI, a publicly owned holding company based in Toronto, Ontario, Canada. On March 31, 2014, the Company completed an initial public offering of its common stock ~~was $7,882,000 or approximately $7.88 per share based upon 1,000,000 shares outstanding. For~~and then on June 13, 2014, the ~~purposes of calculating~~Company completed a follow-on offering. Through the ~~net tangible book value per share as of December 31, 2013, we have included the effect~~combination of the ~~stock split of KFSI’s~~initial public offering and follow-on offering, we issued approximately five million shares of our common ~~stock,~~stock. On October 25, 2017, KAI entered into a purchase agreement with Fundamental Global Investors, LLC, or FGI, pursuant to which ~~occurred on March 19, 2014 and increased KFSI’S holdings of~~KAI agreed to sell 900,000 shares of our common stock to ~~1,000,000 shares. After giving effect~~FGI or to ~~our~~one of FGI’s affiliate companies in two separate transactions. The first transaction, for the sale of ~~1,625,000~~475,428 shares of our common stock, ~~at an initial public offering price~~occurred on November 1, 2017. The second transaction, for the sale of ~~$8.00 per share (the estimated price set forth~~424,572 shares of our common stock, is conditioned on ~~the cover page of this prospectus) assuming no exercise~~approval of the ~~over-allotment option~~transaction by ~~underwriters, including conversion~~both the LDI and FOIR by January 23, 2018. FGI is affiliated with D. Kyle Cerminara, where he serves as Chief Executive Officer, Co-Founder and Partner, and Lewis M. Johnson, where he serves as President, Co-Founder and Partner. Messrs. Cerminara and Johnson are both members of our Board of Directors. Should the ~~Preferred Shares~~second transaction be consummated, FGI, and ~~full exercise~~entities affiliated with FGI, would own approximately 43% of ~~the warrants held by FMG and including the issuance of shares of~~our outstanding common stock to Mr. Raucy upon exercise of the stock option granted to him and the concurrent one-for-one matching of the shares of common stock issued upon exercise of his stock option, and after deducting underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value as of December 31, 2013 would have been $24,406,269, or approximately $7.36 per share. In the aggregate, this represents an immediate decrease in net tangible book value of $0.41 per share to our existing stockholders, and an immediate dilution in net tangible book value of $0.64 per share to purchasers of securities in this Offering, as illustrated in the table below. After giving effect to our sale of 1,625,000 shares of common stock at an initial public offering price of $8.00 per share (the estimated price set forth on the cover page of this prospectus) assuming full exercise of over-allotment option by the underwriters, including conversion of the Preferred Shares and full exercise of the warrants held by FMG and including the issuance of shares of common stock to Mr. Raucy upon exercise of the stock option granted to him and the concurrent one-for-one matching of the shares of common stock issued upon exercise of his stock option, and after deducting underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value as of December 31, 2013 would have been $26,219,769, or approximately $7.37 per share. In the aggregate, this represents an immediate decrease in net tangible book value of $0.40 per share to our existing stockholders, and an immediate dilution in net tangible book value of $0.63 per share to purchasers of securities in this Offering, as illustrated in the following table.shares.

Without Over-
Allotment With Over-
Allotment
Initial public offering price per share $ 8.00 $ 8.00
Net tangible book value per share as of December 31, 2013 7.88 ⁽¹⁾ 7.88 ⁽¹⁾
Decrease per share attributable to FMG and Raucy investments⁽²⁾ (0.11 ) (0.11 )
Pro Forma net tangible book value per share prior to this Offering 7.77 7.77
Decrease per share attributable to this Offering (0.41 ) (0.40 )
Pro forma as adjusted net tangible book value per share after this Offering 7.36 7.37
Dilution per share to new investors 0.64 0.63

~~(1)~~

For the purposes of calculating the net tangible book value per share as of December 31, 2013, we have included the effect of the 1,000:1 stock split of our common stock, which occurred on March 19, 2014 and increased KFSI’S holdings of shares of our common stock to 1,000,000 shares. Without including the effect of the stock split, the net tangible book value per share as of December 31, 2013 would have been $7,882 per share.

~~(2)~~

This consists of the conversion of the Preferred Shares and full exercise of the warrants held by FMG and also includes the issuance of shares of common stock to Mr. Raucy upon exercise of the stock option granted to him and the concurrent one-for-one matching of the shares of common stock issued upon exercise of his stock option.

~~The information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of this Offering determined at pricing.~~

The above discussion does not include the shares of common stock reserved for future issuance under our proposed Equity Incentive Plan, the shares of common stock issuable to KAI upon the achievement of certain stock price milestones or the shares of common stock issuable upon exercise of the Representative’s warrants.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis should be read in conjunction with our historical financial statements and the related notes included in this prospectus. This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. See “Special Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors, including those discussed in “Risk Factors” and elsewhere in this prospectus.

Overview

Our Business

We ~~are~~have three wholly-owned subsidiaries; Maison Insurance Company, or Maison, a Louisiana-domiciled property and casualty insurance ~~holding~~ company, Maison Managers, Inc., or MMI, a managing general agent, incorporated in the State of Delaware on October 2, ~~2012. In December~~ 2012, ~~we began providing~~and ClaimCor, LLC, or ClaimCor, a Florida based claims and underwriting technical solutions company.

Maison writes personal property and casualty insurance ~~to individuals~~ in Louisiana ~~through our wholly-owned subsidiary, Maison Insurance Company. Our insurance offerings currently include homeowners insurance, manufactured home insurance~~ and ~~dwelling fire insurance. We believe the Louisiana~~both personal and commercial property and casualty insurance ~~market has historically been underserved due to the unique weather-related risks~~ in ~~the region. We provide our policyholders~~Texas. Maison provides dwelling policies for wind and hail only, and dwelling, homeowner and mobile home/manufactured home policies for multi-peril property risks.

Maison began writing commercial business in Texas in June 2015, through a quota-share agreement with ~~a selection of insurance products at competitive rates, while pursuing profitability using our selective underwriting criteria.~~

We currently derive all of our business from insuring properties located in Louisiana. Our focus on the Louisiana market is due, in part, to our management’s expertise and specialized knowledge of Louisiana’s homeowner insurance industry trends and demographics. We believe that our local market knowledge provides us with a competitive advantage in terms of marketing, underwriting, claims servicing and policyholder service. We also believe that there currently is a unique growth opportunity for smaller insurance companies like us in Louisiana. National insurers have been reducing and continue to reduce their exposures to personal property insurance in Louisiana, creating an opportunity for us to increase our market share in the full peril protection market and with respect to wind/hail-only exposures. Specifically, in recent years, some insurers in Louisiana have begun to write policies excluding the coverage of wind/hail, creating an opportunity for us to fill the gap for customers who need that coverage. Historically, Louisiana Citizens PropertyBrotherhood Mutual Insurance Company, or ~~Citizens, which was created by~~Brotherhood. Through this agreement, Maison has assumed wind/hail only exposures on certain churches and related structures Brotherhood insures throughout the ~~state~~State of ~~Louisiana has been the only option for wind/hail policies. In addition, Citizens itself has been affording state-approved insurance companies, like~~ Texas.

Maison ~~Insurance, the opportunity to assume full peril protection and wind/hail-only policies written by Citizens.~~

We have an experienced management team led by Douglas N. Raucy, our President and Chief Executive Officer. Mr. Raucy has served in his current position since our founding in October 2012 and has more than 33 years of experience in the insurance industry. As a group, our executive officers have, on average, more than 35 years of experience in the property and casualty insurance industry, as well as long-standing relationships with agents and insurance regulators in Louisiana. Our management team will focus on underwriting and claims management, which we believe will enable us to achieve loss ratios that outperform industry averages.

~~We currently distribute our~~distributes its insurance policies through a network of ~~more than 130~~ independent ~~agents.~~agencies in Louisiana and Texas. These ~~agents~~agencies typically represent several insurance companies in order to provide various insurance product lines to their clients. ~~We refer~~The Company refers to these policies ~~we write through independent agents~~ as voluntary policies.

In addition to the voluntary policies that Maison writes, we have participated in the last five rounds of take-outs from Louisiana Citizens Property Insurance Company, or LA Citizens, occurring on December 1st of each year, as well as the inaugural depopulation of policies from the Texas Windstorm Insurance Association, or TWIA, which occurred on December 1, 2016. Under these programs, state-approved insurance companies, such as Maison, have the opportunity to assume insurance policies written by both LA Citizens and TWIA. The majority of policies that we have obtained through LA Citizens as well as all of the policies we have obtained through TWIA cover losses arising only from wind and hail. Prior to our takeout, both LA Citizens and TWIA policyholders were not able to obtain such coverage from any other marketplace.

On January 2, 2015, the Company completed its acquisition of 100% of the membership interest of ClaimCor, a claims and underwriting technical solutions company. Maison processes claims made by our policyholders through ClaimCor, and also through various third-party claims adjusting companies. We have the ultimate authority over the claims handling process, while the agencies we appoint have no authority to settle our claims or otherwise exercise control over the claims process.

Florida Certificate of Authority

On March 1, 2017, Maison received a certificate of authority from the Florida Office of Insurance Regulation, or FOIR, which authorizes Maison to write personal lines insurance in the State of Florida. Pursuant to the Consent Order issued, Maison has agreed to comply with certain requirements as outlined by the FOIR until Maison can demonstrate three consecutive years of net income following the Company’s admission into Florida as evidenced by its Annual Statement filed with the FOIR via the National Association of Insurance Commissioners electronic filing system. Among other requirements, the FOIR requires the following as conditions related to the issuance of Maison’s certificate of authority:

●

Although domiciled in the State of Louisiana, Maison has agreed to comply with the Florida Insurance Code as if Maison were a domestic insurer within the State of Florida;

●

Maison has agreed to maintain capital and surplus as to policyholders of no less than $35,000;

●

Maison has agreed to receive prior approval from the FOIR prior to the payment of any dividends; and

●

Maison has agreed to receive written approval from the FOIR regarding any form of policy issued or rate charged to its policyholders prior to utilizing any such form or rate for policies written in the State of Florida.

To comply with the Consent Order, on March 31, 2017, Maison received a capital contribution from us in the amount of $16,000. As of September 30, 2017, Maison had not written any insurance policies covering risks in the State of Florida.

On September 29, 2017, Maison received authorization from the FOIR to assume personal lines policies from Florida Citizens Property Insurance Corporation, or FL Citizens, pursuant to a proposal of depopulation which Maison filed with FL Citizens on August 18, 2017. Accordingly, Maison entered the Florida market via the assumption of policies from FL Citizens in December, ~~31, 2013, we had total assets~~2017. The order approving Maison’s assumption of ~~$23.2 million~~policies limited the number of policies which Maison could assume in 2017 to 14,663, and ~~stockholders’ equity of $7.9 million.~~ also stipulates that Maison maintain catastrophe reinsurance at such levels as deemed appropriate by the FOIR.

Our ~~net loss was $0.7 million for the fiscal year ended December 31, 2013.~~ Products

As of ~~December 31, 2013,~~September 30, 2017, we had approximately ~~11,500~~39,500 direct policies in-force. Of ~~the 11,500~~these policies in-force, approximately ~~52% were obtained from take-out~~21% of our policies ~~from Citizens and approximately 48% were voluntary~~are comprised of policies obtained from the LA Citizens take-out program (most of which are wind/hail only dwelling policies) while the remaining 79% are obtained through our independent agents. In total, from both take-out and voluntary business, 55% of our policies are homeowner multi-peril, approximately 12% are manufactured home multi-peril policies, approximately 31% are wind/hail only policies, and approximately 2% are dwelling fire policies.

Homeowners’ Insurance

Our homeowners’ insurance policy is written on an owner occupied dwelling which protects from all perils, except for those specifically excluded from coverage by the policy. It also provides replacement cost coverage on the home and other structures and will provide optional coverage for replacement cost on personal property in the home. It may also offer the option of specifically scheduling individual personal property items for coverage. Additionally, coverage for loss of use of the home until it can be repaired is provided. Personal liability and medical payment coverage to others is included, as well.

Wind/Hail Insurance

Our wind/hail insurance policy is written on an owner or non-owner occupied dwelling which protects from the perils of wind and/or hail-only weather events. This policy type may also provide coverage for personal property, but only for specific types of coverage. It provides replacement cost or actual cash value coverage on the home and other structures depending on the form under which the policy is written. Personal property in the home is written at actual cash value. Additionally, coverage for loss of use of the home is provided.

Manufactured Home Insurance

Our manufactured home insurance policy is written on a manufactured or mobile home and is similar to both the homeowners’ insurance policy and the dwelling fire policy. The policy can provide for coverage on the manufactured home, the insured’s personal property in the home and liability and medical payments can be included. Furthermore, our manufactured home policies can be endorsed to include coverage for flood and earthquake (coverage for these perils is not available under our other policy types. The policy can also be written on either owner occupied or non-owner occupied units. Property coverage can be written on an actual cash value or stated amount basis with an optional replacement cost coverage available for partial loss. There are several other optional coverages that can be included and residential and commercial-use rental units can be written along with seasonal use mobile homes or homes that are used for part of the year.

Dwelling Fire Insurance

Our dwelling fire policy can be issued on an owner occupied or non-owner (tenant) occupied dwelling property. It will also provide coverage against all types of loss unless the peril causing the loss is specifically excluded in the policy. Losses from vandalism and malicious mischief are also included in the coverage. All claims and losses on a dwelling are covered on a replacement cost basis and additional coverage for personal property (contents) can also be added. Personal liability and medical payments to others may be included on an optional basis.

Our direct in-force policy counts as well as assumed policies as of September 30, 2017, December 31, 2016 and December 31, 2015 were as follows:

Policies in-force as of
Source of Policies September 30, 2017 December 31, 2016 December 31, 2015

Total LA Citizens Takeout Policies in Force 8,224 8,892 8,957

Homeowners 21,465 17,685 14,283
Manufactured Homes 4,816 4,694 4,343
Other Dwellings 5,036 2,568 806
Total Voluntary Policies in Force 31,317 24,947 19,432

Total Direct Policies in Force 39,541 33,839 28,389

Assumed through Brotherhood Quota-Share Agreement 766 522 495
Assumed through TWIA Quota-Share Agreement⁽¹⁾ 623 1,251 —
Total Assumed Policies 1,389 1,773 495
(1) The decrease in policies assumed through the TWIA quota share agreement from December 1, 2016 to September 30, 2017 is attributable to the fact that policyholders have a six month period (until May 31, 2017) to opt-out of the assumption process. Upon opt-out, policies are removed from the Company’s listing of assumed policies back to the original date of takeout, December 1, 2016 (as if the Company had never assumed the policy). Furthermore, pursuant to the quota share agreement, any policies which had been assumed through TWIA and had reached their expiration are renewed by Maison directly are no longer considered an assumed policy and are instead reflected Voluntary Policies in Force in the table above.
Maison Managers, Inc.
MMI serves as the Company’s management services subsidiary and provides underwriting, policy administration, claims administration, marketing, accounting and other management services to Maison. MMI contracts with independent agencies for policy sales and services, and contracts with an independent third-party for policy administration services. As a managing general agency, ~~force.~~

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Relationship with KFSI

~~Prior~~MMI is licensed by and subject to the ~~completion~~regulatory oversight of ~~this Offering,~~the Louisiana and Texas Departments of Insurance, or LDI and TDI, respectively, as well as the FOIR.

ClaimCor, LLC

ClaimCor serves as the Company’s claims and underwriting technical solutions company. Maison processes claims made by our policyholders through ClaimCor, and also through various third-party claims adjusting companies. We have the ultimate authority over the claims handling process, while the agencies that we appoint have ~~been~~no authority to settle our claims or otherwise exercise control over the claims process.

The Company operates in a ~~wholly-owned subsidiary~~single segment – property and casualty insurance.

Non U.S.-GAAP Financial Measures

The Company assesses its results of ~~KFSI. We were incorporated under~~operations using certain non-U.S. generally accepted accounting principles (“GAAP”) financial measures, in addition to U.S. GAAP financial measures. These non-U.S. GAAP financial measures are defined below. The Company believes these non-U.S. GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating performance in the ~~name Maison Insurance Holdings Inc.~~same manner as management does.

The non-U.S. GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, any financial measures prepared in accordance with U.S. GAAP. The Company’s non-U.S. GAAP financial measures may be defined differently from time to time and may be defined differently than similar terms used by ~~KFSI to create a new homeowners’~~other companies, and accordingly, care should be exercised in understanding how we define our non-U.S. GAAP financial measures.

Underwriting Ratios

The Company, like many insurance ~~company. Immediately following this Offering~~companies, analyzes performance based on underwriting ratios such as loss ratio, expense ratio and combined ratio. The loss ratio is derived by dividing the amount of net losses and loss adjustment expenses by net premiums earned. The expense ratio is derived by dividing the sum of amortization of deferred policy acquisition costs and general and administrative expenses by net premiums earned. All items included in the loss and expense ratios are presented in the Company’s U.S. GAAP financial statements. The combined ratio is the sum of the loss ratio and the conversion of the Preferred Shares as described herein, KFSI will own approximately 33.3% of our outstanding common stock (or 30.8% if the underwriters exercise their over-allotment option in full) but will no longer be responsible for funding our operations. KFSI is expected to be one of our largest stockholder after this Offering. We have entered into the Management Services Agreement with 1347 Advisors LLC,expense ratio. A combined ratio below 100% demonstrates underwriting profit whereas a ~~wholly-owned subsidiary of KFSI and, upon the completion of this Offering, we will enter into the Transition Services Agreement with KFSI or~~combined ratio over 100% demonstrates an ~~affiliate or subsidiary thereof.~~underwriting loss.

Critical Accounting PoliciesEstimates and Estimates

General

Assumptions
~~We are required~~
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions ~~in certain circumstances~~ that affect the application of policies and the reported amounts ~~reported in our~~of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and ~~related footnotes. We evaluate~~the reported amounts of revenues and expenses for the reporting period. Actual results could differ from these estimates. Estimates and their underlying assumptions are reviewed on an ongoing basis. Changes in estimates are recorded in the accounting period in which they are determined. The critical accounting estimates and assumptions in the accompanying consolidated financial statements include the provision for loss and loss adjustment expense reserves (as well as the reinsurance recoverable on ~~an on-going basis based on historical developments, market conditions, industry trends~~those reserves), the valuation of fixed income and ~~other information~~equity securities, the valuation of net deferred income taxes, the valuation of various securities that we ~~believe~~have issued in conjunction with the termination of the management services agreement with 1347 Advisors and the valuation of deferred policy acquisition costs.
Adoption of Accounting Standards Due to be reasonable under the circumstances. There can be no assurance that actual results will conform to our estimates and assumptions, and that reported results of operation will not be materially adversely affected by the need to make accounting adjustments to reflect changes in these estimates and assumptions from time to time. We believe the following policies are the most sensitive to estimates and judgments.Status as an Emerging Growth Company
Section 107 of the JOBS ~~Act~~act provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act, as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of these benefits until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
Provision for Loss and Loss Adjustment Expense Reserves
~~Losses~~
A significant degree of judgment is required to determine amounts recorded in the consolidated financial statements for the provision for loss and loss adjustment expense reserves. The process for establishing the provision for loss and loss adjustment expense reserves ~~represent~~reflects the uncertainties and significant judgmental factors inherent in predicting future results of both known and unknown loss events. As such, the process is inherently complex and imprecise and estimates are constantly refined. The process of establishing the provision for ~~the ultimate cost of unpaid reported and unreported claims incurred and related expenses. The reserves are adjusted regularly based upon experience. We currently have no discounted reserves.~~
~~We perform a continuing review of our losses~~loss and loss adjustment expense reserves relies on the judgment and opinions of a large number of individuals, including ~~our reserving techniques and~~ the ~~amount of reinsurance we have. The reserves are also reviewed regularly by a Fellow~~opinions of the ~~Casualty Actuarial Society and a member of~~Company’s independent actuaries.
Factors affecting the American Academy of Actuaries who meets the qualification standards set by the American Academy of Actuaries to issue statements of actuarial opinion regarding our financial statements. Since the reserves are based on estimates, the ultimate liability may be more or less than such reserves. The effects of changes in such estimated reserves are included in the results of income in the period in which the estimates are changed. Such changes in estimates could occur in a future period and may be material to our results of operations and financial position in such period.
~~The liability~~provision for ~~losses~~loss and loss adjustment expense ~~or LAE, represents estimates~~reserves include the continually evolving and changing regulatory and legal environment, actuarial studies, professional experience and expertise of the ~~ultimate unpaid cost of all losses incurred, including losses for~~Company’s claims ~~that have not yet been reported~~departments’ personnel and independent adjusters retained to ~~Maison Insurance. The amount of loss reserves for reported~~handle individual claims, ~~is based primarily upon a case-by-case evaluation~~the quality of the ~~kind~~data used for projection purposes, existing claims management practices including claims handling and settlement practices, the effect of ~~risk involved, knowledge~~inflationary trends on future loss settlement costs, court decisions, economic conditions and public attitudes.
In the actuarial review process, an analysis of the ~~circumstances surrounding each claim~~provision for loss and loss adjustment expense reserves is completed for the Company’s insurance ~~policy provisions relating to the type of loss. The amounts of~~subsidiary. Unpaid losses, allocated loss ~~reserves for unreported losses~~adjustment expenses and ~~LAE~~unallocated loss adjustment expenses are ~~determined using historical information~~separately analyzed by line of insurance as adjusted to current conditions. Inflation is ordinarily implicitly provided for in the reserving function through analysis of costs, trends and reviews of historical reserving results over multiple years.
~~Reserves are closely monitored and recalculated periodically using the most recent information on reported claims and a variety~~business or coverage by accident year. A wide range of actuarial ~~techniques. Specifically, on a monthly basis, management reviews existing reserves, new claims, changes~~methods are utilized in order to ~~existing case reserves, and paid losses with respect to the current and prior~~

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~~year. As we develop historical data regarding paid and incurred losses, we use this data to develop expected~~appropriately measure ultimate loss and loss adjustment expense ~~amounts. We then compare these~~costs. These methods include paid loss development, incurred loss development and frequency-severity method. Reasonability tests such as ultimate loss ratio trends and ultimate allocated loss adjustment expense to ultimate loss are also performed prior to selection of the final provision. The provision is indicated by line of business or coverage and is separated into case reserves, reserves for losses incurred but not reported (“IBNR”) and a provision for loss adjustment expenses (“LAE”).

Because the establishment of the provision for loss and loss adjustment expense amounts to earned premiums to derive a loss ratio for each line of business. We also consider other specific factors such as recent weather-related losses, trends in historical paid losses, and legal and judicial trends regarding liability. Since a significant portion of our business was from Citizens take-outs, we use the loss ratio method based on the expected loss ratio underlying Citizens’ rates, among other methods, to project an ultimate loss expectation, and then the related loss history must be regularly evaluated and loss expectations updated, with the possibility of variability from the initial estimate of ultimate losses.

When a claim is reported to us, our claims personnel establish a “case reserve” for the estimated amount of the ultimate payment. This estimate reflects an informed judgment based upon general insurance reserving practices and on the experience and knowledge of the estimator. The estimated reserve includes the nature and value of the specific claim, the severity of injury or damage, location, and the policy provisions relating to the type of loss. Case reserves are adjusted by us as more information becomes available. It is our policy to settle each claim as expeditiously as possible.

We maintain incurred but not reported, or IBNR, reserves to provide for already incurred claims that have not yet been reported and developments on reported claims. The IBNR reserve is determined by estimating our insurance company’s ultimate net liability for both reported and IBNR claims and then subtracting the case reserves and payments made to date for reported claims.

~~Loss Reserve Estimation Methods.~~ ~~We, and our consulting actuary, apply the following general methods in projecting loss and LAE reserves:~~

~~Reported loss development;~~

~~Paid loss development; and~~

~~Loss ratio methods, including Bornhuetter-Ferguson.~~

~~Description of Ultimate Loss Estimation Methods.~~ The reported loss development method relies on the assumption that, at any given state of maturity, ultimate losses can be predicted by multiplying cumulative reported losses (paid losses plus case reserves) by a cumulative development factor. The validity of the results of this method depends on the stability of claim reporting and settlement rates, as well as the consistency of case reserve levels. Case reserves do not have to be adequately stated for this method to be effective; they only need to have a fairly consistent level of adequacy at all stages of maturity. We assume that our loss development patterns will be reasonably consistent with industry averages, and use industry-based factors to project the ultimate losses.

The paid loss development method is mechanically identical to the reported loss development method described above. The paid method does not rely on case reserves or claim reporting patterns in making projections.

The validity of the results from using a loss development approach can be affected by many conditions, such as internal claim department processing changes, a shift between single and multiple claim payments, legal changes, or variations in our mix of business from year to year. Also, since the percentage of losses paid for immature years is often low, development factors are volatile. A small variation in the number of claims paid can have a leveraging effect that can lead to significant changes in estimated ultimate values. Therefore, ultimate values for immature accident years are often based on alternative estimation techniques.

The loss ratio method uses the assumption that remaining unreported losses are a function of the total expected losses rather than a function of currently reported losses. The expected loss ratio is multiplied by earned premium to produce ultimate losses. Paid losses are then subtracted from this estimate to produce expected unreported losses.

The loss ratio method is most useful as an alternative to other models for immature accident years. For these immature years, the amounts reported or paid may be small and unstable, and therefore, not predictive of future development. Therefore, future development is assumed to follow an expected pattern that is supported

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~~by more stable historical data or by emerging trends. This method is also useful when changing reporting patterns or payment patterns distort the historical development of losses.~~

Currently, we calculate our estimated ultimate liability on a quarterly basis using the principles and procedures applicable to the lines of business written. However, because the establishment of loss reserves is an inherently uncertain process weinvolving estimates, current provisions may need to be updated. Adjustments to the provision, both favorable and unfavorable, are reflected in the consolidated statements of operations and comprehensive income (loss) for the periods in which such estimates are updated. Management determines the loss and loss adjustment expense reserves as recorded on the Company’s financial statements, while the Company’s independent actuaries develop a range of reasonable estimates and a point estimate of loss and loss adjustment expense reserves. The actuarial point estimate is intended to represent the actuaries’ best estimate and will not necessarily be at the mid-point of the high and low estimates of the range.

Valuation of Fixed Income and Equity Securities

The Company’s fixed income and equity securities are recorded at fair value using 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. The Company does not have any fixed income or equity investments in its portfolio which require the Company to use unobservable inputs. Any change in the estimated fair value of its investments could impact the amount of unrealized gain or loss the Company has recorded, which could change the amount the Company has recorded for its investments and other comprehensive loss on its consolidated balance sheets and statements of comprehensive income (loss).

Gains and losses realized on the disposition of investments are determined on the first-in, first-out basis and credited or charged to the consolidated statements of operations and comprehensive income (loss). Premium and discount on investments are amortized and accreted using the interest method and charged or credited to net investment income. The Company performs a quarterly analysis of its investment portfolio to determine if declines in market value are other-than-temporary.

Valuation of Net Deferred Income Taxes

The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in the Company’s consolidated financial statements. In determining its provision for income taxes, the Company interprets tax legislation in a variety of jurisdictions and makes assumptions about the expected timing of the reversal of deferred income tax assets and liabilities and the valuation of net deferred income taxes.

The ultimate realization of the deferred income tax asset balance is dependent upon the generation of future taxable income during the periods in which the Company’s temporary differences reverse and become deductible. A valuation allowance is established when it is more likely than not that all or a portion of the deferred income tax asset balance will not be realized. In determining whether a valuation allowance is needed, management considers all available positive and negative evidence affecting specific deferred income tax asset balances, including the Company’s past and anticipated future performance, the reversal of deferred income tax liabilities, and the availability of tax planning strategies. To the extent a valuation allowance is established in a period, an expense must be recorded within the income tax provision in the consolidated statements of operations and comprehensive income.

Securities issued to 1347 Advisors

Pursuant to the termination of the Management Services Agreement with 1347 Advisors, a wholly-owned subsidiary of KFSI, the Company issued Series B Preferred Shares, Warrants, and entered into a Performance Share Grant Agreement with 1347 Advisors on February 24, 2015. On January 2, 2018, the Company entered into a stock purchase agreement with 1347 Advisors and IWS Acquisition Corporation, both affiliates of KFSI, pursuant to which the Company agreed to repurchase all 60,000 Series B Preferred Shares held by 1347 Advisors and all 60,000 Series B Preferred Shares held by IWS Acquisition Corporation. The Company completed the purchase of the shares held by 1347 Advisors on January 2, 2018 and intends to complete the repurchase of the shares held by IWS Acquisition Corporation upon completion of this offering. In connection with the stock purchase agreement, the Performance Share Grant Agreement, dated February 24, 2015, between the Company and 1347 Advisors was terminated. No common shares were issued to 1347 Advisors under the Performance Share Grant Agreement.

Because the Series B Preferred Shares have a provision requiring mandatory redemption on February 24, 2020, the Company was required to classify the Series B Preferred Shares as a liability on its balance sheet. The resulting liability was recorded at a discount to the $4,200 ultimate amount of payments required to be made under the Series B Preferred Shares which includes all periodic dividends to be paid on the Series B Preferred Shares based upon an analysis of the timing and amounts of cash payments expected to occur under the terms of the Series B Preferred Shares discounted for the Company’s estimated cost of equity (13.9%).

The Company has estimated the fair value of the Warrants on grant date based upon the Black-Scholes option pricing model while it utilized a Monte Carlo model to determine the fair value of the Performance Share Grant Agreement due to the fact that the underlying shares are only issuable based upon the achievement of certain market conditions.

Deferred Policy Acquisition Costs

Deferred policy acquisition costs represent the deferral of expenses that the Company incurs related to successful efforts to acquire new business or renew existing business. Acquisition costs, which consist of commissions, premium taxes and underwriting and agency expenses related to issuing insurance policies are deferred and charged against income ratably over the terms of the related insurance policies. Management regularly reviews the categories of acquisition costs that are deferred and assesses the recoverability of this asset. Costs associated with unsuccessful efforts or costs that cannot be ~~certain~~tied directly to a successful policy acquisition are expensed as incurred, as opposed to being deferred and amortized as the premium is earned.

Stock-Based Compensation Expense

The Company uses the fair-value method of accounting for stock-based compensation awards granted. The Company determines the fair value of the stock options on their grant date using the Black-Scholes option pricing model and determines the fair value of restricted stock units on their grant date using multiple Monte Carlo simulations. The fair value of these awards is recorded as compensation expense over the requisite service period, which is generally the expected period over which the awards will vest, with a corresponding increase to additional paid-in capital. When the stock options are exercised, or correspondingly, when the restricted stock units vest, the amount of proceeds together with the amount recorded in additional paid-in capital is recorded in stockholders’ equity.

New Accounting Pronouncements

ASU 2014-09: Revenue from Contracts with Customers:

The FASB has issued ASU No. 2014-09, “Revenue from Contracts with Customers”, and related amendments ASU 2015-14, ASU 2016-10, ASU 2016-12, ASU 2016-20, ASU 2017-05 and ASU 2017-13, (collectively, “Topic 606”). Topic 606 creates a new comprehensive revenue recognition standard that ~~ultimate losses~~ will serve as a single source of revenue guidance for all companies that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of non-financial assets, unless those contracts are within the scope of other standards, such as insurance contracts. Topic 606 becomes effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. The Company will adopt Topic 606 on the effective date and since virtually all of the Company’s revenues relate to insurance contracts and investment income, the adoption of Topic 606 is not ~~exceed the established loss reserves and~~expected to have a material ~~adverse effect~~impact on ~~our~~the Company’s revenues. The Company will continue to monitor and examine transactions that could potentially fall within the scope of Topic 606 as such are consummated.

ASU 2016-01: Financial Instruments-Overall:

In January 2016, the FASB issued ASU 2016-01:Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. Most significantly, ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of an investee) to be measured at fair value with changes in fair value recognized in net income (loss). ASU 2016-01 is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. ASU 2016-01 will be applied using a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Adoption of ASU 2016-01 is not expected to have a material impact on the Company’s financial position, cash flows, or total comprehensive income, but could impact the Company’s results of operations and earnings per share as changes in fair value will be presented in net income rather than other comprehensive income.

ASU 2016-02: Leases:

In February 2016, the FASB issued ASU 2016-02:Leases. ASU 2016-02 was issued to improve the financial ~~condition. Changes in estimates, or differences between estimates~~reporting of leasing transactions. Under current guidance for lessees, leases are only included on the balance sheet if certain criteria, classifying the agreement as a capital lease, are met. This update will require the recognition of a right-of-use asset and ~~amounts ultimately paid, are reflected~~a corresponding lease liability, discounted to present value, for all leases that extend beyond 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating ~~results~~section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income while the repayment of the principal portion of the lease liability will be classified as a financing activity and the interest component will be included in the operating section of the statement of cash flows. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years beginning after December 15, 2020. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period ~~during which such adjustments are made.~~presented using a modified retrospective approach. The Company has reviewed its existing lessee obligations and has determined that ASU 2016-02 will apply should the Company renew its existing leases, or enter into any new lease agreements.

Reinsurance

~~Reinsurance recoverables recorded with respect~~

ASU 2016-09: Stock Compensation:

In March 2016, the FASB issued ASU 2016-09:Compensation – Stock Compensation: Improvement to ~~insurance losses ceded~~Employee Share-Based Payment Accounting. ASU 2016-09 was issued to ~~reinsurers under reinsurance contracts are also subject~~simplify the accounting for share-based payment awards. The guidance requires that all tax effects related to ~~estimation error. Ceding ratios are determined using actuarial assumptions, and therefore, are subject~~share-based payment be made through the statement of operations at the time of settlement as opposed to the ~~same uncertainties as reserves for losses and LAE. Additionally, estimates~~current guidance that requires excess tax benefits to be recognized in additional paid-in-capital. ASU 2016-09 also removes the requirement to delay recognition of ~~reinsurance recoverables may prove uncollectible if the reinsurer is unable or unwilling to perform under the contract.~~a tax benefit until it reduces current taxes payable. The ~~ceding of insurance does not legally discharge the ceding company from its primary liability to the policyholder for the full amount of the policies, and the ceding company~~change is required to ~~pay the loss and bear collection risk if the reinsurer fails~~be applied on a modified retrospective basis, with a cumulative effect adjustment to ~~meet its obligation under the reinsurance agreement. We evaluate the balances due~~opening accumulated deficit. Additionally, all tax related cash flows resulting from reinsurance companies for collectability, and when in management’s opinion issues of collectability exist, establish an allowance for doubtful accounts. For information about the risks of non-collectability of reinsurance, see the risk factor entitled “We face a risk of non-collectability of reinsurance, which could materially and adversely affect our business, results of operations and/or financial condition.”

Deferred Tax Assets and Liabilities

~~Deferred tax assets and liabilities~~share-based payments are ~~determined based~~to be reported as operating activities on the ~~differences between~~statement of cash flows, a departure from the financial reporting and tax bases of assets and liabilities. Deferred tax liabilities are recognized for temporary differences that will result in taxable amounts in future years. Deferred tax assets are recognized for deductible temporary differences and tax operating loss and tax credit carry forwards. The deferred tax assets and liabilities are measured by applying the enacted tax rates and laws in effect for the years incurrent requirement which ~~such differences are expected to reverse. The components of our deferred tax asset are primarily net operating losses and unearned premium reserves.~~

~~Realization of deferred tax assets depends upon our generation of sufficient taxable income in the future to recover~~presents tax benefits ~~that cannot be recovered~~as an inflow from ~~taxes paid in the carryback period, generally two years.~~

Liquidity and Capital Resources

Our primary sources of cash flow include dividends from our subsidiaries, management fee from Maison Managers, and any future capital raising transactions that we may execute. The ability of our subsidiaries to pay us dividends directly impacts the liquidity available to us for the purposes of meeting our expenses and paying dividends to our stockholders. The primary cash flow sources for Maison Insurance are premiums and investment income, and primary cash outflows are claims payments and operating expenses. In the insurance industry, cash collected for premiums from policies written is invested, interest and dividends are earned thereon, and loss and settlement expenses are paid out over a period of years.

This period of time varies by the circumstances surrounding each claim. Additional cash outflow occurs through payments of underwriting costs such as commissions, taxes, payroll, and general overhead expenses.

Net cash provided by operating activities from our inception through the period ended December 31, 2013, was approximately $6.7 million, which consisted primarily of cash received from net written premiums less cash disbursed for losses and losses adjustment expenses and operating expenses. Net cash provided from investing activities of $1.5 million was primarily from the sale of a preferred stock holding, which was originally contributed by our parent company, KAI, net of our purchase of fixed maturity securities. Net cash provided by financing activities ~~totaled $6.9 million~~and an outflow from ~~the initial capitalization~~operating activities. ASU 2016-09 is effective for annual and ~~subsequent additional paid in capital.~~

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~~Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light~~interim reporting periods beginning after December 15, 2017 and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted with any adjustments reflected as of the ~~risks, expenses and difficulties encountered by companies in their early stage~~beginning of ~~development, particularly companies in highly competitive markets. Such risks for us include, but are~~the fiscal year of adoption. The Company does not ~~limited to,~~believe the ~~management~~adoption of ~~future growth. See the risk factor entitled “We have a limited operating history and it is difficult to predict our future growth and operating results.”~~

To address these risks, we must, among other things, target an appropriate base of insureds, implement and successfully execute our business and marketing strategy, continually develop and upgrade our risk-control procedures, respond to competitive pressures, meet the needs of our customers and attract, retain and motivate qualified personnel. There can be no assurance that weASU 2016-09 will ~~be successful in addressing such risks, and the failure to do so can~~ have a material ~~adverse effect~~impact on ~~our business prospects,~~its consolidated financial ~~condition~~statements.

ASU 2016-13: Financial Instruments – Credit Losses:

~~We have tailored our investment policy in an effort to minimize risk in~~using forecasted information instead of the current ~~financial market, particularly the~~methodology which only considered past events and current conditions. Under ASU 2016-13, credit losses on available-for-sale debt securities ~~market. Therefore, we~~will be measured in a manner similar to current GAAP; however, the amendments require that credit losses be presented as an allowance against the investment, rather than as a write-down. The amendments also allow the entity to record reversals of credit losses in current period net income, which is prohibited under current GAAP. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company is currently ~~invest our excess cash in money market accounts or in certificates of deposit that mature in no more than twenty-four months. After~~evaluating the ~~closing~~impact of the ~~Offering,~~adoption of ASU 2016-02 on its consolidated financial statements.

Analysis of Financial Condition

As of September 30, 2017 compared to December 31, 2016 and ~~periodically thereafter, we will review our investment policy in light of our then-current circumstances and available investment opportunities.~~

We classify our investment portfolio as available for sale; therefore, all investments are reported at fair market value, with unrealized gains and losses, net of tax, being reported as a component of stockholders’ equity. In the future we may alter our investment policy to include investments such as federal, state and municipal obligations, corporate bonds, preferred and common equity securities and real estate mortgages, as permitted by applicable law.

Our insurance subsidiary, Maison Insurance, requires liquidity and adequate capital to meet ongoing obligations to policyholders and claimants and to fund operating expenses. Adequate levels of liquidity and surplus are maintained to manage the risks inherent with any differences between the duration of our liabilities and invested assets. We believe that we maintain sufficient liquidity to pay Maison Insurance’s claims and fees to Maison Managers, as well as satisfy commitments in the event of unforeseen events such as reinsurer insolvencies, inadequate premium rates, or reserve deficiencies.

We maintain a comprehensive reinsurance program at levels management considers adequate to diversify risk and safeguard its financial position. To the extent that reinsurance costs cannot be passed on to our customers through our rates, our reinsurance program could have a negative impact on our liquidity.

Louisiana statutes provide that the ratio of net premium written to policyholders’ surplus for Maison Insurance should not exceed 4-to-1. The ratio of annual statutory net premium written by Maison Insurance to combined policyholders’ surplus was 1.7-to-1 as of December 31, ~~2013. Our current levels~~2016 compared to December 31, 20152015

Investments

The Company’s investments in fixed income and equity securities are classified as available-for-sale and are reported at estimated fair value. The Company held an investment portfolio comprised primarily of ~~policyholders’ surplus~~fixed income securities issued by the U.S. government, government agencies and high quality corporate issuers. The fixed income portfolio is managed by a third-party investment management firm in accordance with the investment policies and guidelines approved by the Company’s Board of Directors. These guidelines stress the preservation of capital, market liquidity and the diversification of risk. Additionally, an investment committee comprised of a portion of the Company’s directors is in place to identify, evaluate and approve suitable investment opportunities for the Company. This has resulted in a number of equity investments managed by the committee that represent approximately 3.6% of the Company’s total investment portfolio as of September 30, 2017. Investments held by the Company’s insurance company subsidiary must also comply with applicable domiciliary state regulations that prescribe the type, quality and concentration of investments.

The table below summarizes, by type, the Company’s investments as of September 30, 2017, December 31, 2016, and December 31, 2015.

September 30, 2017
(unaudited)
December 31, 2016 December 31, 2015
Type of Investment Carrying Amount Percent of Total Carrying Amount Percent of Total Carrying Amount Percent of Total
Fixed income securities:
U.S. government $ 2,899 5.8 % $ 1,604 5.6 % $ 647 3.0 %
State municipalities and political subdivisions 5,365 10.8 % 2,246 7.9 % 1,651 7.6 %
Asset-backed securities and collateralized mortgage obligations 16,635 33.5 % 11,968 42.2 % 9,082 42.0 %
Corporate 20,308 40.9 % 10,741 37.8 % 8,858 40.9 %
Total fixed income securities 45,207 91.0 % 26,559 93.5 % 20,238 93.5 %

Equity securities:
Common stock 1,612 3.2 % 1,136 4.0 % — — %
Warrants to purchase common stock 122 0.2 % — — % — — %
Rights to purchase common stock 37 0.1 % — — % — — %
Total equity securities 1,771 3.5 % 1,136 4.0 % — — %

Short-term investments 1,779 3.6 % 196 0.7 % 1,149 5.3 %
Other investments 945 1.9 % 505 1.8 % 248 1.2 %
Total investments $ 49,702 100.0 % $ 28,396 100.0 % $ 21,635 100.0 %
Pursuant to the certificate of authority that we received from the TDI, we are ~~adequate~~required to ~~support current premium writings based~~deposit securities with the State of Texas. These securities consist of cash in the amount of $300 as well as various fixed income securities listed in the table above having an amortized cost basis of $2,001 and an estimated fair value of $1,998 as of September 30, 2017.
The Company’s other investments are comprised of equity investments in two limited partnerships which seek to provide equity and asset-backed debt investment in a variety of privately-owned companies. The Company has committed to a total investment of $1,000, of which the limited partnerships have drawn down approximately $645 through September 30, 2017. One of these limited partnerships is managed by Argo Management Group, LLC, an entity which, as of April 21, 2016 is wholly owned by KFSI. The Company has accounted for its investments under the cost method as the instruments do not have readily determinable fair values and the Company does not exercise significant influence over the operations of the limited partnerships or the underlying privately-owned companies.
Also included in other investments is a $300 certificate of deposit with an original term of 18 months deposited with the State of Florida pursuant to the terms of the certificate of authority issued to Maison from the FOIR.
Liquidity and Cash Flow Risk
The table below summarizes the fair value of the Company’s fixed income securities by contractual maturity as of September 30, 2017, December 31, 2016, and December 31, 2015. 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 these obligations.

September 30, 2017
(unaudited)
December 31, 2016 December 31, 2015
Matures in: Carrying Amount Percent of Total Carrying Amount Percent of Total Carrying Amount Percent of Total
One year or less $ 2,415 5.3 % $ 1,828 6.9 % $ 1,012 5.0 %
More than one to five years 19,757 43.7 % 12,678 47.7 % 10,414 51.5 %
More than five to ten years 11,804 26.1 % 3,918 14.8 % 2,259 11.2 %
More than ten years 11,231 24.9 % 8,135 30.6 % 6,553 32.3 %
Total $ 45,207 100.0 % $ 26,559 100.0 % $ 20,238 100.0 %
The Company holds cash and high-grade short-term assets which, along with fixed income and equity securities, management believes are sufficient in amount for the payment of loss and loss adjustment expense reserves and other operating subsidiary obligations on ~~this standard. We monitor premium and statutory surplus levels of Maison Insurance~~a timely basis. The Company may not be able to liquidate its investments in ~~an effort~~the event that additional cash is required to ~~ensure~~meet obligations to its policyholders; however, the Company believes that the subsidiary maintains adequate premium to surplus ratios. Failure of Maison Insurance to maintain adequate levels of policyholders’ surplus could negatively impact our ability to write additional premiums.high-quality, liquid investments in its portfolio provide it with sufficient liquidity.
In addition, regulators and rating agencies utilize a risk based capital, or RBC, test designed to measure the acceptable amount of surplus an insurer should maintain, based on specific inherent risks of each insurer. If we fail to meet the benchmark level, we may be subject to scrutiny by the LDOI which could potentially result in rehabilitation or liquidation. At December 31, 2013 the total adjusted capital of our insurance subsidiary exceeded the minimum level required under RBC. We continually monitor the RBC ratios and will implement strategies to maintain ratios above the regulatory minimums.
Market Risk
Market risk is the risk that wethe Company will incur losses due to adverse changes in interest or currency exchange rates and equity prices. ~~Our~~Given the Company’s operations only invest in U.S. dollar denominated instruments and maintains a relatively insignificant investment in equity instruments, its primary market risk ~~exposure~~exposures in the investments portfolio isare to changes in interest rates.
Because the investments portfolio is comprised of primarily fixed maturity instruments that are usually held to maturity, periodic changes in interest rate levels generally impact ~~our~~the Company’s financial results to the extent that the investments are recorded at market value and reinvestment yields are different than the original yields on maturing

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instruments. During periods of rising interest rates, the market ~~value~~values of the existing fixed ~~maturities~~income securities will generally decrease. The reverse is true during periods of declining interest rates.

Credit Risk

Credit risk is defined as the risk of financial loss due to failure of the other party to a financial instrument to discharge an obligation. Credit risk arises from the Company’s positions in short-term investments, corporate debt instruments and government and government agency bonds.

At September 30, 2017, December 31, 2016, and December 31, 2015, the Company’s debt securities had the following quality ratings as assigned by Standard and Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”).

September 30, 2017
(unaudited)
December 31, 2016 December 31, 2015
Rating (S&P/Moody’s) Carrying Amount Percent of Total Carrying Amount Percent of Total Carrying Amount Percent of Total
AAA/Aaa $ 22,345 49.4 % $ 14,995 56.4 % $ 10,741 53.0 %
Aa/Aa 5,551 12.3 % 2,627 9.9 % 2,520 12.5 %
A/A 11,735 26.0 % 5,516 20.8 % 4,745 23.4 %
BBB 5,576 12.3 % 3,421 12.9 % 2,232 11.1 %
Total fixed income securities $ 45,207 100.0 % $ 26,559 100.0 % $ 20,238 100.0 %
Other-Than-Temporary Impairment
The length of time an individual investment may be held in an unrealized loss position may vary based on the opinion of the investment manager and their respective analyses related to valuation and to the various credit risks that may prevent the Company from recapturing the principal investment. In the case of an individual investment where the investment manager determines that there is little or no risk of default prior to maturity, the Company would elect to hold the investment in an unrealized loss position until the price recovers or the investment matures. In situations where facts emerge that might increase the risk associated with recapture of principal, the Company may elect to sell the investment at a loss.
The Company performs a quarterly analysis of its investment portfolio to determine if declines in market value are other-than-temporary. As a result of the analysis performed by the Company, there were no write-downs for other-than-temporary impairments related to investments for the nine months ended September 30, 2017 nor the years ended December 31, 2016 and 2015.

As of September 30, 2017, the gross unrealized losses for fixed income and equity securities amounted to $202 and $59, respectively, and there were no unrealized losses attributable to non-investment grade securities. At September 30, 2017 and December 31, 2016 and 2015, all unrealized losses on individual investments were considered temporary. Fixed income securities in unrealized loss positions continued to pay interest and were not subject to material changes in their respective debt ratings. The Company concluded the declines in value were considered temporary. As the Company has the capacity to hold these investments to maturity, no impairment provision was considered necessary.
Deferred Policy Acquisition Costs
The Company’s deferred policy acquisition costs (“DPAC”) include commissions, premium taxes, assessments and policy processing fees that are directly related to successful efforts to acquire new or existing insurance policies to the extent they are considered recoverable and represent those costs related to acquiring the premiums the Company has yet to earn (the unearned premium reserve).
DPAC increased $1,803, to $6,192 as of September 30, 2017 from $4,389 as of December 31, 2016. DPAC expressed as a percentage of unearned premium reserves was 19.2% as of September 30, 2017, compared to 17.0% as of December 31, 2016. This increase results from an increase in the effective rate on premium taxes that we pay in Louisiana and Texas due to a change in Louisiana statute whereby the Company no longer qualifies for certain credits on its premium taxes which were related to the value of investments held in the State of Louisiana.
DPAC increased $359, to $4,389 as of December 31, 2016 compared to $4,030 as of December 31, 2015, corresponding to an increase in our unearned premium reserves over the same period. DPAC expressed as a percentage of unearned premium reserves was 17.0% and 17.2% as of December 31, 2016 and 2015, respectively.
Effective January 1, 2016, we amended the terms of our quota-share agreement with Brotherhood such that the premiums we receive, and the commissions we pay, are remitted on an earned basis. Prior to January 1, 2016, commissions and premiums were remitted on an “as written” basis. While this change does not impact the net income earned as a result of the agreement, it does impact certain assets and liabilities on our consolidated financial statements, such as our unearned premium reserves and DPAC asset. This change to our quota-share agreement with Brotherhood resulted in a $221 decrease to DPAC from December 31, 2015 to December 31, 2016.
Premiums Receivable, Net of Allowance for Doubtful Accounts
Premiums receivable, net of allowances for credit losses, decreased by $703 to $2,220 as of September 30, 2017 from $2,923 as of December 31, 2016. Due to our participation in the LA Citizens take-out program on December 1, 2016, we had a balance due from LA Citizens for approximately $800 as of December 31, 2016, most of which had been collected as of September 30, 2017.
Premiums receivable, net of allowances for credit losses, increased by $528 to $2,923 as of December 31, 2016 from $2,395 as of December 31, 2015. This increase was primarily attributable to premiums due from LA Citizens and TWIA on the December 1, 2016 depopulation of policies from both insurers. Premiums due from LA Citizens increased by approximately $400 due to a change in the timing of payments LA Citizens makes under its depopulation program. In prior years, LA Citizens would remit premium due to us (less a 16% holdback for endorsements and cancellations) prior to December 31st of the year of the depopulation. For the depopulation which occurred on December 1, 2016, LA Citizens changed the timing of payments such that the premium would be remitted to us in late January, 2017. Since December 1, 2016 represented the first-ever depopulation of policies from TWIA, premiums due from TWIA accounted for approximately $140 of the change year over year.
Ceded Unearned Premiums
Ceded unearned premiums represents the unexpired portion of premiums which have been paid to the Company’s reinsurers. Ceded unearned premiums are charged to income over the terms of the respective reinsurance treaties. Ceded unearned premiums decreased $1,011 to $3,836 as of September 30, 2017 from $4,847 as of December 31, 2016 due predominantly to the amount and timing of installment payments due under our excess of loss catastrophe treaties.
Ceded unearned premiums increased $2,042 to $4,847 as of December 31, 2016 from $2,805 as of December 31, 2015, which again was predominantly due to the timing of installment payments due under our excess of loss catastrophe treaties. As we entered into a new treaty effective June 1, 2016, with higher limits compared to our prior treaty which expired on May 31, 2016, the amount of premium we cede and therefor due under our installment agreement had increased over the prior treaty year.

Reinsurance Recoverable
Reinsurance recoverable on both paid losses and loss and LAE reserves represents amounts due to the Company, or expected to be due to the Company, from its reinsurers, based upon claims paid as well as claims reserves which have exceeded the retention amount under our reinsurance treaties. As of September 30, 2017, we have recorded expected recoveries from our reinsurers of $7,767 on paid losses and $17,560 on loss and LAE reserves, resulting primarily from recoveries due under our catastrophe excess of loss treaty for Hurricane Harvey, which affected the Gulf Coast of Texas in late August, 2017.
As of December 31, 2016 we have recorded an expected recovery of $444 on paid losses and $3,652 on loss and loss adjustment expense reserves, compared to $0 and $120 respectively as of December 31, 2015. The expected recoveries as of December 31, 2016 result from a series of severe storms which produced multiple tornadoes and flooding in the State of Louisiana in late February 2016, a wind and hail event occurring in both Texas and Louisiana in early March 2016, as well as a wind and flooding event which occurred in Louisiana in mid-August 2016.
Funds Deposited with Reinsured Companies
Funds deposited with reinsured companies represents collateral that we had placed on deposit with Brotherhood based upon our quota-share agreement to reinsure a portion of Brotherhood’s business for wind/hail coverage only. Pursuant to the agreement, we were required to fund our pro-rata portion of reserves that Brotherhood had established for losses and loss adjustments expenses, and any other amounts for which Brotherhood had not been able to take credit for on its annual statutory financial statements. As of December 31, 2016, we had funded this obligation via a deposit of $500 made to Brotherhood under a trust agreement. This collateral was returned to the Company in March 2017.
Current Income Taxes Recoverable
Current income taxes recoverable were $632 as of September 30, 2017 compared to $1,195 as of December 31, 2016, and $965 as of December 31, 2015, which represent the estimate of both the Company’s state and federal income taxes paid in excess of amounts due as of each reporting date.
Net Deferred Income Taxes
Net deferred income taxes increased $435 to $855 as of September 30, 2017 compared to $420 as of December 31, 2016. Net deferred income taxes are comprised of approximately $3,483 and $2,359 of deferred tax assets, net of approximately $2,628 and $1,939 of deferred tax liabilities as of September 30, 2017 and December 31, 2016, respectively. The change in the net deferred tax asset is primarily due to an increase in deferred tax assets associated with our increase in unearned premium reserves as well as an increase in net operating loss carryforwards due to our net loss for the nine months ended September 30, 2017.
The Company’s net deferred tax asset decreased $86, to $420 as of December 31, 2016 from $506 as of December 31, 2015. Net deferred income taxes are comprised of approximately $2,359 of deferred tax assets, net of approximately $1,939 of deferred tax liabilities as of December 31, 2016. The change in the net deferred tax asset is primarily due to an increase in the deferred tax liabilities related to our deferred policy acquisition costs.
Property and Equipment
Property and equipment was $213, $250, and $234 as of September 30, 2017 and December 31, 2016, and 2015 respectively, and consists of computers, office equipment, and improvements at our leased facilities in Tampa, Florida and Baton Rouge, Louisiana, shown net of accumulated depreciation. Also included in these balances are vehicles that we have purchased for the use of our sales representatives in Texas, Florida and Louisiana.
Other Assets
Other assets increased $79, to $867 as of September 30, 2017 from $788 as of December 31, 2016. The major components of other assets, are shown below.
Other Assets
September 30, 2017
(unaudited)
December 31, 2016 December 31, 2015
Accrued interest on investments $ 233 $ 117 $ 77
Security deposits for facility leases 38 38 38
Prepaid expenses 481 616 590
Other 115 17 —
Total $ 867 $ 788 $ 705

Loss and Loss Adjustment Expense Reserves
Loss and loss adjustment expense reserves represent the estimated liabilities for reported loss events, incurred and but not reported (“IBNR”) loss events, as well as the related estimated loss adjustment expenses (“LAE”). The table below separates our loss reserves and LAE between IBNR and case specific estimates as of September 30, 2017, December 31, 2016 and December 31, 2015, and also shows the expected reinsurance recoverable on those reserves.
Case Loss Reserves Case LAE Reserves Total Case Reserves IBNR Reserves (including LAE) Total Reserves Reinsurance Recoverable on Reserves
September 30, 2017 (unaudited)
Homeowners⁽¹⁾ $ 3,348 $ 347 $ 3,695 $ 3,065 $ 6,760 $ 3,254
Special Property⁽²⁾ 10,372 600 10,972 4,359 15,331 14,306
Total $ 13,720 $ 947 $ 14,667 $ 7,424 $ 22,091 $ 17,560

December 31, 2016
Homeowners $ 1,523 $ 463 $ 1,986 $ 3,302 $ 5,288 $ 2,565
Special Property 697 88 785 898 1,683 1,087
Total $ 2,220 $ 551 $ 2,771 $ 4,200 $ 6,971 $ 3,652

December 31, 2015
Homeowners $ 758 $ 72 $ 830 $ 1,070 $ 1,900 $ 120
Special Property 49 9 58 165 223 —
Total $ 807 $ 81 $ 888 $ 1,235 $ 2,123 $ 120
(1) Homeowners refers to our multi-peril policies for traditional dwellings as well as mobile and manufactured homes.
(2) Special property includes both our fire and allied lines of business, which are primarily wind/hail only products, and also includes the commercial lines wind/hail only business that we have assumed through our agreement with Brotherhood and our personal lines wind/hail only business that we have assumed through our quota-share agreement with TWIA.
Gross reserves as of September 30, 2017 were $22,091, an increase of $15,120 from December 31, 2016. Gross reserves in the approximate amount of $14,200 had been established for PCS Catastrophe 1743, or Harvey, a major ~~factor~~storm which made initial landfall in ~~operating~~the U.S. as a Category 4 hurricane near Rockport, Texas. As of September 30, 2017, we anticipate our ~~business. We have established policies~~total incurred losses from Harvey to be $23,000 on a gross basis, or $5,000 on a net basis after recoveries under our catastrophe excess of loss reinsurance program. The reinsurance recoverable on reserves as of September 30, 2017 was $17,560, an increase of $13,908 from December 31, 2016, due, in large part, to the anticipated recoveries due to the Company from Harvey losses. As a result of the foregoing, net loss reserves were $4,531 and ~~procedures~~$3,319 as of September 30, 2017 and December 31, 2016, respectively.
When comparing loss and LAE reserves for the period of December 31, 2016 to ~~evaluate~~December 31, 2015, we experienced redundancy for the 2015 accident year due to a ceded benefit we received under our ~~exposure, particularly with regard to our investment holdings, and our receivable balances from insureds and reinsurers. We review credit risk from~~aggregate treaty which is a variety of sources, including credit risk from financial institutions, investment risk, counter-party risk from reinsurers, premium receivables, notes receivable and long-term investment assets, loss sensitive underwriting accounts and key vendor relationships.
~~We use specific criteria to judge the credit quality and liquidity~~part of our ~~investments~~catastrophe excess of loss reinsurance program. In March 2016, we experienced the second of two weather related events which, when combined, exceeded the $5,000 retention under our aggregate treaty. This second event allowed us to re-assess all claims we incurred over the reinsurance year covered under our aggregate treaty, or from the period beginning June 1, 2015 and ending May 31, 2016. Thus, in ~~addition to a variety~~calendar 2016 we ceded approximately $1.4 million of ~~credit rating services to monitor these criteria. We currently limit our credit exposure~~losses related to ~~financial instruments by investing our excess cash in money market funds or in bank deposits that mature in no more than thirteen months. After~~ the ~~closing of~~2015 accident year.
For the ~~Offering, and periodically thereafter, we will review our investment policy in light of our then-current circumstances and available investment opportunities.~~
We are also exposed to credit risk on losses recoverable from reinsurers and premiums receivable from insureds. Downturns in one sector or market can adversely impact other sectors and may result in higher credit exposure. We do not use credit default swaps to mitigate our credit exposure from either investments or counterparties.
~~Results of Operations~~
~~Inception through the fiscal~~ year ended December 31, ~~2013~~
2015, the Company reported $182 of favorable development for net loss and LAE reserves from prior accident years.
~~From~~
We cannot predict whether loss and loss adjustment expense reserves will develop favorably or unfavorably from the amounts reported in our ~~inception~~consolidated financial statements. Any such development could have a material effect on ~~October 2, 2012 through~~our consolidated financial results for a given period. Furthermore, while we use, and expect to continue to use, reinsurance to help manage our exposure to catastrophic losses, the availability and cost of reinsurance are each subject to prevailing market conditions beyond our control which can affect business volume and profitability. We may be unable to maintain our current reinsurance coverage, to obtain additional reinsurance coverage in the event our current reinsurance coverage is exhausted by a catastrophic event, or to obtain other reinsurance coverage in adequate amounts or at acceptable rates. Similar risks exist whether we are seeking to replace coverage terminated during the applicable coverage period or to renew or replace coverage upon its expiration..

Unearned Premium Reserves
Unearned premium reserves increased to $32,170 as of September 30, 2017 compared to $25,821 as of December 31, ~~2013, we generated revenues~~2016 and $23,442 as of ~~$5.5 million,~~December 31, 2015. The following table outlines the change in unearned premium reserves by line of business.
September 30, 2017 (unaudited) December 31, 2016 December 31, 2015
Homeowners - LA $ 17,725 $ 16,644 $ 15,585
Special Property - LA 7,379 7,113 6,900
Total Louisiana 25,104 23,757 22,485
Homeowners – TX 3,439 822 103
Special Property – TX 3,627 1,242 854
Total Texas 7,066 2,064 957
Grand Total $ 32,170 $ 25,821 $ 23,442
The Company’s increase to its unearned premium reserve is directly related to the increase in written premiums year over year.
Ceded Reinsurance Premiums Payable
Ceded reinsurance premiums payable increased $557 to $5,786 as of September 30, 2017 compared to $5,229 as of December 31, 2016. The bulk of the balance payable as of September 30, 2017 represents a quarterly installment payment due under our catastrophe reinsurance program, which ~~$5.4 million~~ was paid in October, 2017.
Ceded reinsurance premiums payable increased $1,946, to $5,229 as of December 31, 2016 compared to $3,283 as of December 31, 2015 primarily as a result of an increase in the level of coverage we have purchased from year to year, to coincide with the increase in direct and assumed premium we write. The bulk of the balance payable as of December 31, 2016 represents the quarterly payment due under our catastrophe excess of loss treaty, which was paid in January 2017.
Agency Commissions Payable
Agency commissions payable were $716 as of September 30, 2017 compared to $497 as of December 31, 2016, and $403 as of December 31, 2015. As agency commissions are paid one month in arrears, this balance represents commissions owed to the Company’s independent agencies on policies written throughout the months ended September 30, 2017, and December 31, 2016 and 2015, respectively. Since the commissions that we pay to our independent agencies are based upon a percentage of the premium written by our agencies, the balance due will vary directly with the volume of premium written in the month.
Premiums Collected in Advance
Premium deposits were $1,887, $1,128, and $870 as of September 30, 2017 and December 31, 2016 and 2015, respectively. These deposits represent cash that the Company has received for policies which were not yet in-force as of each respective date. Upon the effective date of coverage, advance premiums are reclassified to the unearned premium reserves account.
Funds held under Reinsurance Treaties
Funds held under reinsurance treaties represents collateral that we have received on deposit from our reinsurers under our catastrophe excess of loss treaties and is intended to fund those reinsurers pro-rata portion of reserves that we have established for losses and loss adjustment expenses. As of December 31, 2016, we had received cash deposits of $73 from our reinsurers. This balance was reduced to $48 as of September 30, 2017 as a portion of the balance was applied to reinsurance recoveries due to us on paid losses during the nine months ended September 30, 2017. Our reserve balances as of December 31, 2015 were such that no collateral was required from our reinsurers.

Accounts Payable and Other Accrued Expenses
Accounts payable and other accrued expenses increased were $4,483 as of September 30, 2017 and $2,065 and $1,863 as of December 31, 2016 and 2015, respectively. The major components of accrued expenses and other liabilities are shown below.
September 30, 2017 (unaudited) December 31, 2016 December 31, 2015
Accrued employee compensation $ 128 $ 95 $ 352
Accrued professional fees 763 509 267
Unearned policy fees 386 204 168
Accrued premium taxes and assessments 2,108 1,193 1,004
Funds due to settle bond trades 1,031 — —
Other accounts payable 67 64 72
Total $ 4,483 $ 2,065 $ 1,863

Related Party Transactions
As a result of the termination of the Management Services Agreement (“MSA”), which occurred on February 24, 2015, the Company issued the following securities to 1347 Advisors, LLC (“1347 Advisors”), a wholly owned subsidiary of KFSI.
● 100,000 shares of the Company’s common stock issuable pursuant to the Performance Shares Grant Agreement dated February 24, 2015, and subject to the achievement of the Milestone Event;
● 120,000 shares of Series B Preferred Stock of the Company (the “Series B Preferred Shares”); and
● A warrant (the “Warrant”) to purchase 1,500,000 shares of the Company’s common stock at an exercise price of $15.00 per share. The Warrant expires on February 24, 2022.
The Performance Shares Grant Agreement granted 1347 Advisors 100,000 shares of the Company’s common stock issuable upon the date that the last sales price of the Company’s common stock equaled or exceeded $10.00 per share for any 20 trading days within any 30-day trading period (the “Milestone Event”). 1347 Advisors was not entitled to any dividends declared or paid on the Company’s stock prior to the Milestone Event having been achieved. As described below, on January 2, 2018, the Performance Shares Grant Agreement was terminated. As the Milestone Event was never achieved, no shares of common stock were issued to 1347 Advisors under the agreement.
Subsequent to the issuance of the Series B Preferred Shares, 1347 Advisors transferred 60,000 of its 120,000 Series B Preferred Shares to IWS Acquisition Corporation, an affiliate of KFSI. On January 2, 2018, the Company entered into a Stock Purchase Agreement with 1347 Advisors and IWS Acquisition Corporation, pursuant to which the Company repurchased 60,000 Series B Preferred Shares from 1347 Advisors for an aggregate purchase price of $1,740, representing (i) $1,500, comprised of $25.00 per Series B Preferred Share, and (ii) declared and unpaid dividends in respect of the dividend payment due on February 23, 2018 amounting to $240 in the aggregate. The Company also agreed to repurchase pursuant to the stock purchase agreement 60,000 Series B Preferred Shares from IWS Acquisition Corporation, upon completion of this offering, for an aggregate purchase price of $1,500, comprised of $25.00 per Series B Preferred Share, without any dividend or interest payment. The foregoing transactions were approved by a special committee of the Board of Directors of the Company consisting solely of independent directors. In connection with the Stock Purchase Agreement, the Performance Shares Grant Agreement, dated February 24, 2015, between the Company and 1347 Advisors was terminated. In connection with the termination, the Company agreed to pay an aggregate cash payment of $300 to 1347 Advisors.
The remaining outstanding Series B Preferred Shares have a par value of $25.00 dollars and pay annual cumulative dividends at a rate of eight percent per annum. In the event the Company does not consummate the repurchase of the remaining outstanding Series B Preferred Shares held by IWS Acquisition Corporation, cumulative dividends shall accrue, whether or not declared by the Board and irrespective of whether there are funds legally available for the payment of dividends. Accrued dividends shall be paid in cash only when, as, and if declared by the Board out of funds legally available therefor or upon a liquidation or redemption of the Series B Preferred Shares. In the event of any voluntary of involuntary liquidation, dissolution, or winding up of the Company, the holders of the Series B Preferred Shares then outstanding shall be entitled to be paid out of the assets of the Company available for distributions to its stockholders, before any payment shall be made to holders of securities junior in preference to the Series B Preferred Shares. The Series B Preferred Shares rank senior to the Company’s common stock, and the Company is not permitted to issue any other series of preferred stock that ranks equal or senior to the Series B Preferred Shares while the Series B Preferred Shares are outstanding. The Company intends to consummate the purchase of the remaining outstanding Series B Preferred Shares held by IWS Acquisition Corporation upon the completion of this offering. On both February 24, 2017 and 2016, the Company issued a cash payment of $240 to Advisors representing annual dividend payments due on the Series B Preferred Shares. As part of the repurchase price paid by the Company to 1347 Advisors for the repurchase of the Series B Preferred Shares held by 1347 Advisors, the Company paid $240 to 1347 Advisors on January 2, 2018, representing declared and unpaid dividends in respect of the dividend payment due on the Series B Preferred Shares on February 23, 2018.

In the event the Company does not consummate the repurchase of the remaining outstanding Series B Preferred Shares held by IWS Acquisition Corporation, unless redeemed earlier by the Company as discussed below, with the written consent of the holders of the majority of the Series B Preferred Shares then outstanding, the Company will be required to redeem the Series B Preferred Shares then outstanding on February 24, 2020 (the “Mandatory Redemption Date”), for a redemption amount equal to $25.00 dollars per share outstanding plus all accrued and unpaid dividends on such shares. The Company has the option to redeem the remaining outstanding Series B Preferred Shares prior to the Mandatory Redemption Date immediately prior to the consummation of any change in control of the Company that may occur.
Since the Series B Preferred Shares have a mandatory redemption provision requiring redemption on February 24, 2020, the Company was required to classify the Series B Preferred Shares as a liability on the balance sheet instead of recording the value of these shares in equity. The resulting liability was recorded at a discount to the ultimate redemption amount of the Series B Preferred Shares based upon an analysis of the cash payments expected to occur under the terms of the Series B Preferred Shares discounted for the Company’s estimated cost of equity (13.9%). As a result, amortization in the amount of $1,889 will be charged to operations during the period the Series B Preferred Shares are outstanding using the effective interest method. For the nine months ended September 30, 2017 and 2016, amortization of the discount on the Series B Preferred Shares totaled $276 and $263, respectively.
Effect of Buyout on Financial Condition and Statement of Operations
Under the original MSA, the Company was required to pay 1347 Advisors a fee of 1% of written premiums on a monthly basis. The Company replaced this ongoing annuity by providing 1347 Advisors with an up-front cash payment and other consideration which lead to a one-time charge of $5,421 to the Company’s operations for the year ended December 31, 2015 as follows:
Year ended
December 31, 2015
Cash paid $ 2,000
Issuance of Series B Preferred Shares 2,311
Issuance of Warrants and Performance Shares 1,010
Professional fees incurred in connection with the Buyout 100
Loss on termination of MSA $ 5,421
The issuance of the Warrants and Performance Shares had no effect on the Company’s total stockholders’ equity as they both resulted in equal and offsetting charges to the Company’s retained earnings and additional paid-in capital. The fair value of the Warrant was estimated on grant date based upon the Black-Scholes option pricing model while a Monte Carlo model was utilized to determine the fair value of the Performance Shares due to the fact that these shares are only issuable based upon the achievement of certain market conditions.
Investment in Limited Liability Company
On April 21, 2016, KFSI completed the acquisition of Argo Management Group LLC (“Argo”). Argo’s primary business is to act as the Managing Member of Argo Holdings Fund I, LLC, an investment fund in which the Company has committed to invest $500, of which the Company has invested $211 as of September 30, 2017. The managing member of Argo, Mr. John T. Fitzgerald, was also appointed to KFSI’s board of directors on April 21, 2016.
Contractual Obligations
As of September 30, 2017, the Company had the following amounts due under its operating leases for facilities leased in Baton Rouge, Louisiana, and Tampa, Florida.
Year ending September 30,
2018 $ 303
2019 298
2020 25
2021 and thereafter —
Total $ 626

Stockholders’ Equity
The primary drivers behind the changes to total stockholders’ equity for the nine months ended September 30, 2017 as well as for the years ended December 31, 2016 and 2015 resulted from the securities issued in the termination of the MSA (see related party transactions for further discussion), the Company’s repurchase of its common stock, as well as the Company’s net loss and net unrealized gains and losses on its investment portfolio as shown below. Furthermore, on September 14, 2017, the Company sold 28,000 restricted common shares to its Chief Operating Officer, Mr. Case, at a price of $8.00 per share.
Common Shares Outstanding Treasury Shares
Total Stockholders’ Equity

Balance, January 1, 2015 6,358,125 — $ 49,914
Issuance of performance shares and warrants pursuant to MSA termination transaction — — 1,010
Stock compensation expense — — 47
Repurchase of common stock (223,851 ) 223,851 (1,731 )
Net loss — — (1,673 )
Unrealized losses on investment portfolio (net of income taxes) — — (61 )
Balance, December 31, 2015 6,134,274 223,851 $ 47,506
Stock compensation expense — — 38
Repurchase of common stock (177,508 ) 177,508 (1,195 )
Retirement of treasury shares — (250,000 ) —
Net income — — 11
Unrealized losses on investment portfolio (net of income taxes) — — (3 )
Balance, December 31, 2016 5,956,766 151,359 $ 46,357
Issuance of common shares 28,000 — 224
Stock compensation expense — — 19
Net loss — — (1,096 )
Unrealized gains on investment portfolio (net of income taxes) — — 94
Balance, September 30, 2017 (unaudited) 5,984,766 151,359 $ 45,598
On December 1, 2014, the Company’s Board of Directors authorized a share repurchase program for up to 500,000 shares of the Company’s common stock, which expired on December 31, 2016. The Company purchased 177,508 shares at an average price of $6.74 per share for the year ending December 31, 2016 and purchased 223,851 shares at an average price of $7.73 per share for the year ending December 31, 2015. On January 29, 2016, the Company retired 250,000 of its treasury shares, resulting in a reclassification of the purchase price of $1,917 to additional paid in capital.
Results of Operations
Three and Nine Months Ended September 30, 2017 Compared with Three and Nine Months Ended September 30, 2016
Gross Premiums Written
The following table shows our gross premiums written by line of business for the three and nine months ending September 30, 2017 and 2016.
(unaudited) Three months ended September 30, Nine months ended September 30,
Line of Business 2017 2016 Change 2017 2016 Change
Homeowners $ 11,275 $ 9,402 $ 1,873 $ 30,474 $ 25,577 $ 4,897
Special Property 5,888 4,564 1,324 18,343 13,907 4,436
Gross Premium Written $ 17,163 $ 13,966 $ 3,197 $ 48,817 $ 39,484 $ 9,333
Gross premiums written were $17,163 for the quarter ended September 30, 2017, up 22.9% from $13,966 for the quarter ended September 30, 2016. This increase was largely due to organic growth in voluntary production from the Company’s independent agents, particularly in Texas where the Company is reporting solid growth across all of its product lines with homeowner’s policies especially strong.
For the nine months ended September 30, 2017, gross premiums written in the State of Louisiana represented approximately 74% of total gross written premiums, with the remaining 26% written in Texas. For the same period in the preceding year, gross premiums written in Louisiana and Texas represented 91% and 9%, respectively, as we continue to expand our network in Texas.

