1. ORGANIZATION, CONSOLIDATION AND BASIS OF PRESENTATION Organization FedNat Holding Company (FNHC, the Company, we, us, or our) is a regional insurance holding company that controls substantially all aspects of the insurance underwriting, distribution and claims processes through our subsidiaries and contractual relationships with independent agents and general agents. We, through our wholly-owned subsidiaries, are authorized to underwrite, and/or place homeowners multi-peril (homeowners), federal flood and other lines of insurance in Florida and other states. We market, distribute and service our own and third-party insurers products and other services through a network of independent and general agents. FedNat Insurance Company (FNIC), our largest wholly-owned insurance subsidiary, is licensed as an admitted carrier to write homeowners property and casualty insurance by the states insurance departments in Florida, Louisiana, Texas, Georgia, South Carolina, Alabama and Mississippi. Maison Insurance Company ("MIC"), an insurance subsidiary, is licensed as an admitted carrier to write homeowners property and casualty insurance as well as wind/hail-only exposures by the state's insurance departments in Louisiana, Texas and Florida. Monarch National Insurance Company (MNIC), an insurance subsidiary, is licensed as an admitted carrier to write homeowners property and casualty insurance in Florida. Material Distribution Relationships Ivantage Select Agency, Inc. The Company is a party to an insurance agency master agreement with Ivantage Select Agency, Inc. (ISA), an affiliate of Allstate Insurance Company (Allstate), pursuant to which the Company has been authorized by ISA to appoint Allstate agents to offer the Companys homeowners insurance products to consumers in Florida. As a percentage of the total homeowners premiums we underwrote, 23.2%, 23.8% and 23.8%, were from Allstates network of Florida agents, for the years ended December 31, 2019, 2018 and 2017, respectively. SageSure Insurance Managers, LLC The Company is a party to a managing general underwriting agreement with SageSure Insurance Managers, LLC (SageSure) to facilitate growth in our FNIC homeowners business outside of Florida. As a percentage of the total homeowners premiums, 23.1%, 15.0% and 10.2% respectively, of the Companys premiums were underwritten by SageSure, for the years ended December 31, 2019, 2018, and 2017 respectively. As part of our partnership with SageSure, we entered into a profit share agreement, whereby we share 50% of net profits of this line of business, as calculated per the terms of the agreement, subject to certain limitations. The profit share cost is reflected in commissions and underwriting expenses on our consolidated statement of operations. Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (GAAP). The consolidated financial statements include the accounts of FNHC and its wholly-owned subsidiaries and all entities in which the Company has a controlling financial interest and any variable interest entity (VIE) of which the Company is the primary beneficiary. The Companys management believes the consolidated financial statements reflect all material adjustments, including normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows of the Company for the periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company identifies a VIE as an entity that does not have sufficient equity to finance its own activities without additional financial support or where the equity investors lack certain characteristics of a controlling financial interest. The Company assesses its contractual, ownership or other interests in a VIE to determine if the Companys interest participates in the variability the VIE was designed to absorb and pass onto variable interest holders. The Company performs an ongoing qualitative assessment of its variable interests in a VIE to determine whether the Company has a controlling financial interest and would therefore be considered the primary beneficiary of the VIE. If the Company determines it is the primary beneficiary of a VIE, the Company consolidates the assets and liabilities of the VIE in its consolidated financial statements. We completed our acquisition of MNIC in February 2018 by acquiring the membership interests in MNICs indirect parent, Monarch Delaware Holdings LLC (Monarch Delaware), held by our joint venture partners. As such, the Company consolidated Monarch Delaware in its consolidated financial statements. In accordance with the accounting standard on consolidation, a primary beneficiary that acquires additional ownership of the previously controlled and consolidated subsidiaries is accounted for as an equity transaction and re-measurement of assets and liabilities of previously controlled and consolidated subsidiaries is not permitted. As a result, we accounted for this transaction by eliminating the carrying value of the non-controlling interest to reflect our 100% ownership interest in MNIC as of February 21, 2018. The difference between the consideration paid and the amount by which the non-controlling interest was eliminated has been recognized in additional paid-in capital. Following the closing, Monarch Delaware and Monarch Holdings were merged into MNIC.