Ceded Premiums Written
Ceded premiums written increased to $16,426 for the nine months ended September 30, 2017, compared to $15,414 for the same period 2016. The increase in ceded premiums written is primarily due to an increase in the total insured value of the Company’s book of business year over year as well as the change in the geographic mix of coverage that we provide. While the limits purchased under our catastrophe excess of loss reinsurance (“CAT XOL”) and aggregate programs did not change year over year, our treaty years run from June 1st through May 31st of each year, thus the nine month periods ended September 30, 2017 and 2016 are covered by ceded premiums written under three separate reinsurance treaties. Therefore, the increase in ceded premiums written for the nine month period can also be attributed to the increase in limits purchased when comparing our 2015/2016 treaty with the Company’s two most recent treaties. The following table is a summary of the key provisions under each of our treaties.
2015/2016 CAT XOL Treaty 06/01/15 – 05/31/16 2016/2017 CAT XOL Treaty 06/01/16 – 05/31/17 2017/2018 CAT XOL Treaty 06/01/17 – 05/31/18
Wind/Hail loss occurrence clause⁽¹⁾ 144 hours 144 hours 144 hours
Retention on first occurrence $ 4,000 $ 5,000 $ 5,000
Retention on second occurrence $ 1,000 $ 2,000 $ 2,000
Limit of coverage including first event retention $ 140,000 $ 200,000 $ 200,000
Franchise deductible⁽²⁾ $ — $ 125 $ 250
(1) Specifies the time period during which our losses from the same occurrence may be aggregated and applied to our retention and limits. We may pick the date and time when the period of consecutive hours begin in order to maximize our recovery.
(2) Specifies the gross incurred losses by which each 144 hour loss occurrence must exceed before recoveries are generated under our aggregate treaty. Once the franchise deductible is met, all losses under the loss occurrence qualify for recovery, not just those losses which exceed the franchise deductible amount.
The total cost of our CAT XOL and aggregate coverage is estimated to be approximately $24,700 for the 2017/2018 treaty year, compared to $21,200 for the 2016/2017 treaty year.
Net Premium Earned
The following table shows our net premiums ~~earned. We generated~~earned by line of business.
(unaudited) Three months ended September 30, Nine months ended September 30,
Line of Business 2017 2016 Change 2017 2016 Change
Homeowners $ 6,494 $ 4,996 $ 1,498 $ 17,410 $ 15,792 $ 1,618
Special Property 2,138 2,140 (2 ) 7,622 7,077 545
Net premium earned $ 8,632 $ 7,136 $ 1,496 $ 25,032 $ 22,869 $ 2,163
Premium earned on a gross and ceded basis is as shown in the following table.
Three months ended September 30, Nine months ended September 30,
(unaudited) 2017 2016 Change 2017 2016 Change
Gross premium earned $ 14,907 $ 12,546 $ 2,361 $ 42,469 $ 35,822 $ 6,647
Ceded premium earned 6,275 5,410 865 17,437 12,953 4,484
Net premium earned $ 8,632 $ 7,136 $ 1,496 $ 25,032 $ 22,869 $ 2,163
Other Income
Other income increased $400 to $1,262 for the nine months ended September 30, 2017, compared to $862 for the same period in 2016. Comparing the three month periods ended September 30, 2017 and 2016, other income increased $129 to $474 from $345. Other income is comprised of policy fee income charged to our policyholders for property inspections, premium financing fees for those policyholders which elect to pay their premiums on an ~~additional $0.1 million~~installment basis, and commission revenue resulting from ~~dividend~~a brokerage sharing agreement between our insurance subsidiary, Maison, and the intermediary Maison uses to place its CAT XOL reinsurance program, whereby a portion of the reinsurance brokerage is shared with us based solely upon the total brokerage collected by our intermediary on the business it places for us. The growth in our book of business is the main driver behind the increase in other ~~income.~~income when comparing the three and nine month periods ended September 30, 2017 to 2016.
~~From October 2, 2012 through December 31, 2013, we incurred a total of $6.8 million in losses and expenses for a net loss of $0.9 million.~~

Net losses and loss adjustment expenses ~~over this time were $2.9 million,~~
Net losses and LAE represent both actual payments made and changes in estimated future payments to be made to our policyholders. The following table sets forth the components of ~~which approximately $2.3 million related~~our losses and loss ratios for the three and nine months ended September 30, 2017 and 2016.
(unaudited) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Losses ($) Loss
Ratio (%) Losses ($) Loss
Ratio (%) Losses ($) Loss
Ratio (%) Losses ($) Loss
Ratio (%)
Non-catastrophe weather losses $ 881 10.2 % $ 51 0.7 % $ 2,753 11.0 % $ 430 1.9 %
Non-weather losses 2,836 32.9 % 1,648 23.1 % 6,500 26.0 % 4,876 21.3 %
Core loss⁽¹⁾ 3,717 43.1 % 1,699 23.8 % 9,253 37.0 % 5,306 23.2 %
Catastrophe loss⁽²⁾ 5,000 57.9 % 4,798 67.2 % 6,700 26.7 % 9,784 42.8 %
Prior period (redundancy) development⁽³⁾ (922 ) (10.7 )% (54 ) (0.7 )% (2,144 ) (8.5 )% (173 ) (0.8 )%
Net losses and LAE incurred $ 7,795 90.3 % $ 6,443 90.3 % $ 13,809 55.2 % $ 14,917 65.2 %
(1) We define Core Loss as net losses and LAE less the sum of catastrophe losses and prior period development/redundancy.
(2) Property Claims Services (PCS) defines a catastrophic event as an event where the insurance industry is estimated to incur over $25,000 of insured property damage that also impacts a significant number of insureds. For purposes of the above table, we have defined a catastrophe as a PCS event where the Company’s estimated gross incurred cost (before recovery from reinsurance) exceeds $1,500.
(3) Prior period development is the amount of ultimate actual loss settlement value which is more than the estimated reserves recorded for a particular liability or loss, while redundancy represents the ultimate actual loss settlement value which is less than the estimated and determined reserves recorded for a particular liability or loss.
Our net loss ratio (net losses and LAE divided by net premiums earned) for the nine months ended September 30, 2017 was 55.2%, compared to a ~~single~~ net loss ratio of 65.2% for the nine months ended September 30, 2016. While we experienced an increase in our core loss ratio, this was offset by a decrease in our catastrophe loss ratio when comparing periods. Although Hurricane Harvey was a significant event for us, as we expect our total gross incurred losses to be approximately $23,000 for this storm, due to our reinsurance program, our net incurred losses from Harvey are limited to $5,000. Furthermore, PCS event 1714 was a series of wind/hail ~~storm~~storms which impacted our policyholders in both Louisiana and Texas in early February, 2017, resulting in $1,700 in net incurred catastrophe losses for the nine months ended September 30, 2017. These net losses from event ~~during~~1714, along with $5,000 in net incurred losses from Hurricane Harvey, represent the ~~first quarter of 2013, for which the Company recovered $1 million from its reinsurance program. We had a federal income tax benefit of $0.4 million.~~
~~Another significant portion~~extent of our ~~total~~catastrophe losses for the nine months ended September 30, 2017 as shown in the preceding table. In comparison, for the nine months ended September 30, 2016, we experienced three catastrophe events: PCS event 1616 in February, PCS event 1617 in March, and PCS event 1644 in August. These three events resulted in $9,784 in net incurred losses for prior year. Our net loss ratio for the current year was further reduced due to redundancy in the amount of $2,144 due to the release of reserves relating to prior accident years.
Our net loss ratio for the three months ended September 30, 2017 was 90.3% and was marked by the impact of Harvey, which resulted in $5,000 in net incurred catastrophe losses for the quarter and accounted for over half of the quarter’s net loss ratio. Non-weather losses also accounted for approximately one-third of the quarter’s net loss ratio as we experienced approximately $1,500 in net losses from fire claims and $1,336 from all other non-weather related causes of loss.
Amortization of Deferred Policy Acquisition Costs
Amortization of deferred acquisition costs for the three months ended September 30, 2017 were $2,755 compared to $2,095 for the three months ended September 30, 2016, and include items such as commissions earned by our agencies, premium taxes, assessments, and policy processing fees. Expressed as a percentage of gross earned premiums, amortization was 18.5% in the current quarter, compared to 16.7% in the same quarter last year. For the nine month periods ended September 30, amortization as a percentage of gross earned premiums was 18.5% and 16.7% in 2017 and 2016, respectively. The increase in amortization of deferred acquisition costs as a percentage of gross earned premiums can be attributed to an increase in the effective rate of the premium taxes that we pay due to the loss of an investment credit received on our premium taxes in previous years. Effective January 1, 2017, the State of Louisiana amended this credit such that certain assets such as cash and money market funds held in the state of Louisiana would no longer qualify as a tax credit on the Company’s premium taxes.
General and Administrative Expenses
General and administrative expenses ~~was~~were $2,145 for the ~~$2.5 million of~~quarter ended September 30, 2017, compared to $1,658 for the quarter ended September 30, 2016. For the nine month periods ended September 30, 2017 and 2016, general and administrative expenses ~~related to management~~were $6,535 and $4,982, respectively. Expressed as a percentage of gross premium earned, general and administrative expenses were 15.4% and 13.9%, for the nine month periods of 2017 and 2016, respectively. The largest drivers in the increase in general and administrative expense over both the three and nine month periods include employee costs ~~including salaries,~~ and ~~outside~~ professional ~~service expenses, which were 45%~~fees. Employee costs accounted for approximately 35% of ~~our total revenue over that time period. We expect that these expenses will continue to~~the nine month increase as we ~~further expand~~have increased staffing to support our ~~number~~growth in Texas and Florida while professional fees accounted for approximately 50% of ~~underwritten policies.~~the nine month increase as we have completed a review of the rates that we charge on our risks in Louisiana and also have initiated filings for the new products that we plan to offer in Florida.

Income Tax Expense
Income tax benefit for the three and nine months ended September 30, 2017 was $1,171 and $397, respectively, on pre-tax losses of $3,434 and 1,493, respectively. This resulted in an effective tax rate of 34% and 27%, respectively. For the ~~fiscal~~three and nine month periods ended September 30, 2016, our effective income tax rate was 32% and 28%, respectively. The variances to the effective income tax rate between periods is due, in large, to state income taxes charged to the Company’s subsidiaries.
Net Income
As a result of the foregoing, the Company’s net loss for the third quarter 2017 was $2,263, or $0.38 per diluted share, compared to a net loss of $1,806, or $0.30 per diluted share for the third quarter of 2016. For the nine months ended September 30, 2017, the Company’s net loss was $1,096, or $0.18 per diluted share, compared to a net loss of $1,581 or $0.26 per diluted share for the nine months ended September 30, 2016.
Results of Operations
Year Ended December 31, 2016 Compared to Year Ended December 31, 2015
Gross Premiums Written
The following table shows our gross premiums written by line of business for the years ended December 31, 2016 and 2015.
Year Ended December 31,
Line of Business 2016 2015 Change
Homeowners $ 33,615 $ 29,987 $ 3,628
Special Property 17,712 13,864 3,848
Gross Written Premium $ 51,327 $ 43,851 $ 7,476
The increase in gross written premiums was primarily the result of organic growth in voluntary production from our independent agents. Our agents wrote an additional $5,348 in the State of Louisiana and $3,291 in the State of Texas when comparing the year ending December 31, 2016 to 2015. This was offset by a decrease of approximately $1,271 in premiums written through the depopulation of policies from LA Citizens. Finally, our participation in the first-ever depopulation from TWIA accounted for an increase of approximately $186 in premiums when comparing annual periods.
Ceded Premiums Written
Ceded premiums written increased by $7,119 to $20,541 for the year ended December 31, ~~2012~~
~~From our inception on October 2, 2012 through~~2016, compared to $13,422 for the year ended December 31, ~~2012,~~2015. The increase in ceded premiums written is primarily due to an increase in limits purchased under our catastrophe excess of loss reinsurance (“CAT XOL”) program. As our treaty years run from June 1st through May 31st of each year, the twelve month period ending December 31, 2015 covers ceded premiums written under both our 2014/2015 CAT XOL treaty and our 2015/2016 CAT XOL treaty. Similarly, the twelve month period ending December 31, 2016 covers ceded premiums written under both our 2015/2016 and 2016/2017 CAT XOL treaties. The following table is a summary of the key provisions under each of our treaties.
2014/2015 CAT XOL Treaty 06/01/14 – 05/31/15 2015/2016 CAT XOL Treaty 06/01/15 – 05/31/16 2016/2017 CAT XOL Treaty 06/01/16 – 05/31/17
Wind/Hail loss occurrence clause⁽¹⁾ 120 hours 144 hours 144 hours
Retention on first occurrence $ 3,000 $ 4,000 $ 5,000
Retention on second occurrence $ 2,000 $ 1,000 $ 2,000
Limit of coverage including first event retention $ 92,000 $ 140,000 $ 200,000
(1) Specifies the time period during which our losses from the same occurrence may be aggregated and applied to our retention and limits. We may pick the date and time when the period of consecutive hours begin in order to maximize our recovery.
(2) Our 2016/2017 CAT XOL Treaty also includes a franchise deductible of $125 per occurrence for the claims we cede to our reinsurers under our aggregate portion of our treaty.

The total cost of our CAT XOL coverage was approximately $21,192 for the 2016/2017 treaty year.
Net Premium Earned
The following table shows our net premiums earned by line of business.
Year Ended December 31,
Line of Business 2016 2015 Change
Homeowners $ 20,887 $ 19,064 $ 1,823
Special Property 9,561 6,870 2,691
Net premium earned $ 30,448 $ 25,934 $ 4,514
The increase in net premiums earned is due to the increase in gross written premiums less premiums ceded as previously discussed. Premium earned on a direct and ceded basis is as shown in the following table.
Year Ended December 31,
2016 2015 Change
Gross premium earned $ 48,947 $ 38,112 $ 10,835
Ceded premium earned 18,499 12,178 6,321
Net premium earned $ 30,448 $ 25,934 $ 4,514
Other Income
Other income increased $430, to $1,264 as of December 31, 2016, compared to $834 as of December 31, 2015. Other income is comprised of claims adjusting fee revenue earned by our subsidiary, ClaimCor, policy fee income charged to our policyholders for inspections, premium financing fees for those policyholders which elect to pay their premiums on an installment basis, and also commission revenue resulting from a brokerage sharing agreement between our insurance subsidiary, Maison, and the intermediary Maison uses to place its CAT XOL reinsurance program.
Net Losses and Loss Adjustment Expenses
Net losses and LAE represent both actual payments made and changes in estimated future payments to be made to our policyholders. Net losses and LAE are as shown in the following table.
Year ended December 31,
2016 2015
Losses ($) Loss Ratio (%) Losses ($) Loss Ratio (%)
Weather-Related Non-Catastrophe Losses $ 1,133 3.7 % $ 3,349 12.9 %
Non-Weather Related Losses 5,815 19.1 % 4,120 15.9 %
Subtotal Core Losses⁽¹⁾ 6,948 22.8 % 7,469 28.8 %
Catastrophe Losses⁽²⁾ 9,805 32.2 % 2,302 8.9 %
Prior Period Development (Redundancy)⁽³⁾ (381 ) (1.2 )% 168 0.6 %
Total $ 16,372 53.8 % $ 9,939 38.3 %
Our loss ratio (net losses and LAE divided by net premiums earned) for the year ended December 31, 2016 was 53.8% compared to 38.3% for the prior year. We experienced a significant increase in catastrophe related losses due to three Property Claims Services (“PCS”) defined events which impacted us during 2016. These were as follows:
● PCS CAT 1616 – Our Louisiana policyholders experienced primarily tornado damage, but also damage due to other high winds and hail during these storms which occurred in late February, 2016. The Company’s gross incurred losses from this event for the year ending December 31, 2016 were $6,501. After recoveries available to us under our excess of loss and per risk reinsurance treaties, our net incurred losses from this event were $3,890.

● PCS CAT 1617 – This event also primarily impacted our Louisiana policyholders who experienced damage from wind, hail, lightning and flooding between March 5-10, 2016. Our gross incurred losses from this event for the year ending December 31, 2016 were $1,597, while net incurred losses were $1,000 after recoveries under our excess of loss treaty.
● PCS CAT 1644 – This event impacted our Louisiana policyholders as a result of heavy rains and wind in the state between August 11-16, 2016. Our gross and net incurred losses from these storms for the year ending December 31, 2016 were $10,000 and $4,915 respectively.
Our loss ratio from weather related non-catastrophe losses has declined year over year, from 12.9% for the year ended December 31, 2015 to 3.7% for the year ended December 31, 2016. This reduction is attributable to the ceded benefit we ~~generated revenues~~received under our aggregate treaty which is a part of ~~$0.4 million,~~our catastrophe excess of loss reinsurance program. In March 2016, we experienced the second of two weather related events (CAT 1617 as described above) which, when combined, exceeded the $5,000 retention under our aggregate treaty. This second event allowed us to re-assess all weather-related claims we incurred over the reinsurance year covered under our aggregate treaty, or from the period beginning June 1, 2015 and ending May 31, 2016. Thus we were able to recover approximately $4,300 in weather-related non-catastrophe claims in the current year.
Amortization of Deferred Policy Acquisition Costs
Amortization of deferred acquisition costs for the year ended December 31, 2016 was $8,492, compared to $6,571 for the year ended December 31, 2015 and includes items such as commissions earned by our agencies, premium taxes, assessments, and policy processing fees. This increase correlates with the increase in earned premiums year over year shown by calculating deferred acquisition cost amortization as a percentage of earned premiums, which was ~~almost entirely~~27.8% for 2016, compared to 25.3% for 2015. The increase in amortization of deferred acquisition costs as a percentage of earned premiums can be attributed to an increase in the effective rate of the premium taxes we pay in the State of Louisiana.
General and Administrative Expenses
General and administrative expenses decreased $335 to $6,918 for the year ended December 31, 2016, compared to $7,253 for the year ended December 31, 2015. The following table delineates the major components for general and administrative expense for the years ended December 31, 2016 and 2015, as well as the annual change in those major components.
Year ended December 31,
2016 2015 Change
Employee salaries and benefits $ 2,875 $ 2,641 $ 234
Professional fees 1,225 1,755 (530 )
Director’s fees 340 315 25
Rent and facility 887 629 258
Marketing and travel 322 334 (12 )
Insurance 276 270 6
Surveys and underwriting reports 385 368 17
Goodwill and other intangible impairment charge — 246 (246 )
Taxes, licenses and fees 190 134 56
Other 418 561 (143 )
Total $ 6,918 $ 7,253 $ (335 )
The change in general and administrative expense was driven primarily by our increased staffing to support our growth in Texas and potentially other states. We went from 22 employees as of December 31, 2015 to 27 employees as of December 31, 2016. While this resulted in an increase in the costs associated with employee salaries, benefits, and rent and facility costs, it also resulted in a decrease in professional fees as we brought in-house many of the services which we previously outsourced. Furthermore, we incurred a charge associated with the impairment of goodwill and other intangibles related to our acquisition of Claimcor in 2015, for which there was no comparable charge in the current year.
Loss on Termination of Management Services Agreement
Upon the termination of the MSA with 1347 Advisors, we recorded a loss of $5,421, representing the estimated fair value of the cash, warrants, preferred shares and performance shares paid to Advisors. For the years ended December 31, 2016 and 2015, we also recorded amortization charges in the amount of $355 and $282, respectively, which are associated with the discount recorded on the preferred shares when issued in the transaction. See “Related Party Transactions” in the Analysis of Financial Condition previously discussed for further information on the termination of the MSA.

Income Tax Expense (Benefit)
Income tax expense for the year ended December 31, 2016 was $108 compared to a benefit of $663 for the year ended December 31, 2015. The effective rate for income taxes is 90.8% for the current year, compared to 28.4% for the prior year. The primary cause of the increase in effective tax rate is current state taxes due on income earned by certain of our subsidiary companies in the current year.
Net Income (Loss)
As a result of the foregoing, the Company’s net ~~premiums earned, and less than $0.1 million was generated from dividend~~ income for the ~~period.~~
~~From October 2, 2012 through~~year ended December 31, ~~2012, we incurred total losses and expenses of $0.5 million for~~2016 was $11, or $0.00 per diluted share compared to a net loss of ~~$0.1 million. The company had a federal income tax benefit of $0.1 million.~~
~~A significant portion of~~$1,673, or $(0.27) per diluted share for the total losses and expenses was the $0.5 million of general and administrative expenses related to management costs, including salaries, and outside professional service expenses, which were 132% of our total revenue over that time period.
~~For the fiscal~~ year ended December 31, ~~2013~~
2015.
~~For~~
Liquidity and Capital Resources
The purpose of liquidity management is to ensure that there is sufficient cash to meet all financial commitments and obligations as they become due. The liquidity requirements for the ~~fiscal year ended December 31, 2013, we generated revenues of $5.1 million, of which $5.0 million was a result of net premiums earned,~~Company and ~~$0.1 million was~~its subsidiaries have been met primarily by funds generated from ~~dividend~~operations, and from the proceeds from the sales of its common and preferred stock. Cash provided from these sources is used primarily for loss and LAE payments as well as other ~~income.~~
~~For the fiscal year ended December 31, 2013, we incurred total losses~~operating expenses. The timing and ~~expenses~~amount of ~~$6.2 million~~payments for a net ~~loss of $0.7 million. We had a federal income tax benefit of $0.4 million.~~
~~We experienced~~ losses and loss adjustment expenses ~~during~~may differ materially from the ~~fiscal year~~Company’s provisions for loss and loss adjustment expense reserves, which may create increased liquidity requirements.
Cash Flows
The following table summarizes the Company’s consolidated cash flows for the nine months ended ~~December 31, 2013~~September 30, 2017 and 2016.
(unaudited) Nine months ended September 30,
Summary of Cash Flows 2017 2016
Net cash provided by operating activities $ 3,832 $ 1,659
Net cash used in investing activities (21,182 ) (9,428 )
Net cash used in financing activities (16 ) (1,262 )
Net decrease in cash and cash equivalents $ (17,366 ) $ (9,031 )
Nine months ended September 30, 2017
For the nine months ended September 30, 2017, net cash provided by operating activities as reported on our consolidated statement of ~~$2.9 million, net~~cash flows was $3,832, driven, in large, by our collection of aapproximately $34,411 in premiums for the period (net of the amounts that we have ceded to our reinsurers), less the payment of approximately $19,920 in loss ~~recovery~~and LAE expenses (net of ~~$1.0 million. Approximately $2.3 million~~ceded recoveries collected from our reinsurers). We also paid approximately $6,830 in commissions to our agencies, Brotherhood and Citizens (as ceding commissions), as well as cash payments in the approximate amount of ~~this $2.9 million~~

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~~related to a single first quarter hail storm event. A significant portion of our total losses~~$3,829 for taxes, assessments and ~~expenses was the $2.0 million of~~ general and administrative ~~expenses related~~expenses.

Net cash used in investing activities as reported on our consolidated statement of cash flows was $21,182, driven primarily by the net purchases of fixed income and equity securities as well as short term investments for our investment portfolio. Net cash used in financing activities was $16, as a result of a dividend payment of $240 made to ~~management costs, including salaries, and outside professional serivce expenses, which were 39%~~Advisors as holders of the Preferred Shares issued in the MSA termination transaction, net of $224 in proceeds from the sale of our ~~total revenue.~~common stock.

Off Balance Sheet

~~We have no off balance sheet items or issues.~~

Contractual Obligations

~~Our only contractual obligation, through Maison Insurance, is~~As a ~~single office space lease in Baton Rouge, Louisiana. This non-cancelable lease is for a period~~result of ~~five years expiring in January 2018, with annual rent payments~~the foregoing, cash and cash equivalents decreased from $43,045 as of ~~approximately $65,000 which is payable in monthly installments.~~

Cash Flows

Inception through the fiscal year ended December 31, 2013

2016 to $25,679 as of September 30, 2017.
~~From our inception on October 2, 2012 through~~
Nine months ended September 30, 2016
For the ~~period~~nine months ended ~~December 31, 2013,~~September 30, 2016, the net cash provided by operating activities as reported on our consolidated statement of cash flows was $1,659, resulting from our collection of approximately ~~$6.6 million, which consisted primarily~~$27,500 in premiums for the year (net of ~~$11.6 million received~~the amounts we have ceded to our reinsurers), less the payment of approximately $13,700 in loss and LAE expenses (net of ceded recoveries collected from our reinsurers). We also paid approximately $5,300 in commissions to our agencies, as well as to Brotherhood and Citizens as ceding commissions. Lastly, cash payments in the approximate amount of $6,800 were made for taxes, assessments and general and administrative expenses.

The net ~~written premiums less $5.0 million disbursed~~cash used by investing activities as reported on our consolidated statement of cash flows was $9,428, resulting from the net purchases of fixed income, equity securities and short term investments for ~~losses and losses adjustment expenses and operating expenses.~~our investment portfolio. Net cash provided from investing activities of $1.5 million was primarily from the sale of $1.9 million from a preferred stock holding, which was originally contributed by our parent company, KAI, net of $0.3 million from the purchase of fixed maturity securities and $0.1 million from the purchase of a certificate of deposit. Net cash providedused by financing activities ~~totaled $6.9 million~~was $1,262, which resulted from a dividend payment of $240 to Advisors as holders of the ~~initial capitalization~~Preferred Shares issued in the MSA termination transaction, as well as the payment of $1,022 for the repurchase of 153,905 shares of our common stock pursuant to our share buyback program.
As a result of the foregoing, cash and ~~subsequent additional paid in capital.~~cash equivalents decreased from $47,957 as of December 31, 2015 to $38,926 as of September 30, 2016.
The following table summarizes the Company’s consolidated cash flows for the years ended December 31, 2016 and 2015.
Year ended December 31,
Summary of Cash Flows 2016 2015
Net cash provided by operating activities $ 3,372 $ 5,417
Net cash used by investing activities (6,849 ) (9,368 )
Net cash used by financing activities (1,435 ) (1,731 )
Net decrease in cash and cash equivalents $ (4,912 ) $ (5,682 )
Year ended December 31, 2016
For the ~~fiscal~~ year ended December 31, ~~2012~~
From our inception on October 2, 2012 through the period ended December 31, 2012, the net cash used in operating activities was approximately $(0.1) million, which consisted primarily of $0.4 received from net written premiums less $0.5 disbursed for losses and losses adjustment expenses and operating expenses. Net cash used in investing activities of $(0.1) million was primarily from the purchase of a certificate of deposit. Net cash provided by financing activities totaled $5.7 million from the initial capitalization.
~~For the fiscal year ended December 31, 2013~~
~~For the fiscal year ended December 31, 2013, the~~2016, net cash provided ~~from~~by operating activities as reported on our consolidated ~~statements~~statement of cash flows was ~~$6.7 million. The~~$3,372. Our source of cash ~~was primarily~~resulted from the collection of ~~written policyholder~~approximately $51,058 in premiums ~~of approximately $14.5 million~~in the period. This amount was reduced by the payment of $18,595 in ceded reinsurance premiums, ~~of $3.3 million, reduced by~~ the payment of losses and loss adjustment expenses ~~net~~(net of ~~approximately $3.6 million, increased by the collection~~recoveries from our reinsurers) of ~~$1.0 million of ceded reinsurance recovered losses, reduced by the payment of expenses, primarily policy acquisition costs of $1.8 million~~$15,500, commissions paid to our agents equaling $7,075, salaries and ~~the payment of U.S.~~benefits paid to our employees equaling $2,958, payments to various local and federal regulators for premium, assessments, and income taxes in the amount of ~~$0.1 million. The~~$2,068, and other net operating payments of $1,490.
Net cash ~~provided~~used by investing activities as reported on our consolidated statements of cash flows was ~~$1.6 million,~~$6,849, primarily ~~from the proceeds from sales of preferred stock in excess of purchases~~due to our purchase of fixed ~~maturities. The~~income and equity securities for our investment portfolio.
Net cash used by financing activities was $1,435, comprised of our purchase of 177,508 of our common shares at an aggregate purchase price of $1,195, as well as a dividend payment of $240 to the holders of our preferred shares.
As a result of the foregoing, our net decrease in cash and cash equivalents for the year ended December 31, 2016 was $4,912.
Year ended December 31, 2015
For the year ended December 31, 2015, net cash provided by operating activities as reported on our consolidated statement of cash flows was $5,417. Our source of cash resulted from ~~financing~~the collection of approximately $43,851 in premiums in the period. This amount was reduced by the payment of ceded reinsurance premiums of $12,460, the payment of losses and loss adjustment expenses (net of recoveries from our reinsurers) of $8,784, the one-time cash payment of $2,000 to Advisors pursuant to the termination of the MSA, commissions paid to our agents equaling $6,219, wages and salaries paid to our employees equaling $2,267, payments to various local and federal regulators for premium and income taxes and assessments in the amount of $2,495, and other net operating payments of $4,209.
Net cash used by investing activities as reported on our consolidated statements of cash flows was ~~$1.2 million~~$9,368, primarily due to our purchase of ~~additional paid in capital provided~~fixed income securities for our investment portfolio.
Net cash used by ~~KFSI. Our~~financing activities was $1,731, comprised entirely of our purchase of 223,851 of our common shares pursuant to the Company’s share buyback program.
As a result of the foregoing, our net ~~increase~~decrease in cash and cash equivalents ~~during 2013~~for the year ended December 31, 2015 was ~~$9.5 million.~~$5,682.

Regulatory Capital
41

~~TABLE OF CONTENTS~~Risk-Based Capital Requirements

BUSINESS

~~We are~~In the United States, a risk-based capital (“RBC”) formula is used by the National Association of Insurance Commissioners (“NAIC”) to identify property and casualty insurance companies that may not be adequately capitalized. Most states, including Louisiana, the domiciliary state of our insurance subsidiary, Maison, as well as Texas, where Maison began writing business in June 2015, have adopted the NAIC RBC requirements. In general, insurers reporting surplus with respect to policyholders below 200% of the authorized control level, as defined by the NAIC, on December 31st of the previous year are subject to varying levels of regulatory action, which may include discontinuation of operations. As of September 30, 2017, Maison’s reported surplus was considered to be in the “no action” level by the Louisiana Department of Insurance.

Furthermore, pursuant to the consent order approving Maison’s admission into the State of Texas, Maison has agreed to:

●

Establish a deposit of $2,000 for the benefit of Texas policyholders. The Company has fulfilled this obligation by depositing fixed income securities, having an estimated fair value of $1,998 as of September 30, 2017, with the State of Texas.

●

Maintain a Risk-Based-Capital (“RBC”) ratio of 300% or more, and provide calculation of such ratio to the TDI on a periodic basis. Maison has fulfilled this obligation by maintaining an RBC ratio over 300% through September 30, 2017.

Similarly, pursuant to the consent order approving Maison’s admission into the State of Florida, Maison has agreed to:

●

Maintain a Risk-Based-Capital (“RBC”) ratio of 300% or more.

●

Maintain minimum capital and surplus as to policyholders of $35,000.

●

Restrict the payment of dividends to only those which have been approved in advance by the FL OIR.

As of September 30, 2017, Maison has fulfilled these obligations as its RBC ratio exceeded 300% and its capital surplus was $35,962.

Impact of the Tax Cuts and Jobs Act

The U.S. Congress recently passed the Tax Cuts and Jobs Act, which was signed into law by the President on December 22, 2017. One of the key features of the legislation is a reduction in the Federal corporate income tax rate to 21% from 35%. Due to this reduction, the Company will incur an initial charge to earnings to write off a portion of the net deferred tax asset position recognized in the Company’s Consolidated Balance Sheet. However, future operating results would be taxed at the lower rate. The Company’s insurance subsidiary will also have to write-off or otherwise non-admit a portion of its respective deferred tax asset, which would result in a decrease in its respective capital and surplus under statutory accounting principles for insurance companies. This might result in the Company contributing additional capital to its insurance subsidiary in order to maintain desired statutory capital adequacy ratios. Due to the reduction in the corporate Federal income tax rate, federal and/or state legislation might be enacted to help offset the decrease in tax revenue to the government. Such legislation might reduce or eliminate certain tax advantages that are currently beneficial to the Company, including tax-exempt interest on municipal securities, the dividends received deduction and certain tax credits. Accordingly, the fair value of the Company’s investments might be adversely impacted. Under the new tax law, the Company estimates a decrease of approximately $325,000 in deferred tax assets on a consolidated basis, and a decrease of $718,000 in deferred tax assets, on a regulatory basis in the Company’s insurance subsidiary.

BUSINESS

Overview

We are an insurance holding company ~~incorporated~~specialized in ~~Delaware~~providing personal property insurance in coastal markets including those in Louisiana, Texas and Florida. These markets are characterized by smaller regional insurers controlling larger market shares than in other, less catastrophe-exposed markets. These markets are also all characterized by state-administered residual insurers controlling large market shares. These unique markets can trace their roots to Hurricane Andrew, after which larger national carriers limited their capital allocation and approaches to property risk aggregation. These trends accelerated again after back to back exceptionally active Hurricane seasons in 2004 and 2005. However, the decade following Hurricane Katrina had relatively few losses arising from tropical storm activity which led to decline in reinsurance pricing and dramatic increases in its availability. We were incorporated on October 2, ~~2012.~~2012 in the State of Delaware to take advantage of these favorable dynamics where premium could be acquired relatively more quickly and under less competitive pressure than in other property insurance markets and reinsurance, the largest single expense, was declining from record high levels. We execute on this opportunity via a management team with expertise in the critical facets of our business: underwriting, claims, reinsurance, and operations. Within our broad three state market, we seek to sell the products in the territories with the highest rate per exposure and the least complexity in terms of risk. Further we seek to leverage our increasingly geographically diverse insurance portfolio to gain efficiencies with respect to reinsurance. As of December 31, 2017 we insure approximately 50,000 homes, an increase of almost 48% from one year prior.

Prior to March 31, 2014, the Company was a wholly owned subsidiary of Kingsway America Inc., or KAI. KAI, in turn is a wholly owned subsidiary of Kingsway Financial Services Inc., or KFSI, a publicly owned holding company based in Toronto, Ontario, Canada. On March 31, 2014, we completed an initial public offering of our common stock and then on June 13, 2014, we completed a follow-on offering. Through the combination of our initial public offering and follow-on offering, we issued approximately five million shares of our common stock. As of the date of this prospectus, KFSI and its affiliates beneficially own approximately 8.3% of our outstanding shares of common stock and warrants and performance shares to acquire an additional 23.9% of our outstanding shares of common stock. In ~~December 2012,~~addition, as of the date of this prospectus, Fundamental Global Investors, LLC and its affiliates, or FGI, beneficially own approximately 36.0% of our outstanding shares of common stock.

On October 25, 2017, KAI entered into a purchase agreement with FGI, pursuant to which KAI agreed to sell 900,000 shares of our common stock to FGI or to one of FGI’s affiliate companies in two separate transactions. The first transaction, for the sale of 475,428 shares of our common stock, occurred on November 1, 2017. The second transaction, for the sale of 424,572 shares of our common stock, is conditioned on approval of the transaction by both the LDI and FOIR by January 23, 2018. FGI is affiliated with D. Kyle Cerminara, where he serves as Chief Executive Officer, Co-Founder and Partner, and Lewis M. Johnson, where he serves as President, Co-Founder and Partner. Messrs. Cerminara and Johnson are both members of our Board of Directors. Should the second transaction be consummated, FGI, and entities affiliated with FGI, would own approximately 43% of our outstanding common shares. Should the second transaction be consummated, FGI, and entities affiliated with FGI, would own approximately 43% of our outstanding common shares.

Through Maison, we began providing property and casualty insurance to individuals in Louisiana ~~through our wholly-owned subsidiary,~~in December 2012. In September 2015, Maison ~~Insurance Company.~~began writing manufactured home policies in the State of Texas on a direct basis. Our current insurance offerings ~~currently~~in Louisiana and Texas include ~~homeowners’~~homeowners insurance, manufactured home insurance and dwelling fire insurance. We ~~believe the Louisiana~~write both full peril property and casualty insurance market has historically been underserved due to the unique weather-related risks in the region. We provide our policyholders with a selection of insurance products at competitive rates, while pursuing profitability using our selective underwriting criteria.

We have an experienced management team led by Douglas N. Raucy, our President and Chief Executive Officer. Mr. Raucy has served in his current position since October 2012 and has more than 33 years of experience in the insurance industry. As a group, our executive officers have, on average, more than 35 years of experience in the property and casualty insurance industry,policies as well as ~~long standing relationships with agents~~wind/hail only exposures and ~~insurance regulators in Louisiana.~~

~~We currently distribute our insurance~~we produce new policies through a network of ~~more than 130~~ independent insurance agents. We refer to the policies we write ~~insurance policies~~ through ~~the~~ independent agents ~~that are unrelated to the Citizens’ take-out program, which we refer to~~ as voluntary policies. ~~The Citizens’ take-out program is further explained below~~

We also write commercial business in~~Our Market~~. Texas through a quota share agreement with Brotherhood Mutual Insurance Company, or Brotherhood. Through this agreement, we have assumed wind/hail only exposures on certain churches and related structures Brotherhood insures throughout the State of Texas.

We have also participated in depopulation programs implemented by Louisiana Citizens Property Insurance Company, or LA Citizens, as well as the Texas Windstorm Insurance Association, or TWIA. These ~~agents typically represent several insurance companies~~programs were instituted by each respective state in order to ~~provide various~~reduce the number of properties each state insures. Under the programs, state-approved insurance ~~product lines~~companies such as Maison Insurance have the opportunity to ~~their clients.~~

~~National insurers~~assume insurance policies written by both LA Citizens and TWIA. We have ~~been reducing and continue to reduce their exposures to personal property business in Louisiana, creating an opportunity for us to increase our market share~~voluntarily participated in the ~~full peril protection market and with respect to wind/hail-only exposures. Specifically, in recent years, some insurers in Louisiana have begun to write policies excluding~~last five depopulation rounds from LA Citizens, occurring on December 1^st of each year, while December 1, 2016 marked the ~~coverage of wind/hail, creating such opportunity~~inaugural depopulation for us to fill the gap with customers who need that coverage. Also, we continue to build relationships with national carriers, so that agents of those national carriers consider us when placing wind/hail policies instead of Citizens, as Citizens has historically been the only market option for such wind/hail policies.TWIA.

As of December 31, 2013, we had total assets of $23.2 million and stockholders’ equity of $7.9 million. Our net loss was $0.7 million for the fiscal year ended December 31, 2013. As of December 31, 2013, we had approximately 11,500 policies in-force, of which approximately 52% were obtained from take-out policies from Citizens and approximately 48% were voluntary policies obtained from our independent agency force. We believe that our focus on underwriting and claims management will enable us to achieve loss ratios that outperform industry averages.

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Our Corporate Structure

~~The chart below displays our corporate structure prior to the closing of this Offering:~~

Immediately following the closing of this Offering and the conversion of the Preferred Shares as described herein, KFSI will continue to indirectly own approximately 30.8% of the shares of common stock of 1347 Property Insurance Holdings, Inc. (or 33.3% if the underwriters exercise their over-allotment option in full).

1347 Property Insurance Holdings, Inc. was incorporated under the name Maison Insurance Holdings Inc. to hold all of the capital stock of our two subsidiaries: Maison Insurance and Maison Managers. We will also hold all of the capital stock of any offshore domiciled reinsurance subsidiary in the event such an entity is formed. As a holding company for these subsidiaries, we are subject to certain regulation by the Louisiana Department of Insurance, or LDOI.

Maison Insurance, our insurance subsidiary, is a Louisiana insurance company that provides property and casualty insurance in Louisiana. As an insurance company, Maison Insurance is subject to examination and comprehensive regulation by the LDOI.

Maison Managers Inc., or MMI, serves as our management services subsidiary, known as a managing general ~~agency. In its role as our management services subsidiary, Maison Managers is responsible for our~~agency, and provides underwriting, policy administration, claims administration, marketing, ~~programs~~accounting, and other management ~~services. It is this subsidiary that~~services to Maison. MMI contracts primarily with independent agencies for policy sales and services, and also contracts with ~~our~~an independent ~~agents for sales services and with our outsourced provider~~third-party for policy administration services. As a managing general agency, ~~Maison Managers~~MMI is licensed by and subject to the regulatory oversight of the ~~LDOI.~~

~~Reinsurance Subsidiary~~~~. We intend to form~~LDI, TDI and FOIR. MMI earns commissions on a portion of the premiums Maison writes, as well as a per policy fee which ranges from $0-$75 for providing policy administration, marketing, reinsurance ~~subsidiary domiciled offshore to augment our current practice of placing reinsurance with unaffiliated reinsurers. If deemed appropriate~~contract negotiation, and accounting and analytical services. Both Maison and MMI are licensed by management, Maison Insurance may use this reinsurance subsidiary to meet certain of its reinsurance needs. In the event that Maison Insurance decides to purchase reinsurance from our reinsurance subsidiary, the reinsurance contracts entered into between these two subsidiaries will contain terms and ~~rates that are substantially similar~~

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subject to the ~~terms~~regulatory oversight of the Louisiana Department of Insurance, or LDI, the Texas Department of Insurance, or TDI, and ~~rates found~~the Florida Office of Insurance Regulation, or FOIR.

On January 2, 2015, we completed our acquisition of 100% of the membership interest of ClaimCor, a claims and underwriting technical solutions company. Maison processes claims made by its policyholders through ClaimCor, and also through various third-party claims adjusting companies.

Florida Certificate of Authority

On March 1, 2017 Maison received a certificate of authority from the FOIR, which authorizes Maison to write personal lines insurance in Florida. Pursuant to the ~~reinsurance contracts between~~Consent Order issued, Maison ~~Insurance and other third party reinsurers. Any reinsurance contracts entered into between these two subsidiaries will be subject~~has agreed to ~~review~~comply with certain requirements as outlined by the ~~LDOI.~~

~~We believe that~~FOIR until Maison can demonstrate three consecutive years of net income following the Company’s admission into Florida as evidenced by our ~~holding company structure will give us greater flexibility~~Annual Statement filed with the National Association of Insurance Commissioners. Among other requirements, the FOIR requires the following as conditions related to expand our operations and the products and services we offer in the event we choose to expand, although presently there are no definitive plans or arrangements to do so. We will be able to diversify our business through existing or newly formed subsidiaries, the issuance of Maison’s certificate of authority:

●

Although domiciled in the State of Louisiana, Maison agreed to comply with the Florida Insurance Code as if Maison were a domestic insurer within the State of Florida;

●

Maison agreed to maintain capital and surplus as to policyholders of no less than $35 million;

●

Maison agreed to receive prior approval from the FOIR prior to the payment of any dividends; and

●

Maison agreed to receive written approval from the FOIR regarding any form of policy issued, or rate charged to its policyholders prior to utilizing any such form or rate for policies written in the State of Florida.

To comply with the consent order, on March 31, 2017, Maison received a capital ~~stock to make acquisitions or obtaining additional financing~~contribution from PIH in the ~~future.~~

Investment Prior to the Offering

~~On January 23, 2014, FMG, an entity~~amount of ~~which our Chairman~~$16,000. As of the board, Gordon G. Pratt, is Managing Member and controlling equity holder, invested $2 million in the company in exchange for 80,000 Preferred Shares of the company pursuant to the terms and conditions of the Preferred Shares Purchase Agreement, which is filed as an exhibit to the Registration Statement of which this prospectus forms a part. The Preferred Shares are non-voting and rank senior to all classes of capital stock of the company. The Preferred Shares willSeptember 30, 2017, Maison has not ~~pay~~written any dividends. When converted, the Preferred Shares will convert into i) 312,500 shares of common stock of the company, which is equal to $2 million of our common stock at 80% of the offering price per share of our common stock issued in this Offering (which we have assumed to be $8.00 per share, the estimated price set forth on the cover page of this prospectus), subject to certain adjustments, and ii) one warrant per share of common stock issued as a result of the conversion. The conversion into shares of our common stock and warrants will be deemed to have occured immediately prior to the closing of this Offering. Each warrant will entitle the holder to purchase one share of our common stock at a price equal to 120% of the offering price per share of our common stock issued in this Offering, subject to certain adjustments under the Warrant Agreement. The warrants will expire five years from the date of issuance and will be immediately exercisable after issuance in accordance with the exercise procedure under the Warrant Agreement. The warrants will be redeemable by us at a price of $0.01 per warrant during any period in which the closing price of our shares of common stock is at or above 175% of the price of shares of our common stock issued in this Offering for 20 consecutive trading days. The warrant holder will be entitled to a 30 day notice prior to the date of such redemption. If the Offering is not completed within one year from the date of issuance, we will redeem the Preferred Shares at a value equal to original investment plus a 12% premium. The common stock issuable to FMG upon conversion of the Preferred Shares will have piggyback registration rights for future registrations of the Company’s common stock under the Securities Act (other than certain excluded registrations) and, upon the two-year anniversary of the Offering, FMG will also have a one-time demand registration right for such common stock, subject to certain restrictions. If all the Preferred Shares are converted and all the warrants are exercised immediately following the Offering, FMG will own approximately 18.8% (or 17.6% if the underwriters exercise their over-allotment in full) of our outstanding common stock immediately after the Offering. We used the proceeds from this investment to settle intercompany payables to our immediate parent, KAI. This intercompany payable amount originates from payments made by KAI on our behalf to various third-party vendors and also includes approximately $68,000 related to accounting services provided by KAI to us. For a complete description of the terms of this investment and the rights and preferences of the Preferred Shares (and the common stock and warrants underlying such Preferred Shares), please refer to the Preferred Shares Purchase Agreement, the Warrant Agreement and the Certificate of Designation of Preferred Shares filed as an exhibit to the Registration Statement of which this prospectus forms a part.

Our Market

~~Historically, the Louisiana homeowners insurance market has been dominated by large national insurance companies, which began writing property and casualty~~ insurance policies in Louisiana when rates were much lower than they are today. Following a period of unusual hurricane activity, it became apparent that the historical rates charged by these insurance companies were not adequate to cover thecovering risks they assumed. In some cases, insurance companies were forced to liquidate. In other cases, insurance companies requested rate increases from the LDOI. The LDOI is typically reluctant to implement large rate increases over a short period in an effort to ensure that property and casualty rates do not become cost prohibitive for Louisiana homeowners. As a result, many insurers were unable to implement rate increases that they believed were sufficient to offset the risks being assumed in a timely manner. Consequently, many insurers began to decrease the number of property and casualty insurance policies they wrote in Louisiana.

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As these large national insurance companies decreased their property and casualty insurance policies in Louisiana, Louisiana property owners experienced increasing difficulty in procuring insurance policies from private insurance companies. This issue was alleviated in part by the creation in 2004 of Citizens, a Louisiana state-created non-profit corporation which operates the residual market insurance programs designated as the Coastal Plan (successor to the Louisiana Insurance Underwriting Plan) and the FAIR Plan (successor to the Louisiana Joint Reinsurance Plan), sometimes collectively referred to as “the plans.” As all insurers authorized to write, and engaged in writing, property insurance in the State of ~~Louisiana shall participate~~Florida.

On September 29, 2017, Maison received authorization from the FOIR to assume personal lines policies from Florida Citizens Property Insurance Corporation, or FL Citizens, pursuant to a proposal of depopulation which Maison filed with FL Citizens on August 18, 2017. Accordingly, Maison entered the Florida market via the assumption of policies from FL Citizens in ~~the Coastal Plan and FAIR Plan as a condition~~December, 2017. The order approving Maison’s assumption of their authority to transact insurance in Louisiana. Citizens, through these plans, provides property insurance for Louisiana property owners who are unable to obtain insurance from private insurance companies. Citizens is an “insurer of last resort,” writing approximately 8% of Louisiana’s homeowners’ policies. Citizens is required by statute to charge rates at least 10% higher than the rest of the private insurance market.

~~An insurance “take-out” program was implemented to reduce~~policies limits the number of ~~properties insured~~policies which Maison may assume in 2017, and also stipulates that Maison maintain catastrophe reinsurance at such levels as deemed appropriate by ~~Citizens. Under this take-out program, state-approved insurance companies, like Maison Insurance, have~~ the ~~opportunity~~FOIR.

Business Strategy

Our primary goal is to ~~assume insurance policies written by Citizens as it did in December 2012 and 2013 and plans~~continue to do so in the future. As of December 31, 2013, the Company had approximately 6,000 net taken-out policies from Citizens, all of which cover wind and hail only, and of which approximately 3,500 were from the latest take-out of December 1, 2013 and approximately 2,500 remain in-force as of December 31, 2013 from the December 1, 2012 take-out. Opportunities for insurance companies to take-out Citizens policies have historically occurred annually on each December 1^st.

~~We believe that the decrease in the number of Louisiana~~expand our property and casualty insurance policies written by various large national insurance companies, coupled with the Citizens take-out program, has provided smaller, domestic insurance companies, such as Maison Insurance, with greater access to and a unique opportunity for growth in the Louisiana property and casualty insurance market. According to the LDOI, the market for homeowners’ insurance, manufactured homes insurance, and dwelling fire insurance (i.e., the insurance products offered by Maison Insurance) in Louisiana represents annual premiums of approximately $2.5 billion. Citizens currently writes approximately 8% of these policies and large national insurance companies account for approximately 76% of these policies.writings through:

Although the Louisiana property and casualty insurance market is particularly susceptible to risks due to hurricanes, the statistical likelihood of experiencing catastrophic hurricane-related losses is not as great as recent storm activity might suggest. Each year, forecasters predict the number of storms for the year and the number of storms likely to hit the United States. These forecasts refer to all manner of storms ranging from tropical storms to category 5 hurricanes. Moreover, these predictions do not attempt to anticipate the number of storms which will impact a particular state, such as Louisiana.

The Saffir/Simpson Hurricane Wind Scale classifies hurricanes into five categories according to intensity of sustained winds, central barometric pressure and storm surge. The scale is used primarily to measure the potential damage and flooding a hurricane will cause upon landfall. The U.S. National Hurricane Center classifies hurricanes of category 3 and above as “major hurricanes.” Tropical storms and the lowest two categories, category 1 and category 2 hurricanes, have wind speeds of less than 110 mph and do not present a significant risk of loss. According to the National Hurricane Center, category 1 storms do not cause significant damage to building structures, other than unanchored mobile homes. According to the same source, category 2 storms may cause damage to roofing material, poorly constructed doors and windows and mobile homes. Consequently, we believe only category 2 storms (for manufactured houses) and category 3 and above hurricanes present a significant risk of property damage to our insureds.

The National Weather Service — National Hurricane Center published the National Oceanic and Atmospheric Administration Technical Memorandum in August 2011, listing the 30 most costly mainland United States tropical cyclones from 1900 through 2010, nine of which impacted Louisiana.

Since 1969, there have been three landfalls of major hurricanes (category 3 or greater) in Louisiana, with the last being Hurricane Katrina in 2005. According to the National Oceanic and Atomspheric Administration Technical Memorandum, the most intense hurricane (ranked by estimated central pressure at the time of landfall) which affected Louisiana was Hurricane Camille in 1969. With estimated winds of 185 miles per

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hour, Hurricane Camille directly hit the Mississippi coast and its effects were felt in Louisiana as well. The most recent hurricane to hit Louisiana was Isaac in 2011, a category 1 hurricane that directly hit New Orleans.

Our Products

As of December 31, 2013, approximately 52% of our policies are comprised of wind/hail only dwelling policies obtained from the Citizens take-out program and the remaining 48% are obtained through our independent agents, approximately 31% of which are home-owner multi-peril, approximately 16% are manufactured home policies, and approximately 1% are dwelling fire policies.

~~Homeowners Insurance~~

Our homeowners insurance policy is written on an owner occupied dwelling which protects from all perils, except for those specifically excluded from coverage by the policy. The homeowners insurance policy also provides coverage for personal property, but only for specific types of coverage. It also provides replacement cost coverage on the home and other structures and will provide optional coverage for replacement cost on personal property in the home. It also offers the option of specifically scheduling individual personal property items for coverage. Additionally, coverage for loss of use of the home until it can be repaired is provided. Personal liability and medical payment coverage to others is included, as well.

~~Manufactured Home Insurance~~

Our manufactured home insurance policy is written on a manufactured or mobile home and is similar to both the homeowners insurance policy and the dwelling fire policy. The policy can provide for coverage on the manufactured home, the insured’s personal property in the home and liability and medical payments can be included. It can be written on owner occupied or non-owner occupied units. Property coverage can be written on a replacement cost, actual cash value or stated amount basis. There are several optional coverages that can be included and residential and commercial-use rental units can be written along with seasonal use mobile homes or homes that are used for part of the year.

~~Dwelling Fire Insurance~~

~~Our policy counts by type as of December 31, 2013 are as follows:~~

Source of Policies Type Policy
Counts % of
Policies
Citizens Take-out Wind/Hail Only 6,021 52.3 %
2012 Take-out Wind/Hail Only 2,505 21.8 %

2013 Take-out Wind/Hail Only 3,516 30.5 %
Independent Agents:    5,485 47.7 %
   Homeowners 3,580 31.1 %
   Manufactured Home 1,786 15.6 %
   Dwelling Fire 119 1.0 %
Total in-force policies as of December 31, 2013    11,506 100.0 %

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Competitive Strengths

~~Since we assumed our first insurance policies in December of 2012, our growth has been due to our competitive strengths, which include:~~

•●

~~Our knowledge~~Increasing our number of ~~insurance products~~voluntary policies. We believe that ease of use enhancements for our web-based agent quoting portal as well as refining our product offerings has positioned us to continue to experience organic new policy growth. Our ~~underwriting and marketing operations are managed and staffed by qualified and experienced team members~~goal is to continue to grow through strategic relationships with ~~specific expertise~~agencies in the ~~product lines being offered.~~states where we currently provide insurance and also potentially in new coastal markets in the United States. Our years of experience in the coastal markets make us qualified to manage agent expectations and provide superior support and service for policyholders.

•●

~~Our local market expertise~~~~. Through~~Increasing our ~~management team~~wind/hail-only book of business through the depopulation of policies from FL Citizens.We participated in the depopulation of wind/hail-only policies from FL Citizens, which will allow us to quickly establish a significant presence in the State of Florida, where, as of September 30, 2017 we had not yet written any insurance policies. We plan to focus on wind/hail-only and ~~key employees,~~other specialty products in this state where we have ~~developed an understanding~~extensive management experience.

●

Strategic acquisitions. We intend to explore growth opportunities through strategic acquisitions in coastal states, including Louisiana, Texas and Florida. We also plan to pursue complementary books of business provided they meet our underwriting criteria. We will evaluate each opportunity based on expected economic contribution to our results and support of our market expansion initiatives.

●

Attracting and retaining high-quality agents. We intend to focus our marketing efforts on maintaining and improving our relationships with highly productive independent agents, as well as on attracting new high quality agents in areas with a substantial potential for profitable growth.

●

Reducing our ratio of expenses to net premiums earned and using technology to increase our operating efficiency. We are committed to improving our profitability by reducing expenses through enhanced technologies and by increasing the ~~Louisiana insurance market in which~~number of policies that we ~~operate,~~write through the strategic deployment of our capital. We currently outsource our policy administration and a portion of our claims handling functions to third parties with dedicated Maison oversight and direction, which we believe ~~provides us with competitive advantages~~results in ~~terms of marketing, underwriting, claims servicing~~increased service and ~~policyholder service in Louisiana.~~lower expense and loss ratios.

•

~~Our ability to attract independent agents~~. Our management team’s extensive industry experience and network of contacts facilitates our ability to attract a network of independent agents that we believe will direct potential policyholders to our company to fulfill their homeowners insurance needs.

•

~~Our outsourced policy administration system~~. Rather than keeping our policy administration function in-house, we have outsourced all of our policy administration services, which allows this function of our business to operate as a variable cost. As our premium volumes grow, such costs increase, but in times of premium contraction, such costs will decrease. Further, outsourcing our policy administration services provides us with access to better processes and systems than we would likely have had we chosen to operate such policy administration function in-house. We find that partnering with a policy administration provider will provide us and our agents a better, more robust platform than we could likely build and service on our own.

•

~~Our strategy to accept dwelling wind and hail-only policies through Citizens~~. We assumed approximately 3,000 wind and hail-only policies from Citizens through their Round 6 Depopulation Program in December 2012 and approximately 3,800 wind/hail-only policies in the December 2013 takeout, of which approximately 2,500 and 3,500 policies are still in-force as of December 31, 2013, respectively. We believe our relationship with Citizens will also allow us to participate in future depopulation programs in Louisiana.

•

~~Our underwriting eligibility criteria and underwriting approach~~. Unlike some competitors, we offer full coverage, all peril products throughout our area of operations. Our underwriting experience provides a unique perspective that we believe allows superior risk selection on overall risk eligibility, preferred and non-preferred geographical locations of risk and specific risk characteristics.

Competition

We operate in a highly competitive market and face competition from national and regional insurance companies, many of whom are larger and have greater financial and other resources and offer more diversified insurance coverage. Our competitors include companies which market their products through independent agents, as well as companies with captive agents. Large national companies may have certain competitive advantages over regional companies such as ours, including increased name recognition, increased loyalty of their customer base and reduced policy acquisition costs.

We may also face competition from new entrants in our niche markets. In some cases, these companies may price their products below ours due to their interest in quickly growing their business in ~~Louisiana.~~Louisiana or Texas. Although our pricing is inevitably influenced to some degree by that of our competitors, we believe that it is generally not in our best interest to compete solely on price. We also compete on the basis of underwriting criteria, our distribution network and superior policy, underwriting and claims service to our agents and insureds.

~~National~~

Some of the national and regional companies which compete with us in the Texas and Louisiana homeowners’ ~~market~~markets include ASI Lloyds, Lighthouse Property Insurance Corporation, ~~ASI Lloyds, Louisiana Farm Bureau Insurance, Centauri Specialty~~United Property & Casualty, First Community Insurance Company, ~~Allstate~~Southern Fidelity Insurance, ~~Company and State Farm Insurance Company. We also compete with other Louisiana domestic property and casualty companies such as Americas~~Safepoint Insurance Company, Imperial F&C Insurance Company, ~~and~~Americas Insurance Company, Access Home Insurance Company, Family Security Insurance Company, Gulfstream Property and Casualty Insurance Company, Federated National Insurance Company, and Centauri Specialty Insurance Company.

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Our Strategies

~~Our primary goal is to continue to expand our property and casualty writings in Louisiana through:~~

•

~~Increasing our number of voluntary policies~~. In recent years, large national insurance companies have significantly reduced their writings of homeowners’ policies in Louisiana. We believe this trend presents an opportunity to acquire a number of homeowners’ policies from these national insurers. We will focus on expanding our relationship with our network of agents in an effort to secure new voluntary business from such agents. When required, we will also seek the approval of their affiliated insurance companies to become an alternative insurance source for their agents and policyholders in Louisiana.

•

~~Increasing our assumption of policies held by Citizens~~. Approximately 8% of Louisiana’s homeowners’ policies are currently written by Citizens. We intend to continue selecting and assuming existing insurance policies from the large pool of policies held by Citizens that meet our underwriting criteria. We also will continue to develop our network of independent agents and, when necessary, obtain approval of their affiliated insurance companies in order to increase the number of policies that we are eligible to assume from Citizens.

•

~~Strategic acquisitions~~~~. We intend to explore growth opportunities through strategic acquisitions, although we are not currently involved in any active negotiations to execute this strategy.~~

•

~~Attracting and retaining high-quality agents~~. We intend to focus our marketing efforts on maintaining and improving our relationships with highly productive independent agents in our current network, as well as on attracting new high-quality agents in areas with a substantial potential for growth. We believe that these agents will play a key role in our efforts to increase the number of voluntary policies written by our insurance subsidiary.

•

~~Reducing our ratio of expenses to net premiums earned and using technology to increase our operating efficiency~~. We are committed to improving our profitability by reducing expenses through enhanced technologies and by increasing the number of policies written through the strategic deployment of our capital. We consolidate all processing and administration of our policies to achieve quality control, operating synergies and tighter expense control. We use technology to automate much of our underwriting activities and to efficiently and cost-effectively facilitate policyholder communications.

•

~~Evaluating appropriate levels of reinsurance and potentially utilizing a reinsurance subsidiary~~. We will continue evaluating the appropriate amount of reinsurance that we believe will limit our loss exposure on individual property and casualty risks in the most cost-effective manner. We are also considering the formation of a new offshore reinsurance subsidiary through which we can meet certain of our insurance subsidiary’s reinsurance needs.

In addition to the goals and strategies described above, in the future we may diversify our business by offering additional insurance products while maintaining our selective underwriting standards. We may also expand our business outside the State of Louisiana through the organic growth of our company or through strategic acquisitions. We are currently assessing strategic opportunities with regard to product line diversification and geographic expansion outside the Louisiana.

Underwriting

Based on a dynamic set of selective criteria, our underwriters evaluate and select those risks that they believe will enable our insurance subsidiary 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, (2) the adequacy of the premium with regard to the risk to be assumed, and (3) the geographic distribution of existing policies within Louisiana. When considering the suitability of the risk to be assumed and the adequacy of the premium with regard to the risk to be assumed, our underwriters may consider factors such as the age, location, value and construction of the home, as well as the premiums to be received from insuring the home.

~~When considering the geographic distribution of existing policies, our underwriters may consider the number of other homes insured by the company within the same region, parish, city and/or zip code.~~

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~~Our underwriters:~~

~~assess and select quality standard and preferred risks through a sophisticated catastrophe scoring system;~~

~~adhere to disciplined underwriting guidelines; and~~

~~utilize various types of risk management and loss control services including inspection, property evaluation and claim and credit history.~~

The factors, or underwriting criteria, that we consider evolve as we assume more policies. Specifically, our standards have become more geographically precise. Our underwriting criteria will continue to evolve as our business grows and expands.

Maison Insurance also reviews its existing policies and accounts to determine whether those risks continue to meet its underwriting guidelines. If a given policy or account no longer meets those underwriting guidelines, Maison Insurance will take appropriate action regarding that policy or account, including raising premium rates or not renewing the policy to the extent permitted by applicable law, provided that we can cancel policies assumed from Citizens.

We intend to expand into Texas, Hawaii and/or Florida during 2014. We intend to seek licensure by the insurance departments of these states as well as building the appropriate information technology infrastructure to address policy administration, marketing and claim functions. We are in the process of developing a strategy for these expansions, but do not have, at present, concrete plans underlying such strategies.

Claims Administration

Claims administration and adjusting involves the handling of routine “non-catastrophic” ~~claims~~ as well as catastrophic ~~including those that are wind/hail-related,~~ claims. In the event of a hurricane or other catastrophic claim, our claims volume would increase ~~significantly due to hurricane-related damage.~~significantly. Rather than increase the size of our staff in anticipation of such an event, we believe that outsourcing claims adjusting improves our operational efficiency because an appropriately selected third party will have the resources to adjust the ~~hurricane-related claims.~~catastrophe related claims cost effectively and with the level of service we endeavor to provide for our policyholders. Accordingly, we have outsourced our claims adjusting program to certain third party ~~administrators~~adjusters with experience in Texas and Louisiana. We expect to implement a similar model in Florida when appropriate.

Under the terms of the service contract between Maison ~~Insurance~~ and ~~Maison Managers, Maison Managers~~MMI, MMI handles the actual claims administration for both catastrophic and non-catastrophic insurable events. In handling the claims administration, the examiner for ~~Maison Managers~~MMI reviews all claims and loss reports, and if warranted, investigates such claims and losses.

~~The field~~

Field adjusting is outsourced to our wholly-owned subsidiary, ClaimCor, as well as third-party service providers, who, subject to company guidance and oversight, either settle ~~the claims~~ or contest the claims. Approval for payment of a claim is given by ~~Maison Managers~~MMI after careful review of the field ~~adjuster's~~adjuster’s report. We maintain a claims fund for the disbursement of payments to our customers after insurable events, and make deposits into the claims fund as claims are ~~made.~~incurred. We pay adjusters based on a pre-determined fee ~~for the claim. Such fees could increase as a result of a catastrophic event.~~schedule. Although we are ultimately responsible for paying the claims made by our policyholders, we believe that outsourcing our claims handling program while maintaining an oversight function is an efficient mechanism for handling individual ~~matters, and helps mitigate~~matters. Furthermore, by delivering responsive service in a challenging situation, we optimize the ~~animosity that can occur~~relationship between insured and insurer.

Technology

Our business depends upon the use, development and implementation of integrated technology systems. These systems enable our insurance subsidiary to provide a high level of service to agents and policyholders by processing business in a timely and efficient manner, 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 the management of our insurance subsidiary. We believe the availability and use of these technology systems has resulted in improved service to agents and customers and increased efficiencies in processing the business of Maison Insurance and resulted in lower operating costs.

~~In addition to normal back-up methods, we also maintain backup copies of our data via offsite backup facilities which can be recovered at any location that has access to the Internet.~~Reinsurance

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Reinsurance

Maison ~~Insurance~~ follows the industry practice of reinsuring a portion of its risk. When an insurance company purchases reinsurance, it transfers or “cedes” all or a portion of its exposure on insurance underwritten by it to another insurer-the “reinsurer.” Although reinsurance is intended to reduce an insurance company’s risk, the ceding of insurance does not legally discharge the insurance company from its primary liability for the full ~~amount~~obligation of its policies. If the reinsurer fails to meet its obligations under the reinsurance agreement, the ceding company is still required to pay the insured for the loss. ~~The~~Maison and its reinsurance ~~agreements entered into by our insurance subsidiary~~broker are ~~designed~~selective in choosing reinsurers and they consider various factors, including, but not limited to, ~~coincide with~~ the ~~seasonality~~financial stability of ~~Louisiana’s hurricane season.~~the reinsurers, the reinsurers’ history of responding to claims, as well as the reinsurer’s overall reputation in making such determinations.

From year-to-year, both the availability of reinsurance and the costs associated with the acquisition of reinsurance will vary. These fluctuations are not subject to our control and may limit our insurance subsidiary’s ability to purchase adequate coverage.

Third Party Reinsurers

In order to limit the credit risk associated with amounts which may become due from our reinsurers, Maison ~~Insurance~~ uses several different reinsurers, ~~all of~~ which ~~consistent with the requirements of our insurance subsidiary,~~ have an A.M. Best Rating of A- (Excellent) or better. ~~The~~Absent such rating, we have required the reinsurers to place collateral on deposit with an independent financial institution under a trust agreement for our benefit. A partial listing of the reinsurance companies ~~are~~which we currently use include Allianz Risk Transfer, AXIS Specialty Limited, Everest Re, DaVinci Re, Renaissance Re, Odyssey Re, Gen Re, as ~~follows:~~

~~Hannover Rueckversicherung~~

~~Everest RE~~

~~DaVinci Re~~

~~Renaissance Re~~

~~Odyssey Re~~

~~Gen Re~~

well as various Lloyd’s of London ~~participants are:~~participating syndicates.

~~Amlin~~

~~Antares~~

~~AF Beazley~~

~~Chaucer~~

~~Canopius~~

~~Barbican~~

~~Atrium~~

~~Maison Insurance~~

The Company’s excess of loss reinsurance treaties are based upon a treaty year beginning on June 1^st of each year and ~~its reinsurance broker are selective in choosing reinsurers and they consider various factors, including, but not limited to,~~expiring on May 31^st of the following year. Thus, the financial ~~stability~~statements for the nine months ended September 30, 2017 and 2016 as well as the years ended December 31, 2016 and 2015 contain premiums ceded under four separate excess of loss treaties. The following table is a summary of the ~~reinsurers,~~key provisions under each of our treaties.

2014/2015 CAT
XOL Treaty
06/01/14 – 05/31/15
2015/2016 CAT
XOL Treaty
06/01/15 – 05/31/16

2016/2017 CAT
XOL Treaty
06/01/16 – 05/31/17

2017/2018 CAT
XOL Treaty
06/01/17 – 05/31/18
Wind/Hail loss occurrence clause⁽¹⁾ 120 hours 144 hours 144 hours 144 hours
Retention on first occurrence $ 3,000 $ 4,000 $ 5,000 $ 5,000
Retention on second occurrence $ 2,000 $ 1,000 $ 2,000 $ 2,000
Limit of coverage including first event retention $ 92,000 $ 140,000 $ 200,000 $ 200,000
Franchise deductible⁽²⁾ $ — $ — $ 125 $ 250
⁽¹⁾ Specifies the time period during which our losses from the same occurrence may be aggregated and applied to our retention and limits. We may pick the date and time when the period of consecutive hours begin in order to maximize our recovery.
⁽²⁾ Specifies the gross incurred losses by which each loss occurrence must exceed before recoveries are generated under our aggregate treaty. Once the franchise deductible is met, all losses under the loss occurrence qualify for recovery, not just those losses which exceed the franchise deductible amount.
We have purchased reinstatement premium protection contracts to fully indemnify us against the ~~reinsurers’ history~~potential cost of ~~responding to claims, and their overall reputations in making such determinations.~~
For any storm occurring from June 1, 2013 through May 31, 2014, Maison Insurance has obtained ceded reinsurance protection. For each event occurring within a 96 hour period, Maison Insurance receives reinsurance recoveries up to $9.5 million inreinstatement premiums under the traditional catastrophe excess of ~~$1.5 million per event. This $1.5 million retention is the amount Maison Insurance retains in~~ loss ~~from~~contracts, thus each ~~storm before the reinsurance protection is available. Maison Insurance also has another~~ layer of our program includes one reinstatement. We have also purchased a catastrophe aggregate reinsurance ~~protection that~~contract providing $25 million of coverage with no reinstatement. The catastrophe aggregate contract can be used ~~for the first event for~~to indemnify us against large losses above ~~$11~~$175 million per event or an aggregation of small losses subject to a franchise deductible per event as listed in ~~an amount up to $13 million. If any~~the preceding table. The Company also purchases per risk reinsurance having a retention of ~~this $13 million coverage is not used from the first event, the remaining portion is available for additional events. This $13 million second layer coverage applies in total~~$250 with a limit of $1,750 for all events occuring during the reinsurance period. For the second event of the season, the earlier described $9.5 million in excess of $1.5 million is available since Maison Insurance has purchased a prepaid reinstatement premium protection for this coverage. The maximum Maison Insurance can pay fromlosses occurring prior to June 1, ~~2013 to May 31, 2014 is $3~~2017, and a retention of $400 with a limit of $1,600 for all losses occurring June 1, 2017 and thereafter.
The Company estimates that the total cost of its reinsurance program will be approximately $24.7 million ~~in retention for any number of events as long as the~~

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total losses from all events do not exceed the reinsurance limits of all protection layers including the reinstatement of first protection layer, and no single event generates losses greater than $24 million.

Reinsurance Through Reinsurance Subsidiary

We intend to form a third subsidiary — a reinsurance subsidiary domiciled offshore. In the future, this reinsurance subsidiary may be used to meet certain of our insurance subsidiary’s reinsurance needs. For instance, Maison Insurance may determine that it no longer wishes to retain the risk for the ~~first $1.5 million in losses in~~2017-2018 treaty-year. From year-to-year, both the ~~event~~availability of areinsurance and the costs associated with the acquisition of reinsurance will vary. Any catastrophic event ~~and may therefore cede that risk~~ or portions of that risk to our reinsurance subsidiary. Although the terms and rates of any such reinsurance treaty are subject to approval by the LDOI and would be substantially similar to the terms and rates found in our third party reinsurance treaties, any reinsurance premiums retained by our reinsurance subsidiary (i.e., not paid out due tomultiple catastrophes could have a catastrophic event) would be recognized as a profit by that subsidiary, rather than by a third party reinsurer. To the extent claims stemming from a catastrophic event exceeded such reinsurance premiums, our reinsurance subsidiary may experience underwriting losses. We will need to capitalize our reinsurance subsidiary basedmaterial adverse effect on the ~~regulatory requirements~~Company’s results of ~~its offshore domicile, which requirements are generally less stringent as compared to domestic regulatory requirements.~~operations, financial condition and liquidity.

Investments

We have historically tailored our investment policy in an effort to minimize risk in the current financial market. Although applicable laws and regulations permit investments (within specified limits and subject to certain qualifications) in federal, state and municipal obligations, corporate bonds, preferred and common equity securities and real estate mortgages, ~~our current investment policy is aimed at avoiding the risk inherent in some~~as of ~~these markets by requiring that all of our cash balances are to be held~~September 30, 2017, we invested primarily in high quality fixed income ~~instruments. After the closing of the Offering, and periodically thereafter, we will review our investment policy in light of our then-current circumstances and available investment opportunities.~~instruments rated “BBB” or higher by Standard & Poor’s Rating Services.

The cash balances of our subsidiaries may be invested in other types of securities subject to domiciliary state regulations, but those investments are subject to pre-approval by our investment committee and the performance of such investments must be reported to our ~~board~~Board of ~~directors~~Directors quarterly. Our investment policy 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. Our investment policy is designed to maximize investment income within specified guidelines, with a strong emphasis on protection of principal.

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 in a timely and efficient manner; 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 the management of our insurance subsidiary. We believe the availability and use of these technology systems has resulted in improved service to agents and customers and increased efficiencies in processing the business of Maison and resulted in lower operating costs.
Regulation

We are subject to the laws and regulations in Louisiana, Florida and Texas, and will be subject to the regulations of any other states in which we may seek to conduct business in the future. ~~The regulations cover all aspects~~In these states, it is the duty of ~~our business and are generally designed to protect the interests~~each respective department of insurance ~~policyholders, as opposed~~to administer the provisions of the insurance code in that state. The purpose of each state’s insurance code is to regulate the insurance industry in all of its phases, including, but not limited to the ~~interests~~following: licensing of ~~insurance companies.~~insurers and producers, regulation of investments and solvency, review and approval of forms and rates, and market conduct. Furthermore, since Maison is domiciled in the State of Louisiana, the LDI conducts periodic examinations of the financial condition and market conduct of Maison and requires Maison to file financial and other reports on a quarterly and annual basis.

~~Regulations relate to authorized lines~~

Regulation of ~~business,~~the Payment of Dividends and other Transactions between Affiliates

Dividends paid by Maison are restricted by the Louisiana Insurance Code. Dividends can only be paid if Maison’s paid-in capital and surplus requirements, allowable rates and policy forms, investment parameters, underwriting limitations, transactions with affiliates, dividend limitations, changes in control, market conduct, maximum amount allowable for premium financing service charges and a variety of other financial and non-financial components of our business. Our failure to comply with certain provisions of applicable insurance laws and regulations could have a material adverse effect on our business, results of operations or financial condition. In addition, any changes in such laws and regulations, includingexceed the ~~adoption of consumer initiatives regarding rates charged for coverage, could materially and adversely affect our operations or our ability to expand.~~

Many states, including Louisiana, have also enacted laws which restrict an insurer’s underwriting discretion, such as the ability to terminate policies, terminate agents or reject insurance coverage applications, and many state regulators have the power to reduce, or to disallow increases, in premium rates. These laws may adversely affect the ability of an insurer to earn a profit on its underwriting operations.

Certain states have recently adopted laws or are considering proposed legislation which, among other things, limit the ability of insurance companies to effect rate increases or to cancel, reduce or non-renew insurance

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~~coverage with respect to existing policies. Also,~~minimum required by the Louisiana ~~legislature may adopt similar~~Insurance Code. Any dividend or ~~more restrictive additional laws in~~distribution (that when aggregated with any other dividends or distributions made within the ~~future,~~preceding twelve months) which ~~may adversely affect our business.~~

~~Most states, including Louisiana, require licensure and regulatory approval prior to~~exceed the ~~marketing~~lesser of new insurance products. Typically, licensure review is comprehensive and includes a review of a company’s business plan, solvency, reinsurance, character of its officers and directors, rates, forms and other financial and non-financial aspects of a company.

The regulatory authorities may not allow entry into a new market by not granting a license or by withholding approval. In addition, regulatory authorities may preclude or delay our entry into markets by disapproving or withholding approval of our product filings. As a newer insurance company, we may also be subject to examination more frequently during our early years of operation.

All insurance companies must file quarterly and annual statements with certain regulatory agencies and are subject to regular and special examinations by those agencies. According to Louisiana insurance law, the commissioner of insurance shall make a regular examination of all insurers doing business in the state no less than once every five years and a special examination of such insurers at any time when, in the opinion(a) ten percent of the ~~commissioner, it~~insurer’s surplus as regards policyholders as of the thirty-first day of December next preceding; or (b) the net income of the insurer, not including realized capital gains, for the twelve month period ending the thirty-first day of December next preceding; is ~~necessary for such a special examination~~considered to be ~~made.~~

States routinely require deposits of assets for the protection of policyholders either in those states or for all policyholders. As of December 31, 2013, Maison Insurance held investment securities with a fair value of approximately $100,000 as a deposit with the LDOI.

Restrictions on Payments of Dividends by Domestic Insurance Companies

Under the agreement by which Maison Insurance became authorized to transact insurance business in Louisiana, Maison Insurance is precluded from paying dividends without prior notice to the LDOI. Such preclusion notwithstanding, under Louisiana law, no domestic insurerextra-ordinary and shall ~~pay any extraordinary dividend or make any other extraordinary distribution to its stockholders~~not be paid until 30thirty days after the ~~commissioner~~LDI has received notice of the declaration thereof and has not within that period disapproved the payment, or until the ~~commissioner~~LDI has approved the payment within the ~~30-day~~thirty-day period. An extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding twelve months exceeds the lesser of the following: (a) 10% of the insurer’s surplus as regards policyholders as of the 31^st ~~day of December next preceding or (b) the net income, not including realized capital gains, for the twelve-month period ending the 31~~^st ~~day of December next preceding, but not including pro rata distributions of any class of the insurer’s own securities.~~ In determining whether a dividend or distribution is ~~extraordinary,~~extra-ordinary, an insurer may carry forward net income from the previous two calendar years that has not already been paid out asin dividends. ~~This carry forward shall be computed by taking~~Pursuant to the ~~net~~Consent Order issued to us, Maison is restricted from issuing any dividends to its stockholder without receiving prior approval from the FOIR.

Our other subsidiary companies collect the majority of their revenue through their affiliation with Maison. Our subsidiary company MMI, earns commission income from ~~the second~~Maison for underwriting, policy administration, claims handling, and ~~third preceding calendar years, not including realized capital gains, less dividends paid in the second and immediate preceding calendar years. Notwithstanding any~~ other provision of law, an insurer may declare an extraordinary dividend or distribution which is conditional upon the commissioner’s approval, and the declaration shall confer no rights upon stockholders until either the commissioner has approved the paymentservices provided to Maison. Our subsidiary company, ClaimCor, earns claims adjusting income for adjusting certain of the claims of Maison’s policyholders. While dividend ~~or distribution, or,~~payments from our other subsidiaries are not restricted under insurance law, the ~~commissioner has not disapproved payment within~~underlying contracts between Maison and our other subsidiary companies are regulated by, and subject to the ~~30-day period referred to above.~~approval of, insurance regulators.

As of September 30, 2017, Maison ~~Insurance~~ has not paid any dividends to ~~date. We believe~~its sole stockholder, the Company.

Regulation of Rates and Rules

Maison is subject to state laws and regulations regarding approval of rates and rules with respect to its insurance policies. Each state’s respective department of insurance has the exclusive authority to approve insurance rates or rate changes for the lines of property and casualty insurance which Maison writes. Maison’s ability to establish and change rates and the relative timing of the rate making process are dependent upon each state’s statutory and regulatory requirements.

Requirements for Exiting Geographic Markets and/or Canceling or Non-renewing Policies

Maison is subject to Florida, Louisiana and Texas state laws and regulations which may restrict Maison’s timing or ability to either discontinue or substantially reduce its writings in the states in which it operates. These laws and regulations limit the reasons for cancellation or non-renewal, typically require prior notice, and in some instances require prior approval from the respective regulatory agency. For example, in Louisiana, no insurer may cancel or fail to renew a homeowner’s policy of insurance or increase the policy deductible that ~~amounts~~has been in effect and renewed for more than three years unless the change is based upon non-payment of premium, fraud of the insured, a material change in the risk being insured, two or more claims within a period of three years, or if continuance of such policy endangers the solvency of the insurer.

Risk of Assessment by Florida, Louisiana and Texas

Maison is a member of the Louisiana Insurance Guaranty Association as a condition of its authority to transact insurance in Louisiana and is subject to assessment as set forth in the Louisiana Insurance Code.

Maison is also required to ~~meet~~participate, as a condition of its authority to transact insurance in Louisiana, in the residual insurance market programs operated by Louisiana Citizens Property Insurance Corporation and designated as the Coastal Plan and the Fair Plan. Maison is subject to assessment as set forth in the Louisiana Insurance Code for its participation in the Coastal Plan and its participation in the Fair Plan.

As a property insurer licensed in Texas, Maison is a member of TWIA, which provides wind and hail coverage to coastal risks unable to procure coverage in the voluntary market. Maison may become subject to assessment from TWIA should a major loss event deplete TWIA’s available loss reserves and reinsurance coverage. Maison is also a member insurer of the Texas Property and Casualty Insurance Guaranty Association and the FAIR Plan and is subject to assessment by each as set forth in the Texas Insurance Code.

Upon our ~~financial and operating obligations~~entry into the Florida market, we will be ~~available~~required to participate in the Florida Insurance Guaranty Association (“FIGA”), the Florida Hurricane Catastrophe Fund (“FHCF”), and FL Citizens. FIGA services claims of member insurance companies which have become insolvent and are ordered to be liquidated. In the event of an insolvency, Maison may be subject to assessment from ~~sources other than dividends from Maison Insurance, though there can be no assurance in this regard.~~

~~Regulatory considerations, such as the impact of dividends on capital and surplus, which could impact an insurer’s competitive position,~~FIGA based upon the amount of ~~premiums~~premium Maison writes in Florida. Similarly, as an admitted insurer in Florida, Maison is subject to assessment from the FHCF and FL Citizens based upon the amount of premium Maison writes in Florida. While current regulations allow the Company to recover from policyholders the amount of these assessments imposed upon the Company, the Company’s payment of the assessments and recoveries may not offset each other in the same year.

Insurance Regulatory Information System

The National Association of Insurance Commissioners (“NAIC”) developed the Insurance Regulatory Information System (“IRIS”) to help state regulators identify companies that ~~can~~may require special attention. Using IRIS, financial examiners develop key financial ratios in order to assess the financial condition of insurance companies such as Maison. Each ratio has an established “usual range” of results. A ratio which falls outside the usual range however, is not considered a failing result, but instead may be ~~written and~~viewed as part of the ~~ability~~regulatory early monitoring system. In some cases, it may not be unusual for financially sound companies to ~~pay future dividends. Further, state insurance laws and regulations require that~~have several ratios with results outside of the ~~statutory capital and surplus~~usual range.

For the year ended December 31, 2016, Maison had twelve of ~~an insurance company following any dividend or distribution by it be reasonable in relation to its outstanding liabilities and adequate for its financial needs.~~

~~While non-insurance company subsidiaries are not subject directly~~the thirteen IRIS ratio results within the usual range. The ratio which had results which fell outside of the usual range was due to the ~~dividend and other distribution limitations~~fact that ~~Maison Insurance is, insurance holding company regulations similarly govern~~Maison’s yield on investments was below the ~~amount that any affiliate within the holding company system may charge any~~lower end of the ~~insurance companies for service (e.g., management fees and commissions).~~usual range (3%) due to the general low investment yields currently realized on the highly rated fixed income securities we hold as part of our overall investment strategy.

Management does not anticipate regulatory action as a result of these IRIS ratio results.

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NAIC Risk Based Capital Requirements

In ~~order to enhance~~ the ~~regulation of insurer solvency, the NAIC established~~United States, a risk-based capital ~~requirements for~~(“RBC”) formula is used by the National Association of Insurance Commissioners (“NAIC”) to identify property and casualty insurance companies that ~~are designed~~may not be adequately capitalized. Most states, including Louisiana, Texas, and Florida have adopted the NAIC RBC requirements. In general, insurers reporting surplus with respect to assess capital adequacy and to raise the level of protection that statutory surplus provides for policyholders. These requirements measure three major areas of risk facing property and casualty insurers: (i) underwriting risks, which encompass the risk of adverse loss developments and inadequate pricing; (ii) declines in asset values arising from credit risk; and (iii) other business risks from investments. Insurers having less statutory surplus than required will be subject to varying degrees of regulatory action, depending on the level of capital inadequacy. The LDOI, which follows these requirements, could require Maison Insurance to cease operations in the event it fails to maintain the required statutory capital.

~~Based upon the 2013 statutory financial statements for Maison Insurance, its statutory surplus exceeded all regulatory action levels established by the NAIC’s risk-based capital requirements.~~

Based on Risk Based Capital requirements, the extent of regulatory intervention and action increases as the ratio of an insurer’s statutory surplus to its Authorized Control Level, or ACL, as calculated under the NAIC’s requirements, decreases. The first action level, the Company Action Level, requires an insurer to submit a plan of corrective actions to the insurance regulators if statutory surplus fallspolicyholders below 200% of the ~~ACL amount. The second action~~authorized control level, as defined by the Regulatory Action Level, requires an insurer to submit a plan containing corrective actions and permits the insurance regulators to perform an examination or other analysis and issue a corrective order if statutory surplus falls below 150%NAIC, on December 31^st of the ACL amount. The third action level, ACL, allows the regulators to rehabilitate or liquidate an insurer in addition to the aforementioned actions if statutory surplus falls below the ACL amount. The fourth action level is the Mandatory Control Level, which requires the regulators to rehabilitate or liquidate the insurer if statutory surplus falls below 70.0% of the ACL amount.

NAIC Insurance Regulatory Information Systems Ratios

The NAIC has also developed Insurance Regulatory Information Systems (“IRIS”) ratios to assist state insurance departments in identifying companies which may be developing performance or solvency problems, as signaled by significant changes in the companies’ operations. Such changes may not necessarily result from any problems with an insurance company, but may merely indicate changes in certain ratios outside the ranges defined as normal by the NAIC. When an insurance company has four or more ratios falling outside “usual ranges,” state regulators may investigate to determine the reasons for the variance and whether corrective action is warranted. The LDOI is able to calculate and review some IRIS ratios based on the annual statement of Maison Insurance following its firstprevious year of operation. However, some of the IRIS ratios are based on year-to-year comparisons, meaning that the LDOI will not be able to calculate those IRIS ratios for Maison Insurance until after its second full year of operation. Due in part to the limited operating history and financial results, the LDOI typically conducts a financial examination of each new insurer following each of its first three years of operation.

Insurance Holding Company Regulation

We are subject to ~~laws governing insurance holding companies~~varying levels of regulatory action, which may include discontinuation of operations. As of September 30, 2017, Maison’s reported surplus was considered to be in ~~Louisiana where~~the “no action” level as defined by the state regulators. Furthermore, pursuant to the consent order approving Maison’s admission into the State of Texas, Maison ~~Insurance is domiciled. These laws, among other things, (i)~~has agreed to maintain a RBC ratio of 300% or more, and provide calculation of such ratio to the TDI on a periodic basis. As of September 30, 2017, Maison’s RBC ratio was above 300%.

State Deposits

States routinely require ~~us to file periodic information~~deposits of assets for the protection of policyholders. As of September 30, 2017, Maison held certificates of deposit with an estimated fair value of approximately $100 and $300 as a deposit with the ~~LDOI, including information concerning our capital structure, ownership, financial condition~~LDI and ~~general business operations, (ii) regulate certain transactions between us and our affiliates, including the amount~~F OIR, respectively. Maison also held investment securities with an estimated fair value of ~~dividends and other distributions and the terms~~approximately $1,998 as of surplus notes and (iii) restrict the ability of any one person to acquire certain levels of our voting securities without prior regulatory approval. Any purchaser of 10% or more of the outstanding shares of our common stock will be deemed to have acquiredSeptember 30, 2017, as a ~~controlling interest in Maison Insurance and will be required to file an acquisition statement~~deposit with the ~~LDOI for review~~TDI.

Employees

As of September 30, 2017, we had twenty-nine employees, twenty-one of whom work at our offices in Tampa, Florida, five of whom work at our offices in Baton Rouge, Louisiana, and ~~regulatory approval. Any purchaser~~three of 5% or more of the outstanding shares of our common stock will be required to notify the LDOI of the acquisition; any such acquiring party then will be required to file an acquisition statement with the LDOI unless the purchaser acquires less than 10% of the outstanding shares of our common stock and files a statement disclaiming control of our insurance subsidiary in a format promulgated by the LDOI.

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Legislation

whom work from Texas. From time to time, ~~new regulations~~we employ and ~~legislation are proposed to bring the industry under regulation by the federal government, to control premiums, policy terminations~~supplement our staff with temporary employees and other policy terms and to impose new taxes and assessments. It is not possible to predict whether, in what form or in what jurisdictions, any of these proposals might be adopted, or the effect, if any, on us.

Employees

~~As of December 31, 2013 we had 5 employees, all of whom are full time employees.~~consultants. 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~~believe that relations with our employees are satisfactory. Each of our employees has entered into confidentiality agreements with us.

Website

Our corporate website address iswww.1347pih.com.

Information contained on our website is not incorporated by reference into this prospectus and you should not consider information on our website to be ~~satisfactory.~~

Facilities

Maison Insurance leases approximately 3,500 square feet of office space in Baton Rouge, Louisiana. The lease for the office space expires in December 2017. The annual rent for the office space is approximately $65,000, which is payable in equal monthly installments.

Legal Proceedings

~~We are subject to routine legal proceedings in the ordinary course of business. However, we are not aware of any such legal proceedings against us at the present time.~~

Risks Associated With Our Business

~~In evaluating our business, the following items should be taken into consideration:~~

We have a limited operating history on which to base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of development.

In the Louisiana property and casualty insurance market, we compete with large, well-established insurance companies, as well as other specialty insurers. Most of these competitors possess greater financial resources, larger agency networks and greater name recognition than we do.

We write insurance policies that cover homeowners, manufactured homes and tenants for losses that result from, among other things, catastrophes. We are, therefore, subject to claims arising out of catastrophes that may have a significant effect on our business, results of operations, and financial condition.

~~Catastrophes can be caused by various events, including hurricanes, windstorms, hailstorms, explosions, power outages, fires and man-made events.~~

The insurance industry is highly regulated and supervised. Maison Insurance is subject to the supervision and regulation of Louisiana. These regulations are administered by the State of Louisiana and relate to, among other things: approval of policy forms and premium rates; licensing of insurers and their products; restrictions on the nature, quality and concentration of investments; restrictions on the ability of our insurance subsidiary to pay dividends to us; restrictions on transactions between insurance company subsidiaries and their affiliates; and standards of solvency, including risk-based capital measurements.

~~We lack geographic diversification of our policyholders, who are concentrated in Louisiana.~~

A majority of our in-force policies were acquired through the Citizens take-out program and all of such assumed policies cover losses arising only from wind and hail, which creates large concentration of our business in wind and hail only coverage and limits our ability to implement our restrictive underwriting guidelines.

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Investment Prior to the Offering

On January 23, 2014, FMG, an entity of which our Chairman of the board, Gordon G. Pratt, is Managing Member and controlling equity holder, invested $2 million in the company in exchange for 80,000 Preferred Shares of the company pursuant to the terms and conditions of the Preferred Shares Purchase Agreement, which is filed as an exhibit to the Registration Statement of which this prospectus forms a part. The Preferred Shares are non-voting and rank senior to all classes of capital stock of the company. The Preferred Shares will not pay any dividends. When converted, the Preferred Shares will convert into i) 312,500 shares of common stock of the company, which is equal to $2 million of our common stock at 80% of the offering price per share of our common stock issued in this Offering (which we have assumed to be $8.00 per share, the estimated price set forth on the cover pagepart of this prospectus), subject to certain adjustments, and ii) one warrant per share of common stock issued as a result of the conversion. The conversion into shares of our common stock and warrants will be deemed to have occured immediately prior to the closing of this Offering. Each warrant will entitle the holder to purchase one share of our common stock at a price equal to 120% of the offering price per share of our common stock issued in this Offering, subject to certain adjustments under the Warrant Agreement. The warrants will expire five years from the date of issuance and will be immediately exercisable after issuance in accordance with the exercise procedure under the Warrant Agreement. The warrants will be redeemable by us at a price of $0.01 per warrant during any period in which the closing price of our shares of common stock is at or above 175% of the price of shares of our common stock issued in this Offering for 20 consecutive trading days. The warrant holder will be entitled to a 30 day notice prior to the date of such redemption. If the Offering is not completed within one year from the date of issuance, we will redeem the Preferred Shares at a value equal to original investment plus a 12% premium. The common stock issued to FMG upon conversion of the Preferred Shares will have piggyback registration rights for future registrations of the company’s common stock under the Securities Act (other than certain excluded registrations) and, upon the two-year anniversary of the Offering, FMG will also have a one-time demand registration right on such common stock, subject to certain restrictions. If all the Preferred Shares are converted and all the warrants are exercised immediately following the Offering, FMG will own approximately 18.8% (or 17.6% if the underwriters exercise their over-allotment in full) of our outstanding common stock immediately after the Offering. We used the proceeds from this investment to settle intercompany payables to our immediate parent, KAI. This intercompany payable amount originates from payments made by KAI on our behalf to various third-party vendors and also includes approximately $68,000 related to accounting services provided by KAI to us. For a complete description of the terms of this investment and the rights and preferences of the Preferred Shares (and the common stock and warrants underlying such Preferred Shares), please refer to the Preferred Shares Purchase Agreement, the Warrant Agreement and the Certificate of Designation of Preferred Shares filed as an exhibit to the Registration Statement of which this prospectus forms a part.prospectus.

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MANAGEMENT

Our Directors and Executive Officers Following the Separation

The following table sets forth the names, ages and positions of our directors and executive officers.

Name	Age
~~Name~~	~~Age~~	Position(s)
Douglas N. Raucy	5761	President and Chief Executive Officer and Director
John S. Hill	5760	Vice President and Chief Financial Officer
Dean E. Stroud	6266	Vice President ~~of Operations~~ and Chief Underwriting Officer ~~of Maison Insurance~~
~~Gordon G. Pratt~~Dan Case	5239	Chief Operating Officer
Larry G. Swets, Jr.	42	Chairman of the Board of Directors
~~Hassan R. Baqar~~D. Kyle Cerminara	3640	Director
~~Leo Christopher Saenger III~~	46	~~Director~~
~~Larry G. Swets, Jr.~~Joshua S. Horowitz	39	Director
Lewis M. Johnson	47	Director
Scott D. Wollney	48	Director
Dennis A. Wong	48	Director

There are no family relationships between any of our executive officers and directors. Except as set forth below, the business address of each of our executive officers and directors is 1511 N. Westshore Blvd., Suite 870, Tampa, FL 33607.

Director Biographies

Douglas N. Raucy, age 61, has served as our President and Chief Executive Officer and as a member of our ~~board~~Board of ~~directors~~Directors since ~~its~~the inception of the Company in October 2012. He has served in the same positions at our wholly-owned subsidiary companies, Maison ~~Insurance~~ Company and at Maison Managers Inc. since their inception in October 2012. Prior to joining our company, Mr. Raucy served as the Chief Executive Officer and President and as a member of the ~~board~~Board of ~~directors~~Directors of Access Home Holdings LLC, Access Home Insurance Company and Access Home Managers LLC from August 2011 to October 2012. He also served as the Chief Executive Officer and President and as a member of the ~~board~~Board of ~~directors~~Directors of Prepared Holdings LLC, Prepared Insurance Company and Prepared Managers LLC. From January 2001 to August 2008, he served as the Chief Operating Officer of the Institute of Business and Home Safety (IBHS), a property mitigation firm that focuses on disaster-resistance property research and education. Mr. Raucy’s prior executive experience also includes positions held during his 20 year tenure at Allstate Insurance Company, including his role as the Director and Founder of the National Catastrophe Team and National Catastrophe Center from 1995 through 2001, where he led ~~the~~ Allstate Insurance ~~Company~~Company’s efforts for every major national catastrophe. He previously served as a member of the advisory board for Marshall Swift/Boech and a consultant to the Ocean Research & Resources Advisory Panel, a U.S. federal advisory committee studying the effects of the ocean on global weather patterns. Mr. Raucy obtained a bachelor’s degree from Utah State University. We believe Mr. Raucy’s ~~qualifications to serve on~~business and management experience make him a qualified and valuable member of our ~~board~~Board of ~~directors include his extensive experience serving~~Directors.

Larry G. Swets, Jr., age 42, has served as a member of our Board of Directors since November 21, 2013 and has served as our Chairman since March 5, 2017. Mr. Swets currently serves as Chief Executive Officer of Kingsway Financial Services, Inc. (TSX: KFS, NYSE: KFS). Beginning in July 2010, Mr. Swets has served as the President and Chief Executive Officer and, since September 2013, as a member of the board of directors, of ~~several companies within~~Kingsway. Prior to that, Mr. Swets served as Executive Vice President of Corporate Development for Kingsway from January 2010 to July 2010. Before joining Kingsway, in 2005, Mr. Swets founded Itasca Financial LLC, an advisory and investment firm specializing in the insurance industry from which Mr. Swets separated in December 2009. Prior to his work at Itasca Financial, Mr. Swets served as an insurance company executive and advisor, including the role of Director of Investments and Fixed Income Portfolio Manager for Kemper Insurance (from June 1997 to May 2005). At Kemper Insurance, he also evaluated business units, executed corporate transactions and divestitures, and developed financial projections and analysis for the company during its runoff stage. Mr. Swets began his career in insurance as an intern in the Kemper Scholar program in 1994. Mr. Swets is a member of the board of directors of Kingsway, Atlas Financial Holdings, Inc. (Nasdaq: AFH), Itasca Capital Ltd. (TSX-V: ICL) and Limbach Holdings, Inc., f/k/a 1347 Capital Corp. (Nasdaq: LMB). He is currently a member of the Young Presidents’ Organization. Previously, he served as a member of the board of directors of United Insurance Holdings Corp. (Nasdaq: UIHC), from 2008 to March 2012, and Risk Enterprise Management Ltd from November 2007 to May 2012. Mr. Swets obtained a bachelor’s degree from Valparaiso University and a Master’s degree in finance from DePaul University. He also holds the Chartered Financial Analyst designation. We believe Mr. Swet’s qualifications to serve on our Board of Directors include his more than ten years of executive management and leadership experience in the insurance industry.

D. Kyle Cerminara, age 40, was appointed to our Board of Directors on December 27, 2016. Mr. Cerminara has been Chief Executive Officer, Co-Founder and Partner of Fundamental Global Investors, LLC, an SEC registered investment advisor that manages equity and fixed income hedge funds, since April 2012. Fundamental Global Investors, LLC is a significant stockholder of the Company. Mr. Cerminara has also served as the Co-Chief Investment Officer of CWA Asset Management Group, LLC d/b/a Capital Wealth Advisors (“CWA”), a wealth advisor and multi-family office affiliated with Fundamental Global Investors, LLC, since December 2012. In addition, he has served Ballantyne Strong, Inc., a holding company with diverse business activities focused on serving the cinema, retail, financial and government markets, as a director since February 2015, as its Chairman since May 2015 and as its Chief Executive Officer since November 2015. Mr. Cerminara also serves as President and Trustee of StrongVest ETF Trust and Chief Executive Officer of StrongVest Global Advisors, LLC. StrongVest Global Advisors, LLC, a wholly-owned subsidiary of Ballantyne Strong, is an investment advisor, and CWA is a sub-advisor, to CWA Income ETF, an exchange-traded fund and series of StrongVest ETF Trust. Mr. Cerminara is a member of the Board of Directors of a number of publicly-held companies focused in the technology, insurance and communication sectors, including Ballantyne Strong, Inc. (NYSE American: BTN), since 2015, RELM Wireless Corporation (NYSE American: RWC), a publicly-traded manufacturer, since 2015, Itasca Capital, Ltd. (TSXV: ICL) (formerly Kobex Capital Corp.), a publicly-traded investment firm, since June 2016, and Iteris, Inc. (Nasdaq: ITI), a provider of intelligent information solutions for traffic management, since August 2016. He also served on the Board of Directors of Magnetek, Inc., a publicly-traded manufacturer, in 2015. Prior to co-founding FGI and partnering with Capital Wealth Advisors, Mr. Cerminara was a Portfolio Manager at Sigma Capital Management from 2011 to 2012, a Director and Sector Head of the Financials Industry at Highside Capital Management from 2009 to 2011, and a Portfolio Manager and Director at CR Intrinsic Investors from 2007 to 2009. Before joining CR Intrinsic Investors, Mr. Cerminara was a Vice President, Associate Portfolio Manager and Analyst at T. Rowe Price from 2001 to 2007 and an Analyst at Legg Mason from 2000 to 2001. Mr. Cerminara received an M.B.A. from the Darden School of Business at the University of Virginia and a B.S. degree in Finance and Accounting from the Smith School of Business at the University of Maryland, where he was a member of Omicron Delta Kappa, an NCAA Academic All American and Co-Captain of the men’s varsity tennis team. He also completed a China Executive Residency at the Cheung Kong Graduate School of Business in Beijing, China. Mr. Cerminara holds the Chartered Financial Analyst designation. We believe Mr. Cerminara brings to the Board the perspective of one of the Company’s largest stockholders. He also offers to the Board valuable insights obtained through his management and operational experience and extensive experience in the financial industry, including investing, capital allocation, finance and financial analysis of public companies. The business addresses for Mr. Cerminara are c/o Fundamental Global Investors, LLC, 4201 Congress Street, Suite 140, Charlotte, North Carolina 28209; c/o Ballantyne Strong, Inc., 11422 Miracle Hills Drive, Suite 300, Omaha, Nebraska 68154; and 131 Plantation Ridge Dr., Suite 100, Mooresville, North Carolina 28117.

Joshua S. Horowitz, age 40, was appointed to our Board of Directors in April 2015. From July 2014 to July 2016, he served as a member of the Board of Directors and Audit Committee Chairman of Limbach Holdings, Inc., f/k/a 1347 Capital Corp. (Nasdaq: LMB). Since January 2012, Mr. Horowitz has served as a portfolio manager and Managing Director at Palm Management (US) LLC, a family office private investment firm that invests in a wide range of public and private companies. From October 2011 to December 2011, Mr. Horowitz worked as an independent consultant providing research and analysis of publicly-held investments. From September 2010 to September 2011, Mr. Horowitz served as Director of Research of Inverlochy Capital Ltd., a private asset management company. From April 2009 to April 2010, Mr. Horowitz served as managing director of Sapinda GmbH, a private investment holding company. From March 2004 to October 2008, Mr. Horowitz served as Director of Research for Berggruen Holdings, Inc., a family office with over $2 billion in assets under management globally. In these positions, Mr. Horowitz has analyzed and managed investments in hundreds of companies, with an emphasis on insurance and financial firms. Mr. Horowitz has served as a member of the Board of Directors of Lincoln General Insurance Company, a private insurance company, from October 2011 until October 2015. He is currently a member of the board of directors of Birner Dental Management Services, Inc. (OTCQX:BDMS) and a director of Democracy at Work, a 501(c)(3) non-profit organization. Mr. Horowitz obtained a Bachelor of Science degree in Management from Binghamton University. In March 2015, Mr. Horowitz successfully completed the Business of Insurance Certificate Program at St. John’s University. We believe Mr. Horowitz’s qualifications to serve on our Board of Directors include his executive management experience, his experience with the analysis and management of investments in companies in the insurance sector, and his service on the board of a private insurance company.

Lewis M. Johnson, age 47, was appointed to our Board of Directors on April 3, 2017. Since May 2016, Mr. Johnson has also served on the Board of Directors of Ballantyne Strong, Inc. (NYSE American: BTN), a holding company with diverse business activities focused on serving the cinema, retail, financial, and government markets, as well as RELM Wireless Corporation (NYSE American: RWC), a company which designs, manufactures and markets two-way land mobile radios, repeaters and related components. Since April 2012, Mr. Johnson has served as President, Co-Founder and Partner of Fundamental Global Investors, LLC, an SEC registered investment advisor that manages equity and fixed income hedge funds. In addition, since April 2012, Mr. Johnson has served as Co-Chief Investment Officer of CWA Asset Management Group, LLC, a wealth advisory firm associated with Fundamental Global Investors. Prior to co-founding Fundamental Global Investors, LLC and partnering with Capital Wealth Advisors, Mr. Johnson was a private investor from 2010 to 2012. From 2008 to 2010 Mr. Johnson served as Portfolio Manager and Managing Director at Louis Dreyfus Highbridge Energy, a diversified merchant energy company involved in the marketing and merchandising of energy commodities as well as the ownership and operation of energy-related infrastructure assets. Previously Mr. Johnson was a Senior Vice President, Portfolio Manager and Analyst at Pequot Capital from 2006 to 2007. Prior to joining Pequot Capital, he was a Vice President and Analyst at T. Rowe Price from 2000 to 2006. He interned as an Analyst at Capital Research and Management during the summer of 1999 and worked as a Vice President at AYSA from 1992 to 1998. Mr. Johnson received an MBA from the Wharton School of Business at the University of Pennsylvania in addition to a MA in Political Science and a BA in International Studies from Emory University, where he graduated Magna Cum Laude and was a member of Phi Beta Kappa. We believe Mr. Johnson’s extensive experience in the financial industry, including asset investment, capital allocation, finance and financial analysis of public companies, qualify him to serve on our Board of Directors. The business addresses for Mr. Johnson are c/o CWA Asset Management Group, LLC, 9130 Galleria Court, Third Floor, Naples, Florida 34109 and c/o Fundamental Global Investors, LLC, 4201 Congress Street, Suite 140, Charlotte, North Carolina 28209.

Scott D. Wollney, age 48, was appointed to our Board of Directors on March 30, 2015. Since December 2010, Mr. Wollney has served as the President, Chief Executive Officer and Director of Atlas Financial Holdings, Inc. (Nasdaq: AFH), a specialty commercial automobile insurance company. From July 2009 until December 2010, Mr. Wollney was President and Chief Executive Officer of Kingsway America Inc. (KAI), a property and casualty holding company and subsidiary of Kingsway. From May 2008 to March 2009, he was the President and Chief Executive Officer of Lincoln General Insurance Company (a subsidiary of KAI), a property and casualty insurance company. Mr. Wollney co-founded Avalon Risk Management, Inc., an insurance broker, in 1998 and served as its President from 2002 to 2008. Mr. Wollney has more than 26 years of experience in property and casualty insurance. During his tenure in the industry, Mr. Wollney has held executive positions at both insurance companies as well as brokerage operations. Mr. Wollney is a MBA graduate of Northwestern University’s Kellogg School of Management with a concentration in finance and management strategy and holds a Bachelor of Arts degree from the University of Illinois. We believe Mr. Wollney’s qualifications to serve on our Board of Directors include his direct operating experience with respect to numerous disciplines which are critical to the insurance business.

Dennis A. Wong, age 48, has served as a member of our Board of Directors since October 2015. Since 2005, Mr. Wong has served as the owner of and a consultant with Insurance Resolution Group, a consulting firm focused on providing strategic advisory and financial consulting for domestic and international insurance carriers. From 1997 to 2005, Mr. Wong worked in a variety of corporate roles with Kemper Insurance Companies, a leading national insurance provider, including as Chief Financial Officer of its international operations. From 1991 to 1997, Mr. Wong worked as a public accountant with KPMG LLP, where he specialized in accounting and operational advisory services for the insurance industry. Mr. Wong obtained a Bachelor of Arts degree in Economics with an Accountancy Cognate from the University of Illinois. Mr. Wong is a Certified Public Accountant. We believe Mr. Wong’s qualifications to serve on our Board of Directors include his insurance industry experience, as well as his experience as an auditor for various insurance companies.

Executive Officer Biographies

Please see “—Director Biographies” above for the biography of Mr. Raucy, our President and Chief Executive Officer.

John S. Hill, CPA, age 60, has served as our Vice President and Chief Financial Officer since July 2013. He has served as the Vice President, ~~Chief Financial Officer~~Secretary, Treasurer and ~~Treasurer~~Director of our subsidiary, Maison ~~Insurance~~ Company and has held the roles of Vice President, Treasurer and Director for our subsidiary, Maison Managers Inc. ~~since July 2013.~~ Prior to joining our company, Mr. Hill served as an Accounting Manager at AmeriLife Group, LLC, a company involved in the distribution of annuity, life and health insurance products, from June 2013 to July 2013 and as the founder and owner of his consulting business, Hill Consulting Services LLC from July 2009 to June 2013. From June 2010 to September 2011, Mr. Hill served as the Chief Financial Officer of Prepared Insurance Company and prior to that, he served as the Chief Financial Officer, Controller and Treasurer of Travelers of Florida from May 1998 to June 2009. Mr. Hill also served as the Chief Financial Officer of Carolina Casualty Insurance Company from 1989 to 1997. ~~He is currently a member of the board of directors of Carlyle Homeowners Association.~~ Mr. Hill served on the Board of Governors of the Florida Automobile Joint Underwriting Association from 1999 through 2003. Mr. Hill’s executive experience includes his prior roles as a national insurance audit instructor and peer review team member in KPMG’s insurance practice. He ~~is a~~also holds the designation of certified public accountant (inactive) and is a member of the American Institute of CPAs. Mr. Hill obtained a bachelor’s degree from Iowa State University with a double major in economics and accounting. ~~He is a member of the American Institute of CPAs.~~

Dean E. Stroud, age 66, has served as our Vice President ~~of Operations~~ and Chief Underwriting Officer and has been a member of the ~~board~~Board of ~~directors~~Directors of Maison ~~Insurance~~Company since October ~~2012.~~2012 and a member of the Board of Directors and Secretary of Maison Managers, Inc. since February 2015. Prior to joining ~~Maison Insurance,~~the Company, he was the Chief Underwriting Officer and a member of the ~~board~~Board of ~~directors~~Directors of Access Home Insurance Company in Baton Rouge, Louisiana from September 2011 to October 2012, where he managed and supervised company underwriting operations. Mr. Stroud served as the Senior Underwriting Consultant of Americas Insurance Company from January 2011 to September 2011 and prior to that, served as their

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Chief Underwriting Officer from April 2010 to January 2011. From October 2003 to May 2009, he was the Vice President of MacNeill Group, Inc., where he directed Louisiana underwriting and claims operations as a service provider for Citizens. Mr. Stroud’s prior executive experience also includes several positions held at Audubon Insurance Company, which he joined in 1971. At Audubon Insurance Company, he served in various commercial lines underwriting, underwriting management and other management positions and subsequently was responsible for companywide standard personal and commercial lines underwriting operations in Louisiana and supervised company marketing operations. Mr. Stroud ~~was later named Audubon Insurance Company’s Vice President and was responsible for all standard personal and commercial lines underwriting in a six state region. He was subsequently appointed~~held the position of Senior Vice President ~~of Audubon Insurance Company~~ with responsibility for companywide standard lines underwriting operations and all company branch offices. ~~Following those positions,~~Subsequently, Mr. Stroud became President and Chief Operating Officer of Audubon Insurance Group and President of Audubon Insurance Company and Audubon Indemnity Company. He also was a director of Audubon Insurance Company and Audubon Indemnity Company. Mr. Stroud has held positions on advisory committees to the Professional Insurance Agents of Louisiana and has served on the ~~board~~Board of ~~directors~~Directors of the Property Insurance Association of Louisiana. He earned a Bachelor of Arts degree from Louisiana State University in 1974. Additionally, he has completed The Management Program at the College of Insurance in Princeton, New Jersey and the American International Group’s Strategic Leadership in the Marketplace program in New York.

~~Gordon G. Pratt~~Dan Case,age 39, has served as ~~the Chairman~~our Chief Operating Officer since May 23, 2017. Mr. Case has 17 years of ~~our board of directors since November 2013. Since March 2004, Mr. Pratt~~experience in financial services during which time he has been Managing Member of FMG. From June 2004 to April 2006, he served as the Senior Vice President, Corporate Development of the Willis Group in New York and London, prior to which he was an equity holder and Managing Director of Hales Capital Advisors LLC and the Managing Partner of Distribution Partners Investment Capital L.P., a private equity fund focused exclusively on the insurance ~~industry.~~and reinsurance industries. Prior to joining the Company, Mr. Pratt currently serves as Chairman of the board of directors (and on the audit and compensation committees) of Atlas Financial Holdings, Inc. (NASDAQ: AFH). He previously served as Vice Chairman of the board of United Insurance Holdings Corp. (NASDAQ: UIHC) and as Vice Chairman of the board of privately-held Avalon Risk Management Insurance Agency LLC. Mr. Pratt also served as a member of the board of directors of United Property & Casualty Insurance Company and as Chairman of the boards of directors for FMG Acquisition Corp. (OTC: FMGQ) and of privately-held Risk Enterprise Management Limited. Before joining Hales, Mr. PrattCase was ~~a Senior~~an Executive Vice President at BMS Re, an independent reinsurance intermediary, from September 2016 to March 2017, and a ~~member of~~founding partner at Advocate Reinsurance Partners, a privately-held reinsurance intermediary for middle-market insurance carriers, captives, risk retention groups and other specialty insurance operations, from October 2010 until its purchase by BMS Re in September 2016. At Advocate Reinsurance Partners, Mr. Case led the ~~management committee of Conning & Company, where he helped to raise~~property reinsurance practice and ~~invest capital for three Conning Private Equity funds. He~~advised both personal lines and commercial clients with catastrophe exposure. Mr. Case began his career as an analyst in Banc of America Securities’ Financial Institutions Group in 2000, where he worked in raising both private and public capital until 2002. In 2002, Mr. Case joined Aon Benfield Securities, a specialist investment bank, where he served the insurance and reinsurance industries until 2006. In 2006, he joined HBK Investments, an investment management firm based in Dallas, Texas, as an analyst managing private equity, collateralized reinsurance investments, and traded securities in the property casualty insurance and reinsurance market. Mr. Case was also a partner at ~~The Chase Manhattan Bank, N.A. in New York.~~TigerRisk Partners, an independent reinsurance intermediary, from 2009 – 2010. Mr. ~~Pratt~~Case obtained a ~~bachelor’s degree~~B.A. in Mathematics-Economics from ~~Cornell University and a Master of Management degree from Northwestern~~Wesleyan University. We believe Mr. Pratt’s qualifications to serve on our board of directors include more than 25 years’ experience in insurance company financial statement analysis and assessment and his experience serving as chairman or vice chairman on the boards of directors of other publicly-traded and privately held insurance enterprises.

~~Hassan R. Baqar~~has served as a member of our board of directors since October 2012 and has been a member of the board of directors of Maison Insurance and Maison Managers since October 2012. Since January 2011, Mr. Baqar has served as the Vice President of KAI, which is a subsidiary of KFSI and as Vice President of KFSI since January 2014. By virtue of a management services agreement between 1347 Advisors LLC, a wholly owned subsidiary of KFSI, and United Insurance Management, L.C., he has also served as the Chief Financial Officer of United Insurance Holdings Corp, a publicly-held property and casualty insurance holding company. Before joining KAI, Mr. Baqar served as the Director of Finance of Itasca Financial LLC, an advisory and investment firm specializing in the insurance industry, from April 2008 to December 2009. His previous experience includes positions held at Kemper Insurance Companies, a diversified mutual property-casualty insurance provider, from June 2000 to April 2008, where he most recently served as a senior analyst. Mr. Baqar obtained a bachelor’s degree from Monmouth College and a Master of Business Administration from Northeastern Illinois University. He also holds a Certified Public Accountant designation. We believe Mr. Baqar’s qualifications to serve on our board of directors include his approximately five years of experience as a finance executive in the insurance industry.

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~~Leo Christopher Saenger III~~ has served as a member of our board of directors since November 2013. Since February 2005, Mr. Saenger has served as President of Reliant Star Capital, Inc., which he founded in 2005 to focus on small and middle market private equity transactions. Based in New York, Reliant Star Capital, Inc. has consummated investments in industries ranging from computer peripherals to healthcare products and energy distribution. Prior to starting Reliant Star Capital, Inc., Mr. Saenger was a Partner at One Equity Partners, or OEP, a $5 billion private equity fund of J.P. Morgan, where he led investments in a variety of industries including healthcare, business services, aviation services and specialty insurance and completed dozens of acquisitions and add-on acquisitions for portfolio companies. During his approximately 10 years with OEP, Mr. Saenger took a leave of absence from April 2000 to February 2001 to work directly under Jamie Dimon, who was the newly-appointed CEO of Bank One, prior to its acquisition by JP Morgan Chase. At Bank One, Mr. Saenger led a five person “skunk works” team that worked on a variety of high-level banking strategic initiatives including technology reviews of various departments, competitive benchmarking, acquisition target analysis, and market research. Mr. Saenger started his career with Continental Illinois Venture Corp., the private equity branch of Continental Bank. He currently serves as a member of the board of directors (and on the audit committee) of Aphena Pharma Holdings and as a member of the board of directors of the Scarsdale Golf Club, which is a non-profit organization. Mr. Saenger is also a Trustee on the board of trustees of the St. Pius X Church, which is a non-profit organization. Mr. Saenger obtained a bachelor’s degree in finance and economics from the University of Notre Dame where he graduated cum laude and a Master of Business Administration with a double major in finance and entrepreneurial management from the University of Pennsylvania Wharton School of Business. We believe Mr. Saenger’s qualifications to serve on our board of directors include his approximately 20 years of management and investment experience leading Reliant Star Capital, Inc. and his experience serving on other boards and board committees across a broad range of industries.

~~Larry G. Swets, Jr.~~has served as a member of our board of directors since November 2013. Since July 2010, Mr. Swets has served as the President and Chief Executive Officer of KFSI, our Parent company, and prior to that, served as Executive Vice President of Corporate Development for that entity from January 2010 to July 2010. Before joining KFSI, in 2005, Mr. Swets founded Itasca Financial LLC, an advisory and investment firm specializing in the insurance industry. Prior to his work at Itasca Financial LLC, Mr. Swets served as an insurance company executive and advisor, including the role of Director of Investments and Fixed Income Portfolio Manager for Kemper Insurance. At Kemper Insurance, he also evaluated business units, executed corporate transactions and divestitures, and developed financial projections and analysis for the company during its runoff stage. Mr. Swets began his career in insurance as an intern in the Kemper Scholar program in 1994. Mr. Swets is a member of the board of directors of Kingsway Financial Services Inc. and Atlas Financial Holdings, Inc. He is currently a member of the Young Presidents’ Organization. Mr. Swets previously served as a member of the board of directors of United Insurance Holdings Corp. from 2008 to March 2012 and Risk Enterprise Management Ltd from November 2007 and May 2012. Mr. Swets obtained a bachelor’s degree from Valparaiso University and a Master’s degree in finance from DePaul University. He also holds the Chartered Financial Analyst designation. We believe Mr. Swet’s qualifications to serve on our board of directors includes his more than ten years of executive management and leadership experience in the insurance industry.

There are no family relationships between any of our executive officers and directors. The business address of each of our executive officers and directors is 9100 Bluebonnet Centre Blvd., Suite 502, Baton Rouge, LA 70809.

The Board of Directors Following the Separation

Our business and affairs are managed under the direction of our ~~board~~Board of ~~directors.~~Directors. We currently have ~~five~~seven directors, ~~two~~five of whom are considered independent under the ~~independence requirements~~applicable rules of ~~NASDAQ.~~Nasdaq and the SEC. Our directors ~~will~~ have discretion to increase or decrease the size of the ~~board~~Board of ~~directors.~~Directors. Our ~~board~~Board of ~~directors will be~~Directors is divided into three classes, with ~~staggered terms, which means that directors in one of the classes will be~~each class being elected ~~each for~~to a ~~new~~ three-year term. Class I directors ~~will have an initial term expiring in 2015,~~are serving terms ending at the 2018 annual meeting, Class II directors ~~will have an initial term expiring in 2016~~are serving terms ending at the 2019 annual meeting and Class III directors ~~will have an initial term expiring in 2017.~~are serving terms ending at the 2020 annual meeting.

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~~Upon completion of this offering, Hassan R. Baqar~~Joshua S. Horowitz and Douglas N. Raucy ~~will become~~are Class I directors, ~~Gordon G. Pratt~~Dennis A. Wong and ~~Leo Christopher Saenger III will become~~Lewis M. Johnson are Class II directors and Larry G. Swets, Jr. ~~will become a~~, Scott D. Wollney and D. Kyle Cerminara are Class III ~~director.~~directors.

Director Independence

The Board has determined that five of its members are “independent directors” as defined under the applicable rules of Nasdaq and the SEC. The five independent directors are Messrs. ~~Pratt~~Wollney, Wong, Horowitz, Cerminara and ~~Saenger meet NASDAQ’s listing standards for independence. The NASDAQ~~Johnson. In making its determination of independence, the Board considered questionnaires completed by each director and all ordinary course transactions between the Company and all entities with which the director is employed. Nasdaq’s listing rules require that the ~~board~~Board of Directors be comprised of a majority of independent directors. ~~We intend to rely on the phase-in-periods provided by the NASDAQ rules~~

Board Committees and ~~Rule 10A-3(b)(iv)(A) of the Exchange Act, which provide for phase-in compliance where the issuer~~Committee Member Independence

Our Board has ~~not previously been required to file public company reports under Section 13(a) or 15(d) of the Exchange Act. Accordingly, we plan to have~~an Audit Committee, a ~~board of directors comprised of a majority of independent directors~~Compensation and ~~an audit committee, compensation and management resources committee and nominating and corporate governance committee comprised solely of independent directors within one year of our listing.~~

~~There are no family relationships among any of the individuals who are expected to serve as members of our board of directors and as our executive officers.~~

Board Committees

~~Prior to the consummation of this Offering, our board of directors will have an audit committee, a compensation and management resources committee~~Management Resources Committee, and a ~~nominating~~Nominating and ~~corporate governance committee.~~

Corporate Governance Committee. The table below provides committee assignments for each of the committees of our ~~board of directors:~~Board. Our Board utilizes the Nasdaq rules and independence standards in determining whether its members are independent.

	Audit Committee		Compensation & Management Resources Committee		Nominating & Corporate Governance Committee
D. Kyle Cerminara			X*		X*
~~Name~~Dennis A. Wong			~~Audit Committee~~		~~Compensation and Management Resources Committee~~		~~Nominating and Corporate Governance Committee~~
~~Hassan R. Baqar~~		ü		X*
~~Gordon G. Pratt~~Joshua S. Horowitz	X		ü				X
~~Douglas N. Raucy~~Scott D. Wollney	X
~~Leo Christopher Saenger III~~		ü*		ü		ü
~~Larry G. Swets, Jr.~~				ü*		ü*X

* Indicates committee chair.

The following is a summary of the respective responsibilities of each of the Board’s standing committees. The Board of Directors has approved and adopted a written charter for each of the committees listed, copies of which are posted on the Company’s website at www.1347pih.com under the heading “Governance Documents.”

Audit Committee. The Audit Committee was appointed by the Board of Directors to assist the Board in fulfilling its oversight responsibilities with respect to the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the external auditor’s qualifications, independence, and performance, and the performance of the Company’s internal audit function. The Audit Committee’s primary duties and responsibilities are to:

*●

~~Indicates committee chair.~~Oversee the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company.

● Identify and monitor the management of the principal risks that could impact the financial reporting of the Company.
● Monitor the integrity of the Company’s financial reporting process and system of internal controls regarding financial reporting and accounting appropriateness and compliance.
● Recommend the appointment of and monitor the independence and performance of the Company’s external auditors and the appointed actuary.
● Provide an avenue of communication among the external auditors, the appointed actuary, management, and the Board.
● Review the annual audited and quarterly financial statements with management and the external auditors.
Audit Committee

~~The~~committee members shall meet independence requirements of Rule 10A-3 under the Exchange Act, the independence requirements of the ~~audit committee are Messrs. Baqar, Pratt~~Nasdaq listing standards and ~~Saenger, with Mr. Saenger serving as chair. We are permitted to phase in our compliance with the independent audit committee requirements set forth in NASDAQ~~all other applicable rules and ~~relevant Exchange Act rules as follows: (1) one independent member at the time~~regulations. The Board of ~~listing, (2) a majority of independent members within 90 days of listing and (3) all independent members within one year of listing. Our board of directors~~Directors has determined that ~~Mssrs. Pratt and Saenger are independent director under NASDAQ rules and Exchange Act rules. Although~~ Mr. ~~Pratt may be deemed to beneficially own more than 10% of our voting power upon completion of this Offering as a result of his affiliation with FMG and therefore may be deemed to fall outside~~Wong is the non-exclusive safe harbor provision provided by Exchange Act rules, our board of directors has concluded he is independent for the purposes of the NASDAQ rules and Rule 10A-3 of the Exchange Act. Further, we believe we are in compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002, NASDAQ and Exchange Act rules and regulations and we intend to comply with any and all future requirements to the extent they become applicable to us. We also expect that, within one year of our listing on NASDAQ, Mr. Baqar will have resigned from our audit committee and any additional new director or directors added to the audit committee will be independent under NASDAQ rules and Exchange Act rules. Our board of directors has determined that Messrs. Baqar, Pratt and Saenger each qualify as an “audit committee financial expert” as that term is defined in ~~the federal securities laws and~~SEC regulations.

~~The audit committee will be responsible for reviewing and discussing with management our policies with respect to risk assessment and risk management, as well as monitoring the integrity~~ Each member of the ~~financial statements,~~Audit Committee is independent and satisfies the ~~independent auditors' qualifications, independence and performance,~~applicable requirements for Audit Committee membership under the ~~performance of our internal audit~~

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~~function and compliance by our company with certain legal and regulatory requirements.~~Nasdaq rules. The ~~board of directors and~~Audit Committee held eight meetings during the audit committee will discuss matters relating to risks that arise or may arise. Investors will be able to view our audit committee charter on the corporate governance section of our investor relations website atyear ended December 31, 2016.

~~www.1347pih.com~~.

Compensation and Management Resources Committee

Committee.The ~~members~~primary purpose of the Compensation & Management Resources Committee, or the Compensation Committee, is to assist the Board of Directors in discharging its responsibilities with respect to compensation of the Company’s senior officers and ~~management resources committee are Messrs. Saenger,~~subsidiary presidents and ~~Swets, with Mr. Swets serving as chair. We are permitted~~ to phase in our compliance with the independent compensation committee requirements set forth in NASDAQ rules and relevant Exchange Act rules as follows: (1) one independent member at the time of listing, (2) a majority of independent members within 90 days of listing and (3) all independent members within one year of listing. Our board of directors has determined that Mr., Saenger is an independent director under NASDAQ rules and Exchange Act rules. We expect that, within 90 days of our listing on NASDAQ, Mr. Swets will have resigned from our compensation and management resources committee and any additional new director or directors addedprovide recommendations to the Board in connection with directors’ compensation. The Compensation Committee receives input and recommendations from the Company’s executive officers. Neither the Compensation Committee nor management engaged a compensation consultant for compensation related to the fiscal year ended December 31, 2016. Each Compensation Committee member is independent and ~~management resources committee will be independent~~satisfies the applicable requirements for Compensation Committee membership under ~~NASDAQ rules~~the Nasdaq rules. The Compensation Committee held two meetings during the year ended December 31, 2016.

Nominating and ~~Exchange Act rules.~~

Our compensation and management resources committee will have responsibility for, among other things, all compensation arrangements for executive officers and awards under our equity compensation plans. Investors will be able to view our compensation and management resources committee charter onCorporate Governance Committee. The purpose of the ~~corporate governance section of our investor relations website at~~~~www.1347pih.com~~.

Nominating and Corporate Governance Committee,

~~The~~ or the Nominating Committee, is to identify, evaluate and recommend individuals qualified to become members of the ~~nominating and corporate governance committee are Mssrs. Saenger and Swets,~~Board of Directors, consistent with ~~Mr., Swets serving as chair. NASDAQ requires all~~criteria approved by the Board of Directors, select, or recommend that the Board select the director nominees to stand for election at each annual or special meeting of stockholders of the Company in which directors will be elected or to fill vacancies on the Board, develop and recommend to the Board a set of corporate governance principles applicable to the Company, oversee the annual performance evaluation of the Board and its committees and management, and otherwise take a leadership role in shaping and providing oversight of the corporate governance of the Company, including recommending directors eligible to serve on all committees of the Board. Each Nominating Committee member is independent and satisfies the applicable requirements for Nominating Committee membership under the Nasdaq rules. The Nominating Committee held two meetings during the year ended December 31, 2016.

Although the Nominating Committee has not formulated any specific minimum qualifications that the committee believes must be met by a director-nominee that the committee recommends to the Board, the factors it will take into account will include judgement, skill, diversity, experiences with businesses and other organizations of comparable size and scope, the interplay of the candidate’s experience with the experience of other directors, and the extent to which the candidate would be a desirable addition to the Board of Directors and any committees of the Board. Each of the Company’s current directors was recommended by independent members of the Board of Directors.

The Nominating Committee will consider recommendations for directorships submitted by stockholders. Any such director nominee recommendations must be addressed to the Secretary of the Company, 1511 N. Westshore Blvd., Suite 870, Tampa, FL 33606, and include appropriate biographical information concerning each proposed nominee. The secretary will forward recommendations to the Nominating Committee and those candidates will be given the same consideration as all other candidates. Each recommendation should set forth the candidate’s name, age, business address, business telephone number, residence address, and principal occupation or employment as well the submitting stockholder’s name, address and telephone number and number of shares held. The committee may require the recommended candidate to furnish additional information.

Board Leadership Structure and Risk Oversight

Our Board of Directors does not have a policy on whether the same person should serve as both the Chief Executive Officer and the Chairman of the Board or, if the roles are separate, whether the Chairman should be selected from the non-employee directors or ~~recommended~~should be an employee. Our Board believes that it should have the flexibility to periodically determine the leadership structure that it believes is best for ~~selection~~the Company. Currently, the positions of Chairman of the Board and Chief Executive Officer are separated. The Chief Executive Officer currently serves as the only member of management on the Board.

The Chairman of the Board typically presides at all meetings of the Board and is elected to serve by the directors. The Chairman’s role also includes providing feedback on the direction and performance of the Company, setting the agenda of meetings of the Board of Directors and leading the Board of Directors in anticipating and responding to changes in our business.

Our Board is actively involved in oversight of risks that could affect the Company. This oversight is conducted primarily through committees of the Board as disclosed in the descriptions of each of the committees herein and in the charters of each of the committees, but the full Board has retained responsibility for general oversight of risks. Our Board satisfies this responsibility through full reports by each committee chair regarding the applicable committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within the Company.

Code of Ethics

We have adopted a code of ethics applicable to all employees and directors of the Company. Our code of ethics has been posted on our corporate website: www.1347pih.com under the heading “Governance Documents.”

Compensation of Executive Officers

With respect to executive compensation, the Compensation Committee’s primary goal is to retain and motivate highly skilled executives aligning their pay with the Company’s performance and stockholder returns. Our compensation consists primarily of five components: (i) base salary, (ii) an annual cash bonus, (iii) equity-based incentive awards, (iv) retirement benefits in the form of Company paid matching and profit sharing contributions to the Company’s 401(k) retirement plan, and (v) premiums paid by the Company on the behalf of our employees for health, dental, life and other ancillary insurance coverage.

The following table summarizes the compensation for our named executive officers for the years shown. The Company does not have any employment agreements with its employees.

SUMMARY COMPENSATION TABLE

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)⁽¹⁾⁽²⁾		Option Awards ($)⁽²⁾		All Other Compensation ($)		Total ($)
Douglas N. Raucy	2016		300,000		75,000		—		—		36,591		411,591
President and Chief Executive Officer	2015		300,000		120,000		16,808		12,866		37,102		473,910
John S. Hill	2016		190,000		35,000		—		—		27,583		252,583
VP & Chief Financial Officer	2015		190,000		45,000		5,378		—		35,889		276,267
Dean E. Stroud	2016		190,000		35,000		—		—		11,670		236,670
VP & Chief Underwriting Officer	2015		190,000		45,000		5,378		—		11,332		251,710
Robert G. Gantley⁽³⁾	2016		51,238		—		—		—		34,107		85,345
Vice President - Claims	2015		175,000		—		—		—		32,552		207,552

	(1)	Stock awards consist of 20,500 restricted stock units, or RSUs, granted to our executive officers on May 29, 2015. Each RSU granted entitles the grantee to one share of the Company’s common stock upon the vesting date of the RSU. The RSUs vest as follows: (i) 50% upon the date that the closing price of the Company’s common stock equals or exceeds $10.00 per share; and (ii) 50% upon the date that the closing price of the Company’s common stock equals or exceeds $12.00 per share. Prior to the vesting of the RSUs, the grantee will not be entitled to any dividends declared on the Company’s common stock. The RSUs do not expire; however, should the grantee discontinue employment with the Company for any reason other than death or disability, all unvested RSUs will be deemed forfeited on the date employment is discontinued.
	(2)	The aggregate grant date fair value for stock and option awards has been presented in the table above in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. For disclosure regarding the assumptions made in the valuation of these awards, refer to notes 2 and 11 to the Company’s consolidated financial statements for the year ended December 31, 2016 on Form 10-K filed with the Securities and Exchange Commission on March 16, 2017.
	(3)	Mr. Gantley resigned from his positions with the Company effective April 2016. Other compensation for Mr. Gantley includes severance payments in the amount of $29,168 in addition to $4,939 in premiums paid by the Company on behalf of Mr. Gantley for health, dental, life and other ancillary insurance coverage.

The following table shows the number of outstanding equity awards that are held by our ~~board~~named executive officers as of September 30, 2017. The Company’s named executive officers did not exercise any stock options during the year ended December 31, 2016.

		OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
		Option awards						Stock awards
Name	Grant Date	Number of securities underlying unexercised options (#) exercisable	Number of securities underlying unexercised options (#) unexercisable		Option Exercise Price ($)		Option Expiration Date	Number of shares or units of stock that have not vested (#)	Market value of shares or units of stock that have not vested ($)
	03/31/2014⁽¹⁾	39,192		26,129		8.00	03/31/2019	—		—
Douglas N. Raucy	04/04/2014⁽¹⁾	3,398		2,265		8.69	04/04/2019	—		—
	05/29/2015⁽²⁾	—		—		—		12,500		97,500
	03/31/2014⁽¹⁾	6,467		4,311		8.00	03/31/2019	—		—
John S. Hill	04/04/2014⁽¹⁾	561		374		8.69	04/04/2019	—		—
	05/29/2015⁽²⁾	—		—		—		4,000		31,200
	03/31/2014⁽¹⁾	13,129		8,753		8.00	03/31/2019	—		—
Dean E. Stroud	04/04/2014⁽¹⁾	1,138		759		8.69	04/04/2019	—		—
	05/29/2015⁽²⁾	—		—		—		4,000		31,200

	(1)	The March 31, 2014 and April 4, 2014 option grants to our named executive officers vest as follows: (i) 20% on date of grant, and (ii) 20% on each of the next four anniversaries of grant date.
	(2)	Stock awards consist of 20,500 RSUs granted to our executive officers on May 29, 2015. Each RSU granted entitles the grantee to one share of the Company’s common stock upon the vesting date of the RSU. The RSUs vest as follows: (i) 50% upon the date that the closing price of the Company’s common stock equals or exceeds $10.00 per share; and (ii) 50% upon the date that the closing price of the Company’s common stock equals or exceeds $12.00 per share. Prior to the vesting of the RSUs, the grantee will not be entitled to any dividends declared on the Company’s common stock. The RSUs do not expire; however, should the grantee discontinue employment with the Company for any reason other than death or disability, all unvested RSUs will be deemed forfeited on the date employment is discontinued.

Biographical information regarding Mr. Raucy is above under “—Director Biographies” and biographical information regarding Messrs. Hill and Stroud is above under “—Executive Officer Biographies.”

Appointment of New Chief Operating Officer

In connection with our appointment of Dan Case as our new Chief Operating Officer effective May 23, 2017, we entered into an offer letter with Mr. Case, which provides for an annual base salary of $275,000 and a sign-on bonus of $30,000 following thirty days of employment with the Company. Mr. Case will also be eligible for an annual bonus, subject to the determination of the Board of Directors. In addition, the offer letter provides Mr. Case with the opportunity to purchase up to 68,027 shares of the Company’s common stock on the open market or in direct purchases from the Company during his first six months of employment with the Company, which purchase period was extended by the Board of Directors to June 15, 2018. At the end of the purchase period, the Company will match any such shares purchased by Mr. Case with a grant of restricted stock units, or RSUs, of the Company equal to two RSUs for each share purchased by Mr. Case. The RSUs will vest 20% per year over five years following the date granted, subject to continued employment through such vesting date. The aggregate maximum number of shares of the Company’s common stock that may be acquired pursuant to this arrangement, including through open market purchases, purchases from the Company and grants from the Company, is 204,081. Any shares purchased directly from the Company will be made at a price equal to the closing price of the Company’s common stock on the prior trading day, but at a price not less than the Company’s latest quarter end published book value per share. This arrangement was entered into outside of the Company’s existing stockholder approved equity plan (the Amended and Restated 2014 Equity Incentive Plan), and was approved by the Compensation Committee of the Board of Directors as an inducement material to Mr. Case entering into employment with the Company in reliance on Nasdaq listing rule 5635(c)(4). As of January 4, 2018, Mr. Case had purchased 56,276 shares of the Company’s common stock pursuant to this arrangement, 28,000 of which shares were purchased directly from the Company at a purchase price of $8.00 per share on September 14, 2017.

Director Compensation

The Board determines the form and amount of non-employee director compensation after its review of recommendations made by the Compensation Committee. Non-employee directors ~~by a committee composed only of independent directors or, if no~~receive such ~~committee exists,~~compensation as determined by ~~independent directors constituting~~ a majority of the ~~independent directors of our board of directors in a vote in which only the independent directors participate.~~

The nominating and corporate governance committee will identify individuals qualified to become board members and recommend to our board of directors the director nominees for each annual meeting of stockholders. It also will review the qualifications and independenceBoard. Directors who are employees of the ~~members~~Company do not receive compensation for their service as directors.

During the year ended December 31, 2016, the Company compensated non-employee directors with cash payments that include a yearly fee of ~~our board of directors and its various committees on a regular basis and make any recommendations the committee members may deem appropriate from time~~$50,000 (paid in four equal quarterly installments) to time concerning any changes in the composition of our board of directors and its committees. The nominating and governance committee also will recommend to our board of directors the corporate governance guidelines and standards regarding the independence of outside directors applicable to our company and review such guidelines and standards and the provisions of the nominating and governance committee charter on a regular basis to confirm that such guidelines, standards and charter remain consistent with sound corporate governance practices and with any legal or regulatory requirements, if applicable. Investors will be able to view our nominating and corporate governance committee charter on the corporate governance section of our investor relations website at~~www.1347pih.com~~.

Board Leadership Structure and the Board’s Role in Risk Oversight

Our management is primarily responsible for managing risk and informing the board of directors of the material risks confronting our company. The board of directors has oversight responsibility of the processes established to monitor and manage such risks. The board of directors believes that such oversight function is the responsibility of the entire board of directors through frequent reports and discussions at regularly scheduled meetings of the board of directors. In addition, the board of directors has delegated specific risk management oversight responsibility to the audit committee. In particular, the audit committee oversees the management of risks related to accounting, auditing and financial reporting and maintaining effective internal controls for financial reporting. The independent members of the board of directors oversee risk management related to our corporate governance practices and our executive compensation plans and arrangements. These specific risk categories and our risk management practices are regularly reviewed by the entire board of directors in the ordinary course of regular meetings of the board of directors.

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Code of Business Conduct and Ethics

Effective upon completion of this Offering, our board of directors will adopt a written Code of Business Conduct and Ethics applicable to our directors, chief executive officer, chief financial officer and all other officers and employees of our company and our subsidiaries. Copies of the Code of Business Conduct and Ethics will be available without charge on the investor relations portion of our website upon completion of this Offering.

Compensation and Management Resources Committee Interlocks and Insider Participation

~~None of the members of our compensation and management resources committee is an officer or employee of our company. Mr. Swets currently serves as a~~each member of the ~~board~~Board serving at each payment date, as well as an additional $25,000 paid to the Chairman of ~~directors~~the Board and an additional $15,000 paid to the Chairman of ~~KFSI.~~the Audit Committee.

~~For 2013, the company’s Named Executive Officers consist of our Chief Executive Officer, our Chief Financial Officer and our Chief Underwriting Officer.~~

~~The following individuals, holding the respective positions set forth opposite their names, are the Named Executive Officers for 2013:~~


~~Name~~		~~Title~~
~~Douglas N. Raucy~~		~~President, Chief Executive Officer and Director~~
~~John Hill~~		~~Chief Financial Officer~~
~~Dean Stroud~~		~~Vice President of Operations and Chief Underwriting Officer of Maison Insurance~~

2013 Summary Compensation Table

The following table ~~provides~~sets forth information ~~regarding the~~with respect to compensation earned ~~during~~by each of our non-employee directors for the ~~last two completed fiscal years by the Named Executive Officers.~~year ended December 31, 2016.

Name and
Principal Position Year⁽⁴⁾ Salary
($) Bonus
($) Stock
Awards
($) Option
Awards
($) Non-Equity
Incentive Plan
Compensation Nonqualified
Deferred
Compensation
Earnings
($) All Other
Compensation⁽³⁾
($) Total
($)
Douglas N. RaucyPresident, CEO
and Director 2013 280,000 50,000 ⁽¹⁾ — — — — 3,733 333,733
2012 71,077 20,000 ⁽¹⁾ — — — — — 91,077
John Hill
Chief Financial
Officer 2013 71,410 ⁽²⁾ — — — — — — 71,410
2012 — — — — — — — —
Dean Stroud
Vice President of
Operations and Chief Underwriting
Officer 2013 175,000 — — — — — 2,479 177,479
2012 37,692 — — — — — — 37,692

Non-Employee Director	Fees Earned or Paid in Cash ($)		Total ($)⁽¹⁾
Gordon G. Pratt⁽²⁾		75,000		75,000
Leo Christopher Saenger, III⁽³⁾		50,000		50,000
Larry G. Swets, Jr.⁽⁴⁾		50,000		50,000
Scott D. Wollney		50,000		50,000
Joshua S. Horowitz		50,000		50,000
Dennis A. Wong⁽⁵⁾		65,000		65,000
D. Kyle Cerminara⁽⁶⁾		—		—
Lewis M. Johnson⁽⁷⁾		—		—

~~Notes:~~

~~(1)~~1.

In addition to their director compensation, non-employee directors are reimbursed for travel and other reasonable out-of-pocket expenses related to their attendance at board or committee meetings. These ~~amounts represents cash bonuses~~expenses have not been included in the table above.

As Mr. Pratt served as the Chairman of our Board for the entirety of 2016, his fees include $50,000 paid to each member of the Board as well as an additional $25,000 paid for his additional responsibilities as Chairman. Mr. ~~Raucy as part~~Pratt retired from our Board of ~~his offer to join us.~~Directors on March 5, 2017.

~~(2)~~3.

Mr. ~~Hill joined us~~Saenger resigned from our Board of Directors on ~~July 15, 2013.~~December 27, 2016.

~~(3)~~4.

~~Amounts reported in this column include contributions to~~Mr. Swets was appointed as Chairman of our ~~401(k) retirement plan.~~Board of Directors on March 5, 2017.

~~(4)~~5.

~~Amounts are~~Mr. Wong’s fees include $50,000 for ~~full calendar year (12 months) through December 31, 2013.~~serving on the Board as well as $15,000 for serving as Chairman of the Audit Committee.

As Mr. Cerminara was not appointed to the Board until December 27, 2016, he did not receive any compensation for his directorship in 2016.

As Mr. Johnson was not appointed to the Board until April 3, 2017, he did not receive any compensation for his directorship in 2016.

Share Matching Arrangements

On May 31, 2017, the Compensation Committee approved a share matching arrangement for certain purchases made by Douglas N. Raucy, ~~is also eligible for an annual cash bonus of up to 150% of his annual salary, payable solely at the discretion of our board of directors.~~John S. Hill and Dean E. Stroud. Messrs. Raucy, Hill and Stroud ~~are also eligible for an annual cash bonus of~~had the opportunity to purchase up to ~~75%~~20,000, 20,000, and 10,000 shares of ~~their annual salary, payable solely~~the Company’s common stock, respectively, in each case through the open market, independently and without assistance from the Company, during the six months beginning on May 31, 2017 and ending on November 30, 2017 and, at the ~~discretion of our board of directors.~~

Narrative Disclosure Regarding Post-Termination Arrangements

~~We intend to adopt a severance plan for the payment of certain benefits to certain classes of eligible employees~~end of the ~~company~~six-month purchase period, the Company agreed to match any such shares purchased by them with a grant of restricted stock units, or RSUs, of the Company equal to two RSUs for each share purchased by them. Accordingly, on December 15, 2017, the Committee granted 40,000, 32,000 and ~~its subsidiaries, including executive~~3,000 RSUs to Messrs. Raucy, Hill and Stroud, respectively.

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~~applicable board of directors. Benefits~~ will be ~~paid~~required to maintain ownership of the shares purchased through the full five-year vesting period, except as set forth above. For additional information on the vesting terms of the RSUs, see “—Potential Payments Upon Termination or Change in Control” below.

In addition, on May 31, 2017, the Compensation Committee approved a share matching arrangement for certain purchases made by the Company’s non-employee directors, as described below. Each current non-employee director had the opportunity, independently and without assistance from the Company, to purchase up to 3,333 shares of the Company’s common stock, through the open market and during the six months beginning on May 31, 2017 and ending on November 30, 2017, and at the end of the six-month purchase period, the Company agreed to match any such shares purchased by the director with a grant of RSUs of the Company equal to two RSUs for each share purchased them. Accordingly, on December 15, 2017, the Committee granted 6,666 RSUs to each of directors Swets, Cerminara, Horowitz, Johnson and Wong.

Each RSU will entitle the grantee to one share of the Company’s common stock upon the vesting date of the RSU, which shall vest 20% per year over a period of five years following the date granted, subject to each director’s continued service on the Board, provided that if a director makes himself available and consents to be nominated by the Company for continued service but is not nominated by the Board for election by the shareholders, other than for good reason as determined by the Board in its discretion, then such director’s RSUs shall vest in full as of his last date of service as a director with the Company. Directors will be required to maintain ownership of the shares purchased through the full five-year vesting period, except as set forth above. For additional information on the vesting terms of the RSUs, see “—Potential Payments Upon Termination or Change in Control” below.

The RSUs granted to the officers and directors pursuant to the share matching arrangements were granted under ~~this policy following~~the Company’s Amended and Restated 2014 Equity Incentive Plan.

Potential Payments Upon Termination or Change in Control

Our Amended and Restated 2014 Equity Incentive Plan (the “Plan”), which was approved by our stockholders on May 29, 2015, contains certain provisions concerning the vesting and termination of equity awards granted under the Plan upon a termination of employment ~~other than for “cause” as defined~~or upon a change in control. The Company’s restricted stock unit agreements entered into under the ~~severance policy in connection with a reduction in work force.~~

~~Mr. Raucy, as our President~~Plan also contain provisions concerning the vesting and Chief Executive Officer, receives severance benefits pursuant to the terms of his severance agreement. Under the terms of Mr. Raucy’s severance agreement, he is eligible to receive twelve months of base salary for a termination of ~~employment by us other than~~the RSUs granted thereunder.

Amended and Restated 2014 Equity Incentive Plan

Stock options granted under the Plan (except for ~~“cause,” or by Mr. Raucy for “good reason” (each as defined in the severance agreement).~~

Director Compensation

~~Our director compensation program is designed~~stock options granted to (i) attract and retain the most qualified people to serve on the board of directors and its committees; and (ii) provide appropriate compensation for the risks and responsibilities of being an effective director. Only non-employee directors of the board of directors are remunerated for serving as directors of the company. Under the non-employee director compensation program, non-employee directors will receive fees of $50,000 annually. The Chair of our audit committee receives an additional $15,000 fee annually. The Chairman of our board receives an additional $25,000 fee annually.

Securities Authorized For Issuance Under Equity Incentive Plan

We have created an equity incentive plan for directors, officers and certain key management employees whereby stock options equal to five percent (5%) of the shares of common stock outstanding at the close of the Offering may be available for award. Such stock options will have a five-year expiration with a strike price equal to the Offering price of our shares of common stock. The options available for grant to the directors shall not exceed two percent, and the remainder — three percent or more — will be available for grant to officers and key management employees. The options granted to employees willCompany) generally vest in five equal installments, with the first ~~such~~ installment vesting ~~upon~~on the grant date of ~~grant. The options will vest pro-rata should~~ the ~~employee leave~~option. If an optionee’s employment is terminated voluntarily, without cause or ~~leave employment~~ due to a ~~disability. The employee~~disability, all unvested stock options will ~~fully~~vest pro-rata. Upon the death of an optionee, all unvested options will vest in full. If an optionee’s employment is terminated for cause, all outstanding options will terminate immediately.

In addition, the ~~case of death. If~~Plan provides that in the ~~employee leaves~~event an optionee’s employment is terminated voluntarily, without cause, due to a disability, or ~~in case of~~due to the optionee’s death, ~~the stock~~then any outstanding options will expire ~~ninety~~90 days from the termination date.

Under the Plan, “cause” and “disability” are defined as follows:

“Cause” generally means a participant’s involuntary separation from employment for any of the following reasons: (i) an intentional act of fraud, embezzlement, theft or any other illegal or unethical act that the Company determines has materially injured or is highly likely to materially injure the Company, or any other terminable offense; (ii) intentional damage to the Company’s assets; (iii) conviction of (or plea of nolo contendere to) any felony or other crime involving moral turpitude; (iv) improper, willful and material disclosure or use of the Company’s confidential information or other willful material breach of the participant’s duty of loyalty to the Company; (v) a willful, material violation of the Company’s policies and procedures or a material violation of the Company’s code of conduct that the Company determines has materially injured or is highly likely to materially injure the Company; or (vi) the participant’s willful failure or refusal to follow the lawful and good faith directions of the Company.

“Disability” means the inability of a participant to continue employment with the Company or a subsidiary of the Company due to a long-term disability for which benefits are claimed or received under an insurance plan established by the Company or a subsidiary of the Company.

Under the Plan, upon a change in control of the Company, the Company’s board of directors (as constituted immediately prior to such change in control) may, in its discretion, (i) require that shares of the corporation resulting from such change in control, or a parent corporation thereof, be substituted for some or all of the common shares subject to an outstanding award granted under the Plan, with an appropriate and equitable adjustment as shall be determined by the board, and/or (ii) require outstanding awards granted under the Plan, in whole or in part, to be surrendered to the Company by the holder, and to be immediately cancelled by the Company, and to provide for the holder to receive: (1) a cash payment in an amount equal to the aggregate number of common shares then subject to the portion of any stock option surrendered multiplied by the excess, if any, of the fair market value (as defined under the Plan) of a common share as of the date of the change in control, over the exercise price per common share subject to such stock option; (2) shares of capital stock of the corporation resulting from or succeeding to the business of the Company pursuant to such change in control, or a parent corporation thereof, having a fair market value not less than the amount determined under clause (1) above; or (3) a combination of the payment of cash pursuant to clause (1) above and the issuance of shares pursuant to clause (2) above.

A “change in control” under the Plan generally means (i) the acquisition by any individual, entity or group of beneficial ownership of 50% or more of the then outstanding common shares or the combined voting power of the then outstanding securities of the Company, with certain exceptions; (ii) the consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company, unless (A) the Company’s current beneficial owners retain more than 50% of the Company’s outstanding shares and combined voting power following such transaction, (B) no new individual entity or group will beneficially own 50% or more of the Company’s outstanding shares or combined voting power following such transaction, or (C) current members of the board will constitute at least a majority of the board following such transaction; or (iii) the consummation of a plan of complete liquidation or dissolution of the Company.

The Compensation Committee has the discretion to determine the form, amount and timing of each award granted under the Plan and all other terms and conditions of the award, including, without limitation, the form of the agreement evidencing the award. As such, future awards granted under the Plan may be subject to additional terms providing for accelerated vesting, pay outs or termination of the award upon a termination of employment or a change in control of the Company.

Restricted Stock Unit Agreements

The Company’s restricted stock unit agreements entered into with executive officers and non-employee directors under the Plan generally provide that the RSUs granted thereunder remain restricted until the applicable vesting date set forth in the agreement. In the event the grantee’s employment with the Company or service on the Company’s board of directors, as applicable, is terminated due to the grantee’s death or disability (as defined under the Plan) prior to one or more of the vesting dates, all unvested RSUs will vest as of the date of death or the date the grantee is determined to be experiencing a disability. In addition, in the event the grantee’s employment ~~ends. Options awarded to directors will fully vest immediately~~with the Company or service on the ~~grant date.~~Company’s board of directors, as applicable, is terminated by the Company or by the grantee for any reason other than death or disability (as defined under the Plan), all unvested RSUs granted under the agreement will be forfeited as of the date of termination.

~~Stock options equal~~

In addition to ~~an additional five percent (5%)~~the general provisions described above, the restricted stock unit agreements entered into by the Company in connection with the share matching arrangements for Messrs. Raucy, Hill and Stroud and the Company’s non-employee directors (other than Mr. Wollney), as described above under “ —Share Matching Arrangements,” contain special acceleration and termination provisions. Specifically, the agreements for Messrs. Raucy, Hill and Stroud provide that the vesting of the RSUs thereunder is subject to the continued employment of the executive through the applicable vesting date, with the ability of the board, in its discretion, to accelerate vesting in the event of the executive’s early retirement, and provided that the executive maintains ownership of the shares ~~of common stock outstanding at~~purchased through the ~~close~~full five-year vesting period. The agreements for the non-employee directors provide that the vesting of the ~~Offering~~RSUs granted thereunder is subject to the director’s continued service on the board through the applicable vesting date, provided that if a director makes himself available and consents to be nominated by the Company for continued service but is not nominated by the Board for election by the shareholders, other than for good reason as determined by the Board in its discretion, then such director’s RSUs will ~~be available for future grants. The board has discretion to set~~vest in full as of his last date of service as a director with the terms of these additional options, provided, however, that the strike price of the options will be at or above the then market price of our shares of common stock, and in no case less than our tangible book value per share.Company.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Transactions
It is the responsibility of the Audit Committee to review and approve, ratify or disapprove proposed transactions or courses of dealings with Related Persons

~~After the completion of this Offering, transactions between us and our directors,~~respect to which executive officers ~~and significant stockholders will be approved by our audit committee, which will be composed of independent~~or directors or members of ~~our board of directors. Our audit committee charter authorizes the audit committee~~their immediate families have an interest (including all transactions required to ~~hire financial advisors and other professionals to assist the committee in evaluating and approving any transaction between us and any related party.~~

Indemnification Agreements

~~We plan to enter into indemnification agreements with each of our directors and executive officers, the form of which is attached as an exhibit~~be disclosed pursuant to the ~~Registration Statement~~SEC’s related person disclosure requirements). In accordance with the Audit Committee’s Charter, the Audit Committee will annually review a summary of ~~which this prospectus is a part. These agreements provide that we will, among other things, indemnify~~directors’ and ~~advance expenses to our directors~~officers’ related party transactions and ~~officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred~~potential conflicts of interest.

Investment by any such person in any action or proceeding, including any action by us arising out of such person’s services as our director or officer, or any other company or enterprise to which the person provides services at our request. We believe that these agreements are necessary to attract and retain qualified persons as directors and officers.Fund Management Group LLC

Investment Prior to the Offering

On January 23, 2014, Fund Management Group LLC, or FMG, an entity of which our former Chairman of the ~~board,~~Board, Gordon G. Pratt, is ~~Managing Member~~a managing member and controlling equity holder, invested $2 million in the ~~company~~Company in exchange for 80,000 ~~Preferred Shares~~convertible preferred shares of the ~~company~~Company. We used the proceeds from this investment to settle balances due to our then-immediate parent, KAI. The preferred shares were issued in a private placement exempt from registration pursuant to ~~the terms and conditions~~Section 4(a)(2) of the ~~Preferred Shares Purchase Agreement, which is filed as an exhibit to the Registration Statement of which this prospectus forms a part.~~ Securities Act.

The ~~Preferred Shares are~~preferred shares were non-voting, ~~and rank~~ranked senior to all classes of our capital stock ~~of the company. The Preferred Shares will~~and did not pay any dividends. ~~When converted,~~On March 31, 2014, the ~~Preferred Shares will convert into i) 312,500 shares of common stock of the company, which is equal to $2 million~~effective date of our ~~common stock at 80% of~~initial public offering, the offering price per share of our common stock issued in this Offering (which we have assumed to be $8.00 per share, the estimated price set forth on the cover page of this prospectus), subject to certain adjustments, and ii) one warrant per share of common stock issued as a result of the conversion. The conversionpreferred shares were converted into (i) 312,500 shares of our common stock and (ii) warrants ~~will be deemed~~ to ~~have occured immediately prior~~purchase up to ~~the closing~~312,500 shares of ~~this Offering.~~our common stock. Each warrant ~~will entitle~~issued to FMG entitles the holder to purchase one share of ~~our~~ common stock at a price equal to ~~120% of the offering price per share of our common stock issued in this Offering,~~$9.60, subject to certain adjustments under ~~the Warrant Agreement.~~a warrant agreement. The warrants ~~will expire five years from the~~have an expiry date of ~~issuance~~March 31, 2019 and ~~will be immediately exercisable after issuance in accordance with the exercise procedure under the Warrant Agreement.~~vested 100% upon issuance. The warrants ~~will~~may be redeemable by usthe Company at a price of $0.01 per warrant during any period in which the closing price of ~~our~~the Company’s common shares ~~of common stock~~ is at or above ~~175% of the price of shares of our common stock issued in this Offering~~$14.00 per share for 20 consecutive trading days. The warrant holder ~~will be~~is entitled to a ~~30 day~~30-day notice prior to the date of such redemption. ~~If the Offering is not completed within one year from the date of issuance, we will redeem the Preferred Shares at a value equal to original investment plus a 12% premium.~~ The common stock ~~issuable~~issued to FMG ~~upon conversion of the Preferred Shares will have~~has piggyback registration rights for future registrations of the ~~company’s~~Company’s common stock under the Securities Act (other than certain excluded registrations) ~~and, upon the two-year anniversary of the Offering,~~. FMG ~~will~~ also ~~have~~had a one-time demand registration right ~~on such~~for the common stock, subject to certain ~~restrictions. If all~~restrictions, on the Preferred Shares are converted and all the warrants are exercised immediately following the Offering, FMG will own approximately 18.8% (or 17.6% if the underwriters exercise their over-allotment in full)two-year anniversary of our initial public offering.

As of the date of this prospectus, Mr. Pratt beneficially owns 10.2% of the outstanding shares of our common stock, immediately after the Offering. We used the proceeds from this investment to settle intercompany payables to our immediate parent, KAI. This intercompany payable amount originates from payments made by KAI on our behalf to various third-party vendors and alsowhich includes ~~approximately $68,000 related to accounting services provided by KAI to us. For a complete description of the terms of this investment and the rights and preferences of the Preferred Shares (and~~ the common stock and warrants underlying such Preferred Shares), please refer to the Preferred Shares Purchase Agreement, the Warrant Agreement and the Certificate of Designation of Preferred Shares, each of which is filed as an exhibit to the Registration Statement of which this prospectus forms a part.

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Investment by Management

~~On February 28, 2014, we entered into a stock option agreement granting Mr. Raucy the option~~ to purchase ~~at the Offering price (which we have assumed~~common stock held by FMG as well as options to ~~be $8.00 per share, the estimated price set forth on the cover page of this prospectus),~~purchase 17,745 shares of our common stock ~~up to $264,269 in value,~~ which if exercised in full, would result in the issuance of 33,033 shares of our common stock (the “Option Shares”) upon the exercise of the stock option at the asssumed Offering price. Concurrently with the exercise of the stock option, we will grant an additional 33,033 shares of our common stock (the “Matched Shares”)were granted to Mr. ~~Raucy as a one-for-one match against the Option Shares. The Option Shares~~Pratt for his service on our Board of Directors.

Transactions with KFSI and ~~Matched Shares will be restricted and the Matched Shares will vest 100% upon the fifth anniversary of this Offering, subject~~its Affiliates

Prior to ~~Mr. Raucy’s continued service as the President and Chief Executive Officer of~~our initial public offering on March 31, 2014, the Company until such vesting date. Any sales of Option Shares prior to vesting will result in pro-rata forfeiture of Matched Shares, and termination of Mr. Raucy’s employment before the vesting date of the Matched Shares will result in total forfeiture of the Matched Shares. For a complete description of the terms of this transaction, please refer to the Option Agreement between the Company and Mr. Raucy, which is filed as an exhibit to the Registration Statement of which this prospectus forms a part.

Our Relationship with KFSI

~~Prior to this Offering we have been~~was a wholly-owned subsidiary of ~~KFSI.~~

~~We were incorporated by~~Kingsway America Inc., or KAI, which is a wholly-owned subsidiary of Kingsway Financial Services Inc., or KFSI, ~~to create~~ a ~~new homeowners’ insurance company. Prior to this Offering, KFSI has contributed approximately $9 million~~publicly owned holding company based in ~~capital, to our company. During and after this Offering we will continue to pursue our business of underwriting homeowners’ insurance.~~

~~Immediately following this Offering and the conversion~~Toronto, Ontario, Canada. As of the ~~Preferred Shares as described herein,~~date of this prospectus, KFSI ~~will~~and its affiliates beneficially own ~~approximately 33.3% (or 30.8% if the underwriters exercise over-allotment option in full)~~8.3% of our outstanding shares of common stock ~~but will no longer be responsible~~and warrants and performance shares to ~~fund our operations following the closing of this Offering. KFSI is expected to be one of the largest stockholders~~acquire an additional 23.9% of our ~~company after the Offering.~~

~~Two~~outstanding shares of ~~our directors,~~common stock. Larry G. Swets, Jr. ~~and Hassan R. Baqar, are currently executive officers~~, the Chairman of ~~KFSI. Mr. Swets~~our Board of Directors, is the Chief Executive Officer of ~~KFSI and Mr. Baqar is a Vice President~~KFSI.

Management Services Agreement; Repurchase of ~~KFSI.~~Series B Preferred Shares

Registration Rights Agreement

On February ~~28,~~11, 2014, we entered into a Management Services Agreement, or MSA, with 1347 Advisors, a wholly-owned subsidiary of KFSI, which provided for certain services that we received from 1347 Advisors, including forecasting, analysis of capital structure and reinsurance programs, consultation in future restructuring or capital raising transactions, and consultation in corporate development initiatives. For the services performed, we paid 1347 Advisors a monthly fee equal to 1% of our gross written premiums, as defined in the MSA. On February 24, 2015, we entered into an Agreement to Buyout and Release with 1347 Advisors to terminate the MSA, or the Buyout Agreement. In connection with the Buyout Agreement and in consideration for 1347 Advisors agreeing to voluntarily terminate the MSA, we: (i) paid 1347 Advisors $2 million in cash, (ii) issued to 1347 Advisors 120,000 shares of our Series B preferred stock having a liquidation amount per share equal to $25.00, (iii) issued to 1347 Advisors a seven-year warrant to purchase up to 1,500,000 shares of our common stock at an exercise price of $15.00 per share, and (iv) entered into a Performance Shares Grant Agreement dated February 24, 2015 with 1347 Advisors, whereby 1347 Advisors is entitled to receive 100,000 shares of our common stock from us if at any time the last sales price of our common stock equals or exceeds $10.00 per share for any 20 trading days within any 30-trading day period. The Series B Preferred Shares and the warrant were issued in a private placement exempt from registration ~~rights agreement~~pursuant to Section 4(a)(2) of the Securities Act. Subsequent to the issuance of the Series B Preferred Shares, 1347 Advisors transferred 60,000 of its 120,000 Series B Preferred Shares to IWS Acquisition Corporation, an affiliate of KSFI.

On January 2, 2018, we entered into a Stock Purchase Agreement with ~~KAI,~~1347 Advisors and IWS Acquisition Corporation, pursuant to which we ~~have~~repurchased 60,000 Series B Preferred Shares from 1347 Advisors for an aggregate purchase price of $1,740,000, representing (i) $1,500,000, comprised of $25 per share of Series B Preferred Shares, and (ii) declared and unpaid dividends in respect of the dividend payment due on February 23, 2018 amounting to $240,000 in the aggregate. We also agreed ~~that, following~~to repurchase pursuant to the stock purchase agreement 60,000 Series B Preferred Shares from IWS Acquisition Corporation, upon completion of this ~~Offering, subject~~offering, for an aggregate purchase price of $1,500,000, comprised of $25 per share of Series B Preferred Shares, without any dividend or interest payment. The foregoing transactions were approved by a special committee of the Board of Directors of the Company consisting solely of independent directors.

In connection with the Stock Purchase Agreement, the Performance Shares Grant Agreement, dated February 24, 2015, between the Company and 1347 Advisors was terminated. As the Milestone Event was never achieved, no shares of common stock were issued to 1347 Advisors under the ~~180-day lock-up period provided for~~agreement. We paid $300,000 to 1347 Advisors in consideration of its agreement to voluntarily terminate the agreement.

The remaining outstanding Series B Preferred Shares have a par value of $25.00 per share and pay annual cumulative dividends at a rate of 8% per annum. In the event the Company does not consummate the repurchase of the remaining outstanding Series B Preferred Shares held by IWS Acquisition Corporation, cumulative dividends shall accrue, whether or not declared by the ~~underwriting agreement~~Board and irrespective of whether there were funds legally available for the payment of dividends. Accrued dividends are paid in cash only when, as and if declared by the Board out of funds legally available therefor or upon a liquidation or redemption of the ~~request of KFSI, we will use our reasonable best efforts~~Series B Preferred Shares. The remaining outstanding Series B Preferred Shares rank senior to ~~effect the registration under applicable federal and state securities laws of~~ our common stock, ~~held by KFSI following this Offering. KFSI’s common~~and we are not permitted to issue any other series of preferred stock ~~will have piggyback registration rights for future registrations~~that rank equal or senior to the Series B Preferred Shares while the Series B Preferred Shares are outstanding. The Company intends to consummate the repurchase of the ~~company’s common stock under the Securities Act (other than certain excluded registrations) and, upon the one-year anniversary~~remaining outstanding shares of the Offering, KFSI will also have a one-time demand registration right on such common stock, subject to certain restrictions. We will generally be responsible for all registration expenses in connection with the performance of our obligations under the registration rights provisions in the registration rights agreement while KFSI is responsible for its own internal fees and expenses. The agreement contains indemnification and contribution provisions by us for the benefit of KFSI and, in limited situations, by KFSI for the benefit of us with respect to the information provided by KFSI included in any registration statement, prospectus or related document. For a complete description of the terms of the registration rights, please refer to the Registration Rights Agreement filed as an exhibit to the Registration Statement of which this prospectus is a part.

Agreements with KFSI

~~We have entered into and intend to enter into certain agreements with KFSI and its affiliates that will govern the separation of our businesses~~Series B Preferred Stock from KFSI and various relationships with KFSI, including the Transition Services Agreement, which will be executed upon completion of the Offering, and the Management Services Agreement which we entered into on February 11, 2014. These agreements establish certain services that the company will receive from 1347 Advisors, on a permanent basis. These agreements will be subject to the approval of our management and the management of KFSI. The terms of these agreements may be more or

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less favorable to us than if they had been negotiated with unaffiliated third parties. The agreements described below are filed as exhibits to the Registration Statement of which this prospectus forms a part and the summaries of each of these agreements below set forth the terms of the agreements that we believe are material. These summaries are qualified in their entireties by reference to the full text of the applicable agreements, which are incorporated by reference into this prospectus.

The Transition Services Agreement

~~The Transition Services Agreement, which will be effective~~IWS Corporation upon the completion of this ~~Offering, will provide~~offering. On both February 24, 2017 and 2016, the Company issued a cash payment of $240,000 to 1347 Advisors representing annual dividend payments due on the Series B Preferred Shares. As part of the repurchase price paid by the Company to 1347 Advisors for the repurchase of the Series B Preferred Shares, the Company paid $240,000 to 1347 Advisors on January 2, 2018, representing declared and unpaid dividends in respect of the dividend payment due on the Series B Preferred Shares on February 23, 2018.

Transition Services Agreement

On March 31, 2014, we entered into a Transition Services Agreement, or TSA, with KFSI. The TSA provided us with temporary access to necessary services and resources for which we ~~are currently~~were reliant on KFSI prior to the completion of our initial public offering, including ~~but not limited to~~ resources and services related to accounting and reporting, ~~accounts payable,~~ cash management, taxes, compliance with the Sarbanes-Oxley Act of 2002, payroll processing and benefits administration, information technology systems and support, human resource ~~function,~~functions, and external audit. ~~The Transition Services Agreement stipulates transition deadlines for all the services provided under it, by which time we are expected to establish its own independent functions for such services.~~

The charges for the transition services ~~generally will be~~were intended to allow KFSI to fully recover the costs directly associated with providing the services, plus all out-of-pocket costs and expenses. The charges of each of the transition services generally ~~will be~~were based on either a pre-determined flat fee or an allocation of the cost incurred by KFSI (or an affiliate or subsidiary thereof) for providing the service, including certain fees and expenses of third-party service providers. ~~We will be provided with reasonable information that supports~~During the ~~charges for such transition service by KFSI.~~

~~We have been preparing for~~fourth quarter of 2014, the ~~transition~~Company began the process of bringing the necessary resources in-house in order to reduce its reliance on KFSI and the services to be provided by KFSI under the Transition Services Agreement, or third-party providers on behalf of KFSI, to us. We anticipate that we will be in a position to complete the transition of those services on or before one year following the completion of the Offering.

~~The services intended to be~~ provided under the ~~Transition Services Agreement will terminate at various times specified~~TSA. This process was substantially completed as of December 31, 2014 and as such, services provided under the TSA ceased beginning in the ~~agreement. We may terminate certain specified services by giving prior written notice to the provider~~first quarter of ~~such services and paying any applicable termination charge.~~2015.

The Transition Services Agreement also provides that neither party will be liable to the other of such service for any special, indirect, incidental or consequential damages, except to the extent such damages result from fraud, gross negligence or intentional misconduct.

The Management Services Agreement

On February 11, 2014, we entered into a Management Services Agreement, which provides for certain permanent services, unless terminated, that we will receive from 1347 Advisors, including forecasting, analysis of capital structure and reinsurance programs, consultation in future restructuring or capital raising transactions, and consultation in corporate development initiatives.For the services performed, 1347 Advisors will be paid a monthly fee equal to 1% of our gross written premiums, as defined in the Management Services Agreement. After the seventh year of the term of the Management Services Agreement, should the ownership of our shares by KFSI or an affiliate or subsidiary thereof fall below fifty percent (50%) of KFSI’s (or an affiliate or subsidiary thereof) ownership of our shares at the close of the Offering, the monthly fee shall be calculated by (a) dividing the existing shares owned by KFSI (or an affiliate or subsidiary thereof) by the number of original shares owned by KFSI (or an affiliate or subsidiary thereof) at the close of the Offering, and (b) multiplying by 1% of our gross written premiums, as defined in the Management Services Agreement. For illustrative purposes, if KFSI (or an affiliate or subsidiary thereof) owned ten shares at the close of the Offering, and in the eighth year, sold six shares, resulting in ownership of four shares, the fee would be four divided by ten multiplied by one percent, or 0.4% annualized.

The Management Services Agreement will only terminate by mutual consent of both parties, except in case of certain exceptions as stated in the form of the agreement. With respect to termination for any reason of the Management Services Agreement (other than due to gross negligence or willful misconduct of 1347 Advisors), we will be required to pay 1347 Advisors an amount equal to twenty times the consulting fee paid to 1347 Advisors in the most recent calendar year immediately preceding.

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The liabilities of 1347 Advisors under the Management Services Agreement will generally be limited to the aggregate fees paid to 1347 Advisors pursuant to the agreement for the six months prior to the time the liability arose.

Performance Share Grant Agreement

On March 26, 2014, wethe Company entered into a Performance Share Grant Agreement, or PSGA, with KAI, ~~a wholly-owned subsidiary of KFSI,~~ whereby ~~we agreed that, beginning on the date that~~KAI is ~~six months following the completion of this Offering, KAI will be~~ entitled to receive up to an aggregate of 375,000 shares of our common stock upon achievement of certain milestones ~~for our~~regarding the Company’s stock price. Pursuant to the terms of the ~~Performance Share Grant Agreement,~~PSGA, if at any time the last sales price of our common stock equals or exceeds: (i) $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of our common stock; (ii) $15.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of our common stock (in addition to the 125,000 shares of ~~our~~ common stock earned pursuant to clause (i) herein); and (iii) $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of our common stock (in addition to the 250,000 shares of ~~our~~ common stock earned pursuant to clauses (i) and (ii) herein). The shares of common stock granted to KAI will have a valuation equal to the last sales price of our common stock on the day prior to such grant. ~~For a complete description~~As of December 31, 2017, we have not issued any shares under the terms of this transaction, please refer to the Performance Share Grant Agreement between the company and KAI, which is filed as an exhibit to the Registration Statement of which this prospectus forms a part.PSGA.

Trademark License Agreement

~~On February 28, 2014, we entered into~~

We are party to a Trademark License Agreement with 1347 Advisors, ~~LLC,~~dated as of February 28, 2014, whereby ~~we are given~~1347 Advisors granted us a limited personal, non-exclusive, royalty-free right and license to use the trade name “1347” in our corporate name and ~~current~~corporate logo.

Expenses

~~We shall pay, or reimburse KFSI~~ The agreement may be terminated by either party upon providing sixty day’s written notice to the ~~extent it has paid such amounts, all third-party costs, fees and expenses relating to~~other party. The agreement also expires upon the ~~Offering, the underwriting discounts and commissions, all~~liquidation or dissolution of the ~~reimbursable~~Company.

Investment in Argo Management Group LLC

On April 21, 2016, KFSI completed the acquisition of Argo Management Group LLC, or Argo. Argo’s primary business is to act as the managing member of Argo Holdings Fund I, LLC, an investment fund in which the Company has committed to invest $500. As of September 30, 2017, the Company has invested $211 into the investment fund. The managing member of Argo, Mr. John T. Fitzgerald, was also appointed to KFSI’s board of directors on April 21, 2016.

Indemnification Agreements

We have entered into indemnification agreements with each of our directors and executive officers. These agreements provide that we will, among other things, indemnify and advance expenses to our directors and officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by us arising out of such person’s services as our director or officer, or any other company or enterprise to which the ~~underwriters pursuant~~person provides services at our request. We believe that these agreements are necessary to ~~the underwriting agreement, all of the costs of producing, printing, mailing~~attract and ~~otherwise distributing the prospectus,~~retain qualified persons as directors and ~~all other third-party fees, costs and expenses paid or incurred in connection with our separation from KFSI.~~officers.

~~TABLE~~SECURITY OWNERSHIP OF ~~CONTENTS~~CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL STOCKHOLDERS

The following table sets forth ~~the anticipated~~certain information ~~with respect to~~regarding the beneficial ownership of shares of our common stock as of ~~the closing date of the Offering, on a pre-offering basis and as adjusted to reflect the sale of our common stock offered by this prospectus,~~January 4, 2018 by:

~~Each of our directors;~~

~~Each of our executive officers;~~

~~All of our directors and executive officers as a group; and~~

●

Each of our directors;

●

Each of our named executive officers;

●

All of our directors and executive officers as a group; and

●

Each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock.

The number and percentage of shares beneficially owned are based on 5,984,766 common shares outstanding as of January 4, 2018. Information with respect to beneficial ownership has been furnished by each director, officer and beneficial owner of more than 5% of our common stock.

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Shares of common stock that may be acquired by an individual or group within 60 days of the ~~closing~~ date of ~~the Offering,~~this prospectus, pursuant to the exercise of options or warrants, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Accordingly, the following table also does not reflect the shares of common stock issuable upon the exercise of stock options or other rights to acquire or receive payments in respect of common stock that we expect to grant in connection with our Equity Incentive Plan as such awards do not vest during the 60-day period subsequent to the completion of this offering. Prior to this Offering, KFSI was our sole owner. Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them, based on information provided to us by such stockholders. The address for each director and executive officer listed is: c/o 1347 Property Insurance Holdings, Inc., ~~9100 Bluebonnet Centre~~1511 N. Westshore Blvd., Suite ~~502, Baton Rouge, LA 70809.~~870, Tampa, FL 33607.

Beneficially Owned
Before the Offering Beneficially Owned After the Offering
   Number of Shares Percent Assuming No Over-Allotment Assuming Maximum
Over-Allotment
Name and Address of Beneficial Owners Number of Shares Percent Number of Shares Percent
5% Shareholders:

KFSI 1,000,000 ⁽¹⁾ 100 % 1,000,000 ⁽²⁾ 30.2 1,000,000 ⁽²⁾ 28.1
FMG — — 625,000 ⁽³⁾ 18.8 625,000 ⁽³⁾ 17.6
Named Executive Officers and Directors:

Gordon Pratt — * 625,000 ⁽³⁾ 18.8 625,000 ⁽³⁾ 17.6
Larry G. Swets, Jr. — * — * — *
Chris Saenger — * — * — *
Douglas Raucy — * 66,066 ⁽⁴⁾ 2.0 66,066 ⁽⁴⁾ 1.9
Hassan Baqar — * — * — *
Dean Stroud — * — * — *
John Hill — * — * — *
All Executive Officers and Directors as a Group (7 people) 1,000,000 ⁽¹⁾ 100 % 1,691,066 51.0 1,691,066 47.5

	Beneficially Owned
Name and Address of Beneficial Owner	Number of Shares		Percentage of Shares
5% Beneficial Owners
Kingsway Financial Services, Inc.⁽¹⁾
150 Pierce Road, Itasca, IL 60143		1,999,572		26.8	%
Solas Capital Management, LLC⁽²⁾
1063 Post Rd., 2^nd Floor, Darien, CT 06820		383,250		6.4	%
Harbert Discovery Fund, LP⁽³⁾
2100 Third Avenue North, Suite 600, Birmingham, AL 35203		396,563		6.6	%
Gordon G. Pratt⁽⁴⁾
1101 Brickell Avenue, South Tower, 8^th Floor, Miami, FL 33131		642,745		10.2	%
Fundamental Global Investors, LLC⁽⁵⁾
4201 Congress Street, Suite 140, Charlotte, NC 28209		2,152,080		36.0	%

Named Executive Officers and Directors
D. Kyle Cerminara⁽⁵⁾		2,155,413		36.0	%
Lewis M. Johnson⁽⁵⁾		2,155,413		36.0	%
Dennis A. Wong		3,500			*
Larry G. Swets, Jr.⁽⁶⁾		21,095			*
Scott D. Wollney		3,000			*
Joshua S. Horowitz⁽⁷⁾		65,974		1.1	%
Douglas N. Raucy^(8)(11)		76,787		1.1	%
John S. Hill^(9)(11)		25,370			*
Dean E. Stroud^(10)(11)		20,524			*
Executive Officers and Directors as a Group (10 individuals)⁽¹²⁾		2,371,663		39.0	%

~~Represents less~~Less than ~~1%.~~1.0% ownership.

~~(1)~~1.

~~This share amount gives effect to the 1,000:1 stock split~~KFSI and its affiliates beneficially own 8.3% of our ~~common stock, which occurred on March 19, 2014 and increased KFSI’s holdings of our common stock to 1,000,000 shares of common stock.~~

~~(2)~~

Does not include shares issuable to KAI, a wholly-owned subsidiary of KFSI, in accordance with the Performance Share Grant Agreement, upon achievement of certain stock price milestones. Such shares are issuable no earlier than 30 days following the date that is six months after the closing of this Offering.

~~(3)~~

~~FMG, of which Gordon G. Pratt is Managing Member and controlling equity holder, presently owns~~

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~~80,000 Preferred Shares which will convert into 312,500~~outstanding shares of common stock and ~~312,500~~warrants and performance shares to acquire an additional 23.9% of our outstanding shares of common stock. The number of beneficially owned shares attributed to KFSI includes warrants exercisable within 60 days of the date of this prospectus to purchase 1,500,000 shares of the Company’s common stock. The warrants have an exercise price of $15.00 per share and expire on February 24, 2022. KFSI shares voting and dispositive power with respect to 1,999,572 shares of the Company’s common stock. 1347 Advisors shares voting and dispositive power with respect to 1,500,000 shares of the Company’s common stock. Mendakota Casualty Company, or MCC, shares voting and dispositive power with respect to 75,000 shares of the Company’s common stock. KAI shares voting and dispositive power with respect to 424,572 shares of the Company’s common stock. Advisors, MCC and KAI are subsidiaries of KFSI. Information regarding beneficial ownership of our common stock by KFSI and its affiliates is included herein in reliance on Schedule 13D/A filed with the SEC on October 27, 2017. The number of beneficially owned shares attributed to KFSI does not include 375,000 shares of the Company’s common stock potentially issuable to subsidiaries of KFSI pursuant to the March 26, 2014 Performance Share Grant Agreement. These shares are issuable as follows: (i) 125,000 shares at any time that the last sales price of the Company’s common stock trades at a price which equals or exceeds $12.00 per share for any 20 trading days within any 30 trading day period; (ii) 125,000 shares at any time that the last sales price of the Company’s common stock trades at a price which equals or exceeds $15.00 per share for any 20 trading days within any 30 trading day period; and (iii) 125,000 shares at any time that the last sales price of the Company’s common stock trades at a price which equals or exceeds $18.00 per share for any 20 trading days within any 30 trading day period.

Solas Capital Management, LLC and Frederick Tucker Golden, its managing member, share voting and dispositive power with respect to 383,250 shares of the Company’s common stock. Information regarding beneficial ownership of our common stock by Solas Capital Management, LLC and its affiliates is included herein in reliance on Schedules 13G/A filed with the SEC on February 14, 2017.

Harbert Discovery Fund, LP (“Harbert Fund”), Harbert Discovery Fund GP, LLC (“Harbert Fund GP”), Harbert Fund Advisors, Inc. (“HFA”), Harbert Management Corporation (“HMC”), Jack Bryant, Kenan Lucas, and Raymond Harbert share voting and dispositive power with respect to 396,563 shares of the Company’s common stock. Messrs. Bryant and Lucas are directors and co-portfolio managers of the Harbert Fund GP, which serves as general partner of the Harbert Fund. Mr. Harbert is the controlling shareholder, Chairman and Chief Executive Officer of HMC, an alternative asset investment management firm that is the managing member of the Harbert Fund GP. Mr. Harbert also serves as the Chairman, Chief Executive Officer and Director of HFA, an indirect, wholly owned subsidiary of HMC, which provides the Harbert Fund with certain operational and administrative services. Information regarding beneficial ownership of our common stock by Harbert Fund and its affiliates is included herein in reliance on Schedule 13D/A filed with the SEC on November 16, 2016.

Mr. Pratt’s beneficial interest includes 312,500 shares of the Company’s common stock owned by Fund Management Group, LLC (“FMG”) as well as warrants to purchase 312,500 shares of the Company’s common stock at an exercise price of $9.60 per share which are owned by FEA Pratt Family Holdings LLC. Both FMG and FEA Pratt Family Holdings LLC are managed by Mr. Pratt, who also holds exclusive authority over both entities. Also included in his beneficial interest are 16,330 options granted to Mr. Pratt for his service as a director of the Company on March 31, 2014 as well as 1,415 options granted to Mr. Pratt for his service as a director of the Company on April 4, 2014. These options vested upon their issuance, have an exercise price equal to the market price of our common stock as ~~described herein. The~~of the date of issuance, and expire on March 31, 2018 and April 4, 2018, respectively. Mr. Pratt retired from our Board of Directors on March 5, 2017.

Fundamental Global Investors, LLC shares voting and dispositive power with respect to 2,152,080 shares of the Company’s common stock. Fundamental Activist Fund I, LP shares voting and dispositive power with respect to 700,687 shares of the Company’s common stock (“FAFI”).. Fundamental Global Partners Master Fund, LP (“FGPM”) shares voting and dispositive power with respect to 403,156 shares of the Company’s common stock. FGI Global Asset Allocation Fund, Ltd. (“FGAA”) shares voting and dispositive power with respect to 5,296 shares of the Company’s common stock. FGI Global Asset Allocation Master Fund, LP (“FGGM”) shares voting and dispositive power with respect to 4,532 shares of the Company’s common stock. Ballantyne Strong, Inc. (“BTN”) shares voting and dispositive power with respect to 1,038,409 shares of the Company’s common stock. Information regarding beneficial ownership of our common stock by Fundamental Global Investors, LLC and its affiliates is included herein in reliance on a Schedule 13D/A filed with the SEC on November 6, 2017 and a Form 4 filed with the SEC on January 3, 2018. In addition, CWA Asset Management Group, LLC, of which 50% is owned by Fundamental Global Investors, LLC, holds 63,898 shares of the Company’s common stock for the accounts of individual investors, which represents approximately 1.1% of the Company’s outstanding shares of common stock. CWA has the power to direct the disposition of the shares of common stock ~~stated above represent~~held in its customer accounts while CWA’s customers retain the power to direct the voting of the shares of common stock ~~received upon conversion of Preferred Shares~~held in their respective accounts. Due to their positions with Fundamental Global Investors, LLC and ~~full exercise~~affiliated entities, D. Kyle Cerminara, Lewis M. Johnson and Joseph H. Moglia may be deemed to be beneficial owners of the ~~warrants underlying such Preferred Shares~~shares of the Company’s common stock disclosed as directly owned by ~~FMG.~~FAFI, FGPM, FGAA and FGGM. Due to their positions with BTN, Fundamental Global Investors, LLC and affiliated entities, Messrs. Cerminara and Johnson may be deemed to be beneficial owners of the shares of the Company’s common stock disclosed as directly owned by BTN. Due to their positions as managers of CWA, Messrs. Cerminara and Johnson may be deemed to beneficially own the number of shares of common stock held in CWA’s customer accounts and disclosed as beneficially owned by CWA.

~~(4)~~6.

Includes ~~33,033 Option Shares~~17,745 shares purchasable pursuant to stock options exercisable within 60 days of the date of this prospectus. Does not include shares reported as beneficially owned by KFSI, of which Mr. Swets is the Chief Executive Officer.

Includes 52,074 shares of the Company’s common stock owned by Palm Global Small Cap Master Fund, of which Mr. Horowitz is portfolio manager, as well as 13,900 shares of the Company’s common stock held in various retirement accounts in the name of Mr. Horowitz or of his immediate family. Mr. Horowitz has voting and ~~33,033 Matched Shares. See “Certain Relationships~~investment power over these shares.

Includes 56,787 shares purchasable pursuant to stock options exercisable within 60 days of the date of this prospectus.

Includes 9,370 shares purchasable pursuant to stock options exercisable within 60 days of the date of this prospectus.

10.

Includes 19,024 shares purchasable pursuant to stock options exercisable within 60 days of the date of this prospectus.

11.

The beneficial interests of Messrs. Raucy, Hill and ~~Related Party Transactions — Investment~~Stroud do not include 12,500 shares potentially issuable Mr. Raucy, and 4,000 shares potentially issuable to each of Messrs. Hill and Stroud pursuant to restricted stock units granted on May 29, 2015, which are discussed in footnote 2 of the “Outstanding Equity Awards at Fiscal Year-End” table in “Compensation of Executive Officers” in this prospectus.

12.

Includes (i) 2,152,080 shares reported as beneficially owned by ~~Management”~~Fundamental Global Investors, LLC, of which Messrs. Cerminara and Johnson are deemed to have beneficial ownership by virtue of their respective positions with Fundamental Global Investors, LLC, (ii) 49,064 shares owned by Palm Global Small Cap Master Fund, of which Mr. Horowitz is portfolio manager, (iii) 13,900 shares of common stock held in various retirement accounts in the name of Mr. Horowitz or of his immediate family, over which Mr. Horowitz has voting and investment power, and (iv) options to purchase our common shares exercisable within 60 days of the date of this prospectus as follows: for ~~more information.~~Mr. Swets, 17,745 shares; for Mr. Raucy, 56,787 shares; for Mr. Hill, 9,370 shares; and for Mr. Stroud, 19,024 shares. Also includes 56,276 shares of common stock owned directly by Mr. Dan Case, the Chief Operating Officer of the Company. Mr. Case was appointed as our new Chief Operating Officer on May 23, 2017 and is an executive officer of the Company. Mr. Case is not separately included in the table because he was not a Named Executive Officer for our fiscal year ended December 31, 2016. Does not include shares reported as beneficially owned by KFSI, of which Mr. Swets is the Chief Executive Officer.

~~TABLE OF CONTENTS~~Transaction between KFSI and FGI

On October 25, 2017, KAI entered into a purchase agreement with FGI, pursuant to which KAI agreed to sell 900,000 shares of our common stock to FGI or to one of FGI’s affiliate companies in two separate transactions. The first transaction, for the sale of 475,428 shares of our common stock, occurred on November 1, 2017. The second transaction, for the sale of 424,572 shares of our common stock, is conditioned on approval of the transaction by both the LDI and FOIR by January 23, 2018. FGI is affiliated with D. Kyle Cerminara, where he serves as Chief Executive Officer, Co-Founder and Partner, and Lewis M. Johnson, where he serves as President, Co-Founder and Partner. Messrs. Cerminara and Johnson are both members of our Board of Directors. Should the second transaction be consummated, FGI, and entities affiliated with FGI, would own approximately 43% of our outstanding common shares. Should the second transaction be consummated, FGI, and entities affiliated with FGI, would own approximately 43% of our outstanding common shares.
DESCRIPTION OF SECURITIES

THE PREFERRED STOCK

~~We have provided below a~~

The following summary ~~description~~ of ~~our capital stock as it will~~the terms and provisions of the Preferred Stock does not purport to be complete and is qualified in ~~effect upon completion~~its entirety by reference to the pertinent sections of ~~this Offering. This description is not complete. You should read~~ the ~~full text of our~~ Third Amended and Restated Certificate of Incorporation ~~and amended and restated by-laws,~~of the Company, which ~~are~~we have previously filed ~~as exhibits to~~with the ~~Registration Statement of which this prospectus is a part, as well as the provisions of applicable Delaware law.~~

Distributions of Securities

~~Except for our issuance of common stock upon formation to KAI, our sole common stockholder prior to the completion of this offering~~SEC, and the ~~1,000:1 stock split in connection with such shares which occurred on March 19, 2014 and resulted in KAI owning 1,000,000 shares~~Certificate of our common stock, in the past three years, we have not sold any securities, including sales of reacquired securities, new issues, securities issued in exchange for property, services, or other securities, and new securities resulting from the modification of outstanding securities, which were not registered under the Securities Act, other than the issuance of Preferred Shares to FMG described below.

On January 23, 2014, FMG, an entity of which our Chairman of the board Gordon G. Pratt is Managing Member and controlling equity holder, invested $2 million in the company in exchange for 80,000 Preferred Shares of the company pursuant to the terms and conditions ofDesignations creating the Preferred ~~Shares Purchase Agreement,~~Stock, which ~~is filed~~will be included as an exhibit to documents that we file with the ~~Registration Statement~~SEC, including the registration statement of which this prospectus forms a part.

General

The ~~Preferred Shares are non-voting~~Certificate of Designations setting forth the specific rights, preferences, limitations and ~~rank senior to all classes of capital stock~~other terms of the ~~company. The~~ Preferred ~~Shares~~Stock will ~~not pay any dividends. When converted,~~be approved by the ~~Preferred Shares will convert into i) 312,500 shares~~Board of ~~common stock~~Directors of the ~~company, which is equal to $2 million~~Company as of our common stock at 80% of the offering price per share of our common stock issued in this Offering (which we have assumed to be $8.00 per share, the estimated price set forth on the cover page of this prospectus), subject to certain adjustments and ii) one warrant per share of common stock issued as a result of the conversion. The conversion into shares of our common stock and warrants will be deemed to have occured immediately prior to the closing of this Offering. Each warrant will entitle the holder to purchase one share of our common stock at a price equal to 120% of the offering price per share of our common stock issued in this Offering, subject to certain adjustments under the Warrant Agreement. The warrants will expire five years from the date of ~~issuance and will be immediately exercisable after issuance in accordance with the exercise procedure under the Warrant Agreement.~~this prospectus. The ~~warrants will be redeemable by us at~~Preferred Stock is a ~~price~~single series of $0.01 per warrant during any period in which the closing price of our shares of common stock is at or above 175% of the price of shares of our common stock issued in this Offering for 20 consecutive trading days. The warrant holder will be entitled to a 30 day notice prior to the date of such redemption. If the Offering is not completed within one year from the date of issuance, we will redeem the Preferred Shares at a value equal to original investment plus a 12% premium. The common stock issuable to FMG upon conversion of the Preferred Shares will have piggyback registration rights for future registrations of the company’s common stock under the Securities Act (other than certain excluded registrations) and, upon the two-year anniversary of the Offering, FMG will also have a one-time demand registration right for such common stock, subject to certain restrictions. If all the Preferred Shares are converted and all the warrants are exercised immediately following the Offering, FMG will own approximately 18.8% (or 17.6% if the underwriters exercise their over-allotment in full) of our outstanding common stock immediately after the Offering (assuming the underwriters do not exercise their over-allotment option). We used the proceeds from this investment to settle intercompany payables to our immediate parent, KAI. This intercompany payable amount originates from payments made by KAI on our behalf to various third-party vendors and also includes approximately $68,000 related to accounting services provided by KAI to us. For a complete description of the terms of this investment and the rights and preferences of the Preferred Shares (and the common stock and warrants underlying such Preferred Shares), please refer to the Preferred Shares Purchase Agreement, the Warrant Agreement and the Certificate of Designation of Preferred Shares filed as an exhibit to the Registration Statement of which this prospectus forms a part.

On February 28, 2014, we entered into a stock option agreement granting Mr. Raucy the option to purchase, at the Offering price (which we have assumed to be $8.00 per share, the estimated price set forth on the cover page of this prospectus), shares of our common stock up to $264,269 in value, which, if exercised in full, would result in the issuance of 33,033 shares of our common stock (the “Option Shares”) upon the exercise

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of the stock option at the asssumed Offering price. Concurrently with the exercise of the stock option, we will grant the Matched Shares to Mr. Raucy as a one-for-one match against the Option Shares. The Option Shares and Matched Shares will be restricted and the Matched Shares will vest 100% upon the fifth anniversary of this Offering, subject to Mr. Raucy’s continued service as the President and Chief Executive Officer of the company until such vesting date.

On March 26, 2014, we entered into a Performance Share Grant Agreement with KAI, whereby we agreed that, beginning on the date that is six months following the completion of this Offering, KAI will be entitled to receive up to an aggregate of 375,000 shares of our common stock upon achievement of certain milestones for our stock price. Pursuant to the terms of the Performance Share Grant Agreement, if at any time the last sales price of our common stock equals or exceeds: (i) $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of our common stock; (ii) $15.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of our common stock (in addition to the 125,000 shares of our common stock earned pursuant to clause (i) herein); and (iii) $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of our common stock (in addition to the 250,000 shares of our common stock earned pursuant to clauses (i) and (ii) herein). The shares of common stock granted to KAI will have a valuation equal to the last sales price of our common stock on the day prior to such grant.

Authorized Capital Stock

~~Upon completion of this Offering, our~~ authorized ~~capital stock will consist of up to 10,000,000 shares of common stock, par value $0.001, and 1,000,000 shares of~~ preferred stock ~~par value $25.00.~~

Common Stock

~~Shares Outstanding~~~~. Upon completion~~consisting of ~~this Offering, we expect that approximately 3,003,566 shares of our common stock will be issued and outstanding (assuming the underwriters do not exercise their over-allotment option).~~shares.

~~Dividends~~. Subject to prior dividend rights of the holders of any preferred stock, holders of shares of our common stock are entitled to receive dividends when, as and if declared by our board of directors out of funds legally available for that purpose. We do not anticipate paying any cash dividends on our common stock in the foreseeable future.

~~Voting Rights~~~~. Each stockholder will be entitled to one vote for each share of common stock on all matters submitted to a vote of the stockholders.~~

~~Other Rights~~. In the event of any liquidation, dissolution or winding up of our company, after the satisfaction in full of the liquidation preferences of holders of any preferred stock, holders of shares of our common stock are entitled to ratable distribution of the remaining assets available for distribution to stockholders. The shares of our common stock are not subject to redemption by operation of a sinking fund or otherwise. Holders of shares of our common stock are not currently entitled to pre-emptive rights.

~~Fully Paid~~. The issued and outstanding shares of our common stock are fully paid and non-assessable. Any additional shares of common stock that we may issue in the future will also be fully paid and non-assessable.

Preferred Stock

Upon completion of this Offering, the 80,000 shares of our preferred stock currently outstanding will be converted into shares of common stock and warrants as described herein. The Preferred Shares are non-voting and rank senior to all classes of capital stock of the company. The Preferred Shares will not pay a fixed dividend. When converted, the Preferred Shares will convert into i) 312,500 shares of common stock of the company, which is equal to $2 million of our common stock at 80% of the offering price per share of our common stock issued in this Offering (which we have assumed to be $8.00 per share, the estimated price set forth on the cover page of this prospectus), and ii) one warrant per share of common stock issued as a result of the conversion. The conversion into shares of our common stock and warrants will occur immediately

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following the closing of this Offering. Each warrant will entitle the holder to purchase one share of our common stock at a price equal to 120% of the offering price per share of our common stock issued in this Offering. The warrants will expire five years from the date of issuance and will be immediately exercisable after issuance. The warrants will be redeemable by us at a price of $0.01 per warrant if the closing price of our shares of common stock is at or above 175% of the price of shares of our common stock issued in this Offering for 20 trading days in a 30-day period. The holder will be entitled to a 30 day notice prior to the date of redemption. If the Offering is not completed within one year from the date of issuance, we will redeem the Preferred Shares at a value equal to original investment plus a 12% premium. The Preferred Shares do not have any registration rights although the shares of common stock issuable upon conversion of the Preferred Shares have registration rights. See, “Certain Relationships and Related Party Transactions — Investment Prior to the Offering” for more information.

Our Third Amended and Restated Certificate of Incorporation permits us to ~~issue~~authorize the issuance of up to 1,000,000 shares of preferred stock, in one or more series without stockholder action. The Preferred Stock constitute a series of our authorized preferred stock. We may from time to ~~time.~~

Representative's Warrants

~~We are registering~~time, without notice to or the ~~warrants (and~~consent of holders of the Preferred Stock, issue shares of ~~common~~preferred stock ~~underlying such warrants) we have agreed~~that rank equally with or junior to ~~sell~~the Preferred Stock. We may also from time to ~~Aegis Capital Corp (the representative~~time, without notice to or consent of holders of the ~~underwriters in this Offering) and/or its designees to purchase up to a total of 81,250~~Preferred Stock, issue additional shares of ~~common stock (5%~~the Preferred Stock; provided, that any such additional shares of Preferred Stock are not treated as “disqualified preferred stock” within the meaning of Section 1059(f)(2) of the Internal Revenue Code and such additional shares of ~~common stock sold in this Offering excluding~~Preferred Stock are otherwise treated as fungible with the ~~over-allotment option). See “Underwriting-Representative's Warrants” beginning on page~~ 83Preferred Stock offered hereby for U.S. federal income tax purposes. The additional shares of ~~this prospectus for~~Preferred Stock would form a ~~description~~single series with the Preferred Stock offered hereby. We have the authority to issue fractional shares of ~~these warrants.~~Preferred Stock.

Restrictions on Payment
The Preferred Stock will be fully paid and non-assessable when issued. Holders of Dividends

~~We are incorporated in Delaware and are governed by Delaware law. Delaware law allows a corporation~~the Preferred Stock will not have preemptive or similar rights to ~~pay dividends only out of surplus, as determined under Delaware law.~~

~~One~~acquire any of our primary sources of liquidity is dividends from our subsidiaries Maison Insurance and Maison Managers. Maison Insurance is regulated under the insurance statutes of the State of Louisiana that impose certain restrictions in payment of dividends above a certain amount. Under the agreement by which Maison Insurance became authorized to transact insurance business in Louisiana, Maison Insurance is precluded from paying dividends without prior notice to the LDOI. Such preclusion notwithstanding, under Louisiana law, no domestic insurer shall pay any extraordinary dividend or make any other extraordinary distribution to its stockholders until 30 days after the commissioner has received notice of the declaration thereof and has not within that period disapproved the payment, or until the commissioner has approved the payment within the 30-day period. An extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding twelve months exceeds the lesser of the following: (a) 10% of the insurer’s surplus as regards policyholders as of the 31^st ~~day of December next preceding or (b) the net income, not including realized~~ capital ~~gains, for the twelve-month period ending the 31~~^st day of December next preceding, but not including pro rata distributions of any class of the insurer’s own securities. In determining whether a dividend or distribution is extraordinary, an insurer may carry forward net income from the previous two calendar years that has not already been paid out as dividends. This carry forward shall be computed by taking the net income from the second and third preceding calendar years, not including realized capital gains, less dividends paid in the second and immediate preceding calendar years. Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution which is conditional upon the commissioner’s approval, and the declaration shall confer no rights upon stockholders until either the commissioner has approved the payment of the dividend or distribution, or, the commissioner has not disapproved payment within the 30-day period referred to above.

~~Maison Insurance has not paid any dividends to date. We believe that amounts required to meet our financial and operating obligations~~stock. Holders will ~~be available from sources other than dividends from Maison Insurance, though there can be no assurance in this regard.~~

Regulatory considerations, such as the impact of dividends on capital surplus, which could impact an insurer’s competitive position, the amount of premiums that can be written and the ability to pay future dividends.

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Further, state insurance laws and regulations require that the statutory capital surplus of an insurance company following any dividend or distribution by it be reasonable in relation to its outstanding liabilities and adequate for its financial needs.

While Maison Managers is not subject directly to the dividend and other distribution limitations that Maison Insurance is, insurance holding company regulations similarly govern the amount that any affiliate within the holding company system may charge any of the insurance companies for service (e.g., management fees and commissions), which can also impact liquidity available to us for payment of dividend to our stockholders. For further discussion on liquidity and capital resources see Management’s Discussion and Analysis on Financial Condition and Results of Operations — Liquidity and Capital Resources.

Anti-Takeover Effects of Delaware Law

Upon the completion of this Offering, we will be subject to Section 203 of the Delaware General Corporation Law, or DGCL, or Section 203. In general, Section 203 prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that such stockholder became an interested stockholder, unless:

~~prior to that date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder,~~

upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares of voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by persons who are directors and also officers and by excluding employee stock plans in which employee participants do not have the right to ~~determine confidentially whether~~convert Preferred Stock into, or exchange Preferred Stock for, shares ~~held~~of any other class or series of shares or other securities of ours. The Preferred Stock has no stated maturity and will not be subject to any sinking fund, retirement fund or purchase fund or other obligation of the ~~plan~~Company to redeem or purchase the Preferred Stock.

Ranking

The Preferred Stock will rank senior to our common stock and any other junior stock (as defined herein) with respect to the payment of dividends and distributions of assets upon liquidation, dissolution or winding up, equally with each other series of our preferred stock that we may issue the terms of which provide that they rank equally with the Preferred Stock with respect to the payment of dividends and distributions of assets upon liquidation, dissolution or winding-up and junior to each other series of our preferred stock that we may issue in the future the terms of which provide that they rank senior to the Preferred Stock with respect to the payment of dividends and distributions of assets upon our liquidation, dissolution or winding-up. Upon completion of this offering and the repurchase of 60,000 Shares of Series B Preferred Stock of the Company pursuant to a stock purchase agreement with IWS Acquisition Corporation, we will not have outstanding any series or class of preferred stock.

Dividends

Holders of Preferred Stock will be ~~tendered in a tender or exchange offer, or~~

~~on or subsequent~~entitled to ~~that date, the business combination is approved~~receive, when, as and if declared by the ~~board~~Board of ~~directors~~Directors of the ~~corporation and~~Company or a duly authorized committee thereof, out of lawfully available funds for the payment of dividends, cumulative cash dividends from the original issue date at ~~an annual or special meeting~~the rate of ~~stockholders, and not by written consent, by the affirmative vote of at least 66 2/3%~~% of the $ per share liquidation preference per annum (equivalent to $ per annum per share). Dividends on the Preferred Stock shall be payable quarterly on the 15th day of March, June, September and December of each year, commencing on , 201. In the event that we issue additional Preferred Stock after the original issue date, dividends on such additional shares may accrue from the original issue date or any other date that we specify at the time such additional shares are issued.

Dividends, if so declared, will be payable to holders of record of the Preferred Stock as they appear on our books on the applicable record date, which shall be March 1, June 1, September 1 and December 1, as applicable, immediately preceding the applicable dividend payment date (each, a “dividend record date”). These dividend record dates will apply regardless of whether a particular dividend record date is a business day. As a result, holders of shares of Preferred Stock will not be entitled to receive dividends on a dividend payment date if such shares were not issued and outstanding ~~voting stock~~on the applicable dividend record date. The first dividend record date will be , 201 .

A dividend period is the period from and including a dividend payment date to but excluding the next dividend payment date, except that the initial dividend period will commence on and include the original issue date of the Preferred Stock and will end on and exclude the , 201 dividend payment date. Dividends payable on the Preferred Stock will be computed on the basis of a 360-day year consisting of twelve 30-day months. If any date on which dividends would otherwise be payable is not ~~owned by~~a business day, then the ~~interested stockholder.~~

~~In general, Section 203 defines an “interested stockholder” as any entity or person beneficially owning 15% or more of~~dividend payment date will be the ~~outstanding voting stock of the corporation or any entity or person affiliated or associated~~next succeeding business day with the ~~corporation~~same force and ~~beneficially owned 15%~~effect as if made on the original dividend payment date, and no additional dividends shall accrue on the amount so payable from such date to such next succeeding business day.

In this subsection, the term “business day” means each Monday, Tuesday, Wednesday, Thursday or ~~more~~Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York.

No dividends on shares of ~~the outstanding voting stock~~Preferred Stock shall be authorized by our Board of ~~the corporation~~Directors (or a duly authorized committee thereof) or paid or set apart for payment by us at any time ~~within~~when the ~~three-year period immediately prior~~terms and provisions of any agreement of ours, including any agreement relating to our indebtedness, prohibit the authorization, payment or setting apart for payment thereof or provide that the authorization, payment or setting apart for payment thereof would constitute a breach of the agreement or a default under the agreement, or if the authorization, payment or setting apart for payment shall be restricted or prohibited by law. You should review the information appearing above under “Risk Factors—We may not be able to pay dividends on the Preferred Stock” for information as to these and other circumstances under which we may be unable to pay dividends on the Preferred Stock.

Notwithstanding the foregoing, dividends on the Preferred Stock will accrue whether or not we have earnings, whether or not there are funds legally available for the payment of those dividends and whether or not those dividends are declared by our Board of Directors. No interest, or sum in lieu of interest, will be payable in respect of any dividend payment or payments on the Preferred Stock that may be in arrears, and holders of the Preferred Stock will not be entitled to any dividends in excess of full cumulative dividends described above. Any dividend payment made on the Preferred Stock shall first be credited against the earliest accumulated but unpaid dividend due with respect to those shares.

Unless full cumulative dividends on all shares of Preferred Stock have been or contemporaneously are declared and paid (or declared and a sum sufficient for the payment thereof has been set aside or contemporaneously is set apart for payment for all past dividend periods):

●

no dividend shall be declared or paid or set aside for payment upon our common stock, or any other junior stock (other than a dividend payable solely in common stock or other junior stock), nor shall any distribution be declared or made upon our common stock or any other junior stock;

●

no common stock or other junior stock shall be purchased, redeemed or otherwise acquired for consideration by us, directly or indirectly (other than (1) as a result of a reclassification of junior stock for or into other junior stock, or the exchange or conversion of one share of junior stock for or into another share of junior stock, or (2) through the use of the proceeds of a substantially contemporaneous sale of junior stock) nor shall any monies be paid to or made available for a sinking fund for the redemption of such stock (it being understood that the provisions of this bullet point shall not apply to grants or settlements of grants pursuant to any equity compensation plan adopted by us); and

●

no shares of Preferred Stock or parity stock shall be repurchased, redeemed or otherwise acquired for consideration by us other than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Preferred Stock and such parity stock except by conversion into or exchange for junior stock.

As used in this prospectus, “junior stock” means any class or series of our capital stock that ranks junior to the ~~date on which it is sought~~Preferred Stock either as to ~~be determined whether such entity~~the payment of dividends or ~~person is an interest stockholder. Section 203 defines “business combination”~~as to ~~include: (i) any merger~~the distribution of assets upon our liquidation, dissolution or ~~consolidation involving the corporation or a majority-owned subsidiary~~winding-up. As of the ~~corporation~~date of this prospectus, junior stock consists solely of our common stock.

As used in this prospectus, “parity stock” means any class or series of our capital stock that ranks equally with the Preferred Stock with respect to the payment of dividends and in the ~~interested stockholder, (ii) any sale, lease, exchange, mortgage, pledge, transfer~~distribution of assets on our liquidation, dissolution or ~~other disposition of 10% or more~~winding-up. As of the ~~assets~~date of ~~the corporation or a majority-owned subsidiary of the corporation involving the interested stockholder, (iii) subject to certain exceptions,~~this prospectus, we did not have any transaction that results in the issuance or transfer by the corporation or a majority-owned subsidiary of the corporation of any stock of the corporation or such subsidiary to the interested stockholder, (iv) any transaction involving the corporation or a majority-owned subsidiary of the corporation that has the effect of increasing the proportionate share of the stockoutstanding shares of any class or series of capital stock that would constitute parity stock.

When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the ~~corporation~~Preferred Stock and any parity stock, all dividends declared upon the Preferred Stock and any party stock shall be declared pro rata so that the amount of dividends declared per share of Preferred Stock and such parity stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Preferred Stock and such parity stock (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such preferred stock does not have a cumulative dividend) bear to each other. No interest, or ~~such subsidiary beneficially owned~~sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Preferred Stock that may be in arrears.

Our ability to pay dividends on the Preferred Stock may be limited by the ~~interested stockholder, or (v) the receipt~~terms of our agreements governing our existing and future indebtedness and by the ~~interested stockholder~~provisions of other existing and future agreements. In addition, we are a holding company and our ability to make dividend payments on the Preferred Stock may depend on our ability to receive dividends or other distributions from our subsidiaries, including our insurance subsidiary, Maison. The ability of Maison, our insurance subsidiary, to pay dividends to us is subject to certain restrictions imposed under Louisiana insurance law, which is the state of domicile for Maison. Dividends payments to us may also be restricted pursuant to a consent agreement entered into with the LDI and the FOIR as a condition of our licensure in each state. As a result, at times, we may not be able to receive dividends from Maison, which would affect our ability to pay dividends on our capital stock, including the Preferred Stock. Our other subsidiary companies collect the majority of their revenue through their affiliation with Maison. Our subsidiary company MMI, earns commission income from Maison for underwriting, policy administration, claims handling, and other services provided to Maison. Our subsidiary company, ClaimCor, earns claims adjusting income for adjusting certain of the ~~benefit~~claims of Maison’s policyholders. While dividend payments from our other subsidiaries are not restricted under insurance law, the underlying contracts between Maison and our other subsidiary companies are regulated by, and subject to the approval of, insurance regulators.

Liquidation Rights

Upon our voluntary or involuntary liquidation, dissolution or winding up, holders of the Preferred Stock and any parity stock are entitled to receive out of our assets available for distribution to stockholders, after satisfaction of liabilities to creditors, if any, and subject to the preferential rights of the holders of any ~~loans, advances, guarantees, pledges~~class or ~~other financial benefits provided by~~series of capital stock that we may issue ranking senior to the Preferred Stock with respect to the distribution of assets upon liquidation, dissolution or ~~through the corporation or~~winding up, a ~~majority-owned subsidiary of the corporation.~~

A Delaware corporation may opt out of Section 203 either by an express provision in its original certificate of incorporation or in an amendment to its certificate of incorporation or bylaws approved by its stockholders. We have not opted out, and do not currently intend to opt out, of this provision. The provisions of Section 203 may encourage companies interested in acquiring our company to negotiate in advance of such acquisition with our board of directors because the stockholder approval requirement referenced above would be avoided if our board of directors approves either the business combination or the transaction that resultsliquidating distribution in the ~~stockholder becoming~~amount equal to the liquidation preference of $ per share of Preferred Stock, plus an ~~interested stockholder. These provisions could prohibit or delay mergers or other~~

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~~takeover or change~~amount equal to any accumulated and unpaid dividends to, but not including, the date of ~~control attempts and may make it more difficult~~payment, but before any distribution of assets is made to ~~accomplish transactions that stockholders may otherwise deem to be in their best interests.~~

Anti-takeover Effects of Our Organizational Documents

Certain provisions of our certificate of incorporation and our bylaws may be considered to have an anti-takeover effect and may delay or prevent a tender offer or other corporate transaction that a stockholder might consider to be in its best interest, including those transactions that might result in payment of a premium over the market price for shares of our common stock. These provisions are designed to discourage certain types of transactions that may involve an actual or threatened change of control of us without prior approval of our board of directors. These provisions are meant to encourage persons interested in acquiring control of us to first consult with our board of directors to negotiate terms of a potential business combination or offer. We believe that these provisions protect us against an unsolicited proposal for a takeover of us that might affect the long-term valueholders of our common stock or ~~that may not be otherwise in the best interests of our stockholders. For example, our certificate of incorporation and our bylaws:~~

~~divide our board of directors into three classes with staggered three-year terms, which may delay~~any class or ~~prevent a change of our management or a change in control,~~

authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares of capital stock, making a takeover more difficult and expensive,

~~do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates,~~

~~do not permit stockholders to take action by written consent,~~

provide that special meetings of the stockholders may be called only by or at the direction of the board of directors or at the request of 50% or more of the voting power of all of the outstanding sharesseries of our capital stock ~~entitled~~we may issue that ranks junior to ~~vote on~~the Preferred Stock as to liquidation rights.

In any ~~issue contemplated~~such distribution, if our assets are not sufficient to ~~be considered at such proposed special meeting,~~

~~require advance notice be given by stockholders for any stockholder proposals or director nominations,~~

~~require~~pay the ~~approval of 66 2/3% or more~~liquidation distributions in full to all holders of the ~~voting power~~Preferred Stock and all holders of ~~all of~~any parity stock, the ~~outstanding shares of our capital stock entitled to vote to amend our certificate of incorporation, and~~

allow our board of directors to make, alter or repeal our bylaws but only allow stockholders to amend our bylaws upon the approval of 66 2/3% or more of the voting power of all of the outstanding shares of our capital stock entitled to vote.

Transfer Agent and Registrar

~~The transfer agent and registrar for our common stock is VStock Transfer, LLC and its phone number is 212-828-8436.~~

NASDAQ Capital Market Listing

~~Our common stock has been approved for listing on NASDAQ under the ticker symbol “PIH.”~~

Limitation on Liability of Directors and Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law, or DGCL, provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, in which such person is made a party by reason of the fact that the person is or was a director, officer, employee or agent of the corporation (other than an action by or in the right of the corporation — a “derivative action”), 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~~holders of Preferred Stock and to the ~~corporation and,~~holders of any parity stock will be paid pro rata in accordance with ~~respect~~the respective aggregate liquidation distributions of those holders. In any such distribution, the liquidation distribution to any ~~criminal action or proceeding, had no reasonable cause~~holder of preferred stock means the amount payable to

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~~believe~~ such ~~person’s conduct was unlawful. A similar standard is applicable~~holder in such distribution, including any declared but unpaid dividends (and any unpaid, accrued cumulative dividends in the case of ~~derivative actions, except that indemnification only extends~~any holder of shares on which dividends accrue on a cumulative basis). If the liquidation distributions have been paid in full to ~~expenses (including attorneys’ fees) incurred in connection with~~all holders of shares of the ~~defense or settlement~~Preferred Stock and any holders of ~~such action,~~shares of parity stock and ~~the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable~~shares ranking senior to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation’s by-laws, disinterested director vote, stockholder vote, agreement or otherwise.

Our Third Amended and Restated Certificate of Incorporation provides that no director shall be liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation on liability is not permitted under the DGCL, as now in effect or as amended. Currently, Section 102(b)(7) of the DGCL requires that liability be imposed for the following:

~~Any breach of the director’s duty of loyalty to our company or our stockholders;~~

~~Any act or omission not in good faith or which involved intentional misconduct or a knowing violation of law;~~

~~Unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; and~~

~~Any transaction from which the director derived an improper personal benefit.~~

Our Third Amended and Restated Certificate of Incorporation provides that, to the fullest extent authorized or permitted by the DGCL, as now in effect or as amended, we will indemnify any person who was or is made a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was our director, officer, employee or agent, or is or was serving, at our request, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. We will indemnify such persons against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding if such person acted in good faith and in a manner reasonably believed to be in or not opposed to our best interest and,Preferred Stock with respect to ~~any criminal proceeding, had no reasonable cause~~the distribution of assets upon liquidation, dissolution or winding-up, the holders of our other classes of capital stock will be entitled to ~~believe such person’s conduct was unlawful. A similar standard is applicable in the case~~receive all of ~~derivative actions or suits, except that indemnification only extends~~our remaining assets according to ~~expenses (including attorneys’ fees) actually~~their respective rights and reasonably incurred in connection with the defense or settlement of such action or suit, and court approval is required before there can be any indemnification where the person seeking indemnification has been adjudged to be liable to us. Any amendmentpreferences.

For purposes of this ~~provision will not reduce our indemnification obligations relating to actions taken before an amendment.~~

~~We intend to obtain policies that insure our directors~~section, a consolidation or merger involving the Company with any other entity, including the consolidation or merger in which the holders of Preferred Stock receive cash, securities or other property for their shares, or the sale or transfer of all or substantially all of the property and ~~officers and those~~assets of ~~our subsidiaries against certain liabilities they may incur in their capacity as directors and officers. Under these policies,~~ the ~~insurer, on our behalf, may also pay amounts~~Company for ~~which we have granted indemnification to the directors~~cash, securities or ~~officers.~~

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SHARES AVAILABLE FOR FUTURE SALE

Immediately prior to this Offering, there was no public market for our common stock. Sales of substantial amounts of our common stock in the public market could adversely affect prevailing market prices of our common stock. Some shares of our common stockother property, will not be ~~available for sale for~~deemed to constitute a ~~certain period of time after this Offering because they are~~liquidation, dissolution or winding-up.

Redemption

The Preferred Stock is not subject to ~~contractual~~any mandatory redemption, sinking fund, retirement fund, purchase fund or other similar provisions.

The Preferred Stock is not redeemable prior to , 202 . On and ~~legal restrictions~~after that date, the Preferred Stock will be redeemable at our option, in whole or in part, upon not less than 30 days nor more than 60 days’ notice, at a redemption price equal to $ per share, plus any accumulated and unpaid dividends thereon to, but not including, the redemption date. Holders of the Preferred Stock will have no right to require the redemption of the Preferred Stock.

In connection with any redemption of Preferred Stock, the Company shall pay, in cash, any accumulated and unpaid dividends to, but not including, the redemption date, unless a redemption date falls after a dividend record date and prior to the corresponding dividend payment date, in which case each holder of Preferred Stock at the close of business on ~~resale, some~~such Dividend Record Date shall be entitled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of which are described below. Sales of substantial amounts of common stock in the public market after these restrictions lapse, or the perception that these sales could occur, could adversely affect the prevailing market price and our ability to raise equity capital in the future.such shares before such Dividend Payment Date.

Sales of Restricted Securities

~~After this Offering, 3,003,566~~

If shares of ~~our common stock~~the Preferred Stock are to be redeemed, the notice of redemption shall be given by first class mail to the holders of record of the Preferred Stock to be redeemed, mailed not less than 30 days nor more than 60 days prior to the date fixed for redemption thereof (provided that, if the Preferred Stock is held in book-entry form through The Depository Trust Company, or “DTC,” we may give such notice in any manner permitted by DTC). Each notice of redemption will ~~be outstanding. Of these~~include a statement setting forth:

●

the redemption date;

●

the number of shares of Preferred Stock to be redeemed and, if less than all the shares of Preferred Stock held by such holder are to be redeemed, the number of such shares of Preferred Stock to be redeemed from such holder;

●

the redemption price;

●

that the shares should be delivered via book entry transfer or the place or places where holders may surrender certificates evidencing the Preferred Stock for payment of the redemption price; and

●

if applicable, that such redemption is being made in connection with a Change of Control and, in that case, a brief description of the transaction or transactions constituting such Change of Control.

In case of ~~common stock, all~~any redemption of only part of the shares of ~~common stock sold in this Offering will be freely tradable without restriction under~~Preferred Stock at the ~~Securities Act, unless purchased by our “affiliates,” as that term is defined in Rule 144 under~~time outstanding, the ~~Securities Act. The remaining 1,378,566~~ shares of ~~our common stock that~~Preferred Stock to be redeemed shall be selected either pro rata or in such other manner as we may determine to be fair and equitable.

If notice of redemption of any shares of Preferred Stock has been given and if the Company has irrevocably set aside the funds necessary for such redemption, then, from and after the redemption date (unless the Company shall default in providing for the payment of the redemption price plus accumulated and unpaid dividends, if any), dividends will cease to accumulate on such shares of Preferred Stock, such shares of Preferred Stock shall no longer be deemed outstanding ~~after this Offering are “restricted securities” within~~and all rights of the ~~meaning~~holders of ~~Rule 144 under~~such shares of Preferred Stock will terminate, except the ~~Securities Act. Restricted securities may be sold in~~right to receive the ~~public market only~~redemption price plus accumulated and unpaid dividends, if they are registered under the Securities Act or are sold pursuant to an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which are summarized below. Subject to the lock-up agreements described below,any, payable upon redemption.

Unless full cumulative dividends on all shares ~~held by our affiliates that are not restricted securities or that~~of Preferred Stock shall have been ~~owned~~or contemporaneously are declared and paid or declared and a sum sufficient for ~~more than one year may~~the payment thereof has been or contemporaneously is set apart for payment for all past dividend periods, no shares of Preferred Stock shall be ~~sold subject to compliance with Rule 144~~redeemed unless all outstanding shares of Preferred Stock are simultaneously redeemed, and the ~~Securities Act without regard to the prescribed one-year holding period under Rule 144.~~

Lock-Up Agreements

~~KFSI, KAI, Kingsway America II Inc., FMG, and all of our directors and executive officers have signed lock-up agreements under which they have agreed~~Company shall not ~~to sell, transfer~~purchase or ~~dispose of,~~otherwise acquire directly or indirectly any shares of ~~our common stock~~Preferred Stock (except by exchanging it for its junior stock); provided, however, that the Company may purchase or ~~any securities convertible into or exercisable or exchangeable for~~acquire shares of ~~our common stock without~~Preferred Stock pursuant to a purchase or exchange offer made on the ~~prior written consent~~same terms to holders of ~~Aegis Capital Corp, for a period~~all outstanding shares of ~~180 days, subject~~Preferred Stock.

Our ability to ~~possible extension under certain circumstances, after~~redeem the ~~date of this prospectus. The lock-up restrictions, specified exceptions and the circumstances under which the lock-up period~~Preferred Stock as described above may be ~~extended~~limited by the terms of our agreements governing our existing and future indebtedness and by the provisions of other existing and future agreements.

Voting Rights

The holders of Preferred Stock will not have any voting rights, except as set forth below or as otherwise from time to time provided by law, nor will the holders of the Preferred Stock be given any notice of a meeting or vote by the Company’s stockholders.

In any matter on which holders of Preferred Stock are ~~described in more detail under “Underwriting — Lock-Up Agreements.”~~

Rule 144

~~In general, under Rule 144, beginning 90 days after the date~~entitled to vote, each share of ~~this prospectus, a person who is not our affiliate and has not been our affiliate at any time during the preceding three months~~Preferred Stock will be entitled to ~~sell~~one vote for each $25.00 of liquidation preference.

So long as any shares of ~~our common stock that such person has beneficially owned for~~Preferred Stock remain outstanding, we will not, without the affirmative vote or consent of the holders of at least ~~six months, including~~two-thirds of the ~~holding period~~votes entitled to be cast by the holders of the Preferred Stock and each other class or series of voting parity stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting together as a single class) (a) authorize, create, or issue, or increase the authorized or issued amount of, any ~~prior owner other than one~~class or series of stock ranking senior to the Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the affairs of the Company or reclassify any authorized shares of capital stock of the Company into such stock, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such stock; or (b) amend, alter or repeal our Certificate of Incorporation, whether by way of a merger, consolidation, transfer or conveyance of all or substantially all of our ~~affiliates, without regard~~assets or otherwise (an “Event”), so as to ~~volume limitations. Sales~~materially and adversely affect any right, preference, privilege or voting power of ~~our common stock by any such person would be subject to~~ the ~~availability of current public information about us if the shares of common stock to be sold were beneficially owned by such person for less than one year.~~

~~In addition, under Rule 144, a person may sell shares of our common stock acquired from us immediately upon the closing of this Offering, without regard to volume limitations~~Preferred Stock or the ~~availability of public information about us, if:~~

~~The person is not our affiliate and has not been our affiliate at any time during the preceding three months; and~~

~~The person has beneficially owned the shares of common stock to be sold for at least one year, including the holding period of any prior owner other than one of our affiliates.~~

~~No shares of our common stock that are not subject to the lock-up agreements described above will be eligible for sale under Rule 144 immediately upon the closing of this Offering.~~

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Beginning 90 days after the date of this prospectus, and subject to the lock up agreements described above, our affiliates who have beneficially owned shares of our common stock for at least six months, including the holding period of any prior owner other than one of our affiliates, will be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

1% of the number of shares of our common stock then outstanding, which will equal approximately 300,356 shares immediately after this Offering, assuming an initial public offering price of $8.00 per share (which is the estimated price set forth on the cover page of this prospectus); and

~~the average weekly trading volume in our common stock on NASDAQ during the four calendar weeks preceding the date of filing of a Notice of Proposed Sale of Securities Pursuant to Rule 144~~holders thereof; provided, however, with respect to the ~~sale.~~

~~Sales under Rule 144 by our affiliates are also subject~~occurrence of any of the Events set forth in (b) above, so long as any shares of Preferred Stock remain outstanding with the terms thereof unchanged or the holders of shares of Preferred Stock receive capital stock of the successor with substantially identical rights (taken as a whole), taking into account that, upon the occurrence of an Event, we may not be the surviving entity, the occurrence of such Event shall not be deemed to ~~manner~~adversely affect such rights, preferences, privileges or voting power of ~~sale provisions~~holders of Preferred Stock, and ~~notice requirements and to the availability of current public information about us.~~

Registration Rights

~~As described above~~ in “Certain Relationships and Related Party Transactions—Investment Prior to the Offering” and “—Registration Rights Agreement” following the completion of this Offering, subject to the 180-day lock-up period described above, each of KFSI and FMG will be entitled, subject to certain exceptions, to certainsuch case such holders shall not have any voting rights with respect to the ~~registration under the Securities Act~~occurrence of any of the ~~common stock it holds. By exercising its registration rights and causing a large number~~Events set forth in (b) above. In addition, if the holders of ~~shares to be registered and sold in~~ the ~~public market, either KFSI or FMG could cause~~Preferred Stock receive the greater of the full trading price of ~~our common~~the Preferred Stock on the date of an Event set forth in (b) above or the $25.00 liquidation preference per share of the Preferred Stock pursuant to the occurrence of any of the Events set forth in (b) above, then such holders will not have any voting rights with respect to the Events set forth in (b) above. Moreover, if any Event set forth in (b) above would adversely affect any right, preference, privilege or voting power of the Preferred Stock disproportionately relative to other classes or series of parity stock, ~~to fall. In addition, any demand to include such~~the affirmative vote of the holders of at least two-thirds of the outstanding shares ~~in our registration statements could have~~of Preferred Stock, voting separately as a ~~material adverse effect on our ability to raise needed capital.~~class, will also be required.

Rule 701

~~Any~~

Holders of ~~our employees, officers or directors who acquired shares under a written compensatory plan or contract may~~the Preferred Stock will not be entitled to ~~sell them~~vote with respect to (x) any increase in ~~reliance~~the total number of authorized shares of parity stock or junior stock of the Company, or (y) any increase in the amount of the authorized Preferred Stock or the creation or issuance of any other class or series of parity stock or junior stock, and any such authorization, creation or issuances will not be deemed to adversely affect the rights of the holders of the Preferred Stock.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Preferred Stock shall have been redeemed or called for redemption upon proper notice and sufficient funds, in cash, shall have been deposited in trust to effect such redemption and irrevocable instructions have been given to the paying agent to pay the redemption price and all accrued and unpaid distributions on ~~Rule 701. Rule 701 permits affiliates~~the Preferred Stock.

Conversion

Holders will not have the right to ~~sell~~convert Preferred Stock into, or exchange Preferred Stock for, any other securities or property of the Company.

Listing of the Preferred Stock

We intend to apply to list the Preferred Stock on the Nasdaq Stock Market under the symbol “ .” If the application is approved, we expect trading to commence within 30 days following the initial issuance of the Preferred Stock.

Transfer Agent, Registrar, Dividend Disbursing Agent and Redemption Agent

VStock Transfer, LLC will be the transfer agent, registrar, dividend disbursing agent and redemption agent for the Preferred Stock. The address of VStock Transfer, LLC is 18 Lafayette Place, Woodmere, NY, 11598.

Book-Entry; Delivery and Form

The Preferred Stock will be represented by one or more global securities that will be deposited with and registered in the name of DTC or its nominee. This means that we will not issue certificates to you for the Preferred Stock except in limited circumstances. The global securities will be issued to DTC, the depository for the Preferred Stock, who will keep a computerized record of its participants (for example, your broker) whose clients have purchased the Preferred Stock. Each participant will then keep a record of its clients. Unless exchanged in whole or in part for a certificated security, a global security may not be transferred. However, DTC, its nominees, and their ~~Rule 701 shares~~successors may transfer a global security as a whole to one another. Beneficial interests in the global securities will be shown on, and transfers of the global securities will be made only through, records maintained by DTC and its participants.

DTC has advised us that it is a limited-purpose trust company organized under ~~Rule 144 without complying~~the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the United States Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform commercial Code and a “clearing agency” registered under the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants (direct participants) deposit with DTC. DTC also records the settlement among direct participants of securities transactions, such as transfers and pledges, in deposited securities through computerized records for direct participants’ accounts. This eliminates the need to exchange certificates. Direct participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Neither we nor the underwriters take any responsibility for these operations or procedures, and you are urged to contact DTC or its participants directly to discuss these matters.

DTC’s book-entry system is also used by other organizations such as securities brokers and dealers, banks and trust companies that work through a direct participant. The rules that apply to DTC and its participants are on file with the ~~holding period requirements~~SEC.

When you purchase Preferred Stock through the DTC system, the purchases must be made by or through a direct participant, who will receive credit for the Preferred Stock on DTC’s records. Since you actually own the Preferred Stock, you are the beneficial owner and your ownership interest will only be recorded in the direct (or indirect) participants’ records. DTC has no knowledge of ~~Rule 144. Rule 701 further provides that non-affiliates may sell~~your individual ownership of the Preferred Stock. DTC’s records only show the identity of the direct participants and the amount of the Preferred Stock held by or through them. You will not receive a written confirmation of your purchase or sale or any periodic account statement directly from DTC. You will receive these ~~shares~~from your direct (or indirect) participant. Thus, the direct (or indirect) participants are responsible for keeping accurate account of the holdings of their customers like you.

We will wire dividend payments to DTC’s nominee and we will treat DTC’s nominee as the owner of the global securities for all purposes. Accordingly, we will have no direct responsibility or liability to pay amounts due on the global securities to you or any other beneficial owners in ~~reliance~~the global securities.

Any redemption notices will be sent by us directly to DTC, who will in turn inform the direct participants, who will then contact you as a beneficial holder.

It is DTC’s current practice, upon receipt of any payment of dividends or liquidation amount, to credit direct participants’ accounts on ~~Rule 144 without complying~~the payment date based on their holdings of beneficial interests in the global securities as shown on DTC’s records. In addition, it is DTC’s current practice to assign any consenting or voting rights to direct participants whose accounts are credited with preferred securities on a record date, by using an omnibus proxy. Payments by participants to owners of beneficial interests in the global securities, and voting by participants, will be based on the customary practices between the participants and owners of beneficial interests, as is the case with the ~~holding period, public information, volume limitation~~Preferred Stock held for the account of customers registered in “street name.” However, payments will be the responsibility of the participants and not of DTC or ~~notice provisions~~us.

Shares of ~~Rule 144. All holders of Rule 701 shares are required to wait until 90 days after~~Preferred Stock represented by global securities will be exchangeable for certificated securities with the ~~date of this prospectus before selling those shares. However, all shares issued under Rule 701 are subject to lock-up agreements~~same terms in authorized denominations only if:

●

DTC is unwilling or unable to continue as depositary or if DTC ceases to be a clearing agency registered under applicable law and a successor depositary is not appointed by us within 90 days; or

●

we determine not to require all of the Preferred Stock to be represented by global securities.

If the book-entry-only system is discontinued, the transfer agent will ~~only become eligible~~keep the registration books for ~~sale when~~ the ~~180-day lock-up agreements expire.~~Preferred Stock at its corporate office.

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following ~~discussion~~ is a ~~summary~~discussion of the material U.S. federal income tax considerations ~~generally~~that may be applicable to ~~beneficial owners~~“U.S. holders” and “non-U.S. holders” (each as defined below) with respect to the purchase, ownership and disposition of ~~our common stock, or Stockholders, that acquire shares of our common stock pursuant to~~the Preferred Stock offered by this ~~Offering and that hold such shares as capital assets (generally, for investment).~~ prospectus.

This ~~summary~~discussion is based ~~on current~~upon provisions of the Internal Revenue Code, ~~of 1986, as amended, or the Code, existing and proposed~~(the “Code”), U.S. Treasury ~~regulations, judicial opinions~~Regulations, and ~~published positions~~administrative rulings and court decisions, all as in effect or in existence on the date of ~~the IRS~~this filing and ~~other applicable authorities,~~ all of which are subject to change or differing interpretations by the Internal Revenue Service (“IRS”) or a court, possibly with retroactive effect. ~~This summary does not consider~~Changes in these authorities may cause the ~~U.S. federal estate or gift~~ tax consequences of anthe purchase, ownership, and disposition of the Preferred Stock to vary substantially from the consequences described below. Unless the context otherwise requires, references in this section to “we,” “our” or “us” are references to 1347 Property Insurance Holdings, Inc.

The following discussion applies only to purchasers who hold the Preferred Stock as a “capital asset” (generally, property held for investment in our common stock, except to the limited extent discussed below for Non-U.S. Holders (as defined below), or the state, local or non-U.S. tax consequences of an investment in our common stock. This summarypurposes). The following discussion does not address all aspects of ~~the~~ U.S. federal income ~~tax considerations that might~~taxation which may be ~~relevant~~important to ~~a Stockholder~~particular holders of the Preferred Stock in light of ~~its particular~~their individual circumstances, ~~or that might be relevant to Stockholders~~such as (i) holders of Preferred Stock subject to special ~~treatment under U.S. federal income~~ tax ~~laws, including, among others, partnerships~~rules (e.g., banks or other ~~pass-through entities, banks,~~financial institutions, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities, persons who hold our common stock as part of a “straddle,” “hedge,” “conversion transaction” or other risk-reduction or integrated transaction, controlled foreign corporations, passive foreign investment companies, foreign personal holding companies, companiesbroker-dealers, traders that ~~accumulate earnings~~elect to avoid U.S. federal income tax, U.S. Holders (as defined below) who do not have the U.S. dollar as their functional currency, tax-exempt organizations, former U.S. citizens or residents and persons who hold or receive our common stock as compensation.

~~For purposes of this summary, the term “U.S. Holder” means a holder of shares of our common stock that,~~mark-to-market for U.S. federal income tax purposes, ~~is:~~

antax-exempt organizations and retirement plans, individual ~~who is a citizen~~retirement accounts and tax-deferred accounts, or ~~resident~~former citizens or long-term residents of the United ~~States,~~

States) or to holders that will hold the Preferred Stock as part of a ~~corporation (or~~straddle, hedge, conversion, constructive sale, or other ~~entity taxable as a corporation) created in or organized under the laws of the United States, any state thereof or the District of Columbia,~~

~~an estate the income of which is subject to~~integrated transaction for U.S. federal income ~~taxation regardless~~tax purposes, (ii) partnerships or other entities classified as partnerships for U.S. federal income tax purposes or their partners, (iii) U.S. holders (as defined below) that have a functional currency other than the U.S. dollar, or (iv) holders who acquire Preferred Stock in a compensation transaction, all of ~~its source, or~~

~~a trust (x) if a court within the United States is able~~whom may be subject to ~~exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust or (y)~~tax rules that ~~has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.~~

differ significantly from those summarized below.

~~The term “Non-U.S. Holder” means any Holder of shares of our common stock that is neither a U.S. Holder nor~~

If a partnership ~~(including an~~or other entity ~~that is treated~~classified as a partnership for U.S. federal income tax ~~purposes).~~

~~This discussion does not address~~purposes holds our Preferred Stock, the ~~tax consequences to partnerships or other pass-through entities or persons investing through such partnerships or entities. If a partnership holds shares of our common stock, the U.S. federal income~~ tax treatment of ~~a partner in the partnership~~its partners generally will depend upon the status of the partner, ~~and~~ the activities of the ~~partnership. Such~~partnership and certain determinations made at the partner level. If you are a partner ~~is encouraged~~in a partnership holding our Preferred Stock, you should consult your own tax advisor regarding the tax consequences to you of the partnership’s ownership of our Preferred Stock.

No ruling has been obtained or will be requested from the IRS, regarding any matter affecting us or prospective holders of our Preferred Stock. The statements made herein may be challenged by the IRS and, if so challenged, may not be sustained upon review in a court.

This discussion does not contain information regarding any state or local, estate, gift or alternative minimum tax considerations concerning the ownership or disposition of the Preferred Stock.

Each prospective holder of our Preferred Stock should consult its own tax ~~advisors as~~advisor regarding the U.S. federal, state, local, and other tax consequences of the purchase, ownership and disposition of the Preferred Stock.

U.S. Holders

Subject to the qualifications set forth above, the following discussion summarizes the U.S. federal income tax ~~consequences of being a partner in a partnership~~considerations that ~~acquires, holds or disposes of our common stock.~~

PROSPECTIVE INVESTORS CONSIDERING THE PURCHASE OF OUR COMMON STOCK ARE ENCOURAGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE APPLICATION OF U.S. FEDERAL TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.

U.S. Holders

~~The following discussion summarizes~~may relate to the ~~material U.S. federal income tax consequences of the~~purchase, ownership and disposition of ~~our common stock applicable to U.S. Holders, subject to~~ the ~~limitations described above.~~

DistributionsPreferred Stock by “U.S. holders.” You are a “U.S. holder” if you are a beneficial owner of Preferred Stock and Dividends

~~Generally, distributions paid to a U.S. Holder with respect to our common stock will constitute dividends~~you are for U.S. federal income tax ~~purposes~~purposes:

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an individual citizen or resident of the United States;

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a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

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a trust if it (i) is subject to the primary supervision of a court within the United States and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust or (ii) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person (as defined in the Code).

Distributions in General

If distributions are made with respect to the Preferred Stock, such distributions (pursuant to Section 301 of the Code) will be treated as dividends to the extent ~~paid from~~of our current or accumulated earnings and profits as determined under ~~U.S. federal income tax principles. If~~the Code. Any portion of a distribution that exceeds ~~our current and accumulated~~

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such earnings and profits will first be applied to reduce a U.S. holder’s tax basis in the Preferred Stock on a share-by-share basis, and the excess will be treated as ~~a tax-free return~~gain from the disposition of the Preferred Stock, the tax treatment of which is discussed below under “– U.S. ~~Holder’s~~Holders: Disposition of Preferred Stock, Including Redemptions.”

Under current law, dividends received by individual holders of the Preferred Stock will be subject to a reduced maximum tax rate of 20% if such dividends are treated as “qualified dividend income” for U.S. federal income tax purposes. The rate reduction does not apply to dividends received to the extent that the individual stockholder elects to treat the dividends as “investment income,” which may be offset against investment upexpenses. Furthermore, the rate reduction does not apply to dividends that are paid to individual stockholders with respect to Preferred Stock that is held for 60 days or less during the 121 day period beginning on the date which is 60 days before the date on which the Preferred Stock becomes ex-dividend (or where the dividend is attributable to a period or periods aggregating in excess of 366 days, Preferred Stock that is held for 90 days or less during the 181 day period beginning on the date which is 90 days before the date on which the Preferred Stock becomes ex-dividend). Also, if a dividend received by an individual stockholder that qualifies for the rate reduction is an “extraordinary dividend” within the meaning of Section 1059 of the Code, any loss recognized by such ~~U.S. Holder’s adjusted tax basis in our common stock. Any remaining excess~~individual stockholder on a subsequent disposition of the stock will be treated as long-term capital ~~gain,~~loss to the extent of such “extraordinary dividend,” irrespective of such stockholder’s holding period for the stock. In addition, dividends recognized by U.S. holders that are individuals could be subject to the 3.8% tax ~~treatment described below under “-Sale, Exchange or Other Taxable Disposition~~on net investment income. Individual stockholders should consult their own tax advisors regarding the implications of ~~Our Common Stock.”~~these rules in light of their particular circumstances.

Dividends ~~paid~~received by ~~us to~~ corporate ~~U.S. Holders~~stockholders generally will be eligible for the dividends-received deduction. Generally, this deduction ~~provided that~~is allowed if the ~~corporate U.S. Holder receiving~~underlying stock is held for at least 46 days during the 91 day period beginning on the date 45 days before the ex-dividend date of the stock (or where the dividend ~~satisfies~~is attributable to a period or periods aggregating in excess of 366 days, Preferred Stock that is held for at least 91 days during the ~~holding~~181 day period ~~and other requirements for~~beginning on the date which is 90 days before the date on which the Preferred Stock becomes ex-dividend). Corporate stockholders of the Preferred Stock should also consider the effect of Section 246A of the Code, which reduces the dividends-received deduction allowed to a corporate stockholder that has incurred indebtedness that is “directly attributable” to an investment in portfolio stock such as preferred stock. If a corporate stockholder receives a dividend on the Preferred Stock that is an “extraordinary dividend” within the meaning of Section 1059 of the Code, the stockholder in certain instances must reduce its basis in the Preferred Stock by the amount of the “nontaxed portion” of such “extraordinary dividend” that results from the application of the dividends-received deduction. ~~Dividends paid by us~~If the “nontaxed portion” of such “extraordinary dividend” exceeds such corporate stockholder’s basis, any excess will be taxed as gain as if such stockholder had disposed of its shares in the year the “extraordinary dividend” is paid. Each domestic corporate holder of the Preferred Stock is urged to ~~certain non-corporate U.S. Holders (including individuals)~~consult with its tax advisors with respect to ~~taxable years beginning after December 31, 2012 generally will be eligible~~the eligibility for ~~U.S. federal income taxation at~~and the ~~rates generally applicable~~amount of any dividends received deduction and the application of Code Section 1059 to ~~long-term capital gains for individuals (currently at a maximum tax rate of 20%), provided that~~any dividends it may receive on the non-corporate U.S. Holder receiving the dividend satisfies the applicable holding period and other requirements, and may also be subject to the Medicare tax described below under “— Medicare Tax.”Preferred Stock.

Sale, Exchange or Other Taxable
Disposition of Our CommonPreferred Stock,

Including Redemptions

Upon aany sale, exchange, redemption (except as discussed below) or other ~~taxable~~ disposition of ~~shares of our common stock,~~the Preferred Stock, a U.S. ~~Holder generally~~holder will recognize capital gain or loss equal to the difference between the amount realized onby the ~~sale, exchange or other taxable disposition~~U.S. holder and the U.S. ~~Holder’s~~holder’s adjusted tax basis in the ~~shares of our common stock.~~Preferred Stock. Such capital gain or loss will be long-term capital gain or loss if the U.S. holder’s holding period for the Preferred Stock is longer than one year. A U.S. holder should consult its own tax advisors with respect to applicable tax rates and netting rules for capital gains and losses. Certain limitations exist on the deduction of capital losses by both corporate and non-corporate taxpayers. In addition, gains recognized by U.S. holders that are individuals could be subject to the 3.8% tax on net investment income.

A redemption of shares of the Preferred Stock will generally be a taxable event. If the redemption is treated as a sale or exchange, instead of a distribution pursuant to Section 301 of the Code, a U.S. holder will recognize capital gain or loss (which will be long-term capital gain or loss, if the U.S. holder’s holding period for such Preferred Stock exceeds one year) equal to the difference between the amount realized by the U.S. holder and the U.S. holder’s adjusted tax basis in the Preferred Stock redeemed, except to the extent that any cash received is attributable to dividends which were declared on the Preferred Stock prior to any action toward redemption (such dividends will be subject to the rules discussed above in “– U.S. Holders – Distributions in General).” A payment made in redemption of Preferred Stock may be treated as a distribution pursuant to Section 301 of the Code, rather than as payment in exchange for the Preferred Stock, unless the redemption:

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is “not essentially equivalent to a dividend” with respect to a U.S. holder under Section 302(b)(1) of the Code;

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is a “substantially disproportionate” redemption with respect to a U.S. holder under Section 302(b)(2) of the Code;

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results in a “complete redemption” of a U.S. holder’s stock interest in the company under Section 302(b)(3) of the Code; or

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is a redemption of stock held by a non-corporate stockholder, which results in a partial liquidation of the company under Section 302(b)(4) of the Code.

In determining whether any of these tests have been met, a U.S. holder must take into account not only shares of the Preferred Stock and the common stock that the U.S. Holder ~~has held~~actually owns, but also shares of stock that the U.S. holder constructively owns within the meaning of Section 318 of the Code.

A redemption payment will be treated as “not essentially equivalent to a dividend” if it results in a “meaningful reduction” in a U.S. holder’s aggregate stock interest in the company, which will depend on the U.S. holder’s particular facts and circumstances at such time. If the redemption payment is treated as a distribution pursuant to Section 301 of the Code, the rules discussed above in “– U.S. Holders – Distributions in General” apply.

Satisfaction of the “complete redemption” and “substantially disproportionate” exceptions is dependent upon compliance with the objective tests set forth in Section 302(b)(3) and Section 302(b)(2) of the Code, respectively. A redemption will result in a “complete redemption” if either all of the shares of our ~~common~~ stock ~~for more than one year at~~actually and constructively owned by a U.S. holder are exchanged in the time of disposition. Long-term capital gains of certain non-corporate U.S. Holders (including individuals) recognized in taxable years beginning after December 31, 2012 are subject to U.S. federal income taxation at a maximum rate of 20% and possibly the Medicare tax described below under “— Medicare Tax.” The deductibility of capital losses is subject to limitations under the Code.

Medicare Tax

~~Section 1411~~redemption or all of the ~~Code generally imposes a 3.8% tax on~~shares of our stock actually owned by the ~~net investment income of certain individuals with modified adjusted gross income exceeding certain thresholds~~U.S. holder are exchanged in the redemption and ~~on certain income of certain estates~~the U.S. holder is eligible to waive, and trusts. For these purposes, “net investment income” will generally include interest, dividends (including dividends paid with respect to our common stock), annuities, royalties, rents, net gain attributable to the ~~disposition of property not held in a trade or business (including net gain from~~U.S. holder effectively waives, the ~~sale, exchange or other taxable disposition~~attribution of shares of our ~~common stock)~~stock constructively owned by the U.S. holder in accordance with the procedures described in Section 302(c)(2) of Code. A redemption does not qualify for the “substantially disproportionate” exception if the stock redeemed is only non-voting stock, and ~~certain other income, but~~for this purpose, stock which does not have voting rights until the occurrence of an event is not voting stock until the occurrence of the specified event. Accordingly, any redemption of the Preferred Stock generally will not qualify for this exception because the voting rights are limited. For purposes of the “redemption from non-corporate stockholders in a partial liquidation” test, a distribution will be ~~reduced~~treated as in partial liquidation of a corporation if the distribution is not essentially equivalent to a dividend (determined at the corporate level rather than the stockholder level) and the distribution is pursuant to a plan and occurs within the taxable year in which the plan was adopted or within the succeeding taxable year. For these purposes, a distribution is generally not essentially equivalent to a dividend if the distribution results in a corporate contraction. The determination of what constitutes a corporate contraction is factual in nature, and has been interpreted under case law to include the termination of a business or line of business. Each U.S. holder of the Preferred Stock should consult its own tax advisors to determine whether a payment made in redemption of the Preferred Stock will be treated as a distribution pursuant to Section 301 of the Code or a payment in exchange for the Preferred Stock. If the redemption payment is treated as a distribution pursuant to Section 301 of the Code, the rules discussed above in “– U.S. Holders – Distributions in General” apply. Under proposed Treasury regulations, if any amount received by ~~any deductions properly allocable~~a U.S. holder in redemption of Preferred Stock is treated as a distribution with respect to such ~~income~~holder’s Preferred Stock, but not as a dividend, such amount will be allocated to all shares of the Preferred Stock held by such holder immediately before the redemption on a pro rata basis. The amount applied to each share will reduce such holder’s adjusted tax basis in that share and any excess after the basis is reduced to zero will result in taxable capital gain. If such holder has different bases in shares of the Preferred Stock, then the amount allocated could reduce a portion of the basis in certain shares while reducing all of the basis, and giving rise to taxable gain, in other shares. Thus, such holder could have gain even if such holder’s aggregate adjusted tax basis in all shares of the Preferred Stock held exceeds the aggregate amount of such distribution.

The proposed Treasury regulations permit the transfer of basis in the redeemed shares of the Preferred Stock to the holder’s remaining, unredeemed Preferred Stock (if any), but not to any other class of stock held, directly or ~~net gain.~~indirectly, by the holder. Any unrecovered basis in the Preferred Stock would be treated as a deferred loss to be recognized when certain conditions are satisfied. The proposed Treasury regulations would be effective for transactions that occur after the date the regulations are published as final Treasury regulations. There can, however, be no assurance as to whether, when and in what particular form such proposed Treasury regulations are ultimately finalized.

Information Reporting and Backup Withholding

~~In general,~~

Information reporting and backup withholding may apply with respect to payments of dividends on ~~our common stock~~the Preferred Stock and to certain payments ~~to a U.S. Holder~~ of proceeds on the ~~proceeds of a~~ sale ~~exchange~~ or other disposition of ~~our common stock are subject to information reporting and~~the Preferred Stock. Certain non-corporate U.S. holders may be subject to U.S. backup withholding (currently at a rate of ~~28%~~24%) on payments of dividends on the Preferred Stock and certain payments of proceeds on the sale or other disposition of the Preferred Stock unless the ~~U.S. Holder (i) is~~beneficial owner thereof furnishes the payor or its agent with a ~~corporation or other exempt recipient or (ii) provides an accurate~~ taxpayer identification number, certified under penalties of perjury, and ~~certifies that it is not subject to~~certain other information, or otherwise establishes, in the manner prescribed by law, an exemption from backup withholding.

~~Backup~~ U.S. backup withholding tax is not an additional tax. Any amounts withheld under the backup withholding rules ~~from~~may be allowed as a ~~payment to~~refund or a credit against a U.S. ~~Holder will be refunded or credited against the U.S. Holder’s~~holder’s U.S. federal income tax liability, ~~if any,~~which may entitle the U.S. holder to a refund, provided ~~that~~the U.S. holder timely furnishes the required information ~~is timely furnished~~ to the ~~IRS.~~Internal Revenue Service.

Non-U.S. Holders

~~The~~

Subject to the qualifications set forth above under the caption “Material U.S. Federal Income Tax Considerations,” the following discussion summarizes ~~the material~~certain U.S. federal income tax consequences of the purchase, ownership and disposition of ~~our common stock applicable to Non-U.S. Holders, subject to~~ the ~~limitations described above.~~Preferred Stock by certain “Non-U.S. holders.” You are a “Non-U.S. holder” if you are a beneficial owner of the Preferred Stock and you are not a “U.S. holder.”

Distributions and Dividends

on the Preferred Stock

~~Generally,~~

If distributions ~~paid to a Non-U.S. Holder~~are made with respect to ~~our common stock~~the Preferred Stock, such distributions will ~~constitute~~be treated as dividends ~~for U.S. federal income tax purposes~~ to the extent ~~paid from~~of our current orand accumulated earnings and profits as determined under the Code and may be subject to withholding as discussed below. Any portion of a distribution that exceeds our current and accumulated earnings and profits will first be applied to reduce the Non-U.S. holder’s basis in the Preferred Stock and, to the extent such portion exceeds the Non-U.S. holder’s basis, the excess will be treated as gain from the disposition of the Preferred Stock, the tax treatment of which is discussed below under “– Non-U.S. Holders – Disposition of Preferred Stock, Including Redemptions.” In addition, if we are a U.S. ~~federal income tax principles. If~~real property holding corporation,i.e. a “USRPHC,” and any distribution exceeds our current and accumulated earnings and profits, we will need to choose to satisfy our withholding requirements either by treating the ~~excess will be treated~~entire distribution as a ~~tax-free return of the Non-U.S. Holder’s investment, up to~~

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~~such Non-U.S. Holder’s adjusted tax basis in our common stock. Any remaining excess will be treated as capital gain,~~dividend, subject to the ~~tax treatment described below under “— Sale, Exchange or Other Taxable Disposition of Our common Stock.”~~

~~Any dividend paid to a Non-U.S. Holder with respect to our common stock generally will be subject to~~ withholding ~~tax~~rules in the following paragraph (and withhold at a ~~30%~~minimum rate ~~(or~~of 15% or such lower rate as may be specified by an applicable income tax ~~treaty). Generally,~~treaty for distributions from a ~~Non-U.S. Holder must certify~~USRPHC), or by treating only the amount of the distribution equal to our reasonable estimate of our current and accumulated earnings and profits as a dividend, subject to ~~its eligibility for reduced~~the withholding ~~under~~rules in the following paragraph, with the excess portion of the distribution subject to withholding at a rate of 15% or such lower rate as may be specified by an applicable income tax treaty as if such excess were the result of a sale of shares in a USRPHC (discussed below under “– Non-U.S. Holders – Disposition of Preferred Stock, Including Redemptions”), with a credit generally allowed against the Non-U.S. holder’s U.S. federal income tax liability in an amount equal to the amount withheld from such excess.

Dividends paid to a Non-U.S. holder of the Preferred Stock 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 the Non-U.S. holder within the United States (and, where a tax treaty applies, are attributable to a permanent establishment maintained by the Non-U.S. holder in the United States) are not subject to the withholding tax, provided that certain certification and disclosure requirements are satisfied including completing Internal Revenue Service Form W-8ECI (or other applicable form). Instead, such dividends are subject to U.S. federal income tax on a ~~properly completed IRS~~net income basis in the same manner as if the Non-U.S. holder were a United States person as defined under the Code, unless an applicable income tax treaty provides otherwise. Any such effectively connected dividends received by a foreign 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. A Non-U.S. holder of the Preferred Stock who wishes to claim the benefit of an applicable treaty rate and avoid backup withholding, as discussed below, for dividends will be required to (i) complete Internal Revenue Service Form W-8BEN ~~in order to obtain~~or Form W-8BEN-E (or other applicable form) and certify under penalty of perjury that such holder is not a United States person as defined under the Code and is eligible for treaty benefits, or (ii) if the Preferred Stock is held through certain foreign intermediaries, satisfy the relevant certification requirements of ~~such treaty.~~applicable Treasury regulations. A Non-U.S. ~~Holders that do not timely provide us with~~holder of the ~~required certification, but which qualify~~Preferred Stock eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty ~~rate,~~ may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the ~~IRS. Non-U.S. Holders are encouraged to consult their tax advisors regarding possible entitlement to benefits under a tax treaty.~~Internal Revenue Service.

If, however, the Non-U.S. Holder provides an IRS Form W-8ECI, certifying that the dividend is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States, and otherwise complies with applicable certification requirements, the dividend will not be subject to such withholding. Instead, such dividend will be subject to U.S. federal income tax in the manner described below under “ — Effectively Connected Income.”

Sale, Exchange or Other Taxable

Disposition of Our CommonPreferred Stock,

Including Redemptions

~~Except as otherwise discussed below,~~

Any gain realized by a Non-U.S. ~~Holder generally~~holder on the disposition of the Preferred Stock will not be subject to U.S. federal income or withholding tax unless:

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the gain is effectively connected with a trade or business of the Non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the Non-U.S. holder in the United States);

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the Non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition, and certain other conditions are met; or

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we are or have been a USRPHC for U.S. federal income tax purposes, as such term is defined in Section 897(c) of the Code, and such Non-U.S. holder owned directly or pursuant to attribution rules at any time during the five year period ending on the date of disposition more than 5% of the Preferred Stock. This assumes that the Preferred Stock is regularly traded on an established securities market, within the meaning of Section 897(c)(3) of the Code.

A Non-U.S. holder described in the first bullet point immediately above will generally be subject to tax on ~~any~~the net gain ~~realized upon~~derived from the sale exchange or other taxable disposition of our common stock unless (i) such gain is effectively connected with the Non-U.S. Holder’s conduct of a U.S. trade or business (or, if an income tax treaty applies, the gain is attributable to a U.S. permanent establishment or fixed base maintained by such Non-U.S. Holder in the United States), (ii) the Non-U.S. Holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which such sale, exchange or other taxable disposition occurs and certain other conditions are met, or (iii) we are or become a “United States real property holding corporation,” or USRPHC, forunder regular graduated U.S. federal income tax ~~purposes, at any time within~~rates in the shorter of the five-year period preceding the disposition or the Non-U.S. Holder's holding period for our common stock. We do not believe that we are or will become a USRPHC. Even if we become a USRPHC, however,same manner as ~~long as our common stock is regularly traded on an established securities market, such common stock will be treated as a U.S. real property interest only~~ if the Non-U.S. ~~Holder held (actually or constructively) more than 5% of our common stock at any time during~~holder were a United States person as defined under the ~~shorter of the five-year period preceding the disposition or the Non-U.S. Holder’s holding period for our common stock.~~

~~Gain described in clause (i) of the paragraph above will~~Code, and if it is a corporation, may also be subject to ~~U.S. federal income~~the branch profits tax ~~in the manner described below under “ — Effectively Connected Income.” A Non-U.S. Holder described in clause (ii)~~equal to 30% of ~~the paragraph above will be subject to U.S. federal income tax~~its effectively connected earnings and profits or at ~~a 30% rate (or~~ such lower rate as may be specified by an applicable income tax ~~treaty) on the net gain derived from the sale, exchange or other taxable disposition, which may be offset by U.S.-source capital losses of the Non-U.S. Holder.~~

Effectively Connected Income

Any dividend with respect to, or gain realized upon the sale or other disposition of, our common stock that is effectively connected with a trade or business carried on by a Non-U.S. Holder within the United States (or, if an income tax treaty applies, that is attributable to a permanent establishment or fixed base maintained by such Non-U.S. Holdertreaty. Gain described in the ~~United States)~~second bullet point immediately above will be subject to U.S. federal income tax ~~based on~~at a rate of 30% (or such lower applicable treaty rate), which may be offset by U.S. source capital losses of the Non-U.S. ~~Holder’s net~~holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses. A Non-U.S. holder described in the third bullet point above will be subject to U.S. federal income tax under regular graduated U.S. federal income tax rates with respect to the gain recognized in the same manner as if the Non-U.S. ~~Holder~~holder were a ~~U.S.~~United States person ~~for~~as defined under the Code.

If a Non-U.S. holder is subject to U.S. federal income tax ~~purposes.~~ on any sale, exchange, redemption (except as discussed below), or other disposition of the Preferred Stock, such a Non-U.S. holder will recognize capital gain or loss equal to the difference between the amount realized by the Non-U.S. holder and the Non-U.S. holder’s adjusted tax basis in the Preferred Stock. Such capital gain or loss will be long-term capital gain or loss if the Non-U.S. holder’s holding period for the Preferred Stock is longer than one year. A Non-U.S. holder should consult its own tax advisors with respect to applicable tax rates and netting rules for capital gains and losses. Certain limitations exist on the deduction of capital losses by both corporate and non-corporate taxpayers.

If a ~~dividend~~Non-U.S. holder is subject to U.S. federal income tax on any disposition of the Preferred Stock, a redemption of shares of the Preferred Stock will be a taxable event. If the redemption is treated as a sale or ~~gain is effectively connected with a U.S. trade or business~~exchange, instead of a distribution pursuant to Section 301 of the Code, a Non-U.S. ~~Holder~~holder generally will recognize long-term capital gain or loss, if the Non-U.S. holder’s holding period for such Preferred Stock exceeds one year, equal to the difference between the amount of cash received and fair market value of property received and the Non-U.S. holder’s adjusted tax basis in the Preferred Stock redeemed, except to the extent that any cash received is ~~a corporation, such corporate Non-U.S. Holder may~~attributable to dividends which were declared on the Preferred Stock prior to any action toward redemption (such dividends will be subject to ~~an additional “branch profits tax” at a 30% rate (or such lower rate as~~the rules discussed above in “– Non-U.S. Holders – Distributions on the Preferred Stock”). A payment made in redemption of the Preferred Stock may be ~~specified by an applicable income tax treaty), subject~~treated as a distribution pursuant to ~~certain adjustments.~~Section 301 of the Code, rather than as payment in exchange for the Preferred Stock, in the same circumstances discussed above under “– U.S. Holders – Disposition of Preferred Stock, including Redemptions.” Each Non-U.S. ~~Holders~~holder of the Preferred Stock should consult ~~their~~its own tax advisors ~~regarding any applicable tax treaties that may provide~~to determine whether a payment made in redemption of the Preferred Stock will be treated as a distribution pursuant to Section 301 of the Code or as payment in exchange for ~~different rules.~~the Preferred Stock.

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Information Reportingreporting and Backup Withholding

backup withholding

~~Annual reporting~~

We must report annually to the ~~IRS~~Internal Revenue Service and to each Non-U.S. ~~Holder will be required as to~~holder the amount of dividends paid to such Non-U.S. ~~Holder~~holder and the ~~amount, if any, of~~ tax withheld with respect to such dividends, ~~unless~~regardless of whether withholding was required. Copies of the ~~Non-U.S. Holder is an exempt recipient or otherwise establishes an exemption from~~information returns reporting such ~~requirements. This information~~dividends and withholding may also be made available to the tax authorities in the ~~Non-U.S. Holder’s~~ country ~~of residence. Dividends generally are not subject to “backup withholding” if~~in which the Non-U.S. ~~Holder properly certifies as to its non-U.S. status (usually by completing an IRS Form W-8BEN, including any claim to reduced withholding~~holder resides under the provisions of an applicable income tax ~~treaty).~~

~~The payment~~treaty. A Non-U.S. holder will not be subject to backup withholding on dividends paid to such Non-U.S. holder as long as such Non-U.S. holder certifies under penalty of perjury that it is a Non-U.S. holder (and the payor does not have actual knowledge or reason to know that such Non-U.S. holder is a United States person as defined under the Code), or such Non-U.S. holder otherwise establishes an exemption. Depending on the circumstances, information reporting and backup withholding may apply to the proceeds ~~of the~~received from a sale ~~exchange~~ or other disposition of ~~our common stock to or through~~ the ~~U.S. office of a broker is subject to both backup withholding and information reporting~~Preferred Stock unless the ~~Non-U.S. Holder, or~~ beneficial owner ~~thereof,~~certifies under penalty of perjury that it is a Non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person as ~~applicable, certifies its non-U.S. status on IRS Form W-8BEN,~~defined under the Code), or such owner otherwise establishes an exemption. ~~Information reporting requirements, but not~~U.S. backup withholding will also generally apply to payments of the proceeds of a sale, exchange or other disposition of our common stock by foreign offices of U.S. brokers or foreign brokers with certain types of relationships to the United States unless the Non-U.S. Holder establishes an exemption.

~~Backup withholding~~tax is not an additional tax. Any amounts withheld under the backup withholding rules ~~from payments made to~~may be allowed as a refund or a credit against a Non-U.S. ~~Holder may be refunded or credited against such Non-U.S. Holder’s~~holder’s U.S. federal income tax liability ~~if any,~~ provided ~~that~~ the required information is timely furnished to the ~~IRS.~~Internal Revenue Service.

Estate
Foreign Account Tax

Compliance Act

A non-resident alien individual should note that shares of our common stock held by (i) such individual or (ii) an entity created by such individual and included in such individual’s gross estate for U.S. federal estate tax purposes (for example, a trust funded by such individual and with respect to which the individual has retained certain interests or powers), will be, absent an applicable treaty, treated as U.S. situs property subject to U.S. federal estate tax. Accordingly, Non-U.S. Holders who are non-resident alien individuals may be subject to U.S. federal estate tax on all or a portion of the value of our common stock owned at the time of their death. Prospective individual Stockholders who are non-U.S. persons are encouraged to consult their tax advisors concerning the potential U.S. federal estate tax consequences with respect to our common stock.

Recently Enacted Legislation

~~Section~~Sections 1471 through 1474 of the Code (provisions which are commonly referred to as “FATCA”), generally ~~imposes~~impose a 30% withholding tax on dividends on Preferred Stock paid ~~with respect to our common stock~~on or after July 1, 2014 and the gross proceeds ~~from~~of a sale or other disposition of ~~shares of our common stock, in each case~~Preferred Stock paid toon or after January 1, 2019 to: (i) a foreign financial institution (as that term is defined in Section 1471(d)(4) of the Code) unless ~~the~~that foreign financial institution enters into an agreement with the U.S. Treasury Department to collect and disclose information regarding ~~its~~ U.S. account holders of that foreign financial institution (including certain account holders that are foreign entities that have U.S. owners) and satisfies ~~certain~~ other ~~requirements,~~requirements; and (ii) ~~certain~~specified other ~~non-financial~~ foreign entities unless ~~the~~such an entity ~~provides the payor with certain information regarding certain direct and indirect U.S. owners of the entity, or~~ certifies that it ~~has no such~~does not have any substantial U.S. owners or provides the name, address and ~~complies with certain~~taxpayer identification number of each substantial U.S. owner and such entity satisfies other ~~requirements (although, under regulations described below,~~specified requirements. Non-U.S. holders should consult their own tax advisors regarding the ~~non-financial foreign entity~~application of FATCA to them and whether it may be ~~exempt from such withholding even if it does not provide such certification or comply with such other requirements). An intergovernmental agreement between the United States~~relevant to their purchase, ownership and an applicable non-U.S. country may modify such requirements. Under current Treasury regulations (as modified by recent guidance released by the IRS on July 12, 2013), such withholding tax will only apply to dividends paid with respect to our common stock after June 30, 2014, and to proceeds from the sale, exchange or other taxable disposition of such stock occurring after December 31, 2016. Under certain circumstances, a Non-U.S. Holder of shares of our common stock might be eligible for refunds or credits of the tax. You are encouraged to consult with your own tax advisor regarding the possible implications of this recently enacted legislation on your investment in shares of our common stock.Preferred Stock.

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UNDERWRITING

~~Aegis Capital Corp~~

Under the terms and subject to the conditions in an underwriting agreement, the underwriters named below, for whom Boenning & Scattergood, Inc. is acting as ~~the sole book-running manager of the Offering~~representative, have severally agreed to purchase, and as representative of the underwriters, or the Representative. We have entered into an underwriting agreement, dated , 2014, with the Representative. Subject to the terms and conditions set forth in the underwriting agreement, we have agreed to sell to ~~each underwriter named below, and each underwriter has~~them, severally, ~~and not jointly agreed to purchase from us, at the public offering price per share less the underwriting discounts set forth on the cover page of this prospectus,~~ the number of shares of ~~common stock listed next to its name in the following table.~~Preferred Stock indicated below.


Underwriters	Number of Shares
~~Aegis Capital Corp~~
~~EarlyBirdCapital,~~Boenning & Scattergood, Inc.
Total		~~1,625,000~~

The underwriting agreement provides that the obligations of the several underwriters ~~are committed~~ to ~~purchase all~~pay for and accept delivery of the shares of ~~common stock~~Preferred Stock offered by us other than those covered by the option to purchase additional shares described below, if they purchase any shares. The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriters’ obligationsthis prospectus are subject to ~~customary conditions, representations and warranties contained in~~ the ~~underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.~~

~~The underwriters are offering the shares of common stock, subject to prior sale, when, as and if issued to and accepted by them, subject to~~ approval of certain legal matters by their counsel and to certain other ~~conditions specified in the underwriting agreement.~~conditions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Over-Allotment Option

~~We have granted~~ The underwriters are obligated to ~~the underwriters an over-allotment option. This option, which is exercisable~~take and pay for ~~up to 45 days after the date of this prospectus, permits the underwriters to purchase a maximum of 243,750 additional shares (15%~~all of the shares of ~~common stock sold in~~Preferred Stock offered by this ~~Offering) from us~~prospectus if any such shares of Preferred Stock are taken. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

We have agreed to ~~cover over-allotments, if any. If~~indemnify the underwriters ~~exercise all~~against certain liabilities, including liabilities under the Securities Act or ~~part~~to contribute to payments the underwriters may be required to make in respect of ~~this option, they will purchase~~any of those liabilities.

Commissions and Discounts

The underwriters propose initially to offer the shares ~~covered by~~of Preferred Stock to the ~~option~~public at the public offering price ~~per share that appears~~set forth on the cover page of this prospectus ~~less the underwriting discount. If this option is exercised in full, the total price~~and to certain dealers at the public ~~will~~offering price minus a concession not in excess of $ per share. After the initial offering, the public offering price, concession and any other selling terms of this offering may be ~~$ and~~changed by the ~~total net proceeds, before expenses, to us will be $ .~~underwriters.

Discounts and Commissions

The following table shows the public offering price, underwriting discount and proceeds, before expenses, that we will pay to ~~us. The information assumes either no exercise or full exercise by~~ the underwriters ~~of their option to purchase additional shares.~~in connection with this offering.

Per
Share

Total ~~Without Over-Allotment Option~~

~~Total With Over-Allotment Option~~

Public offering price

~~Underwriting discounts and commissions (7%)~~

~~Non-accountable expense allowance (1%)~~⁽¹⁾

Underwriting discounts and commissions to be paid by us

Proceeds, before expenses, to us

~~(1)~~

We have agreed to pay a non-accountable expense allowance to the Representative equal to 1% of the gross proceeds received in this Offering; provided, however, the expense allowance of 1% is not payable with respect to the shares of common stock sold upon exercise of the underwriters’ over-allotment option.

The underwriters propose to offer the shares of common stock to the public at the public offering price per share set forth on the cover page of this prospectus. In addition, the underwriters may offer some of the shares of common stock to other securities dealers at such price less a concession of $ per share. If all of the

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shares of common stock offered by us are not sold at the public offering price per share, the underwriters may change the offering price per share and other selling terms by means of a supplement to this prospectus.

We have paid an expense deposit of $50,000 to the Representative, which will be applied against accountable expenses (in compliance with FINRA Rule 5110(f)(2)(C)) that will be paid by us to the Representative in connection with this Offering. We have also agreed to pay certain of the ~~Representative’s~~underwriters’ expenses relating to the ~~Offering,~~offering, including (a) ~~all fees, expenses and disbursements relating to background checks of our officers and directors in an amount not to exceed $5,000 per individual and $15,000 in the aggregate; (b)~~ all filing fees incurred in clearing this ~~Offering~~offering with FINRA; ~~(c)~~(b) all fees, expenses and disbursements relating to the registration, qualification or exemption of securities offered under the securities laws of foreign jurisdictions designated by the ~~Representative; (d) the costs associated with bound volumes of the public offering materials as well as commemorative mementos~~representative; and ~~Lucite tombstones not to exceed $18,225; (e)~~(c) the reasonable fees and expenses of the ~~Representative's~~representative’s legal counsel not to exceed $25,000; (f) the $21,775 cost associated with the use of Ipreo’s book-building, prospectus tracking and compliance software for this Offering; and (g) up to $20,000 of the Representative’s actual accountable road show expenses for the Offering. The total amount of accountable expenses to be reimbursed will not exceed $100,000.$75,000.

We estimate that the total expenses payable by us in connection with this ~~Offering,~~offering, other than the underwriting discounts and commissions referred to above, will be approximately ~~$700,000.~~$ .

Discretionary Accounts

~~The underwriters do not~~

Listing

Prior to this offering, there has been no public market for the Preferred Stock. We intend to ~~confirm sales~~apply to list the Preferred Stock on the Nasdaq Stock Market under the symbol “ .” If the application is approved, we expect trading of the ~~securities offered hereby~~Preferred Stock on the Nasdaq to ~~any accounts over which they have discretionary authority.~~begin within the 30-day period after the initial delivery of the Preferred Stock.

Lock-Up Agreements

~~Pursuant to certain “lock-up” agreements, we~~

No Sales of Similar Securities

We have agreed that, for a period of 90 days from the date hereof, we will not, ~~to,~~ without the prior written consent of the ~~Representative, (i)~~representative on behalf of the underwriters, issue, offer, pledge, sell, contract to sell, ~~sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend,~~ or otherwise ~~transfer or~~ dispose of ~~directly or indirectly,~~ any shares of ~~our capital~~Preferred Stock or any shares of preferred stock ranking on parity with or senior to the Preferred Shares or any securities convertible into or exercisable or exchangeable for shares of ~~our capital~~Preferred Stock or shares of preferred stock ~~(ii) file~~ranking on par with or ~~cause to be filed any registration statement with the Securities and Exchange Commission relating~~senior to the ~~offering of any shares of our capital stock or any securities convertible into or exercisable or exchangeable for shares of our capital stock or (iii)~~Preferred Stock; enter into any swap or other arrangement that transfers ~~to another, in whole or in part,~~ any of the economic consequences of ownership of ~~our capital stock, in each case for a period of 180 days from~~ the date of effectiveness of the offering, which we refer to as the Lock-Up Period. The restrictions described above do not apply to (1) the shares of common stock to be sold to the underwriters pursuant to the underwriting agreement, (2) the issuance of shares of common stock upon the exercise of a stock optionPreferred Stock or ~~warrant~~such parity or the conversion of a security outstanding on the date of this prospectus, of which the Representative has been advised in writing, (3) the issuance of stock options or shares of our capital stock under any of our equity compensation plans, or (4) the filing by us ofsenior preferred stock; file any registration statement ~~on Form S-8~~ relating to ~~shares of our common stock granted under any equity compensation plan; provided that, prior to~~ the issuance of any such stock options or shares of capital stock that vest within the Lock-Up Period, each recipient thereof shall sign and deliver a lock-up agreement substantially similar to the lock-up agreements executed by our executive officers, directors and stockholders.

Each of KFSI, KAI, Kingsway America II Inc., FMG and our executive officers and directors have agreed not to, without the prior written consent of the Representative, (i) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of shares of our common stock, whether any such transaction described in clause (i) or (ii) is to be settled by delivery of common stock, in cash or otherwise, (iii) make any demand for or exercise any right with respect to the registrationoffering of any shares of ~~our common stock~~Preferred Stock or ~~(iv) publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement relating to~~ any shares of ~~our common~~preferred stock in each case during the Lock-Up Period. The restrictions described above do not apply to (1) transactions relating to shares of common stock acquired in open market transactions after the completion of this offering, subject to certain limitations, (2) transfers of common stock

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~~as a bona fide gift, by will~~ranking on par with or intestacy, to a family member or trust or other estate planning vehicle for the direct or indirect benefit of the security holder or a family member, (3) transfers of common stock to a charity or educational institution or (4) any transfers of common stock to (A) any shareholder, partner or member of, or owner of similar equity interests in, the security holder, (B) the security holder’s affiliates or (C) any investment fund or other entity controlled or managed by the security holder, subject to certain limitations; provided that in the case of any transfer pursuantsenior to the ~~foregoing clauses (2), (3)~~Preferred Stock; or ~~(4),~~publicly announce an intention to effect any such ~~transfer shall not involve a disposition for value, and each transferee shall sign and deliver to~~transaction.

Price Stabilization, Short Position

Until the Representative a lock-up agreement substantially in the form of the lock-up agreement executed by our officers, directors and stockholders. Furthermore, the restrictions described above do not restrict or prohibit (a) the exercise, exchange or conversion of any securities exercisable or exchangeable for or convertible into shares of common stock, provided that the security holder does not transfer the shares of common stock acquired on such exercise, exchange or conversion during the Lock-Up Period or (b) the establishment or modification of a 10b5-1 trading plan under the Exchange Act by a security holder for the sale of shares of common stock, provided that such plan does not provide for the transfer of common stock during the Lock-Up Period.

Representative’s Warrants

~~We have agreed to issue to the Representative and/or its designees warrants to purchase up to a total of 81,250 shares of common stock (5%~~distribution of the shares of ~~common stock sold in this Offering, but excluding~~Preferred Stock is completed, SEC rules may limit the over-allotment option). The warrants will be exercisable at any time, and from time to time, in whole or in part, during the four-year period commencing one year from the effective date of the Offering, which period shall not extend further than five years from the effective date of the Offering in compliance with FINRA Rule 5110(f)(2)(H)(i). The warrants are exercisable at a per share price equal to $ per share, or 125% of the public offering price per share in the Offering. The warrants have been deemed compensation by FINRA and are therefore subject to a 180 day lock-up pursuant to Rule 5110(g)(1) of FINRA. The Representative (or permitted assignees under Rule 5110(g)(1)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the date of effectiveness. In addition, the warrants provide for registration rights upon request, in certain cases. The demand registration right provided will not be greater than five years from the effective date of the Offering in compliance with FINRA Rule 5110(f)(2)(H)(iv). The piggyback registration right provided will not be greater than seven years from the effective date of the Offering in compliance with FINRA Rule 5110(f)(2)(H)(v). We will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend or our recapitalization, reorganization, merger or consolidation. However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.

Right of First Refusal

Subject to certain limited exceptions, until 12 months after the date of effectiveness of this Offering, the Representative has a right of first refusal to act as to act as lead or managing underwriter, sole book-running manager or exclusive placement agent, in the event the company or any successor to or any subsidiary of the company retains or otherwise uses (or seeks to retain or use) the services of an investment bank to pursue any future public or private equity or public debt offerings during such 12-month period.

Indemnification

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make for these liabilities.

NASDAQ Capital Market Listing

~~Our common stock has been approved for listing on NASDAQ under the symbol “PIH”.~~

Electronic Offer, Sale and Distribution of Shares.

~~A prospectus in electronic format may be made available on the websites maintained by one or more~~ability of the underwriters to bid for or ~~selling group members, if any, participating in this Offering and one or more of the~~

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underwriters participating in this Offering may distribute prospectuses electronically. The Representative may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part of, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.

Determination of the Initial Public Offering Price

Prior to this Offering, there has been no public market for our common stock. The initial public offering price was determined through negotiations between us and the Representative. In addition to prevailing market conditions, the factors considered in determining the initial public offering price included the following:

~~the information included in this prospectus and otherwise available to the Representative;~~

~~the valuation multiples of publicly traded companies that the Representative believes to be comparable to us;~~

~~our financial information;~~

~~our prospects and the history and the prospectus of the industry in which we compete;~~

~~an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues;~~

~~the present state of our development; and~~

~~the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.~~

~~An active trading market for our common stock may not develop. It is also possible that, after the Offering, the~~purchase shares of ~~common stock will not trade in the public market at or above the initial public offering price.~~

Stabilization

~~In connection with this Offering,~~Preferred Stock. However, the underwriters may engage in transactions that have the effect of stabilizing ~~transactions, over-allotment transactions, syndicate-covering transactions, penalty bids and purchases to cover positions created by short sales.~~

~~Stabilizing transactions permit bids to purchase shares so long as~~ the ~~stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or retarding a decline in the market~~ price of the Preferred Stock, such as purchases that peg, fix or maintain that price.

If the underwriters create a short position in the Preferred Stock in connection with this offering, i.e., if they sell more shares of ~~common stock while~~Preferred Stock than are listed on the ~~Offering is in progress.~~

~~Over-allotment transactions involve sales by~~cover page of this prospectus, the underwriters ~~of shares in excess of the number of shares the underwriters are obligated to purchase. This creates a syndicate short position which~~ may ~~be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares~~reduce that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by ~~exercising their over-allotment option and/or~~ purchasing ~~shares in the open market.~~

Syndicate covering transactions involve purchases of shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the over-allotment option. If the underwriters sell more shares than could be covered by exercise of the over-allotment option and, therefore, have a naked short position, the position can be closed out only by buying sharesPreferred Stock in the open market. ~~A naked~~Purchases of shares of Preferred Stock that stabilize the per share price or reduce a short position ~~is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on~~may cause the price of the ~~shares of common stock in the open market that could adversely affect investors who purchase in the Offering.~~

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~~Penalty bids permit the Representative~~Preferred Stock to reclaim a selling concession from a syndicate member when the shares of common stock originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our shares or common stock or preventing or retarding a decline in the market price of our shares or common stock. As a result, the price of our common stock in the open market may be higher than it ~~would otherwise~~might be in the absence of ~~these transactions.~~ those purchases.

Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of ~~our common stock. These~~the Preferred Stock. In addition, neither we nor the underwriters make any representation that the underwriters will engage in those transactions ~~may be effected on NASDAQ, in the over-the-counter market~~ or ~~otherwise and, if~~that those transactions, once commenced, ~~may~~will not be discontinued ~~at any time.~~without notice.

~~Passive market making~~.

Electronic Offer, Sale and Distribution of Shares

In connection with this Offering, underwriters and selling group members may engage in passive market making transactions in our common stock on NASDAQ in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the shares of common stock and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.

~~Other Relationships~~~~. Certain~~offering, certain of the underwriters ~~and~~or securities dealers may distribute this prospectus by electronic means, such as e-mail. In addition, certain of the underwriters may facilitate Internet distribution for this offering to certain of their ~~affiliates~~Internet subscription customers. Each such underwriter may allocate a limited number of shares of Preferred Stock for sale to its online brokerage customers. An electronic prospectus may be available on the Internet web site maintained by each such underwriter. Other than this prospectus in electronic format, the information on any such underwriter’s web site is not part of this prospectus.

Conflicts of Interest

The underwriters have not historically, but may in the future, provide ~~various~~ investment banking ~~commercial banking~~ and ~~other financial~~advisory services ~~for~~to us and our affiliates in the ordinary course of business, for which they have received, or may ~~in the future~~ receive, ~~customary fees. However, except as disclosed in this prospectus, we have no present arrangements with any of the underwriters~~compensation for ~~any further~~such services.

Offer restrictions outside
Selling Restrictions Outside the United States

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the ~~Offering~~offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

Australia

This prospectus is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission and does not purport to include the information required of a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations Act, (ii) this prospectus is made available in Australia only to those persons as set forth in clause (i) above, and (iii) the offeree must be sent a notice stating in substance that by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and, unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any of the securities sold to the offeree within 12 months after its transfer for the offeree under this prospectus.

Canada
The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
China

The information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional investors.”

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European Economic Area — Belgium, Germany, Luxembourg and Netherlands

The information in this document has been prepared on the basis that all offers of securities will be made pursuant to an exemption under the Directive 2003/71/EC (“Prospectus Directive”), as implemented in Member States of the European Economic Area (each, a “Relevant Member State”), from the requirement to produce a prospectus for offers of securities.

An offer to the public of securities has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus Directive as implemented in that Relevant Member State:

(a)

to legal entities that are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

(b)

to any legal entity that has two or more of (i) an average of at least 250 employees during its last fiscal year; (ii) a total balance sheet of more than €43,000,000 (as shown on its last annual unconsolidated or consolidated financial statements) and (iii) an annual net turnover of more than €50,000,000 (as shown on its last annual unconsolidated or consolidated financial statements);

(c)

to fewer than 100 natural or legal persons (other than qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive) subject to obtaining the prior consent of the company or any underwriter for any such offer; or

(d)

in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall result in a requirement for the publication by the company of a prospectus pursuant to Article 3 of the Prospectus Directive.

France

This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code monétaire et financier) and Articles 211-1 et seq. of the General Regulation of the French Autorité des marchés financiers (“AMF”). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.

This document and any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.

Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.

Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.

Ireland

The information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations and (ii) fewer than 100 natural or legal persons who are not qualified investors.

86Israel

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Israel

The securities offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority, or the ISA, nor have such securities been registered for sale in Israel. The shares of common stock may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus. The ISA has not issued permits, approvals or licenses in connection with the Offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.

Italy

The ~~Offering~~offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le ~~Societ-$$-Aga~~Società e la Borsa, “CONSOB” pursuant to the Italian securities legislation and, accordingly, no offering material relating to the securities may be distributed in Italy and such securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), other than:

to Italian qualified investors, as defined in Article 100 of Decree no. 58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999 (“Regulation no. 1197l”) as amended (“Qualified Investors”); and

~~in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended.~~

●

in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended.

Any offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:

made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and

~~in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws.~~

●

in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws.

Any subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No. 11971 as amended, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors.

Japan

The securities have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the “FIEL”) pursuant to an exemption from the registration requirements applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL and the regulations promulgated thereunder).

Accordingly, the securities may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires securities may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of securities is conditional upon the execution of an agreement to that effect.

Portugal

This document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código

~~TABLE OF CONTENTS~~

dos Valores Mobiliários). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.

Sweden

This document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.

Switzerland

The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering material relating to the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority.

This document is personal to the recipient only and not for general circulation in Switzerland.

United Arab Emirates

Neither this document nor the securities have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates, nor has the company received authorization or licensing from the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the securities within the United Arab Emirates.

This document does not constitute and may not be used for the purpose of an offer or invitation. No services relating to the securities, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered within the United Arab Emirates by the company.

No offer or invitation to subscribe for securities is valid or permitted in the Dubai International Financial Centre.

United Kingdom

Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) has been published or is intended to be published in respect of the securities. This document is issued on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA.

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This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.

Any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the securities has only been communicated or caused to be communicated and will only be communicated or caused to be communicated in the United Kingdom in circumstances in which section 21(1) of FSMA does not apply to us.

In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (“FPO”), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

~~TABLE OF CONTENTS~~

LEGAL MATTERS

The validity of the shares of ~~common stock~~Preferred Stock offered by this prospectus and certain legal matters in connection with this ~~Offering~~offering will be passed upon for us by ~~McDermott Will & Emery~~Thompson Hine LLP. Certain legal matters in connection with this ~~Offering~~offering will be passed upon for the underwriters by ~~Greenberg Traurig, LLP.~~Cozen O’Connor P.C.

EXPERTS

The financial statements as of December 31, ~~2013~~2016 and ~~December 31, 2012~~2015 and for each of the ~~fiscal year~~two years in the period ended December 31, ~~2013 and the period from inception October 2, 2012 to December 31, 2012~~2016 included in this Prospectus and in the Registration Statement have been so included in reliance on the report of BDO USA, LLP, an independent registered public accounting firm, appearing elsewhere herein and in the Registration Statement, given on the authority of said firm as experts in auditing and accounting.

INCORPORATION BY REFERENCE
As permitted under the rules of the SEC, this prospectus incorporates important business information about the Company that is contained in documents that we file with the SEC, but that are not included in or delivered with this prospectus. You may obtain copies of these documents, without charge, from the website maintained by the SEC at www.sec.gov, as well as other sources.
The following documents are incorporated by reference into this prospectus, together with all exhibits filed therewith or incorporated therein by reference to the extent not otherwise amended or superseded by the contents of this prospectus (except for the portions of the Company’s Current Reports on Form 8-K furnished pursuant to Item 2.02 or Item 7.01 thereof or otherwise not filed with the SEC which are deemed not to be incorporated by reference into this prospectus):
● our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on March 16, 2017;
● our Definitive Proxy Statement on Schedule 14A for our 2017 annual meeting of stockholders, as filed with the SEC on April 28, 2017;
● our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2017, June 30, 2017, and September 30, 2017 as filed with the SEC on May 11, 2017, August 10, 2017, and November 13, 2017, respectively; and
● our Current Reports on Form 8-K filed with the SEC on March 8, 2017 (as amended by Form 8-K/A filed with the SEC on March 8, 2017), April 7, 2017, May 23, 2017, May 26, 2017, June 5, 2017, June 14, 2017, September 1, 2017, December 19, 2017, and January 3, 2018.
In addition, all documents subsequently filed by us with the SEC pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act (other than those furnished pursuant to Item 2.02 or Item 7.01 of Form 8-K or other information “furnished” to the SEC) after the effective date of the registration statement of which this prospectus forms a part and prior to the termination of the offering shall be deemed to be incorporated by reference into this prospectus.
Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for all purposes to the extent that a statement contained in this prospectus or in any other subsequently filed document which is also incorporated or deemed to be incorporated by reference, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
We will provide to each person, including any beneficial owner, to whom a prospectus is delivered, a copy of any or all of the reports or documents that have been incorporated by reference in this prospectus but not delivered with this prospectus at no cost upon written or oral request. You may request a copy of these reports or documents (other than an exhibit to a report or document unless that exhibit is specifically incorporated by reference into that report or document) at no cost by writing, telephoning or e-mailing us at the following address, telephone number or e-mail address:
1347 Property Insurance Holdings, Inc.
1511 N. Westshore Blvd., Suite 870
Tampa, Florida 33607
(855) 862-0436
jhellman@equityny.com
Copies of these reports and documents are also available through the “Investor Relations” section of our website at www1347pih.com. For other ways to obtain a copy of these reports and documents, please refer to “Where You Can Find More Information” below.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the Exchange Act and file annual, quarterly and current reports, proxy statements and other information with the SEC. We have also filed ~~with the SEC~~ a registration statement on Form S-1 under the Securities Act, including exhibits, with respect to the shares of ~~common stock offered~~Preferred Stock covered by this prospectus. This prospectus ~~filed as~~is a part of the registration statement, but does not contain all of the information ~~set forth~~included in the registration statement ~~and its exhibits and schedules, portions of which have been omitted as permitted by~~or the ~~rules and regulations of the SEC.~~exhibits. For further information about us and the shares of ~~our common stock,~~Preferred Stock, we refer you to the ~~registration statement~~documents we publicly file with the SEC and to its exhibits and schedules. Statements in this prospectus about the contents of any contract, agreement or other document are not necessarily complete and in each instance we refer you to the copy of such contract, agreement or document filed as an exhibit to the registration statement. Anyone may inspect the registration statement of which this prospectus forms a part, including the documents filed as exhibits thereto. You can find our public filings with the SEC and ~~its~~the registration statement, including exhibits, on the internet at a website maintained by the SEC at http://www.sec.gov or from our website at http://www.1347pih.com. You may also read and ~~schedules without charge~~copy our public filings with the SEC and the registration statement at the ~~public reference facilities the SEC maintains~~SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. ~~20549.~~20549, on official business days during the hours of 10:00 a.m. to 3:00 p.m. You ~~may obtain copies of all or any part of these materials from~~can call the SEC ~~upon the payment of certain fees prescribed by the SEC. You may obtain~~at 1-800-SEC-0330 for further information ~~about~~on the operation of the ~~SEC’s~~ Public Reference ~~Room by calling the SEC at 1-800-SEC-0330. You may~~Room. We also ~~inspect these~~make available on our website our annual, quarterly and current reports and ~~other information without charge at a website maintained by~~amendments as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the SEC. Our website address is www.1347pih.com. The ~~address~~information contained on or accessible through our website is not a part of this ~~site~~prospectus, and the inclusion of our website address in this prospectus is~~http://www.sec.gov~~. an inactive textual reference only.

Upon completion of this Offering, we will become subject to the informational requirements of the Exchange Act and will be required to file reports and other information with the SEC. You will be able to inspect and copy these reports and other information at the public reference facilities maintained by the SEC at the address noted above. You also will be able to obtain copies of this material from the Public Reference Room of the SEC as described above, or inspect them without charge at the SEC’s website. We intend to make available to our common stockholders annual reports containing consolidated financial statements (or consolidated financial statements with respect to historical periods) audited by an independent registered public accounting firm.

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1347 Property Insurance Holdings, Inc.

INDEX TO FINANCIAL STATEMENTS

Consolidated Financial Statements — Three and Nine Months Ended September 30, 2017
Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016	F-2
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2017 and 2016 (unaudited)	F-3
Consolidated Statement of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2017 (unaudited)	F-4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016 (unaudited)	F-5
Notes to Consolidated Financial Statements (unaudited)	F-6
Report of Independent Registered Public Accounting Firm		~~F-2~~	F-23
Consolidated Financial Statements	— Years Ended December 31, 2016 and 2015
Consolidated Balance Sheets as of December 31, ~~2013~~2016 and ~~2012~~2015		~~F-3 - F-4~~	F-24
Consolidated Statements of Operations and Comprehensive ~~Loss For~~Income (Loss) for the ~~Year~~Years Ended December 31, ~~2013~~2016 and ~~the Period from October 2, 2012 through December 31, 2012~~2015		~~F-5~~	F-25
Consolidated Statements of ~~Changes in Shareholder’s~~Shareholders’ Equity ~~For~~for the ~~Year~~Years Ended December 31, ~~2013~~2016 and ~~the Period from October 2, 2012 through December 31, 2012~~2015		~~F-6~~	F-26
Consolidated Statements of Cash Flows ~~For~~for the ~~Year~~Years Ended December 31, ~~2013~~2016 and ~~the Period from October 2, 2012 through December 31, 2012~~2015		~~F-7~~	F-27
Notes to the Consolidated Financial Statements		~~F-8 - F-21~~	F-28

~~F-1~~

~~TABLE OF CONTENTS~~PART I. FINANCIAL INFORMATION

Report of Independent Registered Public Accounting Firm

ITEM 1. FINANCIAL STATEMENTS

~~Board of Directors~~

1347 ~~Property Insurance Holdings, Inc.~~
~~Baton Rouge, Louisiana~~PROPERTY INSURANCE HOLDINGS INC. AND SUBSIDIARIES

~~We have audited the~~Consolidated Balance Sheets

(in thousands, except share and per share data)

	September 30, 2017 (unaudited)			December 31, 2016
ASSETS
Investments:
Fixed income securities, at fair value (amortized cost of $45,252 and $26,793, respectively)	$	45,207		$	26,559
Equity investments, at fair value (cost of $1,682 and $1,000, respectively)		1,771			1,136
Short-term investments, at cost		1,779			196
Other investments, at cost		945			505
Total investments		49,702			28,396
Cash and cash equivalents		25,679			43,045
Deferred policy acquisition costs, net		6,192			4,389
Premiums receivable, net of allowance for credit losses of $39 and $38, respectively		2,220			2,923
Ceded unearned premiums		3,836			4,847
Reinsurance recoverable on paid losses		7,767			444
Reinsurance recoverable on loss and loss adjustment expense reserves		17,560			3,652
Funds deposited with reinsured companies		—			500
Current income taxes recoverable		632			1,195
Deferred tax asset, net		855			420
Property and equipment, net		213			250
Other assets		867			788
Total assets	$	115,523		$	90,849

LIABILITIES
Loss and loss adjustment expense reserves	$	22,091		$	6,971
Unearned premium reserves		32,170			25,821
Ceded reinsurance premiums payable		5,786			5,229
Agency commissions payable		716			497
Premiums collected in advance		1,887			1,128
Funds held under reinsurance treaties		48			73
Accounts payable and other accrued expenses		4,483			2,065
Series B Preferred Shares, $25.00 par value, 1,000,000 shares authorized, 120,000 shares issued and outstanding for both periods		2,744			2,708
Total liabilities	$	69,925		$	44,492

Commitments and contingencies (Note 16)

SHAREHOLDERS’ EQUITY
Common stock, $0.001 par value; 10,000,000 shares authorized; 6,136,125 and 6,108,125 shares issued and 5,984,766 and 5,956,766 shares outstanding as of September 30, 2017 and December 31, 2016, respectively	$	6		$	6
Additional paid-in capital		47,052			46,809
Retained (deficit) earnings		(480	)		616
Accumulated other comprehensive income (loss)		29			(65	)
		46,607			47,366
Less: treasury stock at cost; 151,359 shares for both periods		(1,009	)		(1,009	)
Total shareholders’ equity		45,598			46,357
Total liabilities and shareholders’ equity	$	115,523		$	90,849

See accompanying consolidated balance sheets of 1347 Property Insurance Holdings, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive loss, changes in shareholder’s equity, and cash flows for the year ended December 31, 2013 and the period from inception October 2, 2012notes 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its 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 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~~

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of ~~1347 Property Insurance Holdings, Inc. at December 31, 2013~~Operations and 2012, and the results of its operations and its cash flows for the year ended December 31, 2013 and the period from inception October 2, 2012 to December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.Comprehensive Income (Loss)

~~/s/ BDO USA, LLP~~
~~February 25, 2014, except for Note 16~~
~~which is as of March 19, 2014~~
~~Grand Rapids, Michigan~~

~~F-2~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

Consolidated Balance Sheets
(in thousands)

thousands, except share and per share data)

(Unaudited)

December 31,
2013 December 31,
2012
Assets

Cash and invested assets

Cash $ 15,007 $ 5,525
Short-term investments pledged, at cost 100 100
Fixed income securities, at fair value 301 —
Preferred stock, at fair value — 1,875
Total cash and invested assets 15,408 7,500
Premiums receivable 3,805 2,091
Deferred policy acquisition costs 1,925 346
Ceded unearned premiums 1,126 63
Net deferred federal income taxes 571 159
Other assets 343 39
Total Assets $ 23,178 $ 10,198

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Revenue:
Net premiums earned	$	8,632		$	7,136		$	25,032		$	22,869
Net investment income		248			151			700			393
Other income		474			345			1,262			862
Total revenue		9,354			7,632			26,994			24,124

Expenses:
Net losses and loss adjustment expenses		7,795			6,443			13,809			14,917
Amortization of deferred policy acquisition costs		2,755			2,095			7,867			6,148
General and administrative expenses		2,145			1,658			6,535			4,982
Accretion of discount on Series B Preferred Shares		93			89			276			263
Total expenses		12,788			10,285			28,487			26,310

Loss before income tax benefit		(3,434	)		(2,653	)		(1,493	)		(2,186	)
Income tax benefit		(1,171	)		(847	)		(397	)		(605	)
Net loss	$	(2,263	)	$	(1,806	)	$	(1,096	)	$	(1,581	)

Net loss per common share:
Basic and diluted	$	(0.38	)	$	(0.30	)	$	(0.18	)	$	(0.26	)
Weighted average common shares outstanding:
Basic and diluted		5,961,636			6,022,983			5,958,407			6,076,838

Consolidated Statements of Comprehensive Income (Loss)

Net loss	$	(2,263	)	$	(1,806	)	$	(1,096	)	$	(1,581	)
Unrealized gains (losses) on investments available for sale, net of income taxes		25			(11	)		94			310
Comprehensive loss	$	(2,238	)	$	(1,817	)	$	(1,002	)	$	(1,271	)

See accompanying notes to consolidated financial statements.

~~F-3~~

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1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

1347 Property Insurance Holdings, Inc.

Consolidated Balance Sheets
Statement of Changes in Shareholders’ Equity
(in thousands, except per share amounts)

data)

	Common Stock					Treasury Stock
	Shares			Amount		Shares			Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balance-January 1, 2016		6,134,274		$	6		223,851		$	(1,731	)	$	48,688		$	605		$	(62	)	$	47,506
Stock compensation expense		—			—		—			—			38			—			—			38
Purchase of treasury stock		(177,508	)		—		177,508			(1,195	)		—			—			—			(1,195	)
Retirement of treasury shares		—			—		(250,000	)		1,917			(1,917	)		—			—			—
Net income		—			—		—			—			—			11			—			11
Other comprehensive loss		—			—		—			—			—			—			(3	)		(3	)
Balance - December 31, 2016		5,956,766		$	6		151,359		$	(1,009	)	$	46,809		$	616		$	(65	)	$	46,357

Issuance of common shares		28,000			—		—			—			224			—			—			224
Stock compensation expense		—			—		—			—			19			—			—			19
Net loss		—			—		—			—			—			(1,096	)		—			(1,096	)
Other comprehensive income		—			—		—			—			—			—			94			94
Balance – September 30, 2017 (unaudited)		5,984,766		$	6		151,359		$	(1,009	)	$	47,052		$	(480	)	$	29		$	45,598

See accompanying notes to consolidated financial statements

December 31,
2013 December 31,
2012
Liabilities and Shareholder’s Equity

Liabilities

Loss and loss adjustment expense reserves $ 354 $ 9
Unearned premium reserves 11,004 2,131
Due to parent 2,668 407
Accrued expenses and other liabilities 753 49
Premiums collected in advance 213 —
Agent commissions payable 254 —
Ceded reinsurance premiums payable 50 75
Current federal income taxes payable — 97
Total Liabilities 15,296 2,768
Shareholder’s Equity

Common stock, $0.00 par value; authorized 1,000,000 shares; issued and outstanding 1,000,000 shares — —
Additional paid-in capital 8,750 7,550
Retained deficit (868 ) (120 )
Total Shareholder’s Equity 7,882 7,430
Total Liabilities and Shareholder’s Equity $ 23,178 $ 10,198

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Nine months ended September 30,
	2017			2016
Cash provided by:
Operating activities:
Net loss	$	(1,096	)	$	(1,581	)
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of discount on Series B Preferred Shares		276			263
Net deferred income taxes		(483	)		(209	)
Stock compensation expense		19			30
Depreciation expense		55			49
Changes in operating assets and liabilities:
Premiums receivable		703			293
Reinsurance recoverable on paid losses and loss reserves		(21,231	)		(7,866	)
Amounts held on deposit with reinsured companies		500			725
Ceded unearned premiums		1,011			(1,646	)
Deferred policy acquisition costs, net		(1,803	)		(339	)
Loss and loss adjustment expense reserves		15,120			6,504
Premiums collected in advance		759			819
Unearned premium reserves		6,349			2,902
Ceded reinsurance premiums payable		557			2,333
Current income taxes recoverable		563			(606	)
Other, net		2,533			(12	)
Net cash provided by operating activities		3,832			1,659

Investing activities:
Purchases of furniture and equipment		(18	)		(81	)
Purchases of fixed income securities		(18,459	)		(7,424	)
Purchase of equity investments		(682	)		(1,000	)
Purchase of other investments		(440	)		(139	)
Net purchases of short-term investments		(1,583	)		(784	)
Net cash used in investing activities		(21,182	)		(9,428	)

Financing activities:
Payment of dividends on preferred shares		(240	)		(240	)
Proceeds from sale of common stock		224			—
Purchases of treasury stock		—			(1,022	)
Net cash used in financing activities		(16	)		(1,262	)

Net decrease in cash and cash equivalents		(17,366	)		(9,031	)
Cash and cash equivalents at beginning of period		43,045			47,957
Cash and cash equivalents at end of period	$	25,679		$	38,926

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes	$	35		$	293

See accompanying notes to consolidated financial statements.

~~F-4~~

~~TABLE OF CONTENTS~~

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

1347 Property Insurance Holdings, Inc.

Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)

Year and period ended December 31,
   2013 2012
Revenues

Premiums $ 4,983 $ 346
Net investment income 47 13
Other income 61 —
Total revenues 5,091 359
Expenses

Net losses and loss adjustment expenses 2,928 9
Amortization of deferred policy acquisition costs 1,328 58
General and administrative expenses 1,979 474
Total expenses 6,235 541
Loss before income tax benefit (1,144 ) (182 )
Income tax benefit (396 ) (62 )
Net Loss $ (748 ) $ (120 )
Comprehensive Loss and its Components Consist of the Following

Net loss $ (748 ) $ (120 )
Comprehensive Loss $ (748 ) $ (120 )
Loss per Share – Net Loss

Basic $ (0.75 ) $ (0.12 )
Diluted (0.75 ) (0.12 )
Weighted Average Shares Outstanding

Basic 1,000 1,000
Diluted 1,000 1,000

~~See accompanying notes to consolidated financial statements.~~

~~F-5~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

Consolidated Statements of Changes in Shareholder’s Equity
(in thousands)

~~Common~~
~~Stock~~
~~Shares~~

~~Common~~
~~Stock~~
~~Amount~~

~~Additional~~
~~Paid-in~~
~~Capital~~

~~Retained~~
~~Deficit~~

~~Total~~

~~Balance, October 2, 2012 (inception)~~

—

~~Issuance of common stock~~

~~1,000~~

—

~~5,000~~

—

~~5,000~~

~~Net loss~~

—

~~(120~~

)

~~(120~~

)

~~Capital contributions~~

—

~~2,550~~

—

~~2,550~~

~~Balance, December 31, 2012~~

~~1,000~~

—

~~7,550~~

~~(120~~

)

~~7,430~~

~~Net loss~~

—

~~(748~~

)

~~(748~~

)

~~Capital contributions~~

—

~~1,200~~

—

~~1,200~~

~~Balance, December 31, 2013~~

~~1,000~~

—

~~8,750~~

~~(868~~

)

~~7,882~~

~~See accompanying notes to consolidated financial statements.~~

~~F-6~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

Consolidated Statements of Cash Flows
(in thousands)

Year and period ended December 31,
   2013 2012
Cash Flows From (for) Operating Activities

Net loss $ (748 ) $ (120 )
Adjustments to reconcile net loss to net cash from (for) operating activities:

Premiums receivable (1,714 ) (2,091 )
Additions to deferred policy acquisition costs (2,907 ) (404 )
Amortization of deferred policy acquisition costs 1,328 58
Ceded unearned premiums (1,063 ) (63 )
Net deferred federal income taxes (412 ) (159 )
Loss and loss adjustment expense reserves 345 9
Unearned premium reserves 8,873 2,131
Due to parent 2,261 407
Accrued expenses and other liabilities 704 49
Premiums collected in advance 213 —
Agent commissions payable 254 —
Ceded reinsurance premiums payable (25 ) 75
Current federal income taxes payable (97 ) 97
Other assets (304 ) (39 )
Net Cash From (for) Operating Activities 6,708 (50 )
Cash Flows From (for) Investing Activities

Proceeds from sale of investments 1,875 —
Net sales (purchases) of short-term investments — (100 )
Purchase of fixed income securities (301 ) —
Net Cash From (for) Investing Activities 1,574 (100 )
Cash Flows From Financing Activity

Additional paid-in capital 1,200 5,675
Net Increase in Cash 9,482 5,525
Cash, beginning of period 5,525 �� —
Cash, end of period $ 15,007 $ 5,525
Supplemental Disclosure of Cash Flow Information

Income taxes paid $ 97 $ —
Supplemental Disclosure of Non-Cash Information

Additional paid-in capital of investment in preferred stock $ — $ 1,875

~~See accompanying notes to consolidated financial statements.~~

~~F-7~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

Notes to Consolidated Financial Statements
($ amounts in thousands)

thousands, except share and per share data)
1. DescriptionNature of the Company and Summary of Significant Accounting Policies

Description of the Company

Business

~~1347 Property~~

Maison Insurance Holdings, Inc. ~~(the Company)~~ was incorporated on October 2, 2012 in the State of ~~Delaware under the name Maison Insurance Holdings, Inc. to hold all of the capital stock of our two subsidiaries: Maison Insurance Company (MIC) and Maison Managers Inc. (MMI). Effective~~Delaware. On November 19, 2013, ~~the Company changed~~ its legal name was changed from Maison Insurance Holdings, Inc. to 1347 Property Insurance Holdings, Inc. ~~The Company~~(“PIH”). PIH is a holding company and is engaged, through its subsidiaries, in the property and casualty insurance business. Unless context denotes otherwise, the terms “Company,” “we,” “us,” and “our” refer to 1347 Property Insurance Holdings, Inc., and its subsidiaries.

Prior to March 31, 2014, PIH was a wholly owned subsidiary of Kingsway America Inc. (“KAI”). KAI, ~~(Parent). The Parent~~in turn, is ~~ultimately~~ a wholly owned subsidiary of Kingsway Financial Services Inc. ~~(KFSI)~~(“KFSI”), a publicly owned holding company based in Toronto, Ontario, Canada.

~~The accompanying consolidated financial statements include~~ On March 31, 2014, PIH completed an initial public offering (“IPO”) of its common stock. On June 13, 2014, PIH completed a follow-on offering of its common stock to the ~~Company and its two subsidiaries, collectively referred to as~~public. Through the ~~Company. As a holding company for these subsidiaries, we are subject to regulation by the Louisiana Department of Insurance (LDI). The subsidiaries~~combination of the IPO and follow-on offering, PIH issued approximately five million shares of its common stock, while KAI, and entities affiliated with KAI retained one million shares of PIH. On October 25, 2017, KAI entered into a purchase agreement with Fundamental Global Investors, LLC (“FGI”) pursuant to which KAI agreed to sell 900,000 shares of our common stock to FGI or to one of FGI’s affiliate companies in two separate transactions. The first transaction, for the sale of 475,428 shares of our common stock, occurred on November 1, 2017. The second transaction, for the sale of 424,572 shares of our common stock is conditioned on approval of the transaction by both the LDI and FL OIR by January 23, 2018. FGI is affiliated with D. Kyle Cerminara, where he serves as Chief Executive Officer, Co-Founder and Partner, and Lewis M. Johnson, where he serves as President, Co-Founder and Partner. Messrs. Cerminara and Johnson are also members of our Board of Directors. Should the second transaction be consummated, FGI, and entities affiliated with FGI, would own 43% of our outstanding common shares.

PIH has three wholly-owned subsidiaries; Maison Insurance Company ~~are MIC,~~(“Maison”), a Louisiana-domiciled property and casualty insurance company, ~~incorporated on October 3, 2012, and MMI,~~Maison Managers, Inc. (“MMI”), a managing general agent, incorporated in the State of Delaware, ~~on October 2, 2012.~~and ClaimCor, LLC (“ClaimCor”), a Florida based claims and underwriting solutions company. Maison processes claims made by its policyholders through ClaimCor, and also through various third-party claims adjusting companies. MMI has ultimate authority over the claims handling process, while the agencies that we appoint have no authority to settle our claims or otherwise exercise control over the claims process.

~~MIC is a Louisiana~~

Maison began providing homeowners insurance, ~~company that provides personal property~~manufactured home insurance and ~~casualty~~dwelling fire insurance ~~solely~~ to individuals in ~~Louisiana. As an insurance company, MIC is subject to examination and comprehensive regulation by the LDI. MIC provides dwelling~~Louisiana in December 2012. Maison writes both full peril property policies ~~for wind and~~ as well as wind/hail only exposures in Louisiana and ~~dwelling, homeowner and mobile home/~~distributes its policies through a network of independent insurance agencies. Maison began assuming wind/hail only insurance for commercial properties in Texas beginning in June 2015. In September 2015, Maison began writing manufactured home policies ~~for multi-peril property risks located~~ in the State of ~~Louisiana.~~Texas on a direct basis, and in March 2016, Maison began writing homeowner policies in Texas.

In addition to the voluntary policies that Maison writes, Maison has participated in the last five rounds of take-outs from Louisiana Citizens Property Insurance Company (“LA Citizens”), occurring on December 1^st of each year, as well as the inaugural depopulation of policies from the Texas Windstorm Insurance Association (“TWIA”), which occurred on December 1, 2016. Under these programs, state-approved insurance companies, such as Maison, have the opportunity to assume insurance policies written by both LA Citizens and TWIA. The majority of policies that we have obtained through LA Citizens as well as all of the policies we have obtained through TWIA cover losses arising only from wind and hail. Prior to our takeout, both LA Citizens and TWIA policyholders were not able to obtain such coverage from any other marketplace.

On March 1, 2017, Maison received a certificate of authority from the Florida Office of Insurance Regulation (“FL OIR”) which authorizes Maison to write personal lines insurance in the State of Florida. Pursuant to the consent order issued, Maison has agreed to comply with certain requirements as outlined by the FL OIR until Maison can demonstrate three consecutive years of net income following the Company’s admission into Florida as evidenced by its Annual Statement filed with the FL OIR via the National Association of Insurance Commissioners electronic filing system. Among other requirements, the FL OIR requires the following as conditions related to the issuance of Maison’s certificate of authority:

●

Although domiciled in the State of Louisiana, Maison has agreed to comply with the Florida Insurance Code as if Maison were a domestic insurer within the State of Florida;

●

Maison has agreed to maintain capital and surplus as to policyholders of no less than $35,000;

●

Maison has agreed to receive prior approval from the FL OIR prior to the payment of any dividends; and

●

Maison has agreed to receive written approval from the FL OIR regarding any form of policy issued or rate charged to its policyholders prior to utilizing any such form or rate for policies written in the State of Florida.

To comply with the consent order, on March 31, 2017, Maison received a capital contribution from PIH in the amount of $16,000. As of September 30, 2017, Maison has not written any insurance policies covering risks in the State of Florida.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ amounts in thousands, except share and per share data)

On September 29, 2017, Maison received authorization from the FL OIR to assume personal lines policies from Florida Citizens Property Insurance Corporation (“FL Citizens”) pursuant to a proposal of depopulation which Maison filed with FL Citizens on August 18, 2017. Accordingly, Maison plans to enter the Florida market via the assumption of policies from FL Citizens in December, 2017. The order approving Maison’s assumption of policies limits the number of policies which Maison may assume in 2017, and also stipulates that Maison maintain catastrophe reinsurance at such levels as deemed appropriate by the FL OIR.

MMI serves as the Company’s management services subsidiary, known as a managing general agency, ~~providing~~and provides underwriting, policy administration, claims administration, marketing, accounting, and ~~financial and~~ other management services to ~~MIC. It is this subsidiary that~~Maison. MMI contracts primarily with independent ~~agents~~agencies for policy sales and ~~services. MMI has entered into a contract~~services, and also contracts with an independent third-party for policy administration ~~company for~~ services. As a managing general agency, MMI is licensed by and subject to the regulatory oversight of the ~~LDI.~~Louisiana Department of Insurance (“LDI”), Texas Department of Insurance (“TDI”) and the FL OIR.

The Company distributes insurance policies through a network of more than 130 independent agents. These agents typically represent several insurance companies in order to provide various insurance product lines to their clients. The Company refers to these policies as voluntary policies.

Louisiana Citizens Property Insurance Company (Citizens) is a state-created insurer and as the State of Louisiana has not historically been in the business of serving as an insurer, an insurance “take-out” program was implemented to reduce the number of properties insured by Citizens. Under this take-out program, state-approved insurance companies, such as MIC, have the opportunity to assume insurance policies written by Citizens. It has been MIC’s practice to date to participate in such take-out programs and plans to continue doing so from time to time in the future. While Citizens writes full peril protection policies in addition to wind and hail only policies, the policies that the Company has obtained through the Citizens take-out program covers losses arising only from wind and hail. These policyholders were not able to obtain such coverage from the marketplace prior to our take-out other than through Citizens. As of December 31, 2013, the Company has approximately 6,000 take-out policies in-force from Citizens, of which approximately 3,500 were from the latest take-out which occurred on December 1, 2013, and approximately 2,500 remaining in-force as of December 31, 2013 were from the December 1, 2012 take-out. Additionally, the Company has in-force policies that it obtained from its independent agent force of approximately 5,500. From all sources of distribution, the in-force policy count at December 31, 2013, and December 31, 2012 was approximately 11,500 and 2,900, respectively.

The Company insures personal property located in 62 of the total 64 parishes in the State of Louisiana. These 11,500 policies are concentrated in certain parishes within Louisiana as follows: Jefferson Parish 25.1%, Saint Tammany Parish 10.9%, Orleans Parish 9.6% and Terrebonne Parish 6.9%. No other parish has over 5.0% of the policies, and these remaining 58 parishes aggregate 47.5%.

~~F-8~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

Notes to Consolidated Financial Statements
(in thousands)

1. Description of the Company and Summary of2. Significant Accounting Policies - (continued)

Basis of Presentation:

These statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Consolidation:

The accompanying consolidated financial statements include the accounts of the Company and its ~~subsidiaries and have been prepared on the basis of accounting principles generally accepted in the United States of America (GAAP).~~subsidiaries. All significant intercompany ~~transactions~~balances and ~~accounts~~transactions have been eliminated upon consolidation.

The Use of Estimates in ~~consolidation.~~the Preparation of Consolidated Financial Statements:

Significant Accounting Policies

Cash
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and Invested Assets

~~Cash includes cash~~assumptions that affect the reported amounts of assets and liabilities and disclosures about contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the period reported. Actual results could differ from those estimates. Changes in estimates are recorded in the accounting period in which the change is determined. The critical accounting estimates and assumptions in the accompanying consolidated financial statements include the provision for loss and loss adjustment expense reserves (as well as the associated reinsurance recoverable on those reserves), the valuation of fixed income and equity securities, the valuation of net deferred income taxes, the valuation of various ~~bank accounts.~~securities that we have issued in conjunction with the termination of the management services agreement with 1347 Advisors, LLC, and the valuation of deferred policy acquisition costs.

Investments:

Investments in fixed income ~~securities (bonds)~~ and ~~non-redeemable preferred stock~~equity securities are classified as available-for-sale and reported at estimated fair value. Unrealized gains and losses are included ~~as a separate component of~~in accumulated other comprehensive income ~~in stockholder’s equity,~~(loss), net of ~~income tax.~~ tax, until sold or an other-than-temporary impairment is recognized, at which point the cumulative unrealized gains or losses are transferred to the consolidated statement of operations.

Other investments include investments in limited liability companies in which the Company’s interests are deemed minor and, therefore, are accounted for under the cost method of accounting, which approximates their fair value. Also included in other investments is a fixed rate certificate of deposit with an original maturity of 15 months.

Short-term investments, which consist of ~~securities~~investments with ~~original~~ maturities between ~~90 days~~three months and one year, are reported at cost, which approximates fair ~~value.~~value due to their short-term nature.

~~Gains~~

Realized gains and losses ~~from the sale~~on sales of investments are ~~calculated~~determined on a first-in, first-out ~~basis. If a decline in fair value of an investment is deemed to be other-than-temporary, the carrying value in the investment is reduced to fair value through an adjustment to earnings. Dividends~~basis, and ~~interest income~~ are included in net investment income. ~~Investment~~

Interest income is included in net investment income and is recorded as it accrues.

The Company accounts for its investments using trade date accounting.
The Company conducts a quarterly review to identify and evaluate investments that show objective indications of possible impairment. Impairment is charged to the statement of operations if the fair value of the instrument falls below its amortized cost and the decline is considered other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been below cost, the financial condition and near-term prospects of the issuer, and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ amounts in thousands, except share and per share data)
Cash and Cash Equivalents:
Cash and cash equivalents include cash and highly liquid investments with original maturities of 90 days or less.
Premiums Receivable

Receivable:

Premiums receivable include premium balances due and uncollected ~~and~~as well as installment premiums not yet due from ~~agents~~our independent agencies and insureds. Premiums receivable are ~~shown without any~~reported net of an estimated allowance for ~~bad debt~~credit losses.

Reinsurance:

Reinsurance premiums, losses, and loss adjustment expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and losses ceded to other companies have been reported as a reduction of ~~December 31, 2013~~premium revenue and ~~2012, respectively, as the Company, through its review~~incurred net losses and ~~analysis~~loss adjustment expenses. A reinsurance recoverable is ~~not aware~~recorded for that portion of ~~any events or conditions~~paid and unpaid losses and loss adjustment expenses that ~~would necessitate such a bad debt allowance.~~are ceded to other companies.

Deferred Policy Acquisition Costs

Costs:

The Company defers commissions, premium taxes, assessments and other underwriting and agency expenses that are directly related to successful efforts to acquire new or existing insurance policies to the extent they are considered recoverable. Costs deferred on ~~property and casualty~~ insurance products are amortized over the period in which premiums are earned. Costs associated with unsuccessful efforts or costs that cannot be tied directly to a successful policy acquisition are expensed as incurred, as opposed to being deferred and amortized as the corresponding premium is earned. The method followed in determining the deferred policy acquisition costs limits the deferral to its realizable value by giving consideration to estimated future loss and loss adjustment expenses to be incurred as revenues are earned. Anticipated investment income is included in determining the realizable value of the deferred policy acquisition costs. Changes in estimates, if any, are recorded in the accounting period in which they are determined. ~~Anticipated investment income is included in determining the realizable value of the deferred policy acquisition costs.~~

Reinsurance

Reinsurance premiums, loss and loss adjustment expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and claims ceded to other companies have been reported as a reduction of premiums revenue and incurred loss and loss adjustment expenses. Reinsurance recoverable is recorded for that portion of paid and unpaid losses and loss adjustment expenses that are ceded to other companies. Ceded unearned premiums represent the unexpired portion of premiums ceded to reinsurers.

Federal
Income Taxes

Taxes:

Kingsway America II Inc., a subsidiary of KFSI, and its eligible U.S. subsidiaries, which include the Company, file a U.S. consolidated federal income tax return (KAI Tax Group). The method of allocating federal income taxes among the companies in the KAI Tax Group is subject to written agreement, approved by each company’s Board of Directors. The allocation is made primarily on a separate return basis, with current credit for any net operating losses or other items utilized in the consolidated federal income tax return.

~~F-9~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

Notes to Consolidated Financial Statements
(in thousands)

1. Description of the Company and Summary of Significant Accounting Policies - (continued)

The Company follows the asset and liability method of accounting for income taxes, whereby deferred income tax assets and liabilities are recognized for (i) the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and (ii) loss and tax credit ~~carryforwards.~~carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred ~~income~~ tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not and a valuation allowance is established for any portion of a deferred ~~income~~ tax asset that management believes will not be realized. Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense (benefit).

Other Assets

~~Other assets include fixed assets,~~

Property and Equipment:

Property and equipment is reported at ~~depreciated costs, prepaid assets, capitalized expenses and accrued interest income. Prepaid assets are expenses paid in advance and security deposits.~~historical cost less accumulated depreciation. Depreciation of property and equipment ~~has been provided by the~~is recorded on a straight-line ~~method~~basis over ~~the~~ estimated useful ~~lives of such assets. The useful lives~~life which range from seven ~~to ten~~ years for furniture, ~~fixtures and equipment,~~five years for vehicles, three years for ~~electronic data~~computer equipment, ~~hardware~~ and ~~software, and five years~~the shorter of estimated useful life or the term of the lease for leasehold improvements. Property and equipment is estimated to have no salvage value at its useful life-end.

~~The Company periodically reviews all fixed assets that have finite lives~~

Rent expense for ~~impairment whenever events or changes in circumstances indicate that~~ the ~~carrying amount may not be recoverable. Upon sale or retirement,~~Company’s office leases is recognized on a straight-line basis over the ~~cost and related accumulated depreciation~~term of the ~~assets disposed of are removed from~~lease. Rent expense was $255 and $258 for the ~~accounts,~~nine months ended September 30, 2017 and ~~any resulting gain or loss is reflected in operations.~~2016, respectively.

Loss and Loss Adjustment Expense Reserves

Reserves:

Loss and loss adjustment expense reserves represent ~~estimates~~the estimated liabilities for reported loss events, incurred but not yet reported loss events and the ~~ultimate cost of unpaid reported and unreported claims incurred and~~ related estimated loss adjustment expenses. The Company performs a continuing review of its loss and loss adjustment expense reserves, including its reserving techniques ~~and its reinsurance.~~as well as the impact of reinsurance on our loss reserves. The loss and loss adjustment expense reserves are also reviewed, ~~regularly~~at minimum, on an annual basis by qualified third party actuaries. Since the loss and loss adjustment expense reserves are based on estimates, the ultimate liability may be more or less than such reserves. The effects of changes in such estimated reserves are included in the results of income in the period in which the estimates are changed. Such changes in estimates could occur in a future period and may be material to the Company’s results of operations and financial position in such period.

Net Loss per Share

~~Basic~~

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ amounts in thousands, except share and ~~diluted net loss~~ per share ~~is computed by dividing net loss~~data)

Concentration of Credit Risk:

Financial instruments which potentially expose the Company to concentrations of credit risk include investments, cash, premiums receivable, and amounts due from reinsurers on losses incurred. The Company maintains its cash with two major U.S. domestic banking institutions and two regional banks headquartered in the Southeastern United States. Such amounts are insured by the ~~weighted-average number~~Federal Deposit Insurance Corporation (“FDIC”) up to $250 per institution. At September 30, 2017, the Company held funds on deposit at these institutions in excess of ~~common shares outstanding during~~these FDIC insured amounts. The terms of these deposits are on demand to mitigate some of the ~~year. Since there~~associated risk. The Company has not incurred losses related to these deposits.

The Company has not experienced significant losses related to premiums receivable from its policyholders and management believes that amounts provided as an allowance for credit losses is adequate.

The Company has not experienced any losses on amounts due from reinsurers. In order to limit the credit risk associated with amounts potentially due from reinsurers, the Company uses several different reinsurers, all of which have an A.M. Best Rating of A- (Excellent) or better. Absent such rating, the Company has required its reinsurers to place collateral on deposit with an independent institution under a trust agreement for the Company’s benefit.

The Company also has risk associated with the lack of geographic diversification due to the fact that through September 30, 2017, Maison exclusively underwrote policies in Louisiana and Texas. The Company insures personal property located in 63 of the 64 parishes in the State of Louisiana. As of September 30, 2017, these policies are concentrated within these parishes, presented as a percentage of our total policies in force in all states, as follows: Jefferson Parish 12.6%, Saint Tammany Parish 12.5%, East Baton Rouge Parish 7.2%, and Livingston Parish 5.1%. No other parish individually has over 5.0% of the policies in force as of September 30, 2017. On a direct basis, Maison writes in 150 of the 254 counties that comprise the State of Texas; however, no ~~stock awards which can be exercised and converted into common shares during~~single county represents over 5.0% of the ~~periods, the diluted net loss per share~~Company’s total policies in force as of September 30, 2017.

Revenue Recognition:

Premium revenue is ~~the same calculation as the basic.~~

Revenue Recognition

Premiums and Unearned Premium Reserves

~~Premiums are~~ recognized ~~as revenue~~on a pro rata basis over the term of the respective policy ~~period.~~contract. Unearned premium reserves represent the ~~unexpired~~ portion of ~~policy premiums.~~premium written that is applicable to the unexpired term of policies in force.

Service charges on installment premiums are recognized as income upon receipt of related installment payments and are reflected in other income.

Revenue from other policy fees is deferred and recognized over the terms of the respective policy period, with revenue reflected in other income.

~~F-10~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

NotesAny customer payment received is applied first to Consolidated Financial Statements
(in thousands)

1. Description ofany service charge or policy fee due, with the Company and Summary of Significant Accounting Policies - (continued)

remaining amount applied toward any premium due.

Ceded premiums are charged to income over the applicable term of the various reinsurance contracts with third party reinsurers. Ceded ~~reinsurance~~unearned premiums represent the unexpired portion of premiums ceded to reinsurers and are reported as ~~ceded unearned premiums.~~an asset on the Company’s consolidated balance sheets.

Premiums collected in advance occur when the policyholder premium is paid in advance of the effective commencement period of the ~~annual insurance policy.~~

Fair Values of Financial Instruments

~~The Company’s estimates of fair values for financial assets~~policy and ~~liabilities~~ are ~~based~~recorded as a liability on the ~~framework established~~Company’s consolidated balance sheets.

Stock-Based Compensation:

The Company has accounted for stock-based compensation under the provisions of ASC Topic 718 –Stock Compensation, which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (stock options and common stock purchase warrants). The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model using assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. The fair value of each stock option award is recorded as compensation expense on a straight-line basis over the requisite service period, which is generally the period in which the stock options vest, with a corresponding increase to additional paid-in capital.

The Company has also issued restricted stock units (“RSUs”) to certain of its employees which have been accounted for as equity based awards since, upon vesting, they are required to be settled in the Company’s common shares. The Company used a Monte Carlo valuation model to estimate the fair value ~~accounting guidance.~~of these awards upon grant date as the vesting of these RSUs occurs solely upon market-based conditions. The fair value of each RSU is recorded as compensation expense over the derived service period, as determined by the valuation model. Should the market-based condition be achieved prior to the expiration of the derived service period, any unrecognized cost will be recorded as compensation expense in the period in which the RSUs actually vest.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ amounts in thousands, except share and per share data)

Fair Value of Financial Instruments:

The carrying values of certain financial instruments, including cash, short-term investments, premiums receivable and accounts payable, approximate fair value due to their short-term nature. The Company measures the fair value of financial instruments in accordance with GAAP, which defines fair value as the exchange price that would be received for an asset (or paid to transfer a liability) in the principal or most advantageous market for the asset (or liability) in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Earnings Per Common Share:

Basic earnings per common share is computed using the weighted average number of shares outstanding during the respective period.

Diluted earnings per common share assumes conversion of all potentially dilutive outstanding stock options, warrants or other convertible financial instruments. Potential common shares outstanding are excluded from the calculation of diluted earnings per share if their effect is anti-dilutive.

Operating Segments:

The Company operates in a single segment – property and casualty insurance.

3. Recently Issued Accounting Standards

ASU 2014-09: Revenue from Contracts with Customers:

The FASB has issued ASU No. 2014-09, “Revenue from Contracts with Customers”, and related amendments ASU 2015-14, ASU 2016-10, ASU 2016-12, ASU 2016-20, ASU 2017-05 and ASU 2017-13, (collectively, “Topic 606”). Topic 606 creates a new comprehensive revenue recognition standard that will serve as a single source of revenue guidance for all companies that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of non-financial assets, unless those contracts are within the scope of other standards, such as insurance contracts. Topic 606 becomes effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. The Company will adopt Topic 606 on the effective date and since virtually all of the Company’s revenues relate to insurance contracts and investment income, the adoption of Topic 606 is not expected to have a material impact on the Company’s revenues. The Company will continue to monitor and examine transactions that could potentially fall within the scope of Topic 606 as such are consummated.

ASU 2016-01: Financial Instruments-Overall:

ASU 2016-02: Leases:

In February 2016, the FASB issued ASU 2016-02: Leases. ASU 2016-02 was issued to improve the financial reporting of leasing transactions. Under current guidance for lessees, leases are only included on the balance sheet if certain criteria, classifying the agreement as a capital lease, are met. This update will require the recognition of a right-of-use asset and a corresponding lease liability, discounted to present value, for all leases that extend beyond 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income while the repayment of the principal portion of the lease liability will be classified as a financing activity and the interest component will be included in the operating section of the statement of cash flows. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years beginning after December 15, 2020. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. The Company has reviewed its existing lessee obligations and has determined that ASU 2016-02 will apply should the Company renew its existing leases, or enter into any new lease agreements.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ amounts in thousands, except share and per share data)

ASU 2016-09: Stock Compensation:

In March 2016, the FASB issued ASU 2016-09:Compensation – Stock Compensation: Improvement to Employee Share-Based Payment Accounting. ASU 2016-09 was issued to simplify the accounting for share-based payment awards. The guidance requires that all tax effects related to share-based payment be made through the statement of operations at the time of settlement as opposed to the current guidance that requires excess tax benefits to be recognized in additional paid-in-capital. ASU 2016-09 also removes the requirement to delay recognition of a tax benefit until it reduces current taxes payable. The change is required to be applied on a modified retrospective basis, with a cumulative effect adjustment to opening accumulated deficit. Additionally, all tax related cash flows resulting from share-based payments are to be reported as operating activities on the statement of cash flows, a departure from the current requirement which presents tax benefits as an inflow from financing activities and an outflow from operating activities. ASU 2016-09 is effective for annual and interim reporting periods beginning after December 15, 2017 and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company does not believe the adoption of ASU 2016-09 will have a material impact on its consolidated financial statements.

ASU 2016-13: Financial Instruments – Credit Losses:

In June 2016, the FASB issued ASU 2016-13:Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.ASU 2016-13 was issued to provide financial statement users with more useful information regarding the expected credit losses on financial instruments held as assets. Under current GAAP, financial statement recognition for credit losses on financial instruments was generally delayed until the loss was probable of occurring. The amendments of ASU 2016-13 eliminate this probable initial recognition threshold and instead reflect an entity’s current estimate of all expected credit losses. The amendments also broaden the information that an entity must consider in developing its expected credit loss estimates for those assets measured at amortized cost by using forecasted information instead of the current methodology which only considered past events and current conditions. Under ASU 2016-13, credit losses on available-for-sale debt securities will be measured in a manner similar to current GAAP; however, the amendments require that credit losses be presented as an allowance against the investment, rather than as a write-down. The amendments also allow the entity to record reversals of credit losses in current period net income, which is prohibited under current GAAP. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its consolidated financial statements.

4. Investments

A summary of the amortized cost, estimated fair value, and gross unrealized gains and losses on the Company’s investments in fixed income and equity securities at September 30, 2017 and ~~preferred stocks~~December 31, 2016 is ~~estimated using a fair value hierarchy~~as follows.

As of September 30, 2017 (unaudited)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Fixed income securities:
U.S. government	$	2,911	$	6	$	(18	)	$	2,899
State municipalities and political subdivisions		5,379		12		(26	)		5,365
Asset-backed securities and collateralized mortgage obligations		16,727		26		(119	)		16,635
Corporate		20,235		113		(40	)		20,308
Total fixed income securities		45,252		157		(202	)		45,207
Equity securities:
Common stock		1,571		66		(25	)		1,612
Warrants to purchase common stock		72		79		(29	)		122
Rights to purchase common stock		39		3		(5	)		37
Total equity securities		1,682		148		(59	)		1,771
Total fixed income and equity securities	$	46,934	$	305	$	(261	)	$	46,978

As of December 31, 2016
Fixed income securities:
U.S. government	$	1,623	$	1	$	(20	)	$	1,604
State municipalities and political subdivisions		2,271		2		(27	)		2,246
Asset-backed securities and collateralized mortgage obligations		12,095		9		(136	)		11,968
Corporate		10,804		28		(91	)		10,741
Total fixed income securities		26,793		40		(274	)		26,559
Equity securities:
Common stock		1,000		136		—			1,136
Total equity securities		1,000		136		—			1,136
Total fixed income and equity securities	$	27,793	$	176	$	(274	)	$	27,695

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to ~~categorize~~Consolidated Financial Statements

($ amounts in thousands, except share and per share data)

The table below summarizes the ~~inputs it uses~~Company’s fixed income securities at September 30, 2017 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 these obligations.

Matures in:	Amortized Cost		Estimated Fair Value
One year or less	$	2,416	$	2,415
More than one to five years		19,759		19,757
More than five to ten years		11,780		11,804
More than ten years		11,297		11,231
Total	$	45,252	$	45,207

The following table highlights, by loss position and security type, those fixed income and equity securities in ~~valuation techniques.~~unrealized loss positions as of September 30, 2017 and December 31, 2016. The tables segregate the holdings based on the period of time the investments have been continuously held in unrealized loss positions. There were 149 and 122 fixed income investments that were in unrealized loss positions as of September 30, 2017 and December 31, 2016, respectively. The Company held 12 equity investments in unrealized loss positions as of September 30, 2017.

	Less than 12 Months					Greater than 12 Months					Total
As of September 30, 2017 (unaudited)	Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss
Fixed income securities:
U.S. government	$	2,041	$	(18	)	$	175	$	—		$	2,216	$	(18	)
State municipalities and political subdivisions		2,357		(13	)		589		(13	)		2,946		(26	)
Asset-backed securities and collateralized mortgage obligations		11,682		(83	)		1,675		(36	)		13,357		(119	)
Corporate		6,568		(23	)		556		(16	)		7,124		(39	)
Total fixed income securities		22,648		(137	)		2,995		(65	)		25,643		(202	)
Equity securities:							—		—
Common stock		237		(25	)		—		—			237		(25	)
Warrants to purchase common stock		23		(29	)		—		—			23		(29	)
Rights to purchase common stock		18		(5	)		—		—			18		(5	)
Total equity securities		278		(59	)		—					278		(59	)
Total fixed income and equity securities	$	22,926	$	(196	)	$	2,995	$	(65	)	$	25,921	$	(261	)

As of December 31, 2016
Fixed income securities:
U.S. government	$	1,303	$	(20	)	$	—	$	—		$	1,303	$	(20	)
State municipalities and political subdivisions		1,537		(27	)		—		—			1,537		(27	)
Asset-backed securities and collateralized mortgage obligations		9,552		(133	)		460		(3	)		10,012		(136	)
Corporate		5,952		(91	)		—		—			5,952		(91	)
Total fixed income securities	$	18,344	$	(271	)	$	460	$	(3	)	$	18,804	$	(274	)

Under the terms of the certificate of authority granted to Maison by the Texas Department of Insurance, Maison is required to pledge securities totaling at least $2,000 with the State of Texas. Maison deposited the required securities with the State of Texas on May 13, 2015. These securities consist of various fixed income securities listed in the preceding tables which have an amortized cost basis of $2,001 and estimated fair value of $1,998 as of September 30, 2017.

The Company’s other investments are comprised of investments in two limited partnerships which seek to provide equity and asset-backed debt investment in a variety of privately-owned companies. The Company has committed to a total investment of $1,000, of which the limited partnerships have drawn down approximately $645 through September 30, 2017. One of these limited partnerships is managed by Argo Management Group, LLC, an entity which, as of April 21, 2016 is wholly owned by KFSI (see Note 12 – Related Party Transactions). The Company has accounted for its investments under the cost method as the instruments do not have readily determinable fair values and the Company does not exercise significant influence over the operations of the limited partnerships or the underlying privately-owned companies.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ amounts in thousands, except share and per share data)

Also included in other investments is a certificate of deposit in the amount of $300 with an original term of 18 months deposited with the State of Florida pursuant to the terms of the certificate of authority issued to Maison from the FL OIR.

Other-than-Temporary Impairment:

The establishment of an other-than-temporary impairment on an investment requires a number of judgments and estimates. The Company performs a quarterly analysis of the individual investments to determine if declines in market value are other-than-temporary. The analysis includes some or all of the following procedures as deemed appropriate by the Company:

●

considering the extent and length of time during which the market value has been below cost;

●

identifying any circumstances which management believes may impact the recoverability of the unrealized loss positions;

●

obtaining a valuation analysis from a third-party investment manager regarding the intrinsic value of these investments based upon their knowledge and experience combined with market-based valuation techniques;

●

reviewing the historical trading volatility and trading range of the investment and certain other similar investments;

●

assessing if declines in market value are other-than-temporary for debt instruments based upon the investment grade credit ratings from third-party credit rating agencies;

●

assessing the timeliness and completeness of principal and interest payment due from the investee; and

●

assessing the Company’s ability and intent to hold these investments until the impairment may be recovered.

The risks and uncertainties inherent in the assessment methodology used to determine declines in market value that are other-than-temporary include, but may not be limited to, the following:

●

the opinions of professional investment managers could be incorrect;

●

the past trading patterns of investments may not reflect their future valuation trends;

●

the credit ratings assigned by credit rating agencies may be incorrect due to unforeseen events or unknown facts related to the investee company’s financial situation; and

●

the historical debt service record of an investment may not be indicative of future performance and may not reflect a company’s unknown underlying financial problems.

The Company has reviewed currently available information regarding the investments it holds which have estimated fair values that are less than their carrying amounts and believes that these unrealized losses are primarily due to temporary market and sector-related factors rather than to issuer-specific factors. The Company does not intend to sell these investments in the short term, and it is not likely that it will be required to sell these investments before the recovery of their amortized cost.

Accordingly, all of the Company’s ~~cash~~investments were in good standing and ~~short-term~~there were no write-downs for other-than-temporary impairments on the Company’s investments ~~approximates~~for the ~~carrying values,~~nine months ended September 30, 2017 and 2016.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ amounts in thousands, except share and per share data)

The Company does not have any exposure to subprime mortgage-backed investments. Net investment income for the three and nine months ended September 30, 2017 and 2016 was as ~~these amounts~~follows:

	Three months ended September 30,						Nine months ended September 30,
(unaudited)	2017			2016			2017			2016
Investment income:
Interest on fixed income securities	$	231		$	123		$	548		$	332
Interest on cash and cash equivalents		30			34			126			89
Realized gain upon sale of securities		4			—			68			—
Other		—			5			—			7
Gross investment income		265			162			742			428
Investment expenses		(17	)		(11	)		(42	)		(35	)
Net investment income	$	248		$	151		$	700		$	393

5. Reinsurance

The Company reinsures, or cedes, a portion of its written premiums on a per risk and excess of loss basis to non-affiliated insurers in order to limit its loss exposure. Although reinsurance is intended to reduce the Company’s exposure risk, the ceding of insurance does not legally discharge the Company from its primary liability for the full amount of coverage under its policies. If our reinsurers fail to meet their obligations under the applicable reinsurance agreements, the Company would still be required to pay the insured for the loss.

Under the Company’s per-risk treaty, reinsurance recoveries are ~~liquid.~~

Estimatesreceived for up to $1,750 in excess of a retention of $250 for each loss occurring prior to June 1, 2017. Effective June 1, 2017, the Company amended its per-risk treaty such that recoveries are received for up to $1,600 in excess of a retention of $400 for each loss occurring on June 1, 2017 or thereafter. The Company has ceded $405 and Assumptions

$438 in written premiums under its per-risk treaties for the nine months ended September 30, 2017 and 2016, respectively.

The ~~preparation~~Company’s excess of ~~consolidated~~loss treaties are based upon a treaty year beginning on June 1^st of each year and expiring on May 31^st of the following year. Thus, the financial statements for the nine month periods ended September 30, 2017 and 2016 contain premiums ceded under three separate excess of loss treaties. Under the Company’s 2015/2016 excess of loss treaty which expired on May 31, 2016, for each catastrophic event occurring within a 144-hour period, the Company receives reinsurance recoveries of up to $121,000 in ~~conformity~~excess of a retention of $4,000 per event. The Company had also procured a “top, drop and aggregate” layer of reinsurance protection that may be used for any event above $125,000, up to a maximum recovery of $15,000. This $15,000 second layer of coverage applied in total to all events occurring during the treaty year of June 1, 2015 through May 31, 2016.

For both the treaty years beginning June 1, 2016 and June 1, 2017, the Company’s excess of loss treaties cover losses of up to $170,000 in excess of a $5,000 retention per event. For any event above $175,000, the Company again purchased top, drop and aggregate coverage, with ~~GAAP requires management~~an additional limit of $25,000. The $25,000 aggregate coverage applies in total to ~~make~~all events occurring during each of the treaty years.

The Company has ceded $16,021 and $14,976 in written premiums under its excess of loss treaties for the nine months ended September 30, 2017 and 2016, respectively.

In June 2015, we began writing business through a quota-share agreement with Brotherhood Mutual Insurance Company (“Brotherhood”). Through this agreement, we act as a reinsurer, and have assumed wind/hail only exposures on certain churches and related structures that Brotherhood insures throughout the State of Texas. Our quota-share percentage varies from 25%-100% of the wind/hail premium written by Brotherhood, dependent upon the geographic location (coastal areas versus non-coastal areas) within the State of Texas. For the nine months ended September 30, 2017, we have written $1,427 in assumed premiums through our agreement with Brotherhood, compared to $1,367 in assumed premiums for the same period in 2016.

On December 1, 2016, we participated TWIA’s inaugural depopulation program whereby Maison assumed personal lines policies for wind and hail only exposures along the Gulf Coast area of Texas. The depopulation program was structured such that Maison reinsures TWIA under a 100% quota share agreement. For the nine months ended September 30, 2017, we have written $1,401 in assumed premiums through the TWIA quota share agreement.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ amounts in thousands, except share and per share data)

The impact of reinsurance treaties on the Company’s financial statements is as follows:

(unaudited)	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Premium written:
Direct	$	16,533		$	13,457		$	45,989		$	38,117
Assumed		630			509			2,828			1,367
Ceded		(6,051	)		(5,973	)		(16,426	)		(15,414	)
Net premium written	$	11,112		$	7,993		$	32,391		$	24,070

Premium earned:
Direct	$	14,056		$	12,037		$	40,015		$	34,455
Assumed		851			509			2,454			1,367
Ceded		(6,275	)		(5,410	)		(17,437	)		(12,953	)
Net premium earned	$	8,632		$	7,136		$	25,032		$	22,869

Losses and LAE incurred:
Direct	$	20,451		$	12,529		$	31,297		$	25,985
Assumed		5,734			562			8,937			2,340
Ceded		(18,390	)		(6,648	)		(26,425	)		(13,408	)
Net losses and LAE incurred	$	7,795		$	6,443		$	13,809		$	14,917

6. Deferred Policy Acquisition Costs

Deferred policy acquisition costs (“DPAC”) consist primarily of commissions, premium taxes, assessments and other policy processing fees incurred which are related to successful efforts to acquire new or renewal insurance contracts. Acquisition costs deferred on insurance products are amortized over the period in which the related revenues are earned. Costs associated with unsuccessful efforts or costs that cannot be tied directly to a successful policy acquisition are expensed as incurred.

DPAC as well as the related amortization expense associated with DPAC for the three and nine months ended September 30, 2017 and 2016, is as follows:

(unaudited)	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016

Balance, beginning of period, net	$	5,545		$	4,139		$	4,389		$	4,030
Additions		3,402			2,325			9,670			6,487
Amortization		(2,755	)		(2,095	)		(7,867	)		(6,148	)
Balance, September 30, net	$	6,192		$	4,369		$	6,192		$	4,369

7. Loss and Loss Adjustment Expense Reserves

The Company continually revises its estimates ~~and assumptions that affect~~of the ~~application~~ultimate financial impact of ~~policies and the reported~~claims made. A significant degree of judgment is required to determine amounts ~~of assets and liabilities and disclosure of contingent assets and liabilities at the date of~~recorded in the consolidated financial statements ~~and~~for the reported amounts of revenues and expenses during the year. Actual results could differ from these estimates. Estimates and their underlying assumptions are reviewed on an ongoing basis. Changes in estimates are recorded in the accounting period in which they are determined. The critical accounting estimates and assumptions in the accompanying consolidated financial statements include the reservesprovision for loss and loss adjustment expense ~~valuation~~(“LAE”) reserves. The process for establishing this provision reflects the uncertainties and significant judgmental factors inherent in predicting future results of ~~fixed~~both known and unknown loss events. The process of establishing the provision for loss and LAE reserves relies on the judgment and opinions of a large number of individuals, including the opinions of the Company’s independent actuaries.

The Company’s evaluation of the adequacy of loss and loss adjustment expense reserves includes a re-estimation of the liability for loss and LAE reserves relating to each preceding financial year compared to the liability that was previously established. The results of this comparison and the changes in the provision, net of amounts recoverable from reinsurers, for the nine months ended September 30, 2017 and 2016 were as follows:

(unaudited)	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016

Balance, beginning of period, gross of reinsurance	$	9,583		$	5,884		$	6,971		$	2,123
Less reinsurance recoverable on loss and LAE expense reserves		(6,012	)		(3,431	)		(3,652	)		(120	)
Balance, beginning of period, net of reinsurance		3,571			2,453			3,319			2,003
Incurred related to:
Current year		8,717			6,487			15,953			15,090
Prior years		(922	)		(44	)		(2,144	)		(173	)
Paid related to:
Current year		(7,246	)		(5,671	)		(12,060	)		(12,719	)
Prior years		411			36			(537	)		(940	)
Balance, September 30, net of reinsurance		4,531			3,261			4,531			3,261
Plus reinsurance recoverable related to loss and LAE expense reserves		17,560			5,366			17,560			5,366
Balance, September 30, gross of reinsurance	$	22,091		$	8,627		$	22,091		$	8,627

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ amounts in thousands, except share and per share data)

8. Income Taxes

Actual income ~~securities~~tax expense for the three and ~~preferred stocks, valuation~~nine months ended September 30, 2017 and 2016 varies from the amount that would result by applying the applicable statutory federal income tax rate of 34% to income before income taxes as summarized in the following table:

(unaudited)	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Income tax benefit at statutory income tax rate	$	(1,168	)	$	(902	)	$	(508	)	$	(743	)
State income tax (net of federal tax benefit)		(5	)		54			104			131
Other		2			1			7			7
Income tax benefit	$	(1,171	)	$	(847	)	$	(397	)	$	(605	)

The Company carries a net deferred income ~~taxes,~~tax asset of $855 and $420 as of September 30, 2017 and December 31, 2016, respectively, all of which the Company believes is more likely than not to be fully realized based upon management’s assessment of future taxable income. Significant components of the Company’s net deferred ~~policy acquisition costs.~~tax assets are as follows:

Recently Issued Accounting Standards

~~In February 2013,~~

(unaudited)	September 30, 2017		December 31, 2016
Deferred income tax assets:
Loss and loss adjustment expense reserves	$	49	$	35
Unearned premium reserves		2,055		1,503
Net operating loss carryforwards		736		235
Share-based compensation		335		316
Other		308		270
Deferred income tax assets	$	3,483	$	2,359

Deferred income tax liabilities:
Deferred policy acquisition costs	$	2,105	$	1,492
State deferred taxes		444		397
Other		79		50
Deferred income tax liabilities	$	2,628	$	1,939

Net deferred income tax assets	$	855	$	420

As of September 30, 2017, the ~~Financial~~Company had no unrecognized tax benefits. The Company analyzed its tax positions in accordance with the provisions of Accounting Standards ~~Board (FASB) issued an Accounting Standards Update (ASU) 2013-02,~~~~Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income~~ (ASU 2013-02), which is intended to improve the reporting of reclassifications out of accumulated other comprehensive income. The ASU requires an entity to report, either on the face of the income statement or in the notes to the financial statements, the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in the income statement if the amount being reclassified is required to be reclassified in its entirety to net income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other required disclosures that provide additional detail about those amounts. Effective January 1, 2013, the Company adopted ASU 2013-02. Except for the new disclosure requirements, the adoption of the standard did not have an impact on the consolidated financial statements.

~~In July 2013, the FASB issued ASU 2013-11,~~~~Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists~~ ~~(ASU 2013-11). ASU 2013-11 is effective for the first interim or annual period beginning on or after December 15, 2013 with early adoption permitted. ASU 2013-11 amends ASC~~Codification Topic 740,Income Taxes, and has determined that there are currently no uncertain tax positions. The Company generally recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense (benefit).

9. Net Loss Per Share

Net loss per share is computed by dividing net loss by the weighted average number of common shares and common share equivalents outstanding during the periods presented. In calculating diluted loss per share, those potential common shares that are found to be anti-dilutive are excluded from the calculation. The table below provides a summary of the numerators and denominators used in determining basic and diluted loss per share for the three and nine months ended September 30, 2017 and 2016.

(unaudited)	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Basic and Diluted:
Net loss	$	(2,263	)	$	(1,806	)	$	(1,096	)	$	(1,581	)
Weighted average common shares outstanding		5,961,636			6,022,983			5,958,407			6,076,838
Loss per common share	$	(0.38	)	$	(0.30	)	$	(0.18	)	$	(0.26	)

The following potentially dilutive securities outstanding as of September 30, 2017 and 2016 have been excluded from the computation of diluted weighted-average shares outstanding as their effect would be anti-dilutive.

(unaudited)	As of September 30,
	2017		2016
Options to purchase common stock		177,456		210,489
Warrants to purchase common stock		1,906,875		1,906,875
Restricted stock units		20,500		20,500
Performance shares		475,000		475,000
		2,579,831		2,612,864

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ amounts in thousands, except share and per share data)

10. Options, Warrants, and Restricted Stock Units

The Company has established an equity incentive plan for employees and directors of the Company (the “Plan”). The purpose of the Plan is to create incentives designed to motivate recipients to contribute toward the Company’s growth and success, and also to attract and retain persons of outstanding competence, and provide ~~guidance~~such persons with an opportunity to acquire an equity interest in the Company.

The types of awards available for issuance under the Plan include non-qualified stock options, restricted stock, restricted stock units (“RSUs”), performance shares, performance cash awards, and ~~reduce diversity~~other stock-based awards. The Plan provides for the issuance of 354,912 shares of common stock. As of September 30, 2017, both stock options and RSUs had been issued to the Company’s employees under the Plan resulting in ~~practice~~156,956 shares available for future issuance under the Plan.

There were no grants, exercises, or cancellations of the Company’s stock options for the nine months ended September 30, 2017. The following table summarizes the Company’s stock options outstanding as of September 30, 2017.

Stock Options Outstanding as of September 30, 2017 (unaudited)
Date of Grant	Exercise Price ($)		Expiration Date	Remaining Contractual Life (Years)		Number Outstanding		Number Exercisable
03/31/2014		8.00	03/31/2019		1.50		163,301		143,704
04/04/2014		8.69	04/04/2019		1.51		14,155		12,456
					Total		177,456		156,160

On May 29, 2015, the Compensation Committee of the Company’s Board of Directors granted RSUs to certain of its executive officers under the Plan. Each RSU granted entitles the grantee to one share of the Company’s common stock upon the vesting date of the RSU. The RSUs vest as follows: (i) 50% upon the date that the closing price of the Company’s common stock equals or exceeds $10.00 per share; and (ii) 50% upon the date that the closing price of the Company’s common stock equals or exceeds $12.00 per share. Prior to the vesting of the RSUs, the grantee will not be entitled to any dividends declared on the ~~financial statement presentation~~Company’s common stock. The RSUs do not expire; however, should the grantee discontinue employment with the Company for any reason other than death or disability, all unvested RSUs will be deemed forfeited on the date employment is discontinued.

On May 23, 2017, the Compensation Committee of the Company’s Board of Directors approved the potential issuance of RSUs to the Company’s Chief Operating Officer, Mr. Case. Mr. Case will be awarded two matching RSUs for each share of the Company’s common stock that he purchases on the open market or directly from the Company during the period beginning May 23, 2017 and ending June 15, 2018, up to a maximum of 136,054 RSUs. Each RSU will entitle Mr. Case to one share of the Company’s common stock upon the vesting date of the RSU, which shall vest 20% per year over a period of five years following the date granted, subject to Mr. Case’s continued employment with the Company. Mr. Case will also be required to maintain ownership of the shares purchased through the full five-year vesting period. The RSUs will be issued to Mr. Case outside of the Plan as an ~~unrecognized tax benefit when~~inducement grant material to Mr. Case entering into employment with the Company. Through September 30, 2017, Mr. Case had purchased 50,092 shares of the Company’s common stock, of which 28,000 restricted common shares were purchased directly from the Company.

On May 31, 2017, the Compensation Committee of the Company’s Board of Directors approved the potential issuance of additional RSUs to the Company’s Officers and Directors under the Plan. The number of RSUs to be granted will be based upon the number of shares of the Company’s common stock that each participating Officer and Director purchases in open market transactions, independently, and without assistance from the Company, during the period beginning May 31, 2017 and ending November 30, 2017 (the “Purchase Period”). At the end of the Purchase Period, the Company will issue to each participating Officer and Director a ~~net operating loss carryforward,~~total of two RSUs for each share of the Company’s common stock purchased during the Purchase Period, subject to a ~~similar tax loss, or a tax credit carryforward exists. Except~~maximum of 40,000 RSUs for the ~~changes, if any, in~~Company’s Chief Executive Officer, Mr. Raucy, 40,000 RSUs for the Company’s ~~presentation,~~Chief Financial Officer, Mr. Hill, 20,000 RSUs for the ~~initial application~~Company’s Chief Underwriting Officer, Mr. Stroud, and 6,666 RSUs for each of the ~~standard~~Company’s non-employee Directors. Each RSU will entitle the grantee to one share of the Company’s common stock upon the vesting date of the RSU, which shall vest 20% per year over a period of five years following the date granted, subject to each Officer’s continued employment with the Company and each Director’s continued service on the Board, provided that if a Director makes himself available and consents to be nominated by the Company for continued service but is not ~~impact~~nominated by the Board for election by the shareholders, other than for good reason as determined by the Board in its discretion, then such director’s RSUs shall vest in full as of his last date of service as a director with the Company. Participating Officers and Directors will be required to maintain ownership of the shares purchased through the full five-year vesting period. Pursuant to the arrangement, a maximum number of 139,996 RSUs may be granted to the Company’s Officers and Directors at the end of the Purchase Period under the Plan. Through September 30, 2017, the Company’s Officers and Directors had purchased 41,565 shares of the Company’s common stock.

2.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ amounts in thousands, except share and per share data)
The following table summarizes RSU activity for the nine months ended September 30, 2017.
Restricted Stock Units Number of Units Weighted Average Grant Date Fair Value
Non-vested units, December 31, 2016 20,500 $ 1.34
Granted — —
Vested — —
Forfeited — —
Non-vested units, September 30, 2017(unaudited) 20,500 $ 1.34
Total stock based compensation expense for the nine months ended September 30, 2017 and 2016 was $19 and $30, respectively. As of September 30, 2017, total unrecognized stock compensation expense of $11 remained, which will be recognized through March 31, 2018.
There were no grants, exercises, or cancellations of the Company’s common stock warrants for the nine months ended September 30, 2017. The following table summarizes the Company’s warrants outstanding as of September 30, 2017.
Date of Grant Exercise
Price ($) Expiration Date Remaining Contractual Life (Years) Number Outstanding and Exercisable
03/31/2014 9.60 03/31/2019 1.50 312,500
03/31/2014 10.00 03/31/2019 1.50 94,375
02/24/2015 15.00 02/24/2022 4.41 1,500,000
Total 1,906,875
11. Shareholders’ Equity
Treasury Shares
On December 1, 2014, the Company’s Board of Directors authorized a share repurchase program for up to 500,000 shares of the Company’s common stock, which expired on December 31, 2016. Through December 31, 2016, the Company has repurchased an aggregate 401,359 shares at an aggregate purchase price of $2,927, or $7.29 per share, including all fees and commissions.
On January 29, 2016, the Company retired 250,000 of its treasury shares, resulting in a reclassification of the purchase price of $1,917 to additional paid in capital.
12. Related Party Transactions

Related party transactions ~~including services provided to or received by the Company,~~ are carried out in the normal course of operations and are measured in part by the amount of consideration paid or received as

~~F-11~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

Notes to Consolidated Financial Statements
(in thousands)

2. Related Party Transactions - (continued)

established and agreed by the parties. ~~The Company~~Management believes that consideration paid for such services in each case approximates fair value. ~~During 2013 and 2012, the Company was party to various service agreements with the Parent.~~

The Company has a payable balance of $2,668 and $407 at December 31, 2013 and 2012, respectively, with the Parent. This intercompany payable represents a payment made by Parent, on our behalf to various third-party vendors. At December 31, 2013, $68 was related to accounting services provided by the Parent to the Company.

~~The Parent contributed cash of $1,200 and $2,550 during the year ended December 31, 2013, and the period from October 2, 2012 through December 31, 2012, respectively, as additional paid-in capital.~~

The Initial Public Offering

On December 6, 2013, our Parent announced that the Company plans to conduct an initial public offering of its common stock, (the Offering). The offering was expected to commence after the Securities Exchange Commission (SEC) review process completion which was initiated by the Company’s confidential filing of a draft registration statement with the SEC on December 6, 2013. In conjunction with the Offering, the Company intends to enter intoExcept where disclosed elsewhere in these consolidated financial statements, the following ~~agreements:~~

The Transition Services Agreement

~~The Transition Services Agreement (TSA), which will be effective upon the completion~~is a summary of ~~the Offering, will provide for temporary access to necessary services and resources for which the Company is currently reliant on KFSI, including but not limited to resources and services~~ related to accounting and reporting, accounts payable, cash management, taxes, compliance with the Sarbanes-Oxley Act of 2002, payroll processing and benefits administration, information technology systems and support, human resource function, and external audit. The TSA stipulates transition deadlines for all the services provided under it, by which time the Company is expected to establish its own independent functions for such services. The charges for the transition services generally will be intended to allow KFSI to fully recover the costs directly associated with providing the services, plus all out-of-pocket costs and expenses. The charges of each of the transition services generally will be based on either a pre-determined flat fee or an allocation of the cost incurred by KFSI (or an affiliate or subsidiary thereof) for providing the service, including certain fees and expenses of third-party service providers.party transactions.

The TSA also provides that neither party will be liable to the other of such service for any special, indirect, incidental or consequential damages, except to the extent such damages result from fraud, gross negligence or intentional misconduct.

The Management Services
Performance Share Grant Agreement

On ~~February 11,~~March 26, 2014, the Company entered into a Performance Share Grant Agreement (“PSGA”) with KAI, whereby KAI will be entitled to receive up to an aggregate of 375,000 shares of PIH common stock upon achievement of certain milestones regarding the Company’s stock price. Pursuant to the terms of the PSGA, if at any time the last sales price of the Company’s common stock equals or exceeds: (i) $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of the Company’s common stock; (ii) $15.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of the Company’s common stock (in addition to the 125,000 shares of common stock earned pursuant to clause (i) herein); and (iii) $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of the Company’s common stock (in addition to the 250,000 shares of common stock earned pursuant to clauses (i) and (ii) herein). The shares of common stock granted to KAI will have a valuation equal to the last sales price of PIH common stock on the day prior to such grant. As of September 30, 2017, the Company has not issued any shares under the PSGA.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ amounts in thousands, except share and per share data)

Termination of Management Services Agreement

As a result of the termination of the Management Services Agreement ~~(MSA)~~(“MSA”), which ~~provides for certain permanent services, unless terminated, that we will receive from~~occurred on February 24, 2015, the Company has issued the following securities to 1347 Advisors, LLC ~~(1347 Advisors)~~(“Advisors”), a wholly owned subsidiary of KFSI:

●

100,000 shares of the Company’s common stock issuable pursuant to the Performance Shares Grant Agreement dated February 24, 2015, and subject to the achievement of the Milestone Event;

●

120,000 shares of Series B Preferred Stock of the Company (the “Preferred Shares”); and

●

A warrant (the “Warrant”) to purchase 1,500,000 shares of the Company’s common stock at an exercise price of $15.00 per share. The Warrant expires on February 24, 2022.

The Performance Shares Grant Agreement grants Advisors 100,000 shares of the ~~Parent, including forecasting, analysis~~Company’s common stock issuable upon the date that the last sales price of ~~capital structure and reinsurance programs, consultation in future restructuring~~the Company’s common stock equals or ~~capital raising transactions, and consultation in corporate development initiatives. For the services performed, 1347~~exceeds $10.00 per share for any 20 trading days within any 30-day trading period (the “Milestone Event”). Advisors will not be entitled to any dividends declared or paid on the Company’s stock prior to the Milestone Event having been achieved.

The Preferred Shares have a par value of $25.00 and pay annual cumulative dividends at a rate of eight percent per annum. Cumulative dividends shall accrue, whether or not declared by the Board and irrespective of whether there are funds legally available for the payment of dividends. Accrued dividends shall be paid in cash only when, as, and if declared by the Board out of funds legally available therefor or upon a ~~monthly fee equal to 1% of our gross written premiums, as defined in the form of MSA. After the seventh year~~liquidation or redemption of the ~~term~~Preferred Shares. In the event of any voluntary of involuntary liquidation, dissolution, or winding up of the ~~MSA, should~~Company, the ~~ownership~~holders of ~~our shares by KFSI or an affiliate or subsidiary thereof fall below fifty percent (50%) of KFSI’s (or an affiliate or subsidiary thereof) ownership of our shares at~~ the ~~close of this Offering, the monthly fee~~Preferred Shares then outstanding shall be ~~calculated by (a) dividing~~entitled to be paid out of the ~~existing shares owned by KFSI (or an affiliate~~assets of the Company available for distributions to its shareholders, before any payment shall be made to holders of securities junior in preference to the Preferred Shares. The Preferred Shares rank senior to the Company’s common stock, and the Company is not permitted to issue any other series of preferred stock that ranks equal or ~~subsidiary thereof)~~senior to the Preferred Shares while the Preferred Shares are outstanding. On both February 24, 2017 and 2016, the Company issued a cash payment of $240 to Advisors representing annual dividend payments due on the Preferred Shares.

Unless redeemed earlier by the ~~number of original shares owned by KFSI (or an affiliate or subsidiary thereof) at~~Company as discussed below, with the ~~close of this Offering, and (b) multiplying by 1% of our gross~~ written ~~premiums, as defined in the form of MSA. For illustrative purposes, if KFSI (or an affiliate or subsidiary thereof) owned ten shares at the close of~~

~~F-12~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

Notes to Consolidated Financial Statements
(in thousands)

2. Related Party Transactions - (continued)

~~the Offering, and in the eighth year, sold six shares, resulting in ownership of four shares, the fee would be four divided by ten multiplied by one percent, or 0.4% annualized.~~

~~The MSA will only terminate by mutual~~ consent of ~~both parties, except in case of certain exceptions as stated in~~ the ~~form~~holders of the ~~agreement. With respect to termination for any reason~~majority of the ~~MSA (other than due to gross negligence or willful misconduct of 1347 Advisors),~~Preferred Shares then outstanding, the Company will be required to ~~pay 1347 Advisors an~~redeem the Preferred Shares then outstanding on February 24, 2020 (the “Mandatory Redemption Date”), for a redemption amount equal to ~~twenty times~~$25.00 per share plus all accrued and unpaid dividends on such shares. The Company has the ~~consulting fee paid~~option to ~~1347 Advisors in~~redeem the most recent calendar year immediately preceding. The liabilities of 1347 Advisors under the MSA will generally be limited to the aggregate fees paid to 1347 Advisors pursuant to the agreement for the six monthsPreferred Shares prior to the ~~time~~Mandatory Redemption Date immediately prior to the ~~liability arose.~~

Restricted Granted Common Stock Option

~~In conjunction with the above referenced initial offering,~~consummation of any change in control of the Company ~~is granting~~that may occur.

Since the Preferred Shares have a ~~stock option~~mandatory redemption provision requiring redemption on February 24, 2020, the Company was required to ~~its CEO and President~~classify the Preferred Shares as a liability on the balance sheet instead of recording the value of these shares in equity. The resulting liability was recorded at a discount to ~~purchase a number of shares of its common stock (the “Option Shares”) up to approximately $264 in value at~~ the ~~Offering price. Concurrently with the exercise~~ultimate redemption amount of the ~~stock option, the Company will grant additional shares of its common stock (the “Matched Shares”) as a one-for-one match against the Option Shares. The Option~~Preferred Shares ~~and Matched Shares will be restricted and the Matched Shares will vest 100%~~based upon ~~the fifth anniversary of the Offering.~~

3. Investments

The amortized cost, gross unrealized gains and losses and estimated fair value of investments in fixed income securities and preferred stocks as of December 31, 2013 and 2012 are summarized in the tables shown below:

December 31, 2013 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized Losses Estimated Fair Value
Fixed income securities:

Asset-backed securities $ 100 $ — $ — $ 100
Corporate 201 — — 201
Total Investments in Fixed income securities $ 301 $ — $ — $ 301

December 31, 2012 Amortized
Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Preferred stock $ 1,875 $ — $ — $ 1,875
Total Investments in Preferred stocks $ 1,875 $ — $ — $ 1,875

The contractual maturity periods of the Company’s fixed income securities as December 31, 2013 were all due after one year through five years. These fixed income securities have been owned less than 12 months.

Fair values of fixed income securities are derived from active market prices and if no active market exists are derived from quoted market prices of similar instruments or other third-party evidence. Fair values of preferred stock for which no active market exists are derived from the quoted price of similar financial instruments or valuation models with observable market-based inputs are used to estimate the fair value.

~~A certificate of deposit with a fair value of $100 at December 31, 2013 and 2012 was on deposit with a Louisiana regulatory authority.~~

~~The establishment of~~ an ~~other-than-temporary impairment on an investment requires a number of judgments and estimates. The Company performs a quarterly~~ analysis of the ~~individual investments~~cash payments expected to occur under the terms of the Preferred Shares discounted for the Company’s estimated cost of equity (13.9%). As a result, amortization in the amount of $1,889 will be charged to operations during the period the Preferred Shares are outstanding using the effective interest method. For the nine months ended September 30, 2017 and 2016, amortization of the discount on the Preferred Shares totaled $276 and $263, respectively.

Investment in Limited Liability Company

On April 21, 2016, KFSI completed the acquisition of Argo Management Group LLC (“Argo”). Argo’s primary business is to act as the Managing Member of Argo Holdings Fund I, LLC, an investment fund in which the Company has committed to invest $500, of which the Company has invested $211 as of September 30, 2017. The managing member of Argo, Mr. John T. Fitzgerald, was also appointed to KFSI’s board of directors on April 21, 2016.

13. Accumulated Other Comprehensive Income (Loss)

The table below details the change in the balance of each component of accumulated other comprehensive income (loss), net of tax, for the three and nine months ended September 30, 2017 and 2016.

(unaudited)	Three months ended September 30,						Nine month ended September 30,
	2017			2016			2017			2016
Unrealized gains (losses) on available-for-sale securities:
Balance, beginning of period	$	4		$	259		$	(65	)	$	(62	)
Other comprehensive income (loss) before reclassifications		40			(10	)		187			478
Amounts reclassified from accumulated other comprehensive income (loss)		(3	)		(6	)		(45	)		(8	)
Income taxes		(12	)		5			(48	)		(160	)
Net current-period other comprehensive income (loss)		25			(11	)		94			310
Balance, September 30	$	29		$	248		$	29		$	248

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

~~F-13~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

Notes to Consolidated Financial Statements
(in thousands)

3. Investments - (continued)

~~determine if declines in fair value are other-than-temporary. The analysis includes some or all of the following procedures as deemed appropriate by the Company:~~

~~identifying all unrealized loss positions that have existed for at least six months;~~

~~identifying other circumstances which management believes may impact the recoverability of the unrealized loss positions;~~

obtaining a valuation analysis from third-party investment managers regarding the intrinsic value of these investments based on their knowledge and experience together with market-based valuation techniques;

~~reviewing the trading range of certain investments over the preceding calendar period;~~

~~assessing if declines in market value are other-than-temporary for debt instruments based on the investment grade credit ratings from third-party rating agencies;~~

~~assessing if declines in market value are other-than-temporary for any debt instrument with a non-investment grade credit rating based on the continuity of its debt service record;~~

~~determining the necessary provision for declines in market value that are considered other-than-temporary based on the analyses performed; and~~

~~assessing the Company’s ability and intent to hold these investments at least until the investment impairment is recovered.~~

~~The risks and uncertainties inherent in the assessment methodology used to determine declines in market value that are other-than-temporary include, but may not be limited to, the following:~~

~~the opinions of professional investment managers could be incorrect;~~

~~the past trading patterns of individual investments may not reflect future valuation trends;~~

~~the credit ratings assigned by independent credit rating agencies may be incorrect due to unforeseen or unknown facts related to a company’s financial situation; and~~

~~the debt service pattern of non-investment grade instruments may not reflect future debt service capabilities and may not reflect a company’s unknown underlying financial problems.~~

Given these risks and uncertainties, the Company will monitor the investment holdings to determine whether future declines are other-than-temporary. Accordingly, there is no assurance that future declines in fair value will not occur and other-than-temporary impairment charges to earnings may be required in the foreseeable future.

As a result of the above analysis performed by the Company to determine declines in market value that are other-than-temporary, there were no write-downs for other-than-temporary impairment through the disposal date related to fixed maturities for the year ended December 31, 2013, and the period from October 2, 2012 through December 31, 2012, respectively.

~~The Company does not have any exposure to subprime mortgage-backed investments.~~

~~F-14~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

Notes to Consolidated Financial Statements
(in thousands)

3. Investments - (continued)

~~Net investment income for the year ended December 31, 2013, and the period from October 2, 2012 through December 31, 2012, is comprised of the following:~~

2013 2012
Income

Dividends on preferred stock $ 47 $ 13
Total investment income 47 13
Less investment expenses — —
Net Investment Income $ 47 $ 13

4.
($ amounts in thousands, except share and per share data)
14. Fair Value Measurements

~~Fair value amounts represent estimates~~ of ~~the consideration that would currently be agreed upon between knowledgeable, willing parties who are under no compulsion to act.~~ Financial Instruments

Also, the calculation of estimated fair value is based on market conditions at a specific point in time and may not be reflective of future fair values. For the Company’s financial instruments carried at cost or amortized cost, the book value is not adjusted to reflect increases or decreases in fair value due to market fluctuations, including those due to interest rate changes, as it is the Company’s intention to hold them until there is a recovery of fair value, which may be to maturity.

The Company classifies its investments in fixed income ~~securities~~ and ~~preferred stocks~~equity securities as available-for-sale and reports these investments at fair value. Fair values of fixed income securities ~~are derived from active market prices and if~~for which no active market exists are derived from quoted market prices of similar instruments or other third-party evidence.

The ~~Company employs~~FASB has issued guidance that defines fair value as the exchange price that would be received for and asset (or paid to transfer a liability) in the principal, or most advantageous market in an orderly transaction between market participants. This guidance also establishes a fair value hierarchy that requires and entity to ~~categorize~~maximize the use of observable inputs ~~it uses in valuation techniques to measure~~and minimize the use of unobservable inputs when measuring fair value. The ~~extent~~guidance categorizes assets and liabilities at fair value into one of ~~use~~three different levels depending on the observation of ~~quoted market prices (Level 1), valuation models using observable market information (Level 2) and internal models without observable market information (Level 3)~~the inputs employed in the ~~valuation of the Company’s financial assets and~~measurements, as follows:

●

Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets providing the most reliable measurement of fair value since it is directly observable.

●

Level 2 – inputs to the valuation methodology which include quoted prices for similar assets or liabilities in active markets. These inputs are observable, either directly or indirectly, for substantially the full-term of the financial instrument.

●

Level 3 – inputs to the valuation methodology which are unobservable and significant to the measurement of fair value.

Financial instruments measured at fair value ~~on a recurring basis~~ as of September 30, 2017 and December 31, ~~2013 and 2012 was~~2016 in accordance with this guidance are as ~~follows:~~follows.

September 30, 2017 (unaudited)	Level 1		Level 2		Level 3		Total
Fixed income securities:
U.S. government	$	—	$	2,899	$	—	$	2,899
State municipalities and political subdivisions		—		5,365		—		5,365
Asset-backed securities and collateralized mortgage Obligations		—		16,635		—		16,635
Corporate		—		20,308		—		20,308
Total fixed income securities		—		45,207		—		45,207

Equity securities:
Common stock		1,612		—		—		1,612
Warrants to purchase common stock		122		—		—		122
Rights to purchase common stock		37		—		—		37
Total equity securities		1,771		—		—		1,771
Total fixed income and equity securities	$	1,771	$	45,207	$	—	$	46,978

December 31, 2016
Fixed income securities:
U.S. government	$	—	$	1,604	$	—	$	1,604
State municipalities and political subdivisions		—		2,246		—		2,246
Asset-backed securities and collateralized mortgage Obligations		—		11,968		—		11,968
Corporate		—		10,741		—		10,741
Total fixed income securities	$	—	$	26,559	$	—	$	26,559

Equity securities:
Common stock		1,136		—		—		1,136
Total equity securities		1,136		—		—		1,136

Total fixed income and equity securities	$	1,136	$	26,559	$	—	$	27,695

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Assets and Liabilities at Fair Value
December 31, 2013 Level 1 Level 2 Level 3 Total
Fixed income securities $ — $ 301 $ — $ 301

Assets and Liabilities at Fair Value
December 31, 2012 Level 1 Level 2 Level 3 Total
Preferred stock $ — $ 1,875 $ — $ 1,875

5. Reinsurance

The Company’s consolidated financial statements reflect the effects of ceded reinsurance transactions. Ceded reinsurance involves transferring certain insurance risks (along with the related written and earned premiums) the Company has underwritten to other insurance companies who agree to share these risks. The

~~F-15~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

Notes to Consolidated Financial Statements
($ amounts in thousands)

5. Reinsurance - (continued)

thousands, except share and per share data)

~~primary purpose~~

15. Statutory Requirements

The Company’s insurance subsidiary, Maison, prepares statutory basis financial statements in accordance with accounting practices prescribed or permitted by the LDI. Prescribed statutory accounting practices include state laws, rules and regulations as well as accounting practices and rules as outlined in a variety of ~~ceded reinsurance~~publications of the National Association of Insurance Commissioners (“NAIC”). Permitted statutory accounting practices encompass all accounting practices that are not prescribed, but instead have been specifically requested by an insurer and allowed by the state in which the insurer is domiciled (in Maison’s case, Louisiana). Permitted practices may differ from state to ~~protect~~state, company to company within a state, and may change in the ~~Company,~~future. In converting from statutory accounting basis to U.S. GAAP, typical adjustments include the deferral of acquisition costs (which are all charged to operations as incurred on a statutory basis), the inclusion of statutorily non-admitted assets on the balance sheet, the inclusion of net unrealized holding gains or losses related to investments included on the balance sheet, as well as the inclusion of changes in deferred tax assets and liabilities in the statement of operations.

Statutory Surplus and Capital Requirements

In order to retain its certificate of authority in the States of Louisiana and Florida, Maison is required to maintain a minimum capital surplus of $5,000 and $35,000, respectively. As of September 30, 2017, Maison’s capital surplus was $35,962.

The LDI employs risk-based capital (“RBC”) reports to monitor Maison’s financial condition. Risk-based capital is determined in accordance with a formula adopted by the NAIC which takes into consideration the covariance between asset risk, credit risk, underwriting risk, and other business risks. The RBC report determines whether Maison falls into the “no action” level or one of the four action levels set forth in the Louisiana Insurance Code. Furthermore, in order to retain its certificate of authority in the State of Texas, Maison is required to maintain an RBC ratio of 300% or more. As of September 30, 2017, Maison’s RBC ratio was above 300%.

States routinely require deposits of assets for the protection of policyholders. As of September 30, 2017, Maison held certificates of deposit with an estimated fair value of approximately $100 and $300 as a deposit with the LDI and FL OIR, respectively. Maison also held investment securities with an estimated fair value of approximately $2,000 as a deposit with the TDI.

Surplus Notes

PIH, as the parent company of Maison, is subject to the insurance holding company laws of the State of Louisiana, which, among other things, regulate the terms of surplus notes issued by insurers to their parent company. Maison’s capital is comprised of six surplus notes issued to PIH for the total principal amount of $9,000, all of which have been approved by the LDI prior to their issuance. Notes accrue interest at 10% per annum. Interest payments on the notes are due annually, and are also subject to prior approval by the LDI. The Company’s surplus notes, as of September 30, 2017, are as follows.

Date of Issuance	Maturity Date	Principal Amount
October 22, 2013	October 22, 2017	$	650
December 21, 2015	December 21, 2017		850
March 31, 2016	March 31, 2018		550
September 29, 2016	September 29, 2018		3,450
November 14, 2016	November 14, 2018		550
September 28, 2017	September 28, 2019		2,950
		$	9,000

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ amounts in thousands, except share and per share data)

Dividend Restrictions

As a ~~cost,~~Louisiana domiciled insurer, the payment of dividends from ~~losses~~our insurance subsidiary is restricted by the Louisiana Insurance Code. Dividends can only be paid if an insurer’s paid-in capital and surplus exceed the minimum required by the Louisiana Insurance Code. Any dividend or distribution that when aggregated with any other dividends or distributions made within the preceding twelve months exceeds the lesser of (a) ten percent of the insurer’s surplus as regards policyholders as of the thirty-first day of December next preceding; or (b) the net income of the insurer, not including realized capital gains, for the twelve month period ending the thirty-first day of December next preceding; is considered to be extra-ordinary and shall not be paid until thirty days after the LDI has received notice of the declaration thereof and has not within that period disapproved the payment, or until the LDI has approved the payment within the thirty-day period. In determining whether a dividend or distribution is extra-ordinary, an insurer may carry forward net income from the previous two calendar years that has not already been paid out in dividends.

Furthermore, pursuant to the consent order issued to Maison by the FL OIR, Maison is restricted from paying dividends which have not been approved in advance by the FL OIR.

As of September 30, 2017, Maison had not paid any dividends to its sole shareholder, PIH.

16. Commitments and Contingencies

Legal Proceedings:

From time to time, we are involved in legal proceedings and litigation arising in the ordinary course of business. Currently, it is not possible to predict legal outcomes and their impact on the future development of claims. Any such development will be affected by future court decisions and interpretations. Because of these uncertainties, additional liabilities may arise for amounts in excess of the ~~amount it is prepared to accept. Reinsurance is placed on an excess-of-loss basis. Ceded reinsurance arrangements do not discharge~~Company’s current reserves. In addition, the ~~Company as the primary insurer.~~

The Company utilizes general catastrophe reinsurance treaties with unaffiliated reinsurers to manage its exposure to losses resulting from catastrophes. The Company also utilizes an excess-of-loss treaty with an unaffiliated company to protect against non-catastrophe losses up to a certain threshold. Non-catastrophe losses are defined as events without a name associated with them.

~~The Company monitors the financial condition~~Company’s estimate of ~~its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. Letters of credit are maintained for any unauthorized reinsurer to cover ceded unearned premium and ceded~~ultimate loss and loss adjustment expenses may change. These additional liabilities, or increases in estimates, or a range of either, cannot be reasonably estimated, and could result in income statement charges that could be material to the Company’s results of operations in future periods.

Operating Lease Commitments:

As of September 30, 2017, the Company had the following amounts due under its operating leases for facilities leased in Baton Rouge, Louisiana, and Tampa, Florida.

Year ending September 30,
2018	$	303
2019		298
2020		25
2021 and thereafter		—
	$	626

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

1347 Property Insurance Holdings, Inc.

Tampa, FL

We have audited the accompanying consolidated balance sheets of 1347 Property Insurance Holdings, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the years then ended. 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its 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 1347 Property Insurance Holdings, Inc. at December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO USA, LLP

Grand Rapids, Michigan

March 16, 2017

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

($ in thousands, except per share amounts)

	December 31, 2016			December 31, 2015
ASSETS
Investments:
Fixed income securities, at fair value (amortized cost of $26,793 and $20,332, respectively)	$	26,559		$	20,238
Equity investments, at fair value (cost of $1,000 and $0, respectively)		1,136			—
Short-term investments, at cost		196			1,149
Limited liability investments, at cost		505			248
Total investments		28,396			21,635
Cash and cash equivalents		43,045			47,957
Deferred policy acquisition costs, net		4,389			4,030
Premiums receivable, net of allowance for credit losses of $38 and $3, respectively		2,923			2,395
Ceded unearned premiums		4,847			2,805
Reinsurance recoverable on paid losses		444			—
Reinsurance recoverable on loss and loss adjustment expense reserves		3,652			120
Funds deposited with reinsured companies		500			725
Current income taxes recoverable		1,195			965
Deferred tax asset, net		420			506
Property and equipment, net		250			234
Intangible assets, net of accumulated amortization of $0 and $3, respectively		—			6
Other assets		788			705
Total assets	$	90,849		$	82,083

LIABILITIES
Loss and loss adjustment expense reserves	$	6,971		$	2,123
Unearned premium reserves		25,821			23,442
Ceded reinsurance premiums payable		5,229			3,283
Agent commissions payable		497			403
Premiums collected in advance		1,128			870
Funds held under reinsurance treaties		73			—
Accounts payable and other accrued expenses		2,065			1,863
Series B Preferred Shares, $25.00 par value, 1,000,000 shares authorized, 120,000 shares issued and outstanding at December 31, 2016 and 2015, respectively		2,708			2,593
Total liabilities		44,492			34,577

Commitments and contingencies (Note 19)

SHAREHOLDERS’ EQUITY
Common stock, $0.001 par value; 10,000,000 shares authorized; 6,108,125 and 6,358,125 issued and outstanding at December 31, 2016 and 2015, respectively		6			6
Additional paid-in capital		46,809			48,688
Retained earnings		616			605
Accumulated other comprehensive loss		(65	)		(62	)
		47,366			49,237
Less: treasury stock at cost, 151,359 and 223,851 shares as of December 31, 2016 and 2015, respectively		(1,009	)		(1,731	)
Total shareholders’ equity		46,357			47,506

Total liabilities and shareholders’ equity

90,849

82,083

See accompanying notes to consolidated financial statements.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Income (Loss)

($ in thousands, except per share amounts)

	Year ended December 31,
	2016			2015
Revenue:
Net premiums earned	$	30,448		$	25,934
Net investment income		544			362
Other income		1,264			834
Total revenue		32,256			27,130

Expenses:
Net losses and loss adjustment expenses		16,372			9,939
Amortization of deferred policy acquisition costs		8,492			6,571
General and administrative expenses		6,918			7,253
Loss on termination of Management Services Agreement		—			5,421
Accretion of discount on Series B Preferred Shares		355			282
Total expenses		32,137			29,466

Income (Loss) before income tax expense (benefit)		119			(2,336	)
Income tax expense (benefit)		108			(663	)
Net income (loss)	$	11		$	(1,673	)

Net earnings (loss) per common share:
Basic	$	—		$	(0.27	)
Diluted	$	—		$	(0.27	)
Weighted average common shares outstanding:
Basic		6,047,979			6,286,706
Diluted		6,047,979			6,286,706

Consolidated Statements of Comprehensive Income (Loss)

Net income (loss)	$	11		$	(1,673	)
Unrealized losses on investments available for sale, net of income taxes		(3	)		(61	)
Comprehensive income (loss)	$	8		$	(1,734	)

See accompanying notes to consolidated financial statements.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity
($ in thousands, except share amounts)

	Preferred Stock				Common Stock					Treasury Stock
	Shares		Amount		Shares			Amount		Shares			Amount			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance, January 1, 2015		—		—		6,358,125		$	6		—			—		$	47,631		$	2,278		$	(1	)	$	49,914
Stock compensation expense		—		—		—			—		—			—			47			—			—			47
Issuance of performance shares and warrants pursuant to MSA termination transaction		—		—		—			—		—			—			1,010			—			—			1,010
Repurchases of common stock		—		—		(223,851	)		—		223,851			(1,731	)		—			—			—			(1,731	)
Net loss		—		—		—			—		—			—			—			(1,673	)		—			(1,673	)
Other comprehensive loss		—		—		—			—		—			—			—			—			(61	)		(61	)
Balance, December 31, 2015		—	$	—		6,134,274		$	6		223,851		$	(1,731	)	$	48,688		$	605		$	(62	)	$	47,506

Stock compensation expense		—		—		—			—		—			—			38			—			—			38
Repurchases of common stock		—		—		(177,508	)		—		177,508			(1,195	)		—			—			—			(1,195	)
Retirement of treasury shares		—		—		—			—		(250,000	)		1,917			(1,917	)		—			—			—
Net income		—		—		—			—		—			—			—			11			—			11
Other comprehensive loss		—		—		—			—		—			—			—			—			(3	)		(3	)
Balance, December 31, 2016		—	$	—		5,956,766		$	6		151,359		$	(1,009	)	$	46,809		$	616		$	(65	)	$	46,357

See accompanying notes to consolidated financial statements

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

($ in thousands)

	Year ended December 31,
	2016			2015
Cash provided by (used in):
Operating activities:
Net income (loss)	$	11		$	(1,673	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Issuance of Preferred Shares, Performance Shares, and Warrants pursuant to MSA termination transaction		—			3,321
Accretion of discount on Series B Preferred Shares		355			282
Charge for impairment of goodwill and other intangible assets		—			251
Net deferred income taxes		87			(243	)
Stock compensation expense		38			47
Depreciation expense		67			53
Changes in operating assets and liabilities, net of effect of acquisition:
Premiums receivable, net		(528	)		(309	)
Reinsurance recoverable on paid losses and loss reserves		(3,976	)		243
Amounts held on deposit with reinsured companies		225			(725	)
Ceded unearned premiums		(2,042	)		(1,244	)
Deferred policy acquisition costs, net		(359	)		(939	)
Loss and loss adjustment expense reserves		4,848			912
Premiums collected in advance		258			310
Due to related party		—			(145	)
Unearned premium reserves		2,379			5,739
Ceded reinsurance premiums payable		1,946			724
Current income taxes payable		(230	)		(1,227	)
Other, net		293			40
Net cash provided by operating activities		3,372			5,417

Investing activities:
Purchases of furniture and equipment		(83	)		(48	)
Acquisition of entity, net of cash acquired		—			(305	)
Purchases of limited liability investments		(258	)		(248	)
Net purchases of fixed income securities		(6,461	)		(9,817	)
Purchases of equity securities		(1,000	)		—
Net proceeds from the sales of short-term investments		953			1,050
Net cash used by investing activities		(6,849	)		(9,368	)

Financing activities:
Payment of dividends on preferred shares		(240	)		—
Purchases of treasury stock		(1,195	)		(1,731	)
Net cash used by financing activities		(1,435	)		(1,731	)

Net decrease in cash and cash equivalents		(4,912	)		(5,682	)
Cash and cash equivalents at beginning of period		47,957			53,639
Cash and cash equivalents at end of period	$	43,045		$	47,957

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes	$	128		$	775

See accompanying notes to consolidated financial statements.

F-27

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

1. Nature of Business

Maison Insurance Holdings, Inc. was incorporated on October 2, 2012 in the State of Delaware. On November 19, 2013, the Company changed its legal name from Maison Insurance Holdings, Inc. to 1347 Property Insurance Holdings, Inc. (“PIH”). PIH is a holding company and is engaged, through its subsidiaries, in the property and casualty insurance business. Unless context denotes otherwise, the terms “Company,” “we,” “us,” and “our,” refer to 1347 Property Insurance Holdings, Inc., and its subsidiaries.

Prior to March 31, 2014, the Company was a wholly owned subsidiary of Kingsway America Inc. (“KAI”). KAI in turn, is a wholly owned subsidiary of Kingsway Financial Services Inc. (“KFSI”), a publicly owned holding company based in Toronto, Ontario, Canada. On March 31, 2014, the Company completed an initial public offering of its common stock and then on June 13, 2014, the Company completed a follow-on offering. Through the combination of the Company’s IPO and follow-on offering, we issued approximately five million shares of our common stock. As of December 31, 2016 KAI and companies affiliated with KAI held approximately 975,000 shares of our common stock, equivalent to 16.4% of our outstanding shares.

PIH has three wholly-owned subsidiaries; Maison Insurance Company (“Maison”), a Louisiana-domiciled property and casualty insurance company, Maison Managers, Inc. (“MMI”), a managing general agent, incorporated in the State of Delaware, and ClaimCor, LLC (“ClaimCor”), a Florida based claims solutions company.

Maison began providing homeowners insurance, manufactured home insurance and dwelling fire insurance to individuals in Louisiana in December 2012. Maison writes both full peril property policies as well as wind/hail only exposures in Louisiana and distributes its policies through independent insurance agents. Maison began assuming wind/hail only insurance for commercial properties in Texas beginning in June 2015. In September 2015, Maison began writing manufactured home policies in the State of Texas on a direct basis.

In addition to the voluntary policies Maison writes, we have participated in the last five rounds of depopulation programs implemented by Louisiana Citizens Property Insurance Company (“Citizens”), occurring on December 1^st of each year as well as the inaugural depopulation of policies from the Texas Windstorm Insurance Association (“TWIA”) which occurred on December 1, 2016. Under these programs, state-approved insurance companies, such as Maison, have the opportunity to assume insurance policies written by both Citizens and TWIA.

MMI serves as the Company’s management services subsidiary as a general agency providing underwriting, policy administration, claims administration, marketing, financial and other management services to Maison. MMI contracts with independent agents for policy sales and services, and contracts with an independent third-party for policy administration services. As a managing general agency, MMI is licensed by, and subject to the regulatory oversight of both the Louisiana and Texas Departments of Insurance (“LDI” and “TDI”, respectively).

2. Significant Accounting Policies

Basis of Presentation:

These statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Consolidation:

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances ~~if any.~~and transactions have been eliminated upon consolidation.

~~Direct, ceded~~

The Use of Estimates in the Preparation of Consolidated Financial Statements:

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and ~~net premiums written~~assumptions that affect the reported amounts of assets and ~~earned,~~liabilities and disclosures about contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the period reported. Actual results could differ from those estimates. Changes in estimates are recorded in the accounting period in which the change is determined. The critical accounting estimates and assumptions in the accompanying consolidated financial statements include the provision for loss and loss adjustment expense reserves, valuation of fixed income securities, valuation of net deferred income taxes, the valuation of various securities we have issued in conjunction with the termination of the management services agreement with 1347 Advisors, LLC, the valuation of deferred policy acquisition costs, and stock-based compensation expense.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

Investments:

Investments in fixed income and equity securities are classified as available-for-sale and reported at estimated fair value. Unrealized gains and losses are included in accumulated other comprehensive loss, net of tax, until sold or an other-than-temporary impairment is recognized, at which point the cumulative unrealized gains or losses are transferred to the consolidated statement of operations.

Limited liability investments include investments in limited liability companies in which the Company’s interests are deemed minor and therefor, are accounted for under the cost method of accounting which approximates their fair value.

Short-term investments, which consist of investments with original maturities between three months and one year, are reported at cost, which approximates fair value due to their short-term nature.

Realized gains and losses on sales of investments are determined on a first-in, first-out basis, and are included in net investment income.

Interest income is included in net investment income and is recorded as it accrues.

The Company accounts for its investments using trade date accounting.

The Company conducts a quarterly review to identify and evaluate investments that show objective indications of possible impairment. Impairment is charged to the statement of operations if the fair value of the instrument falls below its amortized cost and the decline is considered other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been below cost, the financial condition and near-term prospects of the issuer, and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

Cash and Cash Equivalents:

Cash and cash equivalents include cash and highly liquid investments with original maturities of 90 days or less.

Premiums Receivable:

Premiums receivable include premium balances due and uncollected and installment premiums not yet due from agents and insureds. Premiums receivable are reported net of an estimated allowance for credit losses.

Reinsurance:

Reinsurance premiums, losses, and loss adjustment expenses ~~and commissions as of and~~are accounted for on a basis consistent with those used in accounting for the ~~year ended December 31, 2013~~original policies issued and the ~~period from October 2, 2012 through December 31, 2012 are summarized as follows:~~

2013 2012
Direct premiums written $ 16,024 $ 2,490
Ceded premiums written 3,232 75
Net premiums written 12,792 2,415
Direct premiums earned 7,151 358
Ceded premiums earned 2,168 12
Net premiums earned 4,983 346
Ceded loss and loss adjustment expense incurred 1,000 —
Ceded loss and loss adjustment expense reserves — —
Ceded unearned premiums 1,126 63
Ceding commissions — —

~~The maximum amount~~terms of ~~return commission, which would~~the reinsurance contracts. Premiums and losses ceded to other companies have been ~~due~~reported as a reduction of premium revenue and incurred net losses and loss adjustment expenses. A reinsurance recoverable is recorded for that portion of paid and unpaid losses and loss adjustment expenses that are ceded to ~~reinsurers if they or the Company had canceled all of the Company’s reinsurance, with the return of the unearned premium, is $0 at both December 31, 2013 and 2012.~~other companies.

6.
Deferred Policy Acquisition Costs

Costs:

~~Policy acquisition costs consist primarily of~~

The Company defers commissions, premium taxes and other underwriting and agency expenses ~~incurred~~that are directly related to successful efforts to acquire new or ~~renewal~~existing insurance ~~contracts. Acquisition costs~~policies to the extent they are considered recoverable. Costs deferred on ~~property and casualty~~ insurance products are amortized over the period in which premiums are earned. Costs associated with unsuccessful efforts or costs that cannot be tied directly to a successful policy acquisition are expensed as incurred, as opposed to being deferred and amortized as the premium is earned.

The ~~components of~~method followed in determining the deferred policy acquisition costs limits the deferral to its realizable value by giving consideration to estimated future loss and loss adjustment expenses to be incurred as revenues are earned. Changes in estimates, if any, are recorded in the accounting period in which they are determined. Anticipated investment income is included in determining the realizable value of the deferred policy acquisition costs.

Income Taxes:

For taxable periods ending on or prior to March 31, 2014, the Company was included in the U.S. consolidated federal income tax return of Kingsway America II Inc. and its eligible U.S. subsidiaries (“KAI Tax Group”). The method of allocating federal income taxes among the companies in the KAI Tax Group is subject to written agreement, approved by each company’s Board of Directors. The allocation is made primarily on a separate return basis, with current credit for any net operating losses or other items utilized in the consolidated federal income tax return. For taxable periods beginning after March 31, 2014, the Company has filed its own U.S. consolidated federal income tax return.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

The Company follows the asset and liability method of accounting for income taxes, whereby deferred income tax assets and liabilities are recognized for (i) the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and (ii) loss and tax credit carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not and a valuation allowance is established for any portion of a deferred tax asset that management believes will not be realized. Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense (benefit).

Property and Equipment:

Property and equipment is reported at historical cost less accumulated depreciation. Depreciation of property and equipment is recorded on a straight-line basis over estimated useful lives which range from seven years for furniture, five years for vehicles, three years for computer equipment, and the shorter of estimated useful life or the term of the lease for leasehold improvements. Property and equipment is estimated to have no salvage value at its useful life-end.

Rent expense for the Company’s office leases is recognized on a straight line basis over the term of the lease. Rent expense was $343 and $214 for the years ended December 31, 2016 and 2015, respectively.

Loss and Loss Adjustment Expense Reserves:

Loss and loss adjustment expense reserves represent the estimated liabilities for reported loss events, incurred but not yet reported loss events and the related ~~amortization~~estimated loss adjustment expenses. The Company performs a continuing review of its loss and loss adjustment expense reserves, including its reserving techniques and its reinsurance. The loss and loss adjustment expense reserves are also reviewed at minimum, on an annual basis by qualified third party actuaries. Since the loss and loss adjustment expense reserves are based on estimates, the ultimate liability may be more or less than such reserves. The effects of changes in such estimated reserves are included in the results of income in the period in which the estimates are changed. Such changes in estimates could occur in a future period and may be material to the Company’s results of operations and financial position in such period.

Concentration of Credit Risk:

Financial instruments which potentially expose the Company to concentrations of credit risk include investments, cash, premiums receivable, and amounts due from reinsurers on losses incurred. The Company maintains its cash with two major U.S. domestic banking institutions and three regional banks headquartered in the Southeastern U.S. Such amounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250 per institution. At December 31, 2016 the Company held funds in excess of these FDIC insured amounts. The terms of these deposits are on demand to mitigate some of the associated risk. The Company has not incurred losses related to these deposits.

The Company has not experienced significant losses related to premiums receivable from its policyholders and management believes that amounts provided as an allowance for credit losses is adequate.

The Company also has risk associated with the lack of geographic diversification due to the fact that Maison primarily underwrites policies in Louisiana and Texas. The Company insures personal property located in 62 of the 64 parishes in the State of Louisiana. As of December 31, 2016, these policies are concentrated within these parishes as follows: Saint Tammany Parish 15.2%, Jefferson Parish 14.2%, East Baton Rouge Parish 7.7%, Orleans Parish 5.6%, Livingston Parish 5.6%, Tangipahoa Parish 5.3%, and Terrebonne Parish 5.2%. No other parish individually has over 5.0% of the total direct policies in force as of December 31, 2016. The remaining 56 parishes combine to equal 33% of our total policies in force as of December 31, 2016. On a direct basis, Maison writes in 105 of the 254 counties that comprise the State of Texas, however no single county represents over 5.0% of our total direct policies in force as of December 31, 2016.

Revenue Recognition:

Premium revenue is recognized on a pro rata basis over the term of the respective policy contract. Unearned premium reserves represent the portion of premium written that is applicable to the unexpired term of policies in force.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

Service charges on installment premiums are recognized as income upon receipt of related installment payments and are reflected in other income.

Revenue from policy fees is deferred and recognized over the term of the respective policy period, with revenue reflected in other income.

Any customer payment received is applied first to any service charge or policy fee due, with the remaining amount applied toward any premium due.

Ceded premiums are charged to income over the applicable term of the various reinsurance contracts with third party reinsurers. Ceded unearned premiums represent the unexpired portion of premiums ceded to reinsurers and are reported as an asset on the Company’s consolidated balance sheets.

Premiums collected in advance occur when the policyholder premium is paid in advance of the effective commencement period of the policy and are recorded as a liability on the Company’s consolidated balance sheets.

Stock-Based Compensation:

The Company has accounted for stock-based compensation under the provisions of ASC Topic 718 –Stock Compensation which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (stock options and common stock purchase warrants). The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model using assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. The fair value of each stock option award is recorded as compensation expense on a straight-line basis over the requisite service period, which is generally the period in which the stock options vest, with a corresponding increase to additional paid-in capital.

The Company has also issued restricted stock units (“RSUs”) to certain of its employees which have been accounted for as equity based awards since, upon vesting, they are required to be settled in the Company’s common shares. The Company used a Monte Carlo valuation model to estimate the fair value of these awards upon grant date as the vesting of these RSUs occurs solely upon market-based conditions. The fair value of each RSU is recorded as compensation expense over the derived service period, as determined by the valuation model. Should the market-based condition be achieved prior to the expiration of the derived service period, any unrecognized cost will be recorded as compensation expense in the period in which the RSUs actually vest. See Note 11 for further disclosure.

Fair Value of Financial Instruments:

The carrying values of certain financial instruments, including cash, short-term investments, premiums receivable, accounts payable, and other accrued expenses approximate fair value due to their short-term nature. The Company measures the fair value of financial instruments in accordance with GAAP which defines fair value as the exchange price that would be received for an asset (or paid to transfer a liability) in the principal or most advantageous market for the asset (or liability) in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. See Note 15 for further information on the fair value of the Company’s financial instruments.

Earnings (loss) Per Common Share:

Basic earnings (loss) per common share is computed using the weighted average number of shares outstanding during the respective period.

Diluted earnings (loss) per common share assumes conversion of all potentially dilutive outstanding stock options, warrants or other convertible financial instruments. Potential common shares outstanding are excluded from the calculation of diluted earnings (loss) per share if their effect is anti-dilutive.

Operating Segments:

The Company operates in a single segment – property and casualty insurance.

3. Recently Issued Accounting Standards

ASU 2015-09: Financial Services – Insurance:

In May 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-09:Financial Services – Insurance (Topic 944): Disclosures about Short-Duration Contracts.This update provides for an increase in the transparency of accounting estimates made by companies in the measurement of short-duration contracts and unpaid claim and claim adjustment expense liabilities by requiring additional disclosures, as well as improvements to existing disclosures. The Company has elected to apply early application of the amendments as permitted in the ASU. The adoption of the amendments did not have an impact on the Company’s results of operations, financial position, or liquidity. The new standard did provide for additional disclosures surrounding our loss and loss adjustment expenses and expense reserves which the Company has included in Note 7 of this report.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

ASU 2016-01: Financial Instruments-Overall:

In January 2016, the FASB issued ASU 2016-01:Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. Most significantly, ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of an investee) to be measured at fair value with changes in fair value recognized in net income (loss). ASU 2016-01 is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. ASU 2016-01 will be applied using a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Adoption of ASU 2016-01 is not expected to have a material impact on the Company’s financial position, cash flows, or total comprehensive income, but could impact the Company’s results of operations and earnings (loss) per share as changes in fair value will be presented in net income (loss) rather than other comprehensive income (loss). For the year ended December 31, ~~2013,~~2016 the Company had an unrealized gain of $90, on its equity investments, net of the effect of income taxes.

ASU 2016-02: Leases:

In February 2016, the FASB issued ASU 2016-02:Leases. ASU 2016-02 was issued to improve the financial reporting of leasing transactions. Under current guidance for lessees, leases are only included on the balance sheet if certain criteria, classifying the agreement as a capital lease, are met. This update will require the recognition of a right-of-use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income while the repayment of the principal portion of the lease liability will be classified as a financing activity and the interest component will be included in the operating section of the statement of cash flows. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. The Company has reviewed its existing lessee obligations and has determined that ASU 2016-02 will apply should the Company renew its existing leases, or enter into any new lease agreements.

ASU 2016-09: Stock Compensation:

In March 2016, the FASB issued ASU 2016-09:Compensation – Stock Compensation: Improvement to Employee Share-Based Payment Accounting. ASU 2016-09 was issued to simplify the accounting for share-based payment awards. The guidance requires that all tax effects related to share-based payment be made through the statement of operations at the time of settlement as opposed to the current guidance that requires excess tax benefits to be recognized in additional paid-in-capital. ASU 2016-09 also removes the requirement to delay recognition of a tax benefit until it reduces current taxes payable. The change is required to be applied on a modified retrospective basis, with a cumulative effect adjustment to opening accumulated deficit. Additionally, all tax related cash flows resulting from ~~October 2, 2012 through~~share-based payments are to be reported as operating activities on the statement of cash flows, a departure from the current requirement which presents tax benefits as an inflow from financing activities and an outflow from operating activities. ASU 2016-09 is effective for annual reporting periods beginning after December ~~31, 2012, respectively,~~15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company does not believe the adoption of ASU 2016-09 will have a material impact on its consolidated financial statements.

ASU 2016-13: Financial Instruments – Credit Losses:

In June 2016, the FASB issued ASU 2016-13:Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. ASU 2016-13 was issued to provide financial statement users with more useful information regarding the expected credit losses on financial instruments held as assets. Under current GAAP, financial statement recognition for credit losses on financial instruments was generally delayed until the loss was probable of occurring. The amendments of ASU 2016-13 eliminate this probable initial recognition threshold and instead reflect an entity’s current estimate of all expected credit losses. The amendments also broaden the information that an entity must consider in developing its expected credit loss estimates for those assets measured at amortized cost by using forecasted information instead of the current methodology which only considered past events and current conditions. Under ASU 2016-13, credit losses on available-for-sale debt securities will be measured in a manner similar to current GAAP, however, the amendments require that credit losses be presented as an allowance against the investment, rather than as a write-down. The amendments also allow the entity to record reversals of credit losses in current period net income, which is prohibited under current GAAP. The amendments in this update are ~~comprised as follows:~~effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its consolidated financial statements.

2013 2012
Balance at Beginning of Period, net $ 346 $ —
Additions 2,907 404
Amortization (1,328 ) (58 )
Balance at End of Period, net $ 1,925 $ 346

~~F-16~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands)

thousands, except per share amounts)
4. Investments
A summary of the amortized cost, estimated fair value, and gross unrealized gains and losses on fixed income securities classified as available-for-sale at December 31, 2016 and 2015 is as follows.
As of December 31, 2016 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Fixed income securities:
U.S. government $ 1,623 $ 1 $ (20 ) $ 1,604
State municipalities and political subdivisions 2,271 2 (27 ) 2,246
Asset-backed securities and collateralized mortgage obligations 12,095 9 (136 ) 11,968
Corporate 10,804 28 (91 ) 10,741
Total fixed income securities 26,793 40 (274 ) 26,559
Equity securities:
Common stock 1,000 136 — 1,136
Total equity securities 1,000 136 — 1,136
Total fixed income and equity securities $ 27,793 $ 176 $ (274 ) $ 27,695

As of December 31, 2015
Fixed income securities:
U.S. government $ 650 $ — $ (3 ) $ 647
State municipalities and political subdivisions 1,656 2 (7 ) 1,651
Asset-backed securities and collateralized mortgage obligations 9,123 14 (55 ) 9,082
Corporate 8,903 16 (61 ) 8,858
Total fixed income securities $ 20,332 $ 32 $ (126 ) $ 20,238
The table below summarizes the Company’s fixed income securities at December 31, 2016 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 these obligations.
Matures in: Amortized Cost Estimated Fair Value
One year or less $ 1,827 $ 1,828
More than one to five years 12,737 12,678
More than five to ten years 3,987 3,918
More than ten years 8,242 8,135
Total $ 26,793 $ 26,559
The following table highlights the aggregate unrealized loss position and security type, those fixed income securities in unrealized loss positions as of December 31, 2016 and December 31, 2015. The tables segregate the holdings based on the period of time the investments have been continuously held in unrealized loss positions. There were 122 and 107 fixed income investments that were in unrealized loss positions as of December 31, 2016 and December 31, 2015, respectively. The Company held no equity securities in unrealized loss positions at either date.
Less than 12 Months Greater than 12 Months Total
As of December 31, 2016 Estimated Fair Value Unrealized Loss Estimated Fair Value
Unrealized
Loss
Estimated Fair Value Unrealized Loss
Fixed income securities:
U.S. government $ 1,303 $ (20 ) $ — $ — $ 1,303 $ (20 )
State municipalities and political subdivisions 1,537 (27 ) — — 1,537 (27 )
Asset-backed securities and collateralized mortgage obligations 9,552 (133 ) 460 (3 ) 10,012 (136 )
Corporate 5,952 (91 ) — — 5,952 (91 )
Total investments in fixed income securities $ 18,344 $ (271 ) $ 460 $ (3 ) $ 18,804 $ (274 )

As of December 31, 2015
Fixed income securities:
U.S. government $ 346 $ (3 ) $ — $ — $ 346 $ (3 )
State municipalities and political subdivisions 1,014 (7 ) — — 1,014 (7 )
Asset-backed securities and collateralized mortgage obligations 7,472 (55 ) — — 7,472 (55 )
Corporate 5,236 (61 ) — — 5,236 (61 )
Total investments in fixed income securities $ 14,068 $ (126 ) $ — $ — $ 14,068 $ (126 )

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Under the terms of the certificate of authority granted to Maison by the Texas Department of Insurance, Maison is required to pledge securities totaling approximately $2,000 with the State of Texas. These securities consist of cash in the amount of $300 as well as various fixed income securities listed in the preceding tables which have an amortized cost basis of $1,701 and estimated fair value of $1,692 as of December 31, 2016.
The Company’s limited liability investments are comprised of investments in two limited partnerships which seek to provide equity and asset-backed debt investment in a variety of privately-owned companies. The Company has committed to a total investment of $1,000, of which the limited partnerships have drawn down approximately $505 through December 31, 2016. One of these limited partnerships is managed by Argo Management Group, LLC, an entity which, as of April 21, 2016, is wholly owned by KFSI. The Company has accounted for its limited liability investments under the cost method as the instruments do not have readily determinable fair values and the Company does not exercise significant influence over the operations of the limited partnerships or the underlying privately-owned companies.
Other-than-Temporary Impairment:
The establishment of an other-than-temporary impairment on an investment requires a number of judgments and estimates. The Company performs a quarterly analysis of the individual investments to determine if declines in market value are other-than-temporary. The analysis includes some or all of the following procedures as deemed appropriate by the Company:
● considering the extent, and length of time during which the market value has been below cost;
● identifying any circumstances which management believes may impact the recoverability of the unrealized loss positions;
● obtaining a valuation analysis from a third-party investment manager regarding the intrinsic value of these investments based upon their knowledge and experience combined with market-based valuation techniques;
● reviewing the historical trading volatility and trading range of the investment and certain other similar investments;
● assessing if declines in market value are other-than-temporary for debt instruments based upon the investment grade credit ratings from third-party credit rating agencies;
● assessing the timeliness and completeness of principal and interest payment due from the investee; and
● assessing the Company’s ability and intent to hold these investments until the impairment may be recovered
The risks and uncertainties inherent in the assessment methodology used to determine declines in market value that are other-than-temporary include, but may not be limited to, the following:
● the opinions of professional investment managers could be incorrect;
● the past trading patterns of investments may not reflect their future valuation trends;
● the credit ratings assigned by credit rating agencies may be incorrect due to unforeseen events or unknown facts related to the investee company’s financial situation; and
● the historical debt service record of an investment may not be indicative of future performance and may not reflect a company’s unknown underlying financial problems.
The Company has reviewed currently available information regarding its investments with estimated fair values that are less than their carrying amounts and believes that these unrealized losses are primarily due to temporary market and sector-related factors rather than to issuer-specific factors. The Company does not intend to sell these investments in the short term, and it is not likely that it will be required to sell these investments before the recovery of their amortized cost.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
Accordingly, all of the Company’s investments were deemed to be in good standing and not impaired as of December 31, 2016 and 2015. Additionally, there were no write-downs for other-than-temporary impairments on the Company’s investments for the years then ended.
The Company does not have any exposure to subprime mortgage-backed investments.
Net investment income for the years ended December 31, 2016 and 2015 is as follows:
Year Ended December 31,
2016 2015
Investment income:
Interest on fixed income securities $ 471 $ 285
Interest on cash and cash equivalents 129 114
Realized gains on sale of fixed income securities 9 —
Gross investment income 609 399
Investment expenses (65 ) (37 )
Net investment income $ 544 $ 362
5. Reinsurance
The Company reinsures, or cedes, a portion of its written premiums on a per-risk and an excess of loss basis to non-affiliated insurers in order to limit its loss exposure. Although reinsurance is intended to reduce the Company’s exposure risk, the ceding of insurance does not legally discharge the Company from its primary liability for the full amount of coverage under its policies. If our reinsurers fail to meet their obligations under the applicable reinsurance agreements, the Company would still be required to pay the insured for the loss.
Under the Company’s per-risk treaties, reinsurance recoveries are received for up to $1,750 in excess of a retention of $250 for each risk. The Company ceded $569 and $342 in written premiums under its per-risk treaties for the years ended December 31, 2016 and 2015 respectively.
The Company’s excess of loss treaties are based upon a treaty year beginning on June 1^st of each year and expiring on May 31^st of the following year. Thus, the financial statements for the years ending December 31, 2016 and 2015 contain premiums ceded under three separate excess of loss treaties. Under the Company’s 2015/2016 excess of loss treaty which expired on May 31, 2016, for each catastrophic event occurring within a 144-hour period, the Company receives reinsurance recoveries of up to $121,000 in excess of a retention of $4,000 per event. The Company had also procured another layer of reinsurance protection that may be used for any event above $125,000, up to a maximum recovery of $15,000. This $15,000 second layer of coverage applied in total to all events occurring during the treaty year of June 1, 2015 through May 31, 2016. Thus, the aggregate loss which the Company retained for the two catastrophes which occurred during the 2015/2016 treaty year was $5,000.
On June 1, 2016 the Company entered into a new excess of loss treaties whereby for each catastrophic event occurring within a 144-hour period, the Company receives reinsurance recoveries of up to $170,000 in excess of a $5,000 retention per event. For any event above $175,000, the Company purchased aggregate coverage, with an additional limit of $25,000 and subject to a franchise deductible of $125 for each 144-hour occurrence. The $25,000 aggregate coverage applies in total to all events occurring during the June 1, 2016 to May 31, 2017 treaty year. The aggregate loss the Company could retain for two catastrophes occurring during the treaty year is $7,000.
The Company ceded $19,972 and $13,080 in written premiums under its excess of loss treaties for the years ended December 31, 2016 and 2015, respectively.
In June 2015, we began writing business through a quota-share agreement with Brotherhood Mutual Insurance Company (“Brotherhood”). Through this agreement, we act as a reinsurer, and have assumed wind/hail only exposures on certain churches and related structures Brotherhood insures throughout the State of Texas. Our quota-share percentage varies from 35%-100% of wind/hail premium written by Brotherhood, dependent upon the geographic location (coastal versus non-coastal) within the State of Texas. As of December 31, 2016, we have written $1,150 in assumed premiums on 522 policies through the Brotherhood agreement.
On December 1, 2016 we participated TWIA’s inaugural depopulation program whereby Maison assumed policies for wind and hail only exposures along the Gulf Coast area of Texas. The depopulation program was structured such that Maison reinsures TWIA under a 100% quota share agreement. As of December 31, 2016, we have written $186 in assumed premiums on approximately 1,300 policies through the TWIA quota share agreement.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands, except per share amounts)
The impact of reinsurance treaties on the Company’s financial statements is as follows:
Year Ended December 31,
2016 2015
Premium written:
Direct $ 49,991 $ 42,677
Assumed 1,336 1,174
Ceded (20,541 ) (13,422 )
Net premium written $ 30,786 $ 30,429

Premium earned:
Direct $ 46,851 $ 37,699
Assumed 2,096 413
Ceded (18,499 ) (12,178 )
Net premium earned $ 30,448 $ 25,934

Losses and LAE incurred:
Direct $ 28,372 $ 10,316
Assumed 3,414 90
Ceded (15,414 ) (467 )
Net losses and LAE incurred $ 16,372 $ 9,939
6. Deferred Policy Acquisition Costs
Deferred policy acquisition costs (“DPAC”) consist primarily of commissions, premium taxes, assessments and other policy processing fees incurred which are related to successful efforts to acquire new or renewal insurance contracts. Acquisition costs deferred on insurance products are amortized over the period in which the related revenues are earned. Costs associated with unsuccessful efforts or costs that cannot be tied directly to a successful policy acquisition are expensed as incurred.
DPAC as well as the related amortization expense associated with DPAC for the years ended December 31, 2016 and 2015 is as follows:
Year Ended December 31,
2016 2015

Balance, January 1, net $ 4,030 $ 3,091
Additions 8,851 7,510
Amortization (8,492 ) (6,571 )
Balance, December 31, net $ 4,389 $ 4,030
7. Loss and Loss Adjustment Expenses

Expense Reserves

The ~~establishment~~Company continually revises its estimates of the ultimate financial impact of claims made. A significant degree of judgment is required to determine amounts recorded in the consolidated financial statements for the provision for loss and loss adjustment expense (“LAE”) reserves. The process for establishing the provision for loss and loss adjustment expense reserves ~~is based on~~reflects the uncertainties and significant judgmental factors inherent in predicting future results of both known ~~facts~~ and ~~interpretation~~unknown loss events. The process of ~~circumstances and is, therefore, a complex and dynamic process influenced by a large variety of factors. These factors include~~establishing the ~~Company’s experience with similar cases and historical trends involving loss payment patterns, pending levels of~~provision for loss and loss adjustment ~~expenses, product mix or concentration, loss severity~~expense reserves relies on the judgment and ~~loss frequency patterns.~~opinions of a large number of individuals within the Company.

Other factors include the continually evolving and changing regulatory and legal environment; actuarial studies; professional experience and expertise of the Company’s claims departments’ personnel and independent adjusters retained to handle individual claims; the quality of the data used for projection purposes; existing claims management practices including claims-handling and settlement practices; the effect of inflationary trends on future loss settlement costs; court decisions; economic conditions; and public attitudes.

~~Consequently, the process of determining the provision necessarily involves risks that the actual results will deviate, perhaps materially, from the best estimates made.~~

The Company’s evaluation of the adequacy of loss and loss adjustment expense reserves includes a re-estimation of the liability for ~~unpaid~~ loss and loss adjustment ~~expenses~~expense reserves relating to each preceding financial year compared to the liability that was previously established. The following tables illustrate incurred and paid claims development as of December 31, 2016, net of reinsurance, along with cumulative claim frequency and total incurred-but-not-reported (“IBNR”) liabilities as well as paid claims development on reported claims within the net incurred claims amounts. We have presented this information separately for both our homeowners multi-peril policies, which includes our traditional dwelling policies and also mobile and manufactured home policies, as well as for our special property policies, which include both our fire and allied lines of business. Our allied lines primarily consist of wind/hail only policies (including those assumed through Citizens and TWIA) as well as the commercial wind/hail only policies we have assumed through our agreement with Brotherhood. The information about incurred and paid claims development for the years ended December 31, 2012 through 2015 is presented as unaudited supplementary information.

~~Following is~~

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

	Cumulative Incurred Losses and LAE, Net of Reinsurance
	For the Years Ended December 31,										As of December 31, 2016
Accident Year	2012 (unaudited)		2013 (unaudited)		2014 (unaudited)		2015 (unaudited)		2016		Total of IBNR Liabilities Plus Expected Development on Reported Losses		Cumulative Number of Reported Claims
2012	$	—	$	—	$	—	$	—	$	—	$	—		—
2013				460		380		355		355		—		57
2014						3,680		3,878		4,357		—		557
2015								8,442		7,734		170		1,207
2016										15,862		1,152		2,704
Total – Homeowners Multi-Peril Policies									$	28,308	$	1,322		4,525


	For the Years Ended December 31,										As of December 31, 2016
Accident Year	2012 (unaudited)		2013 (unaudited)		2014 (unaudited)		2015 (unaudited)		2016		Total of IBNR Liabilities Plus Expected Development on Reported Losses		Cumulative Number of Reported Claims
2012	$	9,392	$	—	$	—	$	—	$	—	$	—		—
2013				2,478		2,375		2,363		2,400		—		406
2014						115		120		120		—		33
2015								1,331		1,142		30		191
2016										891		448		232
Total – Special Property Policies									$	4,553	$	478		862

	For the Years Ended December 31,										As of December 31, 2016
Accident Year	2012 (unaudited)		2013 (unaudited)		2014 (unaudited)		2015 (unaudited)		2016		Total of IBNR Liabilities Plus Expected Development on Reported Losses		Cumulative Number of Reported Claims
2012	$	9,392	$	—	$	—	$	—	$	—	$	—		—
2013				2,938		2,755		2,718		2,755		—		463
2014						3,795		3,998		4,477		—		590
2015								9,773		8,876		200		1,398
2016										16,753		1,600		2,936
Total – All Lines									$	32,861	$	1,800		5,387

	Cumulative Paid Losses and LAE, Net of Reinsurance
	For the Years Ended December 31,
Accident Year	2012 (unaudited)		2013 (unaudited)		2014 (unaudited)		2015 (unaudited)		2016
2012	$	—	$	—	$	—	$	—	$	—
2013				309		352		355		355
2014						2,925		3,674		4,058
2015								6,867		7,426
2016										13,745
Total Paid Losses and LAE, net of reinsurance – Homeowners Multi-Peril Policies									$	25,584
Liability for Losses and LAE, net of reinsurance – Homeowners Multi-Peril Policies									$	2,724


	For the Years Ended December 31,
Accident Year	2012 (unaudited)		2013 (unaudited)		2014 (unaudited)		2015 (unaudited)		2016
2012	$	—	$	—	$	—	$	—	$	—
2013				2,275		2,325		2,346		2,340
2014						99		120		120
2015								1,124		1,112
2016										386
Total Paid Losses and LAE, net of reinsurance – Special Property Policies									$	3,958
Liability for Losses and LAE, net of reinsurance – Special Property Policies									$	595

	For the Years Ended December 31,
Accident Year	2012 (unaudited)		2013 (unaudited)		2014 (unaudited)		2015 (unaudited)		2016
2012	$	—	$	—	$	—	$	—	$	—
2013				2,584		2,677		2,701		2,695
2014						3,024		3,794		4,178
2015								7,991		8,538
2016										14,131
Total Paid Losses and LAE, net of reinsurance – All Lines									$	29,542
Liability for Losses and LAE, net of reinsurance – All Lines									$	3,319

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

A reconciliation of the ~~activity~~net incurred and paid loss development tables to the liability for loss and loss adjustment expenses on the balance sheet is as follows.

	As of December 31,
	2016		2015
Net Liability for Loss and LAE Reserves
Homeowners Multi-Peril Policies	$	2,724	$	1,780
Special Property Policies		595		223
Liability for Loss and LAE, net of reinsurance – All Lines	$	3,319	$	2,003

Reinsurance Recoverable on Loss and LAE Reserves
Homeowners Multi-Peril Policies	$	2,565	$	120
Special Property Policies		1,087		—
Reinsurance Recoverable on Loss and LAE Reserves – All Lines	$	3,652	$	120

Total Gross Liability for Loss and LAE Reserves – All Lines	$	6,971	$	2,123

The following supplementary information provides average historical claims duration as of December 31, 2016.

Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance (unaudited)
Age of loss (in years)	1		2		3		4
Homeowners Multi-Peril Policies	84.2	%	4.8	%	1.4	%	—	%
Special Property Policies	85.3	%	1.3	%	0.4	%	—	%
All Lines	84.4	%	4.3	%	1.2	%	—	%

8. Income Taxes

A summary of income tax expense (benefit) is as follows:

	Year Ended December 31,
	2016		2015
Current income tax expense (benefit)	$	20	$	(452	)
Deferred income tax expense (benefit)		88		(211	)
Total income tax expense (benefit)	$	108	$	(663	)

Actual income tax expense (benefit) differs from the income tax expense computed by applying the applicable effective federal and state tax rates to income before income tax expense (benefit) as follows:

	Year ended December 31,
	2016					2015
	$		%			$			%

Provision for taxes at U.S. statutory marginal income tax rate of 34%	$	40		34.0	%	$	(794	)		34.0	%
Nondeductible expenses		15		12.4	%		20			(0.8	)%
State tax (net of federal benefit)		53		44.4	%		105			(4.5	)%
Other		—		—	%		6			(0.3	)%
Income tax expense (benefit)	$	108		90.8	%	$	(663	)		28.4	%

Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes as compared to the amounts used for income tax purposes. Significant components of the Company’s net deferred tax assets are as follows:

	As of December 31,
	2016		2015
Deferred income tax assets:
Loss and loss adjustment expense reserves	$	35	$	22
Unearned premium reserves		1,503		1,462
Net operating loss carryforwards		235		284
Share-based compensation		316		264
Other		270		278
Deferred income tax assets	$	2,359	$	2,310

Deferred income tax liabilities:
Deferred policy acquisition costs	$	1,492	$	1,370
State deferred taxes		397		378
Other		50		56
Deferred income tax liabilities	$	1,939	$	1,804

Net deferred income tax assets	$	420	$	506

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

The Company has recorded a net deferred tax asset of $420 and $506 as of December 31, 2016 and December 31, 2015, respectively. Realization of net deferred tax asset is dependent on generating sufficient taxable income in future periods. Management believes that it is more likely than not that the deferred tax assets will be realized and as such no valuation allowance has been recorded against the net deferred tax asset. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. As of December 31, 2016, based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences. When assessing the need for valuation allowances, the Company considers future taxable income and ongoing prudent and feasible tax planning strategies. Should a change in circumstances lead to a change in judgment about the ability to realize the deferred tax assets in future years, the Company would record valuation allowances as deemed appropriate in the period that the change in circumstances occurs, along with a corresponding charge to net income. The resolution of tax reserves and changes in valuation allowances could be material to the Company’s results of operations for any period, but is not expected to be material to the Company’s financial position.

As of December 31, 2016 the Company had net operating loss carryforwards (“NOLs”) for federal income tax purposes of approximately $691 which will be available to offset future taxable income. As a result of certain changes in ownership and pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, these NOLs are subject to a yearly limitation. The amount and expiration date of the NOL carryforwards are as follows:

Year of Occurrence	Year of Expiration		Amount
2013		2032	$	684
2014		2033		7
Total			$	691

Based upon the results of the Company’s analysis and the application of ASC 740-10, management has determined that all material tax positions meet the recognition threshold and can be considered as highly certain tax positions. This is based on clear and unambiguous tax law, and the Company is confident that the full amount of each tax position will be sustained upon possible examination. Accordingly, the full amount of the tax positions is anticipated to be recognized in the financial statements.

The Company files federal income tax returns as well as multiple state and local tax returns. The Company’s consolidated federal and state income tax returns for the years 2012 - 2015 are open for review by the Internal Revenue Service (“IRS”) and the various state taxing authorities.

9. Purchase of ClaimCor LLC

On January 2, 2015, the Company acquired a 100% interest in ClaimCor, a Florida domiciled independent adjusting company in order to complement the Company’s strategic plan and growth objectives by entering into the insurance services outsourcing industry. Under the terms of the membership interest purchase agreement, the purchase price was $323, paid by the Company, in cash, at closing. Pursuant to the purchase agreement, the previous managing members of ClaimCor entered into a non-compete agreement with the Company, whereby the members will not engage in, continue in, or carry on any business that competes with ClaimCor for a period of three years from the date of purchase.

The ClaimCor purchase was accounted for under the acquisition method as outlined in ASC Topic 805 –Business Combinations.Under the acquisition method, the acquiring company is required to recognize the identifiable assets acquired and liabilities assumed at fair value as of the acquisition date. Excess purchase price, if any, over the fair value of the net assets acquired, is recognized as goodwill. The following table presents the estimated allocation of the purchase price to the net assets of ClaimCor as of January 2, 2015.

Cash	$	18
Accounts receivable		132
Intangible asset: Non-compete agreement		9
Intangible asset: Customer base		43
Goodwill		211
Other assets		7
Total assets	$	420

Accounts payable		89
Other liabilities		8
Total liabilities assumed	$	97

Net assets acquired	$	323

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

As a result of the purchase, we initially recorded goodwill in the amount of $211 on our consolidated balance sheet as of January 2, 2015. The goodwill was not amortized, but rather subject to impairment testing on, at minimum, an annual basis. We also recognized the estimated fair value of the non-compete agreement as well as a customer base asset as part of the ClaimCor acquisition at a combined total of $52 as of January 2, 2015. The non-compete agreement was amortized over a two year period and on December 31, 2016, the remaining unamortized balance of the non-compete agreement was charged to operations due to its de-minimus nature. The customer base asset was to be amortized over an estimated useful-life of 5 years. The Company recognized expense related to the amortization of these assets in the amount of $6 and $11 for the years ended December 31, 2016 and 2015, respectively.

In the fourth quarter 2015, after analyzing ClaimCor’s performance in comparison to management’s expectations and forecasts at the time of acquisition, the Company noted that an impairment to the value of the goodwill and other intangibles which were recorded was likely. Accordingly, the Company’s analysis resulted in a charge of $246 associated with the impairment of goodwill and the customer base asset and has been charged to general and administrative expense for the year ended December 31, ~~2013,~~2015. The Company used a date of December 1, 2015 for purposes of calculating the impairment charges.

10. Net Earnings (Loss) Per Share

Net earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares and common share equivalents outstanding during the periods presented. In calculating diluted earnings per share, those potential common shares that are found to be anti-dilutive are excluded from the calculation. The table below provides a summary of the numerators and denominators used in determining basic and diluted earnings (loss) per share for the years ended December 31, 2016 and 2015.

	Year Ended December 31,
	2016		2015
Basic:
Net income (loss)	$	11	$	(1,673	)
Weighted average common shares outstanding		6,047,979		6,286,706
Basic earnings (loss) per common share	$	—	$	(0.27	)

Diluted:
Net income (loss)	$	11	$	(1,673	)
Weighted average common shares outstanding		6,047,979		6,286,706
Dilutive stock options outstanding		—		—
Diluted weighted average common shares outstanding		6,047,979		6,286,706
Diluted earnings (loss) per common share	$	—	$	(0.27	)

The following potentially dilutive securities outstanding as of December 31, 2016 and 2015 have been excluded from the computation of diluted weighted-average shares outstanding as their effect would be anti-dilutive.

	As of December 31,
	2016		2015
Options to purchase common stock		177,456		210,489
Warrants to purchase common stock		1,906,875		1,906,875
Restricted stock units		20,500		20,500
Performance shares (Note 13)		475,000		475,000
		2,579,831		2,612,864

11. Equity Incentive Plan

The Company has established a stock option incentive plan for employees and directors of the Company (the “Plan”). The purpose of the Plan is to create incentives designed to motivate recipients to significantly contribute toward the Company’s growth and success, and also to attract and retain persons of outstanding competence, and provide such persons with an opportunity to acquire an equity interest in the Company.

The Plan is administered by a committee appointed by the Board of Directors. All members of such committee must be non-employee directors and independent directors as defined in the Plan. Subject to the limitations set forth in the Plan, the committee has the authority to grant awards as well as determine the general provisions of each award including the purchase price, term, number of shares, and performance criteria, and also to establish vesting schedules and other terms and conditions of the award.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

In April 2015, the Company’s shareholders approved an amendment to the Plan to allow for the issuance of additional award types under the Plan. In addition to non-qualified stock options issuable under the Plan, the amendment provides for the issuance of restricted stock, restricted stock units (“RSUs”), performance shares, performance cash awards, and other stock-based awards. The Plan provides for the issuance of 354,912 shares of common stock. As of December 31, 2016, both stock options and RSUs had been issued to the Company’s employees under the Plan resulting in 156,956 shares available for future issuance under the Plan.

Stock option information for the two years ended December 31, 2016 is as follows.

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Common Stock Options
Outstanding, January 1, 2015		210,489		$	8.05		3.62	$	0.96	$	—
Exercisable, January 1, 2015		125,308		$	8.04		3.18	$	0.88	$	—
Granted		—			—
Exercised		—			—
Cancelled		—			—
Outstanding, December 31, 2015		210,489		$	8.05		2.81	$	0.96	$	—
Exercisable, December 31, 2015		146,603		$	8.04		2.62	$	0.90	$	—
Granted		—			—
Exercised		—			—
Cancelled		(33,033	)		8.00
Outstanding, December 31, 2016		177,456		$	8.06		2.25	$	1.07	$	—
Exercisable, December 31, 2016		134,865		$	8.06		2.25	$	1.07	$	—

A summary of the status of the Company’s non-vested employee stock options is as follows.

	Shares			Weighted Average Grant Date Fair Value
Non-Vested Common Stock Options
Non-vested, January 1, 2015		85,181		$	1.07
Granted		—			—
Vested		(21,295	)		1.07
Cancelled		—			—
Non-vested, December 31, 2015		63,886		$	1.07
Granted		—			—
Vested		(21,295	)		1.07
Cancelled		—			—
Non-vested, December 31, 2016		42,591		$	1.07

On May 29, 2015, the Company’s Board of Directors granted RSUs to certain of its executive officers under the Plan. Each RSU granted entitles the grantee to one share of the Company’s common stock upon the vesting date of the RSU. The RSUs vest as follows: (i) 50% upon the date that the closing price of the Company’s common stock equals or exceeds $10.00 per share and; (ii) 50% upon the date that the closing price of the Company’s common stock equals or exceeds $12.00 per share. Prior to the vesting of the RSUs, the grantee will not be entitled to any dividends declared on the Company’s common stock. The RSUs do not expire, however, should the grantee discontinue employment with the Company for any reason other than death or disability, all unvested RSUs will be deemed forfeited on the date employment is discontinued. The following table summarizes RSU activity for the two years ended December 31, 2016.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

Restricted Stock Units	Number of Units		Weighted Average Grant Date Fair Value
Non-vested units, January 1, 2015		—	$	—
Granted		20,500		1.34
Vested		—		—
Forfeited		—		—
Non-vested units, December 31, 2015		20,500	$	1.34
Granted		—		—
Vested		—		—
Forfeited		—		—
Non-vest units, December 31, 2016		20,500	$	1.34

Total stock based compensation expense for the years ended December 31, 2016 and 2015 was $38 and $47, respectively. As of December 31, 2016, total unrecognized stock compensation expense of $30 remains, which will be recognized ratably through March 31, 2018.

Stock warrants issued, exercised and outstanding as of December 31, 2016 are as follows.

	Shares		Weighted Average Exercise Price
Common Stock Warrants
Outstanding, January 1, 2015		406,875	$	9.69
Exercisable, January 1, 2015		312,500	$	9.60
Granted		1,500,000		15.00
Exercised		—
Cancelled		—
Outstanding, December 31, 2015		1,906,875	$	13.87
Exercisable, December 31, 2015		1,906,875	$	13.87
Granted		—		—
Exercised		—		—
Cancelled		—		—
Outstanding, December 31, 2016		1,906,875	$	13.87
Exercisable, December 31, 2016		1,906,875	$	13.87

On March 31, 2014, the Company issued warrants to purchase 94,375 shares of its common stock to the underwriters of the Company’s IPO. Each warrant entitles the holder to purchase one common share of PIH at a price of $10.00 per share at any time after March 31, 2015 and prior to expiry on March 31, 2019.

Also on March 31, 2014, in connection with the conversion of Series A Preferred Shares then outstanding into the Company’s common shares, the Company issued warrants to purchase 312,500 shares of the Company’s common stock to Fund Management Group LLC, an entity of which the Company’s Chairman of the Board, Gordon G. Pratt, is a Managing Member and controlling equity holder. Each warrant issued to Fund Management Group LLC entitles the holder to purchase one share of common stock at a price equal to $9.60, subject to certain adjustments under a warrant agreement (the “Warrant Agreement”). The warrants have an expiry date of March 31, 2019 and vested upon issuance. The warrants may be redeemable by the Company at a price of $0.01 per warrant during any period in which the closing price of the Company’s common shares is at or above $14.00 per share for 20 consecutive trading days. The warrant holder is entitled to a 30-day notice prior to the date of such redemption.

The details of the Company’s remaining warrants issued and outstanding are discussed in Note 13 – Related Party Transactions, below.

12. Shareholders’ Equity

Treasury Shares

On December 1, 2014, the Company’s Board of Directors authorized a share repurchase program for up to 500,000 shares of the Company’s common stock which expired on December 31, 2016. Through December 31, 2016, the Company has repurchased an aggregate 401,359 shares at an aggregate purchase price of $2,927, or $7.29 per share, including all fees and commissions.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

On January 29, 2016, the Company retired 250,000 of its treasury shares, resulting in a reclassification of the purchase price of $1,917 to additional paid in capital.

13. Related Party Transactions

Related party transactions are carried out in the normal course of operations and are measured in part by the amount of consideration paid or received as established and agreed by the parties. Management believes that consideration paid for such services in each case approximates fair value. Except where disclosed elsewhere in these consolidated financial statements, the following is a summary of related party transactions.

Performance Share Grant Agreement

On March 26, 2014, the Company entered into a Performance Share Grant Agreement (“PSGA”) with KAI, whereby KAI will be entitled to receive up to an aggregate of 375,000 shares of PIH common stock upon achievement of certain milestones regarding the Company’s stock price. Pursuant to the terms of the PSGA, if at any time the last sales price of the Company’s common stock equals or exceeds: (i) $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, ~~from October 2, 2012 through~~KAI will receive 125,000 shares of the Company’s common stock; (ii) $15.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of the Company’s common stock (in addition to the 125,000 shares of common stock earned pursuant to clause (i) herein); and (iii) $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, KAI will receive 125,000 shares of the Company’s common stock (in addition to the 250,000 shares of common stock earned pursuant to clauses (i) and (ii) herein). The shares of common stock granted to KAI will have a valuation equal to the last sales price of PIH common stock on the day prior to such grant. As of December 31, ~~2012:~~2016, the Company has not issued any shares under the PSGA.

2013 2012
Balance, January 1 $ 9 $ —
Less reinsurance recoverable on loss and loss adjustment expense reserves — —
Net balance at January 1 9 —
Incurred related to

Current year 2,937 9
Prior years (9 ) —
Total incurred 2,928 9
Paid related to

Current year 2,583 —
Prior years — —
Total paid 2,583 —
Net balance at December 31 354 9
Plus reinsurance recoverable on loss and loss adjustment expense reserves — —
Balance, December 31 $ 354 $ 9

Termination of Management Services Agreement

As a result of the termination of the Management Services Agreement (“MSA”), which occurred on February 24, 2015, the Company has issued the following securities to 1347 Advisors, LLC (“Advisors”), a wholly owned subsidiary of KFSI.

●

The Performance Shares Grant Agreement dated February 24, 2015.

●

120,000 shares of Series B Preferred Stock of the Company (the “Preferred Shares”)

●

A warrant (the “Warrant”) to purchase 1,500,000 shares of the Company’s common stock at an exercise price of fifteen dollars per share. The Warrant expires seven years from date of issuance.

The ~~results~~Performance Shares Grant Agreement grants Advisors 100,000 shares of the Company’s common stock issuable upon the date that the last sales price of the Company’s common stock equals or exceeds ten dollars per share for any twenty trading days within any 30-day trading period (the “Milestone Event”). Advisors will not be entitled to any dividends declared or paid on the Company’s stock prior to the Milestone Event having been achieved.

The Preferred Shares have a par value of twenty five dollars and pay annual cumulative dividends at a rate of eight percent per annum. Cumulative dividends shall accrue, whether or not declared by the Board and irrespective of whether there are funds legally available for the payment of dividends. Accrued dividends shall be paid in cash only when, as, and if declared by the Board out of funds legally available therefor or upon a liquidation or redemption of the Preferred Shares. In the event of any voluntary of involuntary liquidation, dissolution, or winding up of the Company, the holders of the Preferred Shares then outstanding shall be entitled to be paid out of the assets of the Company available for distributions to its shareholders, before any payment shall be made to holders of securities junior in preference to the Preferred Shares. The Preferred Shares rank senior to the Company’s common stock, and the Company is not permitted to issue any other series of preferred stock that ranks equal or senior to the Preferred Shares while the Preferred Shares are outstanding. On February 22, 2016 the Company’s board of directors authorized a dividend payment on the Preferred Shares for shareholders of record as of February 23, 2016. Accordingly, on February 24, 2016, the Company issued a cash payment of $240 to Advisors representing the first annual dividend payment the Company has made on the Preferred Shares.

Unless redeemed earlier by the Company as discussed below, with the written consent of the holders of the majority of the Preferred Shares then outstanding, the Company will be required to redeem the Preferred Shares then outstanding on February 24, 2020 (the “Mandatory Redemption Date”), for a redemption amount equal to twenty five dollars per share plus all accrued and unpaid dividends on such shares. The Company has the option to redeem the Preferred Shares prior to the Mandatory Redemption Date immediately prior to the consummation of any change in control of the Company that may occur.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in thousands, except per share amounts)

Accounting for the termination of the MSA

As a result of the termination of the MSA agreement, the Company recognized an expense in the amount of $5,421 for the year ended December 31, ~~2013, and~~2015 as follows:

	Year ended December 31, 2015
Cash paid	$	2,000
Issuance of Series B Preferred Shares (recorded at a discount to redemption amount)		2,311
Issuance of Warrants and Performance Shares		1,010
Professional fees incurred in connection with the Buyout		100
Loss on termination of MSA	$	5,421

The Company applied the guidance outlined in ASC 480 –Distinguishing Liabilities from Equity in recording the issuance of the Series B Preferred Shares. Due to the fact that the Preferred Shares have a mandatory redemption date of February 24, 2020, the guidance required that we classify the Preferred Shares as a liability on our consolidated balance sheet, rather than recording the value of the shares in equity. The resulting liability was recorded at a discount to the $4,200 redemption amount plus dividends expected to be paid on the Preferred Shares while outstanding, discounted for the ~~period from October 2, 2012 through December 31, 2012, were not adversely affected by the evaluation~~Company’s estimated cost of property and casualty unpaid loss and loss adjustment expenses related to prior years. Original estimates are increased or decreased as additional information becomes known regarding individual claims.

8. Income Taxes

~~Income tax benefit varies from~~equity (13.9%). As a result, total amortization in the amount ~~that would result by applying the applicable federal income tax rate~~ of ~~34%~~$355 and $282 was charged to ~~loss before income tax benefit. The following tables summarize the differences~~operations for the ~~year~~years ended December 31, ~~2013~~2016 and 2015, respectively. An additional $1,252 is expected to be charged to operations through February 2020 using the effective interest method.

The Company applied the guidance outlined in ASC 505-50 –Equity-Based Payments to Non-Employeesin recording the issuance of the Warrants and Performance Shares by recognizing an increase to equity for the ~~period from October 2, 2012 through~~estimated fair value of both instruments as of their date of grant. We estimated the fair value of the Warrants on grant date based upon the Black-Scholes option pricing model. Significant assumptions used in determining the fair value of the Warrants were as follows:


Risk-free interest rate	1.79	%
Dividend yield	—
Expected volatility	23.7	%
Expected term (in years)	7

We utilized a Monte Carlo simulation model to determine the estimated fair value of the Performance Shares due to the fact that shares are only issuable based upon the achievement of certain market conditions. This pricing model uses multiple simulations to evaluate the probability of achieving the market conditions, as well as a number of other inputs (some of which are Level 3 inputs as defined by the FASB) with respect to the expected volatility and dividend yield (among other inputs) of the Company’s common shares.

Based upon these models, the total estimated fair value of both the Warrants and Performance Shares was determined to be $1,010 on the date of grant.

14. Accumulated Other Comprehensive Loss

The table below details the change in the balance of each component of accumulated other comprehensive loss, net of tax, for the years ended December 31, ~~2012 as follows:~~2016 and 2015.

	Year Ended December 31,
	2016			2015
Unrealized gains (losses) on available-for-sale securities:
Balance, January 1	$	(62	)	$	(1	)
Other comprehensive income (loss) before reclassifications		1			(95	)
Amounts reclassified from accumulated other comprehensive loss		(6	)		—
Income taxes		2			34
Net current-period other comprehensive loss		(3	)		(61	)
Balance, December 31	$	(65	)	$	(62	)

~~F-17~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands)

8. Income Taxes - (continued)

thousands, except per share amounts)

2013 2012
Expected tax benefit $ (389 ) $ (62 )
Dividends received deduction (9 ) —
Non-deductible expenses 2 —
Total $ (396 ) $ (62 )

~~Income tax benefit consists~~15. Fair Value of Financial Instruments

Fair value is best evidenced by quoted bid or ask price, as appropriate, in an active market. Where bid or ask prices are not available, such as in an illiquid or inactive market, the closing price of the ~~following:~~most recent transaction of that instrument subject to appropriate adjustments as required is used. Where quoted market prices are not available, the quoted prices of similar financial instruments or valuation models with observable market based inputs are used to estimate the fair value. These valuation models may use multiple observable market inputs, including observable interest rates, foreign exchange rates, index levels, credit spreads, equity prices, counterparty credit quality, corresponding market volatility levels and option volatilities. Minimal management judgment is required for fair values calculated using quoted market prices or observable market inputs for models. Greater subjectivity is required when making valuation adjustments for financial instruments in inactive markets or when using models where observable parameters do not exist. Also, the calculation of estimated fair value is based on market conditions at a specific point in time and may not be reflective of future fair values. For the Company’s financial instruments carried at cost or amortized cost, the book value is not adjusted to reflect increases or decreases in fair value due to market fluctuations, including those due to interest rate changes, as it is the Company’s intention to hold them until there is a recovery of fair value, which may be to maturity.

2013 2012
Current tax expense $ 16 $ 97
Deferred tax benefit (412 ) (159 )
Total $ (396 ) $ (62 )

The ~~tax effects~~Company classifies its investments in fixed income and equity securities as available-for-sale and reports these investments at fair value. Fair values of ~~temporary differences~~fixed income securities for which no active market exists are derived from quoted market prices of similar instruments or other third-party evidence.

The FASB has issued guidance that ~~give rise~~defines fair value as the exchange price that would be received for an asset (or paid to ~~significant portions~~transfer a liability) in the principal, or most advantageous market in an orderly transaction between market participants. This guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance categorizes assets and liabilities at fair value into one of three different levels depending on the observation of the ~~deferred income tax assets and deferred income tax liabilities are presented~~inputs employed in the measurements, as follows:

December 31 2013 2012
Deferred federal income tax assets:

Unearned premium reserves $ 672 $ 141
Net operating loss carryforwards 400 132
Other 154 8
Total gross deferred federal income tax assets before valuation allowance 1,226 281
Valuation allowance — —
Total gross deferred federal income tax assets 1,226 281
Deferred federal income tax liabilities:

Deferred policy acquisition costs (655 ) (118 )
Other — (4 )
Total gross deferred federal income tax liabilities (655 ) (122 )
Net Deferred Federal Income Tax Assets $ 571 $ 159

●

~~The Company carries a $571 net deferred federal income tax asset~~

●

Level 2 – inputs to the valuation methodology which include quoted prices for similar assets or liabilities in active markets. These inputs are observable, either directly or indirectly for substantially the full-term of the financial instrument.

●

Level 3 – inputs to the valuation methodology which are unobservable and significant to the measurement of fair value.

Financial instruments measured at ~~December 31, 2013, all of which the Company believes is more likely than not to be fully realized based upon management’s assessment of future federal taxable income.~~

~~Amounts, origination dates and expiration dates of the federal net operating loss carryforward are~~fair value as ~~follows:~~

Year of net operating loss Expiration Date Net Operating
Loss
2012 2032 $ 139
2013 2033 1,036

As of December 31, ~~2013, the Company had no unrecognized tax benefits. The Company analyzed its tax positions~~2016 and 2015 in accordance with ~~the provisions of ASC Topic 740,~~~~Income Taxes,~~ ~~and has determined that there~~this guidance are currently no uncertain tax positions. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax benefit. The KAI tax group’s consolidated federal income tax return is not currently under examination by the Internal Revenue Service for any open tax years.as follows.

As of December 31, 2016	Level 1		Level 2		Level 3		Total
Fixed income securities:
U.S. government	$	—	$	1,604	$	—	$	1,604
State municipalities and political subdivisions		—		2,246		—		2,246
Asset-backed securities and collateralized mortgage obligations		—		11,968		—		11,968
Corporate		—		10,741		—		10,741
Total fixed income securities		—		26,559		—		26,559

Equity securities:
Common stock		1,136		—		—		1,136
Total equity securities		1,136		—		—		1,136

Total fixed income and equity securities	$	1,136	$	26,559	$	—	$	27,695

As of December 31, 2015
Fixed income securities:
U.S. government	$	—	$	647	$	—	$	647
State municipalities and political subdivisions		—		1,651		—		1,651
Asset-backed securities and collateralized mortgage obligations		—		9,082		—		9,082
Corporate		—		8,858		—		8,858
Total	$	—	$	20,238	$	—	$	20,238

~~F-18~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
($ in thousands)

9.thousands, except per share amounts)
16. Statutory Information

Requirements

~~MIC~~

The Company’s insurance subsidiary, Maison, prepares statutory basis financial statements in accordance with accounting practices prescribed or permitted by the LDI. ~~“Prescribed”~~Prescribed statutory accounting practices include state laws, rules and regulations as well as accounting practices and ~~general administrative~~ rules as ~~well as~~outlined in a variety of publications of the National Association of Insurance Commissioners ~~(NAIC)~~(“NAIC”). ~~“Permitted”~~Permitted statutory accounting practices encompass all accounting practices that are not ~~prescribed; such~~prescribed, but instead have been specifically requested by an insurer and allowed by the state in which the insurer is domiciled (in Maison’s case, Louisiana). Permitted practices may differ from state to state, ~~may differ from~~or company to company within a state, and may change in the future. ~~MIC has no differences between~~In converting from statutory accounting ~~practices set forth~~basis to U.S. GAAP, typical adjustments include the deferral of acquisition costs (which are all charged to operations as incurred on a statutory basis), the inclusion of statutorily non-admitted assets on the balance sheet, the inclusion of net unrealized holding gains or losses related to investments included on the balance sheet, as well as the inclusion of changes in deferred tax assets and liabilities in the ~~NAIC Practices~~statement of operations.

Statutory Surplus and ~~Procedures Manual and prescribed practices in the state of Louisiana.~~Capital Requirements

~~A risk-based capital (RBC) formula is used by the NAIC~~

In order to identify property and casualty insurance companies that may not be adequately capitalized. Most states, including the domiciliary states of the Company’s insurance subsidiary, have adopted the NAIC RBC requirements. In general, property and casualty insurance company surplus as regards policyholders below 200% of the authorized control level, as defined by the NAIC, at December 31 is subject to varying levels of regulatory action, including discontinuation of operations. As of December 31, 2013, surplus as regards policyholders reported by MIC exceeded the 200% threshold. As of December 31, 2013, the surplus as regards policyholders was reported at $7,722, while the 200% of authorized control level risk based capital was at $2,818, excluding catastrophe risk, hence MIC exceeded the 200% threshold by $4,904.

~~Statutory capital and surplus and statutory net loss for MIC as of and for year ended December 31, 2013, and the period from October 2, 2012 through December 31, 2012 is as follows:~~

2013 2012
Net loss, statutory basis $ (2,496 ) $ (172 )
Capital and surplus, statutory basis 7,722 7,514

~~When MIC was issued~~retain its certificate of authority ~~from~~in the ~~LDI, the consent order requires minimum capital and surplus~~State of ~~$5,000. Additionally, MIC~~Louisiana, Maison is required to maintain a ~~$100~~minimum capital surplus of $5,000. As of December 31, 2016 Maison’s capital surplus was $19,835.

The LDI employs risk-based capital (“RBC”) reports to monitor Maison’s financial condition. Risk-based capital is determined in accordance with a formula adopted by the NAIC which takes into consideration the covariance between asset risk, credit risk, underwriting risk, and other business risks. The RBC report determines whether Maison falls into the “no action” level or one of the four action levels set forth in the Louisiana Insurance Code. In order to retain its certificate of ~~deposit~~authority in the State of Texas, Maison is required to maintain an RBC ratio of 300% or more.

As of December 31, 2016, Maison’s RBC ratio was 346%, as a ~~special restrictive~~result, our surplus was considered to be in the “no action” level.

States routinely require deposits of assets for the protection of policyholders either in those states or for all policyholders. As of December 31, 2016, Maison held investment securities with a fair value of approximately $100 as a deposit with the ~~LDI.~~LDI and cash and investment securities with a fair value of approximately $1,992 as a deposit with the TDI.

~~Dividends paid~~

Surplus Notes

PIH, as the parent company of Maison, is subject to the insurance holding company laws of the State of Louisiana, which, among other things, regulate the terms of surplus notes issued by insurers to their parent company. Maison’s capital includes five surplus notes issued to PIH in the amount of $6,050, all of which were approved by the LDI prior to their issuance. Notes accrue interest at 10% per annum. Interest payments on the notes are due annually, and are also subject to prior approval by the LDI. The Company’s surplus notes, as of December 31, 2016, are as follows.

Date of Issuance	Maturity Date	Principal Amount
October 22, 2013	October 22, 2017	$	650
December 21, 2015	December 21, 2017		850
March 31, 2016	March 31, 2018		550
September 29, 2016	September 29, 2018		3,450
November 14, 2016	November 14, 2018		550
		$	6,050

Dividend Restrictions

As a Louisiana domiciled insurer, the payment of dividends from our insurance ~~companies are~~subsidiary is restricted by ~~regulatory requirements of~~ the ~~insurance departments in the subsidiaries’ state of domicile. The maximum amount of dividends that~~Louisiana Insurance Code. Dividends can only be paid ~~to shareholders~~if an insurer’s paid-in capital and surplus exceed the minimum required by ~~insurance companies without prior approval of~~ the ~~domiciliary state insurance commissioner is generally limited to~~Louisiana Insurance Code by one hundred percent or more, or as otherwise provided. Any dividend or distribution that when aggregated with any other dividends or distributions made within the preceding twelve months exceeds the lesser of ~~(i) 10% of a company’s statutory capital and surplus at the end~~(a) ten percent of the ~~previous year~~insurer’s surplus as regards policyholders as of the thirty-first day of December next preceding; or ~~(ii) 100% of a company’s~~(b) the net income ~~excluding~~of the insurer, not including realized capital gains, for the ~~previous year, plus a carry-forward~~twelve month period ending the thirty-first day of December next preceding; is considered to be extra-ordinary and shall not be paid until thirty days after the LDI has received notice of the ~~previous second~~declaration thereof and ~~third year~~has not within that period disapproved the payment, or until the LDI has approved the payment within the thirty-day period. In determining whether a dividend or distribution is extra-ordinary, an insurer may carry forward net income ~~excluding realized gains, less dividends~~from the previous two calendar years that has not already been paid out in ~~the second and immediate preceding year.~~

dividends. As ~~MIC has negative unassigned funds, it cannot pay~~of December 31, 2016, Maison had not paid any dividends to its shareholder, PIH.

See Note 20 – Subsequent Events, for additional statutory requirements regarding the ~~Company~~certificate of authority granted to Maison from the Florida Office of Insurance Regulation.

1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

($ in ~~2014 without prior notice to LDI.~~thousands, except per share amounts)

10. Commitments and Contingencies

The Company has a non-cancelable, five-year operating lease for office space that commenced January 2013 and expires January 2018. Office space lease expense for the year ended in 2013 was $62 and zero for 2012. Future minimum lease payments are $65 in 2014, $65 in 2015, $65 in 2016, $65 in 2017 and $3 in 2018.

17. Retirement plans

The Company’s insurance subsidiary is liable for guaranty fund assessments related to Louisiana domiciled unaffiliated insurance companies that have become insolvent. Additionally, the Company’s insurance subsidiary is liable for regular assessments related to Louisiana Citizens Property Insurance Corporation. MIC includes a provision for all known assessments, as well as an estimate of amounts that it believes will be

~~F-19~~

~~TABLE OF CONTENTS~~

1347 Property Insurance Holdings, Inc.

Notes 401(k) Plan (the “Retirement Plan”) was established effective January 1, 2015, as a defined contribution plan. The Retirement Plan is subject to Consolidated Financial Statements
(in thousands)

10. Commitmentsthe provisions for the Employee Retirement Income Security Act of 1974 (“ERISA”); eligible employees of the Company and Contingencies - (continued)

~~assessed~~its subsidiaries may participate in the ~~future. At December 31, 2013~~plan. Employees who have completed one month of service are eligible to participate and ~~2012, MIC carried no liabilities for these assessments. No single assessment or aggregate~~are permitted to make annual pre and post-tax salary reduction contributions not to exceed the limits imposed by the Internal Revenue Code of ~~multiple assessments is expected to have a material impact on earnings or surplus~~1986, as amended. Contributions are invested at the direction of the ~~Company.~~

~~In connection with its operations in the ordinary course of business, the Company may be named as defendants~~employee participant in various ~~actions for damages~~money market and ~~costs allegedly sustained by the plaintiffs. The Company is not aware of any such actions at this time.~~

11. Defined Contribution Plan

The Company participates in the Parent’s defined contribution 401(k) plan (the Plan) for all of its qualified employees. Qualifying employees can choose to voluntarily contribute up to 60% of their annual earnings subject to an overall limitation of $17.5 and $17 in 2013 and 2012, respectively.mutual funds. The Company matches ~~an amount equal~~contributions up to ~~50%~~100% of each participant’s contribution, limited to contributions up to 5%4% of a participant’s earnings. The Company may also elect to make a profit sharing contribution to the Retirement Plan based upon discretionary amounts and percentages authorized by the Company’s board of directors. For the years ended December 31, 2016 and 2015, the Company made matching contributions to the Retirement Plan ~~vest based~~in the amount of $75 and $67, respectively.

19. Commitments and Contingencies

Legal Proceedings:

From time to time, we are involved in legal proceedings and litigation arising in the ordinary course of business. Currently, it is not possible to predict legal outcomes and their impact on ~~years~~the future development of ~~service with 20% earned each year~~claims. Any such development will be affected by future court decisions and ~~100% vesting after five years~~interpretations. Because of ~~service. The Company incurred matching contribution expenses of $7 and $0~~these uncertainties, additional liabilities may arise for ~~the year ended December 31, 2013, and the period from October 2, 2012 through December 31, 2012, respectively.~~

12. General and Administrative Expenses

~~The components~~amounts in excess of the Company’s ~~general~~current reserves. In addition, the Company’s estimate of ultimate loss and ~~administrative~~loss adjustment expenses ~~for~~may change. These additional liabilities, or increases in estimates, or a range of either, cannot be reasonably estimated, and could result in income statement charges that could be material to the ~~year ended~~Company’s results of operations in future periods.

Operating Lease Commitments:

As of December 31, ~~2013 and for the period from October 2, 2012 through December 31, 2012 are as follows:~~

For the year and period ended 2013 2012
Salaries and benefits $ 779 $ 139
Professional outside service expenses 764 291
Policy underwriting inspection fees 93 —
Postage 75 —
Management fees to parent 68 —
Other 200 44
Total General and Administrative Expenses $ 1,979 $ 474

13. Subsequent Events

Preferred Stock

~~When~~2016, the Company ~~changed~~had the following amounts due under its ~~name on November 19, 2013, it amended its articles~~operating leases for facilities leased in Baton Rouge, Louisiana, and Tampa, Florida.

Year ended December 31,
2017	$	344
2018		291
2019		249
Total	$	884

20. Subsequent Events

Florida Certificate of ~~incorporation~~Authority

On March 1, 2017 Maison received a certificate of authority from the Florida Office of Insurance Regulation (“OIR”) which authorizes Maison to authorize one million shares of preferred stock, each with a par value of $25.00. On January 23, 2014, Fund Management Group LLC, an entity of which our Chairman of the Board, Gordon G Pratt, is Managing Member and controlling equity holder, invested $2 millionwrite personal lines insurance in the ~~Company in exchange for 80 Series A Convertible Preferred Shares (Preferred Shares)~~state of ~~the Company pursuant~~Florida. Pursuant to the ~~terms and conditions~~Consent Order issued, Maison has agreed to comply with certain requirements as outlined by the OIR until Maison can demonstrate three consecutive years of the Series A Convertible Preferred Shares Purchase Agreement between Fund Management Group LLC and the Company. The Preferred Shares are non-voting and rank senior to all classes of capital stock of the Company. The Preferred Shares do not pay any dividends. When converted, the Preferred Shares will convert into (i) common shares of the Company, which is equal to $2 million of our common stock at 80% of the offering price per share of our common stock issued innet income following the Company’s ~~Initial Public Offering (the Offering), subject~~admission into Florida as evidenced by its Annual Statement filed with the National Association of Insurance Commissioners. Among other requirements, the OIR requires the following as conditions related to ~~certain adjustments, and (ii) one warrant per each common share issued~~the issuance of Maison’s certificate of authority:

●

Although domiciled in the state of Louisiana, Maison agreed to comply with the Florida Insurance Code as if Maison were a domestic insurer within the state of Florida;

●

Maison agreed to maintain capital and surplus as to policyholders of no less than $35 million;

●

Maison agreed to receive prior approval from the OIR prior to the payment of any dividends and;

●

Maison agreed to receive written approval from the OIR regarding any form of policy issued, or rate charged to its policyholders prior to utilizing any such form or rate for policies written in the state of Florida.

To comply with the Consent Order, Maison will receive a result of the conversion. The conversion into shares of our common stock and warrants will be deemed to have occurred immediately prior to closing of the Offering. Each warrant will entitle the holder to purchase one share of our common stock at a price equal to 120% of the offering price per share of our common stock issued in this Offering, subject to certain adjustments under a warrant agreement (the “Warrant Agreement”) to be entered into upon issuance of

~~F-20~~

~~TABLE OF CONTENTS~~

capital contribution from its parent company, 1347 Property Insurance Holdings, Inc.

Notes, in the approximate amount of $15 million. This contribution is expected to Consolidated Financial Statements
(be in thousands)

13. Subsequent Events - (continued)

~~such warrants between Fund Management Group LLC~~the form of one or more surplus notes as well as a direct contribution to paid in and ~~the Company. The warrants will have an expiry date of five years from the date of issuance~~contributed surplus and will be immediately exercisable after issuance in accordance with the exercise procedure under the Warrant Agreement. The warrants will be redeemable by us at a price of $0.01 per warrant during any period in which the closing price of our common shares is ~~at or above 175% of the price of shares of our common stock issued in this Offering for 20 consecutive trading days. The warrant holder will be entitled~~expected to ~~a 30-day notice~~occur prior to ~~the date~~March 31, 2017. As of such redemption. If the Offering is not completed within one year from the date of issuance, we will redeem the Preferred Shares at a value equal to original investment plus a 12% premium. The common stock issuable to Fund Management Group LLC upon conversion of the Preferred Shares will have piggyback registration rights for future registrations of the Company’s common stock under the Securities Act (other than certain excluded registrations) and, upon the two-year anniversary of the Offering, Fund Management Group LLC will also have a one-time demand registration right for such common stock, subject to certain restrictions. The proceeds from this transaction were used to settle intercompany payables to the Parent.

Other

~~The Company has evaluated subsequent events through February 25, 2014, the date these consolidated financial statements were available to be issued.~~

14. Concentration of Credit Risk

The Company maintains its cash in bank deposit accounts which may exceed federally insured limits. The balances are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250. At December 31, 2013, the Company had balances in excess of insured limits totaling $14,757. The CompanyMarch 16, 2017 Maison has not ~~experienced~~written any ~~losses~~insurance policies covering risks in ~~such accounts.~~the state of Florida.

15. Selected Quarterly Financial Data (Unaudited and Unreviewed)

2013 (in thousands, except per-share amounts) Total 4^th
Quarter 3^rd
Quarter 2^nd
Quarter 1^st
Quarter
Total Revenues $ 5,091 $ 2,562 $ 1,060 $ 533 $ 936
Total Expenses 6,235 1,531 979 1,319 2,406
Income (loss) before income taxes (1,144 ) 1,031 81 (786 ) (1,470 )
Income tax expense (benefit) (396 ) 342 29 (263 ) (504 )
Net Income (Loss) $ (748 ) $ 689 $ 52 $ (523 ) $ (966 )
Income (loss) per share

Basic $ (0.75 ) $ 0.69 $ 0.05 $ (0.52 ) $ (0.97 )
Diluted (0.75 ) 0.69 0.05 (0.52 ) (0.97 )
Cash flows from operating activities 6,708 2,147 2,947 83 1,531
Cash flows from (for) investing activities 1,574 (301 ) 1,875 — —
Cash flows from financing activities 1,200 — — 1,200 —
Net Increase in Cash $ 9,482 $ 1,846 $ 4,822 $ 1,283 $ 1,531

16. Stock Split

On March 19, 2014, the Company effected a stock split on a one thousand new shares of common stock for one old share of common stock basis. As a result of this stock split, the Company’s outstanding share capital increased from 1,000 shares of common stock to 1,000,000 shares of common stock. This stock split has been applied retroactively to restate all share and per share amounts.

~~F-21~~

~~TABLE OF CONTENTS~~

Shares
% Cumulative Preferred Stock
(Liquidation Preference Equivalent to $ Per Share)

(GRAPHIC)

PROSPECTUS

Boenning & Scattergood, Inc.

, 2018

1,625,000 Shares
Common Stock

PROSPECTUS


~~Sole Book-Running Manager~~
~~Aegis Capital Corp~~
				~~Co-Manager~~
				~~EarlyBirdCapital, Inc.~~

~~, 2014~~

Until , 2014, all dealers that buy, sell or trade our common stock may be required to deliver a prospectus, regardless of whether they are participating in this Offering. 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.

~~TABLE OF CONTENTS~~

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance

and Distribution

The following table sets forth the costs and expenses payable by us in connection with the sale of the securities being registered. All such costs and expenses shall be borne by us. All amounts are estimates except the fees payable to the SEC.

SEC Registration Fee $ 4,685.10
FINRA filing fee 5,675.00
NASDAQ filing fee 50,000.00
Printing Expenses 20,000.00
Accounting Fees and Expenses 115,000.00
Legal Fees and Expenses 410,000.00
Miscellaneous 94,639.90
Total 700,000.00

SEC Registration Fee $ 2,864.00
FINRA Filing Fee
Nasdaq Listing Fee
Printing Expenses
Accounting Fees and Expenses
Legal Fees and Expenses
Transfer Agent Fees and Expenses
Miscellaneous
Total $
Item 14. Indemnification of Directors and Officers

The Registrant is incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law, or DGCL, authorizes the Registrant to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Registrant) by reason of the fact that the person is or was a director, officer, employee or agent of the Registrant, or is or was serving at the request of the Registrant as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the 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 the person’s conduct was unlawful.

Further, the Registrant may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Registrant to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the Registrant, or is or was serving at the request of the Registrant as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Registrant, provided that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Registrant unless and only to the extent that the Delaware Court of Chancery 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, such person is fairly and reasonably entitled to ~~award,~~indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. To the extent that a ~~corporation’s board~~present or former director or officer of ~~directors~~the Registrant has been successful on the merits or otherwise in defense of any action, suit or proceeding discussed above, or in defense of any claim, issue or matter therein, the Registrant is required to ~~grant, indemnity to directors~~indemnify such person against expenses, including attorneys’ fees, actually and ~~officers under certain circumstances and subject to certain limitations.~~ reasonably incurred by such person in connection therewith.

The terms of Section 145 of the ~~Delaware General Corporation Law~~DGCL are sufficiently broad to permit indemnification under certain circumstances for liabilities, including reimbursement of expenses incurred, arising under the Securities Act of 1933, as amended, or the Securities Act.

As permitted by the ~~Delaware General Corporation Law,~~DGCL, the ~~registrant’s~~Registrant’s Third Amended and Restated Certificate of Incorporation, or the Certificate of Incorporation, and Second Amended and Restated Bylaws, or the Bylaws, provide that the Registrant is required to indemnify its directors and officers to the fullest extent authorized by the DGCL, subject to the exceptions set forth in the DGCL described above; provided, however, that, except for proceedings to enforce rights to indemnification, the Registrant is not obligated to indemnify any director or officer or advance expenses in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Registrant’s Board of Directors. In addition, as permitted by the DGCL, the Certificate of Incorporation and the Bylaws authorize the Registrant to advance expenses incurred by a director or officer in defending or otherwise participating in any proceeding upon receipt by the Registrant of an undertaking by or on behalf of the director or officer receiving the advancement to repay the amount advanced if it is ultimately determined that such person is not entitled to be indemnified by the Registrant.

II-1

Under the Certificate of Incorporation and the Bylaws, the Registrant may, to the extent authorized from time to time by the Registrant’s Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Registrant similar to those conferred to the Registrant’s directors and officers.

Further, under the Bylaws, unless ordered by a court, no indemnification may be provided to a director, officer or employee unless a determination has been made that 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 proceeding, such person had no reasonable cause to believe his or her conduct was unlawful. Such determination shall be made by (a) a majority vote of the disinterested directors, even though less than a quorum of the Registrant’s Board of Directors, (b) a committee comprised of disinterested directors, such committee having been designated by a majority vote of the disinterested directors (even though less than a quorum), (c) if there are no such disinterested directors, or if a majority of disinterested directors so directs, by independent legal counsel in a written opinion, or (d) by the stockholders of the Corporation. A “disinterested director” means a director of the Registrant who is not and was not a party to the proceeding in question.

The Certificate of Incorporation and Bylaws also provides that the rights to indemnification and to the advancement of expenses conferred in the Certificate of Incorporation and Bylaws are not exclusive of any other right which any person may have or hereafter acquire under the Certificate of Incorporation, the Bylaws, any statute, agreement, vote of stockholders or disinterested directors or otherwise. Further, any repeal or modification of the indemnification provisions in the Certificate of Incorporation or the Bylaws by the stockholders of the Registrant will not adversely affect any rights to indemnification and to the advancement of expenses of a director or officer of the Registrant existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification.

In addition, Section 102(b)(7) of the DGCL grants the Registrant the right to eliminate or limit the personal liability of a director to the Registrant or its stockholders for monetary damages for breach of the director’s fiduciary duty, subject to certain limitations. As permitted by the DGCL, the Registrant’s Certificate of Incorporation contains provisions that eliminate the personal liability of its directors for monetary damages for any breach of fiduciary duties as a director, except for liability:

~~For any breach of the director’s duty of loyalty to the registrant or its stockholders;~~

~~For acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;~~

~~Under Section 174 of the Delaware General Corporation Law (regarding unlawful dividends and stock purchases); or~~

~~For any transaction from which the director derived an improper personal benefit.~~

~~As permitted by the Delaware General Corporation Law, the registrant’s Third Amended and Restated~~

●

For any breach of the director’s duty of loyalty to the Registrant or its stockholders;

●

For acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

●

Under Section 174 of the DGCL (providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemptions); or

●

For any transaction from which the director derived an improper personal benefit.

The Registrant’s Certificate of Incorporation ~~and~~further provides that if the DGCL is amended ~~and restated by-laws provide that:~~

~~The registrant is required~~ to ~~indemnify its~~authorize corporate action further eliminating or limiting the personal liability of directors, ~~and officers~~then the liability of a director of the Registrant shall be eliminated or limited to the fullest extent permitted by the ~~Delaware General Corporation Law, subject to very limited exceptions;~~

~~The registrant may indemnify its other employees and agents~~DGCL, as ~~set forth in the Delaware General Corporation Law;~~

The registrant is required to advance expenses, as incurred, to its directors and officers in connection with a legal proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject to very limited exceptions; and

~~The rights conferred in the Third Amended and Restated Certificate of Incorporation and the amended and restated bylaws are not exclusive.~~

so amended.

The ~~registrant~~Registrant has entered into indemnification agreements with each of its current directors and certain executive officers to provide these directors and executive officers additional contractual assurances regarding the scope of the indemnification set forth in the ~~registrant’s Third Amended and Restated~~ Certificate of Incorporation and ~~amended and restated bylaws~~Bylaws and to provide additional procedural protections. At present, there is no pending litigation or proceeding involving a director, executive officer or employee of the ~~registrant~~Registrant regarding which indemnification is sought. Reference is also made to section ~~seven~~ of the

~~II-1~~

~~TABLE OF CONTENTS~~

Underwriting Agreement, which provides for the indemnification of executive officers, directors and controlling persons of the ~~registrant~~Registrant against certain liabilities. ~~The~~

Insofar as indemnification provisions in the registrant’s Third Amended and Restated Certificate of Incorporation and amended and restated bylaws and the indemnification agreements entered into or to be entered into between the registrant and each of its directors and executive officers may be sufficiently broad to permit indemnification of the registrant’s directors and executive officers for liabilities arising under the Securities ~~Act.~~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 Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

The ~~registrant has~~Bylaws provide that the Registrant may maintain insurance, at its expense, to protect itself and any director, officer or employee against any liability of any character asserted against or incurred by the Registrant or any such director, officer or employee, or arising out of any such person’s “corporate status” with the Registrant, or status as a director, officer, employee or agent of the Registrant, whether or not the Registrant would have the power to indemnify such person against such liability under the DGCL or the provisions of the Bylaws.

The Registrant maintains directors’ and officers’ liability ~~insurance for securities matters.~~insurance.

II-2
Item 15. Recent Sales of Unregistered Securities

On ~~October 2, 2012, we~~January 23, 2014, the Registrant issued ~~1,000~~80,000 shares of ~~common~~its Series A convertible preferred stock, no par value $25.00 per share, or the Series A Preferred Shares, to ~~Kingsway America Inc., our sole common stockholder, in connection with our incorporation. These shares~~Fund Management Group LLC, of ~~common stock~~which the Registrant’s former Chairman of the Board, Gordon G. Pratt, is a managing member and controlling equity holder, for $2 million. The Series A Preferred Shares were issued in reliance on the private placement exemption provided by Section 4(a)(2) of the Securities Act on the basis that the sale did not involve a public offering. The Series A Preferred Shares were non-voting and ranked senior to all classes of capital stock of the Registrant. On March 31, 2014, the effective date of the Registrant’s initial public offering, the Series A Preferred Shares were converted into 312,500 shares of the Registrant’s common stock and a warrant to purchase up to 312,500 shares of the Registrant’s common stock at a price equal to $9.60 per share, subject to certain adjustments set forth in a warrant agreement. The warrant, which became exercisable upon issuance, expires on March 31, 2019. The Registrant may redeem the warrant at a price of $0.01 per share during any period in which the closing price of the Registrant’s common stock is at or above $14.00 per share for 20 consecutive trading days.

On February 24, 2015, the Registrant entered into an agreement with 1347 Advisors, LLC, or 1347 Advisors, a subsidiary of Kingsway Financial Services Inc., the Registrant’s largest stockholder, to terminate a Management Services Agreement between the Registrant and 1347 Advisors whereby 1347 Advisors provided certain services to the Registrant. As part of the consideration paid to 1347 Advisors for agreeing to voluntarily terminate the Management Services Agreement, the Registrant issued to 1347 Advisors 120,000 shares of the Registrant’s Series B preferred stock, par value $25.00 per share, or the Series B Preferred Shares, and a warrant to purchase up to 1,500,000 shares of the Registrant’s common stock at an exercise price of $15.00 per share, subject to certain adjustments set forth in a warrant agreement. 1347 Advisors subsequently transferred 60,000 of the shares to IWS Acquisition, an affiliate of KFSI. The Series B Preferred Shares are non-voting and rank senior to all classes of capital stock of the Registrant. The warrant, which became exercisable on issuance, expires on February 24, 2022. The Registrant and 1347 Advisors also entered into a Performance Shares Grant Agreement, dated February 24, 2015, whereby 1347 Advisors was entitled to receive 100,000 shares of the Registrant’s common stock from the Registrant if at any time the last sales price of the common stock equaled or exceeded $10.00 per share for any 20 trading days within any 30-trading day period. The Series B Preferred Shares and the warrant were issued in reliance on the private placement exemption provided by Section 4(a)(2) of the Securities Act on the basis that the sale did not involve a public offering. On ~~March 19, 2014, these~~January 2, 2018, the Registrant entered into a Stock Purchase Agreement with 1347 Advisors and IWS Acquisition Corporation pursuant to which the Registrant agreed to repurchase the 60,000 Series B Preferred Shares held by 1347 Advisors for an aggregate purchase price of $1,740,000, representing (i) $1,500,000, comprised of $25 per share of Series B preferred stock, and (ii) declared and unpaid dividends in respect of the dividend payment due on February 23, 2018 amounting to $240,000 in the aggregate. The Registrant also agreed to repurchase pursuant to the stock purchase agreement 60,000 Series B Preferred Shares from IWS Acquisition Corporation, upon completion of this offering, for an aggregate purchase price of $1,500,000, comprised of $25 per share of Series B preferred stock, without any dividend or interest payment. In connection with the Stock Purchase Agreement, the Performance Shares Grant Agreement, dated February 24, 2015, between the Registrant and 1347 Advisors was terminated. The Registrant paid 1347 Advisors $300,000 in connection with the termination. No common shares were issued to 1347 Advisors under the Performance Shares Grant Agreement.

On May 23, 2017, the Company announced that Dan Case has been appointed to the position of Chief Operating Officer. In connection with Mr. Case’s new employment, Mr. Case has the opportunity to purchase up to 68,027 shares of the Company’s common stock ~~were split~~on the open market or in direct purchases from the Company until June 15, 2018 and at the end of the purchase period, the Company will match any such ~~that Kingsway America Inc. holds 1,000,000~~shares purchased by Mr. Case with a grant of restricted stock units (“RSUs”) of the Company equal to two RSUs for each share purchased by Mr. Case. The RSUs will vest 20% per year over five years following the date granted, subject to continued employment through such vesting date. The aggregate maximum number of shares of ~~our~~the Company’s common stock ~~par~~that may be acquired pursuant to this arrangement, including through open market purchases, purchases from the Company and grants from the Company, is 204,081. Any shares purchased directly from the Company will be made at a price equal to the closing price of the Company’s common stock on the prior trading day, but not less than the latest quarter end published book value ~~$0.001~~ per share.

~~On January 23, 2014, we issued 80,000 Series A Convertible Preferred Shares, par value $25.00 per share (the “Preferred Shares”),~~ This arrangement was entered into outside of the Company’s existing stockholder approved equity plans and was approved by the Compensation Committee of the Company’s Board of Directors as an inducement material to ~~Fund Management Group LLC. These Preferred Shares were issued~~Mr. Case entering into employment with the Company in reliance on Nasdaq Listing Rule 5635(c)(4). As of January 4, 2018, Mr. Case had purchased 56,276 shares of the Company’s common stock pursuant to this arrangement, 28,000 of which shares were purchased directly from the Company at a purchase price of $8.00 per share on September 14, 2017. The shares of the Company’s common stock issued under this arrangement were issued pursuant to an exemption ~~provided by~~from registration under Section 4(a)(2) of the Securities Act ~~on the basis that the sale did not involve a public offering. In connection with this Offering, these Preferred Shares will be converted into shares~~ of ~~common stock and warrants exercisable for common stock.~~1933, as amended.

II-3
Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits.

~~The exhibit index attached hereto is incorporated herein by reference.~~

Item 17. Undertakings

Exhibit No.	~~(f)~~	~~The undersigned registrant hereby undertakes~~Description
1.1**		Form of Underwriting Agreement.
3.1		Third Amended and Restated Certificate of Incorporation (incorporated by reference to ~~provide~~Exhibit 3.2 of Registrant’s Registration Statement on Form S-1/A filed with the Commission on January 30, 2014).
3.2		Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.3 of Registrant’s Registration Statement on Form S-1/A filed with the Commission on January 30, 2014).
3.3		Certificate of Designations of Series A Preferred Shares of 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit A of Exhibit 10.9 of Registrant’s Registration Statement on Form S-1/A filed with the Commission on January 30, 2014).
3.4		Certificate of Designations of Series B Preferred Shares of 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit 3.1 of Registrant’s Current Report on Form 8-K filed with the Commission on February 27, 2015).
3.5**		Form of Certificate of Designations of Cumulative Preferred Stock, Series A, of 1347 Property Insurance Holdings, Inc.
4.1		Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of Registrant’s Registration Statement on Form S-1/A filed with the Commission on January 30, 2014).
4.2		Warrant to Purchase Shares of Common Stock (incorporated by reference to Exhibit 4.2 of Registrant’s Current Report on Form 8-K filed with the Commission on February 27, 2015).
4.3		Certificate of Series B Preferred Shares (incorporated by reference to Exhibit 4.1 of Registrant’s Current Report on Form 8-K filed with the Commission on February 27, 2015).
4.4**		Form of Certificate of Cumulative Preferred Stock, Series A.
5.1**		Opinion of Thompson Hine LLP as to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

	~~(h)~~	~~Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons~~validity of the ~~registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion~~shares of the Securities and Exchange Commission 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,~~registered.
10.1†		1347 Property Insurance Holdings, Inc. Amended and Restated 2014 Equity Incentive Plan (incorporated by reference to Appendix A of Registrant’s Definitive Proxy Statement on Schedule 14A filed with the ~~registrant will, unless in~~Commission on April 30, 2015).
10.2		Indemnification Agreement (incorporated by reference to Exhibit 10.6 of Registrant’s Registration Statement on Form S-1/A filed with the ~~opinion~~Commission on January 30, 2014).
10.3		Trademark License Agreement, dated February 28, 2014, between 1347 Advisors LLC and 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.6 of ~~its counsel~~Registrant’s Registration Statement on Form S-1 filed with the ~~matter has been settled~~Commission on May 20, 2014).
10.4†		Option Agreement, dated February 28, 2014 between Douglas N. Raucy and 1347 Property Insurance Holdings, Inc. (incorporated by ~~controlling precedent, submit~~reference to ~~a court~~Exhibit 10.7 of ~~appropriate jurisdiction~~Registrant’s Registration Statement on Form S-1 filed with the ~~question whether such indemnification~~Commission on May 20, 2014).
10.5†		First Amendment to Option Agreement, dated June 19, 2014 between Douglas N. Raucy and 1347 Property Insurance Holdings, Inc. (incorporated by ~~it is against public policy~~reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed with the Commission on June 19, 2014).
10.6†		Second Amendment to Option Agreement, dated March 13, 2015 between Douglas N. Raucy and 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed with the Commission on March 17, 2015).
10.7†		Third Amendment to Option Agreement, dated March 13, 2015 between Douglas N. Raucy and 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.3 of Registrant’s Current Report on Form 8-K filed with the Commission on June 2, 2015).
10.8†		Fourth Amendment to Option Agreement, dated December 15, 2015 between Douglas N. Raucy and 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed with the Commission on December 17, 2015).
10.9†		Fifth Amendment to Option Agreement, dated June 14, 2016 between Douglas N. Raucy and 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed with the Commission on June 16, 2016).
10.10		Series A Convertible Preferred Stock Purchase Agreement, dated January 23, 2014, between Fund Management Group LLC and 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.9 of Registrant’s Registration Statement on Form S-1/A filed with the Commission on January 30, 2014).
10.11†		Offer letter to Douglas N. Raucy, dated September 25, 2012 (incorporated by reference to Exhibit 10.10 of our Registration Statement on Form S-1/A filed with the Commission on January 30, 2014).
10.12		Registration Rights Agreement, dated February 28, 2014, by and between Kingsway America, Inc. and 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.10 of Registrant’s Registration Statement on Form S-1 filed with the Commission on May 20, 2014).
10.13		Performance Share Grant Agreement by and between Kingsway America, Inc. and 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.12 of Registrant’s Registration Statement on Form S-1/A filed with the Commission on March 27, 2014).

II-4

10.14		Agreement to Buyout and Release dated February 24, 2015 (incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed with the Commission on February 27, 2015).
10.15†		Performance Shares Grant Agreement dated February 24, 2015 (incorporated by reference to Exhibit 10.2 of Registrant’s Current Report on Form 8-K filed with the Commission on February 27, 2015).
10.16†		Form of Option Agreement Issued to the Executive Officers of 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.16 of Registrant’s Annual Report on Form 10-K filed with the Commission on March 26, 2015).
10.17†		Form of Option Agreement Issued to the Directors of 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.17 of Registrant’s Annual Report on Form 10-K filed with the Commission on March 26, 2015).
10.18†		Form of Restricted Stock Unit Agreement Issued to the Executive Officers of 1347 Property Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.2 of Registrant’s Current Report on Form 8-K filed with the Commission on June 2, 2015).
10.19†		Employment Offer Letter, dated May 23, 2017, by and between 1347 Property Insurance Holdings, Inc. and Dan Case (incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed with the Commission on May 23, 2017).
10.20†		Form of Executive Restricted Stock Unit Award Agreement under the Share-Matching Program (incorporated by reference to Exhibit 10.1 of Registrant’s Current on Report on Form 8-K filed with the Commission on December 19, 2017).
10.21†		Form of Non-Employee Director Restricted Stock Unit Award Agreement under the Share-Matching Program (incorporated by reference to Exhibit 10.2 of Registrant’s Current on Report on Form 8-K filed with the Commission on December 19, 2017).
10.22*		Stock Purchase Agreement, dated January 2, 2018, by and among 1347 Advisors LLC, IWS Acquisition Corporation and 1347 Property Insurance Holdings, Inc.
21.1*		Subsidiaries of 1347 Property Insurance Holdings, Inc.
23.1*		Consent of BDO USA LLP.
23.2**		Consent of Thompson Hine LLP (included as ~~expressed in the Securities Act and will~~part of Exhibit 5.1).
24.1*		Power of Attorney.

*	Filed herewith.
**	To be ~~governed~~filed by ~~the final adjudication of such issue.~~amendment.
†	Denotes management contracts or compensatory plans or arrangements.

~~(i)~~

~~The undersigned registrant hereby undertakes that:~~

(b) Financial statement schedules.

No financial statement schedules are provided because the information called for is either not required or is shown either in the financial statements or the notes thereto.

Item 17. Undertakings

(b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933 (the “Securities Act”), each filing of the Registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement 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 in the initialbona fide offering thereof.

(h) 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 Securities and Exchange Commission 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.

(i) The undersigned Registrant hereby undertakes that:

(1)

For purposes of determining any liability under the Securities Act, ~~of 1933,~~ 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.

(2)

For the purpose of determining any liability under the Securities Act, ~~of 1933,~~ 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.

II-5

~~II-2~~

~~TABLE OF CONTENTS~~

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of ~~Baton Rouge,~~Tampa, State of ~~Louisiana,~~Florida, on the ~~26th~~8th day of ~~March, 2014.~~

~~1347 PROPERTY INSURANCE HOLDINGS, INC.~~January, 2018.


	1347 PROPERTY INSURANCE HOLDINGS, INC.

	By:	~~/s/~~ /s/ Douglas N. Raucy
	Name: Douglas N. Raucy
	Title: President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on the ~~26th~~8th day of ~~March, 2014.~~January, 2018.

Signature		Title
~~Signature~~		~~Title~~
/s/ ~~Douglas N. Raucy~~ Douglas N. Raucy		President, Chief Executive Officer and Director ~~(principal executive officer)~~
Douglas N. Raucy		(Principal Executive Officer)

/s/ John S. Hill		Vice President, Chief Financial Officer and Secretary
John S. Hill		~~Chief~~(Principal Financial Officer, ~~(principal financial and accounting officer)~~ Principal Accounting Officer)

/s/ Larry Gene Swets, Jr.* ~~Hassan R. Baqar~~		Director, Chairman of the Board
Larry Gene Swets, Jr.

/s/ D. Kyle Cerminara*		Director
* ~~Gordon G. Pratt~~D. Kyle Cerminara

/s/ Joshua S. Horowitz*		Director
* ~~Leo Christopher Saenger III~~Joshua S. Horowitz

/s/ Lewis M. Johnson*		Director
* ~~Larry G. Swets, Jr.~~Lewis M. Johnson

/s/ Scott David Wollney*		Director
Scott David Wollney

/s/ Dennis A. Wong*		Director
Dennis A. Wong

*~~By /s/ Hassan R. Baqar~~ ~~Hassan R. Baqar~~By:	/s/ John S. Hill
	John S. Hill
	Attorney-in-Fact

~~II-3~~

~~TABLE OF CONTENTS~~

EXHIBIT INDEX


1.1*		~~Form of Underwriting Agreement~~
3.1*		~~Second Amended and Restated Certificate of Incorporation (including Certificate of Designations)~~
3.2*		~~Form of Third Amended and Restated Certificate of Incorporation~~
3.3*		~~Form of Amended and Restated Bylaws~~
4.1*		~~Form of common stock certificate~~
4.2*		~~Form of Representative's Warrant~~
5.1*		~~Opinion of McDermott Will & Emery LLP regarding validity of the shares of common stock registered~~
10.1*		~~Form of Management Services Agreement by and between 1347 Advisors LLC, a Delaware limited liability company and 1347 Property Insurance Holdings, Inc.~~
10.2*		~~Form of Transition Services Agreement by and between Kingsway Financial Services Inc. and 1347 Property Insurance Holdings, Inc.~~
10.3*		~~1347 Property Insurance Holdings, Inc. Equity Incentive Plan~~
10.4*		~~Form of Lock-up Agreement~~
10.5*		~~Severance Agreement with Douglas N. Raucy, dated September 25, 2012~~
10.6*		~~Form of Indemnification Agreement~~
10.7*		~~Form of Trademark License Agreement between 1347 Advisors LLC and 1347 Property Insurance Holdings, Inc.~~
10.8*		~~Form of Option Agreement between Douglas N. Raucy and 1347 Property Insurance Holdings, Inc.~~
10.9*		~~Series A Convertible Preferred Stock Purchase Agreement between Fund Management Group LLC and 1347 Property Insurance Holdings, Inc.~~
10.10*		~~Offer letter to Douglas N. Raucy, dated September 25, 2012~~
10.11*		~~Form of Registration Rights Agreement by and between Kingsway America Inc. and 1347 Property Insurance Holdings, Inc.~~
~~10.12~~		~~Performance Share Grant Agreement by and between Kingsway America Inc. and 1347 Property Insurance Holdings, Inc.~~
21.1*		~~Subsidiaries of 1347 Property Insurance Holdings, Inc.~~
~~23.1~~		~~Consent of BDO USA, LLP~~
23.2*		~~Consent of McDermott Will & Emery LLP (included as part of Exhibit 5.1)~~
24.1*		~~Power of Attorney (included on signature page)~~

II-6

~~Filed previously~~

~~II-4~~

Delaware	6331
~~Delaware~~	~~6331~~	46-1119100
(State or ~~Other Jurisdiction~~other jurisdiction of ~~Incorporation~~incorporation or ~~Organization)~~organization)	(Primary Standard Industrial Classification Code Number)	(IRS Employer Identification No.)


Large accelerated filero ☐		Accelerated filero ☐
Non-accelerated filero ☐ (Do not check if a smaller reporting company)		Smaller reporting companyx ☒
		Emerging growth company ☒

Title of Each Class of Securities to be Registered		Proposed Maximum Aggregate Offering Price⁽¹⁾				Amount of Registration Fee
Cumulative Preferred Stock, Series A, par value $25.00 per share		$	23,000,000			$	2,864.00

~~Securities offered~~Issuer		1347 Property Insurance Holdings, Inc.

Securities Offered		shares of % Cumulative Preferred Stock, Series A (or “Preferred Stock”), $25.00 par value per share, with a liquidation preference of $ per share, of the Company. We may from time to time elect to issue additional shares of Preferred Stock, and all the additional shares would be deemed to form a single series with the Preferred Stock.


PRELIMINARY PROSPECTUS		SUBJECT TO COMPLETION		DATED ~~MARCH 26, 2014~~JANUARY 8, 2018

	Per Share
Total		~~Per Share~~		~~Total~~
Public offering price	$		$
Underwriting discounts and commissions⁽¹⁾	$		$
Offering proceeds to us, before expenses	$		$

PROSPECTUS SUMMARY
~~Sole Book-Running Manager~~				1
~~Aegis Capital Corp~~RISK FACTORS				10
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS				~~Co-Manager~~26
USE OF PROCEEDS				~~EarlyBirdCapital, Inc.~~

	28
~~Prospectus Summary~~DIVIDEND POLICY		1	29
~~Risk Factors~~CAPITALIZATION		10	29
~~Special Note Regarding Forward-Looking Statements~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		29	30
~~Our Separation from KFSI~~BUSINESS		30	54
~~Use of Proceeds~~MANAGEMENT		31	61
~~Dividend Policy~~CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		32	71
~~Capitalization~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		33	74
~~Dilution~~DESCRIPTION OF THE PREFERRED STOCK		34	76
~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS		35	82
~~Business~~UNDERWRITING		42	87
~~Management~~LEGAL MATTERS		56	93
~~Certain Relationships and Related Party Transactions~~EXPERTS		63	93
~~Principal Stockholders~~INCORPORATION BY REFERENCE		67	93
~~Description of Securities~~WHERE YOU CAN FIND MORE INFORMATION		69	94
~~Shares Available for Future Sale~~INDEX TO FINANCIAL STATEMENTS		75
~~Material U.S. Tax Considerations~~		77
~~Underwriting~~		81
~~Legal Matters~~		90
~~Experts~~		90
~~Where You Can Find More Information~~		90	F-1

		~~1,625,000 shares~~
Dividends		Holders of ~~common stock~~the Preferred Stock will be entitled to receive cumulative cash dividends at a rate of % per annum of the $ per share liquidation preference (equivalent to $ per annum per share).

~~Shares~~		Dividends on the Preferred Stock, when, as and if declared by the Board of ~~common~~Directors of the Company or a duly authorized committee thereof, will be payable quarterly on or about the 15th day of March, June, September and December of each year (each, a “dividend payment date”), provided that if any dividend payment date is not a business day, then the dividend that would otherwise have been payable on that dividend payment date may be paid on the next succeeding business day without adjustment in the amount of the dividend. Dividends will be payable to holders of record as they appear in our stock torecord books for the Preferred Stock at the close of business on the corresponding record date, which shall be ~~outstanding after~~ the ~~Offering assuming~~first day of March, June, September and December of each year, whether or not a business day, immediately preceding the ~~sale~~applicable dividend payment date (each, a “dividend record date”). Dividends will be computed on the basis of a 360-day year consisting of twelve 30-day months. The first dividend record date will be , 201 . Dividends on the Preferred Stock will accumulate whether or not the Company has earnings, whether or not there are funds legally available for the payment of those dividends and whether or not those dividends are declared by the Board of Directors of the Company. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Preferred Stock and any parity stock, all ~~shares covered by~~dividends declared upon the Preferred Stock and such parity stock shall be declared on a pro rata basis. See “Description of the Preferred Stock — Dividends” in this ~~prospectus~~prospectus.

Redemption		On and after , 202 , the Preferred Stock will be redeemable at our option, in whole or in part, at a redemption price equal to $ per share, plus any accumulated and unpaid dividends to, but not including, the redemption date. Our ability to redeem the Preferred Stock as described above may be limited by the terms of our agreements governing our existing and future indebtedness and by the provisions of other existing and future agreements. The Preferred Stock will not be subject to any sinking fund or other obligations of ours to redeem, purchase or retire the Preferred Stock. See “Description of the Preferred Stock — Redemption” in this prospectus.

Ranking		The Preferred Stock: ● will rank senior to our common stock and any other junior stock with respect to the payment of dividends and distributions upon our liquidation, dissolution or winding up. Junior stock includes our common stock and any other class or series of our capital stock that ranks junior to the Preferred Stock either as to the payment of dividends or as to the distribution of assets upon our liquidation, dissolution or winding up; ● will rank at least equally with each other class or series of our capital stock ranking on parity with the Preferred Stock as to dividends and distributions upon our liquidation or dissolution or winding up, which we refer to as parity stock; and

		~~3,003,566 shares~~
		● will rank junior to each other class or series of ~~common~~our capital stock that by its terms ranks senior to the Preferred Stock as to dividends and distributions upon our liquidation or dissolution or winding up.

Liquidation Rights		Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, holders of shares of Preferred Stock and any parity stock are entitled to receive out of our assets available for distribution to stockholders, before any distribution is made to holders of common stock or other junior stock, a liquidating distribution in the amount of the liquidation preference of $ per share of Preferred Stock, plus any accumulated and unpaid dividends to, but not including, the date of payment. Distributions will be made pro rata as to the Preferred Stock and any parity stock and only to the extent of our assets, if any, that are available after satisfaction of all liabilities to creditors. See “Description of the Preferred Stock — Liquidation Rights” in this prospectus.

Voting Rights		The ~~underwriters may exercise their option~~holders of Preferred Stock will generally have no voting rights, except as provided in the Certificate of Designations or as from time to ~~acquire~~time provided by law, nor will the holders of the Preferred Stock be given any notice of a meeting or vote by the Company’s common stockholders. The affirmative vote of the holders of at least two-thirds of the outstanding shares of Preferred Stock and each other class or series of voting parity stock is required at any time for us to authorize, create or issue any class or series of our capital stock ranking senior to the Preferred Stock with respect to the payment of dividends or the distribution of assets on liquidation, dissolution or winding up, to ~~an additional 15%~~amend any provision of our Certificate of Incorporation so as to materially and adversely affect any rights of the ~~total number~~Preferred Stock or to take certain other actions. If any such amendment to our Certificate of Incorporation would adversely affect the rights, preferences, privileges or voting powers of the Preferred Stock disproportionately relative to other classes or series of parity stock, the affirmative vote of the holders of at least two-thirds of the outstanding shares of ~~common stock to~~the Preferred Stock, voting separately as a class, will also be ~~offered in~~required. Please see the ~~Offering within 45 days~~section titled “Description of the ~~closing of the Offering, solely for the purpose of covering over-allotments.~~Preferred Stock—Voting Rights.”

Maturity		The Preferred Stock does not have any maturity date, and we are not required to redeem the Preferred Stock. Holders of the Preferred Stock will have no right to have the Preferred Stock redeemed. Accordingly, the shares of Preferred Stock will remain outstanding indefinitely, unless and until we decide to redeem them.

Preemptive Rights		Holders of the Preferred Stock will have no preemptive rights.

Listing		We intend to apply to list the Preferred Stock on the Nasdaq Stock Market under the symbol “ .” If the application is approved, we expect trading to commence within 30 days following the initial issuance of the Preferred Stock.

Tax Considerations		For a discussion of the U.S. federal income tax consequences of purchasing, owning and disposing of the Preferred Stock, please see “Material U.S. Federal Income Tax Considerations.” You are urged to consult your tax advisor with respect to the U.S. federal income tax consequences of owning shares of the Preferred Stock in light of your own particular situation and with respect to any tax consequences arising under the laws of any state, local, foreign or other taxing jurisdiction.

Use of Proceeds		We estimate ~~we will receive approximately $11.3 million (or approximately $13.1 million if~~that the ~~underwriters exercise their over-allotment option in full) in~~ net proceeds to us from the sale of the Preferred Stock issued in this offering will be approximately $ million after deducting the underwriting discount and our estimated offering expenses. We intend to use $1.5 million of the net proceeds from this offering to complete the repurchase of the shares of ~~common stock in this Offering, based on a price~~our Series B Preferred Stock from IWS Acquisition Corporation, an affiliate of ~~$8.00 per share (the estimated price set forth on the cover page~~KFSI, upon completion of this ~~prospectus), and after deducting underwriting discounts and commissions and estimated Offering expenses payable by us. We~~offering. Following the repurchase of the shares, we expect to use the remainder of the net proceeds offrom this ~~Offering as follows: approximately $5.0 million~~offering to ~~provide further capital to~~support our ~~existing insurance underwriting subsidiary Maison Insurance, approximately $2.0 million~~organic growth, and for ~~other~~ general corporate purposes, including ~~settlement of payables,~~ spending for business development, sales and marketing and working capital, and ~~the remainder used~~ for the formation of a new subsidiary, which will allow for the expansion of our insurance products in new markets. We may also use a portion of the net proceeds from this offering to pursue acquisitions, or to capitalize an offshore reinsurance subsidiary that we intend to form.future potential acquisition opportunities. See “Use of Proceeds” in this prospectus for more information.

~~Risk factors~~
Transfer Agent		The registrar, transfer agent and dividend and redemption price disbursing agent in respect of the Preferred Stock is VStock Transfer, LLC.


Book Entry and Form		The shares of ~~common stock offered hereby involve~~Preferred Stock will be represented by one or more global certificates in definitive, fully registered form deposited with a ~~high degree~~custodian for, and registered in the name of, ~~risk. See “Risk Factors”~~a nominee of The Depository Trust Company.


	Actual			Pro Forma			Pro forma as adjusted Without Over- Allotment			Pro forma as adjusted With Over- Allotment
Total long-term debt		0			0			0			0
Stockholders' equity
Common stock, no par value, 1,000,000 authorized shares, 1,000,000 shares issued and outstanding, actual; $0.001 par value, 10,000,000 authorized shares, 1,691,066 shares issued and outstanding pro forma, 3,316,066 shares issued and outstanding pro forma as adjusted without over-allotment, 3,559,816 shares issued and outstanding pro forma as adjusted with over-allotment⁽¹⁾		0			2			3			4
Additional paid in capital		8,750			14,013			25,271			27,084
Retained Deficit		(868	)		(868	)		(868	)		(868	)
Total Stockholders' Equity		7,882			13,146			24,406			26,220
Total Capitalization		7,882			13,146			24,406			26,220

	As of September 30, 2017 (unaudited)
	Actual			As adjusted
Cash and cash equivalents	$	25,679		$	—
Series B Preferred Stock, $25.00 par value, 1,000,000 authorized shares, 120,000 shares issued and outstanding on an actual, and pro forma as adjusted basis⁽¹⁾		2,744
Stockholders’ equity:
Common stock, $0.001 par value, 10,000,000 authorized shares, 6,136,125 shares issued and 5,984,766 shares outstanding on an actual, and pro forma as adjusted basis		6			6
Cumulative Preferred Stock, $25.00 par value, 1,000,000 authorized shares, shares issued and outstanding on an actual basis; shares issued and outstanding on a pro forma and pro forma as adjusted basis		—
Additional paid in capital		47,052			47,052
Retained deficit		(480	)		(480	)
Accumulated other comprehensive income		29			29
Total stockholders’ equity		45,598
Total capitalization	$	48,342		$


	Without Over- Allotment			With Over- Allotment
Initial public offering price per share	$	8.00		$	8.00
Net tangible book value per share as of December 31, 2013		7.88	⁽¹⁾		7.88	⁽¹⁾
Decrease per share attributable to FMG and Raucy investments⁽²⁾		(0.11	)		(0.11	)
Pro Forma net tangible book value per share prior to this Offering		7.77			7.77
Decrease per share attributable to this Offering		(0.41	)		(0.40	)
Pro forma as adjusted net tangible book value per share after this Offering		7.36			7.37
Dilution per share to new investors		0.64			0.63

	Policies in-force as of
Source of Policies	September 30, 2017		December 31, 2016		December 31, 2015

Total LA Citizens Takeout Policies in Force		8,224		8,892		8,957

Homeowners		21,465		17,685		14,283
Manufactured Homes		4,816		4,694		4,343
Other Dwellings		5,036		2,568		806
Total Voluntary Policies in Force		31,317		24,947		19,432

Total Direct Policies in Force		39,541		33,839		28,389

Assumed through Brotherhood Quota-Share Agreement		766		522		495
Assumed through TWIA Quota-Share Agreement⁽¹⁾		623		1,251		—
Total Assumed Policies		1,389		1,773		495

	September 30, 2017 (unaudited)					December 31, 2016					December 31, 2015
Type of Investment	Carrying Amount		Percent of Total			Carrying Amount		Percent of Total			Carrying Amount		Percent of Total
Fixed income securities:
U.S. government	$	2,899		5.8	%	$	1,604		5.6	%	$	647		3.0	%
State municipalities and political subdivisions		5,365		10.8	%		2,246		7.9	%		1,651		7.6	%
Asset-backed securities and collateralized mortgage obligations		16,635		33.5	%		11,968		42.2	%		9,082		42.0	%
Corporate		20,308		40.9	%		10,741		37.8	%		8,858		40.9	%
Total fixed income securities		45,207		91.0	%		26,559		93.5	%		20,238		93.5	%

Equity securities:
Common stock		1,612		3.2	%		1,136		4.0	%		—		—	%
Warrants to purchase common stock		122		0.2	%		—		—	%		—		—	%
Rights to purchase common stock		37		0.1	%		—		—	%		—		—	%
Total equity securities		1,771		3.5	%		1,136		4.0	%		—		—	%

Short-term investments		1,779		3.6	%		196		0.7	%		1,149		5.3	%
Other investments		945		1.9	%		505		1.8	%		248		1.2	%
Total investments	$	49,702		100.0	%	$	28,396		100.0	%	$	21,635		100.0	%

	September 30, 2017 (unaudited)					December 31, 2016					December 31, 2015
Matures in:	Carrying Amount		Percent of Total			Carrying Amount		Percent of Total			Carrying Amount		Percent of Total
One year or less	$	2,415		5.3	%	$	1,828		6.9	%	$	1,012		5.0	%
More than one to five years		19,757		43.7	%		12,678		47.7	%		10,414		51.5	%
More than five to ten years		11,804		26.1	%		3,918		14.8	%		2,259		11.2	%
More than ten years		11,231		24.9	%		8,135		30.6	%		6,553		32.3	%
Total	$	45,207		100.0	%	$	26,559		100.0	%	$	20,238		100.0	%

Other Assets	September 30, 2017 (unaudited)		December 31, 2016		December 31, 2015
Accrued interest on investments	$	233	$	117	$	77
Security deposits for facility leases		38		38		38
Prepaid expenses		481		616		590
Other		115		17		—
Total	$	867	$	788	$	705

	Case Loss Reserves		Case LAE Reserves		Total Case Reserves		IBNR Reserves (including LAE)		Total Reserves		Reinsurance Recoverable on Reserves
September 30, 2017 (unaudited)
Homeowners⁽¹⁾	$	3,348	$	347	$	3,695	$	3,065	$	6,760	$	3,254
Special Property⁽²⁾		10,372		600		10,972		4,359		15,331		14,306
Total	$	13,720	$	947	$	14,667	$	7,424	$	22,091	$	17,560

December 31, 2016
Homeowners	$	1,523	$	463	$	1,986	$	3,302	$	5,288	$	2,565
Special Property		697		88		785		898		1,683		1,087
Total	$	2,220	$	551	$	2,771	$	4,200	$	6,971	$	3,652

December 31, 2015
Homeowners	$	758	$	72	$	830	$	1,070	$	1,900	$	120
Special Property		49		9		58		165		223		—
Total	$	807	$	81	$	888	$	1,235	$	2,123	$	120

	Common Shares Outstanding			Treasury Shares			Total Stockholders’ Equity
Balance, January 1, 2015		6,358,125			—		$	49,914
Issuance of performance shares and warrants pursuant to MSA termination transaction		—			—			1,010
Stock compensation expense		—			—			47
Repurchase of common stock		(223,851	)		223,851			(1,731	)
Net loss		—			—			(1,673	)
Unrealized losses on investment portfolio (net of income taxes)		—			—			(61	)
Balance, December 31, 2015		6,134,274			223,851		$	47,506
Stock compensation expense		—			—			38
Repurchase of common stock		(177,508	)		177,508			(1,195	)
Retirement of treasury shares		—			(250,000	)		—
Net income		—			—			11
Unrealized losses on investment portfolio (net of income taxes)		—			—			(3	)
Balance, December 31, 2016		5,956,766			151,359		$	46,357
Issuance of common shares		28,000			—			224
Stock compensation expense		—			—			19
Net loss		—			—			(1,096	)
Unrealized gains on investment portfolio (net of income taxes)		—			—			94
Balance, September 30, 2017 (unaudited)		5,984,766			151,359		$	45,598

Registration No. 333-193314

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

AMENDMENT NO. 5 TOFORM S-1REGISTRATION STATEMENTUNDERTHE SECURITIES ACT OF 1933

FORM S-1REGISTRATION STATEMENTUNDERTHE SECURITIES ACT OF 19331347 PROPERTY INSURANCE HOLDINGS, INC.

1,625,000 SharesCommon Stock

TABLE OF CONTENTS

PROSPECTUS SUMMARY

Defined Terms

Business Overview

Our Market

Competitive Strengths

Our Strategies

Risks Associated With Our Business

Investment Prior to the Offering

Corporate Information and Relationship with Kingsway Financial Services Inc.

Emerging Growth Company

The Offering

RISK FACTORS

Risks Relating To Our Company

We have not generated a profit over a fiscal year to date and we may never achieve or sustain such profitability.

We have a limited operating history and it is difficult to predict our future growth and operating results.

We may not have future opportunities to participate in Citizens take-out programs.

We have a risk posed by the lack of geographic diversification and concentration of policyholders in Louisiana.

We have exposure to unpredictable catastrophes, which may have a material adverse effect on our financial results if they occur.

Our results may fluctuate based on many factors, including cyclical changes in the insurance industry.

Increased competition could adversely impact our results and growth.

If our actual losses from insureds exceed our loss reserves, our financial results would be adversely affected.

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

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.

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 and surplus, premiums and loss reserves in money market funds and othervarious investment vehicles.

We may experience financial exposure from climate change.

Our ability to compete in the property and casualty insurance industry and our ability to expand our business may be negatively affected by the fact that we do not have a rating from A.M. Best.

We face a risk of non-collectability of reinsurance, which may have a material adverse effect on our business, results of operations and/or financial condition.

We use actuarially driven catastrophe models to provide us with risk management guidelines.

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

Our strategy to expand into other states may not succeed

The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or our results of operations.

Maison Insurance is subject to an independent third party rating agency and must maintain certain rating levels to continue to write much of its current and future policies.

If we fail to establish and maintain an effective system of integrated internal controls, we may not be able to report our financial results accurately, which could have a material adverse effect on our business, financial condition and results of operations.

Any failure on the part of our third-party policy administration processor could lead to material litigation, undermine our reputation in the marketplace, impair our image and negatively affect our financial results.

TheWe have a limited operating history as a publicly-traded company. Our inexperience as a public company and the requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain qualified board members.

We have no operating history as a publicly-traded company, and our inexperience may have a material adverse effect on us and our stockholders.

We may require additional capital in the future which may not be available or may only be available on unfavorable terms.

Our acquisition strategy may not succeed.

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

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

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

Current operating resources are necessary to develop future new insurance products.

As an insurance holding company, we are currently subject to regulation by the Statestates of Louisiana, Texas and Florida and in the future may become subject to regulation by certain other states or a federal regulator.

Maison Insurance is subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action.

We may be unable to attract and retain qualified employees.

Risks Relating to our Separation from KFSI

As long as KFSI has a substantial interestChanges in us, your ability to influence matters requiring stockholder approval may be limited.

We may be unable to achieve some or all of the benefits that we expect to achieve from our separation from KFSI.

We may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent company, and we may experience increased costs after the separation or as a result of the separation.

Our historical and pro forma financial information is not necessarily representative of the results we would have achieved as a separate publicly traded company and may not be a reliable indicator of our future results.

We may have received better terms from unaffiliated third parties than the terms we received in our agreements with KFSI.

Any disputes that arise between us and KFSI with respect to our past and ongoing relationships could harm our business operations.

Risks Related to this Offering

There is currently no established public trading market for our securities and your investment may be illiquid for an indefinite amount of time.

Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.

This Offering may result in a dilution of your interests in our company.

FMG, of which our Chairman of the board Gordon G. Pratt is Managing Member and controlling equity holder, has invested in Preferred Shares of the company prior to completion of the Offering.

We have never paid dividends on our common stock and do not anticipate paying dividends on our common stock for the foreseeable future; therefore, returns on your investment may only be realized by the appreciation in value of our securities.

Future issuances or sales, or the potential for future issuances or sales, of shares of our common stock may cause the trading price of our securities to decline and could impair our ability to raise capital through subsequent equity offerings.

If we are determined to be an investment company, we would become subject to burdensome regulatory requirements and our business activities would be restricted.

Our revenues, operating results and cash flows may fluctuate in future periods and we may fail to meet investor expectations, which may cause the price of our common stock to decline.

Our common stock may be thinly traded, so you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

OUR SEPARATION FROM KFSI

Our Relationship with KFSI

Benefits of Separation

USE OF PROCEEDS

DIVIDEND POLICY

CAPITALIZATION

DILUTION

MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Our Business

Relationship with KFSI

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 5 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
1347 PROPERTY INSURANCE HOLDINGS, INC.

1,625,000 Shares
Common Stock

The

We have a limited operating history as a publicly-traded company. Our inexperience as a public company and the requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain qualified board members.

As long as KFSI has a substantial interest
Changes in us, your ability to influence matters requiring stockholder approval may be limited.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	2015/2016 CAT XOL Treaty 06/01/15 – 05/31/16		2016/2017 CAT XOL Treaty 06/01/16 – 05/31/17		2017/2018 CAT XOL Treaty 06/01/17 – 05/31/18
Wind/Hail loss occurrence clause⁽¹⁾		144 hours		144 hours		144 hours
Retention on first occurrence	$	4,000	$	5,000	$	5,000
Retention on second occurrence	$	1,000	$	2,000	$	2,000
Limit of coverage including first event retention	$	140,000	$	200,000	$	200,000
Franchise deductible⁽²⁾	$	—	$	125	$	250

	Year Ended December 31,
Line of Business	2016		2015		Change
Homeowners	$	33,615	$	29,987	$	3,628
Special Property		17,712		13,864		3,848
Gross Written Premium	$	51,327	$	43,851	$	7,476

	2014/2015 CAT XOL Treaty 06/01/14 – 05/31/15		2015/2016 CAT XOL Treaty 06/01/15 – 05/31/16		2016/2017 CAT XOL Treaty 06/01/16 – 05/31/17
Wind/Hail loss occurrence clause⁽¹⁾		120 hours		144 hours		144 hours
Retention on first occurrence	$	3,000	$	4,000	$	5,000
Retention on second occurrence	$	2,000	$	1,000	$	2,000
Limit of coverage including first event retention	$	92,000	$	140,000	$	200,000

(unaudited)	Nine months ended September 30,
Summary of Cash Flows	2017			2016
Net cash provided by operating activities	$	3,832		$	1,659
Net cash used in investing activities		(21,182	)		(9,428	)
Net cash used in financing activities		(16	)		(1,262	)
Net decrease in cash and cash equivalents	$	(17,366	)	$	(9,031	)


Source of Policies	Type		Policy Counts		% of Policies
Citizens Take-out		Wind/Hail Only		6,021		52.3	%
2012 Take-out		Wind/Hail Only		2,505		21.8	%

2013 Take-out		Wind/Hail Only		3,516		30.5	%
Independent Agents:				5,485		47.7	%
		Homeowners		3,580		31.1	%
		Manufactured Home		1,786		15.6	%
		Dwelling Fire		119		1.0	%
Total in-force policies as of December 31, 2013				11,506		100.0	%

	2014/2015 CAT XOL Treaty 06/01/14 – 05/31/15		2015/2016 CAT XOL Treaty 06/01/15 – 05/31/16		2016/2017 CAT XOL Treaty 06/01/16 – 05/31/17		2017/2018 CAT XOL Treaty 06/01/17 – 05/31/18
Wind/Hail loss occurrence clause⁽¹⁾		120 hours		144 hours		144 hours		144 hours
Retention on first occurrence	$	3,000	$	4,000	$	5,000	$	5,000
Retention on second occurrence	$	2,000	$	1,000	$	2,000	$	2,000
Limit of coverage including first event retention	$	92,000	$	140,000	$	200,000	$	200,000
Franchise deductible⁽²⁾	$	—	$	—	$	125	$	250


Name and Principal Position	Year⁽⁴⁾		Salary ($)			Bonus ($)			Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation⁽³⁾ ($)		Total ($)
Douglas N. RaucyPresident, CEO and Director		2013		280,000			50,000	⁽¹⁾		—		—		—		—		3,733		333,733
Douglas N. RaucyPresident, CEO and Director		2012		71,077			20,000	⁽¹⁾		—		—		—		—		—		91,077
John Hill Chief Financial Officer		2013		71,410	⁽²⁾		—			—		—		—		—		—		71,410
John Hill Chief Financial Officer		2012		—			—			—		—		—		—		—		—
Dean Stroud Vice President of Operations and Chief Underwriting Officer		2013		175,000			—			—		—		—		—		2,479		177,479
		2012		37,692			—			—		—		—		—		—		37,692


	Beneficially Owned Before the Offering						Beneficially Owned After the Offering
	Number of Shares			Percent			Assuming No Over-Allotment					Assuming Maximum Over-Allotment
Name and Address of Beneficial Owners	Number of Shares			Percent			Number of Shares			Percent		Number of Shares			Percent
5% Shareholders:
KFSI		1,000,000	⁽¹⁾		100	%		1,000,000	⁽²⁾		30.2		1,000,000	⁽²⁾		28.1
FMG		—			—			625,000	⁽³⁾		18.8		625,000	⁽³⁾		17.6
Named Executive Officers and Directors:
Gordon Pratt		—			*			625,000	⁽³⁾		18.8		625,000	⁽³⁾		17.6
Larry G. Swets, Jr.		—			*			—			*		—			*
Chris Saenger		—			*			—			*		—			*
Douglas Raucy		—			*			66,066	⁽⁴⁾		2.0		66,066	⁽⁴⁾		1.9
Hassan Baqar		—			*			—			*		—			*
Dean Stroud		—			*			—			*		—			*
John Hill		—			*			—			*		—			*
All Executive Officers and Directors as a Group (7 people)		1,000,000	⁽¹⁾		100	%		1,691,066			51.0		1,691,066			47.5


	December 31, 2013		December 31, 2012
Assets
Cash and invested assets
Cash	$	15,007	$	5,525
Short-term investments pledged, at cost		100		100
Fixed income securities, at fair value		301		—
Preferred stock, at fair value		—		1,875
Total cash and invested assets		15,408		7,500
Premiums receivable		3,805		2,091
Deferred policy acquisition costs		1,925		346
Ceded unearned premiums		1,126		63
Net deferred federal income taxes		571		159
Other assets		343		39
Total Assets	$	23,178	$	10,198


	December 31, 2013			December 31, 2012
Liabilities and Shareholder’s Equity
Liabilities
Loss and loss adjustment expense reserves	$	354		$	9
Unearned premium reserves		11,004			2,131
Due to parent		2,668			407
Accrued expenses and other liabilities		753			49
Premiums collected in advance		213			—
Agent commissions payable		254			—
Ceded reinsurance premiums payable		50			75
Current federal income taxes payable		—			97
Total Liabilities		15,296			2,768
Shareholder’s Equity
Common stock, $0.00 par value; authorized 1,000,000 shares; issued and outstanding 1,000,000 shares		—			—
Additional paid-in capital		8,750			7,550
Retained deficit		(868	)		(120	)
Total Shareholder’s Equity		7,882			7,430
Total Liabilities and Shareholder’s Equity	$	23,178		$	10,198